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By Nick Wakeman

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Nick Wakeman

Why Amazon should come to DC

For the most part, I’ve stayed away from writing about the Washington D.C. area. We are based in the D.C. area but our coverage is national as is our readership.

But I’m going to put on my hometown boy hat for a moment now that Amazon has announced that it is looking for a second headquarters.

To me, the Washington D.C. area makes a logical choice. Amazon CEO Jeff Bezos already has a strong position here through his ownership of the Washington Post. It is important to note that Bezos owns the Post, not Amazon.

The D.C. area also is a major communications hub, enabling Amazon and others to build data centers serving customers around the world.

And it is Amazon Web Services that I think makes the strongest argument for the headquarters to be here. Amazon reported $7.8 billion in AWS revenue for the first six months of 2017 at $2.3 billion more that the same six-month period in 2016.

AWS is on track to top $15 billion in revenue this year. Overall, Amazon should be close to $147 billion in total revenue.

It is interesting to note that AWS is more profitable the company’s other segments. Its operating income is $1.8 billion, compared to $1 billion for Amazon.com.

Amazon does not break out AWS revenue by customer or market, but I feel confident that public sector and the federal government in particular have got to be close to AWS’ largest market. AWS is definitely the dominant cloud provider in the federal market with major civilian, defense and intelligence customers. It has become the standard against which other cloud service providers are striving in the federal market.

The company created the AWS GovCloud to host sensitive data and workloads in the cloud. It has invested in myriad security requirements such as FedRAMP. And the cloud is really only getting started in the federal market as agencies look to modernize their infrastructures and reduce the security risks represented by legacy systems. So AWS has plenty of growth opportunities ahead of it.

So a D.C. area headquarters would put Amazon close to a large and growing customer. And the federal government also is an important customer to Amazon’s other customers -- its AWS partners.

D.C. also fits the bill when looking at some of Amazon’s search criteria:

  • Metropolitan area of 1 million people or more.
  • Stable and business-friendly environment
  • Urban and suburban locations

The battle to win Amazon will be intense, especially considering that it plans to invest $5 billion and locate 50,000 jobs at the new headquarters.

Using Amazon's Seattle headquarters as a guide, the economic impact will be huge. The headquarters campus has 33 buildings, 8.1 million square feet, 24 restaurants, and $25.7 billion payroll. The company also claims that it help create another 53,000 non-Amazon jobs because of its investment there.

Not only is the D.C. area a major communications hub, it also has a transportation infrastructure that includes three airports and a mass transit system. But the roads are probably a negative. There also are major universities in the area. So those are pluses.

And of course there is the D.C. area's highly skilled work force.

But again, I think the biggest draw is the customer base Amazon already has here and the potential the company has to be an even bigger and perhaps the dominant player in the federal market.

According to the RFP it posted on its website, the company wants 500,000 square feet built by 2019 and over the next decade another 8,000,000 square feet by 2027 and beyond.

That would have a transformative effect in area they decide to land. So let’s see if D.C. has the chops to woo them.

Posted by Nick Wakeman on Sep 07, 2017 at 12:37 PM

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