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Everyone said AWS would eat everything
The 2014 fear
AWS launched S3 and EC2 in 2006, and investors responded poorly. Put thirty of the smartest investors of 2007 in a room and ask whether AWS has durable long-term margins, and they would have gone zero for thirty. By 2014 the fear was specific: software companies ran at 85 percent gross margins, and Amazon could offer similar products at 8 percent.
What actually happened
Instead, Snowflake built a direct competitor to Amazon Redshift and ran it on Amazon. Confluent, Elastic, Mongo, and Databricks followed, and Datadog, which Amazon competed with directly, became a $100 billion company. Some companies did get run over.
Why the thesis broke
The thesis broke mostly because Azure and GCP, irrelevant at the time, became enormous. Cloud now splits roughly 40, 30, and 20 among the big three, and Cloudflare, a different kind of cloud provider, is another $100 billion company.
Why do software companies run on rival clouds?
Customers want their software next to the data and services already in their cloud account, so a vendor that runs there is easy to adopt. Buying through a cloud marketplace can also count toward a customer's cloud spending commitment. Snowflake's service first ran on AWS and later added Azure and Google Cloud. Databricks, Confluent, and MongoDB also offer their services on all three major clouds.
Why did Amazon sell computing in 2006?
Amazon had spent years building internal infrastructure to run its retail business and concluded that other developers needed the same building blocks. S3, its storage service, launched in March 2006. EC2, its rentable computers, entered public beta that August. Andy Jassy, who later became Amazon's chief executive, led the creation of the business.
What makes Cloudflare a different cloud?
Cloudflare began as a service that speeds up and protects websites by routing traffic through its own network of data centers around the world. It later added the ability to run customers' code on that network, near users. The company launched its Workers product in 2017. Cloudflare was founded in 2009 and went public in 2019.
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