Five Reasons Why The Amazon Cloud Has Lost Its Silver Lining
I, however, will not be in attendance. The simple reason: I wasn’t invited.
Amazon.com AMZN +0.69% routinely invites both reporters and analysts to its uber-shindig, and I’m both. I’ve also covered Amazon before, dinging them for their weak digital strategy in 2014, balanced with kudos for getting their digital act together in 2015.
I have no idea, therefore, why my invite was lost in the mail. Time to squeeze some sour grapes, I suppose – but to be honest, all in good fun. I’m still a huge fan. But my lack of invite gives me an excellent excuse to play the skeptic.
Playing the Amazon Cloud Skeptic
For everybody out there enjoying Vegas while worshiping at the altar of Bezos, here is some food for thought.
- Amazon’s price-cutting strategy will soon peter out
In advance of this year’s re:Invent, Amazon Web Services (AWS), its cloud division, announced yet another price cut, this time to its cloud-based storage services. In fact, Amazon uses price cuts as a club to beat up its competition, leveraging its massive economies of scale as it plays the Walmart of the cloud.
True, such price reductions squeeze the margins of competitors struggling to keep up – but they also squeeze Amazon’s margins as well. And remember, regular pricing can never go to zero or the company will lose money regardless of its massive scale.
As a result, expect price drops to asymptotically level out over time at best – or even give way to price increases, as inflation inevitably trumps downward pricing pressure.
- re:Invent will get too large
There’s something to be said for large conferences, of course – but at some point, they become unwieldy. Vegas still sports the largest tech show in the world, the Consumer Electronics Show (CES) – but re:Invent’s annual growth will soon put it close on CES’s heels.
CES, however, is a nightmare to navigate. It’s scattered over several hotels, and Vegas’s taxi-centric transportation infrastructure isn’t up to the challenge. Once re:Invent catches up to CES and eventually enters Comdex territory, it may be too late. Remember Comdex? The largest tech show in the US couldn’t survive the dot-com downturn.
- Amazon’s arrogance will be its undoing
It’s hard to stay humble when you go from being a simple online bookseller to reinventing how companies buy their technology infrastructure. Evidence that Amazon’s stupendous success has gone to its head is easy to find if you look hard enough.
For example, Amazon’s Session Builder app for re:Invent attendees crashed under its first-day load – a rookie mistake for any cloud company, let alone one who prides itself on its scalability.
Or how Amazon routinely turns away attendees from the more popular sessions, instead of holding them in sufficiently large venues. Scalability only takes you so far, eh? (To be fair, Salesforce.com CRM -0.64% has the same problem with its massive Dreamforce conference.)
Having worked with Microsoft’s Distributed Computing division back in the mid-2000s, I never would have guessed Ballmer’s Microsoft would have been able to get its public cloud Azure to work at all, let alone rise to the number two position behind Amazon.
Today, Microsoft is a different company. Nadella and his crew are taking no prisoners. While Amazon continues to focus on Infrastructure-as-a-Service, Microsoft doubles down on Platform-as-a-Service as well as Software-as-a-Service offerings like the popular Office 365.
At this point I wouldn’t be at all surprised if Jeff Bezos wakes up one day in the not too distant future only to find Azure has pushed AWS into the number two position.
- Switching to the wrong side of the Innovator’s Dilemma
Amazon has long enjoyed the position of market disruptor, taking on diverse industries from booksellers to data center providers and turning them on their respective heads.
However, given all the other concerns on this list, you have to ask yourself whether Amazon will be able to survive becoming the disruptee rather than the disruptor, when the inevitable next big thing rolls around. And remember: there’s always a next big thing.
True, Amazon continues to innovate, with exciting technologies like serverless computing and the artificial intelligence behind Alexa serving as jewels in its disruptor’s crown. But a handful of jewels belies the now-mundane cloud infrastructure that makes the company tick.
You may think this fifth concern is the least likely of the bunch – and in truth, the point of this article is more to provide food for thought than uncover any serious weaknesses. Truth be told, it may be quite some time until Amazon becomes ripe for disruption itself.
Time, however, isn’t on Amazon’s side, as technology innovation continues its unrelenting pace of acceleration. Disruption is getting faster by the day. Amazon’s success has made it the incumbent, and thus vulnerable to even more nimble adversaries.
Complacency, therefore, may eventually be Amazon’s undoing – more than arrogance, more even than the maladies of massive scale. In the grand scheme of things, it’s still a young company. Let’s hope that tech historians of the future don’t end up considering it to be a sudden bright light, only to have faded away too quickly.
This article was updated to reflect the range of predicted attendees at re:Invent. Amazon reports 32,000+ attendees and another 50,000+ live stream registrants.
Intellyx publishes the Agile Digital Transformation Roadmap poster, advises companies on their digital transformation initiatives, and helps vendors communicate their agility stories. As of the time of writing, none of the organizations mentioned in this article are Intellyx customers. Image Credit: Ashley Field.