Amazon built an innovative utility business model to offer two new technology services to its clients, namely Simple Storage Service (S3) and Elastic Compute Cloud (EC2). Since only a small fraction of computing capacity was used at any given time, the sale of unutilized processing power and storage to other companies improved the ROI, by generating revenue.
Subscribers benefited because this model was pay-as-you-go, had no setup fees, deposits, or contracts, and had comparatively lower fees. Besides, subscribers could focus on their core competencies without having to invest in their own hardware and IT staff or having to worry about outdated hardware.
If however, Amazon’s own computing capacity increased due to demand and it was unable to handle the increased load, its own web services may be affected. Small startup web based companies used Amazon Web Services (AWS) as their primary storage or computing source and other companies used AWS for secondary or for backup purposes (Laudon & Laudon, 2007, pp 203-204).
Concepts such as capacity planning, scalability, and TCO ensure that future demand can be met within reasonable budget. When selling computing power and storage space to customers, if Amazon uses proper capacity planning techniques taking into consideration service level requirements and current capacity, it will ensure there is enough computing power and storage to meet the fluctuating demands of amazon.com.
By adding additional capacity, if there is a transparent growth and noticeable performance improvement then a system is said to be scalable. The July 2008 issue which was caused due to failure in “internal system communication” could be a scalability issue. Total Cost of Ownership (TCO), over the lifecycle of the hardware or software, are associated costs to keep the system running in optimal condition.
Amazon realizing that it uses a fraction of processing power at any given time loaned the unutilized processing power and storage in an attempt to reduce the TCO. Subscribers such as Powerset managed their demands, by using Amazons services, without having to worry about capacity planning or system scalability. MileMeter Inc., SmugMug Inc., and Webmail.us reduced their TCO by not having to invest in hardware and by maintaining an IT staff by using Amazons virtual servers (Laudon & Laudon, 2007, pp 203-204).
Below are four companies in the cloud computing utility market offering different services. Depending on the need, a web startup company would benefit best by using services offered by Amazon. Google and Rackspace are focused on web hosting and NewServers loans servers (Goia, 2008). If I were with a larger company I would still recommend AWS because it offers better services with the same reliability, high availability, and scalability as competitors.
These days most consumers have computers or laptops that have powerful CPU’s and large memory, which can be connected to flat screen TV’s. High speed internet is also available for a reasonable price is usually underutilized. A suitable web-based startup business would be online movie rentals. With Amazons S3 service, a large collection of past and current movies in different languages can be stored.
Using the EC2 service, consumers can connect to the website and view the movie online without having to download it to their laptops. EC2 service provides powerful computing which allows multiple users to view the same movie without overlaps, since each movie creates a separate instance. Also the high connection bandwidth will ensure all consumes will enjoy the same movie quality.
References
Goia, Mircea. Cloud computing, grid computing, utility computing – list of top providers (2008). Web.
Laudon, K. C. & Laudon, J. P. (2007). Management Information Systems: Managing the Digital Firm (Ch 5). Upper Saddle River, NJ. Pearson – Prentice Hall.