WHY Did Amazon Share Its Secret Cloud Recipe?

Amazon is huge. It is the largest online retailer of the world selling anything and everything from electronics to groceries. It has one of the world’s most enviable hardware businesses producing ebook readers (kindle), table and ‘Echo’. And the latest addition to the long list of Amazon products is its entertainment section Amazon Prime Video giving direct (and increasingly tough) competition to Netflix.

To put it in numbers, Amazon sold $32bn worth of stuff worldwide in its last financial quarter.

However, what if I tell you that there is another section of Amazon business that is not related to all of the above and is generating one-tenth of the company’s revenue. That division of Amazon is called as Amazon Web Services or AWS.

Why Amazon Launched AWS?

AWS is the section of Amazon that sells cloud computing and storage services to the outside world as well as the company itself. While there are several companies selling server bandwidth and several others selling cloud storage, AWS sells both and more.

In AWS, you can buy bandwidth to host a website, storage space to hold a database as well as processing power to run software remotely. AWS allows companies and individuals use as much storage and bandwidth they need and pay only for what they actually use. 

Amazon is the world’s largest online retailer facilitating millions of transactions every day. Somewhere along the way, the company realized that it needed to build new technology to make it easier to run its vast retail operation.

Jeff Bezos, Amazon’s founder and CEO along with the rest of the braintrust realized that if new technology is the need of Amazon and its partners, it is needed for the rest of the world too!

And then come Elastic Compute Cloud (EC2), Simple Storage Service (S3) and an array of various other Amazon Web Services that would make it easier for companies and individuals to run their own operations regardless of what those operations might be.

EC2 is an internet service that provides instant access to virtually unlimited collection of computing power. Which means with EC2, you can use any amount of computing power to run complex software application you like. S3 lets you store vast amounts of computer data on clouds without setting up on your own hardware. 

From a website such as Instagram to banking websites and heavy on content applications, you can use AWS to run just any online application your like.

Rather than loading your software on physical computer servers, you have set up in your company’s data center, you can load it onto virtual servers set up in your web browser. You can have as much computing power and as much storage space you need. And whenever you need more virtual servers, you can have them.

It has changed the way we think about computing. So it doesn’t come as a surprise when Amazon Web Services holds as high as 47% of the market regardless of other prominent players like Google and Microsoft entering the market.

What Makes AWS so Popular & Reliable?

When AWS was launched, it was mainly aimed at allowing the customers to buy space and time on Amazon’s computers. However, Amazon spent many years trying different services and gradually opening each one of the service-led structures for outside customers. After trying several services, the company coalesced mainly into four services namely storage, computing, database and internal messaging.

As mentioned above, out of all the services, the two most widely used AWS are S3 and EC2. This is because storage and computing power is the basis of almost everything done on the Internet.   

Before AWS was opened for all, if you wanted to buy computing power and storage on the internet, you had to spend money hiring server time for it. This means paying monthly fees for the storage and any bandwidth you have opted.

This means if there is a sudden rise in your website traffic, it would crash under the load.  Whereas if you buy enough server bandwidth to support heavy traffic, you would be paying for things you aren’t using.

AWS came as a boon for companies giving flexibility a whole new meaning. Unlike earlier, when you need to either buy additional server bandwidth to allow scaling (and pay huge amounts for unused space) or risk your application crash in case of sudden spike in traffic, AWS has made it easier and affordable to scale-up. 

To put it in perspective, AWS has reduced the cost of cloud storage from $4 to $5 per terabyte per month to $1. So, it doesn’t come as a surprise to AWS’s standalone sales grew an eye-popping 43 percent since last year. And the latest trend shows that this level of growth is likely to continue in the coming years too.

The Elite Clientele List of AWS

Image source: Slideshare

As of today, AWS has more than a million customers worldwide including some of the biggest names in the industry. Currently, Apple is spending more than $30 million a month on AWS services. It is estimated than Apple will spend more than $360 million on AWS services in 2019 whereas it spends approximately $350 million in 2018. Other major clientele of the company includes Lyft that agreed to pay AWS at least $300 million for cloud services through the end of 2021, while Pinterest said it has committed to spend at least $750 million by a period of six years ending 2023.

Netflix, Twitter, Facebook, LinkedIn and Quora too are spending heavily on AWS services with an annual spend of each reaching nearly $200 million.

If we talk about products EC2 is the most successful product of the entire AWS range. Apart from companies like BMW, Samsung, Nokia, GE, Quora, Tata Motors, Spotify, Schneider Electric, and Siemens, an endless list of other companies are using AWS services too. You can check out the entire client list here.

The Future of AWS

Amazon has been making many futuristic changes to AWS and has also planned many new services that can be added to the array. Some of the upcoming products/changes in AWS includes –

1.  AWS has announced the release of Quantum Ledger Database (QLDB), an encrypted, transactional ledger that aims at bringing blockchain to the mainstream.

2.  AWS has opened up Personalize, real-time personalization and recommendation engine we have all experienced on Amazon, to the public. It will help all the retailers to leverage personalization. 

3.  AWS has announced DynamoDB On-Demand which can be used by companies to predict purchase flows. This will help them manage physical inventory and allow them time series flexibility has always been a thorn in the side of database managers. Having tools—including the new Forecast—that allow organizations to make predictions based on historic data solves for that pain point without needing to hire machine-learning experts.

Conclusion

While AWS accounts for nearly 11 percent of Amazon’s total annual revenue, its operating cost is pretty low, making it one of the most profitable ventures of the company.  And the fact that many elite customers have committed an increasing amount of money for the use of AWS services in the future shows that the future of AWS is very bright. 

AWS is a beautiful example of democratizing AI and ML. It is building high-end tools and then translating them into ML and AI programs. Thus the data scientists and developer community are able to leverage what otherwise would need specialized education. To people who want to make a career in AWS or have a full-fledged career in cloud computing, opting for online courses in cloud computing and the related field is the best way to advance & enhance!