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AWS at 10: How the cloud giant shook up enterprise IT

A decade on from the launch of its first cloud service, the UK managing director of Amazon Web Services reflects on its first 10 years in business

The executives at Amazon Web Services (AWS) are fond of relating stories about startups using its technologies to quickly and successfully break into markets historically dominated by older, slower-moving enterprises.

The company’s decade-long rise to market prominence has followed a similar pattern, with AWS using its portfolio of low-cost and readily accessible cloud infrastructure services to rapidly encroach on the territory of its larger and longer-established enterprise IT rivals.

Having initially (and successfully) marketed its services as a way of helping startups get their ideas off the ground more quickly, the company has used this messaging to convince enterprises from a wide range of verticals to run more of their IT operations in the cloud too – and with great success.

“What we have seen over the past decade, and will continue to see into the next, is the rise of these very large, internet-scale companies – such as Netflix, which has over 42 billion hours of content available to users at any given time via the cloud,” Gavin Jackson, AWS managing director for UK and Ireland, tells Computer Weekly.

“These types of firms will continue to disrupt established companies over time, and what they are doing in response is using cloud to harden themselves to this disruption by becoming more agile.”

Landmark events in the cloud firm’s first decade in business included securing the custom of the CIA, and Netflix outlining its commitment to go “all-in” on AWS, says Jason Deck, vice-president of strategic development at AWS partner Logicworks.

“The defining year for AWS was 2014 – the year that enterprises finally ‘got’ the cloud and AWS transformed from a startup’s darling to an enterprise juggernaut,” he says.

“The publicity around both Netflix and the CIA adopting AWS helped the world understand that AWS is not just a test/dev sandbox, but a highly secure and automatable platform suitable for even the most risk-averse organisations.”

Ahead in the clouds

In the time it has taken AWS to sign up one million active customers and establish itself as a bone fide $10bn run rate business, many of its competitors have been hurriedly and expensively trying to work out what role (if any) the cloud would play in their enterprise portfolio.

The industry has already seen Dell back-track on its 2011 pledge to build an OpenStack-based public cloud, before opting to resell the wares of providers already operating in the space.

HP called time on its public cloud service in January 2016, having decided on a similar approach to Dell that would see it partner others to provide these services to customers.

The firm’s most recent results showed it banked a profit of $687m during the final quarter of its 2015 financial year, and with revenue up 69% on the previous year, the AWS juggernaut  shows no sign of slowing down.

A research note recently circulated by Canadian investment bank RBC Capital Markets suggests that 2016 could be a landmark year for AWS – with its profits reportedly on course to pass those of its retail arm,

Jackson joined AWS seven months ago, ending his four-year tenure at rival cloud firm VMware. As someone who has watched the company grow from the sidelines for many years, he points to the second quarter of 2015, when released its first breakdown of AWS’s contribution to the company’s overall business during its financial results.

Not only did this put paid to speculation about how much money AWS was bringing in, but also showed its competitors what they were up against in the public cloud.

“That was a time of realisation for a lot of people – Wall Street, shareholders and our competitors – and since then we have seen many of our competitors pull back their investments on public cloud,” says Jackson.

“It was not necessarily as a direct response to that, but because they realise it is very hard to keep up with the very large capital expense you need to deploy as a cloud provider.”

Changing the face of tech

AWS celebrated its 10th anniversary on 14 March, which the company marked with a series of retrospective blog posts looking at how, since the release of its cloud-based Simple Storage Service (S3) in 2006, the cloud market has evolved, and how AWS’s activities have contributed to it.

In one of these blogs, James Hamilton, a senior principal engineer at AWS, references the disruption the company caused by freeing end-users from the hassle of traditional procurement procedures by allowing anyone with a credit card to obtain the storage they need.

“There was no required proposal for financial approval, there was no request for proposal, no vendor selection process, no vendor negotiation, and no datacentre space needed be found,” he writes. “I could just sign up and get working.”

While that sentiment might hold true for startups or small groups within enterprises embarking on test and development work, the self-service element of provisioning the AWS cloud was always going to prove trickier for companies looking to embark on large-scale infrastructure or legacy application migrations.

For that reason, the company has taken steps to beef up the support it offers enterprises looking to get up and running in the cloud, through expanding its own customer support operations, and partnering enterprise-focused third-party IT providers.

