There was a recent article on CNBC talking about how AWS is creating new solutions that could potentially put existing companies out of business. That prompted a tweet from Matthew Prince about how if you are running your company on AWS, you are feeding them data about how to beat you. Prince is certainly not the first to make this leap of logic, and I am certain he won’t be the last. During the Microsoft Ignite Keynote this year, Satya Nadella said something similar about choosing a public cloud partner. Here’s the direct quote:
“If you’re dependent on a provider, who through some game theory construct, is providing you a commodity on one end, only to compete with you on another end. Then you could be making another strategic mistake.”
Is any of this true? Does is matter if you run your company on AWS or Azure? Is AWS or Amazon going to destroy your business? I have some thoughts.
First let’s define what is actually being argued here. As a hypothetical, let’s say you have a business called LogSlap! that provides a new log analytics capability to clients. You’re a modern hip company, and running your own infrastructure is so passe. Naturally, you’re going to run your service out of a public cloud. But which one?! What if you put your service in AWS, and they harvest analytical data about LogSnap! 1.0 and recreate your service? Then you’re out of business! Well, better not use AWS then.
There’s some many problems with this argument, I feel a list coming on!
- Your spend in AWS is irrelevant
- AWS is not spying on you
- AWS doesn’t need you to run in AWS to destroy you
- Azure makes services too
- Competition is normal
Your spend in AWS is irrelevant
One thing I keep hearing is that you are paying AWS to compete with you. That’s malarkey. You are paying AWS for services that they are rendering to you. One of the core tenets of AWS’ Well Architected Framework is cost optimization. One of the core tenets of running a successful business is managing costs. When you are deciding which public cloud provider to use, one of the factors should be how much it will cost to run your solution in that environment. It may not be the sole determinant, but it will definitely be in the top five. All other things being equal, if AWS is the cheapest place to run your service, then you’d be a fool not to run it there. There’s no reason to pay more for the same service, unless things aren’t equal. For instance, what if AWS is spying on me?
AWS is not spying on you
I should probably qualify this. When you deploy a application in AWS, they definitely know what services you are using and how much of those services you are consuming. Otherwise they wouldn’t be able to bill you. Beyond that, they don’t have access to anything. They aren’t looking inside your EC2 instances, or S3 buckets, or Lambda code. They aren’t pulling the source code for your solution our of CodeCommit. To do so would violate all of their security attestations, and land them in some significant legal trouble. Plus, it would completely destroy people’s trust in AWS as a company. Is AWS willing to risk their $40B annual run rate on potentially gaining some insight on your service? I’m going with ‘no’ on that one.
AWS doesn’t need you to run in AWS to destroy you
There is no reason to believe that AWS isn’t going to eventually destroy you. If you have a successful business model and product, and AWS/Amazon decides they can do better, then they are probably right. And it doesn’t matter if your service was running on AWS or Azure or Bob’s Crab Shack and Public Cloud. AWS has a lot of very smart engineers that can figure out how your service works, and maybe even design one that works better. Your best bet in that situation is to hope they acquire you, rather than build it in-house. But, just because AWS puts out a similar offering doesn’t mean that your company is de facto done for. We live in a competitive, capitalistic marketplace. Even though AWS has announced a new Log Analytics platform, it doesn’t mean that LogSlap! is suddenly worthless. The clients you have today chose your service for reason. It’s up to you to make sure you retain a competitive advantage over the offering from AWS. That advantage doesn’t have to be price, in fact you’re going to lose on price. AWS and Amazon can have multi-year loss leaders that put other brands out of business. Just ask Toys’R’Us… oh wait, you can’t. Any service from AWS is not going to meet the needs of every customer, and they aren’t striving to do that. There will almost always be market segments that are under-served, and you can be there to help. Should you move your service to Azure though? I mean AWS is now a competitor. Not so fast Charlie.
Azure makes services too
Despite Satya’s attempts to quell fears about Microsoft being a competitor, the fact remains that they are. Microsoft makes services; these days they are primarily a services company. Everything else they make is dedicated to increasing consumption of their services. That means that Microsoft may very well create a service in Azure that directly competes with your fancy Log Analytics software. What are you going to do then? Move to Google Cloud? Same problem. If you get big enough, and it makes financial sense, you can move things in-house. Dropbox did that. Dropbox also still uses AWS for some portions of their service, because it makes good financial sense to do so.
Competition is normal
It would be a fair point that all the examples I gave are around SaaS offerings. Those are the things that are brought up most often in these types of arguments. But the counter example would be something like Walmart. They are not a SaaS company, and they have decided not to run in AWS because Amazon is a major competitor. And I say, that’s fair. Walmart’s annual spend on Azure is probably in the hundreds of millions. At that size and scale, Walmart’s spend would have a material impact on Amazon’s bottom line. That is an extreme example though, and I still say, if running your business is more cost effective in AWS, and you aren’t Walmart, then don’t worry about it. Amazon looks for new businesses to break into. There’s a chance that they could look at spend in AWS and see which business appears to be spending the most money, and then leap to the conclusion that maybe they should get into that business. Of course, Amazon doesn’t really need that information. Businesses that are successful tend to have investors and produce financial reports. Even privately held companies give indications about how much revenue they are bringing in. If you are a successful business, you’re usually not quiet about the fact. If Amazon catches wind and turns their Gorgon gaze upon you, running in AWS is going to be the least of your worries.