The rumours of Amazon Web Services’ (AWS) fall from the pinnacle were premature. In the push to democratise cloud computing services, AWS had the jump on everyone from the beginning, ever since it was spun out of the mega retailer Amazon in 2002 and launched the flagship S3 storage and EC2 compute products in 2006. It still does.
AWS quickly grew into a company that fundamentally transformed the IT industry and carved out a market-leading position, and has maintained that lead — most recently pegged by Synergy Research at almost double the market share of its nearest rival Microsoft Azure, with 33 per cent of the market to Redmond's 18 per cent.
Market tracker data from IDC for the second half of 2019 also puts AWS in a clear lead, with 13.2 per cent of the public cloud services market, narrowly ahead of Microsoft with 11.7 per cent.
As with any business, Amazon’s cloud success comes down to a confluence of factors: good timing, solid technology, and a parent company with deep enough pockets to make aggressive capital investments early on.
There are other, unique factors that have led to the success of AWS, however, including a relentless customer focus, a ruthless competitive streak, and continued commitment to “dog-fooding,” or eating your own dog food — a perhaps unfortunate turn of phrase that has proliferated through the tech industry since the late eighties.
Dog-fooding refers to a company making a bet on its own technology — in Amazon’s case by making it publicly available as a product or service. This is what Amazon did with S3 and EC2 in 2006, and it’s what Amazon has been doing with almost all of its AWS product launches since.
We asked the experts how AWS has been able to dominate the public cloud market to date, and, with worldwide adoption of cloud services due to continue climbing, according to the 2020 IDG Cloud Computing Survey, whether AWS can stay on top of the pile for years to come.
There is no escaping the fact that Amazon’s jump on the competition has put them in the ascendancy from day one, giving them a six-year head start over its nearest competitor, Microsoft Azure.
These years didn’t just help position AWS as the dominant cloud computing service provider in people’s minds, it also furnished the company with years of feedback to crunch through and better serve its customer base of software developers, engineers, and architects.
“They invented the market space, there wasn’t the concept of public cloud like this before,” Dave Bartoletti, vice president and principal analyst at Forrester said. “We have been renting computing services for 30 or 40 years. Really what AWS did was establish in a corporate environment for a developer or IT person to go to an external service and start a server with a credit card and do computing somewhere else.”
As Bartoletti notes, AWS wasn’t just first to market, it also had the deep pockets of its parent company, allowing it to blow anyone else out of the water. “They outspent their rivals,” he bluntly assessed.
That being said, not all first-movers lead their market as definitively as AWS is — just ask the founders of Netscape.
“Early movers don’t always have an advantage,” Deepak Mohan, research director for cloud infrastructure services at IDC, said, noting that AWS was especially rigorous in creating and bringing products to market. “Being a high-quality company and delivering a high-quality product and being responsive to customer needs all play equally important parts.”
A special relationship
Mohan points to Amazon’s superior ability to “eat its own dog food” as a key driver towards its success, as the cloud division had to address significant technology challenges faced by the huge ramping up of scale Amazon was seeing in the aftermath of the dotcom bubble bursting.
“You have to consider the relationship between AWS and Amazon the e-commerce company,” said Ed Anderson, distinguished VP analyst at Gartner — which has AWS as its clear leader in its latest Magic Quadrant for Cloud Infrastructure and Platform Services.
Just as customers of Google Cloud today want to “run like Google,” early AWS customers wanted to leverage the technology that had enabled Amazon to grow into an e-commerce giant so quickly.
“A hallmark of AWS has been how technical and capable it has been,” Anderson notes. “And being really oriented around that ‘builder’ audience of developers, implementers, and architects,” he adds. “As a consequence, the sales team is very technical and capable in having those conversations, which means the experience customers have is really smooth.”
It is that attention to customer needs that has long been a hallmark of the AWS value proposition, even if they don’t always get it right.
As Amazon founder and CEO Jeff Bezos wrote in a 2016 letter to shareholders: “Customers are always beautifully, wonderfully dissatisfied, even when they report being happy and business is great. Even when they don’t yet know it, customers want something better, and your desire to delight customers will drive you to invent on their behalf.”
It is this attention to what customers want — and don’t yet know what they want, to paraphrase Steve Jobs, by way of Henry Ford — which has been codified in Amazon’s leadership principles.
“Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers,” Amazon’s leadership principles state.
“That is a value I see exhibited over and over at AWS,” Anderson at Gartner observes. “This attention to customer requirements and the needs of builders and developers and architects, that has prioritised the features they built and is tightly aligned.”
