Amazon’s model required e-commerce technology at scale, which led to a new business opportunity

IT MIGHT seem like a giant leap from selling books to doing the heavy lifting for technology start-ups, but as Amazon.com’s chief technology officer Dr Werner Vogels tells the story, entry into the cloud computing market was a natural development from selling online.

The company originally went from hosting its own Amazon.com e-commerce site to providing the same service on its own platform to retailers such as Target and Mothercare.

“To support that, we had to develop a lot of unique technologies because the technology wasn’t developed for that kind of scale. It needed to be extremely scalable and reliable because those e-commerce businesses couldn’t afford a minute of downtime,” Vogels says.

Amazon Web Services began offering space on its infrastructure to software developers and businesses in 2006 and since then has grown exponentially – more than doubling every year, Vogels claims. “At this moment we have hundreds of thousands of companies using this in 190 countries,” he says.

The growth has made Amazon one of the leaders in the ever-evolving cloud computing market.

Vogels is the only Amazon executive apart from founder Jeff Bezos who speaks publicly on the company’s behalf. Last year readers of the ReadWriteWeb technology blog voted the Dutchman the most influential cloud computing executive.

Amazon’s decision to offer its own computing platform to innovative internet companies is a deliberate strategy, Vogels adds. “This has never been a case of us just selling excess capacity. This is a capital-intensive business and the only way we could go into it is to be fully aware of the size of business we could hope to achieve. We were aware this could be huge.”

For start-ups, cloud services’ primary appeal is in sparing them the expense of building and hosting their own information technology (IT). “The cloud is a great breeding ground for very low-cost ideas to get started. Five years ago, you needed between three to five million dollars to get started. These days you will need $10,000-$20,000 and that will get your business off the ground,” says Vogels.

He points to Orchestra.io, the Irish start-up formed just six months ago that launched on Amazon’s platform and has already been acquired by US software company Engine Yard.

Vogels contends that without access to services like this, the investment levels needed to run these businesses would bring many start-ups to a sudden stop. “If these guys had to do this on their hardware they would never have started. I like to call that the democratisation of business creation.”

Amazon Web Services’ growth isn’t exclusively derived from start-ups, but also features many well-established and large organisations including Nasa, the European Space Agency, Netflix, News International, Voyages-SNCF and PlayFish. “We also see enterprises using this as a way to experiment with new products, launch them to market and quickly iterate. We honestly believe this will be a great enabler of innovation in markets around the world,” says Vogels.

Cloud computing’s pay-as-you-use business model also turns the traditional approach to enterprise IT on its head, Vogels asserts.

“The old-style IT world was all about locking customers in and forcing them into long-term contracts and depriving them of choice. I believe everybody hates that. With the cloud, they will walk away if you don’t do a good job. We are continuously lowering our pricing – it’s part of the playbook we took from our retail groups.”

Ireland has become a key international location for Amazon Web Services. It first set up here in 2007 and expanded earlier this year, having acquired a former Tesco storage facility in west Dublin. Last year, Netcraft estimated the company alone accounted for more than one-third of all internet-facing data centres in Ireland.

Amazon doesn’t talk about individual data centres but about availability zones – a cluster of facilities treated as a whole. Ireland is home to its European zone, in addition to two availability zones in the US and another specifically for government use. It also has one zone in Singapore and another in Tokyo.

The company doesn’t reveal the locations of its sites, although it is understood to have at least three individual facilities in Dublin.

Customers can select a particular zone for latency reasons, providing faster access for users in the same geographical area, and for compliance with regulations such as Data Protection. “If you place your data in our European region, we guarantee that it will not leave that region,” says Vogels.

Another reason for Amazon’s zonal approach is that the other sites immediately take over the load in the event that one goes offline. That risk is consistently cited by sceptics who doubt whether the cloud computing trend is as reliable as its cheerleaders claim.

Amazon hasn’t been immune to setbacks. During what passed for the Irish summer this year, Amazon Web Services’ service in Europe was taken offline for 48 hours by what was first attributed to a lightning strike at its Dublin facility in Citywest. The cause was subsequently found to be a transformer failure, but by then the news had spread globally.

Vogels candidly admits outages are a fact of life in cloud computing. “We see reports of tens a day, in general,” he says. However, he questions the notion that companies running IT systems for their own operations can do so as reliably as large providers who do so for hundreds or thousands of businesses at a time.

“There’s been a range of myths around cloud computing, reliability being one, security being one. With all of those emotional concerns the thing is to sit with the customer and look at the facts. In reliability and availability, and also in security – really evaluating the customer’s own security procedures and showing how that maps to the controls in the cloud – I’ve yet to encounter a case where the customer says ‘That’s not good enough’. As with anything in IT, I think there’s a risk of failures.”

The Irish Government has firmly backed cloud computing as a driver for economic growth. Vogels – who recently visited 10 Downing Street to talk about this very subject – offers the example of the US government’s “cloud first” strategy. “That first element was focused on saving significant amounts of dollars by becoming more efficient. We see a tremendous interest around the world from that.”

The argument boils down to using the massive resources of data centres to lower the cost of computer processing and storage. It’s a message he says resonates well in times of economic hardship. “These days, where pounds, dollars or euros are strapped, every euro we can help the government save will be well spent.”

Werner Vogels speaks at the Dublin Web Summit next Thursday