Despite the dot-com crash in 2000, Amazon was looking to expand in areas other than online retail. It was during that year that Amazon began selling its e-commerce platform to other retailers. "Today, hundreds of thousands of world-class retail brands and individual sellers increase their sales and reach new customers by leveraging the power of the Amazon.com e-commerce platform," Amazon claims on its Website.
Amazon sells its platform through its subsidiary Amazon Services, giving businesses the ability to sell their products on Amazon.com or make their own Website more successful. Or, like Target, businesses can have a store on Amazon.com but also use Amazon Services to build and manage its own e-commerce site, Target.com.
Amazon Rolls Out the Cloud
But Amazon didn't stop there. The next stop was the cloud.
When Amazon entered the cloud computing space, it seemed an unlikely company to do so. Again, the company saw a way of taking an internal technology and making it available to everyone. Amazon realized it needed a "massive, distributed system that could handle its retail operation. When it was finished, they realized that they had something big on their hands that could potentially be used by many other people. The result was AWS (Amazon Web Services)," wrote Jeff Cogswell in a tutorial about AWS in eWEEK.
This computing infrastructure came about because Amazon realized that as it continued to sell ever more items beyond books and as its business grew it needed a system that could keep up with the increasing demands on it. Unfortunately, no such solution existed at the time. So Amazon did the only thing it could do: It built the system itself—a system that distributed the work among separate computers, with the computers offering their services on an as-needed basis.
Amazon realized that providing such a large computing capacity to organizations would be much faster and cheaper than their building their own server farms—and another way for Amazon to earn a return on this huge capital expenditure. By doing so, it was providing infrastructure as a service (IaaS) and platform as a service (PaaS). Little did the company know then how much money it could make from this industry.
Officially launched in 2006, AWS is made up of Web services, the most well-known being Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3). EC2 is a Web service that provides resizable compute capacity (like elastic) in the cloud, designed to make Web-scale computing easier for developers, Amazon claims.
When asked why Amazon got into the cloud computing business, Werner Vogels, CTO of Amazon, wrote on Quora, "The thinking [was] that offering Amazon's expertise in ultra-scalable system software as primitive infrastructure building blocks delivered through a services interface could trigger [a] whole new world of innovation as developers no longer needed to focus on buying, building and maintaining infrastructure.
"From experience we knew that the cost of maintaining a reliable, scalable infrastructure in a traditional multi-datacenter model could be as high as 70 percent, both in time and effort, and requires significant investment of intellectual capital to sustain over a longer period of time," he continued. "The initial thinking was to deliver services that could reduce that cost to 30 percent or less (we now know it can be much less)."