Marcus Cake

Amazon web services are pioneering essential building blocks for economic development. These blocks will provide a foundation for the next phase of online networks which will pioneer new structures. They reduce processing power and information storage to basic utilities, just like telephone, gas and electric supply. The storage service (S3) and web hosting service (EC2) cost less than 50% of traditional approaches and are more flexible and simpler to use.

Amazon EC2 is their virtual server or web hosting service. It also has the nickname Elastic Cloud. An entrepreneur may rent computing power from Amazon for US$50 per month and scale to the largest of online businesses within hours. I recommend you watch the ZDNet video “Throw away your servers” or read the article here. The EC2 service is currently in beta (being tested by a limited public audience). New users join a waiting list. Some users have had to wait 4-5 months for access to the EC2 service. I am still waiting for access.

S3 is Amazon’s online storage service. They simply pay for the processing power and storage they use. The cost of the Amazon service may be less than half of other approaches. Other approaches do not offer the same scalability or ease of use.

The following comments provide a broader perspective on this facility becoming available for public use.

Opening Up to Collaboration, Business Week, 9th March 2007

Extract:

As president of SAP’s Product & Technology Group, Shai Agassi runs product development for the world’s largest applications-software company. Ask him to name the most important development in the software industry of the last decade and he won’t say Linux, Web 2.0, services-oriented architectures, or industry consolidation.

He will tell you it’s the Amazon.com (AMZN) cloud. Chances are you won’t know what he’s talking about, let alone how this cloud has deeper implications for software developers in every industry.

Officially called Amazon Elastic Compute Cloud (EC2), it’s the equivalent of a 21st century utility. Users pay 10 cents an hour to harness its nearly unlimited computing capacity, allowing anyone to leverage the size and reach of the world’s greatest e-commerce engine—from the computer geek testing a new algorithm from her dorm room to a Mumbai-based startup that wants to roll out a new call-center service without spending all its capital on computers.

Amazon’s cloud is one of many new low-cost collaborative infrastructures—such as free Internet telephony, open-source software, and global outsourcing—that allow individuals and small producers to harness world-class capabilities, access markets, and serve customers in ways that only large corporations could in the past.

The Amazon computing facility is one of the largest in the world and has received billions of dollars of investment. In the early years of its business Amazon added new products to its product line. Amazon is, now, much more than a bookstore. In recent years, it has been selling the methods, processes and infrastructure to the market (see http://aws.amazon.com).

How significant are the cost and time savings?
A quick introduction to the economics of EC2 is provided in the video titled “Time to throw away your servers” by David Berlind of ZDNet. A comprehensive discussion of costs of hosting (in particular storage) is provided by the Don MacAskill, CEO of Smugmug. The CEO makes a significant contribution by sharing his knowledge through his blog. The video suggests EC2 will provide savings of more than 50% over conventional alternatives.

Smugmug is an online photo sharing company with 19 employees. 220,000 paying customers and storing 120,000,000 photos. It is a profitable and debt free company. The CEO recently wrote some insightful blogs about the cost and time savings of using the Amazon cloud. Smugmug’s primary challenge is storage. Other businesses may not have similar storage requirements. The lessons of Smugmug provide an insight into the economics of using the Amazon S3 service.

Show me the money, Don MacAskill, Smugmug

Extract:

• Total amount NOT spent over the last 7 months: $423,686
• Total amount spent on S3: $84,255.25
• Total savings: $339,430.75
• That works out to $48,490 / month, which is $581,881 per year. Remember, though, our rate of growth is high, so over the remaining 5 months, the monthly savings will be even greater.
• These are real, hard numbers after using S3 for 7 months, not our projections. They closely match (but are actually slightly better) than our projections.

I recommend you read the original article for the details. I also recommend that you review Rightscale, the Amazon EC2 Firefox extension, Enomalism Virtualized Management Dashboard, Elasticlive, Geostratus, the Amazon Developer forums and review the publicly available Amazon Machine Images. I also recommend the Video: Setting up and running Amazon EC2 from Windows .

Drag and drop a server from home onto the Amazon cloud
Hackers can design their online network at home and simply drag and drop it onto the Amazon cloud. The conventional approach would require a large number of employees or consultants to deliver equivalent functionality. Ofcourse, a significant amount of time was required to raise capital from investors to pay for it. Today, a hacker can create an application on the (free) Linux desktop and an open source development platform. A major ebusiness could be built by a hacker with less than US25k in external development. If you are not a hacker, then you will need to raise some serious capital because you will need significant support to navigate unfamiliar ground and achieve your outcomes.