Amazon CTO Werner Vogels: Cloud and SaaS are going global, fast

Werner Vogels, CTO and VP, Amazon Structure 2012

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.”

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