Ben Kepes: Why Amazon’s data centres are such a big deal for NZ

A chap who lives near me is something of a local legend. He’s arguably not awesome at actually finishing off his myriad great ideas, but John is widely regarded as the village visionary. He was the first person to think about the appropriateness of grapes as a crop in hot, dry North Canterbury and can rightly lay claim to inventing the Waipara wine industry.

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Now, 30 years on from his original viticultural forays, John can sit back, observe the dozens of vineyards and wineries within a few kilometres of his home, and reflect on the vintages that he has observed. With age and time comes a certain warm pleasure as we see our early hunches validated. I’m sure he sometimes chuckles to himself that people all over the country, and all over the world, are savouring a Waipara pinot noir or riesling thanks, at least in part, to his vision.

I’m feeling a similar sort of warm glow today with the news that Amazon Web Services (AWS), the largest cloud computing vendor on the planet, is building a region right here in New Zealand. I’ve been involved in cloud computing for more than 15 years now. When I started pretty much no one had heard of it, especially not here in New Zealand and hence my work was almost entirely in the US.

The growth of a vibrant cloud software industry in New Zealand (thanks, Xero), and a much deeper understanding from large organisations about how cloud software and infrastructure can drive huge benefits to their organisations has meant that times have changed. Pretty much everyone talks about their photos and documents being “in the cloud”, most large organisations leverage cloud computing infrastructure from the likes of AWS, Microsoft or Google, and even the most conservative of industries are talking about being “cloud-first”.

Which is all being capped off with today’s news. For some context: New Zealand individuals and organisations have been able to leverage cloud computing since the technology was invented. And it must be said we even have our own homegrown cloud infrastructure vendors, most notably Catalyst Cloud. Furthermore, it needs to be noted that AWS’ arch-rival in the cloud, Microsoft, announced last year that it would be building its own data centre region here in New Zealand.

None of which changes the fact that AWS is by far the biggest cloud computing vendor on the planet. In terms of its revenue, and in terms of its revenue growth, AWS eclipses all the other players. Indeed, AWS holds twice the market share of its nearest competitor, Microsoft.

AWS also can rightly claim that it invented cloud computing. The apocryphal tale goes that Andy Jassy (former CEO of AWS and now CEO of the entire Amazon mothership) pitched the idea of selling excess Amazon computing capacity to the company’s founder, Jeff Bezos. Bezos, perhaps already dreaming about building rocketships and travelling to Mars, wasn’t convinced and Jassy had to doggedly keep pitching his boss until he got the green light.

And that green light turned out to be pretty smart. AWS revenue was nearly US$15 billion ($21.4) in the past three months. This may be only a smidgen over 10 per cent of Amazon’s total revenue but, more importantly, it constitutes over half of Amazon’s total operating profits.

But those numbers aside, it’s pretty awesome that public and private organisations in New Zealand will have so much choice: a home-grown cloud vendor in Catalyst as well as the two biggest names in the game, AWS and Microsoft. Maybe it doesn’t feel like that much of a big deal now that pretty much every organisation is cloud-first. But consider that only a decade ago a small band of people were articulating the benefits of cloud computing, all the while being criticised by traditional vendors worried about maintaining their profits. When seen in that light, it’s a pretty tectonic shift.

Of course, like all of these sorts of announcements, this is an indication of something that is due to come in the future. AWS tells us that the region should be running in 2024. They’re also frustratingly not disclosing whether they’re actually building the physical infrastructure or relying on third-party data centre providers. The devil is in the detail and apart from big numbers (a $7.5 billion investment and 1000 jobs), there is little detail in the announcement. But details aside, this is exciting and further puts New Zealand on the map as a credible technology nation.

I drive down my road past the land where John planted his first grapes. Nearly every acre of land is now planted with grapes, and most people agree that wine is a logical high-value product to be grown in our climate and terroir. Kind of the same feeling shared by those who were the lone voices talking about cloud a decade or two ago.

– Ben Kepes is a Christchurch-based investor and entrepreneur.

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