This reminds me when Google brought Youtube and migrated it’s services from Rackspace. Wondering how this will affect smaller cloud providers outside of AWS. I believe Amazon will find plenty of companies to utilize the space given up by Instagram but I don’t know how smaller cloud players plan on competing with Amazon in the long run. Specifically Rackspace, as OpenStack stutters with the loss of Citrix does Rackspace have enough runway to get to critical size. Can it remain a standalone company?

Gigaom

Social photo-sharing service Instagram is pretty proud of the infrastructure it built atop the Amazon Web Services (s amzn) cloud, but I have to wonder whether the startup’s acquisition by Facebook today means all that effort was for nothing. Well, it wasn’t for nothing, obviously — Instagram was able to scale to handle tens of millions of users without developing a reputation for being slow or unavailable — but Facebook is pretty adamant about running its services in its own custom-built data centers. And for good reason.

AWS is great for startups with lean budgets, but it’s not unheard for them to leave it behind when they strike it rich. There are plenty of reasons not to remain in the cloud, ranging from the cost to availability to the complexity of building scalable, high-performance web applications on virtual infrastructure. As Facebook explained in its S-1 filing earlier this year

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