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Summary:

Amazon’s cloud services helped jump start a lot of entrepreneurial activity and now its globe trotting, maverick CTO Werner Vogels believes it help global small and medium sized businesses embrace the cloud and SaaS — which in the end is a good news for AWS.

Werner Vogels, CTO and VP, Amazon Structure 2012
photo: Pinar Ozger

It goes without saying that when it comes to cloud, Amazon’s chief technology officer Werner Vogels has a pulse of the planet. Thanks to the boom in demand for Amazon Web Services and his endless evangelizing of its cloud services in furthest corners of the world, Vogels is intimately aware of how people are using cloud and how it is impacting businesses and people.

A few years ago, during the course of an interview, he told us the cloud with its pay-as-you-go led to more tinkering and that was good for entrepreneurial activity. That prognosis has come true and Amazon is now at the heart of the startup revolution. So a few weeks ago when I asked him where will cloud and cloud services will have the biggest impact, Vogels said one should look overseas, especially in countries that have little or no technology infrastructure.

Structure 2010: Werner Vogels – CTO and Vice President, Amazon

Structure 2010: Werner Vogels – CTO and Vice President, Amazon

Going global

Just as many countries leap frogged fixed line telephony with mobile phones and bypassed DSL-type broadband by going straight to fiber, cloud computing and software as a service allow many countries to bypass the old IT infrastructure model. The rise of cheap cloud clients — tablets and Chrome OS computers — makes it relatively affordable for even emerging economies to put the cloud to work.

“The cloud is eliminating the need for IT infrastructure and as a result we are starting to see cloud just catch up internationally, and how businesses are changing as a result,” said Vogels during a recent phone conversation. Whether it is SaaS startups in India or online banks in New Zealand, the cloud’s international impact is just starting to show and Amazon wants to “be a part of it.” Amazon is going to face competition from local cloud providers — be it Alibaba in China or Telefonica in Latin America and Spain — but it has a head start, and that counts for something.

“There has been a tremendous rise of cloud in the U.S. and it will continue,” he said. AWS is on track to becoming a $9 billion business by 2015. Internationally, Vogels pointed out that the cloud and SaaS revolution is only just getting started and expect tremendous acceleration.

“The growth internationally is accelerating because we are putting more regions on the ground and more companies are seeing the advantage of the cloud,” he said. “What we’ll continue to see is the trend in the U.S. as the front runner in usage of the cloud, but the rest of the world is picking up pretty quickly in that sense and that is very interesting.”

SaaS-side-up for small businesses

Vogels pointed out that in many countries the financial systems used by companies are rather old. The software that is showing its age and smaller and medium sized companies aren’t using much technology. In other words, there are a lot of global opportunities for SaaS. Vogels gave an example of Hotelogix, an Indian startup that is offering hotel management as a service, which is essentially offering top-of-the-line software to small and boutique hotels, putting many online for the first time.

“Cloud and SaaS change the way companies compete,” he said, citing the example of an Indian construction company that used an open source ERP system, hacked and customized it, and then tied it to 2,000-odd suppliers. The cloud-based system is much cheaper than the traditional ERP systems, and Vogels expect more companies to do precisely the same. This might not be what Oracle, SAP and others want to hear. Even the smallest mom-and-pop operation has access to the technology that gave giants an advantage. “[The] pay-as-you-go model is pretty empowering,” Vogels said.

“The impact of cloud and SaaS will be huge on small and medium businesses,” he said, especially in places like “India and Indonesia where they are large part of the economy.” He believes Amazon’s growth will be driven by these small-and-medium sized business, who will embrace cloud.

The big challenge for Amazon (and to some extent many US cloud-oriented companies) is going to be regulatory and legal problems that exist in non-US markets. It took AWS a while to do business in China. I wonder if the NSA-disclosures are going to limit opportunities for US based cloud companies. These are a lot of unanswered questions, but for Amazon, the prospects of global cloud expansion are quite alluring.

“One of the things that excites me about the business that we’re in is the impact that we’re having internationally,” Vogels said. “While cloud has brought a true revolution in the U.S. very early already, it is just catching on internationally and it is great to see how those businesses are changing.  I love to be part of that.”

  1. I agree that the cloud (IaaS) is just starting to scratch the surface… but it’s mind blowing how far ahead AWS is in the public cloud game. The way things are going it will be 5+ years before others start catching up to their scale. They’re sprinting while everyone else is trying to tie their shoes. OpenShift is not even remotely a viable alternative and may not survive to see 2015. AWS also proves once again how important it is to have a vibrant developer and ISV ecosystem. There’s nothing like the energy and momentum AWS is enjoying elsewhere in IaaS-land. I don’t know whether to be excited, scared, or both.

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  2. Interesting observations on the prospects and potential of the cloud business,

    The analogy of countries skipping wired networks to go straight to wireless could be real for cloud-based services, especially when offered with utility type pricing…

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  3. There’s some good research from Parallels about the growth in the SMB cloud market from 2013 to 2015 which shows the biggest growth is going to be outside US and Europe, in particular the Asia Pacific region.

    All the innovations we see from Silicon Valley tend to be limited to English only, which offers opportunities for localised versions either as actual local independent businesses or with proper localisation from the relevant US companies.

    https://www.parallels.com/fileadmin/parallels/documents/smb-reports/2013/2013_SMB_Brochure_Global_web.pdf

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  4. Robert MacArthur Thursday, January 2, 2014

    What I find very interesting in this article is this line

    Even the smallest mom-and-pop operation has access to the technology that gave giants an advantage. “[The] pay-as-you-go model is pretty empowering,” Vogels said.

    Which jives with http://campustechnology.com/articles/2013/12/19/gartner-4-disruptive-trends-changing-the-future-of-it.aspx?=CTITTNL = trend number 1 suggesting the return of manufacturing to mom-and-pop businesses with 3-D printers and now IT at same cost as bigger companies? Could be the revival of SMBs and the middles class?

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