A cloud infrastructure analyst said Amazon Web Services (AWS) could begin to lose customers if service outages like the one that occurred Monday are repeated.

"Major vendors who run their entire businesses on AWS, such as Netflix, Foursquare, Pinterest and Salesforce.com’s Heroku platform were affected in the October 2012 outage," Jillian E. Mirandi, an analyst with Technology Business Research, wrote in report following Amazon's quarterly earnings report Thursday. "If major companies such as these continue to experience outages, they will be tempted to move services onto competing IaaS products.

"TBR believes that the market spotlight is on AWS when it comes to outages as it is the biggest IaaS vendor and supports well-known customers," she added.

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An outage in Amazon Web Services' Northern Virginia market Monday caused website outages throughout the day. The incident followed a similar occurrence on June 14 in the same market and one on April 21, 2011, also in the Northern Virginia data center.

Although Amazon mentioned AWS only briefly in its quarterly report and during its conference call with analysts, Mirandi estimated AWS' quarterly revenues grew 65 percent year-over-year to $451 million.

During the earnings call, Amazon Chief Financial Officer Tom Szkutak said the company planned to invest heavily in AWS, without giving details.

Mirandi said AWS continues to use price cutting as its chief weapon to maintain its market leadership position but said Google can challenge that approach.

"We maintain that if any vendor can compete with AWS on price, it is Google, as both companies have other large and successful business units to support profitability and revenue stability," Mirandi wrote. "TBR expects further price cuts from AWS in response to the emergence of Google Compute Engine as an IaaS rival, but we maintain that continued price battles are not sustainable."

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AWS will see the rate of new customers slowing as its faces continued competition from other cloud providers, including Verizon, Rackspace, IBM and HP, TBR's Mirandi wrote.

AWS is gaining traction in the public sector, as 300 government agencies are now using AWS GovCloud service, the Amazon's report said.

"Government organizations are turning to cloud-based infrastructure to improve efficiencies, increase visibility, cut costs and meet mandates for data center consolidation. AWS initially launched GovCloud in August 2011 (a month before Verizon launched its federal cloud portfolio) making both vendors early-to-market IaaS vendors in the government space," Mirandi wrote.

AWS has offered more features to its government service, on Oct. 10 announcing the addition of more memory, compliance-ready storage capabilities and increased regulatory integration.

In its quarterly report for the entire company, Amazon announced a loss of $274 million, with revenue of $13.81 billion, compared with a profit of $63 million, on $10.9 billion in revenue, in the same period a year ago.

Amazon could not be reached for comment Friday.

PUBLISHED OCT. 26, 2012