AWS keeps getting bigger—growing another $10 billion in the 12 months ended September 2020—even as the units of cloud services it offers get ever smaller.
“One of the things that’s really interesting, that we’ve seen in the last several years, is that people are moving to smaller and smaller units of compute,” CEO Andy Jassy said during his marathon-length keynote at AWS re:Invent in early December.
Jassy announced, for example, that customers can now pay for just one millisecond of AWS’s Lambda serverless compute service, whereas in the past they were charged to the nearest 100 milliseconds. Customers with low-latency apps stand to save as much as 70% on Lambda.
That was one of more than two dozen announcements of new AWS cloud capabilities that Jassy made during a keynote that went on for 2 hours and 52 minutes. It was an impressive showing of innovations, in areas including containers, serverless, storage, databases, microprocessors, machine learning, and analytics.
Accelerating growth rate
Customer demand for this kind of soup-to-nuts R&D has elevated AWS into the upper tier of the tech industry. As Jassy sees it, AWS is now the fifth largest enterprise IT company in the world. A 12-month revenue run rate of $46 billion through Q3 2020 puts AWS ahead of even Oracle and SAP, he said.
(AWS is ranked #2 in the Cloud Wars Top 10, behind Microsoft and one place ahead of #3 Google Cloud. You can read more in our Special Report “As Amazon Web Services Blows Past $50 Billion, Will Jeff Bezos Trigger Huge IPO?”)
Here’s what AWS’s growth looks like over the last 14 years: “It took us 123 months, a little over 10 years, to grow to a $10 billion business,” Jassy said. “And it took us only 23 months to go from $10 billion to $20 billion, 13 months to go from $20 billion to $30 billion, and then 12 months to go from $30 billion to $40 billion. So, the rate of growth in AWS continues to accelerate.”
More businesses are getting serious
Yet, even as AWS grows in $10 billion increments, there’s still tremendous potential upside. That’s because a mere 4% of IT spending currently goes to cloud, Jassy noted.
The global COVID-19 pandemic accelerated the move to cloud. Many businesses have now made the jump from talking about cloud “to having a real plan,” Jassy said. “And that is going to be one of the biggest changes you see. I think when you look back on the history of the cloud, it will turn out that the pandemic accelerated cloud adoption by several years.”
Of course, cloud adoption isn’t the end game. Successful business outcomes are the end game, and that requires invention and reinvention—the theme of AWS’s annual event. Jassy pointed out that only half of the Fortune 500 companies from twenty years ago are still on the list. “It is really hard to build a business that lasts successfully for many years,” he said. “And to do it, you’re going to have to reinvent yourself, and often you’re going to have to reinvent yourself multiple times over.”
Andy Jassy’s 8-point plan
How do organizations do that? Jassy, a 24-year Amazon veteran, laid out a plan to build what he called “the right reinvention culture.” It requires:
- The leadership will to invent and reinvent. Jassy pointed to Airbnb, Peloton, and Stripe as examples of companies that have reimagined and reinvented entire industries. “If you’re going to be a leader that’s going to reinvent, you have got to be maniacal, relentless, and tenacious about getting to the truth,” he said. “You have to know what competitors are doing in your space. You have to know what your customers think about your products. You have to know what’s working and what’s not.”
And there are sure to be obstacles along the way. “You will always have a lot of people inside the company who will try and obfuscate that data from you. Sometimes they think they’re doing you a favor. And sometimes it’s for self-preservation reasons. But it’s hard to get at that data. And you have to be relentless about it. You have to challenge people, often people who know a lot more about a subject than you do. But you’ve got to get to the truth. And then when you realize that there’s something you have to reinvent and change, you have to have the courage to pick the company up and force them to change and move.”
- Acknowledge that you can’t fight gravity. Jassy used Amazon’s own experience in the 1990’s as a case study in how to recognize and overcome resistance to changing an established business model. At the time, it had to do with Amazon’s owned-inventory retail business. After much internal debate, Amazon decided to build a marketplace for third-party sellers “because we know that you cannot fight gravity.” It turned out to be the right decision for Amazon’s customers—and we know the rest of the story. “You’ve got to realize that if something’s going to happen, it is going to happen regardless of whether you want it to or not. You’re much better off cannibalizing yourself than having someone do it to you and chasing it.”
- Talent that’s hungry to invent. Everybody believes their company has talent that wants to invent, “but it’s not always true,” Jassy said. Some employees may be unable to rethink and re-do something they had a hand in building. “It’s hard to rip up something you spent a lot of time and energy and dedication doing.”
- Customer focus. “You want people to solve problems for customers, as opposed to solving problems because they like the technology and think it’s cool.”
- Speed. “Speed disproportionally matters at every stage of your business, and in every sized company. I think that a number of leaders at enterprises have resigned themselves that they have to move slowly,” Jassy said. But “speed is not preordained. Speed is a choice….You’ve got to set up a culture that has urgency, and that actually wants to experiment because you can’t flip a switch and suddenly get speed.”
