This paper examines how Amazon Web Services (AWS) has fundamentally transformed enterprise software by commercializing cloud computing through a layered technology stack encompassing Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and Software-as-a-Service (SaaS). The paper analyzes Amazon's disruptive shift from capital expense (CAPEX) to operating expense (OPEX) software purchasing, the competitive advantages of AWS over rivals such as Google AppEngine and Microsoft Azure, and the role of virtualization in sustaining profitability. It also reviews the core components of the AWS platform and evaluates how Amazon's focus on agility, developer tools, and analytics positions it as the leading global cloud provider.
The lessons learned in building, growing, securing, and scaling Amazon.com have become directly applicable to the foundation of cloud computing. Amazon's lessons have been successfully translated into an entirely new business model framework — one that completely redefines enterprise software as it has been known for decades. Amazon Web Services (AWS), the subsidiary of Amazon responsible for cloud-based services and development tools, was projected to be a $500 million business by 2016 (Marston, Li, Bandyopadhyay, Zhang, & Ghalsasi, 2011). Amazon has been able to set the foundation for such rapid, profitable growth by concentrating on creating a scalable, secure technology stack that continues to be adopted across many other cloud service providers.
The AWS technology stack was the first to create the foundational elements of Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS), and then defined the flexibility of Software-as-a-Service (SaaS) at the application layer (Armbrust, Fox, Griffith, et al., 2010). This protocol stack dominates cloud computing architectures today and has also been instrumental in redefining the economics of cloud computing and enterprise software (Wang, Rashid, & Chuang, 2011).
There are many disruptive innovations made possible by Amazon's commercialization of cloud computing. Foremost among them is the ability to consume only those portions or functions of an application that are relevant to a given business (Marston et al., 2011). The innate ability of cloud-based platforms to support this selective purchasing of software has led to an entirely new approach to buying software — one based on funding from a company's operating expense (OPEX) budget. Previously, software was purchased through capital expense (CAPEX) investment, which often took months, and in some cases years, to approve (Wang, Rashid, & Chuang, 2011). Amazon was able to quickly recognize this dynamic and create entire business models — including the Amazon Web Services business unit — to capitalize on it. As a result, Amazon holds the majority of market share among cloud providers today.
At the center of the unique value proposition with which Amazon continues to gain market share is the ability to provide cloud service customers with a streamlined approach to enabling their applications in cloud services. The speed of deployment for new applications using the AWS architecture is why this platform is the choice of the majority of start-ups launching new SaaS applications, according to Marc Andreessen, a Silicon Valley venture capitalist (Arinze & Anandarajan, 2010). Speed and time-to-value are the two most critical aspects of any new business model, as it must ramp up quickly to generate new revenue. That is what Amazon continues to concentrate on from a graphical user interface and usability perspective (Armbrust et al., 2010).
In addition to start-ups, many Fortune 1,000 companies are also using the AWS architecture to build their own applications, often deploying them across broad geographic distances to support global operations (Marston et al., 2011). Amazon has also differentiated itself by offering developer services, training, certification, and a continual stream of new enhancements to its cloud platform. All of these efforts are aimed at ensuring a high level of scalability and security, while also reducing costs for customers and the workloads their applications generate.
The business model of Amazon is predicated on a usage-based scenario that seeks to optimally utilize as much spare computing processing power as possible. Amazon has been able to continually reduce costs by investing heavily in the development of virtualization techniques, which extract more performance from servers than traditional operating systems allow (Wang, Rashid, & Chuang, 2011). Virtualization is a critical success factor for Amazon's business, and is equally critical for its competitors' profitability. Google AppEngine, Microsoft Azure, Rackspace's platform offerings, and all others in the cloud computing industry rely on virtualization to achieve the continual cost advantages necessary to remain profitable and reduce costs over time (Vance, 2011).
Virtualization is just one of the many technologies that cloud computing service providers must excel at in order to retain existing customers and attract new ones. Gartner's Hype Cycle for Cloud Computing illustrates the breadth of technologies cloud service providers must navigate to succeed in their business models. The intent of the hype cycle is to inform technology buyers which emerging and proven technologies are best suited to meeting business needs. There is a tendency in the cloud computing market to rely purely on technology as a means of communicating with customers. The hype cycle refocuses the discussion on the customer and their need to use cloud computing to accomplish business objectives. Amazon's senior management team uses these frameworks to plan their product lines and educate their sales force on how to create and sell solutions for customers.
AWS has been designed by Amazon to support the core functionality required of a cloud service without sacrificing the flexibility and features customers need. The main components of the AWS platform include the Amazon Elastic Compute Cloud (EC2), Amazon Elastic Block Store (EBS), Amazon Simple Storage Service (S3), Amazon DynamoDB and SimpleDB services, Amazon Relational Database Service (RDS), and Amazon SQS. Amazon has also created its own content delivery system, Amazon CloudFront. All of these components are delivered with Application Programming Interfaces (APIs) that allow developers to quickly integrate them together, creating customized, unique applications.
Amazon has deliberately structured its solution platform to ensure a high level of agility and adaptability, while also allowing customers to create their own specific platforms of choice. The structural and component design of AWS enables a degree of customization that competing platforms have struggled to replicate, in large part because of the foundational architectural decisions made early in AWS's development.
"AWS advantages over AppEngine and Azure"
Amazon has been able to transform its expertise in e-commerce into a global cloud platform that is defining the industry today. It is also now the most trusted cloud platform globally due to the heavy investments in its architecture discussed in this analysis. The competitive direction of Google with AppEngine and Microsoft with Azure points to a more integrated approach to databases, yet both lack the customization at the SaaS level that Amazon provides. For all of these reasons, the recommendation to any company evaluating cloud services would be to choose Amazon Web Services.
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