Amazon Shares Solutions
May 22, 2012, Open Source Business Conference, San Francisco—Colin Bodell from Amazon illustrated the value of finding solutions for internal problems and then sharing the solutions with others.
First, an example of the fortuitous results of sharing solutions. About 900 years ago, governments formed in France, Germany, and Spain. The taxing authorities decided to place tariffs on the wines crossing borders. Someone figured out that you could boil off most of the water in the wine and reduce the tariff, which was based on volume. Then the shipper would add water back into the casks to restore the wine to its former volume. Someone in the supply chain decided to sample the wares and found it to be very good to drink. The birth of brandy resulted from a tactic to get around a tariff.
Another example is the genesis of gin and tonic. The East Asia and India company found that quinine helped to cure malaria, or at least relieve symptoms. Quinine is very bitter, so they started to mix the quinine with various liquids. One combination was with a fermented drink made from juniper berries. The combination worked well in controlling the bitterness.
Amazon had to develop the software stack, infrastructure, control, and tools to externalize its operations. They took advantage of open source, infrastructure, and everything else to create their systems. They have lots of opens source code in use. By opening up the platforms, they created AWS APIs for many others.
Although their cloud software was for their private cloud, they found that sharing their efforts helped their partners. The company's retail focus led to AWS handling price and availability, and converged on a freemium model for others to try and use. The creation of self-service platforms resulted in more innovation and a reduction in gatekeepers.
The key ideals for these developments are: to scratch your own itch; make it easy, scalable, and self service; find others with the same problem; and make the solution available. Amazon has to manage four main functions for their partners, retail, sellers, developers, and content providers.
For the consumers, they help to cycle people for repeat business. They act as middleman for the smaller partners, and have found that the scale of their operations has led to lower costs. Sellers take advantage of Amazon's capacity for inventory and drop ship. This reduced control has led to the formation of a fulfillment network that relies on scalable capacity, storage, and elasticity for physical goods.
Developers want on-demand infrastructure because their traffic is cyclic. They need to scale capacity without paying for 40 percent over capacity, which results in lots of wasted capacity. Cyber Monday requires much more than typical peak loads for traffic. Amazon looked at the issues of capacity and found that their retail website was underused. The excess capacity became what is now the EC2 cloud services.
Because they had to forecast capacity, they developed tools to manage loading, and tunnel technology to connect the website to their back-end systems. Now, this infrastructure enables better scalability for startup companies.
Another function they needed was a basic e-mail function for marketing and order balancing and inquiries. When smaller companies complained about black-listing from ISPs, they migrated the e-mail services into SES, which also provides monitors, high quality, and security for partner e-mail. The package has a simple API to the users and a low price, $0.10 per thousand addresses.
Amazon has found that solving its own problems often results in benefits to other users. They contribute to 30 or 40 open source projects a year, but only if it benefits their customers.