I spent the first 6 years of my life in a small town near Ciudad Cuauhtémoc. The region consisted of hundreds of small villages (50-100 residents in each) and was agriculturally-based, but it wasn’t a very advanced economy. Each farm was largely a self-contained unit of skills. A farmer was a generalist and needed to know how to farm, fix machinery, raise livestock, dry grains, build and repair buildings, etc. If you wanted chicken for supper, you didn’t go to a grocery store. You went to the barn and assisted a poor chicken in parting with its head. Skills, when lacking, could be bartered with neighbours. Even after we moved to Canada, we made annual trips to Ciudad Cuauhtémoc to visit family/friends. It wasn’t until the mid-90′s that I noticed specialized businesses developing in region (a motel, a car repair shop, a restaurant). Specialization is a mark of complex and integrated economies in regions where population density hits a certain threshold.
In most circles, Amazon is best known as an online retailer, mainly for books. For technology startups, however, Amazon is known as a critical lifeline for cheap computing. More than any other company, Amazon is a “cloud provider”. Their Elastic Compute Cloud (EC2) is a “pay as you go” service. The idea of “utility computing” has been around for a while, but Amazon (and to a lessor degree, IBM) made it a reality. For startups, EC2 is a terrific resource – instead of a company having to maintain their own servers, they use Amazon’s infrastructure in order to rapidly scale up computing when needed. I’m not sure how much AWS contributes to Amazon’s revenue or profits, but it promises to be a huge part of their future success. As with small agricultural communities, cloud computing is growing due to the innovation density of small companies/startups, causing the web-based economy to cross the mysterious threshold that drives it into specialized, complex, and integrated clusters.
Late last week, Amazon’s cloud platform suffered a massive failure, bringing down a long list of startups. Which is why concerns about single points of failure are causing a bit of panic. The EC2 outage is causing the angst and handwringing that accompanies buzzword-filled concepts like cloud computing (The Chronicle declares that cloud has a lead linings and a few minutes on Google News will unearth related articles. Hardly surprising – when you build an idea on hype and chase it for that hype, any setback is treated as naked emperor syndrome. That’s why once a concept (such as blogging) is declared dead, it moves off of the radar of news/media and the real work of adoption and innovation begins). However, once a sector in an economy begins to specialize, it rarely reverts – other than in small segments such as “back to earth” naturalists/farmers. Amazon has a bit of a black eye after the past week, but the cloud is compelling and it creates the ecosystem that allows rapid development of startups. A setback for Amazon, but barely a blip for cloud computing.