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.


Monday, August 28, 2006 5:31:01 PM (GMT Daylight Time, UTC+01:00)
"Of course, this means that like Sun was during the 90s they'll be pretty vulnerable once the bubble pops."

Not really, if they invest carefully in this new business. When the bubble pops they'll just have to go back to being a successful online business.

If they sink all their resources into EC2/S3, then they are doomed unless they get a lot of government contracts.
Monday, August 28, 2006 7:13:12 PM (GMT Daylight Time, UTC+01:00)
Sun does have -- -- their own grid computing service that was released (quietly?) earlier this year. I think the blogsphere almost completely ignored that. Sun seems to be approaching the problem from a metered utility perspective (something you use occasionally) versus Amazon which gives you a service on which you build your own business. Maybe it's just perception, but aside from scalability issues, I see little else in the way of Sun making the leap to the latter. That's if there's business sense in doing so.
Monday, August 28, 2006 9:02:09 PM (GMT Daylight Time, UTC+01:00)
Don't underestimate the business value of having multiple providers of commodity services. Businesses want to know that they can switch providers if they want/need to.
Monday, August 28, 2006 10:59:41 PM (GMT Daylight Time, UTC+01:00)
" Of course, this means that like Sun was during the 90s they'll be pretty vulnerable once the bubble pops. "

Not entirely. During DotCom Sun were in the busines of pushing server tin. Amazon already seem to have surplus tin and are renting back excess storage and compute power - to use an ropey analogy, Amazon are selling wattage, not generators. That means their facilities could become profit centers (most IT datacenters are pure cost). Assuming they have the facility not to lose other people's information, about the worst that can happen to them is that their gear goes back to being a capital cost and they have higher operating costs (ie on par with the rest of the industry), and all their internal services can buy "bytecycles" so that service costs can be measured better - it's all very good from an operations management perspective. Finally, they'll be able to renegotiate any number of computing contracts with suppliers (and eventually grid compute supplies).

I'll guess they're ultimately after consumer storage space for all manner of digital media; startups are just ahead of the curve.

(apologies if you get this multiple times; I can't tell if the form is being accepted)
Monday, August 28, 2006 11:49:43 PM (GMT Daylight Time, UTC+01:00)
S3 is becoming the low-cost backup solution

Check out JungleDisk -
I pushed 5 yrs of photos there for backup. Total cost is <$1/month
Tuesday, August 29, 2006 12:12:49 AM (GMT Daylight Time, UTC+01:00)
Looks like they may have to fight Sun for that title, since Sun is evidently thinking of bringing it back, revamped:
Tuesday, August 29, 2006 11:34:03 AM (GMT Daylight Time, UTC+01:00)
Sun's offering will probably a more stable and better though-out effort than the hideous tangle of CGI and scrag-ends of Perl, with incompatible databases and data transfers that often still involve CSV files, that constitutes what goes on, scratch-deep, below the surface of Amazon (last I heard, anyway). Amazon proves one thing, if anything: if you can employ an army of developers who will aparently work like slaves because they think you're God, and then spend absolutely nothing on them ,or the software they use, you can build a successful online retail store. From what I've heard, for the last decade Amazon's approach to code-maintenance has been redefining the word 'cloud'.

If I may, I'd also draw issue with "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." I've made this point before, Dare, but, next time you use your cash card to draw money out of a hole in the wall, five timezones away from where you opened your account - THAT's when you're using IBM computing. And you know where it says "You have not been charged for this service" - even though you're using a machine from a bank you've never heard of? Well, IMO, that's when you're seeing something that's as 'cheap as possible'.
Daniel Walker
Tuesday, August 29, 2006 12:24:21 PM (GMT Daylight Time, UTC+01:00)
I must just be old fashioned. Would anyone else be petrified of building a startup whose entire customer-facing IT infrastructure was entirely dependent on a single service, especially one owned & operated by a potential competitor? Even if it was cheaper to do so?

Even the SmugMug example doesn't exactly give me warm fuzzies about the idea; from what I've read SmugMug is using S3 as a backup, not as primary storage.

Operating your own servers is a pain in the @ss but at least it means you've got some control over your operations...
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