Who Are The Biggest Users of Amazon Web Services? It’s Not Startups.
Erick Schonfeld
37 comments »
Amazon loves to talk about its Web Services because it positions the company as a bold innovator bringing cloud computing to the unwashed masses and other companies still stuck in the land of legacy data centers. But it is coy when it comes to details about the actual business behind Amazon Web Services, which includes its S3 storage service, EC2 compute cloud, and SimpleDB online database.
During its fourth-quarter earnings call, Amazon offered up the tidbit that Amazon Web Services (AWS) now uses up more bandwidth than Amazon.com proper, but not much else. You could infer, however, that the business is not yet very large, accounting for less than $131 million of Amazon’s $5.7 billion in revenues that quarter. The revenues may be small, but they are no doubt growing very quickly.
So who are using these services? A high-ranking Amazon executive told me there are 60,000 different customers across the various Amazon Web Services, and most of them are not the startups that are normally associated with on-demand computing. Rather the biggest customers in both number and amount of computing resources consumed are divisions of banks, pharmaceuticals companies and other large corporations who try AWS once for a temporary project, and then get hooked.
That surprised me. These are the types of customers you wouldn’t expect to see running their data through a hosted service. But apparently the cost advantage of paying by the drink versus buying new hardware and staffing up to do a random data run is convincing them to trust more of their data with Amazon. It goes without saying that these are the types of companies who demand the highest security for their data. Banks and drug companies. And they have a lot of data to crunch.
You just hear more about the startups because many are increasingly putting their entire businesses on Amazon, and the economics of cloud computing really levels the playing field for them. They also tend to be more open about their data practices. But cloud computing is already going much deeper than the startup world, and gaining adherents in big IT organizations.
Excellent post. This is the kind of content I enjoy seeing on Techcrunch.
This is good news for startups as now that AWS has these huge demanding customers, they’re going to ramp up their offerings to satisy them. Which will benefit the small 2 man startup in the long run
We’re using Amazon’s EC2, S3, and Elastra powered databases to power our new SaaS - Email Center Pro (ECP). We’re an established private company. AWS was appealing to us because it offered an inexpensive way to build the infrastructure a product like ECP needs and we think the product benefits from the credibility we get from being associated with AWS.
More here: http://www.deadsimplesoftware......-services/
As the head of a medium sized company (194 computers at this writing) I can say that we’re just finishing testing on our first Amazon service which is using S3 for off-site backup. The truth is, off-site backup is massively overpriced and the programming logic isn’t that hard to do by yourself. Even the encryption was taken care of by the .Net Framework (we’re a Windows Agency). So Amazon made it a no-brainer.
The licensing for some of the services still prevents us from using it for anything that might include live, confidential data (again the backup is encrypted 12 ways from Sunday) but if things go well with this first project I can see us using it for other things. The truth is, with much of the reference material we store it actually makes things easier to have it on Amazon because remote offices can access the data just as easily as those on our campus. So not only does it eliminate all the server maintenance for us it frees us from the hassles of firewalls and such (again this is non-confidential reference info).
This is counterintuitive but consistent with our customer base too. I think it’s the largest companies that get the biggest benefits of Web 2.0 / Enterprise 2.0 / Web Services because the cost savings are so obvious and dramatic to them vs. other options. Vs. the little guys always have another option - do nothing - which is even cheaper …
this does not surprize me, also maybe you should of added this to the story http://open.nytimes.com/2007/1.....uting-fun/
nytimes uses amazon web services for their archive project.
$131M in revenue from this business unit is HUGE. Yes, compared to the core business this is tiny, but, I would venture to guess that the gross margins are greater than 65% whereas the core business margins are weak and will continue to go south.
Scale has its advantages.
Cloud computing is exploding in a big way. We’ve created a system that lets you easily build your application or component stack into a virtualized server and deploy it with one click into the cloud. We support Amazon EC2 and will support other clouds as they come online. You can also build to vmware, xen, and parallels formats, so you can easily test your virtualized server locally and then launch the cloud version quickly, easily, and with consistency.
Check out Elastic Server On Demand: http://es.cohesiveft.com
I love how $131 million in a quarter is “small”
I’m surprised Amazon doesn’t mention this more publicly. If more medium to large companies knew that other big companies, especially security conscience companies, used their services I would venture to say more would join.
I would also be however that the bigger roadblock is the established mindset of the IT staff against such services, especially when it comes to database intensive applications.
This is surprising indeed. Thanks for the insight. It’s …. priceless
I agree with post 2… if more ‘big’ clients are in need of more power, they will ‘up’ there services for the little guys as well
Great post. That should lead to the financial stability of Amazon’s Web Service product.
