Cloud

Could Amazon's cloudy appetite crush your startup dreams?

Amazon Web Services is the world's leading cloud platform, but that doesn't mean it's your ticket to riches. Here's why.

Sometimes (okay, quite often) The Onion nails it. Take, for example, The Onion's take on Amazon CEO Jeff Bezos' advice to young entrepreneurs everywhere, interested in starting a business: "Value your customers, hire well, find a market that isn't being served, and realize that someday I will utterly crush you."

Oof.

It's quite funny, but mostly because there's a lot of truth to it. While I talked up Microsoft's impressive shifting of 800,000 partners to its new, cloud-centric world, it's far harder to see how companies can realistically partner with a company whose ambitions include dominating...everything.

Pain Management, Inc.

Don't believe me? Steering clear of Amazon's entry into logistics, groceries, media and entertainment, and more, let's look at its ambitions simply for AWS. This should be limited to infrastructure services, right?

Nope.

According to Amazon CTO Werner Vogels, "We're in the business of pain management for enterprises. Tell me what your pain points are and I'll help you make them feel better." When asked: "What kind of pain won't you cure?" Vogels answered: "I don't know. There's certainly a lot of pain points left."

SEE: Learn Cloud Computing with AWS (TechRepublic)

Small wonder, then, that The Onion's farce rings true:

In the early days of your startup, you may have to do a little bit of everything: design, accounting, marketing, legal, even cleaning up the office. That takes hard work, perseverance, and—I can't emphasize this enough—the understanding that once you've succeeded, I will begin systematically choking off your revenue streams. It's all part of the process, as integral as drafting your business plan, scaling up your company, and coming to terms with the fact that I will ultimately force you to take out a second mortgage just to make payroll.

Not only does AWS (and Amazon) have a voracious appetite for new markets, but once it enters a market, it is both content with and adept at running at razor-thin margins. AWS margins have buoyed up the company's overall profitability lately, but make no mistake: If Bezos sees a long-term opportunity to own a valuable market, he's going to cut prices (and costs) relentlessly to do so.

Competing with AWS, in short, is brutal.

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Which brings us to partnering with AWS. Before my current employer, I worked for a few startups that discussed partnerships with AWS. In the first case we did, but it didn't end up netting much revenue (not the fault of AWS—demand for our product as a hosted service was simply too low). In the second, it was clear we could build a business on AWS that would generate hundreds of millions of dollars, and perhaps $1 billion.

But it was also clear who would be taking home that revenue, and it wasn't us.

SEE: Amazon adds call centers to its list of cloud services (TechRepublic)

And frankly, that makes sense. It's Amazon Web Services, and they have built the platform that generates all the magnetic pull that would have attracted more users to the service. They deserve the revenue.

It does, however, call into question AWS's ability to effectively partner with anyone of any size or promise. If you're in a hot market, odds are very good AWS will enter that market and, to borrow The Onion's phrase, will crush you. If you're in a hot market and have the brand to hold off AWS, they might make a good platform but they're unlikely going to be a good channel partner. And if you're in a small market, you're safe but irrelevant.

None of this is intended as a criticism of Amazon or AWS. Quite the opposite. AWS is defining enterprise technology for the next 30-50 years, and is one of the most impressive companies with which I've had the pleasure to work. It's simply a reality that with the company's appetite to solve customer pain, partners today become competitors (and roadkill) tomorrow.

Or, as The Onion's Bezos might say, "never lose sight of the vision that brought you to this point, and never forget that I can and will use the insurmountable powers that I wield to snuff out your dream like a candle, condemning you to a bitter darkness of misery." Happy trails!

Also see

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Image: James Martin/CNET

About Matt Asay

Matt Asay is a veteran technology columnist who has written for CNET, ReadWrite, and other tech media. Asay has also held a variety of executive roles with leading mobile and big data software companies.

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