When should a retailer work with Amazon Web Services?
In February it was announced that Best Buy chose Amazon Web Services (AWS) as its preferred Cloud technology partner.
This would not be so newsworthy If not for the many retailers either shunning AWS or keeping investments in the cloud service to a minimum. Anyone in the retail industry has at some point felt conflicted about AWS as it provides fuel for Amazon retail.
Is this paranoia or sound strategy? Retailers in overlapping categories may be reasonably leery of working with AWS. Others, where competition is less clear, might not, especially when there’s a favorable cost/benefit. In either case, even knowing there are technical and legal barriers between AWS and Amazon retail may not matter when both are part of the same company.
Businesses in every industry are hedging bets by working with many providers. This has led to the problem of “spaghetti architecture.”
Even when claiming a primary relationship with a single partner, there will be investments in others. Avoiding AWS only gives more power to Microsoft, Google and others at contract or renewal time.
It makes sense to shift course when it’s financially advantageous in a world where commodity cloud services come with relatively low switching costs.
What about capabilities with distinct value, however, that are worth stitching into your business at a deeper level?
Two compelling public examples for Amazon are its Go technology and a new way to forecast demand developed by Amazon for its 400 million products. Automation, labor scarcity, margins and supply chain are subjects most retail CEOs are dealing with right now.
Go technology is available from Amazon retail, not AWS, and appears to have customer appeal beyond retailing where any form of zero friction check-in or check-out experience adds value.
Meanwhile, the forecasting example stands as a terrific showcase of Amazon’s data science expertise leveraging AWS Cloud services. To unlock similar value in your company probably requires outside help.
Is it possible to architect the same solutions using other clouds? Perhaps, but it’s possible that sourcing the underlying services from Amazon or AWS represents the fastest path to value. It ultimately depends on what is unique, differentiated and can be consumed by your company given its expertise, resources and priorities.
I suspect the decision hinges on how confident a retailer’s executives are that they hold a unique and defensible position with their customers. That is a rare but aspirational state today for many retailers.
- In blow to Google Cloud, Best Buy picks AWS as preferred provider, will shift from on-premises data centers – DCD
- Best Buy to Accelerate Cloud Tech Implementation – RIS News
- Report: Target to leave AWS after Amazon buys Whole Foods – DCD
- Reconciling multi-cloud strategy with data gravity and the value of AI at scale – Medium
- Amazon is now selling its cashierless store technology to other retailers – TechCrunch
- Predicting The Future Of Demand: How Amazon Is Reinventing Forecasting With Machine Learning – Forbes
- Just Walk Out Technology – Amazon.com
DISCUSSION QUESTIONS: Do retail executives have the knowledge and expertise to make cloud partner decisions in the best interests of their companies? What should executives consider when evaluating their cloud options?