Werner Vogels on the rise and rise of AWS in Australia

Amazon CTO says we "haven't even hit the hockey stick" of cloud adoption

Werner Vogels, CTO and vice president of Amazon

Werner Vogels, CTO and vice president of Amazon

The customers around the table are gushing in their praise for Amazon CTO Werner Vogels. One puts his arm round the Dutchman’s broad shoulders to pose for a selfie: “If that’s ok? I’ve got to get one.”

Each has a story to share about how Amazon Web Services, the ecommerce giant’s cloud infrastructure platform, is aiding the digital transformation of their companies. Some claim they wouldn’t even have a business without it.

In Australia AWS is used by all four of the major banks, the tax office, the postal service, the stock exchange and the flagship airline. It has helped the country’s biggest online start-ups – the likes of Atlassian, Freelancer, and Canva – get off the ground.

For the “tens of thousands” of monthly users here (the company doesn’t release specific regional counts), AWS changed the way compute is accessed and procured.

Vogels, cringing at the introduction as “guest of honour” at an event held in Sydney earlier this month, argues AWS’s success here has been down to putting the customer first. That and the continued growth of cloud based services. As Vogels puts it: “I honestly think we haven’t hit the hockey stick yet”.

No wait state

A decade ago, for all but the biggest companies, gaining access to space and storage was slow and expensive.

“I’ve been at the receiving end of that,” said Vogels at the client and media lunch. “In the old world all digital technologies were delivered from large server farms, things you needed to wait half a year or a year for before you could extend. You needed to invest massive amounts of capital. You’d be working on a feature or product, only to find out that your customers have moved on. The problem that you were thinking about is no longer relevant.

“The only way to drive costs down was to make very long term contracts with providers, paying massive amounts of money up front, buying many more licenses than you needed because you had to guess what you needed in five or ten years, and the moment you’d written the cheque, the provider would walk away, they wouldn’t care any more; they’d got paid.”

That situation began to change in 2003, when Amazon found their own IT wasn’t keeping up with the growth of the company. Engineers began exploring how abstraction and decoupling applications from the infrastructure could make it easier to manage (unlike the myth). Realising the value of doing so went beyond its walls, Amazon set about selling infrastructure as a service. Elastic Compute Cloud (EC2) was released in 2006.

Ten years later, a period which has seen Amazon open two operationally discrete data centres in Sydney, AWS has a million customers worldwide.

“When we started building AWS, it wasn’t just a matter of bringing up this very scaleable technology, it was also about taking away the old way of procuring IT systems,” says Vogels. “We wanted to really change that model, trying to be the earth’s most customer-centric company like we’d done in retail, but how do you do that in IT?”

It's just not us

The biggest names in what Vogels calls the “old world” have followed AWS into the IaaS and PaaS market, but Amazon still dominates. A Synergy Research Group report for the second quarter of this year put AWS’ market share at more than 30 per cent. Microsoft Azure, in second place, had taken 11 per cent and IBM 5 per cent.

It is probably telling that Oracle CTO Larry Ellison’s two keynote speeches at OpenWorld focused on Amazon.

“You can be competitor-following business. That’s actually a very valid business model to have. It’s just not us," says Vogels. "I like to believe that other players that are coming to market are being dragged in there kicking and screaming. You really need to know what you’re doing. The other players in the market are somewhere where Amazon were in 2009, 2010, somewhere like that.”

“This is a ten year old market because we created the market in reality,” Vogels says. “There’s still a lot of room to grow for multiple players. This is not, cannot be, a winner take all market. I think there’s going to be at most a handful of really true global players. AWS is going to be one of them…we’re not worried about the one, two, three spot.”

Inventive powers

Keeping AWS ahead, the CTO says, is the company’s “inventive powers” and the constant flow of new features and services, which in the last year totals more than 700.

“Most of that is defined by direct customer requests,” Vogels says. “I think that sets us apart from other players who are coming out of an old world where they tell customers 'this is how you should do it'.”

A notable recent release is Lambda, available in Australia since June, which allows users to run code for any type of application or backend service without provisioning or managing servers. Customers are only charged when the code runs. This 'serverless computing' is a concept Vogels says has revolutionised and reignited the developer community.

And if a customer of any size requests a new feature, if it’s a “good ask” it will be enacted and all customers can benefit.

“There are no private deals being done,” says Vogels. “It’s not like the old world where you negotiate. Everybody that comes onto the platform gets an equal deal. And also gets equal technology.”

Gods of nature

There have been outages. In June, storms lashed the Sydney coast causing house fronts to crumble into the sea and irreparable damage to the coastline. A number of Australian customers were knocked offline when a loss of power affected one of AWS' Availability Zones. But according to Vogels, even "the gods of nature" can't stop AWS's rise. If anything the incident demonstrated to customers that with the right architecture, they could survive an even bigger catastrophe.

Australian businesses are migrating more and more applications and workloads to cloud providers. Businesses are becoming increasingly data driven, while industrial IoT has just begun. There’s simply no time for lengthy planning and procurement.

“If I look at the kind of things we’ve developed at Amazon,” Vogels says, “as much as I love the technology, it’s the business model that we’ve sat with it that has radically changed things, for the whole world.”

Already AWS is Amazon’s most profitable segment. Its revenue for the second quarter 2016 increased 58 per cent from the same period last year to US$2.9 billion. Cisco predicts that by 2019, more than four-fifths of workloads will be processed by cloud data centres.

As Vogels puts it: “It’s still day one.”

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