Amazon Case Analysis

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Management of Information Systems MBA562 Amazon’s New Store: Utility Computing Andrea Bell James Phillips April 2, 2011 Amazon spent its first 12 years refining its informational infrastructure responsible for making its online service successful. In March 2006 Amazon introduced the first of several new services, which included Simple Storage Service (S3) and later Elastic Compute Cloud (EC2); Amazon entered the cloud utility computing market. Amazon had tremendous computing capacity but they only used a small portion of it at one time. In addition, Amazon’s infrastructure was considered by many companies to be the most robust in the world so Amazon decided to extend its services over the internet to any developer who could make use of them. Amazon began to sell its computing power on a per usage basis, just like a power company sells electricity. Established companies like IBM, Hewlett-Packard, and Sun Microsystems could follow Amazon’s lead and offer utility computing without service level agreements. Many of the traditional utility computing suppliers charge around one dollar per CPU hour, or ten times what Amazon does. Amazon charges 15 cents per gigabyte of data stored per month on Amazon’s network of disk drives. There is also 20 cents per gigabyte of data transferred. In 2005 Hewlett Packard announced that they had formalized a six year effort to build a utility computing business. In 2007 IBM launched at utility computing system called “Blue Cloud,” but IBM’s product differs from Amazon because IBM is focused on helping build cloud computing platforms in customer data centers instead of leasing out its own data center infrastructure on a pay as you go model. There are several small companies emerging into the market of utility computing because the bigger companies do not concentrate their business in the utility computing area, which

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