Andy Jassy speaking at the AWS Re:Invent conference last year, with an Amazon data center aisle in the background. (Photo: Amazon Web Services)

How Amazon Stays On Top in the Cloud Wars

Amazon Web Services was the first major player in cloud computing, and has maintained its clear leadership position as rivals like Microsoft and Google have poured billions of dollars into competing platforms.

How has Amazon, a company with its roots in online retailing, managed to dominate one of the major tech battlegrounds of our era?

The answer? Amazon has done many things right:

  • The company’s early adoption among developers gave it an unparalleled ecosystem of experimenters.
  • Requests for new features allowed AWS to maintain its lead in functionality.
  • Its focus on scale and data center automation has created an extremely efficient infrastructure, making it resistant to pricing pressures.
  • Through education and certification services, Amazon has cultivated a talent pool of workers skilled in their use of AWS and its services, expanding beyond its initial developer-focused base and into all market segments.

The competition, however, is growing. New clouds are rising and prices are being aggressively cut. In order to understand Amazon’s ability to maintain its leadership, it is important to look at how it built its cloud empire.

The Early Days: A New Business Model

Many companies say they’ve been doing cloud computing for years. However, Amazon was the first to offer a true utility compute offering in 2006. This allowed it to gain an early lead.

Companies like Rackspace soon followed into the market, acquiring online storage provider Jungle Disk and unique VPS hoster Slicehost in 2008 to form the basis of its cloud offering. The business models for the two companies were very different; Rackspace focused on providing the best customer experience, positioning as a premium cloud product. The same tactic of “fanatical support” served Rackspace well during the mass market hosting pricing wars, when it refused to participate in the race to the bottom for prices. Rackspace has built itself a nice cloud business, but it still hasn’t challenged Amazon.

In another corner, there was SoftLayer (now part of IBM), which  focused on dedicated servers, later rebranded as “bare-metal” servers. SoftLayer was innovating in terms of automation, shrinking the provisioning time and automating the purchasing of dedicated servers to the point where it was a utility, just like cloud. Under IBM, it now has the scale to achieve new heights. IBM/SoftLayer is building a nice cloud business, but it also hasn’t challenged Amazon.

Out of the three pillars of early cloud, Amazon offered the bare bones utility compute and storage, the cloud that most resembled a utility, like electricity. It was a playground for developers and startups who wanted to experiment, which led to building applications and businesses atop of AWS. By 2007, Amazon already had 180,000 developers using AWS. It was this early foundation, as well as continued evolution, that kept the company on top.

Building A Cloud Ecosystem

The playground-like atmosphere, coupled with the fact that AWS was “bare bones,” meant a lot of developers were able to innovate and scale without the traditional hurdles of upfront cost. Amazon basically open-sourced the platform and allowed others the ability to build functionality atop of raw infrastructure.  Since this was the ‘Wild West’ days of cloud, several companies built businesses that provided functionality atop of AWS.

One of the poster children of this movement was – and continues to be – Rightscale. Letting techies go wild building businesses atop of AWS in the early days meant that Amazon was the platform where many new technologies were rolled out, either through these third parties, or by Amazon itself.

Companies like Netflix, which relies 100 percent on AWS to this day, kicked the tires for larger purposes, creating their own tools like Chaos Monkey (which was open sourced in 2012). Chaos Monkey provides auto-scaling and seeks to rid failures by intentionally causing chaos in the system. This is just one example of how AWS was as resilient as you wanted it to be, depending on the hands which handled it.

Other clouds had to catch up, either building or partnering for similar functionality and toolsets. The big push for cloud agnosticism meant that many third-party cloud-handling businesses (think scaling, cost control etc.) began to offer their services on other clouds. This was one factor that allowed Amazon to build out functionality without necessarily threatening its ecosystem; in order to survive, its ecosystem had to either do it better or extend across different clouds. AWS adding services forced these companies to expand the breadth of their offerings or perish.

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About the Author

Jason Verge is an Editor/Industry Analyst on the Data Center Knowledge team with a strong background in the data center and Web hosting industries. In the past he’s covered all things Internet Infrastructure, including cloud (IaaS, PaaS and SaaS), mass market hosting, managed hosting, enterprise IT spending trends and M&A. He writes about a range of topics at DCK, with an emphasis on cloud hosting.

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  1. Amazon has done a great job with the cloud. Doesn't Dropbox actually rely on Amazon for it's cloud storage? It would seem that they won't be passed by easily because of how dependent so many companies are on their service.