Quite literally actually. Amazon has an amazing compute platform that is by far the most advanced in the industry. The idea to bring computing resources to the application in an object orientated, programmatic interface is a real game changer in how people build (and run) production applications.
It seems to be that when AWS first started to gain traction in the tech industry, especially among the silicon valley crowd, it was always recognized as a cost-effective way for a boot-strapping start-up could build an application that would previously have been impractical for such an early stage idea. Data-center co-location is not something you sign up for in an afternoon from a coffee shop, and hardware has become more inexpensive but usually requires significant up-front capital to get the needed components to run a web application. So naturally, the idea of being able to obtain a production ready server in a matter of minutes with just a credit card and an email address for less than a dollar an hour is quite a savings.
This is how many of the trendy tech companies in the bay area have come to rely on AWS to run their production application. Their success can in some ways be linked to the availability and affordability of AWS during their initial proof of concept, product launch, and subsequent growth. However what some have found as their production infrastructure grew in scale is that the cost benefits were not as great as they appeared when they first started. While flexibly to scale their infrastructure to meet demand quickly and with less risk may still be of great business value, their monthly operating expenses are not lower because of AWS. This by no means is true for every company. There are many companies at a tremendous size and scale that still see AWS as being more cost effective than running their own data-centers. My point is simply that the reputation of AWS being the solution to reducing operating costs for production infrastructure is not accurate, and it really depends on the company and the use case.
Companies looking to build their application AWS infrastructure should carefully evaluate these trade offs. In general an early-stage start-up will be well off to use AWS, but as they grow that principle may not continue. Thankfully there are options for companies who want to run their application that was originally built for the cloud in house, such as Eucalyptus and OpenStack. It’s going to be exciting to see how the industry matures in it’s use of cloud technologies in 2012!