UPDATE: Amazon Cloud Service Suffers Errors, Hurting Websites

Amazon.com Inc. (AMZN) said its hosted cloud service, which has been experiencing errors Thursday, isn't expected to be fully recovered for at least a few hours.

Amazon said on its website Thursday that its Amazon Elastic Compute Cloud is experiencing "instance connectivity, latency and error rates." The outage has taken down several websites and highlights the risks plaguing companies who rely on public cloud offerings.

The service, hosted in northern Virginia, handles operations for the U.S. East Coast. The company has been providing regular updates and said it is still working to correct the problem.

"We deeply understand why this is important and promise to share this information as soon as we have an estimate that we believe is close to accurate," Amazon said on its website at 2:09 pm EDT regarding when it expects its service to be fully recovered. "Our high-level ballpark right now is that the ETA is a few hours."

Websites such as Foursquare, Quora and Reddit have cited service problems related to Amazon's outage, with user-generated news link site Reddit recently noting on its web page that Amazon is currently experiencing a "degradation" and is working on it.

"We are still waiting on them to get to our volumes. Sorry," the site said.

Amazon wasn't immediately available to comment. Shares, up 27% over the past 12 months, recently climbed about 1% to $185.43.

The service is core to Amazon's cloud computing platform and is often listed as a model for other such offerings. It allows users to run programs and store information remotely, accessing the applications over the Internet and eliminating the cost of operating the equipment themselves.

The market for cloud services is expected to grow to $102.1 billion in 2012, up from $68.3 billion in 2010, according to research firm Gartner. The predicted demand has enticed a broad range of technology companies to build data centers for these services, including Dell Inc. (DELL), International Business Machines Corp. (IBM) and many smaller specialists.

While utilizing a cloud service provider helps companies lower data costs, it also comes with the added risk of relying on a third-party to fix problems that may arise.

"Amazon's taking the hit today because they're the poster child, but outages aren't anything new and unfortunately they're going to continue to happen," said Vanessa Alvarez, an analyst at Forrester Research.

She said any company that is leveraging the cloud needs to clarify exactly what their cloud service providers have to offer when situations like this occur. "Companies can't automatically assume there are disaster recovery plans in place when in reality there really isn't," she said.

Amazon first acknowledged the error at 4:41 a.m. EDT on its Amazon Web Services service health dashboard, saying it was investigating the issues. The dashboard provides users details about delays or errors.

In addition, the company's relational database service, also based in northern Virginia, has been experiencing service disruptions.

"Despite the continued effort from the team to resolve the issue we have not made any meaningful progress for the affected database instances since the last update," Amazon said about the relational database service on its dashboard at 11:12 a.m. EDT.

Its Elastic Beanstalk service also has seen some performance issues with increased error rates, Amazon said.

-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com

--Steven Russolillo contributed to this report.

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