Moving to the Cloud: The AWS Value Proposition Examined

Everyone seems to be moving to the Cloud. Amazon Web Services (AWS) is the clear current leader in providing cloud services passing the $ 10 billion revenue milestone as of this writing. This post reviews the AWS value proposition to see why so many customers may be moving to their cloud.

Netflix on AWS

In August, 2008 Netflix had to stop shipping DVDs to their customers for three days due to a database corruption issue in their data center. They decided they needed to move from their vertically scaled single point of failure to a highly reliable, horizontally scaled, distributed systems in the cloud. They chose Amazon Web Services (AWS) and started migrating their systems over the next eight years. During that time they also grew their streaming video hours at an exponential three orders of magnitude (1000x).  

This growth and expansion could not have happened with their own data center. The ability that AWS provides to add thousands of virtual servers and petabytes of storage in minutes around the world allowed this type of growth. There must be a high degree of confidence in the value Netflix is receiving from AWS considering Amazon is their primary competitor in the on demand streaming of television and movies.

AWS as a Solution to an Amazon Problem

In less than 20 years Amazon has gone from $ 0 to $ 136 billion in annual revenue. The business model was heavily dependent on IT infrastructure growth to allow this explosive revenue growth. Constantly building infrastructure (compute, storage and database) over and over again using the traditional on premise data center architecture became one of their biggest bottlenecks. Known for customer focus, innovation, experimentation and an uncommon disinterest in quarterly profits Amazon found ways to deliver infrastructure as a service with much more agility and lower costs to solve their dilemma. The problem Amazon was facing was one that all companies large and small were facing as every industry was turning into a digital business. The solutions to their internal problems became the foundation for AWS which has now reached over 1 million external customers such as Netflix. They have successfully applied the same customer experience is everything philosophy to the business and enterprise market that they originally perfected for the consumer market.


The AWS value proposition (VP) begins with giving their customers the agility to leverage infrastructure for speed, experimentation and innovation which they believe are keys for any company to become successful. The ability to create new markets and respond to changing markets require speed. The traditional on premise infrastructure can be a barrier to speed.  It involves estimating infrastructure need and investing upfront for the greatest use rather than the actual use. It involves a limited geographic capability based on existing on premise data center locations. The expense and time to scale up can be too much where the project fails or doesn't happen at all. 

Similarly the cost for experimentation with technology projects within an on premise model can be very high and the cost of failure even higher making it a difficult choice for most business leaders to make.  AWS provides the interface and tools for customers in a DIY fashion to add virtual instances, databases and storage in very small or large increments in minutes and then remove them at anytime while only paying for usage. This makes experimentation much less costly and within time frames that can meet the market need. 

The third part of the Agility VP is to allow the customer to innovate. In addition to speed and experimentation as enablers of innovation, AWS also allow customers to focus on the business side of technology leaving the infrastructure side to AWS. Instead IT and Business resources on the customer side can focus on leveraging the infrastructure technology to build and deploy applications that provide the greatest value to their customers. The resource savings in cost and time can be redistributed to better focus on the application of technology. Many companies face this dilemma of spending to much time maintaining technology rather than applying them for success. 

The Netflix product itself has continued to evolve rapidly, incorporating many new resource-hungry features and relying on ever-growing volumes of data. Supporting such rapid growth would have been extremely difficult out of our own data centers; we simply could not have racked the servers fast enough.

- Yury Izrailevsky, VP Cloud and Platform Engineering, Netflix (from Netflix Media Center)


Some AWS customers experience 50% or more lower cost than their previous on premise or traditional hosted data center. A significant portion of the savings comes from eliminating large upfront investments for:

  • Cabling
  • Cooling
  • Power
  • Networking
  • Racks
  • Servers
  • Storage
  • Certifications
  • Labor

Secondly, the massive scale  will reduce costs on an ongoing basis as shown in the graphic below from AWS. This benefit is one of the primary reasons AWS has grown to be 5 times the size of it's next 5 competitors and also the difficulty of start ups being able to deliver lower costs.


Continuous Lower Costs.jpg

The third component of lower costs come from customers paying only for what they use. This ability is attributable to the elasticity of AWS services as compared to on premise and traditional data centers. The graphic below from AWS highlights the waste required to meet infrastructure demand by paying for more than needed or the customer dissatisfaction when paying for less than is needed to save money. AWS's ability to provide what is needed when it is needed as an infrastructure service removes this inefficiency.


AWS Pay as you go graphic.jpg


Cost reduction was not the main reason we decided to move to the cloud. However, our cloud costs per streaming start ended up being a fraction of those in the data center -- a welcome side benefit. This is possible due to the elasticity of the cloud, enabling us to continuously optimize instance type mix and to grow and shrink our footprint near-instantaneously without the need to maintain large capacity buffers. We can also benefit from the economies of scale that are only possible in a large cloud ecosystem.  

- Yury Izrailevsky, VP Cloud and Platform Engineering, Netflix (from Netflix Media Center)


In cloud computing, elasticity is the power to scale up or down easily. The lack of elasticity is the reason where the difficulty in predicting demand and then the slowness to meet demand changes lead to very high costs from underutilized resources or high customer dissatisfaction due to inability to meet demand. Amazon's ecommerce business is very seasonal with very large increases in demand during the November/December holiday period. The graphics from AWS below shows the challenge for a company like Amazon to meet demand using traditional on premise approach compared to the large benefits from the AWS elastic approach.


