Amazon Broadens Cloud Services as Big Companies Sign On

SEATTLE� Inc.'s first cloud-computing conference in 2011 was a curiosity. Many of its 6,000 attendees worked for startups that had chosen to buy access to processing power and data storage via the web from Amazon Web Services rather than own and maintain their own data centers.

With the fifth Amazon Web Services re:Invent conference set to start Tuesday in Las Vegas, the cloud-computing revolution that AWS largely pioneered has upended the world of corporate information technology, displacing on-site servers, storage, networking and software with more economical web-based alternatives. The company expects more than 32,000 people to attend the conference, said AWS Chief Executive Andy Jassy.

While sales growth slows or even reverses at traditional hardware and software giants, sales of Amazon's subscription-based, on-demand services ballooned 55% in the third quarter to $3.2 billion. The quarter's rise was fueled not only by startups but also by big companies including Unilever PLC, Merck & Co., Coca-Cola Co. and Capital One Financial Corp., according to Amazon.

And the list is growing. Amazon is expected to announce on Monday that shipping company Matson Inc. has closed its four data centers and moved core computing operations to AWS. The Honolulu-based company expects the shift to slice its information-technology operating costs in half, freeing up money to invest in innovations that might spur its business, said Peter Weis, Matson's chief information officer.

Large companies need a wider array of services than AWS's core computing and storage offerings. For them, Amazon has, in industry parlance, moved "up the stack," building layers of software on top of its basic platform, from programming commands that help companies build customized services to full-fledged applications. The company has added databases that can handle many different types of data and programming tools that automate allocation of computing resources.

"We're not close to being done adding new capabilities," Mr. Jassy said in an interview here last week. "When we look at areas that we choose to participate in a little bit further up the stack, they are almost always in areas that our customers are demanding us to get involved in."

New offerings aren't just a way to attract new customers. They create a "gravitational pull" that makes it more difficult for customers to switch providers, said Gartner Inc. analyst Lydia Leong. Applications built on specialized AWS services may not be easily portable to other vendors' services.

Many of these services are supplied by business partners who charge AWS customers for access to their own corners of the platform. The challenge for AWS is to meet the needs of its big customers without encroaching on its partners' offerings.

Amazon isn't the first tech company to wrestle with striking a balance between satisfying both customers and partners. As Microsoft Corp.'s Windows operating system came to dominate the market for personal-computer software, it added features that sometimes undermined the business of application vendors. That led to regulatory scrutiny and litigation.

One distinct difference, however, is that Amazon, unlike Microsoft, stands to make money when AWS customers use partners' services. Microsoft customers until recently paid only once for a Windows license, but AWS customers pay more as they spend more time on the platform.

"Andy is doing a better job than I did, in part because the business model is different," said Bob Muglia, a former Windows executive who now serves as CEO of Snowflake Computing, a data-warehouse service that customers use to analyze stored information. Snowflake both runs on AWS and competes with Amazon's Redshift service.

As the market matures, Mr. Muglia expects to see Amazon compete more with what the company calls its "ecosystem partners."

Mr. Jassy said the market is evolving so fast that there is plenty of opportunity to offer differentiated services. "What most ecosystem partners realize is that, if they built substantial functionality on top of our platform, our merely offering something in that space is not going to have a meaningful impact on them," he said.

In the past, Amazon has used re: Invent to introduce new services. Mr. Jassy declined to disclose Amazon's plans for this week's conference. He also didn't comment on speculation that the company will unveil another database offering as well as new capabilities in the hot area of artificial intelligence known as machine learning.

It is likely, though, that any new offerings will be designed to appeal to large corporate customers such as Matson. The shipping company uses only AWS's basic computing and storage services, partly to keep its options open in case it wants to switch providers, Mr. Weis said.

But he is intrigued by the possibility that Amazon might offer a version of PostgreSQL, a database service popular with big companies. "I don't think we'll go anywhere, and we'll probably use more of their tools," he said.