One of the biggest surprises for me over the past year is how instead of Sun or IBM, it's Amazon that looks set to become the defining face of utility computing in the new millenium. Of course, the other shoe dropped when I read about Amazon Elastic Compute Cloud (Amazon EC2) which is described below

Amazon Elastic Compute Cloud (Amazon EC2) is a web service that provides resizable compute capacity in the cloud. It is designed to make web-scale computing easier for developers.

Just as Amazon Simple Storage Service (Amazon S3) enables storage in the cloud, Amazon EC2 enables "compute" in the cloud. Amazon EC2's simple web service interface allows you to obtain and configure capacity with minimal friction. It provides you with complete control of your computing resources and lets you run on Amazon's proven computing environment. Amazon EC2 reduces the time required to obtain and boot new server instances to minutes, allowing you to quickly scale capacity, both up and down, as your computing requirements change. Amazon EC2 changes the economics of computing by allowing you to pay only for capacity that you actually use.

All Amazon needs to do is to add some SQL-like capabilities on top of Amazon S3 and I can't see any reason why any self respecting startup would want to host their own datacenters with the high bandwidth, staff, server, space and power costs that it entails. Anecdotes such as the fact that SmugMug is now storing 300 terabytes of data on Amazon's servers for cheaper than they could themselves will only fuel this trend. I definitely didn't see this one coming but now that it is here, it seems pretty obvious. Companies like IBM and Sun, simply don't have the expertise at building something that has to handle traffic/capacitye at mega-service scale yet be as cheap as possible. Companies like Yahoo!, MSN/Windows Live and Google have this expertise but these are competitive advantages that they likely won't or can't give away for a variety of reasons. However Amazon does have he expertise at building a mega-scale service as cheaply as possible as well as the experience of opening it up as a platform for other companies to build businesses on. With the flood of startups looking to build out services cheaply due to the "Web 2.0" hype, this is a logical extension of Amazon's business of enabling companies to build eCommerce businesses on their platform.

With a few more high profile customers like SmugMug, Amazon could easily become the "dot in dotcomm Web 2.0". Of course, this means that like Sun was during the 90s they'll be pretty vulnerable once the bubble pops.