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AWS vs Google vs Microsoft: Competition concerns fuel retail war between the big cloud three

The retail market is no slouch when it comes to adopting cloud technologies, but competitive concerns appear to be influencing the cloud-buying decisions of some

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While Amazon, Google and Microsoft all claim to be picking up customers in every conceivable vertical market, it is the retail sector where the competition between the big three cloud giants is really starting to get interesting.

All three have some huge, household named retailers among their reference customers, all of whom are drawing on their cloud technologies (in way or another) to enhance the online and in-store shopping experience they can offer.

Ocado, Lush Cosmetics, Target and PayPal are among the retail brands whose IT estates are underpinned by the Google Cloud Platform, while Microsoft Azure boasts Marks & Spencer, ASOS, and DixonsCarphone as reference customers.

Amazon Web Services (AWS) is no slouch either when it comes to attracting retail clients, with grocery brands Sainsbury’s and Nisa both known to use its technology, along with multi-brand online retailer Shop Direct, high street fashion store River Island and specialist wine-seller Majestic Wine.

These all pale in comparison to Amazon.com, which is not only the biggest retail client on AWS’s books, but its biggest customer overall.

For some retailers, though, there are concerns that Amazon and AWS are too close for them to comfortably entrust the cloud giant with their applications and workloads.

The Walmart revolt

US retail giant Walmart, for example, issued a statement in June 2017 to clarify reports in the Wall Street Journal that it had warned its technology partners off using AWS to host its applications, workloads and data.

“Our suppliers have the choice of using any cloud provider that meets their needs and their customers’ needs,” the statement read.

“It shouldn’t be a big surprise that there are cases in which we’d prefer our most sensitive data isn’t sitting on a competitor’s platform.”

Amazon released a statement of its own, hitting out at Walmart for allegedly trying to “bully” its suppliers out of using AWS technologies based on an “incorrect” assumption that its cloud division is “somehow supporting Amazon’s retail”.

Walmart has since gone on to sign a multi-year cloud deal with AWS competitor Microsoft, and is also regularly cited as a reference customer for open source private cloud platform OpenStack.

Customer conflict of interest concerns

More recently, Singapore-based AWS reference customer Trax Retail announced an expansion in the number of cloud providers it deals with to include the Google Cloud Platform, citing customer conflict of interest concerns.

The firm makes data-analytics software that helps retailers to design their store layouts, and manage stock levels using image data accrued from in-store mobile devices.

“There is a uniqueness in retail where there is some reluctance on the part of retailers to have technology ecosystems built on Amazon because they feel competitive with Amazon on the shopper side,” David Gottlieb, managing director for the Americas at Trax Retail, told Computer Weekly during an interview at the 2019 National Retail Federation (NRF) conference in New York, earlier this month.

At the show, the company debuted its Trax Retail Watch offering, which will see it roll out custom-designed internet of things (IoT) cameras that can be fixed to store shelves, so retailers can monitor stock levels of every item they stock.

The company claims the setup will provide retailers with insights into how stock is performing in real-time, with the data processing side of things taking place within the Google Cloud Platform.

“We have a significant franchise working directly with consumer packaged goods (CPG) manufacturers and historically all those deployments are done on AWS,” said Gottlieb.

“We still have the option to deploy those programmes on AWS for those manufacturers… [but] we wanted to look for another partner, and the relationship with the Google Cloud Platform has made a lot of sense for us,” he said.

When multi-cloud is not the answer

Adopting a multi-cloud strategy is certainly one way of working round user concerns about competitor conflict, but it might not be right for everyone, said Nicholas McQuire, vice-president of enterprise research at CCS Insight.

A lot of retailers are still in the early days of digital transformation, and may have taken a punt on a number of different cloud providers along the way, but this approach may not work out practical or economical as time goes on, he said.

In some instances, retailers may find themselves having to weigh up the whether the benefits they get from using AWS outweigh any potential competitive concerns they may have, continued McQuire.

“Many companies – not just retail organisations – have a multi-cloud strategy, but – at some point – they may have to decide if [following] a multi-cloud strategy is sustainable if they want to be truly disrupt their market and transform their organisation,” he said.

“[This may prompt] some to nominate a preferred cloud partner and go much deeper with a single cloud provider instead, because there are economic benefits and more innovation that can be [tapped into] by going deeper with a single provider.”

A recent example of this is the move by cloud-based e-commerce platform provider BigCommerce to move more than 60,000 of the retailers who use its services to conduct online transactions from IBM Softlayer and AWS to the Google Cloud Platform.

Relying on one host

As reported by Computer Weekly, the firm had previously relied on IBM to host the bulk of its infrastructure, while drawing on AWS’s cloud capacity to help it handle traffic during peak traffic periods, but – for latency and performance reasons – it has now signed with Google.

“The decision to move to Google Cloud was driven primarily by our customers, both [in terms] of where they were located and where their customers were located,” the company said, in a statement to Computer Weekly.

“Google is the only hosting provider that has its own fibre laid internationally, as well as a network for undersea cables, which is notable because it allows merchants to have a presence as close as possible to their consumers. We saw the physical infrastructure behind Google on the network side as a strong competitive differentiator.”

Microsoft makes retail move

The NRF conference also saw Microsoft announce a seven-year cloud deal with the Walgreens Boots Alliance (WBA), which owns a number of well-known pharmaceutical and cosmetics brands across the US and Europe, including UK-based high street chain Boots.

The organisation employs more than 415,000 people and has jointly committed to moving the “majority” of its IT infrastructure to the Microsoft Azure public cloud, and rolling out the Microsoft 365 online productivity suite to 380,000 of the firm’s staff.

