Amazon's revenues are reaching an all-time high; however, the online retailer's profit is decreasing. Amazon is focusing heavily on digital offerings such as ereaders or digital movies and music; therefore, the entity is spending an immense amount of money on both physical and digital infrastructure to add capacity to it's fast-growing web services business. Many will argue the spending on infrastructure is a problem and needs to decrease; however, it is necessary to think about the important facts. Amazon is strictly an online retailer, the largest of its market; therefore, without the most up-to-date and effective information technology systems in place, problems will occur on the website which can totally destroy the business. If the site could not handle the increased traffic, customers would experience issues when purchasing items and the site could potentially crash, which in turn, drives customers away and creates much bigger problems.
As we discussed in class today, people are turning to electronics to do everything; read, watch movies, listen to music, talk, shop, etc; therefore, the demand for digital offerings are only going to continue to increase at an increasing rate. Amazon has the money right now to spend on updating and improving their digital infrastructure, which in the long-term if implemented correctly, the benefits can potentially significantly outweight the costs in the near future. I absolutely think the spending on IT infrastructure is the right choice, and it will definitely pay off in the future.
http://online.wsj.com/article/SB10001424053111904772304576470510839305924.html
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