Amazon: B2C Player with Hopes for B2B
Most Web users think of Amazon as the mothership of online retailing, hawking everything from books to perfume to organic peanut butter. (You can even buy a robot duck kit for $19.99.) Yet the e-commerce king is also a cloud pioneer that offered a robust service menu well before most competitors.
The companys cloud strategy grew from its e-commerce roots. As Amazon grew, the number of online retailers connecting to it to sell goods grew as well. Its army of third party retailers is now vast. As it gave small vendors ever more access to its APIs (application program interfaces), it realized that providing Web-based services could be an extra revenue source.
In 2003 CEO Jeff Bezos began developing a business plan around this new idea. Helping him was a big thinker in distributed computing, Werner Vogels (he pens the well-read blog All Things Distributed), who became Amazons CTO in 2004.
Fast forward to 2009 and Amazon Web Services (AWS) boasts a plethora of cloud offerings. The leading components are:
Amazon Elastic Compute Cloud, EC2: virtual servers that customers access over the Web, scaleable as needed.
Amazon Simple Storage Service, S3: a data vault that integrates closely with Amazons SimpleDB, an online database tool.
AWS enables businesses to do upper level tasks such as accessing major applications from Microsoft, Red Hat, Oracle and Sun all over the Internet, on demand. Beyond its core products are myriad peripheral services like Mechanical Turk, which helps manage work among distributed staffers, and Alexa, which tracks Web traffic.
AWS claims 440,000 registered customers, many of which are small businesses and developers. It also touts some big fish clients like Phillips, Nasdaq and the New York Times.
Amazons low-priced cloud tools have earned it a reputation as a kind of entrepreneurs helper. It allows start-ups with only few bucks to leverage a robust technical infrastructure without needing to invest in an IT department. Plenty of SMBs appear far larger than they really are with the help of an AWS back-end.
Clearly, Amazon has dreams of taking over ever more of the IT workload from businesses. It positions itself as a seamless extension of the corporate data center. It can handle an IT departments need for overflow capacity, so-called cloud bursting, or in theory allow an established firm to cut its in-house IT department altogether.
Despite having gained an early lead in the cloud, however, a central question hangs over AWS.
A potential concern is that theyre not really differentiating, Mann says. Microsoft is obviously a major management play, Salesforce is dedicated to a specific application, Google is a very strong infrastructure play with great understanding of a very broad application. Amazon? I dont know. How do they differentiate?
Theyre fundamentally just an infrastructure player or an MSP [managed service provider]. Base infrastructure providers are a dime a dozen and its a very low margin business.
Bernsteins Lindsay echoes Manns sentiment. Amazon probably isnt going all that far in it [cloud]. Its got great utilities; you can get very low-cost computing from its virtual machines. And its got some other services that are kind of cute but good, like Mechanical Turk. But its partly a gee-whiz factor, and partly a way for them to service an online developer bank for people who need to build online stores.
In sum, Amazon is largely offering utilities, Lindsay says. In contrast, the players that will eventually dominate the cloud will offer their own business services and online business processes. Lindsay leans toward Salesforce in that regard.
Indeed, Lindsday doesnt see the cloud as a big revenue source for Amazon. Amazon is a retailer with a $19 billion revenue stream, but if you just look at the very best players [in the cloud space] youll find that their revenues are numbered in the hundreds of millions, he says. The company doesnt break out its cloud revenue separately, but If you look at their revenues from the [cloud] business its probably under $10 million dollars at the moment.
Yet these analysts may be underestimating the clouds division into both a consumer and an enterprise market and Amazon has a profound skill set in the online consumer market.
Theyve taken the worlds second oldest profession, commerce, and put it into the cloud and made it pretty much the way weve always liked to do commerce, says Joshua Greenbaum, analyst with Enterprise Applications Consulting.
The way that Amazon manages the consumer relationship is absolutely unparalleled in its excellence, he says. I expect them to do a really fabulous job in B2C cloud computing.
And for its enterprise play? Amazon wants to be more B2B but I think fundamentally they will devolve toward more of a B2C play.
Or, go the page that describes a cloud vendor's strategy: