How and Why Did Amazon Get Into The Cloud Computing Business?

Why is Amazon focusing on cloud computing? A few different reasons. On Q&A social networking site Quora users, including Amazon’s CTO, have been discussing the question, “How and why did Amazon get into the cloud computing business?”

Werner Vogels, CTO at Amazon.com, responded: “…The thinking then developed that offering Amazon’s expertise in ultra-scalable system software as primitive infrastructure building blocks delivered through a services interface could trigger whole new world of innovation as developers no longer needed to focus on buying, building and maintaining infrastructure. From experience we knew that the cost of maintaining a reliable, scalable infrastructure in a traditional multi-datacenter model could be as high as 70%, both in time and effort, and requires significant investment of intellectual capital to sustain over a longer period of time. The initial thinking was to deliver services that could reduce that cost to 30% or less (we now know it can be much less)…”

Ashish Kelkar, market junkie, responded: “…selling books and shoes basically is a pretty low margin business, AMZN’s net margin is about 5-7%. I believe over time they will be able to scale AWS to a 10-15% net margin business, possibly even higher so its a good business play. Conversely the reason I believe Google does not play aggressively in the arena despite easily having the scale and expertise is because when you have 30% plus margins selling adwords, why bother with a lower margin addition.”

Charles-Axel Dein, Project Analyst at faberNovel, responded: “The cloud computing is a very important component in the digital content economy. Amazon is a retailer that is increasingly selling digital goods (most notably Kindle ebooks). In the personal cloud paradigm, all my digital content is stored in the clouds, on Amazon’s server. This requires a whole new set of technologies and skills. By implementing its own technology, Amazon wants to create an ecosystem and be a strong player in the cloud computing paradigm.”