Amazon is Likely To Be Evil (At Some Point)

Amazon is taking on Dropbox in an aggressive way, with a cloud-based storage service at about half the price.  Dropbox has survived Apple’s iCloud, but this is much more in Amazon’s wheelhouse than iCloud was in Apple’s; Amazon has revolutionized cloud-based Internet-delivered infrastructure services with Amazon Web Services (AWS), and it can definitely offer this service for a substantially lower internal cost than Dropbox.  However, this is a consumer web product and Dropbox just works, insanely well – we’ll see if that can be enough to beat Amazon, but I personally have no idea.  Interesting times ahead for Dropbox.

The big irony here: Dropbox runs on Amazon Web Services.  It uses Amazon’s S3 storage cloud to do the actual storing of all user data, rather than having a dedicated data center handling all this stuff.  This isn’t unusual these days – in fact, for new cloud service offerings launching these days, especially computation/data-heavy ones, running on AWS is the default.   It can scale up or down instantly, it doesn’t require buying real estate or servers, and you pay only for what you actually need.  It’s a lot cheaper to use AWS rather than build out a data center for an enterprise-scale application, and a lot easier to use it for a new product than have to worry about setting up your own server infrastructure and scaling it with growth.

Scott Weiss succinctly explains why AWS is the easiest and cheapest option to outsource transactions to:

The new data center designs use only commodity “vanity free” components procured directly from the original design manufacturers (ODM) — the current incumbent’s suppliers. For easy serviceability, components are velcro’d together versus mounted in a box. All bells and whistles are stripped off and the hardware is purpose built for a specific application and therefore carefully tuned. As compute utilization rates skyrocket from virtualization and parallel processing, the CPUs are running harder and hotter and therefore the new expense bottleneck is all about power and cooling.

Locating in cold climates and next to super-cheap hydro power has become de rigor. Power distribution, cooling and building layouts have been redesigned from the ground-up to maximize mechanical performance and electrical efficiency of the datacenter. And unfortunately for Intel, the relentless march of Moore’s Law no longer affords them differentiation, as customer needs have shifted from performance to power efficiency, an area where they lag rival ARM processors.

Hence you have the weird spectacle of Dropbox and Amazon competing on a consumer service, while each are attempting to make more efficient use of Amazon’s own backend data center engineering.

Amazon’s dominance of backend data and processing is emerging as a serious anti-competitive concern. This may seem dull and prosaic in the flashy world of cloud computing, but Amazon has pretty serious market power over what is increasingly becoming an essential part of technological infrastructure.  If Amazon continues to expand in both consumer web services and backend web services, it will begin walking on a pretty tight tightrope.  It’s a position of enormous market power, and those positions are usually abused – unless Amazon is a great and altruistic exception, I think we can expect to see greater and greater anti-competitive action out of Seattle.

They could maybe drive east for some advice on how to deal with the DOJ afterwards.


Tags: , , , , , , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: