AWS, my goodness!, what a service
Amazon Web Service (AWS) is Amazon's goose that lays the golden egg. The platform provides advanced cloud computing services to thousands of businesses, including Netflix, Airbnb and Expedia. And it contributes decisively to the profits of the Seattle giant and to its capitalization. Some analysts think that, precisely because of AWS, Amazon is the main candidate to reach the two trillion market capitalization, leaving behind Saudi Aramco, Apple, Microsoft and Alphabet who have already broken through the trillion mark. When Trump wanted to hit Amazon, and in particular his boss, Jeff Bezos, owner of The Washington Post newspaper, who puts pebbles in his shoes every day, targeting AWS. Amazon has seen overnight, almost by presidential decree, the most lucrative order in American military history: that of providing cloud computing to the country's defense system. The service went to Microsoft. Under the quiet leadership of Satya Nadella, Microsoft has taken a very low political profile, despite Gates not being soft on the incumbent administration. According to Forbes, AWS contributes 40% of Amazon's capitalization in the United States alone. It has an operating margin of 25%, against 2-3% for other services (e-commerce, marketplace, etc.). Internationally, the latter are at a loss.
AWS, quite by accident
Finally, Wall Street got what it had wanted from the Seattle giant for years: double-digit profits. For this he will continue to reward him. A strike for AWS, considering that the cloud service is responsible for just 16% of Amazon's total revenues. And yet, AWS was born almost by chance, from a conceptual overturning of industrial policy of which Bezos was the officiant. Originally, AWS was an internal service within Amazon. He had to manage the group's operational businesses and beat the competition in executing transactions in terms of competitive advantage. In true Amazonian fashion, Bezos has dotted the world map with data centers where AWS has been installed on servers. So far nothing unusual. Then came disruptive intuition. They said to themselves: “Why keep this jewel of technology to ourselves? Why not sell the cloud computing service to anyone who wants it, including competitors? After all, this way of doing business - competing fiercely with competitors and serving them at the same time - has been in Amazon's DNA, ever since Bezos and his wife Tuttle MacKenzie were packing books.
AWS is a universal service
For example, the marketplace competes with Amazon's native e-commerce. Publishers who distribute on Amazon compete on the Kindle Store with books published by Amazon itself. The giant has an almost endless line of own-brand products, from diapers to chewing gum. It also now has its own logistics system, including a fleet of transport planes, which competes with the Federal Reserve System, the United Parcel Service and the US Post Office. It has the Amazon Prime streaming service, which competes with Netflix, although the latter uses AWS to bring movies and series to the homes of more than XNUMX million households. Martin Sorrell, who is certainly second to none in terms of acumen and euphemistic vein, has defined Amazon as a "frenemy" (from the union of the words "friend" plus "enemy"). In the sense that it provides an excellent service to partners and seeks to erode their market shares with the best of services, primarily in terms of price. Generally it is an operation that succeeds because everyone competes on the same platform: that of Amazon, to be precise. And it is Amazon that controls it in its various aspects, from technology to discounts. That's why Elizabeth Warren would like to make five different companies out of it, in case of her improbable success in the November elections.
The AWS paradox
Like all things in the new economy, AWS's success is based on a paradox. AWS was not created by Amazon technologists. Its foundation, in fact, lies in open source technology. It happens, therefore, that software created by the open source community drives Amazon's profits, in a way that the missionaries of the Open Source Foundation would never have had the audacity to imagine. AWS is the purest example of piggybacking, i.e. the act of piggybacking on someone else. To use a football metaphor, it is as if the centre-forward was carried up by the full-back to hit the ball with his head, leaving the full-back with the palm of his nose. Style the famous robbery goals by Paolo Rossi. Open source software has few parallels in the business world. It's a bar that gives away a coffee in the hope that the customer will buy milk, sugar or a croissant.
Open source and the market
Open source is a proven and efficient model that the software industry has cultivated to get technology to customers quickly. IBM and Microsoft, who have long derided and opposed it, are now enthusiastic users. It is open software whose source is open, modifiable and shareable, created by an immense community of developers estimated by GitHub at 40 million users. Members continuously improve the programs, and try to show the world the contribution of open source in terms of cost and social value. Many view open source as a common good. It also happens that the most shrewd companies, which operate in the open source field, earn from the many collateral services that the technology requires to function better in a highly competitive market. First of all assistance, consultancy and ancillary software.
