Amazon.com is making a big bet, but it's not on selling books, CDs or holiday gifts. Instead, it wants to sell you all the processing power you can eat. Rather than competing with your local bookstore, it's taking on the likes of IBM, HP and Sun.

Amazon's recently released Elastic Compute Cloud (which it calls EC2 and is still in beta) for the first time brings to the masses grid computing and utility computing --- the ability to buy server power in the same way you now buy electricity or water.

In essence, you pay 10 cents per virtual server per hour, plus bandwidth costs, and you do with that power whatever you want. While it's not quite as simple as turning on your water tap, it's the same basic idea. You pay only for the processing power you use, and how much you use is entirely in your control.

IBM, HP and Sun already sell computing power on demand, but they sell primarily to large enterprises, and on a very big scale. Amazon, on the other hand, sells to small and midsized businesses, as well as to large enterprises, and does it via unique technology that builds on previously released Amazon middleware services.

Not everyone agrees that the same company that offers 40% off best-sellers should try to become a big-time IT provider. But Amazon has always believed that books were only an entree into selling far more sophisticated goods and services. Can it succeed? We'll take a look inside the technology, then talk to the Amazon executives in charge of the service, which may give some hint as to whether it will pay off.

How it works

Let's start off with a look at what the system is, how it works, and a brief history of it. EC2 is not, in fact, the first of this type of service that Amazon has launched; it's an outgrowth of an existing platform called Amazon Web Services. Back in March of 2006, Amazon released its Simple Storage Service (S3), online metered storage that costs 15 cents per gigabyte per month of storage used, plus 20 cents per gigabyte of data transferred. It uses standard REST and SOAP interfaces.

In July of 2006, Amazon followed on with the Simple Queuing Service (SQS), a scalable hosted queue that stores messages as they travel between computers. It's designed to let developers easily move data between distributed application components, while ensuring that messages aren't lost.

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