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First, Amazon has already proven that it can build and manage a large and complex ecosystem that delivers value to all players. I'm talking about Amazon's retail platform that supports tens of thousands of merchants, apps developers, publishers selling digital content such as books, music, movies, TV shows and applications and its hardware business, with Kindle at the center of its plate (at least for the moment ... stay tuned).
AWS already plays an important role in this ecosystem offering low-cost storage for users' content. Amazon completes the picture with its unequaled fulfillment system, including Amazon Prime, which for $79 a year gives customers free shipping and instant streaming downloads.
Unlike Apple and now Microsoft, the Amazon hardware strategy is to sell its Kindle products close to cost as a gateway to other products and services. Of course, offering low-cost hardware and enabling services to sell massive quantities of other products only works if sales volumes are huge. But so far, the strategy is working. Second, the low-cost, reliable and scalable AWS cloud platform has all the earmarks of a business platform capable of sustaining large numbers of value-added contributors at extraordinary scale over time. The decisions Amazon has made about which services to offer itself and which to leave to partners suggests that the company is sensitive to the need to return value to all participants -- not just a select few.
Furthermore, comments from Amazon executives, including Jeff Bezos at re:Invent, made it clear -- if it wasn't before -- that Amazon is pursuing a similar strategy in cloud infrastructure as in its hardware business: offer initial services at low cost and reap rewards only when customers use them. Bezos views this as the right formula for creating a long-term business based on high-value services.
Third, Amazon recognizes that cloud computing is all about the ecosystem. Back in 2011, Amazon CTO Werner Vogels said, "The successful cloud play requires an ecosystem of partners and collaboration to tie services together and make an environment work."
Of course, capitalizing on the AWS opportunity will require solution providers to reinvent their businesses and their business models to take advantage of it.
One great example is Avnet, which introduced a new package of integrated cloud computing solutions based on AWS at re:Invent. These "cloud-in-a-box" solutions provide Avnet's channel partners -- MSPs, VARs, ISVs -- with a fast, low-cost entry into the cloud business with enterprise customers. They also buy precious time channel partners can use to sort out their own longer-term cloud positioning and value-added offerings.
While the opportunities are real, partnering with any ambitious market leader is not without its risks. And some of the moves Amazon has made in the past year -- the AWS Marketplace, for example, which is a one-stop shop for applications that can be purchased on subscription with Amazon managing the underlying infrastructure -- are signs that Amazon sees value in moving up the stack. This could certainly displace some partners in the AWS ecosystem -- in much the same way that Microsoft edged out some ISVs when it entered the applications business.
But it will be a very long time -- if ever -- before Amazon blows up its partner network like Microsoft did this year.
In the meantime, one place solution providers should look for new paths to growth is the cloud ecosystem that Amazon is building.
Marty Wolf is founder and president of martinwolf | M&A Advisors. Marty has been directly involved in the divestiture of six Fortune 500 divisions and has completed more than 115 transactions in the IT services sector. A frequent commentator and guest blogger for leading business and IT media outlets, Marty also acts as a counselor and trusted adviser to CEOs of select IT firms.
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