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For those users rushing to hosted storage solutions, the news that Amazon’s S3 utility has crashed should make many of them think twice before putting their eggs in the remote basket.

S3 suffered a “massive” outage today, beginning at about 7:30 am ET. By about 9:00am, Amazon posted a note in the service’s customer forum, saying, “We can confirm the high error rate you’re experiencing. While we don’t have an ETA at this point, we’re working as quickly as possible to restore performance. We’ll provide updates as soon as we have them.”

Although the company reports that service has been restored, service seems spotty at best. So what’s the big deal about this outage? Simply put, it undoes many of the assertions hosted storage providers have been offering to prospective customers. For VARs reselling hosted solutions, the job becomes just that more difficult. But for those competing against hosted storage, the news could not be better!

While service providers of all types and sizes have experienced outages in the past, most users were kept in the loop and well informed of the problems, and this is where Amazon seems to have dropped the ball. It simply comes down to, Can you trust your service providers with your data? Only time will tell if Amazon’s foibles have set the hosted services and storage market back to the days of uncertainty and doubt.