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Amazon sets sights on massive Internet of things opportunity with new cloud offering

October 5, 2015, 4:05 PM UTC

1. Jeff Bezos

Founder and CEO, Amazon When it comes to the tech giant he built from scratch, Bezos has always prioritized long-term gains over short-term profitability, a philosophy that's yielding palpable results. Analysts estimate Amazon Web Services, a cloud-based computing platform used by hundreds of thousands of businesses around the world, could generate as much as $1.5 billion. And the company's Amazon's Kindle Fire line helped popularize the 7-inch tablet form such that Apple finally released a version of its own. --JP Mangalindan
Photo: Patrick Fallon/Bloomberg/Getty

Amazon plans to announce a cloud-based service for the Internet of things this week at its AWS Re:Invent trade show, according to sections of a memo Fortune has viewed. The document implies that the new AWS service will mimic similar offerings from Microsoft, IBM, Ayla Networks and others that target developers trying to build connected devices in that it will link the AWS cloud platform to silicon from specific vendors.

IBM and Microsoft have announced broad platforms and aggressive plans to support the Internet of things—billions of connected devices that collect data for consumer and industrial applications and typically pass it on to some sort of cloud for storage and analysis.

Amazon (AMZN) Web Services, on the other hand, has been fairly quiet on this topic, although many of its existing services—EC2 compute, Kinesis data ingestion, and S3 storage—are already used for these applications by companies like Ayla and others. The silence will lift this week at its annual AWS Re:Invent conference, where sources said the company will announce partnerships with chip companies and others, as well as services to support this huge opportunity.

What Amazon needs to do is knit together some of these disparate services, making them more easily consumable by developers, observers said. In short it needs to offer what Microsoft would call a “suite,” or what IBM calls its IoT Foundation. The resulting combination of services needs to have a few key capabilities, such as a way to get a lot of devices online and then manage them. The service also needs strong data gathering and analytics capabilities.

Part of this effort could revolve around a new to-be-announced analytics service, code-named Space Needle (as described in the Wall Street Journal) that will make sense of incoming data. As for device management and monitoring, Amazon purchased a company called 2lemetry back in March.

In a sense Amazon is playing catch up to some of the larger cloud players, as well as to a host of smaller startups that have been offering cloud services tied to development platforms for years. Ironically, many of the smaller players such as Ayla Networks, Particle (formerly Spark Labs), or Electric Imp, have been hosting their cloud offerings on AWS. If Amazon gets into this game, they may find themselves competing with a key partner.

As for the bigger players, IBM (IBM) announced a partnership with ARM in early September that aims to make it easy for developers building products around ARM’s mbed operating system to tie those devices into IBM’s special IoT cloud. Chip partners include Freescale, which makes development boards. And last week, in what looked like pre-emptive programming, Microsoft (MSFT) announced its long-touted Azure Internet of Things Suite. Chip partners for that effort include Texas Instruments (TXN).

There is definitely heightened buzz around the notion that tons of connected tiny devices means a huge business opportunity. A new IDC Survey of 2,500 IoT “decision makers” across 15 countries found that nearly three-quarters of companies surveyed (73%) said they have IoT implementations running now, or will have within 12 months.

For many of these companies, these ideas start out in an engineer’s lab on a test board running in one of these clouds. The beauty of having a name-brand cloud provider that can scale up is that if the test is a success, the company can then build it and manufacture thousands or hundred of thousands of units without ever switching from a test cloud to a “real” one. This is why IBM, Amazon, and Microsoft are trying to build these tight links from their cloud platforms to the development boards that engineers use in testing environments.

An AWS spokesperson we reached out to said the company does not comment on rumors and speculation.

In the run-up to AWS Re:Invent, Amazon hasn’t been lazing around. Last week it announced a managed version of the Elasticsearch service that should make it easier for developers to incorporate search into their applications.

For more on how Amazon built its cloud, see the video.

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