Is Amazon the Wal-Mart of Cloud Computing?

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    John Pescatore, information security analyst at Gartner, recently reflected on an analogy he used to illustrate the different security options available with cloud computing.

    You see, if I want a tomato I can go to Wal-Mart and buy a really cheap tomato that was grown God knows where. If I need a tomato that is a bit tastier, I can go to my local grocery store that has a decent produce shop and the tomatoes are still fairly inexpensive. If I want a really good tasty tomato and am willing to pay a good bit more, I can go to a local farm stand – yum…

    Or if I want the best tomatoes possible, I can grow them myself in my home garden…

    imageIn his analogy, John identifies all the players in what I call the cloud computing ecosystem: public cloud infrastructure providers, virtual private cloud providers, and the enterprise itself as a private cloud provider.

    John makes the connection between tomatoes and cloud computing a bit more explicit further down in his post, but I was still left wondering who is the ‘Wal-Mart’ of cloud computing in his mind.

    For my money it would have to be Amazon.

    As I started thinking about it, I found interesting parallels between the two and their roles in their respective industries. And, just as with Wal-Mart, there are both good and bad effects to Amazon’s dominant role in the cloud:

    • Accessibility: Just as Wal-Mart has brought discount retail goods to many, Amazon has made public cloud infrastructure readily accessible to the masses.
    • Innovation: Wal-Mart has used its heft to motivate its industry and supply chain to adopt more efficient practices such as RFID and supplier-managed inventory. Amazon has delivered innovation in the cloud realm with technologies such as Dynamo.
    • Low Prices (Commoditization): The effect here on the cloud-side is best characterized by the words of a CloudCamp San Francisco attendee: Amazon’s hourly pricing model has created a “race to zero” for cloud CPU-hours.
    • Competition: Wal-Mart has long been maligned for forcing smaller retailers out of business. At this point in time I think Amazon has done more to create the cloud market than to stifle it. One possible area of long-term impact is with traditional Web hosting. Hosting is an extremely fragmented market with lots of small players and it will be interesting to see how that market responds. Over time these markets must converge.
    • Supplier Power: I think there’s an analogy here but I can’t quite put my finger on it. Any thoughts on how Amazon has driven changes at Dell, Rackspace and other suppliers?
    • Sweat-Shop Labor: Ok, this one’s mostly a stretch, but there is Amazon’s Mechanical Turk. 🙂

    What do you think? Is Amazon the Wal-Mart of cloud computing?

     

    BONUS LINKS: In researching this post I found an interesting series of articles by the LA Times on the Wal-Mart effect (2003), and a more recent book with the same name by Charles Fishman who is (or was) a writer at Fast Company.

     

    Update: James Urquhart called this one way back in October in a very nice blog post.

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