Few will have heard of it, or know its value, but Amazon Web Services is one-half of one of the world's largest companies, Amazon.com
Twenty laps to go in the Hungarian Grand Prix, and World Champion Lewis Hamilton pits for new tyres, having unsuccessfully tried twice to get past race leader Max Verstappen.
Emerging with fresh tyres and greater speed, Hamilton is 20 seconds behind the young Dutchman – an eternity in F1 racing. To most watching on TV around the world, it’s the Red Bull driver who will take his second win of the season, having secured his first a week earlier in Germany.
Suddenly graphic F1 insights pops up on screen predicting that Hamilton has a 93 percent chance of winning the race, based on statistics powered by Amazon Web Services’ machine learning and data analytics services. Sure enough, three laps from the end, Hamilton sweeps past the outside of Verstappen on turn one to take the lead, and eventually win the race.
This is typical of Amazon Web Services (AWS) and how it works with companies around the world and in the Middle East.
Few will have heard of it, or know its value, but AWS is one-half of one of the world’s largest companies.
Go talk to your CFO about investing $5m in hardware for a new project; it’s not a good conversation to have
The cloud computing arm of its more illustrious e-commerce parent company, Amazon.com, AWS doesn’t generate much headlines beyond the tech industry pages and it’s easy to see why.
First and foremost, AWS is a technology and services provider for software and cloud developers – people that build things for consumers.
In F1’s case, it built the ‘insights’ using AWS technology.
The services on its platform, now totalling 165, allow developers (or builders as AWS likes to call them) to create and deploy any type of application in the cloud.
The ease of use, where developers can pick and choose, and use on a pay-as-you-go basis, has helped spur its phenomenal growth since its official launch in 2006 to become an integral part of the Amazon story today.
When Amazon published its full-year results from 2018 earlier this year, its net income reached $10.1bn – up from $3bn 12 months earlier. AWS revealed operating income of $7.3bn for 2018, while Amazon North America reported $7.27bn. The figures also showed that it took Amazon North America $141.4bn of sales to reach that operating income, while AWS reported $25.65bn.
“Will AWS ever be a larger business than the retail operation will be?” Werner Vogels, vice president and chief technology officer at Amazon.com, asks when the business comparison is put to him.
“I think Jeff [Bezos] has said in the past that [AWS] definitely has the potential but, remember the retail business is growing … [double digits] as well.”
Vogels admits the speed of AWS’ growth has surprised him, but not its success. He points to the global financial crisis of 2008 as a key driving factor in its early days, when it “took all capital out of the market”.
“Go talk to your CFO about investing $5m in hardware for a new project; it’s not a good conversation to have,” says Vogels, speaking to Arabian Business during a recent visit to Dubai.
“I think that was definitely also one of the accelerating factors, in enterprises starting to move over to AWS because I think most started to realise that even though there was a crisis going on, this crisis will stop at some moment. We can use this time to innovate and build new innovative products. Cloud is clearly the underlying driver for most of these digital innovations that these companies want to go through,” he adds.
I think Bahrain will play an important role in bringing all sorts of Arab content to the region
AWS, which counts Flydubai, Al Tayer Group, Careem, MBC and Emirates NBD as some of its major customers in the Middle East, saw a noticeable spurt in its figures in recent years, which Vogels puts down to enterprises globally doing mass migrations into AWS, but also says the emergence of new businesses has been an essential factor.
“We are seeing a number of consumer services that didn’t exist, let’s say, five to 10 years ago. If you look at whether it’s Airbnb or whether it’s Uber or Spotify or whatever. All these companies are exploding in their growth and in their usage. On the back hand of that, AWS has been successful as well,” he says.
“The beauty of our platform being that customers can pick and choose what they need, and do not have to commit into a long-term contract. It’s not difficult to find various departments using a particular service. Then, thinking about all the massive migration [that has taken place].”
The Middle East is one of the fastest growing public cloud services markets, led by governments adopting moves towards services that offer immediate savings.
