By annie shum | March 27, 2009
While other tech companies watch plummeting stock markets with fear, Amazon’s Adam Selipsky (vice president of product management and developer relations) is quietly enjoying the recession. “It’s hard to quantify but the current economic environment is helping our business,” he tells me confidently, in a conference room with a panoramic view of downtown Seattle.
He’s got some impressive statistics to back up his claims: a customer base that’s growing at 10% a quarter, using services that are three times as popular as a year ago and that offer 99.95% reliability. They are numbers that would have turned heads even in IT’s boom times. Now they seem positively fantastic.
This is what working with your head in the cloud can do to you. To evangelists such as Selipsky (and as vice-president for product management and developer relations for Amazon Web Services, “evangelist” is one of the few words not in his job title), cloud computing is the saviour of IT. It’s scalable, affordable and profitable. It’s reliable, flexible and green. It’s Christmas, your birthday and new year all come at once.
The idea behind cloud computing is deceptively simple. Instead of buying and maintaining your own computing hardware, why not simply rent hard drive space, database storage and computing power from a company such as Amazon (or Microsoft or Google)? Let them worry about operating systems, security patches and upgrades, while you get on with running your business – and saving money.
“Every executive I speak with is trying to do the same or a greater number of projects with a static budget,” says Selipsky. ” We offer the opportunity to take capital expenditure and turn it into operating expenditure. That’s always a compelling value proposition for a CIO [chief information officer] but particularly so in today’s capital-constrained environment.”
The growth of Amazon’s Web Services has been little short of explosive. Just a year ago, its Simple Storage Service (S3) contained around 12bn “objects” (usually a single file, up to 5GB in size). Now it’s home to 40bn and climbing rapidly. When Amazon’s virtual computing service, the Elastic Compute Cloud (EC2), launched less than three years ago, it attracted impoverished startups and web 2.0 entrepreneurs. Now it has working partnerships with everyone from the Max Planck Institute and the New York Times to Sun, Oracle and even IBM.
“There’s a mix-shift under way,” says Selipsky. “It’s natural that smaller, newer companies tended to be early adopters. They’re more risk-tolerant and have fewer legacy infrastructure issues. What has been a surprise to us is how quickly enterprise adoption has accelerated in the past year. We’ve now got larger companies who are totally deployed on mission-critical applications in a meaningful way. For example, there are hedge funds who are doing their daily trading algorithm optimisations on EC2, as well as [the pharmaceutical company] Eli Lilly conducting basic research.”
The technology analyst IDC shares Amazon’s upbeat vision. It expects spending on cloud services to almost triple over the next five years, reaching $42bn (£29bn) by 2012. Crucially, IDC also predicts that cloud computing will capture nearly a third of IT spending growth by 2013. Merrill Lynch goes further still, estimating that cloud computing can slash the cost of business applications by 60%-80%, and pegging the potential market at more than $160bn.
With such rich pickings on offer, clouds are gathering from other quarters. Microsoft’s Windows Azure will offer storage and processing that mesh neatly with legacy systems, while Google’s App Engine is using its expertise in large-scale data centres to offer currently free hosting of web applications. There are also dozens of smaller rivals floating into view. Do these rival clouds herald storms ahead for Amazon? Not according to Selipsky.
“Our competition isn’t Microsoft or Salesforce or GoGrid,” he insists. “It’s the disk drive in the computer. Far more important than differentiating ourselves from the big rivals is to differentiate ourselves from the way customers have been doing IT for the past 30 years. There has been a significant awareness shift in the last couple of years, but the majority of users are still buying a bunch of hardware, installing a bunch of software and putting it all in their basement.”
Despite this, Selipsky acknowledges that Amazon’s cloud could evaporate as quickly as it formed. “There are no upfront commitments, no usage contracts and no minimums,” he says. “Amazon Web Services are purely pay-as-you-go and you can fire us on a minute’s notice without telling us. Our CEO [Jeff Bezos] sometimes says: ‘You shouldn’t wake up in the morning terrified of your competitors, you should wake up terrified of your customers’.”
Selipsky must have felt a touch of terror when Amazon’s S3 service failed for seven hours last July, paralysing some of AWS’s 490,000 registered customers, including the industry darling, Twitter. If so, he’s hiding it well. “Our customers have been very forgiving with us because they’ve seen that our overall performance has been superior to the performance they’ve been able to achieve elsewhere,” says Selipsky. “The question is not whether it is literally 100% but how does it compare to the performance of services elsewhere?”
The truth is that all large-scale cloud services have suffered high-profile downtime. Google’s Gmail service has suffered at least five major outages in the past six months, including a two-hour hiatus in late February. More worrying, perhaps, is that Amazon’s affordable cloud services have also proved popular with the digital underworld. Marketeers using EC2 to generate massive quantities of junk email led the anti-spam organisations Spamhaus and Outblaze to blacklist whole ranges of EC2 internet addresses. Law-abiding users unable to send email via Amazon’s cloud were understandably annoyed.
“It’s an incredibly small percentage of what goes on in EC2,” according to Selipsky. “And one person’s spam is another person’s targeted advertising. But if we see a pattern of abuse, we will prevent access to an individual account.”
Another facet of Amazon Web Services attracting criticism is its Mechanical Turk website. This “marketplace for human intelligence” allows businesses to offer micro-jobs to individual web surfers. The tasks typically involve classifying images, populating databases, searching websites or harvesting emails, and usually pay just a handful of cents each. “It’s a very exciting service, there’s been nothing quite like it in the world before,” enthuses Selipsky. “We think that it has the potential to be a very significant business as more and more workers get involved.”
Businesses seem keen to take advantage of this ability to farm out repetitive digital tasks for peanuts, with the Mechanical Turk portal currently showing more than 33,000 jobs available to anyone with a web browser and broadband connection. The problem is that, in the absence of minimum wage regulations and the legal protections offered through traditional employment agencies, pay levels tend to be very low: $2 (£1.40) a hour or less before tax, with no holiday pay or sick leave.
Selipsky rejects charges of exploitation, saying: “Our experience is that if the pay is not adequate then the work does not get done. Some groups of workers are doing this as they do other things, they might be watching TV or whatever else they’re doing in their lives. A lot of workers find work they think is fun and do it for fun.”
However, Selipsky happily admits: “What’s very interesting about Mechanical Turk is that it’s actually very capitalistic. The free market really does produce winners and losers.”
One conclusion seems inescapable. Any company eyeing a healthy share of a $160bn cloud computing business while running a marketplace where workers are paid in cents is well on its way to becoming one of this recession’s biggest winners. Let the bad times roll.
Mark Harris, The Guardian, March 26, 2009