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Operations Planning

AWS's Vogels seeks IT pain relief as he builds the Everything Platform

Next Thursday when Amazon announces its first financial quarter for 2015, the world will discover the true size of Amazon Web Services and the scale of what chief technology officer Werner Vogels and colleagues have achieved in creating a platform that has changed forever the way businesses deploy IT infrastructure. Amazon has said it will break out details of AWS performance and that statement is likely to be a blessed relief for Netherlands-born, globetrotting Vogels who has become the face of AWS, helping to take it in just nine years from basic cloud processing and storage capabilities to today’s hugely popular and increasingly broad cloud environment.

How big is AWS? That’s the question Vogels and other AWS executives get asked on what must be an unremittingly frequent basis. One writer believes AWS could be hosting up to 5.6 million servers. And financially? Morgan Stanley says revenues could be $24bn by 2022. Pacific Crest has predicted $6.7bn in 2015 revenues. The FT cites JP Morgan saying AWS as a standalone business might be worth $44bn. That would mean that this one part of Amazon’s overall business is worth about the same as Salesforce.com and more than fixed points on the tech compass such as Yahoo, Adobe Systems or VMware. Most watchers already see AWS as the segment leader, despite intense competition from Microsoft, Google and many others, and Amazon executives have said many times that AWS could even become larger than Amazon’s vast retail operation.

Pain points

On Tuesday I spent 45 minutes with the genial Vogels on the eve of the AWS Summit event in London and he started by reminding me that when he joined Amazon in 2004 his role was purely internally focused and especially concentrated on how to support the growing scale of the Amazon business. But having realised that some of the work Amazon had developed for its own purposes could be useful for others it quickly began to zero in on the “pain points” IT leaders are facing. Listening to customers became a mantra for Vogels who describes himself as being in the “pain management” business and to this day, he says, AWS is guided by what CIOs and others are asking for and struggling with.

“In the early days AWS was focused on core components [but IT leaders] continued to ask us for more ... In the business of pain management it’s not just solving [problems] but solving them in a better way.”

That has led AWS to grow and morph, adding services such as database capabilities, Amazon Redshift for data warehousing, Amazon WorkSpaces for desktop virtualisation and more recently Amazon Glacier for governance/compliance, Amazon Machine Leaning for data analytics and acquiring Amiato for migrating data.

An example:

“Customers gave us the message that bring-your-own-device-to-work was [starting to] outweigh what the enterprise [IT] could bring.” By deploying AWS with Amazon WorkSpaces virtual desktops, however, these customers were able to get a standardised platform, consistent performance and high levels of efficiency.

Similarly, Vogels describes Amazon Redshift as AWS’s fastest growing service ever and says Glacier means companies don’t need to invest in a “second tape robot” that’s not as reliable. “In 30 years’ time will it still be readable? Can you be sure?”

IT lessons

Vogels says AWS “never was a matter of flipping” Amazon’s IT operations – security models are very different internally and externally, for example – but taking the knowledge of building highly scalable services and giving organisations the ability to have services that are highly available with unprecedented ease and transparent pricing. In part this was born of experience as, in previous roles before Amazon, Vogels had gone through the familiar hassles of dealing with vendors, the procurement cycle and so on.

“I’ve been the buyer of IT services,” he says. “Those were some of the most frustrating years I’ve ever had. I never felt these guys were on my side. You shouldn’t need to have to get $5m in investment for a comparison shopping service. Today, for $30,000 and a box of ramen you can go a huge way.”

This experience has also led him to an appreciation of clarity and AWS’s approach to development might well be unique, beginning as it does with… a press release.

“We start off with writing a press release and write in very clear wording what this product is going to do. You don’t have room for 20 paragraphs, you have room for one paragraph. Then you write the FAQ and then the ‘rude FAQ’ of the questions that you didn’t want people to ask. It forces us to build exactly what you want to build because if you let a lot of engineers [decide] they’ll build everything but the kitchen sink.”

Parent to unicorns

Vogels is rightly proud that a lot of today’s profusion of “unicorns” (companies with a pre-IPO valuation of $1bn or more) grew up on AWS, from Dropbox to Airbnb, but says even he is surprised by the spread of companies that have adopted his cloud platform.

“When we launched we were clearly focused on internet-style companies or businesses like Amazon but pretty quickly financial services companies were becoming significant customers so we realised there might be something broader.”

If Amazon has been characterised as the “everything store” then AWS might be dubbed the “everything platform”, providing the IT tools that let companies concentrate on what they do best.

Staying close to customers

“The ideal world would be that anybody could focus on things that matter to their customers,” Vogels says. “[Amazon runs on] a lean methodology and you have to remove waste that doesn’t lead to direct customer value.”

Citing Nicholas Carr and his influential Does IT Matter?, Vogels says that the fundamentals of IT don’t contribute to competitive differentiation and notes that after Carr “most companies started to look at IT as a cost centre, not a means of competitive differentiation”. But IT was short of options to make rapid change available to their bosses – even disaster recovery was a matter of backing up and hoping to restore the whole organisation’s information needs. By contrast, he says that cloud platforms bring flexibility, let unhappy companies switch suppliers and let IT become that most desired of outcomes – an enabler of business strategies rather than a blocker.

But just how far are we along in the journey towards cloud becoming the way the large majority of companies will operate most or all of their IT when the mainframe still roams the earth 25 years after its extinction was anticipated? Vogels detects some changes in IT spending patterns having an effect.

“I really think we are de facto [in some areas],” Vogels says. “The digital purse strings are not [only] held by the CIO; the chief marketing officer in quite a few cases has quite a substantial budget. In new products that are being delivered it’s cloud-first.”

Peace and wars

That said, Vogels is not one of those expecting Utopia now and foresees a period of peaceful coexistence with mixed on- and off-premise approaches.

“It’s not like we think datacentres are going to go away but there will be less and less [of this approach] over time and the whole hybrid story is in good harmony [with AWS’s approach to single sign-on, identity management and so on].”

What about the price wars that have seen the major cloud platforms (Microsoft, Google et al) periodically lower charges: is that sustainable?

Vogels points to the economies of scale AWS has managed through the incredible scale of its operations and the “quite a bit of innovation” it has achieved in datacentre networking, power management and server design. AWS is “comfortable with managing a high-volume, low-margin business”, he adds.

Of course, next Thursday’s trading announcement will also lead to yet more speculation over whether AWS sits nicely alongside the Amazon e-commerce business. But without giving an opinion on whether AWS would be better off as an independent, Vogels makes it sound like the two are already running along demarcated lines.

“We try to separate AWS and Amazon the retailer,” he says. “It’s just another customer on the platform. If Netflix got an inkling [that there was any preferential terms for Amazon Instant Video] that would be the end of the business.”

And with that Vogels is off, heading back to the company that is providing the IT platform for one-person businesses, startups, blue-chip enterprises and governments. It’s a huge deal, effectively changing the way that organisations start out, manage change and achieve operational excellence. How huge? In money terms at least, we’re about to find out.

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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