Sun was taking a huge risk. It would begin a shift from selling high-profit hardware outright to becoming more of a grunt, renting computers. The company famous for wining and dining customers to close multimillion-dollar hardware orders would begin processing credit-card payments.

Sun's plan proved too radical. The U.S. government, which regulated the sale of large computing systems at the time, balked at the idea of allowing any old terrorist with a Mastercard to gain unfettered access to a supercomputer. Building the data centers also proved harder than Sun expected, and its so-called "grid engine" stalled. While Sun licked its wounds, something altogether unfathomable happened. The online book and decorative pillow seller Amazon.com swooped in and, in 2006, launched its own computer rental system—the future Amazon Web Services.

The once-fledgling service has since turned cloud computing into a mainstream phenomenon and left hardware makers such as Sun (now part of Oracle), Dell, IBM, and Hewlett-Packard looking like lost souls. “One of the biggest surprises around this business has been how long it took the old guard companies to try and pursue an offering,” says Andy Jassy, head of Web services at Amazon. “None of us thought we would get a seven-year head start.”

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