Bahrain has fully embraced the cloud – adopting a cloud-first policy. Following the AWS decision in 2017 to locate its data centres in the kingdom, it was announced that it would move its ministries to the digital cloud.
“By December of this year, we will have 30 percent of all 72 government entities migrated to AWS and by June 2020, we expect to have most government data centres shut down,” said Mohammed Ali Al Qaed, chief executive of Bahrain Information and eGovernment Authority, the body that is leading the government’s migration project.
Kuwait’s regulator, Communication and Information Technology Regulatory Authority (CITRA), is also working with AWS on its strategy of transforming Kuwait into a regional ICT hub, and the digitisation of the Kuwaiti economy.
According to intelligence firm IDC, the total spending on public cloud services in the wider MEA region crossed $1.5bn in 2018 and is expected to grow at a compound annual growth rate (CAGR) of 27.2 percent over the next five years to reach $5.2bn in 2023.
Looking at the major markets such as Saudi Arabia, UAE and Bahrain in the Middle East region alone, the five-year growth is at a much faster rate, crossing a CAGR of 30 percent, where countries are quicker at adopting various emerging technologies such as artificial intelligence (AI), machine learning, blockchain and internet of things (IoT), all of which are based in the cloud.
Globally, AWS remains the dominant player, with almost 50 percent market-share according to Gartner, with a similar – if not better – market share in the Middle East, according to experts.
If you look at whether it’s Airbnb or whether it’s Uber or Spotify. All these companies are exploding in their growth and in their usage
The expansion of its AWS cloud operations in the Middle East, with the opening of its first AWS Region in Bahrain (which will give users lower latency and greater speed) will help grow that market share even further, according to Vogels.
“The ability for our local customers here in the region to be able to have low latency access to technology - that can drive their digital transformation, whether that is improving their internal processes or whether they are building new consumer-facing technologies,” says Vogels.
“But it’s also important for companies from outside of the region to be able to serve local customers with lower latency. We see almost a balance in how these regions are being used. Definitely I think Bahrain will play an important role in bringing all sorts of Arab content to the region, not just by local companies but also from [global] companies.”
Vogels says customer feedback is vital to AWS’ growth and its products. As much as 95 percent of services and features are related to customer needs.
“I spend most of my time actually in the offices of my customers, and hearing from them [first-hand] how they are using our services, what are the things that we can do better. But also, what are their pain-points in their IT infrastructure, and it might be surprising,” he explains.
“When we launched Workspaces, which is our virtual desktop service that for many didn’t look like an obvious thing that AWS would deliver, it was clearly the feedback we got from CIOs saying that, ‘Listen, bringing your own device to work is a really important strategy at the moment. Every one of our workers wants to do this’,” he says.
Vogels describes AWS as a “builder-oriented technology” that provides tools in a toolbox.
“In the past, IT providers would give you everything in the kitchen sink and would tell you, ‘This is how you shall develop software’. But basically to do that, you probably started building five years ago to deliver this to your customers. That means you have technology from five years ago, and not the technology you need five or 10 years from now. What we tried to do with AWS is build many smaller tools where everything is in the toolbox, and builders can pick out the things they need.
“What IT providers used to do is give you a pre-fabricated house. You can still give a different paint, you can maybe move the walls a bit, but it’s dull for you. In the case of AWS, you can build any house you want, with the exact tools that you need to build the most beautiful, unique, capable house that you want.”
AWS operates a pay-as-you-go pricing model, which Vogels says helps reduce the bill for customers.
“Traditionally, account managers are rewarded by making your customer lose more,” he says. “For AWS account managers, part of their remuneration is if they save customers money. You need to put the right incentives in place to make sure that everybody does the right thing.
“So the economies of scale together with the innovations we do in our data centres, allow us to lower our own cost picture, and then we’ve made the commitment to keep our margins fixed. So we immediately give out that profit back to our customers.”
Amazon is guided by four principles: customer obsession rather than competitor focus; passion for invention, commitment to operational excellence, and long-term thinking.
