Although Amazon.com began as an online retailer of books in 1995, it was not until 2002 that it entered the market for technology services with its Amazon Web Services (AWS) product. Today, Amazon Web Services is most pertinently known for hosting the Amazon EC2 (Elastic Cloud Compute) product offering as well as Amazon S3 (Amazon Simple Storage Service). Amazon EC2 was launched as a beta product on August 25, 2006 and since then, has progressed to dominate global market share for cloud computing services in the wake of competition from vendors such as the Google App Engine, Microsoft Azure, Rackspace, RightScale and Joyent. Amazon EC2 provides business subscribers with a pool of computing resources that can be configured and provisioned on demand by the subscriber. Amazon’s web-based services enable businesses to avoid expensive capital investments in IT hardware and its maintenance. Additionally, the EC2 product frees businesses from the obligation of term based subscriptions to web hosting environments that typically have fixed monthly costs and minimum term length subscription requirements. Amazon’s EC2 environment allows developers to pay only for system usage and consequently embrace a pricing structure that recognizes inconsistencies in system usage such as spikes in holiday sales or event driven website or application traffic. In 2010, analysts estimated that Amazon’s EC2 product offering earned between $500 and $700 million in revenue. Given that Amazon’s total 2010 revenue was approximately $34 billion, its AWS vertical represents a miniscule percentage of its total sales. Nevertheless, in the second quarter of 2010, Amazon CEO Jeff Bezos reported that Amazon was “seeing rapid growth in Kindle, Amazon Web Services, third-party sales, and retail,” thereby suggesting significant market uptake of the AWS line of business that is currently grouped into the “Other” category on the company’s balance sheet.
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