More and more “strip mining”
AWS' database, a huge success, was not created by Amazon. Instead, the company relied on public domain programs developed by the open source community and freely shared. Initially the thing did not arouse particular clamors. But when Amazon repeated the operation in 2015 by integrating the search function developed by the start-up Elastic into AWS, the open source community began to react. Todd Persen, head of Elastic, told Daisuke Wakabayashi of the New York Times: “There is a company, mine, that has built a business around an open source product that people like and, overnight else, there is a competitor (Amazon) who uses that same product against us. We have been wiped out." Increasingly, the open-source software industry has become a mine from which Amazon extracts raw material. When it offloaded and integrated into AWS Elasticsearch, it didn't need to ask for permission, pay royalties to the startup, or acquire it. There was absolutely no need because open source is based on the non-business ethical principle. Needless to say, here returns the dilemma on the commons triggered by a reflection by Garrett Hardin, in 1969, on the tragedy of the commons faced with free riders. But there are other ways of doing things in the corporate world as well. IBM, which knows how to be a ruthless and assertive company like Amazon, for example hasn't cloned Red Hat's open source software beautifully, but has acquired the company, maintaining its autonomy, with an investment that's not a trifle, well 34 billion dollars. The money Macron lacks for the French pension reform.
New rules for open source
Amazon's stance is different, leaving few options for many open source startups whose service it sets its sights on. This will change the very nature of open source. Some start-ups have already decided to change the rules on the use of their products, barring Amazon and other companies from developing free riding, that is, from appropriating their software, turning it into a paid service and bankrupting them. Within a year, Amazon made more money from Elasticsearch than Elastic itself. So, in the middle of last year, Elastic added some premium features while trying to avoid a total suck-up of its clientele. But Amazon still duplicated many of these new features and added them, free of charge, to the AWS cloud platform. At this point Elastic decided to take legal action. In September, it sued Amazon for trademark infringement. Foolishly, Amazon has in fact named their product with the same name: Elasticsearch. The case is pending in California federal court.
Amazon's open source strategy
At this point, the Seattle giant has decided to come out into the open. In a detailed post on the AWS blog, Adrian Cockcroft, Amazon's head of cloud computing strategy, outlined the company's strategy towards open source, leaving little room for hope of any change of course. We will continue to use public domain software heavily and natively within AWS, excluding any forking options. The latter would, in Amazon's opinion, require an unnecessary additional effort, cause delays in updates and exclude the open source community from the advances that AWS can bring to this technology. Amazon fully embraces the philosophy of the Open Source Foundation. Says Cockcroft: "Open source has produced some of the most important innovations in the field of artificial intelligence thanks to the collaboration between companies, academic institutions and enthusiasts ... Therefore Amazon will increase its commitment to open source projects." The memo goes on to accuse some open source contributors of wanting to "muddy the waters" between open source software and the proprietary code they create to monetize it.
The Java example
First, Cockcroft cites the significant example of Java and Amazon's response to its customers' concern about Oracle's intention to no longer support the version of Java customers rely on, or to change the license terms. use. Amazon responded to this threat with the Corretto project, distributed at no cost and cross-platform, ready for the production of an Amazon OpenJDK. At the same time, it will continue to directly support Oracle's OpenJDK. Cockcroft expresses Amazon's vision regarding Oracle-like projects thus: "If the core software of open source is completely open and anyone can use and contribute to it, there is no problem in the fact that a maintainer (and anyone else) can develop on it over a proprietary software or application to generate revenue. However, this release must be kept separate from the open source distribution in order not to confuse users, to preserve anyone's ability to innovate above open source, and not to create ambiguity in the issue of software licensing or limiting access to specific classes of users". Finally he comes to the subject of Elasticsearch, to which he dedicates ample space, reiterating Amazon's firm intention not to proceed with forking the software, but to use it as it is. In this regard he mentions the satisfaction of AWS customers such as Expedia and Netflix with Elasticsearch and their intention to contribute to its improvement and to share these implementations with the open source community.
The red wedding
Many open source individuals and startups contribute to AWS. They also typically attend one of the biggest events within the software industry: the Amazon AWS Developer Conference held annually in Seattle. Many have begun to equate this event to the famous Red Wedding of the series Game of Thrones: at the end of the episode The rains of Castamere, one of the most heinous of the series, the king of the North, his bride and his mother and the pleiad more than three thousand loyal to the Stark dynasty are cruelly killed during a wedding party. Corey Quinn, who helps businesses work with AWS and has a newsletter titled Last Week in AWS, told Wakabayashi that "nobody knows who's next" from Amazon. However, it must be said that Amazon does not always suck up the software or service it needs, wiping out the company that developed it. There may be a possibly unintentional rebound effect. This is what happened to the Tel Aviv-Yafo start-up, Redis Lab: Amazon cloned the solution developed by the start-up, yes, but continued to support the software created by Redis. This allowed Redis to raise 150 million of venture capital from the market, despite the fact that Amazon tried in every way to take possession of its technology and personnel. This is an emblematic case of the love-hate relationship between Amazon and companies that relate to AWS. A relationship that Wakabayashi labels with a colorful expression, which I leave in the original language: "Can't-live-with-can't-live-without relationship". Frenemy, to be precise.
Information in this post is taken from Daisuke Wakabayashi, Prime Leverage: How Amazon Wields Power in the Technology World, The New York Times.
