There's been a bit of a debate raging over whether or not Amazon EC2 has been oversubscribed and is suffering from performance problems because it. The discussion started when Alan Williamson wrote a blog post on Tuesday that said he was experiencing growing performance problems while running a large EC2 deployment for one of his customers. The post accused Amazon of oversubscribing their environment which in turn meant he needed to buy larger instances to maintain the same level of performance in turn increasing his client’s costs.
The debate hits at the heart of complexities involved in trying to deploy cost effective, revenue generating, public use infrastructure as a service platforms. I've been saying this for a while -- one of the hardest parts creating a public cloud service is estimating your customers demand while trying to remain competitive, which really means having prices that are on par or better then Amazon EC2.
Amazon was quick to respond saying “We do not have over-capacity issues. -- When customers report a problem they are having, we take it very seriously. Sometimes this means working with customers to tweak their configurations or it could mean making modifications in our services to assure maximum performance.”