Do These Outages Spell Trouble for Amazon?

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The Amazon-caused (NASDAQ:AMZN) outage of Netflix’s (NASDAQ:NFLX) streaming video services has numerous clients reconsidering their dependence on the Internet retailer’s web services for their cloud-computing needs.

What does Amazon have to say about the outages?

Although the problem at its operations in Northern Virginia has been fixed, Amazon has not provided an explanation for cause of the technical issues that prevented Netflix users across North America and Latin America from watching television programs and movies on Christmas Eve. However, a spokeswoman told The Wall Street Journal that the company would release a full report in the next few days.

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“Our goal remains to make our operational performance indistinguishable from perfect, and we know we have more work to do,” she said. “Our operational performance has been quite strong over the last seven years and one of the key reasons we’ve grown as quickly as we have.”

Netflix, which relies on AWS for 95 percent of its computation and cloud-storage requirements, was not the only Internet company affected by the outage; Scope, a San Francisco social-media company, and Heroku, also experienced problems related to Amazon’s technical glitch. AWS outages have been quite numerous this year. In June and October, Amazon Web Services saw huge outages at its East Coast data centers that brought down the servers of Pinterest, Salesforce.com (NYSE:CRM), Instagram, Netflix, and several other companies.

In comparison, Amazon’s Prime streaming video service, which is a main competitor of Netflix, experienced no technical problems during the December 24 outage.

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One of the core components of our CHEAT SHEET Investing Framework requires that companies consistently produce successful products or services, and the series of service outages have Amazon Web Service clients concerned over the quality of its cloud-computing services.

While Amazon is often considered to be the best infrastructure-as-a-service provider and its business is increasing, its technical problems are also on the rise. As Scope Chief Executive Amit Kumar told the Journal, the company is considering an alternative service as these types of problems are “happening on a fairly consistent basis.” Even though his company was not affected by the outage, Chief Executive Manish Chandra of the shopping application Poshmark said, “Potentially in the next year or so, we may look at other providers.”

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