Until Digital Ocean came around, I'd always thought it bizzare that there weren't more serious competitors to AWS.
Under the 'competitive advantage' model, it is somewhat unusual that a diversified company like Amazon could be the most efficient vendor at providing a 'commodified', targeted offering like cloud hosting.
I dunno... it seems like the likely winner in a commoditized market would be the one with the greatest economies of scale, since that would drive down their costs and allow them to underprice their competitors. (If a product is truly commoditized, then price is the only thing vendors have to compete on.) And few companies have economies of scale to the degree that Amazon does.
This also provides a classic "moat" -- the more sophisticated AWS' offerings become, the more it would cost potential competitors to even attempt to compete with them.
The costs of your own hardware are significant. A decent initial foray will be at least $1m when you think about servers, routers, switches, etc. Against VC money flowing around, that doesn't seem like much, but it is a big stretch for many start-ups to have that much cash tied up in Capital.
Under the 'competitive advantage' model, it is somewhat unusual that a diversified company like Amazon could be the most efficient vendor at providing a 'commodified', targeted offering like cloud hosting.