Amazon: Books, DVDs and … Infrastructure?

Let me be the first to admit it: I love Amazon. Unlike many trendy “Web 2.0” startups that seem to be little more than a concept in search of a real value proposition (my favorite: social networking for dogs), Amazon puts Web 2.0 elements like user-generated data and application access for end users and outside business mashups in service of an old-fashioned business concept: selling stuff. And stuff Amazon has: watches, shoes, computer accessories and … books.

Amazon has leveraged wide Internet access, dispersed product storage, and clever logistics design to provide an amazing assortment of products at rock-bottom prices. I often shop Amazon since it has better pricing than the local electronics superstore and, crucially, much better info about the features and benefits of the product in question — instead of a lightly-trained sales rep trying to steer you toward this week’s “special,”  

Amazon’s ambitions appear to be broader these days. I recently attended a Software Development Forum Emerging Technology SIG presentation given by Jinesh Varia, Evangelist for Amazon Web Services.

Jinesh’s presentation focused on the new Amazon technology offering, Elastic Compute Cloud (EC2), which may be thought of as a processing counterpart to its S3 storage offering. Essentially, EC2 offers the ability to immediately bring up a remote machine with the capability of dual-core Xeon power, 2 gig of RAM, and 160 gig of local storage. For this functionality, Amazon charges ten cents per hour; a full month’s machine time would run you around $70.

Amazon offers a web services interface to create, store (more info on this in a moment) and tear down the machines on a moment’s notice. How can it do this?, one might ask.

What Amazon has done is fiendishly clever. It uses the open source virtualization technology called Xen to provide the machine capability outlined in the previous paragraph. The underlying physical hardware is divided up to deliver each EC2 machine. The web services interface encapsulates the Xen admin commands, enabling remote control. In a discussion I had with another SIG attendee, we concluded that the underlying hardware is probably something on the order of a dual processor box; anything more powerful would be too expensive to support the pricing Amazon has offered.

Now, Xen can bring up and take down the machine and offer you processing capability; but how do you store your data and machine state should you decide to take it offline? Remember, Amazon is only offering the ‘capability’ of 160 gigs of storage, not a physical dedication of that amount of a physical hard drive. For persistent storage, you can use the corresponding Amazon web services capability called S3. S3 is virtualized storage, charged at 15 cents per gig stored and 20 cents per gig transferred (you don’t get charged for transferring machine info between EC2 and S3). Naturally, S3 has a web services interface to control it.

Amazon’s EC2 offers real potential to companies needing short-term computing power; e.g., testing, training, and so on. But it holds far more potential than that: Making processing and storage functionality available on-demand with pay-as-you-go pricing creates the foundation for a whole new class of technology business models. Clever entrepreneurs will figure out how to build businesses that offer computing-based services yet avoid the need for investing capital in data center infrastructure and operating expense for admin personnel.

As an example of the type of business made possible by this new processing model, a friend of mine is starting a business called DigiSense (I usually avoid discussing businesses friends or colleagues are involved in, but think DigiSense is taking advantage of today’s technology ecosystem so brilliantly it deserves looking at). It will offer the SMB MSP market automatic data backup for SMB infrastructure, particularly for Exchange servers (a critical resource, yet often not rigorously managed with respect to backups). DigiSense will deliver an appliance (stuffed with carefully configured open source software) that will seek out shared storage resources and automatically begin backing them up to reliable storage. The storage mechanism DigiSense will use? You guessed it, S3.

What I think about DigiSense’s business model that is so brilliant is that it takes advantage of newly-available, functionally- and financially-appropriate resources to create an offering that can be delivered at an SMB-appropriate pricepoint.  To my mind, creating solutions that absorb new capabilities in the technology ecosystem is the right path forward for tomorrow’s successful companies. The alternative that seems to be in vogue is for enterprise vendors to attempt to shoehorn their enterprise-focused offerings into an SMB-focused product; inevitably, these products impose compromises upon the user and are eventually found dissatisfying. By starting with a clean sheet of paper, leveraging new resources. entrepreneurs will create products and services much better suited to the SMB market.

Amazon’s role in this is truly amazing. It has in stealth created a vision of a new style of computing, delivered in market-appropriate, market-transforming fashion. I’m astonished they’ve turned in this direction (what, single-handedly creating ecommerce wasn’t enough?), but believe they’ve limned one path forward for the IT industry.