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August 29, 2012

Amazon Aims to Disrupt Traditional Enterprise Practices

Robert Gelber

Back in 2006, Amazon launched its Web services division (AWS), offering users the ability to access its infrastructure on demand. Since then, AWS has become the cloud industry’s alpha dog, drawing an estimated $1 billion for the company. This week, The New York Times profiled Amazon’s cloud division, recounting its effect on the enterprise market over the past ten years.

Andrew Jassy, the head of AWS, feels that cloud computing is quickly evolving the way society interacts with technology. “We are on a shift that is as momentous and as fundamental as the shift to the electrical grid,” he said “It’s happening a lot faster than any of us thought.” 

There is no lack of use cases explaining how a particular company utilized Amazon’s web services. The examples can range from something as simple as handling email operations, to streaming NASA’s curiosity rover landing on Mars, or building a temporary virtual supercomputer.

This is the primary advantage of cloud computing. Users receive only the resources they require and if more storage or compute capacity is needed, they can be quickly provisioned. It’s this type of infrastructure that enables streaming services like Netflix to operate efficiently.

The division boasts a cornucopia of services including content distribution, database management, server virtualization, big data analysis and storage to name a few. Their most recent offering, named Glacier, is an archival service with the ability to store petabytes of data at rate of $0.01/GB/mo. The new utility takes direct aim at IT operations that utilize physical tape backups and mail them to an offsite facility.

The ability to setup a Web-based business without investing in costly infrastructure and capital expenses has become an attractive option for recent startups. Before Instagram was acquired by Facebook for an eye-popping $1 billion, the 12-person company decided to rely on AWS instead of setting up in-house servers.

Another company called Cue, which can produce an individual’s online identity, uses Amazon to process 500 million documents including corporate messages, Facebook updates and e-mails. In fact, Cue’s co-founder Daniel Gross said he’s not even familiar with how much a server actually costs. “I don’t even know what the ballpark number for a server is — for me, it would be like knowing what the price of a sword is.” He also said his company pays Amazon roughly $100,000 each month. If Cue attempted to run its operation with local servers, it would cost an estimated $2 million.

Jassy believes his cloud division is less than ten percent of its eventual size. While the demand for cloud services may continue to grow, AWS will no longer be operating uncontested. Since Amazon began offering its web services, a number of competitors have joined the fray. In 2010, Microsoft launched Windows Azure and just this summer, search giant Google announced its IaaS play, named Google Compute Engine. It should be interesting to see how the cloud market will develop moving forward.

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