Everybody knows what “the cloud” is, right? It’s, like, internet storage or something? Sure. Yeah.
I wanted to go a little deeper. I wanted to know exactly what it is, where it is, who owns it, who runs it, and how it works. So I did a little travel, conducted some interviews—and last Sunday, “CBS Sunday Morning” aired my story. You can watch it here.
The “who runs it” part has a particularly interesting answer. In large part, the answer to that is, “Amazon” (AMZN), which reports earnings on Thursday.
Over the last decade, Amazon has quietly built up the world’s largest cloud-services company, called AWS (Amazon Web Services). In terms of income and profit, it’s much bigger than Amazon.com (the division that sells stuff by mail-order).
Most companies don’t like to reveal what cloud-services company they use, but here are a few companies that don’t mind saying that they run on AWS: Hulu, Netflix, Comcast, Spotify, Pinterest, Yelp, Airbnb, Slack, PBS, SmugMug, Hertz, Time, Intuit, Unilever, Zillow, Dow Jones, Morningstar, Under Armour, Kellogg’s, Expedia, Adobe, Philips, GE, Shell, AOL, BMW, Canon, Capital One, IMDb, Johnson & Johnson, Lamborghini, Lyft, McDonald’s, NASA, Novartis, Pfizer, Philips, Samsung, SAP, Sony, SoundCloud, Ticketmaster, and the US Department of State.
For the TV story, I had the rare opportunity to interview an Amazon executive: Dr. Matt Wood. His current title is general manager for artificial intelligence AWS, but he’s been part of AWS from the beginning. (I asked him if the “Dr.” meant medical doctor or PhD doctor. In Wood’s case, both. He started his career as a medical doctor.)
As always happens, though, the time constraints of TV meant that not all of the good stuff from our interview made it into the broadcast. So here, for your reading pleasure, is a more complete edited transcript of my interview with Dr. Wood.
POGUE: Because AWS caters to businesses, not ordinary consumers, most consumers haven’t heard of it. But it’s giant, right?
WOOD: It’s a relatively large business today. We’re a little over $16 billion in revenue run rate [projected income for 2017], and we’re growing at just over 40% a year.
POGUE: So who had the foresight, when AWS started, to say, “You know what could be really a good business for us…?”
WOOD: It actually came out of Amazon retail. The developers inside Amazon retail wanted to be able to move more quickly. They were frustrated about having to write big checks [to buy new server equipment] and wait and wait and wait [for them to be delivered], and do all this extra work to be able to try out their idea.
And so we started to come up with some ideas about how we could make that faster. And so we started to explore an entirely new business for us, selling these services to businesses in the same way as Amazon was consuming them.
POGUE: So all of these companies are hiring AWS to do what?
WOOD: They are able to pull down computational power as if it was a utility.
So let’s say you’re a brewery, right? They don’t want to manage computers. They want to brew beer. They don’t want to be going through the expense and the upfront cost and all the complexity of managing these large amounts of computers.
POGUE: So it sounds like cloud companies like AWS are basically renting computers, storage, power, security—all the stuff that technicians would have normally had to do on site, right?
WOOD: That’s right, yes.