Jeff Bezos’ Risky Bet Isn’t New
While I was with Amazon, Bezos always made a point to say that Amazon wasn’t an e-tailer: Amazon was a software company. He drove this point home at almost every company event. Along with the “Amazon is a software company” mantra was his companion mantra of “customer obsession.” And, we all believed it. In fact, to progress in your career at Amazon, there was an implicit HR policy that if you didn’t have a strong physical science or technical degree, either as an undergraduate or graduate degree, then you wouldn’t have much of a career advancement at Amazon. Luckily for me, I had a technical undergraduate degree, a technical graduate degree, and I dropped out of the Ph.D program in Business at Chicago.
Recently, there’s been a lot of talk about Bezos and his “Risky Bet” as described by Business Week. Bezos also spoke at O’Reilly’s Recent Web 2.0 conference last week, where he explained his “Risky Bet.” Guess what everybody — Bezos’ Risky Bet isn’t new. Amazon has been doing that for years, but they’re just now opening services up to the masses.
In Bezos words’ during his interview with O’Reilly:
The answer is we been doing this for 11 years. We take the things we are good at internally and figure out how to expose those and charge for them. We are good at it, we know how to do it and it is an attractive business,” Bezos said. “We are in this business to serve developers. We are in the mode now of listening and trying to figure out how to make the services better.”
This is absolutely true. Amazon Web Services is common place within Amazon. Remember, Bezos believes and teaches to all Amazonians that Amazon “is a software company”, not just an e-tailer. It just so happens that Amazon’s software prowess is manifested as a very efficient web retailing company. Amazon is now making Web Services public, because it has built an amazing infrastructure, based on large-scale Linux clusters to an Oracle back-end, and ALL the software was written in-house: literally, ALL the software, from their Warehouse Management System to their Human Resource Management Software. Sofware is either written in PERL, PERL Mason, C, C++, or Java; some Python and some Ruby. If there was ever an argument between “Build or Buy”, Bezos will almost always say “Build.”
As a sidenote, the image above shows the process step right before the pallets of cartons are loaded to a truck. This step is called “Manifested”. The process step prior to this is called “Manifest Pending.” The steps prior to “Manifest Pending” (going backwards) “Slam”, “Picked”, “Picking”, and “Pending Pick”. These steps are internal to the Fulfillment Center and are part of the Order Pipeline of Events or, more commonly called “Click-to-Ship“, which consist of two major process steps: “Click-to-Paid” and “Paid-to-Ship”. Time is very sensitive and pushing volume through the facility at an acceptable velocity is what Amazon has become very, very good at. It’s a complicated process and there’s much more to it. Amazon is a fascinating company.
Continuing . . .
During that same interview with O’Reilly, Bezos said the following:
Bezos explained that the biggest cost for Amazon is not power, servers or people maintaining data centers, but utilization. “Because we are high volume, low margin, we are focused on things like power, but lack of utilization is the dominant cost for everybody in world who operates a datacenter. He gave out a figure of 17 percent for utilization (not Amazon’s), which is like leaving a 747 on the ground 83 percent of the time.
This is also very true. Almost 80% of the revenue for Amazon comes in the 4th quarter. That quarter (Peek Season) is crazy. Utilization is an Operations-specific term, that most people don’t understand. This is the formal definition:
Utilization = (Average Output Rate / Maximum Capacity) * 100%
For example, Amazon is all about shipping units. A unit is an item. For an average off-peak day at Amazon, a Fulfillment Center ships about 60,000 units. But, a Fulfillment Center has enough capacity to ship about 300,000 units per day. This means that the Utilization Rate at Amazon is roughly ~20%. This is pretty low, but highlights the Amazon business well. Lack of sufficient utilization is a killer on the cost structure.
What this means, then, is that Amazon has to find other, more stable sources of revenue. Enter: Amazon Web Services. I have nothing but respect for Bezos. He’s brilliant and is going to make Amazon a winner in this space like they are the clear winner in the online retail space. Below are the current Amazon Web Services:
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Amazon E-Commerce Service
Amazon E-Commerce Service (ECS) exposes Amazon’s product data and e-commerce functionality. This allows developers, web site owners and merchants to leverage the data and functionality that Amazon uses to power its own e-commerce business. ECS 4.0 makes it extremely easy for developers to build rich, highly effective web sites and applications.
Amazon Elastic Compute Cloud (Amazon EC2) – Limited Beta
Amazon Elastic Compute Cloud (Amazon EC2) is a web service that provides resizable compute capacity in the cloud. It is designed to make web-scale computing easier for developers.
Just as Amazon Simple Storage Service (Amazon S3) enables storage in the cloud, Amazon EC2 enables “compute” in the cloud. Amazon EC2’s simple web service interface allows you to obtain and configure capacity with minimal friction. It provides you with complete control of your computing resources and lets you run on Amazon’s proven computing environment. Amazon EC2 reduces the time required to obtain and boot new server instances to minutes, allowing you to quickly scale capacity, both up and down, as your computing requirements change. Amazon EC2 changes the economics of computing by allowing you to pay only for capacity that you actually use.
