It seems extraordinarily stupid to entrust such an obvious potential competitor with the keys to your infrastructure, particularly in a single-vendor solution.

This is fundamentally different from the Roku model -- neither Amazon nor Netflix own Roku, so they can remain neutral.

(edit: formatting)

[1] http://technologizer.com/2010/08/31/amazon-subscription-stre...

[2] And don't give me any bullshit about AWS not being capacity constrained unless you routinely spin up 1000 temporary XL instances.

A couple points:

• Netflix pulling out amid internet drama of anti-competitive behavior would hurt Amazon much worse than it would hurt Netflix. Netflix can find someone to throw their money at to host their infrastructure, but they could deal a pretty hefty blow to Amazon's emerging revenue stream in infrastructure by scaring lots of potential customers away.

• There have been talks about a some-day Amazon / Netflix merger for a bazillion years. This could be a little technical lubricant to such a deal.

I sincerely doubt that Netflix would be acquired by Amazon without a serious downward adjustment to their market cap. Besides, Amazon hosting the entire Netflix infrastructure would present a dramatic disadvantage to any other potential acquirer; in general, M&A yields the best returns for shareholders of the acquired company when there is a bidding war taking place.

If this (http://www.google.com/finance?client=ob&q=NASDAQ:NFLX) is any indication, I am sure they are secretly building their farm somewhere as we speak.

On a side note, I wonder why all these companies brag about AWS so much (yeah, yeah, AWS is awesome, I use it myself too) - are they getting endorsement incentives or something?

I think they're starting to discuss these things a bit more as a recruitment strategy.

Amazon already happily takes a small cut from competitors' businesses: from the many third party sellers who sell through Amazon's retail sites.

I'm not sure your analogy stands up.

If you are building almost any type of company today, it makes no sense to build your own datacenter. We're going to look back in 10-20 years and laugh that every company felt the need to build datacenters. While doing some research relating to sustainability and cloud computing, I found some statistics showing that federal agencies saved between 25-50% by moving to "cloud" solutions.

http://www.brookings.edu/papers/2010/0407_cloud_computing_we...

Cloud computing is an excellent way for companies to dramatically lower their carbon footprint as well. Instead of using coal-fired electricity running your own inefficient datacenters, why not host your stuff at Google or Amazon where the PUE is low and they're using hydro/cleaner power?

Except for when it _does_ make sense.

I'm starting a project at my company to add a single server in-house, and move some data storage away from Amazon S3. This will save us thousands of dollars a month -- the payback period for the project is 3 months. (!) That includes the engineering cost to set up the new server. This particular project is compelling because we don't need S3's other advantages, we just need raw storage.

Moral: Don't be dogmatic about decisions in your business. Just weigh the pros and cons (including cost) carefully.

When looking at a cost/benefit don't forget the following costs:

  Power
  Cooling
  Space (lease costs)
  Administration
  Backup
  Redundancy
  Decommissioning (you don't just throw the server away do you?)

What most people don't realize and/or talk about with AWS is how much more expensive it is than in-house/co-lo/dedicated elsewhere.

Until recently, I don't think it was "felt the need to" as much as "had no choice but to." AWS-style data-center is a new development in technology. The ability to remotely fire up servers and have them running in minutes is wonderful but it also means you have to redo your entire IT architecture. For companies just starting up, it's no big deal. For ones already established for 30 years, it is nothing short of a Herculean effort. Setting up a datacenter might be a better choice.

OTOH, there are companies now that can handle mainframe SaaS ( outsourcing your mainframe apps). Huge gains for companies that want to take the leap and dismantle their mainframes.

I think, as you allude, that the primary issue is not technical but behavioral. In the area of healthcare I work in (nursing homes), quite a few organizations have their data hosted elsewhere. Sometimes it's through the vendor, sometimes it's with a third-party service. I don't see that big a leap of faith to Amazon from this.

Anyway, a better PUE will certainly help your carbon footprint, but saying "using hydro/cleaner power" is meaningless.

You don't get to pick and choose "I'm using hydro, you're using coal" - the power grid is interconnected - everyone is using everything.

Additionally all the possible hydro that can be used already is, so it's not like you can individually promote hydro usage - if you "use" hydro power, all the happens is that someone else doesn't get to use it, which means effectively you are burning coal, but remotely.

There are some slight benefits to using the power near where it's generated to avoid transmission losses, but it's not large.

Unless you can say "because of me there is a new, cleaner, power station that is built" you are not using cleaner power, you are just shifting less clean power to someone else.

However, there are some cases where "core competency" is a vague term. Take Facebook for example - could they outsource their infrastructure to somebody else? Given how much data they have to handle, probably not. When you get to the point where scaling requires very low-level (Hunch) or massive (Google or Facebook) optimizations/deployments, you might be entering the business of handling intricate infrastructure yourself.

Also companies that embrace the cloud have changed how they do things because they see the efficiencies and recognize that they don't want to be in the business of managing servers.

To sum up, Netflix's strategy is to go with the best and biggest in each category, and AWS is obviously the biggest as of now.

Granted, my computing needs are basic compared to the needs of Netflix.

But they are good enough to admit that, and plan accordingly. Hat off.