A very valid question worth a response, since Amazon has been one of the front-runners in cloud services. Researching the web, this question has come up several times. Finding no real answer, research continued. An answer finally was found as to how Amazon got into the cloud computing business. The answer is directly from Amazon’s CTO; Werner Vogels.
His answer is precise and definitive. It also shows Amazon plans on being a major player in cloud business for years to come. Take a look at his response and feel free to leave your thoughts on the subject.
How Amazon Web Services (AWS) was born?
At Amazon we had developed unique software and services based on more than a decade of infrastructure work for the evolution of the Amazon E-Commerce Platform. This was dedicated software and operation procedures that drove excellent performance, reliability, operational quality and security all at very large scale. At the same time we had seen that offering programmatic access to the Amazon Catalog and other e commerce services was driving tremendous unexpected innovation by a very large developer ecosystem.
The thinking then developed that offering Amazon’s expertise in ultra-scalable system software as primitive infrastructure building blocks delivered through a services interface could trigger whole new world of innovation as developers no longer needed to focus on buying, building and maintaining infrastructure. From experience we knew that the cost of maintaining a reliable, scalable infrastructure in a traditional multi-datacenter model could be as high as 70%, both in time and effort, and requires significant investment of intellectual capital to sustain over a longer period of time.
The initial thinking was to deliver services that could reduce that cost to 30% or less (we now know it can be much less). We were also keenly aware that compute utilization in most cases, enterprise as well as startups, is dramatically low (less than 20% and often even lower than 10%) and is often subject to significant periodicity.
Providing these services in an on-demand fashion using a utility pricing model had the potential to radically change this. AWS delivered the first storage service (Amazon S3) in the spring of 2006 and compute (Amazon EC2) in the fall of that year. The rest is public history…
The excess capacity story is a myth. It was never a matter of selling excess capacity, actually within 2 months after launch AWS would have already burned through the excess Amazon.com capacity. Amazon Web Services was always considered a business by itself, with the expectation that it could even grow as big as the Amazon.com retail operation