Amazon.com has long been the leader in online application hosting, with its Amazon Web Services business.  This business allows customers to utilize Amazon's cloud computing infrastructure to procure computing and storage resources as a utility.  In the past, web developers had two main options:  use Amazon to host their applications, or host their own applications.

Now, after a swirl of rumors, Google announced that it is prepared to take on Amazon in the application hosting business.  Google will deploy its new business called the Google App Engine which will allow users to write code and deploy it.  The new business promises to deliver unparalleled scaling potential, flexing the muscle of Google's claimed 1 million servers.  Many analysts lauded the move as it provides Google another opportunity to expand into a different business market.

Analysts think that large application hosting companies will largely replace individual hosting for storage and deployment of web applications.  This move will save smaller companies time and hassle with setup, system administration, and maintenance.  Google's strong capacity in the server market primes it to be able to handle the massive spikes that frequently occur in online traffic.  To combat such occurrences, Google will also use its automatic replication and load balancing technologies, as well as its Bigtable database system. 

Another feature of Google's system that may make it more attractive to many developers than Amazon's is the ability to use Google's APIs.  Authentication and Gmail will be among the easy to plugin APIs as Google says "it's unnecessary and inefficient for developers to write components like authentication and e-mail from scratch for each new application."

Google's experience in developing its own SAAS (software as a service) applications and dealing with their massive growth, make it a logical fit for helping others in the applications hosting business.  These applications deal with millions of petabytes and users without a hitch, so Google should be prepared for the worst its customers might give.

The company has been extremely secretive about its data centers, with only a few people knowing how it works.  Many speculate that they are composed of "Hadoop, Linux and just about any piece of open-source software that works."  However, few doubt their prowess.

Some speculate that the move may force Amazon to cut its rates for its EC2 (Elastic Compute Cloud) infrastructure, which currently is at 10 to 80 cents per instance hour, and its S3 (Simple Storage Service), which currently costs 15 cents per gigabyte per month.

Google has not announced pricing yet, so this may be the biggest deciding factor.  A beta version of the service is available for free to the first 10,000 developers to volunteer.  Developers will only be allowed 500MB of storage and enough CPU resources to handle 5 million page views per month per application.  Eventually additional bandwidth and storage will be purchasable as the service moves out of beta.

In other news Google defended its policy of retaining data on all its users for 18 months on Monday.  Responding to criticism from the European Union, Google said the policy is essential to improving its search results.  The EU commission complained that computer Web addresses and cookie monitoring are personal information that Google needs to do more to protect and purge.  The commission’s recommendations for European data protection laws have finally been released and are readable here.  This will likely have a major effect on Google and its fellow online players.

The recommendation recommends increased user notification and making it punishable by law to not do so.  Cookies, which track a user’s comings and goings, are widely used by Google to track user behavior and target ads, but this practice has been criticized as invasive of privacy.  The committee responsible for the report, known as the Working Party stated in the report, "It is the opinion of the Working Party that search engines in their role as collectors of user data have so far insufficiently explained the nature and purpose of their operations to the users of their services.  The Working Party does not see a basis for a retention period beyond 6 months."

Peter Fleischer, Google's global privacy counsel issued a statement Monday, taking issue with the findings.  He stated, "We believe that data retention requirements have to take into account the need to provide quality products and services for users, like accurate search results, as well as system security and integrity concerns."

If the EU chooses to legislate such actions, Google may have its own day in court, like its rival Microsoft did over antitrust issues.