Almost five years ago, Amazon.com made an announcement that dealt a heavy blow to Sun Microsystems: The online retailer had switched from Sun's Unix servers to vastly cheaper servers running Linux. Amazon cut its technology expenses by $17 million in one quarter -- money that presumably came out of Sun's hide.

Now Amazon.com is looking to take money away from Sun again. This time, Amazon's not just a former customer -- it's an outright competitor. It has launched a new service, the Elastic Compute Cloud, which rents out time on Amazon's servers. Amazon is undercutting Sun's similar Sun Grid service by 90 percent, charging 10 cents per server per hour versus Sun's $1 charge. (Amazon also charges for the volume of data transferred back and forth over the Internet, a charge Sun doesn't have, but all but the most bandwidth-greedy customers are still likely to come out way ahead.)

Initially, Amazon's hoping to target the same startups that are already using its S3 Web-storage service. S3, launched earlier this year, rents out storage space on Amazon's servers to companies like photo-sharing website SmugMug, which stores customers' photos on S3 when SmugMug's own servers fill up unexpectedly. Those startups still had to keep their own servers to run the software behind their websites, however. What EC2 means is that Web 2.0 companies won't have to build their own server data centers at all, says software consultant Sergey Schetinin at his Maluke & Co. blog.

That's good news for Amazon, which is hoping not just to rent servers to startups but persuade them to build in links to its online store through its Amazon.com Associates affiliate-marketing program. Here's Amazon's value proposition: Save money by renting our servers, and make money by funneling customers to our store, where we'll split revenues with you. That's a perk that Sun can't offer at any price.