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AWS exodus due to Amazon Australia competition 'doesn’t make rational sense': A/NZ chief

AWS exodus due to Amazon Australia competition 'doesn’t make rational sense': A/NZ chief

Amazon Web Services' managing director not expecting US-style retailer retaliation locally

Amazon Web Services' Australian chief has dismissed suggestions local retailers will pull out of the company’s cloud services following the arrival of Amazon.com.au in the country.

Paul Migliorini, managing director of AWS in A/NZ, told CIO Australia that major retailers want access to the best cloud technology and leaving the platform to avoid helping their biggest competitor "doesn’t make rational sense".

Amazon Australia went live this morning, ending almost a year of hype and speculation about the timing of the launch.

Its arrival has already had a damaging effect on Australia’s biggest retailers. Shares in Myer are down 30 per cent since Amazon confirmed its Australia plans in April. Shares in electronics retailer Harvey Norman have fallen 7 per cent since the announcement and JB Hi-Fi shares are down by 6 per cent.

In the US, the likes of Walmart, the country’s biggest retail chain, and Target, the second largest, are reportedly shunning Amazon’s cloud computing arm in an effort to avoid indirectly financing a rival.

Walmart – although predominantly a customer of Microsoft Azure – has, according to a Wall Street Journal report, been telling its technology partners to take their apps off of AWS.

"Our vendors have the choice of using any cloud provider that meets their needs and their customers' needs," a spokesperson for Walmart later clarified.

"It shouldn't be a big surprise that there are cases in which we'd prefer our most sensitive data isn't sitting on a competitor's platform."

Amazon responded by calling out Walmart as a “bully”.

Target meanwhile is scaling back its use of AWS, according to a CNBC report, with a source saying the retailer was planning to aggressively move e-commerce activities, mobile development and operations away from AWS through the end of the year and into 2018.

Although Target has made no statement on the reports, in a late 2016 blog post on its adoption of open source platform Spinnaker it noted the “old system wasn’t cloud-agnostic, meaning it only allowed us to make updates, or ‘deploy,’ to a single cloud provider”.

Aussie backlash?

Migliorini said AWS was not expecting a similar reaction locally, although customers had been asking about the connection between Amazon’s e-commerce and cloud arms.

“We don't see the two as related. Obviously AWS and Amazon.com run separately and many of Amazon.com’s competitors are great customers of ours, so we run very, very separately… But I have heard that and customers do rightly ask us questions, you know, ‘what's the linkage?’” Migliorini told CIO Australia on the sidelines of AWS’ Re:Invent conference in Las Vegas last week.

AWS operates as a subsidiary of Amazon.com with an US$18 billion revenue run rate and a 42 per cent annual growth rate. It is far and away the public cloud market leader with a 44 per cent share of the market, according to Gartner.

In recent quarters AWS’s operating profits have covered the operating losses suffered by Amazon’s e-commerce business, giving Amazon the ability to aggressively expand and run on razor thin margins.

Migliorini said many direct competitors of Amazon in Australia were using AWS platform to huge benefit.

“What we find is we've got a lot of great retailers doing really well on our platform, people like Kogan and The Iconic who are actually out and out competitors of Amazon.com and what they tell us is, what they care about is that we continue to iterate at the right rate to enable them to focus on their differentiating capabilities while we do the undifferentiated work,” Migliorini added.

“And as long as we continue to do that they’ll continue to work with us.”

Understandable thought

When asked whether the arrival of Amazon.com would prompt a move from AWS, online fashion store The Iconic confirmed to CIO Australia that “yes we are currently on AWS, but we wish to make no further comment at this stage”.

Kogan.com – which last year acquired Dick Smith’s online business – did not respond to a request for comment by the time of publication.

Australian retailer Harvey Norman – whose chairman Gerry Harvey has been a vocal opponent of Amazon – was named as a customer of AWS when the company launched two availability zones in Sydney in 2012.

A spokesperson confirmed Harvey Norman utilised AWS predominantly for its overseas operations, with Microsoft Azure used in the main in Australia.

“We’ve got no changes planned for the current moment but like all third party services we look at those on a regular basis,” the spokesperson told CIO Australia.

Asked about the moves made by US retailers, they added: “It’s a very understandable thought. Why would you want to prop up a competitor?”

AWS’ Migliorini said local retailers were sophisticated enough to see the advantages of sticking with the cloud company.

“What we see is Australian retailers are really sophisticated users of technology so they can go deeper than that thin veneer and understand what the best technology choice is. They can move beyond those irrational emotional decisions,” he said.

In any case, if any were seeking to depart AWS as some in the US had, it would have little impact on the business, Migliorini said.

“Just look at the numbers. Amazon.com is an over $150 billion global corporation. Is it really going to make any material difference whether a retailer in Australia uses AWS in terms of helping or not helping Amazon.com? It just doesn’t make rational sense,” he added.

The author travelled to AWS Re:Invent 2017 in Las Vegas as a guest of Amazon Web Services.

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Tags Cloudbusinesstechnologycloud computingfinanceASXJB HiFiamazonHarvey NormanAmazon Web Servicesdick smithamazon.comLas VegasmyerAWSJeff BezosKogan.comshare priceAndy JassyReinventAmazon.com.auThe Iconic

More about AmazonAmazon.comAmazon Web ServicesAustraliaAWSCNBCGartnerIRKoganMicrosoftMicrosoft AzureMyerNormanThe IconicWall Street

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