I recommend reading Sam Lessin’s recent essay, AWS : NYC AS COMPUTE CLOUD : HUMAN CAPITAL CLOUD. Tons to think about if you are building web services or living in NYC (I’m doing both). Particularly important is the insight about network effects of choosing EC2 to host your webservice:
But, Amazon’s game of Oregon trail is becoming Civ. II in a matter of months – more and more what propels AWS, and what puts it on track to be untouchable, is massively scaled co-location with everyone else using AWS. I have heard rumblings of hedge-funds moving into AWS partially for the scale, and partially because that is where the data they need to target on an ongoing basis lives. I know for a fact that drop.io is starting to engage in more and more deals with other companies that also are in AWS – allowing us to take advantage of free and really fast data transit between our services, and massively scaling the benefits of working with others rather than building everything ourselves. Thus, the Return on Scale (ROS) that AWS enjoys is now only minorly driven by cost sharing, procurement synergies, networking synergies, etc… these are all big deals – but the clincher is the fact that that the internet is not actually flat, and the more people who use AWS, the more valuable AWS becomes as a hyper centralized hyper networked flexible node. Frontier town no more, AWS is becoming a self fulfilling prophecy, where each new inhabitant both benefits from the value of all those that settled before him/her, and brings incremental value to everyone else. Sure, I can live somewhere else on the gird and commute in and out of AWS, but there are serious benefits to living in Manhattan. So, maybe tax benefits will compel me to live next door in Greenwich, CT but I can’t really live in Kansas, even if Skype is getting better every day. The Metropolis benefits everyone, but it does not benefit everyone evenly, and those near the center gain more – faster.