In that case, AWS may offer more flexibility for scalability needs and lower cost than setting up one's own servers on premise or in a collocation facility, Passell said.

Analysts praise AWS for offering services that are comparatively low in price and billed on a usage basis, without upfront or minimum fees.

"They have introduced a new business model and as a result everyone is chasing them. They've jumped to the forefront of the hosting business as a result," Staten said.

AWS competitors include GoGrid Cloud Hosting, Rackspace's Mosso, Joyent and Layered Technologies' Grid Layer, along with dozens of other players.

AWS also gets good marks for the uptime and reliability of its hosted systems.