By Vahid Razavi
Amazon Web Services (AWS) has tremendous market share when it comes to the cloud customer base and cloud offerings. I am not here to argue its success, but rather to show that its success has been won at the expense of its partner ecosystem. Amazon pioneered this space and has done extremely well in it. I would argue that this performance comes at the expense of Amazon’s partners — and its employees. I do not want this to be a discussion about Amazon work culture or lack thereof; instead, let’s discuss the partnership philosophy at AWS that drives partners to a race to the bottom. I worked at AWS as a Senior Alliances Manager for Big Data and Analytics, so I know what I’m talking about. My experience is very relevant to this topic.
How does AWS lure customers? By offering up-front credits that are readily available to move or build workloads to AWS Cloud. These incentives are carefully measured and monitored so that AWS receives a multiple-times return on the up-front investment of bare metal resources of compute, database and storage in form of credits. It is simply a lure to bring independent software vendors into the Amazon ecosystem.
Once an ISV starts running workloads on #AWSCloud and becomes one of their customers, you might think that the best way to market your products is to approach Amazon customers so your organization takes the next step and engages with the Amazon Partnership team, a group that once worked for. You will participate in Amazon Roadshows, cover Amazon marketing expenses at sales kick-offs and re:Invent conference, all with the hope of winning clients. In fact, what you are doing is subsidizing Amazon’s own marketing at your expense.
As an Amazon customer it is Amazon that determines the underlying infrastructure costs. It is AWS that knows how much you are paying for compute, storage or database and other services utilization. Soon you decide to take the next step with AWS and join the Marketplace. Now, depending on what you negotiated, Amazon can take a large chunk of your topline revenues from the marketplace. Since you have agreed to join the marketplace on behalf of your ISV, AWS knows your topline revenue. The depth of penetration in the AWS marketplace becomes AWS knowledge about your business, its underlying financials and fundamentals. Remember, you already have agreed to run the workloads on top of Amazon so they have a captive audience and your costs. Now they just know more about your ISV business practices.
For the kiss of death, AWS looks at the services you are running on its infrastructure and builds an in-house product services team to compete with you directly. That is only if the service is worth their time, meaning it generates substantial revenue for AWS. Not only have they commoditized your business, but AWS also knows your margins, underlying costs and they have the customer base and sales team to penetrate the market and put you out of business. They also have the lowest infrastructure cost for their own product offerings. In addition, you have paid into AWS marketing. You’ve spent hundreds of employee hours with a dedicated team of engineers, software development and a partnership strategy team, while Amazon has fed you a self-service model to transition your business and your expertise to its infrastructure and services teams.
You will soon realize the Darwinism philosophy of Jeff Bezos and Andy Jassy that simply turns and burns partnerships. Now it’s Amazon that controls your deal funnel, your marketing, your underlying infrastructure costs and your topline revenue numbers. If you are an open-source partner of AWS, you can be sure that Andy Jassy has no respect for the open-source community. Without supporting organizations behind the code, AWS will simply run the open source software as their own product offerings.
For the final push, you offer to sell your products to AWS for potential internal use at a tremendous discount. That’s even more product knowledge for AWS. Soon you will discover that Jeff Bezos Frugality leadership principle is not just being Frugal but being cheap in purchasing any software for internal use.
You have now awakened a giant in your space. Be mindful and very cautious on how you proceed.
Vahid Razavi is a Founder and Managing Director of Ethics In Technology. He has worked in Silicon Valley for over 20 years including for Amazon Web Services. He is author of two books The Age of Nepotism and Ethics in Tech and Lack Thereof.
Photo Credit: FeistyTortilla/Flickr Creative Commons
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