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February 15, 2008 10:06 AM

Amazon service outage fixed, but what's the financial hit?

Posted by Brier Dudley

Entrepreneurs building companies on Amazon Web Services are having conniptions this morning after an extended crash that began early this morning.

A spokesman said the problem is fixed and service is coming back up:

"We've resolved this issue and performance is returning to normal levels for all Amazon Web Services that were impacted. We understand the critical importance of our services to our customers, which is why operational excellence is our highest priority,'' Drew Herdener said via e-mail.

But it will take longer to fix perceptions hurt by the crash of the S3 storage service, which hosts all sorts of data for companies big and small. Maybe it will blow over, or maybe it will continue to be cited by skeptics and competitors...

Will this be a setback for cloud services? Will it convince businesses tiptoeing into this world that it's still better and safer to store and serve data in-house? If key services can go down for five or more hours, the cost savings don't look quite as attractive. Startups built on a shoestring don't have much choice, however.

On the bright side, companies using S3 are going to receive big credits on their accounts thanks to the new service level guarantees Amazon provides. If uptime falls between 99.9 percent and 99 percent, they get a credit of 10 percent on their accounts. If it falls below 99 percent, they get a 25 percent credit.

Amazon hasn't said a lot about how much money it's making from Web services, but I wonder if all the 25 percent rebates are enough to surface in its next earnings report. Probably not.

In the meantime, the company should be doing a better job communicating the situation. Its Web services honchos are prolific bloggers. Why aren't they using their blogs to shed light on what's happening or even acknowledge that there's a problem?

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