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Amazon Web Services…not obvious but “clear” strategic synergies

May 12th, 2007
by Lou Paglia.

Amazon S3 and Amazon EC2 are getting lots of coverage as of late. The former allows you to store/retrieve data out of the Amazon cloud “paying by the drink” while the latter allows you to computer in the Amazon “cloud”.

Amazon Web Services

At Web 2.0 Expo, Jeff Bezos made an interesting statement about a recent and early-stage offering, Amazon Mechanical Turk. This new venture will leverage “human intelligence” and their cloud via Amazon Web Services. The specific example Jeff mentioned was leveraging humans to process product pages to eliminate duplicates, as task often difficult where products that are identical but represented differently exist on an e-commerce site.  Another Amazon Web Services example was allowing customers to notify Amazon that a shipment is coming and Amazon would allocate the appropriate amount of warehouse space for the inventory. And then, almost obviously, customers can use the Amazon web services to process e-commerce transactions which would subsequently be managed through top-notch Amazon’s supply chain processes.

Aside from the impressive nature of all three web service initiatives, I am most impressed by Amazon’s approach to extend their business in non-obvious ways. Companies so often move from core competencies to drive future revenue which causes a lack of focus organizationally. I thought this initially about Amazon as well (what? Amazon sells books and goods…they sell books.) until reading further into it.

Here is some additional articles and coverage about Amazon Web Services:

Amazon moved swiftly beyond selling only books to being synonymous with e-commerce. Very similarly, Amazon is leveraging its strengths such as scalable architecture, e-commerce leadership and supply chain/warehouse capabilities to expand its business once again.

Amazon needs to build architectural transaction capacity to support high transaction volume; why not lease it out to the “cloud” in EC2 to offset expense and make money. Amazon needs to build large database systems to support its business and e-commerce product catalogs; why not lease it out to the “cloud” in S3 to offset expenses and make money. Finally, and arguably the most interesting scenario, is Amazon’s bridging of its off-line and online worlds. Amazon needs to build world-class warehouse capacity and supply chain system support; why not lease it out to the “cloud” (so to speak) and (you guessed it) offset these expenses and make money.

Many may say this is a strategic gamble. However, even if this becomes a break-even proposition to support their core business, it may be enough of a win. And in the long term, Amazon will be controlling a large cloud of information and transactions many other businesses. That is not a bad place to be as the web services model continues to expand and establish itself.

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  • understood. It could have been taken out of context but Nielson is infamous for not agreeing with the designs of most advanced web sites. In the late 90s, I subscribed to a lot of his design aesthetics and thinking because they were very well aligned with information-based web sites. Now, sites are more functionality-oriented as well and 2.0 sites are exceedingly more so.

  • In fairness to Nielson, none of us will ever know how much of the BBC interview with him actually made it to their Web page (unless he decides to speak up about it). From what I have read of his, my guess is that he elaborated on his points at greater length and pulled out examples from both sides of the coin. So it may have been a BBC decision to frame the article as an attack on Web 2.0.

  • Well, most of the advanced web site development/design/UI tends to be contrary to a lot of the principles that Nielson touts in his books and writing. It does not shock me that he would call the latest web sites of the 2.0 "glossy but useless" but to call many of the web 2.0 sites useless is subscribing himself to his own agenda rather than reviewing them subjectively.

  • Over on my own <a href="http://therehearsalstudio.blogspot.com/2007/05/finding-visible-clothes-for-emperor.html" rel="nofollow">

    blog</a> I wrote up some comments on a recent BBC NEWS feature based on an interview with Jakob Nielsen. Nielsen has invested most of his cognitive ergs into developing guidelines for preparing readable and useful Web pages. The substance of the interview is that Nielsen fears that his ox is being gored by Web 2.0, whose sites he calls "glossy but useless." The BBC link is in my post. All visitors are welcome, as this aspect of Web 2.0 has not received that much attention.

  • Margaret: No apology necessary, cynicism is one of the fundamental needs to keep an even keel when assessing this marketplace, particularly as we are potentially in the age of a new Web 2.0 based bubble.

    Secondly, very interesting that you used the term "tangled web". It is a term that I just used in one of my recent posts:


    <a href="http://correlate.wordpress.com/2007/05/04/how-many-webs-are-there-tangled-web/" rel="nofollow">How many webs are there?</a>


    Enjoy!

  • I apologize for being cynical. :-)


    I think it's the term "Web 2.0" that sets my teeth on edge. Going to go define "tangled web" now.

  • You are welcome. Margaret, I believe it is both. Web 2.0 is about the empowerment of people but like with all things technology, unless it is solving a user problem where people are willing to pay or advertising are willing to go where people are getting that value, it is simply cool technology.


    I believe Web 2.0 is both. It is a paradigm shift with technologies that empower people and solve a problem for them. Users flock to those solutions and advertisers flock to where those people are. And in the Amazon example, businesses are also finding new ways to capture revenue or establish/create a new marketplace. It seems that Web 2.0 tactics a is method to do so.

  • Thanks for the shout out. I think you nailed it when you said "And in the long term, Amazon will be controlling a large cloud of information and transactions about many other businesses." Web 2.0 is not about empowering people -- it's about big business aggregating data and figuring out how to monetize it.

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