The over-arching aim of this work, the companies said in a press statement, is to help change the way that healthcare is delivered to people, so it becomes more accessible, personal and affordable.

The significance of the deal should not be underplayed, Ed Anderson, research vice-president and distinguished analyst at IT market watcher Gartner, told Computer Weekly, as there is a lot more to it than a straightforward lift and shift to the public cloud going on here.

“It’s a big customer win for Azure and Microsoft 365. It’s a multi-year commitment to innovate with a leader in retail and healthcare using Microsoft technologies, [and] it demonstrates a vision for how Microsoft technologies can be used to deliver transformative, digital solutions,” he said.

“Although it’s not clear what the long-term plans will produce, it does outline enough detail to highlight some of the interesting joint solutions that will come out of the deal.”

News of the deal also comes at a time when Amazon, the retailer, is in the midst of a concerted push into the healthcare retail space itself, which – to-date – has included its acquisition of online pharmacy PillPack.

Read more about AWS

A year ago, the firm also embarked on a joint venture with financial services heavyweight JP Morgan and insurance firm Berkshire Hathaway that is geared towards improving the quality and affordability of the healthcare services these firms provide to their US-based employees.

With Amazon appearing to be increasingly encroaching on its turf, one has to wonder if this possibly played a role in WBA’s decision to go all-in on the Microsoft cloud.

“There’s no question that many retailers are looking to work with technology providers other than AWS because of a perceived competitive conflict. That will drive some retail organisations to work with the likes of Microsoft, Google and others,” said Gartner’s Anderson.

“However, AWS has been able to attract many retailers too, so it’s not a foregone conclusion that AWS will necessarily lose out in that particular segment of the market.”

And that is a view the company certainly seems to share, with a spokesperson for the firm telling Computer Weekly that the “vast majority of Amazon's retail competitors use AWS” in some fashion.

“The reason so many retailers continue to choose AWS is [because] they take the view that they want to use the technology infrastructure platform that gives them the most functionality, the greatest agility, and the best security and performance. AWS is the clear leader in these areas,” the AWS spokesperson said.

“Retailers’ users don’t care about any rivalry that may exist with another retailer. In this fast-moving world, end users care about whether the customer experience is evolving quickly enough to warrant their doing business with that retailer. Speed and capability matter a lot.”

Amazon and competitors get cosy

And there are, indeed, some notable examples within the AWS customer base of firms that compete directly with Amazon and still use its cloud.

Film and TV streaming service Netflix is a long-standing AWS customer whose core offering competes directly with Amazon Prime Video, for example. 

On this point, it is also worth noting the number of retailers who have put their competitive differences aside in order to sell their own wares via the Amazon.com platform, as outlined by the firm during its appearance at the House of Lords’ Communication Committee’s internet regulation hearing in early January 2019.

According to figures shared during the hearing by Lesley Smith, director for public policy at Amazon UK and Ireland, just over 50% of all the items bought on Amazon.com are sold by third-party retailers, which include one-man band outlets and high street brands.

It is Amazon.com’s aim to provide customers with “anything they could need or want” online, Smith told the committee, and achieving that means working in collaboration with these brands, rather than competing against them.

“We want to be competitive and we want to attract people [but] I do not thing for a second that we have any interest in taking out competitors,” she said. “That is not how it works.”

Working with retailers

She then went on to share examples of how the firm is working with retailers to boost footfall on UK high streets, through the introduction of Click and Collect stations for Amazon goods within local post offices and Co-op supermarkets.

“People are not sitting at home with Amazon as their only [retail] option. They have a great many choices,” she added.

The fact so many retailers are willing to partner with Amazon.com to sell products or house its click and collect stations is because they trust the brand to work in their interests. And – for AWS – its focus this year should be on building the same level of trust with the retailers it deals with too.

“It’s definitely an area, as we look into 2019, AWS is going to have to work on in terms of establishing trust out there in the market, particularly in industry verticals where the Amazon retail organisation has disrupted those industries,” said CCS Insight’s McQuire.

“How does AWS, as an entity inside the Amazon conglomerate, [become] the trusted platform of organisations as they go deeper around digital transformation and cloud in the future.”

Regulatory intervention

Amazon, along with a number of other big technology firms, has found its working practices come under scrutiny from regulators both in the US and Europe of late, over concerns their size and influence is contributing towards them monopolising the markets in which they operate.

This was topic was touched upon during the House of Lords Communication Committee’s summit with Amazon, and hotly denied by Smith, who proclaimed the firm dominates neither the cloud or online retail space.

Furthermore, the European Competition Commissioner confirmed a preliminary probe into how Amazon’s retail platform uses merchant data is underway back in September 2018.

Access to sales figures

When quizzed on this topic during the House of Lords hearing, Smith rejected the notion that Amazon.com is able to access the sales figures of any third-party merchant that sells products via its platform.

“We do not have that visibility,” she said. “Marketplace sellers can see how their things are selling, but our marketing people cannot see the sales figures or any of that data that relates to a Marketplace seller.”

Despite such declarations, one solution that has been repeatedly put forward by industry watchers about how concerns about Amazon’s influence and data use could be addressed is through breaking the company up.

But McQuire is unconvinced such a move would make much difference to how retailers view AWS’s working relationship with Amazon.com, or that it is likely to happen without the involvement of regulators.

“The AWS and retail businesses are actually more separated than most people think, but it relies too heavily on the AWS profit machine to make [a breakup] happen from within,” he said.

“For this to ever happen, much depends on government action on this topic which is why the EU verdict will be crucial.”

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