How to Turn Cloud Computing Into Big Business—A Peek Inside Amazon Web Services

On Tuesday night, I attended an intriguing event in the Washington Technology Industry Association’s cloud computing series, on “Scaling Into the Cloud with Amazon Web Services.” It was held at Amazon’s Beacon Hill headquarters in Seattle, in a room with gorgeous, sweeping views of the downtown skyline. The talks, given by Amazon and two prominent local startups—Bellevue-based Smartsheet and Seattle-based Picnik—provided an inside look at Amazon’s cloud computing business, how it works, and how its customers are using it to help run their own companies. (Xconomy has reported on some other local startups’ experiences with Amazon’s Web services here.)

Adam Selipsky, a vice president of Amazon Web Services (AWS), began by giving an overview of the company’s strategy and thinking about cloud computing. Selipsky joined Amazon in 2005 (previously he was a vice president at Seattle-based RealNetworks and a Harvard University alum), and he oversees many aspects of the business, including developer support, product strategy, and product management. “We found ourselves in the middle of a new industry,” he said. “About a year and a half ago, the term ‘cloud computing’ emerged around us…I’ve come to know, love, and adopt ‘cloud computing.'”

As a pioneer in the field, Amazon had been experimenting with Web services since 2002. Selipsky described the cloud computing concept as “individual components that talk to each other at the edges, but have hard shells.” So when you go to a webpage to buy a Harry Potter book, say, what you’re seeing is the result of 200-300 online components coming together to render that page. To make its retail sites super-reliable, Selipsky said, Amazon spent years “building modular, loosely-coupled infrastructure” to handle things like spikes in demand and quiet periods.

It was only natural that Amazon, once it figured out how to do it, would sell its service to developers and IT professionals. “Amazon is fundamentally a technology company,” Selipsky said, “not a bookseller, not a retailer.” As he explained, developers want an Internet service—whether it’s for hosting their website, backing up files, or processing queries and orders—that is reliable, scalable, fast, easy to use, and cheap. Instead of investing upfront in hardware, servers, and coordinating a large team, developers can use Amazon Web Services to gain access to storage and computing via the Internet cloud. “Our core tenet was, we wanted to level the playing field and make our pricing accessible to anyone,” Selipsky said. “Every time we get cost improvements, we lower our prices. And pass those savings on to customers.” (He didn’t give specifics to back this up, but Amazon charges on the order of 10 cents per hour of computing per server.)

Amazon Web Services started out in 2006 with a data-storage service, called S3. It then progressed to doing computing and processing with its Elastic Compute Cloud (EC2). Now it provides companies access to online database, content delivery, and secure payment services—as well as outsourcing of tasks through what it calls Mechanical Turk. That service uses the skills of people worldwide who sign up to complete small tasks (like classifying photos) for small payments.

And the business has taken off. Although Web services represented less than … Next Page »

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6 responses to “How to Turn Cloud Computing Into Big Business—A Peek Inside Amazon Web Services”

  1. Brent FreiBrent Frei says:

    Amazon’s cloud computing offerings and approach have really forced beneficial changes in pricing and delivery models across the industry. I was detailing the hookup times and costs for the various services we consume at a business dinner the other night to a group of tech execs. Every one of them asked for the contact information of our ops director Todd.