My buddy Al, who works at Amazon, posted an interesting comment on my recent next-gen web hosting post. In it he mentions this Forbes article, The Death of Hardware, that discusses the pendulum swing back to timesharing, a.k.a. utility computing.

Snippets:

The company divulges almost nothing about its costs or margins but is said to run its Web Services business on huge networks of computers costing as little as $300 each. Ten cents an hour adds up to $876 a year in revenue (assuming nonstop usage). If hardware lasts two years and if, let’s say, electricity and other overhead cost as much as the hardware, Amazon would have a gross margin of 45%, better than what it gets on books.

In the last two months of 2007 the number of items stored at Amazon Web Services grew 40%, to 14 billion units. (Units vary in size from a couple of bytes to 5 gigabytes, and Amazon keeps the totals secret.) That’s a faster growth rate than in the April-October period.

Amazon’s s3 storage service now handles 30,000 requests to its database per second.

Surely it is just a matter of time until Google and Microsoft do some flavor of this.

I can see two strategic challenges that would make it tough for Microsoft: deciding which platform to use (versus offering naked or nearly naked linux boxes like Amazon does and Google probably would) and putting together a billing infrastructure for purchasing cloud software and services.

Thanks for the link and your thoughts, Al.