Cloud Hosting

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Over the past decade, Amazon has found its way into your homes with Alexa, in your ears with Audible, on your screens with Amazon Prime Video, and maybe even in your fridge if you shop at Whole Foods.

But the tech giant's reach does not end with products and streaming services. With Amazon Web Services (AWS), the company now holds a 50 per cent share of the cloud hosting market, according to a Gartner report published in July 2019.

"Any website that you don't know where it's hosted might be on Amazon's servers or Microsoft's or Google's. That's the primary way in which you may be interacting with Amazon and not know it," says Brad Stone, author of The Everything Store: Jeff Bezos and The Age of Amazon.

The San Francisco-based tech reporter with Bloomberg started researching Amazon for his book a decade ago. Stone spoke to The Current's interim host Nil Kksal about the company's foray into cloud hosting and its future in the next 10 years.

Here's part of their conversation.

Tell us more about AWS Amazon Web Services.

Amazon has been a pioneer in the market to get companies, universities and government agencies to stop relying on the data centre in the back office or down the street and to move all their technology operations to the cloud hosted centrally by Amazon. Microsoft, Google, IBM and Oracle are also in pursuit of this market. It's been a massive change for all of computing over the past few years.

How much of that cloud does Amazon own?

I don't have the market share numbers handy but Amazon was the first player and it is the market leader with Microsoft hot on its heels. Microsoft recently scored a significant industry win by winning the very contested Jedi contract from the Pentagon a $10 billion contract. Amazon is now appealing that verdict and saying that the Trump administration made a political judgment in awarding the prize to Microsoft.

What sort of things might we be doing online that has us interacting with Amazon, but are unaware of it happening?

Any website that you don't know where it's hosted might be on Amazon's servers or Microsoft's or Google's. That's the primary way in which you may be interacting with Amazon and not know it. But just in terms of something like walking up to your neighbour's house they could have a Ring camera and doorbell that's recording your image. Alexa is no longer just in someone's home. They're increasingly moving into cars, hotel rooms and even workplaces. So that's another way in which Amazon's influence is being extended.

Most North American households are Amazon Prime members. There's no illusion about how often they use Amazon. They watch the movies and the TV shows, they order packages for one and two-day deliveries. A lot of people I know are relying on Amazon to make their holidays and to get gifts on time. So it's a company whose influence and impact we can't really avoid these days.

We checked the numbers Amazon owns nearly 50 per cent of the cloud. How much should we worry that this is the reality?

I think when it comes to AWS and the cloud business, it is a competitive market. You can make an argument that Microsoft and Google were more naturally positioned to pioneer and innovate in cloud computing. They didn't. Amazon took the lead there. Microsoft has caught up. In some respects, it's growing faster than Amazon now. I don't think there's any easy way to call that a monopoly.

In other parts of Amazon's empire, it does have a worryingly large impact. I think the book business Amazon's earliest business clearly has a majority of sales, both physical and digital. And it makes its influence known in very tough negotiations with booksellers. I think that could be a worry. The fact is that you know, Amazon plays in massive markets. It's still a single digit percentage of overall retail in the U.S., North America and around the world. And that's going to be a very strong argument when it comes to any kind of antitrust scrutiny of the company.

The U.S. Federal Trade Commission is looking into Amazon's influence and control over the market. Do you see a future where Amazon could be forced to break up?

It's certainly possible over the long term. I think it's fair to say in the short term that the federal government has more pressing priorities as we're entering into an election year. It's unclear what direction antitrust enforcement will take. It does seem like all the major presidential candidates agree on that one thing: the big tech companies are too big. But Amazon is now in a cluster of kind of worrying companies along with Google and Facebook and to some extent Apple, with the App Store. These are complex markets and complicated businesses. They're not going to be easy cases for the Department of Justice or the FTC to win.

So in talking about a breakup, it's kind of hard to imagine. You could see some regulation that requires the company to abandon some of its retail businesses so it doesn't end up competing with some of its customers. But again that's assuming there's a functional U.S. government, which we don't have right now. So I don't think anything will happen quickly.

On the issue of antitrust, we've got a statement from Amazon. They wrote, "We understand that success invites scrutiny and we aim to run our business so that when scrutinized we pass with flying colours."

That statement is interesting because there's a long record of companies like Microsoft responding to scrutiny more obstinately, stubbornly and combatively. Amazon clearly doesn't want to do that. They want to be submissive. But that's clearly not the nature of the company. So it will be interesting to see how transparent and amenable they are to regulation.

What is the Amazon of the next 10 years look like?

I think the opportunities and the possibilities are limitless and hard to predict. I don't think 10 years ago when I was starting to work on The Everything Store, I would have imagined Alexa, Echo or the extent to which AWS has grown. Part of what Amazon looks like in the next 10 years is going to be dependent on its ability to keep inventing and investing in the new thing. I think that the physical store initiative is very intriguing in the U.S. now.

We have these ghost stores where you can walk in, grab a package, walk out. Cameras track your every move and charge your account. We could be looking at a future where Amazon stores are on every corner and not just to buy groceries and maybe electronics, but to return packages that you get via online delivery. We could see the emergence of a kind of two-way fulfilment network where Amazon isn't just bringing things to you but it could also allow you to easily return products. Some of that already exists today.

But if that happens, then watch out. We're going to see FedEx, UPS. and the national postal services really suffer because Amazon is in a position to invest in that transportation capability. So there are all sorts of possibilities for disruption. Some we can imagine, some we probably can't yet.

Written by Tahiat Mahboob. Interview produced by Ben Jamieson.

Read more:
From bookstore to cloud hosting: How Amazon 'took the lead' in the technology world - CBC.ca