Promises to end-users

This has been an important part of the company’s evolution, says Jackson, and ensures that the promises to end-users about how using cloud can cut costs and improve business agility are delivered.

“Tesco Bank is a good example of that,” he says. “They had an application that was costing them £3,500 a month and it would typically take them three months to deploy an application like that using on-premise infrastructure.

“When they migrated to AWS, it cost them 13 pence a month, and they can deploy a new version of that app within days.”

The fact that Tesco Bank, Aviva, Capital One and others are entrusting their financial data to the cloud is notable in itself, says Jackson, and indicates how enterprise attitudes towards public cloud computing have changed over the years. 

“When you have Capital One saying they can be more secure and stay ahead of the cyber criminals by using cloud, rather than through building their own capabilities, that’s a great validation for the cloud market,” he says.

“The fact is, the bad guys are using up-to-date technology and can iterate very fast, and if you’re running your own infrastructure and adhering to version controls for software and hardware, you’re really a sitting duck.”

Sign of things to come? 

The day after AWS celebrated its 10th anniversary, Dropbox – a major S3 user – published a blog post outlining the work it had done to curtail its use of the service, resulting in 90% of its user data now residing on its own, on-premise storage infrastructure.

According to Dropbox, this move makes sense because it is now operating at such scale that the economics of building its own infrastructure works out better value than using cloud.

This change in strategy has raised a few eyebrows within the IT industry, particularly as so many enterprises are currently winding down their on-premise investments and moving more of their infrastructure to the cloud – not out of it.

While some have seized on this news to suggest the soar-away success of AWS might be coming to an end, the fact is that Dropbox is something of an anomaly, says Simon Robinson, research vice-president at market watcher 451 Research.

“AWS has never looked stronger – it’s just that Dropbox has become too big to rely entirely on AWS,” he tells Computer Weekly.

“The number of companies in this situation is always going to be relatively small, and our data indicates that more organisations are viewing cloud – and AWS in particular – as an increasingly viable option for storage workloads, such as backup, disaster recovery and archiving.”

Read more about AWS

Deck says the other thing to remember about Dropbox is that AWS has a file sync and share service of its own, called Zocalo.

“Dropbox’s announcement has nothing to do with the quality of AWS’s storage services, and everything to do with Dropbox trying to differentiate itself in the marketplace,” he says.

“For Dropbox, storage is their differentiating service, so – in that way – it makes sense they would want to build their own internal capabilities.”

As time goes on, says Robinson, we are likely to see enterprises move more of their workloads and applications into the AWS cloud than out of it.

“Any significant user of public cloud is always going to be evaluating whether the ongoing cost is sufficient to offset the direct and ‘soft’ costs associated with building and maintaining internal infrastructure,” he says.

“We have seen other companies move workloads from the public cloud to on-premise, and there is a certain amount of ‘private cloud repatriation’ going on. But some of those companies that moved from cloud to on-prem have now moved back to cloud, Zynga being an example.”

Innovation is what we’ve been doing for the past 10 years, and I can only see that continue over the coming decade
Gavin Jackson, AWS

Regardless of which analyst’s view of the market you subscribe to, AWS has a firm hold on the cloud infrastructure services market right now – but how does it intend to sustain this as it enters its second decade of existence?

“Innovation is what we’ve been doing for the past 10 years, and I can only see that continue over the coming decade,” says Jackson.

About 95% of the new products and services AWS brings to market are in direct response to customer feedback, he says, and the remaining 5% are “invented on their behalf”.

In 2015 alone, the company added 722 new features and services to the AWS product portfolio – 40% more than in 2014.

“What we will never do is rest on our laurels,” says Jackson. “We have very strong mechanisms for hearing the voice of our customers, and reacting in kind. Through that, the next 10 years will be filled with new innovations and progress for our customers.”

And while AWS regularly attracts press attention for dropping the price of its services, Logicworks’ Deck says it is the pace of innovation that should ensure it remains ahead of the pack for a long time yet.

“AWS is the clear market leader, and we do not think it is because of price,” he says. “AWS will remain in pole position by innovating around ways that workloads can be migrated to the cloud and deployed more easily, such as deeper container integration, serverless computing and additional native security features.”



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