When Amazon’s EC2 product came out, many companies jumped on it for good reasons. EC2 allows for fast and easy provisioning of virtual servers and bandwidth resources backed by Amazon datacenter staff. It also bills on a hourly basis, eliminating customer commitments. It was as close to on-demand cloud computing as one can get. However, one of the biggest compromises one makes when hosting on EC2 is the lack of persistent storage. Local storage on virtual instances goes away with the instance when it shuts down or gets destroyed when failures happen. And failures do occur on EC2 virtual instances occasionally, just like anything in the datacenter, real or virtual.

This week, Amazon announced persistent storage that can be mounted from an instance. This is significant mainly because it eliminates one of the biggest reasons why companies (with standard hosting requirements) aren’t on EC2 yet. This new offering is in essence, an on-demand SAN solution for EC2 with snapshot backups to S3. The fear of losing data to failures is greatly reduced (or effectively eliminated) in the EC2 environment.

The SAN market has seen its lower-end market getting eroded by open-source and commodity hardware solutions from Redhat and other ISVs. For this reason, it has increasingly focused on medium-sized and higher-end markets with bigger and more powerful solutions, targeting medium-to-big enterprises, ISPs etc. Will EC2 with persistent storage now start to cut further into the SAN market for vendors? It has a really good chance in the SME market. With Google also entering the cloud computing space in a big way, it becomes even more imminent that storage is disappearing into the cloud for the majority of lower-end IT infrastructure needs. SAN vendors will probably have to push its offering further up the chain and serve customers who are competing with Amazon in the same space — rather than just selling directly into SMEs. The bad news for some vendors is that some of these potential EC2 competitors (like Sun and IBM) are also SAN vendors to some extent. The good news is that there are many others (Google, Joyent, MediaTemple etc.) who are not. But either way, with cloud computing starting to reach maturity, the very nature of the SAN market is going to start to change. That’s definitely an opportunity for vendors, but it may not be where they were expecting it to be.