Amazon is an online company that provides buyers and sellers with a platform to buy and sell products. It is the largest online retailer. The main problem Amazon was dealing with is that it was generating large revenues but its profit margin was very small. In addition, the growth of the number of e-tailers competing with Amazon threatened the company’s long-term profitability. In addition to these, Amazons global expansion was approaching the limits, hence its programs to encourage e-tailers to buy and sell via Amazon (Behr).
Amazon chose to use Linux as its operating platform to reduce IT costs (Behr). By cutting back on costs, Amazon could raise its profit margin. After the implementation of Linux as the operating platform, Amazon saved twenty percent of its IT costs. Linux is an open source software that does not attract licensing fees. This means that Amazon saved all the money it previously spent on software licensing.
Amazon relies on an internet platform to conduct all its businesses. This means the Amazon store exists on servers. In order run this store, users log in to the Amazon website and access its virtual store. Linux supports several Amazon value chain activities, which include operations, marketing and sales, and services.
Amazon operations include all administrative activities in Amazon. The marketing and sales functions refer to the advertising Amazon does, and all online efforts it makes to find new clients. Services refer to the actual activities relating to the buying and selling of products on the Amazon website.
The main factors that influenced the switch to Linux by Amazon were to cut costs and to enjoy greater control over the expansion of Amazon’s systems. After implementing the Linux operating system, Amazon saved twenty percent of its software costs. This came from savings made from licensing fees. In addition, as an open source software, Linux allows users to expand it in any way that improves its functionality. This capacity to adapt the operating system to meet unique needs also made it attractive for Amazon.
The first issue Amazon needed to consider before switching to the Linux operating system was the cost of acquiring the new software. Since Linux is an open source software, this cost was minimal. Secondly, Amazon needed to consider the cost of running the software. Linux depends on a dedicated community of developers therefore there was no direct cost on Amazon.
Thirdly, Amazon considered the capacity to operate the software and the technical support it would need. On the technical side, Amazon considered its plans for future expansion, and the compatibility of the Linux operating system with its existing system.
Amazon experienced a cost saving in its IT costs because of switching to an open source platform. It saved the money it initially spent on acquiring software licenses from commercial vendors (Behr). Secondly, it ability to exert greater control over the development of its software platform grew because of the freedom to expand and adjust the operating system when needed.
The main conclusions from this study are that it is possible to change the financial performance of a company by using available resources. It is risky, but it is also rewarding. Secondly, acquiring the new platform freed Amazon to concentrate on optimizing its business model by finding more retailers willing to use Amazon. This will serve to increase the company’s revenue.
Works Cited
Behr, Mary E. “Case Study: Amazon.com.” CIO Insights. 11 Jan. 2003. Web. <https://www.cioinsight.com/c/a/Past-News/Case-Study-Amazoncom>