Now that Amazon Web Services Inc. is disrupting the entire information technology business and running at an $18 billion annual revenue run rate after scarcely 11 years in business, it almost looks like it was easy.

But to hear AWS Chief Executive Andy Jassy (pictured) tell it, it was the result of the same kind of painstaking process parent company Amazon.com Inc. uses to sift through myriad potential services to offer. People at Amazon call it “working backwards,” starting not with the product but with a customer need and establishing a set of technology requirements to satisfy that need. AWS works the same way.

In this final of a three-part exclusive interview with SiliconANGLE, the gravel-voice CEO talked about how Amazon identifies and settles on which new products and markets to pursue. “It’s one of the hardest parts of all of our jobs,” he said.

One big market where AWS continues to hope it can expand is China, where it recently sold more than $300 million worth of data center assets to its Chinese partner and faces a formidable foe in Alibaba Group Holding Ltd. Jassy revealed that Amazon plans to open its biggest cloud region in China in the next few months to pursue its growth strategy in the huge market against the odds. “We have a lot of growth ahead of us in Beijing and in China,” he said.

In another sense, however, AWS is staying put — that is, inside Amazon. Countering speculation that the retail giant could spin off AWS, which of course is a very different business from Amazon’s core, Jassy explained why it’s not in the cards anytime soon.

This interview was edited for clarity. You can read Part 1 here and Part 2 here. Jassy also will speak at the Wednesday morning keynote at AWS re:Invent in Las Vegas. By many accounts it has become the premier conference for cloud computing, and Jassy is expected to announce new services, partners and customers at the show.

Part 3: Managing the cloud

Taking the cloud international

Q: What’s the growth strategy for you guys as you look at the global horizon? You’ve got Europe, which is a battleground. And then you’ve got Asia-Pacific with China, where you recently announced an asset sale to your Chinese partner.

A: We have a huge amount of growth opportunity in the U.S. and outside of the U.S. Actually Europe and Asia, Asia in general and China, if you consider China its own entity, are all really large businesses for us. And yet, we’re so early.

Q: There was some confusion on your China operations because of the asset sale. Can you clarify the opportunity you see?

A: We have a really big business in China. We have a lot of customers in China who use AWS for regions outside of China. And then we have a lot of customers in China who use us in our Beijing region. And then, of course, we have a region in Mingsha coming in the next few months that I think will be our biggest region in China, because the cost structure will be even better than it is in Beijing.

I think if you look at how many computer science graduates China’s graduating every year, it’s like a quarter of a million people every year just with a degree in computer science. There’s a lot of invention and a lot of building. One of the things I notice when I have a chance to spend time with Chinese customers is that they want to use the leading platform. They don’t want to go to the platform that just has a fraction of capabilities. So I think we have a lot of growth ahead of us in Beijing and in China.

Managing AWS

Q: As an executive, how do you handle all of this personally?

A: I don’t have any secret. I think everybody has their own formula for what gives them whatever harmony they want. I wake up every morning at 6 a.m. I work out for an hour. I usually have it to myself. I’m able to read and do a little bit of email when I’m working out on the elliptical. It’s really a great way to ground myself in the morning and also feel like I’m doing something besides work or I’m doing something healthy.

Anybody who is managing an organization or a business that’s got any kind of scale has to constantly looking at where they’re spending their time and what mechanisms they’re using to inspect the business, and keep adjusting that, because your business changes and the size of it changes. And the geographic scope and the scale of what you’re doing changes. So I try really hard to kind of keep looking at where I’m spending my time and where I think that my being in meetings is adding value and where the team doesn’t need me to be in those meetings.

Q: I would imagine that with all this growth, there’s so much opportunity. I mean, your eyes could get too big, bigger than your stomach, as they say. But saying “no” can be disempowering to employees and partners: “No, I’ll pass on that billion-dollar opportunity.”

A: We don’t pass on billion-dollar opportunities very often. If we believe they’re billion-dollar opportunities.

Q: But how do you filter it?

A: There’s no perfect way to determine which things to do and what not to do. I think it’s one of the hardest parts of all of our jobs.

You have to have a great team. And everybody can say they have a great team, but it’s very different in practice to have a great team that knows how to work together, that knows how to argue and debate with one another, but then pull the same way when you make the decision. We have a set of mechanisms we use to try and make decisions. We get a lot of customer inputs and feedback between our forums and our customers that like to tweet and blog and our sales team and our support team and our evangelism team. Then we are able to collect that data in a way where we’re able to kind of filter: Which are the ones that we’re hearing consistently and which are kind of one-off comments that we’re not hearing consistently?

And then we sit down in a room and try to decide which are the ones that we think have enough resonance with customers more generally that we should build a working-backwards set of documents. And then we ask teams to go propose them. And then if we like them, we’ll fund those with separate single-threaded teams that aren’t distracted by something else.

Q: Is that the company’s think big-idea concept?

A: No, internally we have a competition where people can submit big ideas, which is just a way of our being able collect feedback across the entire company. But we do that inside AWS every day.

Some of the very best ideas that we do and we pursue come from the lowest levels of the organization. And everybody feels empowered to write up a working-backwards set of documents to propose an idea. And we don’t say yes to everything, but we say yes to a heck of a lot more than most other companies.

Q: How do you engage with your customers?

A: I did a couple customer conversations on Friday. I spend several hours a week with customers. And it’s really what customers need me to do and what our team asks me to do. And so sometimes we have customers who are making a really big migration, and there are key milestones, and they want to talk about what they’re planning on doing and see if we have any feedback on that. Or make sure they know that they have our support as they’re making a big cut-over.

Sometimes it’s customers who are right on the cusp of a decision, and before they make a decision, they want to make sure that they get to know the leaders of the business and what they care about and how they treat customers and how they partner with customers and what the relationship and the interactions will be moving forward.

Sometimes, even if customers don’t ask to have a conversation, there’s a set of customers that I seek out all the time whenever I’m in town that I just like to hear what they’re doing, and I like to hear how they think we’re doing. And I like to think to hear what they think could be better, because the only way that you can get better is to know what issues people are encountering and what they want you to do.

Will AWS spin out of Amazon.com?

Q: There’s always talk about AWS spinning out of Amazon.com. Is that in the plan?

A: There’s no plan to spin out AWS. I have been at Amazon for so long that I’ll never say never about anything. Almost every year of my adventure at Amazon has been different from what I might have expected, but we don’t have any plan to spin out AWS. I think when companies choose to spin out a division, typically it’s either because you’re not committing the capital that you need to that company or you just somehow want to get that division off your books for whatever reason. And I think if you know Amazon, we’re not really focused on what our books look like. We’re willing to be misunderstood for long periods of time.

Q: You certainly were, but not anymore.

A: We can always debate if people fully understand what Amazon’s [doing]. I think people still misunderstand pieces of Amazon.

If you look at our retail business, sometimes people will look at retail and say, “Oh, retail’s not that profitable,” because they’ll look at how we break it out on our financials team. The reality is that in our North America and international consumer segments are gigantic investments, billions of dollars we’re making in Prime Video and in our devices business and in India and the international side. We have a very self-sufficient, very successful retail business. But we’re continuing to make investments in lots of other areas.

Amazon has been so gracious about funding AWS with whatever capital needs it has to grow as fast as we possibly can, and because we’re not so focused on trying to make our financial statements go any different than they are right now, I think it’s unlikely we’ll spin it out.

Photo: Robert Hof