Archive for February 10th, 2011

Article from SFGate.

“Amazon.com Vice President James Hamilton’s schooling in computer-data centers started under the hood of a Lamborghini Countach.

Fixing luxury Italian autos in British Columbia while in his 20s taught Hamilton, 51, valuable lessons in problem solving, forcing him to come up with creative ways to repair cars because replacement parts were hard to find.

“It’s amazing how many things you can pick up in one industry and apply to another,” Hamilton, who also has been a distinguished engineer at Amazon since 2009, said.

Hamilton is putting these skills to use at Amazon, where he’s central to an effort by Chief Executive Officer Jeff Bezos to make Amazon Web Services, which leases server space and computing power to other companies, as big as the core e-commerce business. He’s charged with finding ways to make data centers work faster and more efficiently while fending off competition from Microsoft Corp. and IBM Corp., his two prior employers, and AT&T Inc.

$56 billion in 2014

Revenue from the kinds of cloud services offered by Amazon is expected to reach $56 billion in 2014, up from more than $16 billion in 2009, according to research firm IDC.

Amazon’s Web services brought in about $500 million in revenue in the past year, according to estimates from Barclays Capital and Lazard Capital Markets, or about 1.5 percent of Amazon’s $34.2 billion in sales. The company doesn’t disclose revenue from Web services, also called cloud computing.

As they pursue growth, Hamilton and his team will have to ensure that Amazon’s investment in Web services is well spent. Investors pummeled shares of the Seattle e-commerce giant on Jan. 28, the day after the company said it would boost spending on data centers and warehouses, fueling concern that margins will narrow.

Although still relatively small, Amazon Web Services is growing at a faster rate than the company’s core business, and it’s more profitable, said Sandeep Aggarwal, an analyst at Caris & Co. in San Francisco. Web services may generate as much as $900 million in sales this year, and operating margins could be as wide as 23 percent, compared with 5 percent margins in the main business, Aggarwal said.

Hamilton, who has filed almost 50 patents in various technologies, is developing new ideas in cloud computing, which lets companies run their software and infrastructure in remote data centers on an as-needed basis, rather than in a computer room down the hall.

He spends much of his time shuttling between departments, encouraging teams focused on storage, databases, networking and other functions to work together. One aim: devising ways to squeeze costs out of multimillion-dollar data centers and passing those savings on to customers such as Eli Lilly & Co. and Netflix Inc.

Among the challenges Hamilton and his colleagues face is making Amazon flexible enough for customers that want custom services, while overcoming companies’ concerns about storing sensitive information outside their own secure firewalls. They’ve met with early success, with Amazon emerging as the leader in cloud computing among developers, according to consulting and research firm Forrester Research Inc.

Innovation required

Amazon’s Web services unit will have to stay innovative to keep ahead of competition from Rackspace Hosting Inc., which manages applications for businesses. Startups such as Cloud.com also are trying to carve their own niche in cloud computing.

Amazon has been able to stand apart from rivals by introducing unique products, said Jeff Hammond, an analyst at Forrester. For example, the company unveiled a service last month called Elastic Beanstalk, which lets even novices who don’t know how to write computer code plug into Amazon’s computing power.

“These guys continue to innovate in a way that the large traditional companies – the IBMs and the Oracles and the Microsofts of the world – are not doing,” Hammond said.

Last year, Amazon introduced Spot Instances, which took a nontraditional approach to managing underused servers. While many companies pack tasks onto underused servers and unplug the extra ones, Hamilton and his colleagues began auctioning off idle computing capacity. The result: Amazon got revenue rather than an unused server and the customer got a cheaper price than the normal rental rate.

“The trick is to find a steady stream of things like that,” said Hamilton. “We can make such a big difference here on services and server efficiency.”

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