Isilon reached an important milestone this month: their first profitable quarter and an annual run rate of about $150 million a year — in only 10 years. But what if I told you there was another Seattle-area storage company on target to do $500 million in only 5 years?
That would be Amazon. Since the August 4, 2006 startup of the Elastic Compute Cloud, Amazon Web services has seen staggering growth.
Amazon doesn’t break out AWS results, so all numbers are speculative. But I went through five years of Amazons annual reports and it is clear that a 2009 $300M run rate — most of it storage — is in the ballpark.
Amazon has until August 2011 to reach $500M. Will you bet against them?
Running with numbers
Here’s a sketch of the numbers.
In 2005 Amazon had sales of $8.5 billion, $230M in “other” revenues (“Includes non-retail activities, such as our co-branded credit card agreements, Amazon Enterprise Solutions, and miscellaneous marketing and promotional activities”), fixed asset purchases including internal-use software and web site development of $204M (up from $89M in 2004) and fixed assets of $223M.
In 2009, sales of $24.5B, “Other” revenue of $653 (“Includes non-retail activities, such as marketing and promotional activities, Amazon Web Services, other seller sites, and our co-branded credit card agreements”), fixed asset purchases of $373M, $1.3B of fixed assets.
What do these numbers tell us? Not as much as we’d like, but . . . .
It is obvious that the non-AWS revenue has not kept pace with Amazon’s 3x growth in the last 5 years – otherwise AWS revenues would be a pathetic $40M.
Also, the fixed assets – which don’t include real estate, as Amazon doesn’t own any – have risen 6x. Factor in Moore’s Law and disk capacity increases over the last 5 years and Amazon has 30x more compute cycles and terabytes than it did 5 years ago – assuming a 3 year equipment life cycle. Yes, there are other fixed assets – no telling what the percentage is – but that growth rate is extreme.
All that to support 3x revenue growth? Hardly. They have to put hundreds of thousands of AWS customers somewhere.
Amazon is also promoting AWS much more aggressively than in the past. From James Hamilton’s Private clouds are not the future to the new AWS
Promo Economics Center white papers, references, vertical solutions and reseller catalog, Amazon is pushing hard.
This new aggressiveness might be interpreted as desperation by some, but it doesn’t read that way. It sounds like confidence: the pilot programs have proven out and now the evangelism begins in earnest. Besides, Jeff Bezos is a finance guy. If the numbers didn’t add up he wouldn’t throw good money after bad. Not after 5 years.
The StorageMojo take
Amazon and Google proved the economics of cloud infrastructures several years ago. Corporate America is beginning to catch on.
This is reminiscent of the 1985, when it was apparent that PCs were going to bulldoze the minicomputer market, but DG, Wang, Prime and DEC were all making brave noises. In the next 10 years they all failed – billions of dollars of revenue and capital gone.
AWS isn’t the PC and today’s storage companies aren’t Route 128 minicomputer companies, but the implications are still sobering.
As I noted in Why private clouds are part of the future
. . . public clouds will claim the majority of the market whether measured in dollars or exabytes, but private clouds will remain significant contributors to our data infrastructure for decades, if not centuries, to come.
Thus the question: will today’s storage vendors adapt better than DEC did 25 years ago? They can, if they have the vision and the will.
Courteous comments welcome, of course.