Meet the Man Who Really Runs Amazon Web Serviecs

Meet the Man Who Really Runs the Internet

Much of the Internet Runs Under the Watch of Amazon’s Web Services Chief

GREG BENSINGER

Andy Jassy, the head of Amazon’s Web Services, wants cloud computing to be as vital to the Seattle-based retailer as diapers, books and skin-care products. Drew Kelly for The Wall Street Journal

 Nov. 12, 2013 8:25 p.m. ET

From Netflix Inc. NFLX -1.24% ‘s streaming video service to Pinterest Inc.’s social network, much of the Internet runs under Andy Jassy’s watch. The head of Amazon.com Inc. AMZN -1.37% ‘s Web Services division, which sells computing power to other companies from network of Internet-connected servers, wants cloud computing to be as vital to the Seattle-based retailer as diapers, books and skin-care products. Numerous technology startups and even government agencies rent server space from Amazon Web Services, including the Central Intelligence Agency, which recently chose AWS for a $600 million data storage contract.While Amazon discloses little about the seven-year-old division’s financial performance, analysts estimate the unit contributes as much as $4 billion in annual sales. Competitors such as International Business Machines Corp. IBM +0.10% , Google Inc. and Microsoft Corp.MSFT -0.61% are muscling in and marketing their own cloud services, though Mr. Jassy says AWS is cheaper and offers companies more choices.

This week the 45-year-old Mr. Jassy hosts AWS re:Invent, a tech conference in Las Vegas designed to get developers excited about making things that run on Amazon’s servers. He spoke with The Wall Street Journal earlier this month. Edited excerpts:

WSJ: How did the Web services business come about?

Mr. Jassy: In the early 2000s, we were finding at Amazon that software development projects were taking us longer than we thought they should. We decided to build a set of infrastructure services to allow our retail business to move more quickly.

As we were building these services, we thought other companies would find these services useful.

WSJ: You’ve said that AWS could one day be bigger than Amazon’s $60 billion retail business. How do you get there?

Mr. Jassy: If you look at the market segments that AWS covers—infrastructure software, hardware, and data center services—those market segments world-wide are trillions of dollars. We believe the business can be really, really large.

We’re a long way from being where we think we can be. Much of the enterprise and public sector adoption all [around] the world is yet to happen.

WSJ: How important is the CIA contract you recently landed?

Mr. Jassy: We were already growing substantially in the public sector, but it is a credibility builder. A lot of enterprises saw that news and…it gives them more confidence that they can move more quickly to cloud computing.

WSJ: What other ways do you convince large companies to throw out their servers and switch to the cloud?

Mr. Jassy: AWS wraps the software, the infrastructure software, the hardware and the data center in a service. [Other companies don’t] have to invest in the time of writing software or buying software, [or] buying hardware, installing it in data centers and managing those data centers. They get to focus their time and engineering resources on what differentiates their business…We manage the muck so other people don’t have to do it for themselves.

We have so much scale that we’re able to buy all the infrastructure at much lower prices and then pass those on at prices that are lower than what they can do on their own.

WSJ: Some of your clients are your competitors, such as Netflix, which competes with Amazon’s own streaming video service. At what point do those conflicts matter?

Mr. Jassy: A lot of competitors of various Amazon businesses use AWS. We don’t view that as a problem. We very consciously want any company, competitor or not, to use our infrastructure to build their business.

We believe that very few companies are going to own their own data centers and those that do will have much smaller footprints than they have today. All that computing is moving to the cloud.

WSJ: AWS is the cloud computing provider to many Silicon Valley startups. Startups come and go; is that a liability?

Mr. Jassy: No one customer is a significant percentage of our overall business. We always knew that startups were risky and we’re really excited to try to help more of them have a chance to succeed.

WSJ: How is AWS complementary to the retail business?

Mr. Jassy: We don’t think at all about how the AWS business complements the Amazon business from a financial overview perspective. We never talk [about] it; we never think about it. It’s just not how we consider the business.

WSJ: So, what should investors know about AWS?

Mr. Jassy: We don’t spend a lot of time thinking about how to position the business for investors. The company has been clear from the start that we try to serve customers long-term, and long-term investors are going to be more excited about Amazon than short-term investors. I would be excited about AWS because it’s a very large market segment, trillions of dollars.

WSJ: Talk about the competitive landscape in cloud computing today.

Mr. Jassy: We always expected there would be a lot of companies pursuing the cloud computing space because it’s such a good value proposition for customers. It’s unclear which ones are going to end up being long-term successful players along with AWS. But we just aren’t a competitor-focused company.

WSJ: Who owns the data that run through your servers?

Mr. Jassy: Customers own the data. We have a lot of competitors and a lot of companies of all types that appropriately view their data as theirs, and we respect that. We don’t look at the data, it just looks like a blob to us.

WSJ: What is the annual revenue of AWS? Is it profitable?

Mr. Jassy: You know I can’t disclose that. We don’t disclose our financial results. It will be a very significant free cash flow generating business for Amazon.

WSJ: You’ve been running AWS for about seven years. How do you view your trajectory within Amazon?

Mr. Jassy: I feel very lucky to get to do what I am doing. I get to go to work every day on a business that is changing technology.