On the last principle, Vogels says he likes to look just six months ahead when it comes to product development.
“I try to move fast. Some things require more time. When [we got] feedback from our customers that they wanted to move away from the expensive, restrictive enterprise data bases… we started to build Amazon Aurora, the fastest growing database service ever,” he recalls.
In recent years, he says, customers started to ask about blockchain “because they heard all around them that this was something that they should be looking at”.
“It turns out that most of these customers are just looking for a reliable ledger service. They weren’t looking for something that was massively distributed over multiple players. They just wanted to have a cryptographically proven immutable ledger. We already built something for us that solves that internally, but that really served our customers well. So that’s something we could deliver within six months,” Vogels explains.
And the next big thing, according to Vogels, is training and recruiting the right people. AWS says 10,000 data solutions architects will be required in the Middle East region in the next five years. In Bahrain, 2,500 Bahraini nationals have already signed up for AWS training programmes, according to Khalid Al Rumaihi, CEO of Bahrain Economic Development Board (Bahrain EDB).
“I think, one thing that most enterprises are struggling with today is getting the right people with the right skills. There’s a massive skills gap at this moment. Not necessarily around the cloud but just in general,” he says.
“Companies that are going for digital transformation want to bring development back in-house. They may have outsourced that in the past... It requires a change in organisational structure, it requires a change in the way that you actually think about product development and so you need to be able to hire the right people.”
Vogels says AWS is “making massive investments in the educational structure here and around the region” by bringing AWS Educate to many of the universities.
“Young engineers can actually learn from the biggest universities in and around the world about distributed systems and computer science and things like that,” he explains.
“We have grants available for young entrepreneurs that are looking to become successful and we work with many of the local groups around coding skills and things like that to really try and build a workforce for the future, so that our customers can be successful.
“You know, technology’s biggest stumbling block at the moment is making sure that we have enough people that actually understand how to work in this world.”
Vogels is certainly one of those people.
AWS offers over 165 fully featured services for computing, storage, databases, networking, analytics, robotics, machine learning and artificial intelligence (AI), Internet of Things (IoT), mobile, security, hybrid, virtual and augmented reality (VR and AR), media, and application development, deployment, and management from 69 Availability Zones (AZs) within 22 geographic regions.
To support the growth of new business, AWS works with incubators and accelerators in the Middle East to provide resources to start-ups, including AWS promotional credits, through the AWS Activate programme.
In the Middle East, AWS works with a number of local and international accelerators and incubators active in the region such as AstroLabs, 500 Startups, BADIR in Saudi Arabia, Startupbootcamp, Oasis 500, Techstars, Beco, MEVP, and FinTech Hive providing training, AWS credits, in-person technical support and other benefits.
In the education sector, AWS is supporting the development of technology and cloud computing skills at local universities through the AWS Educate programme, providing students and educators with the resources needed to accelerate cloud-related learning.
With AWS Educate, there are over 75 member institutions in the Middle East including King Abdullah University of Science and Technology (KAUST) in Saudi Arabia, the Higher Colleges of Technology (HTC) in the UAE, Bahrain Polytechnic, University of Bahrain, as well as Oman College of Management and Technology (OCMT), the Jordan University of Science and Technology (JUST), and many others across the region.
The World Bank, in collaboration with Amazon Web Services (AWS), and the Abdulla Al Ghurair Foundation for Education (AGFE), hosted the Skills for The Future Initiative (SFI) at Zayed University in Dubai on June 19th and 20th.
The programme introduced the next generation of technology leaders in the UAE to the skills needed to prepare them for the jobs of the future. The two-day training boot camp attracted students from 12 institutes who learned about the changing nature of work and received introductory training on cloud technology leveraging AWS Educate resources.
Last year, during the AWS Summit in Bahrain, AWS hosted a special “We Power Tech Day in the Cloud” training dedicated to cloud technology learning for women in Bahrain, in collaboration with C5 Nebula.For all the latest tech news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.