There are numerous stories regarding how AWS came to be, but one thing is certain: Amazon Web Services, Amazon.com’s cloud Infrastructure as a Service arm, was founded as a side business for Amazon.com ten years ago with little fanfare. It is now a tremendously successful firm in its own right, with a staggering $10 billion run rate.

In fact, according to Synergy Research, AWS has developed into the world’s most successful cloud infrastructure company in the decade since its inception, capturing more than 30% of the industry. That is more than its three main competitors — Microsoft, IBM, and Google — combined (and by a fair margin).

What you may not realize is that the origins of AWS can be traced back to the year 2000, when Amazon was a very different company than it is today — merely an e-commerce company battling with scalability issues. These challenges compelled the firm to establish some robust internal processes to deal with the hypergrowth it was experiencing — laying the groundwork for what would become AWS.

Speaking recently at an event in Washington, DC, AWS CEO Andy Jassy, who has been there since the beginning, discussed how these fundamental systems grew out of need over a three-year period beginning in 2000, and how, before they knew it, they had the makings of a business that would become AWS.

Developing internal systems

It all started in the early 2000s, when the business sought to create Merchant.com, an e-commerce service that would help third-party merchants like Target or Marks & Spencer develop online shopping sites on top of Amazon’s e-commerce engine. It proved to be much more difficult than they anticipated to construct an external development platform since, like many businesses, when it debuted in 1994, it did not plan effectively for future requirements. They had unintentionally created a disorganized mess instead of an orderly development environment. This made it extremely difficult to separate the numerous services in order to create a single development platform that could be used by third parties.

At that point, the company made its first move toward establishing the AWS business by untangling that tangle of APIs into a collection of well-documented APIs. While it aided in the smoother development of Merchant.com, it also benefited the internal developer audience, and it laid the groundwork for a much more ordered and disciplined approach to producing tools internally in the future.

“From that point forward, we expected all internal teams to build in a decoupled, API-access form, and then all internal teams within Amazon expected to be able to consume their peer internal development team services in that way.” So, discreetly, around the year 2000, we became a services company with little fanfare,” Jassy explained.

Around the same time, the company was rapidly expanding and adding new software developers. But they were still finding that, despite the increased staff, they weren’t building applications any faster. When Jassy, who was Amazon CEO Jeff Bezos’ chief of staff at the time, investigated the issue. He discovered a long-running complaint. The executive team anticipated that a project would take three months. Yet it took three months merely to create the database, computing, or storage component. Everyone was creating their own resources for a single project, with no regard for size or reuse. 

Amazon’s internal teams needed a set of common infrastructure services that everyone could access without recreating the wheel every time. That’s exactly what Amazon set out to build — and that’s when they realized they might have something greater on their hands.

A fantastically terrible concept

Jassy recalls a 2003 management retreat at Jeff Bezos’ home. The executive team did an exercise establishing the company’s fundamental skills there. Which they intended to last 30 minutes but ended up lasting much longer. Of course, they knew they could offer a wide range of products and were competent at fulfilling and shipping orders. But when they dug further, they discovered they possessed several other skills they hadn’t considered.

Jassy said that while the team worked. They realized they had also grown fairly adept at handling infrastructure services such as compute, storage, and database (due to those previously articulated internal requirements). Furthermore, out of necessity, they had grown highly proficient at running reliable, scalable, and cost-effective data centers. Amazon, being a low-margin firm, has to be as lean and efficient as possible.

It was at that point, without really expressing it. That they began to construct a notion of what AWS could be. They began to question if they had a separate business providing infrastructure services to developers.

“In retrospect, that seems very apparent, but I don’t believe we ever fully comprehended that at the time,” Jassy explained.

The internet’s operating system

They didn’t exactly have a “aha” moment. But they did start to build on the first nugget of an idea that originated at the retreat. In the Summer of 2003. They began to think of this set of services as a type of internet operating system. Remember, this was three years before AWS was launched, so it was a notion that would take time to mature.

If you believe that companies will build applications from scratch on top of infrastructure services if the right selection of services is available, and we believe they will if the right selection is available, then the operating system becomes the internet, which is very different from what has been the case for the [previous] 30 years,” Jassy said.

This sparked a new conversation regarding the components of this operating system and how Amazon could assist in their development. As they dug deeper, they came to the conclusion in the Fall of 2003 that this was a green field. Where all of the components needed to run the internet OS were yet to be constructed.  At which time I imagine their eyes lit up.

“We recognized we could contribute all of those important components of that internet operating system. So we went on to pursue this much bigger objective. Which is AWS today.” says the company. Which is really to allow any organization, company, or developer to run their technology applications on top of our technology infrastructure platform.”

Then they set out to accomplish just that — and, as they say, the rest is history. A few years later, the company released Infrastructure as a Service. It took some time for the concept to catch on, but it is now a hugely profitable business.

When it introduced Amazon Elastic Compute Cloud in August 2006. AWS was the first to market with a modern cloud infrastructure solution. Surprisingly, a competitor remained silent for many years. As a result, they have a sizable market share, at least for the time being. You can bet that well-heeled competitors like Microsoft, Google, IBM, and others are out to get them.

When questioned if he could have predicted the company’s success. Jassy was modest, saying, “I don’t think any of us had the audacity to anticipate. It would grow as big or as fast as it has.”

However, considering how meticulously the business prepared the groundwork for what would become AWS, you had to believe that they saw something here that no one else did, a concept that they believed might be massive. What they saw was, as it turned out, nothing less than the future of computers.