UPDATED 15:58 EDT / JUNE 30 2015

AWS (Amazon Web Services) breakout moments with more on the horizon

A.Jassy_3-(April-2014)_SMALLERToday, Fortune did a story on Andy Jassy the leader or Amazon Web Services or AWS.   I wrote on Forbes in January the first profile on Jassy . In that post we discussed that the TAM (total addressable market) is in the “trillions”.

The business world learned just how big AWS was in April, when Amazon for the first time broke out its numbers in a quarterly earnings report. AWS was not only profitable, Amazon said, but on track to earn $6.3 billion in revenue in 2015.  Wikibon’s Dave Vellante thinks it’s more like $10 billion this year. 

The breakout of the financials shines a spotlight on Jassy’s and AWS achievements.  This was no easy task.  From day one all the players in the industry were dismissing AWS as a viable strategy.  Even with incredible successful product execution and financial performance, AWS is under pressure from the big players like Google, Microsoft, Oracle, HP, EMC/VMware, and IBM. 

A Harvard MBA, Jassy has been with Amazon since the early online bookstore years. It was when he took a unique position as “Jeff Bezo’s Shadow” in the early 2000s (essentially a chief of staff/technical advisor role) that the seeds of AWS would be planted, take root, and then take off.

By this time, Amazon was no longer just an ecommerce bookseller. They’d launched their affiliates business, providing ways for third-party merchants to feature Amazon products, and they’d begun building web infrastructure for other large retail partners. Jassy’s shadowing responsibilities kept him at Bezo’s side daily, and they spent most of their time together surveying the business and asking themselves two questions: What is the business doing well, and what is it not doing well? A series of realizations began to unfold during this process that would hopscotch the business toward the development of AWS in fairly short order.

Realization 1
As Bezos and Jassy dug into and examined their own internal development process and what they were doing for affiliates and partners, they kept bumping into one particular problem. What the business wasn’t doing well was accurately forecasting the time it took to complete projects—both internal and external. Providing a solution for Target, for example, one of their Amazon’s early merchant.com deals, was “far more painful than we thought it would be,” Jassy notes.

Way too much time was being spent building the same old infrastructure—storage and database solutions—over and over again. One product development lead after another pointed a finger at infrastructure development as their biggest pain point. Bezos and Jassy had pulled up the rug on Amazon’s development process and discovered a deep thirst for internally scalable, reliable infrastructure services.

Realization 2
Then, recalls Jassy, Amazon began hearing the same things from external partners who knew and understood the space well and were also expressing frustration. First one, then two, then three CEOs declared infrastructure services a top priority and asked Amazon to take a hard look at helping them with data warehousing. It was too expensive, hard to manage, required too much commitment and was riddled with pricey upgrades. It seems in these early days of widespread Internet adoption, a collective grumbling emerged over how much hardware was required to operate at “web scale”—interact globally in real-time with huge user bases. No one had the stomach for the banks of servers they’d have to swallow in order to operate a global online presence.

Amazon Andy JassyRealization 3
Along with Google and Yahoo, Amazon was one of the first businesses in the world to operate at web scale, so this was a development process they knew well. When Bezos and Jassy got around to discussing what the business was doing right, building good infrastructure services floated to the top immediately.

“We’d realized in the first ten years we’d built an infrastructure competence deep in the stack—reliable, scalable cost effective data centers to grow the Amazon retail biz the way we needed to,” says Jassy. “But we’d built Amazon so quickly that a number of the pieces of the platform had become entangled.” To develop solutions for external partners, Amazon would need an effective way to communicate with them via hardened APIs, and that meant decoupling the entangled parts of the platform.

“Under the gun to deliver,” Jassy says, “the learnings were magnified.” In the end, the experience did nothing less than change the way Amazon thought about development. They separated data from the presentation layer operating under the theory that their merchant associates would do far more interesting things with the data than Amazon would ever have the time to do itself. And that’s just what happened. Those customers who used the new API increased conversion rates on their web properties by 30%.

Is AWS Recession Proof?

Born out of the ashes of the dot.com bust in the early 2000s, Amazon also weathered the 2008 downturn well. “The 2008 – 2009 economy was rough and we didn’t know what that would do to this fast-growing AWS business,” Jassy remembers. AWS had huge adoption among startups, but in that rough economy, many were not getting funded. “But a lot did and I can’t help but to think that AWS was a part of that,” says Jassy. AWS enabled innovators to prove the validity of their ideas in the marketplace, mitigating a lot of risk for investors.

