By Nina Zipkin, Entrepreneur
Amazon’s cloud computing business is growing quietly and quickly. Amazon Web Services, whose high-profile clients include Netflix and Spotify, surged 49% last year, drawing $4.6 billion in revenue. By comparison, its North America business grew just 24%, year over year.
Helping drive this effort is Amazon’s (AMZN) chief technology officer Werner Vogels, a Ph.D in Computer Science and spent nearly 14 years in academia before joining the tech giant in 2004 as the Director of Systems Research. AWS was one of the first to offer services for small businesses and major enterprises when it launched nearly a decade ago. The cloud market is becoming more competitive, with big names like Google (GOOG) and Microsoft (MSFT) trying to chip away at AWS’s 28% market share.
We sat down with Vogels to talk about why the cloud is becoming more important and why understanding it is essential for any startup’s future success.
Q: What’s surprised you about how cloud computing has evolved?
A: We’re heading into almost the tenth anniversary of the first service that we built. We always knew that it was going to be big – we didn’t know how fast.
Q: What’s helping to fuel this shift?
A. There is such an abundance of applications being built. That has driven this explosion of new businesses and markets. But also, people start to realize that their competition may be coming from a completely different direction than it was in the past. Take for example, hospitality. Airbnb is a major competitor. [Hundreds of thousands] of people each night book rooms brokered by Airbnb. As such, companies in that industry need to be agile, to be able to react, and not only to the competition that comes into the market but also to the feedback that their customers are giving them. In the past, that would take years to implement.
Q: What holds companies back from the cloud?
A: This is a radical way of consuming IT. There are emotional barriers to giving up some level of control over the servers that you are running.
Q: What aren’t they seeing?
A: It’s very important to realize today that with minimal investment you can start building applications. Five, ten years ago you would need millions [of dollars] in investment. It allows entrepreneurs to truly focus on new products without having to worry about the infrastructure, without having to get additional investment to buy hardware. And if you look at the big household names these days, Airbnb, Spotify, Instagram (FB), Pinterest – all of these are born in the cloud. Without cloud, if you asked them, they would probably say they would not have been able to reach this scale at the speed they did, without it.
Q: What will AWS need to be successful going forward?
A: At Amazon we have this particular philosophy that we are firmly customer-focused. Our goal is to be the earth’s most customer-centric company. We don’t think we have the monopoly on exactly being able to know what you want. So we work very closely with our customers to very quickly add those updates. Last year we added 516 new major features to our AWS. So, we really thrive by this collaboration with our customers that have no problem giving us feedback. Startups and entrepreneurs have always been very close to our heart. We consider ourselves sometimes still to be a startup.
Q: How is the cloud solving everyday problems?
A: Most of them are in the concept of the Internet of Things, in daily devices. If you look at the consumer side of it, the more of these devices that can generate data might actually help you very easily improve your life. For example, there is a great little device that you can put on your water meter that can show you where in your home the most water is being used. Or, we all get an electricity bill, but it’s never detailed enough to know whether it was the washing machine or the video recorded or the Xbox that I left on? With simple improvements we could get better insights into how we are actually using our technologies.
Q: What could be on the horizon?
A. With some new toothbrushes, you can look at the graph on your cellphone and you see how well you brushed. Well, you know what? If the toothbrush would change color while you’re brushing, to give you an indication of how well you’re doing it, we’d actually have an immediate effect. Similarly, if you set yourself a goal for energy usage in your house, if you have to look at a graph on your phone, you probably won’t change your behavior. But if you have a clock on the wall that changes color from green to red if you’re using more energy than you’ve planned, then that actually can change your behavior. There are a lot of things to be done in that world that actually have an impact on our daily lives.
This interview has been edited and condensed for clarity and brevity.