Wall Street thought Jeff Bezos had his head in the clouds when he came up with the idea of Amazon's becoming a utility that offered web services to other companies.
In one sense, the financial analysts have been proved right. Amazon's founder has made his company a trailblazer in the field now known as cloud computing.
But when Amazon Web Services (AWS) was launched in March 2006, it seemed to investors like a diversification too far for the online retailer. The hundreds of millions of dollars Amazon was spending to build up its infrastructure and hire engineers were hard to justify.
Today, the move seems less contentious. Microsoft and Google are among the big companies following Amazon's lead and it reported a 41 per cent year-on-year growth in third-quarter revenues this week to $107m from the non-retail services that include AWS.
Adam Selipsky, vice-president for product management and developer relations at AWS, says the company had spent over a decade building a massively scalable infrastructure to support its own operation at Amazon.com. It felt it had the scale and expertise to offer this to those who did not want to focus on or did not have the means to build their own.
"We've built a business around providing the heavy lifting for developers with our cloud computing platform," he says.
Storage was seen as a basic need and S3 - Simple Storage Service - was the initial service launched. More than 400,000 developers are now using S3, which stored 29bn objects - anything from an e-mail to a video file - at the end of the third quarter, growing from 22bn the previous quarter.
Amazon followed up in August 2006 by offering raw computing power for businesses to run processes. Both services are pay-as-you-go - companies are charged only for the capacity they use and no contracts are needed.
Other services have followed, including billing and account management.
Adoption of Amazon's services began with smaller Web 2.0-type companies but larger corporations have joined the client list in the past year, including Oracle, Sun, the New York Times and Nasdaq.
By Chris Nuttall
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