November 8, 2006 4:00 PM PST

Bezos: Amazon Web Services will be 'meaningful business'

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SAN FRANCISCO--Amazon.com CEO Jeff Bezos is convinced that the company's nascent hosted computing service will yield dividends for the retail giant, with time.

Bezos spoke at the Web 2.0 Summit on Wednesday where the publisher and conference host queried him on Amazon's Web Services business.

Financial analysts have voiced some concern about the level of technology spending that Amazon is doing and whether its foray into hosted computing services is a distraction from its online commerce business.

Bezos was unapologetic about investing in Amazon Web Services--a collection of 10 hosted services which give software developers access to Amazon data and computing services, such as storage and processing power.

"Why we're doing this is because we're good at it and we think it can be a meaningful, financially attractive business one day," he said.

Amazon has spent 11 years and $2 billion building up its network of data centers. Opening up that infrastructure to outside developers is an effort to gain financially from that investment and expertise.

"The basic idea is that there are certain pieces of heavy-lifting infrastructure where we can take all that fixed cost and resell it to people by the drink as a variable cost," Bezos said. Amazon's Web crawling services Alexa and A9 search engine fall into that category as well, he said.

Bezos said people at Amazon are somewhat surprised at the level of excitement developers have shown in Amazon Web Services, such as its recently introduced Amazon Elastic Compute Cloud.

His theory on its appeal is that it allows small companies to spend most of their time developing their business, rather than occupying themselves with the "undifferentiated muck" of buying servers, setting up bandwidth contracts and the like.

"People are excited because they see a future where they will be able to go from an idea to seeing a successful product" in less time, Bezos said.

People now spend 70 percent of their time on the nitty-gritty technical details of procuring Web servers. In an ideal world, the opposite percentage would work, where entrepreneurs spend 70 percent of the time on differentiated work rather than the muck, he said.

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