Written by Alex Iskold and edited by Richard MacManus.
We have written before about the innovative Amazon Web Services Platform. This stack was officially announced by Amazon CEO Jeff Bezos during the recent Web 2.0 summit and is now considered part of the core business strategy for Amazon. While analysts, competitors and Wall Street are pondering what to make of this move from a business sense, in this post we look at who is utilizing Amazon Web Services - and how. This post is based on personal communication with those people, along with the set of success stories available on the Amazon Web Services site.
The fact is many small, medium and even large businesses (even Microsoft), rushed to put Amazon Web Services to use. Why did they do it? Because Amazon offers a decade of experience in running one of the largest internet enterprises - and has wrapped this expertise into a set of pre-packaged services and APIs.
To remind you, here again is the Amazon Web Services Stack:
The Amazon Web Services stack is impressive in its scale and also well thought through. Amazon is methodical about this strategy and is aiming to create an offering which can truly be called an Operating System for the new Web. Many companies have already recognized the power and ROI of the Amazon platform and are literally betting their business on it.
Webmail.us - email hosting provider
Webmail.us is probably the most compelling success story for Amazon Web Services because of its huge ROI. It is an established business with over 27,000 customers. It had a real and simple business need - improve the cost and reliability of its backup system. After considering many alternative solutions, the company decided to utilize Amazon S3, The Simple Queue Service and the Elastic Compute cloud to address all of its needs.
The company claims to have improved its backup process and cut costs by 75%. The Webmail.us success story on Amazon contains a paragraph that nicely summarizes the technical and business gains:
"Amazon's Web Scale Computing model shifts the focus from do-it-yourself to let-the-experts-do-it. It allows businesses to scale up or down based on requirements and demand, and provides pay-as-you-go billing models. This combination allows businesses to turn fixed costs into variable costs, while knowing that their data or services will always be available."
SmugMug - online photo provider
SmugMug is another interesting success story. It is a straightforward one, because it uses Amazon S3 exactly how it was intended to be used - for storing large media. Today SmugMug hosts over half a billion photos on Amazon. And here is the real "wow factor" in this story: one week after writing the first line of code, SmugMug was storing all of its new images in Amazon S3.
To pepper this with more numbers: SmugMug is now backing up all of its new images to S3, which amounts to 10 terabytes of data monthly. The SmugMug site has not gone down since adopting Amazon S3 and it estimates it will save half a million dollars on its disk storage annually. So, as the company points out, S3 makes it possible for SmugMug to compete head to head with bigger companies that have deep pockets, without having to raise massive amounts of cash for hardware. So this is game changing.
Altexa, ElephantDrive and JungleDisk - backup providers
As soon as S3 came out, many companies recognized an opportunity to deliver business and personal backup solutions. The model is simple - charge a small premium on the top of the Amazon S3 storage costs.
With that approach it is essentially a user acquisition battle, where the implementation and marketing become paramount. Altexa targets small businesses, while ElephantDrive and JungleDisk target consumers - but all of them share the benefit and ease of use of S3. In their success stories, the companies emphasized incredibly quick (literally a few days) adoption, cost savings and reliability.
Scanbuy - mobile shopping solution provider
The success stories that we have covered so far are mostly using Amazon's S3 storage service. Scanbuy however is utilizing the Amazon eCommerce API to bring unique comparison shopping solutions to mobile phones. Their claim to fame is allowing the users to lookup prices by simply scanning the barcodes of items in a store. This is a clever approach that is made possible by a combination of technologies.
One of the key technologies here is the Amazon eCommerce API, which offers unlimited and complete access to most Amazon items. Scanbuy uses the API to fetch the latest pricing information, letting the user decide if they are really getting a good deal in the store. And as the company explains, they simply could not have done what they are doing now without the Amazon eCommerce API.
So why are analysts not sure what to make of the Amazon Web Services? In an article in BusinessWeek entitled Jeff Bezos' Risky Bet, their main concern seemed to be: will businesses use this? Well in this post we've shown that for some businesses, the AWS stack provides a set of very compelling value propositions - both technical and business. And having real business success stories with ROI and cost savings in the 50-75% range, makes it basically a no brainer.
We think that the real question is: does this work for Amazon? Is it ready to be a software and Web Services company? Will Amazon be able to scale this business indefinitely... and most importantly: are the margins high enough for it to be worthwhile? We have to believe that Jeff Bezos and the Amazon team did the math - and that the answer is absolutely yes.