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An Amazon engineer had a little idea that turned into a billion-dollar business

Once upon a time, Amazon was a dot-com-era technology company best known for selling books. Then, in 2003 and 2004, Amazon wanted to streamline its internal process between the programmers and the hardware engineers. It was a move that many other companies were taking, but an Amazon engineer had a brilliant idea: Why not use the same project to design an application that could rent chunks of Amazon’s computing facilities to customers?

On August 24, 2006, the public beta of Amazon’s “Infrastructure as a Service” (IaaS). And so, the ability to rent computing capacity managed by someone else was born. It was a gamble that has, so far, paid off. Amazon includes IaaS revenue in a larger unit called Amazon Web Service, which includes other cloud products. That, in turn, is under a part of the financial reports that includes non-cloud  products called “other.” Besides Amazon Web Service, Amazon’s other revenue includes non-retail activities, such as marketing and promotional activities, co-branded credit card agreements, and other seller sites. Yet most analysts studying the industry believe that the mass majority of the “other” is cloud computing, and the growth is stunning.

IaaS at Amazon went from a thought project in 2004, to a startup in 2006 and it is almost certainly heading toward a billion-dollar business, if it is not there already.

Renting computers, called servers, that were managed by someone else, somewhere else, was not a new concept. What was new was the pricing that allowed customers to buy servers by the hour with a click of a button. That rental concept allowed businesses with uncertain future demand to buy computing capacity rapidly, 24 hours a day, as needed. Other companies followed Amazon’s lead. Rackspace, Terremark, CSC, Savvis, among others have similar options now, and technology research-firm Gartner estimates that businesses will spend $6.2 billion, or 45.4% growth, in 2012 on IaaS.

Read more at Quartz.

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