How AWS Changed Tech Industry In A Decade

by Sohini Bagchi    Mar 16, 2016

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Amazon Web Services (AWS), Amazon.com’s cloud-computing business that turned 10 years old this week has undoutedly revolutionized the technology industry in a short span of time. With the accelerating growth of cloud services across the globe, AWS’ growth spurt will continue in the next decade too believe analysts.

Commencing as a service provider of cheap storage for software developers in 2006, the company soon added computer power for rent on a pay-as-you-go basis. This enabled a new generation of Web-oriented startups such as Airbnb and Pinterest to focus on building apps rather than the technology infrastructure to support their products.

Today, cloud computing is the fastest growing business for Amazon, which until recently was mostly known as an online marketplace. Some even believe that its cloud business will surpass that of its e-commerce business soon. In 2015, AWS accounted for 41 percent of Amazon’s profit.

AWS came out of Amazon’s own gargantuan needs as a fast-evolving Internet retailer. In a 2007 letter to shareholders, Amazon CEO Jeff Bezos wrote that AWS targeted “broad needs universally faced by developers,” which Amazon knew well from “scaling Amazon over the last twelve years… We’re well positioned to do it, it’s highly differentiated, and it can be a significant, financially attractive business over time,” he wrote.

Read more: Microsoft, AWS Fly High As More Firms Look Cloud-Ready

AWS’ sales rose to $2.4 billion in the October-December quarter 2015 up from $1.4 billion during the same period in 2014. The company’s revenue reports were in line with analyst expectations. It generated almost $8 billion in sales over the full year of 2015. The report also showed that the net sales from AWS cloud services business rose 69.4 percent to $2.41 billion, compared with a growth of more than 78 percent in the earlier quarter. AWS continues to be the fastest growing division within Amazon.

Ross Sandler at Deutsche Bank describes AWS as the “fastest-growing enterprise technology company in history” and predicts that WS, now a $10 billion business, could be  could soon be more valuable than Amazon’s retail business.

“We have not been able to find another infrastructure or application software company with the same growth trajectory and margin profile at scale,” wrote analysts with RBC Capital Markets in a note. “We think there’s a very compelling argument that AWS’ growth and market dominance is the most powerful trend in all of (technology, media and telecommunications) today.”

In a conference call with analysts, Amazon says more than 1 million customers across 190 countries are AWS users.  It hosts data and computing power in 12 different physical locations, from Oregon to São Paulo, Brazil, and Sydney. Five more regions are reportedly expected to come online this year.

Read more: After IBM And Microsoft, Amazon To Build India Datacenter

On Tuesday, AWS said that more than 1,000 databases have been moved to the AWS cloud by customers since the beginning of the year. The AWS Data Migration Service, which allows migration of databases such as Oracle, SQL Server, MySQL, MariaDB and PostgreSQL from on-premises data centres to AWS, is now available to all customers, it said, adding that Expedia Inc, Pegasystems Inc and Thomas Publishing are among many of the customers who have moved on-premises databases to Amazon Aurora and other Amazon RDS engines.

Amazon Chief Financial Officer Brian Olsavsky reiterated Amazon’s expectation to make continued investments in its cloud division and expand its offering for Prime members with faster delivery and more original video content.

The market for cloud services is expected to rise to $27.4 billion in 2016, up from $14.9 billion in 2014, according to Synergy Research Group Inc. A recent study by the research group shows that Amazon Web Services (AWS) continues to dominate the cloud infrastructure services market, achieving a worldwide market share of over 31% in Q4. Microsoft and Google have by far the highest growth rates among the market leaders but are making little impact on AWS, which continues to grow strongly and to increase its market share, it said. 

Across a wide range of cloud applications and services we have seen that usage has now passed well beyond the early adopter phase and barriers to adoption continue to diminish,” said Synergy Research Group’s founder and Chief Analyst Jeremy Duke on a seperate report. “Cloud technologies are now generating massive revenues and high growth rates that will continue long into the future, making this an exciting time for IT vendors and service providers that focus on cloud,” he added.

Looking ahead, AWS is also venturing in the “Internet of Things” cloud-connected appliances from cars to thermostats that experts say could be the next wave of consumer tech.