Amazon changes the game

When I heard about EC2, the new Amazon "Elastic Compute Cloud", last week, it was immediately clear that this will completely change the way startups operate. $.10/hr/CPU is cheap even if you can't add and delete servers in minutes - at under $75/month, it is still cheaper than dedicated servers. $.20/Gb of outbound traffic can be expensive for certain applications, but bandwidth-intensive apps can avail themselves of caching (who wants to bet that Amazon adds caching in the not-too-distant future).

Coming on the heels of Amazon's launch of SC3, the flexible, on-demand storage solution that pretty much ended startup companies' demand for large-scale SAN storage, Amazon has for all intents and purposes removed the "CapEx" slide from web startup "use of funds" section.  Aside from employee laptops and a few desks from IKEA (or, more likely, IKEA desks recycled from a previous startup and half the team showing up with their own computers anyway), we're OpEx only, certainly through Series A.

One of the concerns about SC3 was that storage traffic had to go over the web to get from your server to Amazon's storage. But with EC2 and SC3 colocated in the same cage, that problem is gone. As is the cost of SC2 bandwidth for traffic between server and storage - now you only pay for traffic that leaves the cage. (I wonder if you pay for traffic that comes into the cage - hmmm, for a business like Feedster that crawls massive amounts of content but only has to re-serve the small fraction that people find interesting, this could be an even better deal...).

And you get root access to the server, so this is a much, much different beast than ordinary hosting opportunities.  Dedicated server companies like Servepath and ServerBeach should be concerned, as should hardware providers not selling to Amazon or their inevitable competitors. Amazon appears to have thought this one through very well. I look forward to seeing where this takes us.

Unfortunately, the "limited beta" of EC2 is currently full (that didn't take long!), but I expect we'll see more room soon.

Comments

[Alfredo Gutierrez]

Dear Oren,

I really like your blog and what you have to say. Can you please contact me at my email. Thank you for your time.

[John Herren]

I think the idea is that S3 *is* the cache. Also, I got an invite for EC2 earlier this week after being on the wait list for just a couple weeks, so it looks like they are moving quickly to get people on board.