“They are incredibly customer focused and everything they build is driven by the customer,” Bartoletti at Forrester adds.” To maintain that as their large pool of customers continues growing gives them the advantage of knowing what their customers want.”
Take the 2019 release of the hybrid cloud product AWS Outposts as an example. Instead of squaring neatly with Amazon’s public cloud-centric view of the world, Outposts met the customer’s needs in a different sphere — their on-premises data centres.
A key move made by Bezos in the early days of commercial cloud computing was formalising the way AWS would build and expose products to its customers.
Referencing an early-2000s internal email mandate from Bezos, former Amazon and Google engineer Steve Yegee paraphrased in his Google Platforms Rant, from 2011, that: “All teams will henceforth expose their data and functionality through service interfaces. Teams must communicate with each other through these interfaces.” Lastly, “Anyone who doesn’t do this will be fired,” Yegge added.
With this mandate, Bezos spurred the creation of an enormous service-oriented architecture, with business logic and data accessible only through application programming interfaces (APIs).
“From the time Bezos issued his edict through the time I left [in 2005], Amazon had transformed culturally into a company that thinks about everything in a services-first fashion. It is now fundamental to how they approach all designs, including internal designs for stuff that might never see the light of day externally,” Yegge wrote.
The enormous service-oriented architecture had effectively transformed an infrastructure for selling books into an extensible, programmable computing platform. The online bookstore had become a cloud.
The everything store for enterprise builders
All of this has led to an unrivalled breadth and maturity of services available to AWS customers.
And while Amazon had the jump on the competition, it hasn’t rested on its laurels, regularly pioneering new services in the public cloud, such as the cloud-based data warehouse Redshift, the high-performance relational database service Aurora, and the event-based serverless computing platform Lambda, after developing the latter service for its AI-driven virtual assistant Alexa.
“Yes, Google Cloud and Microsoft have ‘closed the gap,’ but AWS is still more capable on breadth of offerings and the maturity of those individual services,” Anderson at Gartner says. “I would say when it comes to market perception, most customers feel Azure and AWS are effectively on par and Google slightly behind. In terms of pure capability, though, AWS is a more mature architecture and set of capabilities, and the breadth is wider.”
At the AWS re:Invent conference in December of 2019, AWS said it had 175 services, with a wealth of options and flavours across compute, storage, database, analytics, networking, mobile, developer tools, management tools, IoT, security, and enterprise applications.
“Without doubt the market leader, AWS often wins on developer functionality, due to the breadth of its services as a result of its first-mover advantage,” Nick McQuire, vice president of enterprise research at CSS Insight says. “AWS has also done a good job at translating its scale into economic benefits for customers, although there are times where cloud can be cost prohibitive.”
This broad set of capabilities can also be seen as a negative for some, with the service catalog representing a dizzying maze of services and options, but this level of choice has also proved a great resource for engineers.
Bartoletti at Forrester, who has called AWS the cloud “everything store” for enterprise builders, points to a key difference in approach.
“AWS can have three to four different database services, and they don’t care which one you use, as long as you use it at Amazon,” he notes. “Traditionally vendors would have had to pick one and run with it. That makes AWS tough to compete with.”
The next phase for cloud computing
The age of AWS dominance shows no sign of slowing, but the competition is fierce.
“Microsoft has been able to close the gap by being open source focused and commercialising that in their cloud as fast as AWS,” Bartoletti says. “Google is working hard not to over rotate on the bleeding edge and focus on helping enterprises migrate workloads to the cloud.”
Breadth and maturity of services, underpinned by strong engineering chops and relentless customer focus, look to keep AWS ahead of the curve for some time.
Now, the company’s ability to simplify the adoption of new technology for enterprise customers through managed services will be the litmus test for the next wave of cloud computing adoption. It will also determine how AWS will fare against the ongoing fierce competition from Microsoft Azure and Google Cloud.
“I think it is far from given that AWS will always dominate the cloud market,” Mohan at IDC says. At the same time, he acknowledges that the competitors have a lot of catching up to do.
“Google is still quite a ways behind, and Microsoft, while a force, has certain advantages in the enterprise market,” Mohan says. “It is conceivable that companies will get closer, but I don’t expect any substantial changes in the next few years... There is a leap in capacity and scale that is yet to be built. All of this gives [AWS] a clearly dominant position for now.”
As Warren Buffet said, “Never bet against America.” And when it comes to the public cloud market, we’ve learned it would be just as foolish to bet against Amazon.