Amazon’s Top Techie, Werner Vogels, on How Web Services Follows the Retail Playbook

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the company’s data centers, customer data wouldn’t be lost. By 2004 and 2005, this vision for “cloud computing” started taking shape at what is now called Amazon Web Services.

Having secure, remote servers to handle huge peaks in demand during the Christmas season meant that Amazon had a lot of excess capacity during other times of the year. And that’s what has enabled the company to rent out its cloud computing capacity to all sorts of small tech startups, helping to drastically lower startup costs for hundreds of Internet companies in recent years. The Amazon cloud computing infrastructure even caught my eye (as Xconomy’s biotech editor) this summer, when I started hearing that more and more biologists are using this service to store and access vast piles of genomic data coming off the new breed of fast and cheap gene sequencing machines.

A key to juggling all these tasks was to make as much of this cloud service automated as possible, Vogels said. During holiday seasons of the past, when Amazon engineers were asked if they could return some of the excess server capacity after Christmas, they often said something like “No, we’ll hang onto it, just in case we need it,” Vogels said. But it was inefficient to sit on all that capacity, and better to design a system that could automatically scale up and down.

“There’s no engineer anymore involved, there’s no emotion, just business rules decide how to use the capacity,” Vogels said.

Vogels’ talk was aimed largely at the engineers in the open-house crowd , and got fairly technical at times. But as a business writer listening to Vogels, it does strike me as a trend of lasting importance when companies like Amazon and Microsoft make big investments in cloud computing infrastructure. It’s the sort of thing that will make it possible for startups to rent processing and storage capacity and pay as they go, instead of spending a lot of precious startup capital on their own equipment, freeing up more time and money for whatever the real business idea is.

And Vogels stressed that Amazon’s same customer-focused mentality in the retail business extends to how it treats business customers who use its cloud infrastructure. “In Web services, it’s about security, reliability, scale, and low cost,” Vogels said. “These are things that our customers will forever appreciate. So you put a lot of energy into innovation, that continues in those dimensions.”

If Amazon is successful at doing that, economies of scale will improve, and prices will come down even further, just as with Internet retail. “We’re applying the same principles,” Vogels said.

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2 responses to “Amazon’s Top Techie, Werner Vogels, on How Web Services Follows the Retail Playbook”

  1. Amazon Web Services spokeswoman Tera Randall wrote in to raise a point of clarification. I left this event before the end of the Q&A session, in which a question was raised about whether excess infrastructure capacity surrounding holiday peak demand for drove the development of Amazon Web Services. Here’s what she had to say:

    “It is inaccurate to suggest in any way that AWS was started because of excess capacity had available. AWS was started because we had gained a core competency in running large, scalable infrastructure and realized that many developers and businesses could benefit from this experience. Our goal has always been to enable businesses and developers to use our web services to build sophisticated, scalable applications.”

  2. Luke,

    Darnit. I liked the mythical excess capacity story way more than the officialspokeswoman version. It seemed real and accurate from my experience in startups. Not even Amazon can anticipate EVERYTHING…I like the idea that even they might be opportunistic and responsive rather than always coldly strategic.