There are plenty of players in this space such as Nirvanix , the cloud is becoming a major factor in todays IT decisions
I agree with other comments — great post, and very timely. yeah, cloud computing could level the playing field and allow startups to scale more easily. but it’s also all about not having to go pray to the altar of IT & network guys whenever you want to try a new project.
This is not a big surprise to me. Last year sometime, at some random geeky event, I was explaining why I thought AWS was so cool, and one of the people I was explaining it to worked for a local insurance company, and he got very excited. Apparently, at this company, they would have huge stacks of compute servers that would lie fallow 28 days out of the month, but when it came time to run the monthly math to recalculate various risk reward calculations, they would max out their capacity, and were constantly begging for more. They would very happily pay a premium to have those compute instances on-demand, by-the-drink, and not have to pay for them the rest of the month.
I wouldnt be surprised if they are now one of those AWS customers.
This is very cool info. I still would not rely 100% in Amazon, read my blog post below, but my argument is becoming increasingly harder to support.
http://www.fabianschonholz.com.....-solution/
We just launched a social network (http://sportsnation.espn.go.com/slimc9999) and widget directory (http://widgetcenter.espn.go.com) on AWS, so i can believe other large companies are examining it.
There are definitely some large customers using AWS, but they tend to be quiet and they are unlikely to have signed-up anonymously using their credit card. They probably also already had a business relationship with Amazon before AWS… While these companies may be using a big chunk of cpu-hours and gigabyte-hours from AWS today, I’m not sure they will build the momentum behind cloud computing. It seems so much more likely that the real momentum will be built through the startups that run several thousand servers when they become successful. At RightScale (http://www.rightscale.com) we’re helping one of those at the moment and I can’t imagine doing it on any platform other than EC2! That’s where the press is and what inspires the forward-looking CIOs of larger corps to try it out as well in a public manner.
Excellent Post! I am using Amazon for a new project and is working beautifully.
I’m not sure it’s appropriate to ask a question in this forum but I hope so.
I have a question to someone whom knows the technical side of S3.
Is it possible to use the S3 as your one and only server?
We are two guys from Denmark putting together this new video site (different from all other of cause) :-). So we have a need to host our videos somewhere and we were thinking of using the S3 as our server, if that is possible.
We are planning to include a developer later on (whom knows this “stuff”), but until then it would be nice for us to know if it’s possible or not? If not what is recommendable for a video site with “on demand videos” ?
Thanks!
Duncan.
Duncan_dk@yahoo.com
Actually, I can offer one counterexample to this. StyleFeeder definitely qualifies as a startup and we’re also one of the largest users of Amazon’s SQS service, something we discovered out recently when one of their product managers reached out to us to ask if we had any input for the future direction of the product.
We really love love Amazon’s webservices - they’ve been truly super for us.
And, @Duncan, yes, you can serve a website directly off of S3, but only if it’s static content. There’s no ability to execute code there. For that, you could use EC2 now that they have elastic IP addresses that you can assign to your instances.
Amazon has struck gold with AWS. I think it’s one of the best examples of utility computing today, hence the large number of corporate users. I would guess that the conversion rate for those testing the service is quite high.
I use EC2 and S3 to host my blog and several other domains. It has become the “platform of choice” for all future web projects for myself and clients. I couldn’t be happier with the service and while I’m paying $60 more on average per month (compared to the $20 I spent at Media Temple), I believe I’m getting far more value and capability for the money.
You can’t help but to be giddy about the service and all it has to offer.
Look for Diomede Storage to launch later this year and be a game changing alternative to S3.
We are seeing the exact same trend at Joyent. More and more large companies are starting to use Joyent’s Cloud Computing services.
Joyent has over 10,000 customers, and our revenues are growing at over 550% a year. At least half that revenue comes from larger companies, and not start-ups.
These Fortune 1000 companies are setting up Light Engineering Departments. For CIOs, Joyent gives them the best of both worlds. Their employees can experiment and increase the velocity of innovation within their organization with out putting their mission critical legacy infrastructure at risk.
CIOs particularly like Joyent because our stack is completely open. Thus, CIOs do not have to worry about having to re-write an application if they want to bring it back in house.
You might be interested in a post on Joyent’s site about Light Engeering and Cloud Computing. http://www.joyeur.com/2008/03/10/light-engineering
Something to note is that basecamp, a fairly widely used collaboration portal seems to also be using aws to serve its clients + client projects with file hosting. Very smart move…
It would surprise me too if Amazon’s biggest customers are big customers. The economics makes sense for customers large and small, and I hope that it is true but awareness of AWS is quite low amongst the companies we work with. It would be nice to have this story verified somehow. Thanks for the post.