- Don’t “complexify.” Complexity is the enemy of speed, said Jassy, and he warned that a “plethora” of tech providers often descend on companies taking on transformation projects. It’s better to choose a partner and notch some success before layering on complexity, he said.
- Choose a platform with the broadest set of tools. “It not only makes it easier for you to migrate all your existing applications, but also to enable your builders to build anything they can imagine.”
- Set aggressive top-down goals. GE moved 9,000 applications to the cloud. Capital One reinvented its digital banking platform. These are the kind of top-down goals, Jassy said, that make it clear to teams across the company that “you mean business.”
How AWS drives innovation
To recap: invention and reinvention are a virtuous cycle, requiring not only the right organizational mindset and talent, but the best technology to accomplish it. How does AWS keep its own innovation flywheel spinning?
Two things make this possible, according to Jassy. First, he credits AWS’s Nitro System, a virtualization hypervisor introduced in 2017 that let AWS move security, networking, and storage capabilities to the EC2 instances used by customers. Nitro packs more functionality and management in AWS cloud instances at lower costs.
The other game changer is that AWS began designing its own microprocessors, while continuing to work with AMD and Intel. At re:Invent, Jassy announced AWS’s Arm-based Graviton2, which powers its EC2 DT4g, M6g, and R6g instances. There is also a new chip called Trainium, designed for training machine learning.
Shrinking units, burgeoning data
As noted, the units of cloud computing are getting infinitesimally smaller. Jassy frames it this way: “There are three major modes of compute. Instances, which are the traditional way that people have run compute, particularly when they want to get all the resources on a box for their application. Smaller units like containers, where people build these smaller microservices, because it lets them move faster and be more portable. And then event-driven serverless computing, when they don’t want to worry about servers or clusters at all.”
The irony is that at the same time that compute units are shrinking, data volumes are burgeoning. “It’s astounding how much data is being created and stored today,” said Jassy. By some estimates, he said, the world now creates as much data in an hour as it did in an entire year, twenty years ago.
That may seem like hyperbole, but few data strategists would disagree. Jassy shared the story of how SmugMug planned to store 6 terabytes of data in Amazon’s S3 storage service when it was launched in 2006. At the time, that seemed like a motherlode. “We just couldn’t believe it.”
Yesterday’s tools won’t cut it
Yet, that pales in comparison to big data today. JP Morgan Chase now manages 450 petabytes in its hybrid cloud environment, according to CIO Lori Beer, who spoke at re:Invent. That’s 75,000 times more than SmugMug’s 6 Tbytes.
“These old tools and the old data stores that existed the last 20 to 30 years are not going to cut it to be able to handle this,” Jassy said. “Every single type of data store is being reinvented and will be reinvented multiple times over.”
AWS introduced a range of new storage and database capabilities to help manage the terabytes and petabytes that its customers like Astra Zeneca and Capital One are accumulating. The new offerings include io2 Block Express, a storage area network in the cloud, and gp3, next-gen SSD (solid-state drive) volumes for Amazon Elastic Block Store.
Cloud databases heat up
Jassy also highlighted new database capabilities, including Amazon Aurora Serverless v2, which scales to hundreds of thousands of transactions in a fraction of a second, and AQUA (Advanced Query Accelerator), an accelerated cache for faster queries with Amazon Redshift data warehouses.
The cloud database market has become hotly contested as AWS, with 15 databases, competes with standard-bearers Oracle and Microsoft and a growing field of newcomers such as Snowflake. Customers have migrated more than 350,000 databases to AWS, and Jassy announced another way to do that: a service called Babelfish to migrate Microsoft SQL Server apps to Aurora PostgreSQL.
Jassy took a dig at “old guard” database providers for being proprietary and expensive. “This is an unhappy place for customers. We’ve talked about this for several years, which is why you’re seeing so much movement.”
Amazon anywhere you want
Jassy asked “What is hybrid?” He answered with new products and services that extend the AWS cloud to more edge nodes and on-premises environments, including 5G networks and so-called rugged locations. You can now put an AWS cloud just about anywhere you want it.
AWS’s Elastic Container Service (ECS) and Elastic Kubernetes Service (EKS) are popular ways to deploy and manage containers and Kubernetes clusters. More than 100,000 customers are using ECS, and billions of compute hours run on EKS every week, according to Jassy.
AWS is now making it possible for customers to deploy those technologies on-premises with the rollout of ECS Anywhere and EKS Anywhere. “People really wanted to have the same management and deployment mechanisms that they have in AWS, on-premises,” he explained.
AWS cloud in a pizza box
AWS already offers hardware called Outposts, which are essentially AWS cloud in a box for those who want to run AWS services in data centers and edge nodes, such as retail stores. Jassy announced two smaller AWS Outposts. You can now get the same hardware, software, tools, and APIs that AWS uses in a server about the size of a pizza box.
There’s every reason to believe that these seemingly opposite trends—ever-smaller AWS cloud resources contributing to ever-growing revenue—will continue on track. The likely next step: a $50 billion revenue run rate in the months ahead.
Subscribe to the Cloud Wars Newsletter for in-depth analysis of the major cloud vendors from the perspective of business customers. It’s free, it’s exclusive and it’s great!