Private equity insiders, take note: AWS is back with a vengeance, and the implications for value creation in technology investments are more significant than ever. The recent AWS re:Invent 2024 conference unveiled a series of game-changing announcements that not only address technical debt but also open up new avenues for innovation and revenue generation. Here are the key developments that should be on every PE professional's radar:
Modernization: Retiring Technical Debt Just Got Faster, Cheaper, and Better
Amazon Q Developer is transforming the landscape of legacy modernization:
Accelerates Java application upgrades, potentially saving thousands of developer years.
Modernizes Windows .NET applications to Linux up to four times faster, reducing licensing costs by up to 40%.
Transforms VMware workloads to cloud-native architectures in hours instead of weeks.
Why it matters: Matt Garman, CEO of AWS, shared that Signatureit Group, a PSG Equity portfolio company, leveraged an early development version of Q to move their .Net code base from Windows to Linux. Where the project was estimated to take 6 to 8 months, they achieved it in just a few days. More importantly, by removing the licensing cost they can reduce the operating cost by 40% (and improve EBITDA and ultimately the Enterprise Value).
Compute: The EBITDA Gift That Keeps on Giving
AWS's custom silicon innovations offer significant cost savings for SaaS solutions:
AWS Graviton-based instances deliver 25% better performance than Graviton2 generation. These Instances provide up to 40% better price performance over comparable x86-based instances.
Trainium3 chips and Trn2 instances for AI model training, offering optimized performance for training large, complex AI models.
Amazon EC2 Inf1 instances offer up to 70% lower cost per inference than comparable GPU-based instances.
Why it matters: These advancements enable portfolio companies to optimize operational costs while scaling AI capabilities, directly impacting EBITDA.
DATA and AI: Lowering Barriers to Extend IP and Innovate Faster
AWS continues to reinforce its status as the premier platform for builders and innovators, as highlighted by the latest announcements at re:Invent 2024. The focus on AI and data management tools empowers private equity firms and their portfolio companies to innovate faster and more efficiently. Key highlights include:
Amazon Nova Foundation Models: These new AI models can process text, image, and video prompts, enabling rapid development of sophisticated AI applications.
Amazon SageMaker Lakehouse: This unified platform integrates data across S3 data lakes and Redshift data warehouses, allowing portfolio companies to build powerful AI/ML applications seamlessly.
AWS Builder Studio: This comprehensive development environment streamlines the journey from concept to deployment, accelerating innovation cycles for portfolio companies.
A notable example is S&P Global, which showcased its transformation to a cloud-first and AI-enabled organization at re:Invent 2023. This illustrates how PE firms can leverage AWS to drive innovation and create value in their investments.
Why it matters: By providing these cutting-edge tools, AWS enables PE firms and their portfolio companies to stay ahead of the curve, uncover new revenue streams, and optimize operations for improved EBITDA.
The AWS 'GTM' Force Multiplier: Expanding Scale and Reach
While there were no big announcements specific to the SaaS Factory program and AWS Marketplace, AWS continues to enhance these platforms. We met several great AWS partners that continue to make it easier for technology companies to add scale and reach to their GTM capabilities:
Improved discovery and deployment of software solutions in AWS Marketplace
Streamlined procurement processes for enterprise customers
Enhanced analytics for sellers to optimize their offerings
Why it matters: These improvements can help PE portfolio companies expand their market reach and increase sales velocity through the AWS ecosystem.
Closing Thoughts...
As we reflect on this year’s re:Invent conference, we can't help but feel a sense of optimism about the future for private equity firms. The potential to leverage these innovative tools and technologies is immense, and we believe they can significantly enhance value creation in PE -backed portfolio companies. It’s not just about cutting costs or streamlining processes; it’s about unlocking new opportunities for growth and innovation that can drive impressive outcomes.
We’re genuinely excited to see how PE firms will harness these capabilities to transform their investments and achieve remarkable results in the technology sector.
By leveraging these advancements, PE firms can accelerate value creation, optimize costs, and uncover new growth opportunities across their technology investments. AWS is positioning itself as a crucial partner in driving EBITDA growth and ARR expansion for PE-backed companies in the technology sector.
We’d love to hear your thoughts! What caught your attention at the event? How do you see these advancements impacting your investments? Please feel free to reach out or share your insights in the comments below.
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