“The recession actually accelerated the rate at which enterprises began looking at AWS as well,” Jassy continues. “CIOs and CFOs were hard pressed to lower variable expenses and were looking hard at every project. I think the recession advanced enterprise consideration of the cloud by at least two years.” When enterprises did come knocking, Jassy remembers the whole team was thinking “This is happening faster than we thought—we should staff up.”

But it wasn’t done in frenzied rush like so many high-growth tech companies are famous for doing flush with lots of cash from venture capitalists. AWS was careful in its’ early expansion period. “We think about our hiring a lot,” says Jassy. “Businesses often compromise on hiring characteristics in the name of rapid growth, but we’re vigilant about hiring builders—inventive, entrepreneurial, creative types that want to operate what they build,” he explains, ”We want missionaries, not mercenaries—people focused on building businesses that last beyond their tenure at the company.”

In typical market-driven fashion, they then fleshed out the AWS business according to the feedback they got from customers. “Some customers never talk to us and don’t want to. Others really want people services,” Jassy says. “The enterprise requires more human contact—dedicated account managers that know their business and their workload as if they were part of their team. Other customers have voiced the need for help thinking through their architecture and building migration plans, so we’ve added solutions architects.”

When it comes to product development, Jassy cites the same market-driven approach. When customers said that for archival purposes, they’d trade latency for lower prices, AWS built Glacier, an archival and back up storage service at a penny per gigabyte per month.

The Future of Computing

So what about the chess match? Will there ever be a clear winner? Will server racks and datacenters in fact go the way of dinosaurs and dodo birds?

“There’s substantial migration happening now,” says Jassy, and it’s delicate work. It requires thought and care, attention to legacies and dependencies that have built up over time, and can take 2 to 4 years to complete. “But repeatable migration patterns can be built,” he adds, noting that all 1000 of Unilever’s websites sit on AWS, and that 500 of them were migrated.

“Our point of view is that in the future very few companies will own their own data centers, and those still in operation will cover a small footprint,” Jassy says. “The vast majority of workloads will go to the cloud. We’re just at the beginning—there’s so much more to happen, especially in the mobile space,” he adds, “Most people believe mobile devices will one day become the primary computing shell. The smaller the device, the more the cloud is needed.” Eventually, Jassy sees on-premises workloads dwindling to only those that involve regulatory or compliance components, or have some other cultural reason for not being migrated. Traditional enterprise IT players see things differently. Joe Tucci, EMC’s Chairman, for example, has often stated that he believes there will be very few public clouds and many private or hybrid clouds in the future. Can both camps be right or is this a war of wordsmithing?

Currently, AWS does a lot of business in its version of “hybrid or migrated workloads”—apps built on premise but that want to reach out to the cloud to supplement. NASDAQ’s Market Watch application, for instance, was built and still runs on-premises, but uses AWS for all their analytics and data crunching, moving data in and out of the cloud several times per day. Nokia mobile apps use AWS Red Shift analytics because according to Jassy it’s half the price and twice as fast as their old on-premises solution. Samsung SmartHub runs on AWS, but their payment transactions are on-premises. According to Jassy, customers seamlessly move between the two without ever knowing it.

The pace of innovation at AWS continues to run very high. “In the sixteen years I’ve been here, I’ve noticed how easy it is to focus on the shiny new pennies,” says Jassy, alluding to the natural tendency for Amazon culture to get excited about new capabilities. He then tosses out a list of AWS services with the enthusiasm of someone describing their first trip around the galaxy. “Elastic Compute Cloud, Elastic Map Reduce, S3 which stores trillions of objects, Dynamo DB—a very fast, high throughput, low latency, non-relational database, RDS Service, Mobile Push Notification—demand for these services just keeps accelerating. We’re waiting for it to attenuate and it just hasn’t yet.”

More Videos from AWS:Reinvent Conference powered by @theCUBE

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http://siliconangle.tv/aws-reinvent-november-11-14-2014-las-vegas-nv/

Andy Jassy Keynote at AWS Re:Invent 2014


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