Amazon Historical Pricing
The Amazon Historical Pricing web service gives developers programmatic access to over three years of actual sales data for books, music, videos, and DVDs (as sold by third-party sellers on Amazon.com). Sellers can use Amazon Historical Pricing to make informed decisions on pricing and purchasing.
Amazon Mechanical Turk (Beta)
Amazon Mechanical Turk provides a web services API for computers to integrate Artificial Artificial Intelligence directly into their processing by making requests of humans. Developers use the Amazon Mechanical Turk web services API to submit tasks to the Amazon Mechanical Turk web site, approve completed tasks, and incorporate the answers into their software applications. To the application, the transaction looks very much like any remote procedure call – the application sends the request, and the service returns the results. In reality, a network of humans fuels this Artificial Artificial Intelligence by coming to the web site, searching for and completing tasks, and receiving payment for their work.
Amazon Simple Storage Service (Amazon S3)
Amazon S3 is storage for the Internet. It is designed to make web-scale computing easier for developers.
Amazon S3 provides a simple web services interface that can be used to store and retrieve any amount of data, at any time, from anywhere on the web. It gives any developer access to the same highly scalable, reliable, fast, inexpensive data storage infrastructure that Amazon uses to run its own global network of web sites. The service aims to maximize benefits of scale and to pass those benefits on to developers.
Amazon Simple Queue Service (Amazon SQS)
Amazon Simple Queue Service (Amazon SQS) offers a reliable, highly scalable hosted queue for storing messages as they travel between computers. By using Amazon SQS, developers can simply move data between distributed application components performing different tasks, without losing messages or requiring each component to be always available.
Amazon SQS works by exposing Amazon’s web-scale messaging infrastructure as a web service. Any computer on the Internet can add or read messages without any installed software or special firewall configurations. Components of applications using Amazon SQS can run independently, and do not need to be on the same network, developed with the same technologies, or running at the same time.
Alexa Site Thumbnail
The Alexa Site Thumbnail web service provides developers with programmatic access to thumbnail images for the home pages of web sites. It offers access to Alexa’s large and growing collection of images, gathered from its comprehensive web crawl.
This web service enables developers to enhance web sites, search results, web directories, blog entries, and other web real estate with Alexa thumbnail images. Including web site thumbnails improves user experience by allowing end users to preview sites before clicking on the thumbnail’s associated link.
Alexa Top Sites
The Alexa Top Sites web service provides access to lists of web sites ordered by Alexa Traffic Rank. Using the web service developers can understand traffic rankings from the largest to the smallest sites. The service enables users to page through the list 100 web sites at a time, and by making multiple requests, to retrieve lists of any size – be it the top 1,000, 5,000, or 100,000 web sites.
In addition to Alexa Traffic Rank, the information returned for each web site includes the number of page views the site receives per million users, the average page views per user, and the number of Alexa users visiting the site.
Alexa Web Information Service (AWIS)
The Alexa Web Information Service makes Alexa’s vast repository of information about the traffic and structure of the web available to developers.
Service Highlights
- Gather information about web sites, including traffic data, contact information, related links and more.
- Access historical traffic data for web sites to analyze growth and understand the effects of specific events on web site traffic.
- Build a web directory into your web site or service using an Alexa enhanced DMOZ-based browse service.
- Access the list of sites linking to any given site.
- Use the Alexa web map to analyze the link structure of the web without the content. Use the page-to-page links-in and links-out information to invent wholly new search engine algorithms.
Alexa Web Search
The Alexa Web Search web service offers programmatic access to Alexa’s web search engine. Developers can use this service to incorporate search results directly into their web sites or services.
Service Highlights
- Comprehensive: Based on 300 Terabytes of Alexa’s web crawl.
- Relevant : Advanced relevance algorithms provide highly pertinent search results.
- Configurable: Filter search results by passing in over 50 different search fields.
- Customizable: Advanced users can build new search index files that can be incorporated into the Alexa search engine.
- Cost-effective: Pay a low rate, and only for what you use.
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These are the current Amazon Web Services available. There are more Services to come, according to Bezos. In addition to the Web Services above, Amazon also provides other services to current Merchants, such as shipping, storing, and a variety of other storing-picking-packing-shipping type of services.
Amazon is a prime mover and Bezos is a visionary. I see big things ahead for Amazon.
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To learn about what it is like to work at Amazon, here are anonymized former Amazon Employee Work Experiences.
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Comments
@Rob,
All the customer-facing code was written in a c-based language, called OBIDOS. But, Amazon is off of that now and uses a flavor of PERL, called PERL Mason. The inventor of PERL Mason is an Amazon employee.
Pretty much — almost everything else — is in ANSI C or C++, in a linux environment, hitting an Oracle back-end, in a development environment called BRAZIL, and using CVS for versioning and Perforce for configuration management.
Pete
[...] Jeff Bezos Risky Bet Isn’t New by Peter Abilla – “Guess what everybody — Bezos’ Risky Bet isn’t new. Amazon has been doing that for years, but they’re just now opening services up to the masses.” [...]
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Are the programing languages mentioned used for customer facing applications or services? There is an impression that all amazon’s customer facing code is written in C.