Amazon Web Services (AWS) is a set of Cloud-based data services launched by Amazon.com, Inc. in 2002. AWS allows users to use the excess capacity of the Amazon.com site to store data, use on-line computing capacity, and borrow super-computer capabilities from Amazon's network.
In order to service its own needs, Amazon.com became one of the world's most aggressive acquirers of storage and CPU capacity. The larger their capacity grew, the lower their cost to put out a Gigabyte of storage, or a CPU cycle. Their cost became so low, that an internal analysis showed that they could sell virtual networks in the public Cloud for a significantly lower price that any small or medium-sized firm could develop their own networks. Their experience with on-line services allows their service to not only be less costly than privately built networks, they are also able to provide a much service with greater reliability, more features, more up-time and more easily scaled when a firm grows.
AWS represents a key advancement in Cloud services, since many of the users of AWS are themselves Cloud providers. By using AWS, these firms are able to focus on their service rather than the infrastructure needed to run it. AWS is the largest service of its kind, and is likely to retain its lead by making use of the combination of its own massive need for capacity growth plus the needs of external clients to build new capacity.
AWS is an example of the classic outsourcing paradigm: allowing a firm with a specific expertise to sell that expertise to firms that could not create a similar service at the same price point.