1. What technology services does Amazon provide? What are the business advantages to Amazon and to subscribers of these services? What are the disadvantages to each? What kinds of businesses are likely to benefit from these services?

Amazon provides cloud computing, also known as on-demand computing or utility computing.  Similar to other utility providers like electric, water, and natural gas, Amazon provides computing capacity to businesses that want to pay only for what they use.

Amazon can generate extra revenue from other businesses by offering its excess capacity to those that need it.  Like most companies, Amazon used only a small portion of it total computing capacity at any one time.  Its infrastructure is considered by many to be among the most robust in the world. Subscribers to the Simple Storage Service (S3) can use only what they need without having to purchase their own hardware and software.  That reduces the total cost of ownership for small and medium-size businesses.  The system is scalable and reliable for both Amazon and subscribers. The Elastic Compute Cloud (EC2) service enables businesses to utilize Amazon’s servers for computing tasks without having the overhead costs.  Risks associated with incorporating the technology are minimal for businesses—Amazon takes most of the risks.

Companies may want to go with more established names in computing; Amazon is not known as a technology company—its reputation is more as a retailer. It’s combating this perception by not requiring service contracts. However, its competitors like IBM, HP, and Sun Microsystems may follow Amazon’s lead and offer utility computing without requiring service-level agreements.  Some companies are wary of using a supplier that doesn’t offer SLAs which guarantee the availability of services in terms of time.  The growth of Amazon Web Services (AWS) could be harmful to its Web services line as well as its retail line if the company doesn’t position itself to handle a dramatic increase in demand on its infrastructure.

Customers may experience outages in the service and not have any recompense since there are no service level agreements—only Amazon’s word that it will maintain 99.9 percent availability.

Businesses, large and small, can benefit from using AWS.  The service relieves small business from the TCO of having its own systems.  AWS creates the opportunity for others to work at Web scale without making the mistakes that Amazon has already made and learned from.  Large businesses can use AWS as an auxiliary unit without having to increase their hardware and associated TCO.

2.      How do the concepts of capacity planning, scalability, and TCO apply to this case? Apply these concepts both to Amazon and to subscribers of its services.

Amazon must provide hardware capacity planning and scalability for not just its own needs but for all its subscribers.  Overestimates will create a drain on Amazon’s financial assets.  Underestimating capacity and scalability will create shortages for its own business and its subscribers.  Too many instances of non-availability will create the impression that Amazon can’t manage the service.  Estimating scalability for such a large, diverse number of users without breaking down is a huge task.  Amazon must bear the total TCO of its services, all the while ensuring it can profit from it.  The services’ subscribers benefit from not having to worry about these issues and not bearing the brunt of TCO issues.

Sun Microsystems offers utility computing through grid computing.  It charges $1 per cpu hour.  It provides platforms for its target users in computational mathematics, computer aided engineering, electronic design automation, financial services, life sciences computing tasks. Software developers use Sun’s Network.com service for building, testing, and deploying new applications to their customers. It promises 99.9 percent availability. 

Hewlett-Packard (HP) provides utility computing for PCs, server storage, mail and messaging, print, and centralized data center infrastructure through its distributed grid technology.  It targets small, medium and large sized companies for a variety of computing services.  Costs were not available on its web site.  Availability was listed as 99.9 percent.

Amazon seems to be an easier service to incorporate into a start-up business because it has been geared towards small and medium sized businesses since its inception.  It doesn’t bring the same baggage to the table as the larger, more diverse companies do. 

Students will present a variety of startup business ideas in this question.  They should address the following components:

·         Costs associated with S3 data storage

·         Access procedures for S3 data storage—they may have to research Amazon’s site to determine what the processes are

·         Costs associated with EC2

·         Access procedures for EC2

·         Interfaces that may be required between the business and Amazon’s services

·         Processes that may be necessary in case of outages