The inability to use elasticity results in 76% wasted resources for November to meet the spikes from Black Friday and/or Cyber Monday. By contrast the AWS approach provisions the needed capacity as needed using auto scaling capabilities as shown below eliminating the 76% of resources that were being wasted.

Elacitcity 2.jpg


Elasticity of the cloud allows us to add thousands of virtual servers and petabytes of storage within minutes, making such an expansion possible. On January 6, 2016, Netflix expanded its service to over 130 new countries, becoming a truly global Internet TV network. Leveraging multiple AWS cloud regions, spread all over the world, enables us to dynamically shift around and expand our global infrastructure capacity, creating a better and more enjoyable streaming experience for Netflix members wherever they are. 

- Yury Izrailevsky, VP Cloud and Platform Engineering, Netflix (from Netflix Media Center)


AWS provides a broad set of infrastructure and software services that allow both large and small companies to   leverage them for their entire business. These services shown in the graphic from AWS allow companies to engage with their customers, manage their internal processes and analyze data from internal and external sources to gain competitive advantage. The tools and features AWS provides are growing each year.


These services provide smaller companies with tools like Machine Learning and Big Data Analytics that require large high performing infrastructure that can't be justified for purchase. For larger companies advanced tools that are accessible at lower cost when needed and quickly rather than after large investments and implementation projects.

We rely on the cloud for all of our scalable computing and storage needs — our business logic, distributed databases and big data processing/analytics, recommendations, transcoding, and hundreds of other functions that make up the Netflix application. Video is delivered through Netflix Open Connect, our content delivery network that is distributed globally to efficiently deliver our bits to members’ devices. 

- Yury Izrailevsky, VP Cloud and Platform Engineering, Netflix (from Netflix Media Center)


Security is a big part of AWS's value proposition. The investment they make in best of breed solutions and the certifications they have achieved would be almost impossible for small companies and very difficult for large companies within their own data centers.  AWS shares the responsibility for security with the customers as shown in their graphic below.  AWS is responsible for the physical security of the facilities as well as the infrastructure that includes compute, database, storage and networking resources. The customer is responsible for software, data and access that sits on top of the infrastructure layer.

Shared Responsibility - Security.jpg



Many IT leaders are currently or will be evaluating moving into the cloud. Some of their IT resources may already be there as IaaS, PaaS or SaaS so they are asked the question; will it make sense to move more IT into the cloud? Cloud Joni Mitchell.pngFor startups it's probably an easy decision but for more established organizations with large  investments already on their books it may be a more difficult one. In my own conversations I hear some assumptions that people have about the cloud or AWS that I know or determine with some research to be false. It reminds me of the song written by Joni Mitchell because all the information at the surface can, pardon the pun, cloud one's judgment. 

It's better to dig a little deeper with facts and determine if the value proposition for moving all or a subset of your IT infrastructure makes sense. AWS is one where the value proposition is very strong. Gartner's Magic Quadrant for Cloud Infrastructure as a Service has them as a leader with a lot of separation from  all the other major providers.

Gartner 2016 MQ hi-res graphic.jpg

AWS hasn't just built a better data center. They have truly turned Infrastructure into service that can easily be purchased when needed, scaled up or down by the customer with user friendly web interfaces at very competitive prices just like they have done with "the everything store" at Amazon. They have also focused on integrating DevOps practices into their service capabilities. Netflix went through a seven year process to fully migrate to AWS. They could have migrated much sooner using much more of a big bang approach but they didn't for very smart reasons that highlight the difference between migrating to a datacenter versus leveraging cloud services for full value.

Given the obvious benefits of the cloud, why did it take us a full seven years to complete the migration? The truth is, moving to the cloud was a lot of hard work, and we had to make a number of difficult choices along the way. Arguably, the easiest way to move to the cloud is to forklift all of the systems, unchanged, out of the data center and drop them in AWS. But in doing so, you end up moving all the problems and limitations of the data center along with it. Instead, we chose the cloud-native approach, rebuilding virtually all of our technology and fundamentally changing the way we operate the company. Architecturally, we migrated from a monolithic app to hundreds of micro-services, and denormalized and our data model, using NoSQL databases. Budget approvals, centralized release coordination and multi-week hardware provisioning cycles made way to continuous delivery, engineering teams making independent decisions using self service tools in a loosely coupled DevOps environment, helping accelerate innovation. Many new systems had to be built, and new skills learned. It took time and effort to transform Netflix into a cloud-native company, but it put us in a much better position to continue to grow and become a global TV network. 

- Yury Izrailevsky, VP Cloud and Platform Engineering, Netflix (from Netflix Media Center)

The strong value proposition outlined above, the positive perspectives from a competitor like Netflix, the evaluation from Gartner and ten years of adding over a million customers make a strong case for furthering AWS's leadership in the cloud market.

The next blog in this series provides an introduction to the AWS platform of products and services.


3. Listening to Joni Mitchell and Judy Collins