Amazon’s cloud computing business turned 10 on Monday, a short but fast-paced life that has revolutionized the technology industry and contributed strongly to Seattle’s economic boom. The real growth spurt for Amazon Web Services, however, may yet lay ahead.
Amazon.com’s cloud-computing business turned 10 years old Monday, a short but fast-paced life that has revolutionized the technology industry and strongly contributed to Seattle’s economic boom. The real growth spurt for Amazon Web Services (AWS), however, may yet lay ahead.
What started as a service to provide cheap storage for software developers soon added computer power for rent on a pay-as-you-go basis, enabling a new generation of Web-oriented startups such as Airbnb and Pinterest to focus on building apps rather than the technology infrastructure to support their products.
It’s such a moneymaking machine that when its financial record was first publicly disclosed in April 2015, its shares soared to new heights. In 2015, AWS accounted for 41 percent of Amazon’s profit, though it was only 7 percent of its revenue (some analysts expect AWS’ operating profit to surpass that of Amazon’s retail segment starting this year.)
A decade of AWS growth
March 2006: Offers Amazon S3, a service for cheap, pay-as-you-go data storage in the cloud
August 2006: Launches Amazon EC2, which provides computing capacity for rent on a metered basis
December 2008: Offers Amazon EC2 in Europe
April 2010: Opens data hub, also dubbed a “region,” in Singapore
August 2011: Launches a physical data-center hub in the Northwest dedicated to U.S. government agencies and contractors
December 2011: Opens region in São Paulo, Brazil
December 2013: Announces “region” in China
April 2015: Releases financial data on AWS performance; stock soars
January 2016: Launches Korea region, bringing the number of regions to 12
Now, as big companies and even national governments jump on the bandwagon, analysts say cloud computing is still in its infancy. It’s a business, moreover, that Amazon dominates to a great extent, although it’s being increasingly penetrated by rivals such as Microsoft and Google.
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AWS, now a $10 billion business, could be much, much bigger, experts say.
“We have not been able to find another infrastructure or application software company with the same growth trajectory and margin profile at scale,” wrote analysts with RBC Capital Markets in a note. “We think there’s a very compelling argument that AWS’ growth and market dominance is the most powerful trend in all of (technology, media and telecommunications) today.”
Amazon says more than 1 million customers across 190 countries are AWS users. It hosts data and computing power in 12 different physical locations, dubbed “regions,” from Oregon to São Paulo, Brazil, and Sydney. One of these hubs, at an unidentified site in the Northwest, is dedicated to serving U.S. government agencies and contractors. Five more regions are expected to come online this year.
Looking ahead, AWS is also making itself a critical cog in the “Internet of Things” cloud-connected appliances from cars to thermostats that experts say could be the next wave of consumer tech.
Alexa, a voice-activated artificial-intelligence platform that’s proved to be a hit with consumers who interact with it through the Echo home speaker, lives on the AWS cloud.
Growing this business takes a lot of people. A search for “AWS” on Amazon’s job website yielded 2,284 open positions just in Seattle — nearly a third of the jobs the site says are open at the company’s South Lake Union headquarters. Amazon declines to comment on hiring, other than to say there are “thousands” of AWS employees.
AWS came out of Amazon’s own gargantuan needs as a fast-evolving Internet retailer. In a 2007 letter to shareholders, Amazon CEO Jeff Bezos wrote that AWS targeted “broad needs universally faced by developers,” which Amazon knew well from “scaling Amazon.com over the last twelve years.”
“We’re well positioned to do it, it’s highly differentiated, and it can be a significant, financially attractive business over time,” he wrote.
The business grew quickly, but it required a rethinking of traditional approaches. In a blog post Friday, Amazon Chief Technology Officer Werner Vogels said early developers knew they couldn’t upgrade the software through usual maintenance outages; businesses needed the service at all hours.
Vogels, citing a quip by a colleague, said the evolution of Amazon S3, AWS data-storage service, “could be described as starting off as a single engine Cessna plane, but over time that plane was upgraded to a 737, then a group of 747s, all the way to the large fleet of Airbus 380s that it is now.
All the while, we were refueling in midair and moving customers from plane to plane without them even realizing it.”