“It’s still really early days,” says Amazon Web Services CEO Andy Jassy speaking about the cloud. “Sometimes we remind ourselves that even though it’s a $30 billion revenue run rate business growing 45 percent year-over-year, it’s the early stages of enterprise and public sector adoption in the US. Outside the US they’re 12 to 36 months behind depending on the country and industry.”
Jassy says that although price is the conversation starter, speed and agility are the primary reasons that enterprises are moving to the cloud. He says that most startups have built their businesses from scratch on top of AWS. Some of the big examples, he notes, are Lyft, Airbnb, Pinterest, Slack, Tomo, and Robinhood.
Cloud is Still Really Early Days
Sometimes we remind ourselves that even though it’s a $30 billion revenue run rate business growing 45 percent year-over-year, it’s the early stages of enterprise and public sector adoption in the US. Outside the US they’re 12 to 36 months behind depending on the country and industry. It’s still really early days. The conversation starter when people move to the cloud is always cost. Instead of laying out all that capital for data centers and servers and instead only spend what you consume that’s usually very advantageous.
Capital expense turns to variable expense and variable expense is much lower than what most companies can do on their own because we have such a large scale that we pass on to customers in the form of lower prices. We’ve lowered our prices on 70 different occasions in the last ten years. You get real elasticity. You provision what you need and if it turns out you need more, you provision more. If you don’t need anymore because you’re at the peak you just give it back and stop paying for it.
Primary Reason Enterprises Move to Cloud is Speed and Agility
Price always is the conversation starter but the number one reason that enterprises are moving is speed and agility. Usually, if you want to try an experiment in your company it takes 10 to 12 weeks to get a server and then you have got to build all the infrastructure software around it. In the cloud, you can provision thousands of servers and minutes. Then because we have 165 services that you can use in whatever combination you want you can get from an idea to implementation in several orders of magnitude faster. You can innovate much quicker.
As an example, what Lyft is doing in the space is pretty amazing and the piece that they’re growing at is really amazing. To be able to scale the way they have, first as a start-up and then a fast growing business, and then what they would tell you is that they’re able to invent and change the customer experience so quickly, several orders of magnitude faster than they could if they were doing on premise that it’s really helped build their business.
The Cloud Encourages Innovation
The vast majority of applications in the next five to ten years will be infused with some sort of machine learning. We are in kind of a golden age of computing. Almost every company that we speak with is interested most importantly in being able to take their own data. Most companies have gobs of data. Even startups today have gobs of data. But it’s so hard to know what’s in there and it’s so hard to know what the gems are and it’s so hard to know what’s going to be the predictive pieces that change the customer experience. Our machine learning capabilities are going to solve that for a lot of customers.
If you are building technology applications and trying to build consumer experiences, you want to do as much as you can for as little money as possible. Then when you have ideas you want to be able to move fast. One of the things that happen at companies that build on the cloud is it used to be so hard to get anything done that none of your employees spent any time outside of work thinking about new ideas, because why bother. It was so demoralizing that you never get to try it.
With the cloud, you can provision instances and servers in minutes so people spend their free time thinking about new customer experiences. They know that if they come up with something over the weekend they can come
Most Startups Have Built Their Businesses on Top of AWS
Most startups have built their businesses from scratch on top of AWS. Some of the big examples are companies like Lyft, Airbnb, Pinterest, Slack, Tomo, and Robinhood. There is a very large number of them. But there are a lot of businesses that either haven’t gotten big yet or are just trying to build a business. One of the interesting things that happened I remember in 2007-2008 when we had the recession. There were all these very gloomy emails sent from a lot of venture capitalists saying don’t expect to get funded, but the number of startups kept growing.
As opposed to having to go raise money to pay for data centers and servers people can try several instantiations of their idea on top of AWS and if it isn’t getting traction you paid something like 80 cents a month or a $1.50 a month, whatever your usage is. We have loads of companies that are trying to build businesses on top of us that really only pay anything meaningful when they have traction.
Amazon More Focused on Long Term Than Most Companies
It’s always hard for me to measure the impact we have on the overall world. The way we think about it at Amazon is that in every single one of our businesses we have never met customers who don’t want prices to go down. If the center of your gravity is customers, which it is in every single one of Amazon’s businesses, you’re always working relentlessly to find ways to take cost out of your structure so you can give it back to customers in the form of lower prices. It’s actually really easy to lower prices. It’s much harder to be able to afford to lower prices.
We’re much more focused on the long term than most companies. We are trying to build a business and a set of customer relationships that outlasts all of us. As such, we think if we help our customers get more done and are successful on their own, even if it means lower margin percentages, over time we’ll drive more absolute margin dollars. They’ll be more successful and we will ultimately be more relevant.
It Takes Work to Actually Move Away From Oracle
I think Larry (Ellison of Oracle) has a certain view of the world that isn’t always steeped in what the facts are. If you look at Amazon, we started the company at a very early stage and we had Oracle. It takes work to actually move away from Oracle. Lots of customers are learning this as so many people are trying to move away from the commercial-grade legacy database providers like Oracle or SQL server to newer engines like Aurora.
We now are 88 percent of the way through moving all of our Oracle databases and will be at 100 percent by mid this year. We turned off our Oracle data warehouse in November of last year and moved it to Redshift. We learned some very interesting patterns that customers are very excited about copying. We don’t really meet a lot of customers who aren’t looking to move away from those databases to Aurora.