Friday, October 24, 2008

Is Amazon in Danger of Becoming the Walmart of the Cloud?

Update: Serious misspelling of Walmart throughout the post initially. If you are going to lean an argument heavily on the controversial actions of any entity, spell their name right. Mea culpa. Thanks to Thorsten von Eicken for the heads up.

Also, check out Thorsten's comment below. Perhaps all is not as bleak as I paint it here for established partners...I'm not entirely convinced this is true for the smaller independent projects, however.


I grew up in the great state of Iowa. After attending college in St. Paul, Minnesota, I returned to my home state where I worked as a computer support technician for Cornell College, a small liberal arts college in Mount Vernon, Iowa. It was a great gig, with plenty of funny stories. Ask me over drinks sometime.

While in Mount Vernon, there was a great controversy brewing--well, nation wide, really--amongst the rural towns and farm villages struggling to survive. You see, the tradition of the family farm was being devastated, and local downtowns were disappearing. Amidst this traumatic upheaval appeared a great beast, threatening to suck what little life was left out of small town retail businesses.

The threat, in one word, was Walmart.

Walmart is, and was, a brilliant company, and their success in retail is astounding. In a Walmart, one can find almost any household item one needs under a single roof, including in many cases groceries and other basic staples. Their purchasing power drives prices so low, that there was almost no way they can get undercut. If you have a WalMart in your area, it might find it the most logical place to go for just about anything you needed for your home.

That, though, was the problem in rural America. If a Walmart showed up in your area, all the local household goods stores, clothing stores, electronics stores and so on were instantly the higher price, lower selection option. Mom and Pop just couldn't compete, and downtown businesses disappeared almost overnight. The great lifestyle that rural Americans led with such pride was an innocent bystander to the pursuit of volume discounts.

Many of the farm towns in Iowa were on the lookout then, circa 1990, for any sign that Walmart might be moving in. (They still are, I guess.) When a store was proposed just outside of Cedar Rapids, on the road to Mount Vernon, all heck broke loose. There was strong lobbying on both sides, and businesses went on a media campaign to paint Walmart as a community killer. The local business community remained in conflict and turmoil for years on end while the store's location and development were negotiated.

(The concern about Walmart stores in the countryside is controversial. I will concede that not everyone objects to their building stores in rural areas. However, all of the retailers I knew in Mount Vernon did.)

If I remember correctly, Walmart backed off, but its been a long time. (Even now, they haven't given up entirely.)

While I admire Amazon and the Amazon Web Services team immensely, I worry that their quest to be the ultimate cloud computing provider might force them into a similar role on the Internet that Walmart played in rural America. As they pursue the drive to bring more and better functionality to those that buy their capacity, the one-time book retailer is finding themselves adding more and more features, expanding their coverage farther and farther afield from just core storage, network and compute capacity--pushing into the market territory of entrepreneurs who seized the opportunity to earn an income off the AWS community.

This week, Amazon may have crossed an invisible line.

With the announcement that they are adding not just a monitoring API, not just a monitoring console, but actual interactive management user interface, with load balancing and automated scaling services, Amazon is for the first time creeping into the territory held firm by the partners that benefited and benefited from Amazon's amazing story. The Sun is expanding into the path of its satellites, so to speak.

The list of the endangered potentially include innovative little projects like ElasticFox, Ylastic and Firefox S3, as well as major cloud players such as RightScale, Hyperic and EUCALYPTUS. These guys cut their teeth on Amazon's platform, and have built decent businesses/projects serving the AWS community.

Not that they all go away, mind you. RightScale and Hyperic, for example, support multiple clouds, and can even provide their services across disparate clouds. EUCALYPTUS was designed with multiple cloud simulations in mind. Furthermore, exactly what Amazon will and won't do for these erstwhile partners remains unclear. Its possible that this may work out well for everyone involved. Not likely, in my opinion, but possible.

Sure, these small shops can stay in business, but they now have to watch Amazon with a weary eye (if they weren't already doing that). There is no doubt that their market has been penetrated, and they have to be concerned about Amazon doing to them what Microsoft did to Netscape.

Or Walmart did to rural America.

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