Amazon CTO Werner Vogels on Amazon’s Web Services, Startups and Innovation

Werner Vogels onstage at our Structure 08 conference

Over the past four years, I have watched with amazement the rise of Amazon (s AMZN) Web Services. What started out as a basic S3 storage service and now includes a content delivery network and virtual private clouds has disrupted — and transformed — the entire technology landscape. Wall Street doesn’t know what to make of AWS, but here in startupville, its utility is pretty clear.

While there is a lot of talk about lean startups and agile startups, had it not been for Amazon’s web services, Internet startups would still be stuck spending on infrastructure without knowing if their service was every going to be  a hit. What if San Francisco-based online storage service Dropbox had been forced to start by building its own infrastructure, like back in the old days? It never would have been able to grow and scale as quickly as it has. More importantly, it would have had to spend hundreds of thousands of dollars to just hang its proverbial shingle. Instead, it used Amazon’s S3 storage service.

At the DLD Conference in Munich last week, over a cup of tea, I sat down for a casual chat with Werner Vogels, Amazon’s chief technology officer. I asked him about the company’s role as a catalyst for innovation. In classic Amazon style, he dismissed the notion, instead choosing to focus entirely on the “cloud.”

“With the cloud comes unconstrained thinking and willingness to tinker and experiment without worrying too much about cost,” Vogels said. I agree — success-based scaling is perhaps one of the biggest disruptions of our times. In the old days they used to call it getting your money’s worth. Today, it’s more commonly referred to as getting the most out of your startup capital.

“The cloud allows lot of businesses to scale aggressively, like Facebook apps,” he said. Indeed, it means makers of Facebook apps don’t have to invest huge upfront capital for what is a hit-driven business. After all, in this era of extremely fickle customers, a hot app of today is left to rot tomorrow.

“We are enabling a lot things in a way that will be long-term beneficial as it would help build more sustainable businesses using a lot less capital,” said Vogels. “The fact is that because of the cloud, today a young upstart can take market share without an incumbent having time to react.”

He cited San Francisco-based Twilio, whose platform offers a way to easily merge web and voice offerings, as one such company that is benefiting from the cloud. “Twilio excites me with their programmable voice platform and that is a company where you see the power of the cloud, of a startup becoming a platform to challenge any incumbent. The cloud is helping make an even playing field.”

Just like Twilio, Vogels said he was excited about the emergence of cloud-centric companies like Dropbox, Foursquare and Soundcloud. “Just imagine if you could combine Twilio with location and media and build a whole new mash-up of apps, all running off the cloud,” Vogels mused.

From the outside it is hard to quantify Amazon’s success in the cloud services — the company doesn’t break out AWS revenues and profits (or losses). It refuses to give guidance on how big this line of business is, often serving up somewhat ambiguous data sets such as “Amazon’s S3 now has 82 billion objects.” Such numbers are meaningless to me. What matters to me is how many developers — hundreds of thousands, according to Vogels — who are building on Amazon Web Services.

Just as developers help Microsoft dominate the PC era and more recently, helped Apple to reign with its iPhone, the endless army of developers working for startups that use Amazon’s web services are going to ensure two things. One, that AWS remains a platform of innovation for a long time to come. And two, that Amazon has an advantage over newer cloud providers — for the more such developers use AWS, the tougher it is to switch to another cloud platform.

A second installment of this post will appear later this week. In that post, I will focus on what Vogels had to say about the recent announcements made by Amazon, the impact of EC2 spot instances and his general views on the cloud computing landscape during 2010.

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