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From Retail to Services

By Edward Cone  |  Posted 01-07-2007 Print

From Retail to Services

Amazon's Web services unit was created in 2002 to help developers build applications that allowed the company and affiliated vendors work more smoothly and sell more product. "At first, we primarily exposed our product information and data to our affiliates and associates," says Selipsky. "It was really a productivity tool for our associate base, and it unleashed an explosion of innovation, with people creating a lot of cool applications."

Over time, Amazon has gone from selling books and other products to opening up its platform to merchants who sell their own stuff, to enabling a developer community. The next move seemed natural—turning the guts of the $2 billion system—especially since Amazon, like many companies, uses only a small fraction of its computing capacity at a given moment. "We saw we could help people, and we saw a potentially interesting business for us," says Selipsky. "We thought, maybe there's other stuff Amazon can open up. What else could we expose or build in terms of Web services that would help make developers' lives easier?"

S3 was launched in March 2006, with demand strong from the outset. When a beta version of EC2 went live in August, says Selipsky, "I don't think we had fully thought through its utility for testing software. If you want 50 or 100 boxes pointing at an application and pounding on it, that's really expensive to set up if you only need it for an hour. Instead, you can use EC2 and feel like you have the scale of Amazon. It's disruptive to the way developers currently develop applications, when and how much they make capital expenditures, the level of quality and how they scale."

A third service, called Mechanical Turk (named for an 18th-century chess-playing contraption with a human concealed inside), combines computing power with networks of real, live people who are paid to do the kind of work machines can't yet do well, such as recognizing inappropriate content in images or transcribing audio. A company that needs to post hundreds of photos to its Web site, for example, or identify key portions of a podcast, might use the service. "It's a marketplace for intellectual capital, and we're the marketplace for the workforce" says Selipsky. "Pieces of work get posted onto Mechanical Turk, and people get paid online by the entity that requests their help. We get a percentage of the fee paid." (Amazon takes a 10 percent commission.) A fourth service released in 2006, Amazon Simple Queue Service (SQS), allows developers to transfer data efficiently between application components.

Simplicity and ease-of-use are a big part of what Amazon is selling. Users program to Amazon's services by means of Application Programming Interfaces (APIs) the company makes available, so some expertise is required, but nothing exotic. That's exactly how Amazon designed things, says spokesman Drew Herdener. "All of the services are intentionally primitive and feature-poor—'close to the metal,' we say." Amazon is close-mouthed about the details of its architecture. The company runs all its operations on grids of commodity servers at multiple data centers across the U.S., and uses service-oriented architecture to insulate outside users from the workings of the underlying systems.

And more services are on the way. "As with most good ideas, we come at things from two different directions: What do people need, and what can we do well?" says Selipsky. "We look internally and ask, 'what do we have built, or what can we build with our world-class engineering talent that would justify creating a business?' "

Amazon prohibits illegal activity on its servers, and not much else. "Our terms of use are broad and there are no contracts, so if you want to stop paying you just take your data out of storage," says Selipsky.

In the larger view, says Selipsky, Amazon's moves go beyond Web services to a "long shift—from proprietary ownership of everything, to opening up and focusing your efforts on things that really add value to your customers, whether you are a big company or a small one. The entire open-source software movement is part of the same phenomenon. The emphasis now is on nimbleness and speed, grabbing things other people have done."


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