Economies of scale: Reducing pricing 38 times

By Cat Yong

How often does Amazon Web Services (AWS) add the equivalent server capacity to companies like Amazon, when Amazon was still just a USD5.2 billion enterprise? During a briefing with members of the media recently, Rick Harshman, Head of ASEAN said the answer is every single day.

The story of how Amazon Web Services came to be, is one of evolution, and these days it is difficult to have a conversation about cloud services or platform-as-a –service, without bringing Amazon Web Services (AWS) into the mix.

Their approach towards the market thus far, has been with a range of 30 different services and solutions in the areas of compute, storage, content delivery, deployment and management, applications, networking, big data and high performance computing and even disaster recovery.

Recently, they also added AWS Activate, a collection of two structured packages for the startup community, the Self-Starter Package and the Portfolio Package.

Of note is a feature called the AWS Free Usage Tier which new customers can use, for anything on the cloud like launch a new app, test existing apps in the cloud or gain hands on experience. More information can be found here.

The compelling cloud
Why are businesses adopting the cloud? Harshman laid out the key value propositions that Amazon Web Services offers to organistions.

He said, “First of all, there is no upfront investment to get started. For traditional IT, you have to pay upfront, sign long term contracts… there is typically higher ongoing running costs also.

He claimed that AWS offered a pay-as-you-go model. “There are no contracts, and no commitments.”

Businesses can also do without hassle of capacity planning. “It is difficult to predict what demand might be and there is danger of under-provisioning or wastage. This goes away with the elastic model that AWS provides.”

This agility also translates to how fast a services can be provisioned. Harshman explained, “One of the challenges that CIOs in Malaysia and across the globe face is having to wait for days, weeks and months to get their infrastructure. With AWS, you can get resources in minutes.”

That also holds true when it comes to going global. Businesses can do so without the hassle of travelling to the site, building relationships, negotiating deals, just to set up presence halfway across the world.

“AWS allows you to focus on your business and not on the undifferentiated heavy lifting. One of our value proposition is allowing CIOs to be enablers for the business and focus on new projects for the business as opposed to managing infrastructure,” said Harshman.

Perhaps, AWS’ most compelling value proposition is its ability leverage its economies of scale, and offer lower ongoing cost for its customers.

Proof of that, according to Harshman is that they have been able to reduce their prices 38 times since starting off in 2006, without any competitive pressure.

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