Amazon's Next Battle Will Be on the Cloud

In 2011, the Amazon everyone knew was the thrifty online retailer -- the Seattle company famous for frugality so extreme that its headquarters' light fixtures were literally collections of extension cords fitted with bulbs. But inside that same company, Andy Jassy was pitching a different Amazon: Amazon Web Services, the division renting out computing power for pennies an hour.

The pitch was simple and radical. Anyone with an internet connection and a credit card could rent the same world-class infrastructure Amazon used to run its $34 billion-a-year retail operation. Jassy -- then a senior vice president, fueled by what a Bloomberg Businessweek profile cheerfully reported as a multi-Diet-Coke-a-day habit -- wouldn't give exact numbers, but claimed hundreds of thousands of customers. Analysts at UBS estimated AWS would do about $750 million in business that year.

The customer list already told the story. Netflix's streaming empire ran on AWS. Zynga used it to absorb the violent traffic spikes of social gaming. AWS had become such a fact of life for Silicon Valley startups that venture capitalists handed out Amazon gift cards to founders. Every day, Jassy's operation added roughly the computing capacity of the entire Amazon.com of 2000.

The 2011 framing -- that Amazon's next battle would be in the cloud, against Microsoft, Google, and IBM, rather than in retail against Walmart -- turned out to be one of the great understatements in business journalism. AWS didn't just become a big business; it became the profit engine of Amazon, a $100-billion-a-year operation that bankrolled everything else. And Jassy, the thrifty lieutenant pitching pennies-per-hour computing in a bare-bones cafeteria, eventually became CEO of the whole company.

The extension cords, presumably, stayed.