Companies Praise Financial Benefits For Amazon's Simple Storage ServiceCompanies Praise Financial Benefits For Amazon's Simple Storage Service

Launched in March, Amazon's Simple Storage Service (S3) offers businesses the ability to scale competitively with the likes of Google and Yahoo. It may not quite be Google-quality IT on-demand, but to judge by the esteem of S3 users, Amazon is selling the next best thing.

Microsoft, for example, says it saved 90% on storage costs when, in an effort to expand its MSDN Direct Student Download program, it switched to Amazon's S3.

With S3's rate of $0.15 per gigabyte of storage per month and $0.20 per gigabyte of data transferred, online photo sharing and storage service SmugMug.com says it has saved $500,000 in storage costs since starting to use the service in March.

Google declined to confirm whether its storage costs were lower than this. Yahoo had not responded to a request for comment at the time this story was filed.

Amazon, hardly much more forthcoming, says that S3 currently holds over 800 million data objects, ranging in size from a few hundred bytes to several gigabytes a piece. To date, thousands of developers have signed up for the service.

Don MacAskill, CEO of online photo site SmugMug, says that when his company first started adding S3 storage, he didn't expect it would become a core part of his company's infrastructure. S3 was seen as an experiment. But having implemented and integrated it in only five days, he says, it has become essential. SmugMug is now in the process of migrating 80 terabytes of legacy storage over to S3, not to mention the 10 terabytes of customer photos being added every month.

All told, SmugMug maintains some 300 terabytes of information. Data, says MacAskill, "is a big deal for us and we constantly looking for ways to save on cost without sacrificing reliability."

For the past few years, SmugMug has been using customized Apple XServe RAIDs attached to Linux boxes that serve as front-ends. "In terms of cost per gigabyte, they [Apple] are absolutely the lowest, in terms of total-cost-of-ownership, on the market," says MacAskill. "I don't think there's a lot debate about that. But it turns out that S3 is even cheaper."

"You could custom manufacture boxes the way Google does, where you just screw commodity hardware together," MacAskill says. "But if you do the actual math on that, it's fairly labor-intensive, both building and maintaining the boxes."

MacAskill says that S3 also has the advantage of freeing up capital. "One of the other big cost issues is you don't have to front-load your capital costs," he explains. "So even if S3 were slightly more expensive in the long run, it makes utilizing your existing cash much easier. It also gets away from the silly capital-expenses-amortized-over-five-years tax law, which basically means that in your first year you have to pay 30% of the capital expenses again to the government and you don't get it back for a few years."

"In terms of online storage, S3 is the most impressive pricing structure that I've seen," says Ben Widhelm, co-founder and VP of engineering of online storage service ElephantDrive. "As you may guess, I watch this pretty closely."

That's not to say that high-end storage vendors like EMC or affordable innovators like Apple have no place anymore. Widhelm readily acknowledges that it's possible to meet or beat Amazon's pricing using retail hardware. What's more, for some companies, S3 is impossible: Trusting corporate data to a hosted service provider, even one with a brand like Amazon's, isn't a viable option for everyone.

S3's advantage is that is can be deployed quickly on a pay-as-you-go model. "The thing that's so attractive to us, and I think a lot of users of S3, is the 'burstability,' the ability to scale without the front-loaded cash costs," Widhelm says. "For any startup business, cash is king."

Perhaps more significantly, S3's instant infrastructure gives startups hope. As Widhelm put it, "To compete with companies like Google and Microsoft, we're ready, willing, and able to stand on the shoulders of an enterprise like Amazon to get us there and put a linear connection in between our needs and our costs."