Amazon looks to widen lead in cloud computing

Aaron Ricadela
Bloomberg BusinessWeek

To widen its lead in the cloud computing market, Amazon.com is working to make its Web services compelling to more customers as computing giants such as Microsoft and IBM attack the same territory.

On Apr. 28, Amazon announced the opening of a new data center in Singapore to give customers in Asia, India, and Australia speedier access to its Amazon Web Services business. That business lets companies buy from Amazon, on an hourly basis, computing power that's delivered over the Internet. The Singapore data center will target Asian customers and Western companies that have many users in the region.

In coming weeks, Amazon plans to introduce simplified management software for more of its 16 cloud computing products. "Amazon Web Services wants to be the data center for the world," says James Staten, a principal analyst at Forrester Research.

Amazon has established a booming business selling cloud computing services including processing, disk storage, and database software to what it says are hundreds of thousands of users, at hourly fees based on how much computing power they consume. "Amazon Web Services can be as big as our retail business, in the fullness of time," says Andy Jassy, the senior vice-president in charge of Amazon's cloud computing business, sitting in the converted Seattle hospital that's long served as Amazon's headquarters. Jassy joined Amazon in 1997 after Harvard Business School and has held a variety of jobs in the company, including as CEO Jeff Bezos' technical assistant. He launched Amazon Web Services in 2006, and has turned it into an unlikely success.

"Lot of momentum"

It could take years for Amazon's cloud business to rival the size of its retail sales, executives admit. Amazon won't break out the unit's sales. Citigroup estimates cloud computing services could generate about $650 million in sales for Amazon this year, or about 2% of its total. "There's no doubt it's got a lot of momentum," says Mark Mahaney, an analyst at Citigroup. He has a buy rating on Amazon shares.

In a February report, Goldman Sachs said that 77% of companies it surveyed using cloud computing development tools were using Amazon's Elastic Compute Cloud service. About 17% were using software from Google and Salesforce.com, and 10% chose Microsoft's Windows Azure. Amazon has been "running the table," says Tim O'Brien, senior director of platform strategy at Microsoft.

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