Partners Grapple With Conflicts Between Retail Customers And Amazon

A common practice by large retailers, most notably Walmart, of pushing their cloud technology vendors away from using Amazon Web Services (AWS) is one that partners increasingly must be prepared to confront.

Large customers insisting suppliers boycott technology from rivals is nothing new across industries and platforms. But Amazon's uniquely dominant position in both online retail and cloud computing makes that inclination more pervasive, creating potential pitfalls for AWS partners, and business opportunities for those selling services from cloud rivals Microsoft and Google.

"Everyone has a story about how they lost a deal to a brand collision," said Scott Webb, president of Chicago-based solution provider Avionos.

[Related: 5 AWS Repercussions From Amazon's Blockbuster Planned Acquisition of Whole Foods]

Amazon’s competitors steering supply chains to preferred vendors will become more prevalent, and fraught for partners, with the latest escalation of the battle between e-commerce giants—Amazon's plan to acquire the Whole Foods grocery chain.

To avoid getting entangled in rivalries between big customers and cloud vendors, especially AWS, partners must study in-depth the technologies they pitch and have multiple ecosystem options in their arsenals, Webb advised.

"If you're going to have retailers as clients, you need to think about what your technology framework is and have the ability to host on multiple platforms," Webb told CRN. "You need to know where things are running all the way through your stack, be able to articulate all the way through your service,"

There's no surprise in the channel that online retailers have, in some cases, been loathe to even indirectly spend with AWS because Amazon is a rival, partners said in response to a recent Wall Street Journal article on the subject. That report cited Snowflake Computing, a data warehousing vendor, and Lofty Labs, a software-development firm, as companies mandated by Wal-Mart Stores, Inc. (Walmart) to re-platform on Microsoft Azure.

Such practices, from Walmart and many other retailers and manufacturers, are "the worst kept secret in all IT," said Scott Mellegaard, director of cloud strategy at Trace3, an AWS partner headquartered in Southern California.

Walmart did not reply to a request for comment on this story.

"Many customers are reluctant to partner with an organization that, ultimately, may end up competing with them," Reed Wiedower, CTO at New Signature, a Washington D.C.-based Microsoft partner, told CRN.

Walmart especially has been "playing hardball for years with suppliers," Wiedower added.

But while those imperatives are nothing new for many channel partners, they do weigh heavily on the industry.

"A lot of these suppliers are neutral in nature. They don’t particularly care whether they spend money on Amazon or Microsoft. There’s price parity," Wiedower said. "So if it becomes necessary to play ball with Walmart, I suspect a lot of these shops will simply spin up services on Azure and work from there."

Last week's blockbuster $13.7 billion deal for Whole Foods, which still needs regulatory approval, will likely harden the positions of Amazon's e-commerce competitors. "The full assault by Amazon on retail with the Whole Foods acquisition will definitely cause defections and avoidance of AWS by these factions," said Tom Kieffer, CEO of Virteva, a Microsoft partner based in Minneapolis.

With cloud Infrastructure-as-a-Service and Platform-as-a-Service increasingly commoditized, second-order rationales often drive buying decisions, Kieffer told CRN. "Boycotting AWS is definitely in this category," he said.

Those complex customer-supplier dynamics inevitably redound to the channel.

Walmart executives, like any other responsible corporate leaders feeling the "Amazon effect" on their retail businesses, "would push that sentiment onto partners," Trace3's Mellegaard told CRN.

Amazon's Whole Foods deal may benefit companies known to be big Google and Microsoft partners. One such partner, Tony Safoian, CEO of SADA Systems in Los Angeles, told CRN, "We're getting deals from this already!"

Webb, of Avionos, said in the past Walmart and other retailers, especially grocers, would encourage suppliers to use specific technologies to better integrate with their supply chains.

"For a long time, you saw Walmart driving technology innovation because they were looking to become more efficient," Webb said. "They needed vendors to make investments."

The anti-AWS phenomena is both an extension of that practice in which large retailers were "setting the rules of the game," Webb said, and "at the same time it's very different."

"What's probably the biggest difference, for the first time you're seeing an overlap where a broad-based technology service provider like Amazon is also becoming a very firm retail competitor," Webb said.

An AWS spokesperson told CRN that Amazon has "heard Walmart continues to try to bully their suppliers into not using AWS because they have an incorrect view that AWS is somehow supporting Amazon's retail business."

"Plenty of suppliers are standing up to Walmart and refusing to be told that they can't use the leading‎ infrastructure technology platform (AWS). Tactics like this are bad for business and customers and rarely carry the day," the spokesperson said via email.

Partners told CRN that, like the companies cited by The Wall Street Journal, they had seen Software-as-a-Service vendors instructed by Walmart, as a condition of doing business, to port applications from AWS to Azure. Walmart is certainly not unique in making such demands, they said, which are rarely aired publicly.

But one well-publicized case in that vein, they said, was Home Depot directly working with Pivotal Software to introduce Pivotal Cloud Foundry to Google Cloud Platform. The home improvement retailer wanted to continue to use the popular development environment in the public cloud, but avoid giving business to Amazon's largest profit-generating division.

A Pivotal spokesperson told CRN that Home Depot, like other Fortune 500 retail customers using Pivotal Cloud Foundry for app development, prefer Google Cloud Platform or Microsoft Azure above AWS. Pivotal and Google "rapidly accelerated joint R&D efforts to add new capabilities," he said, "encouraged" by those retail giants.

At the same time, Pivotal and Microsoft have also stepped up efforts to integrate capabilities on Azure, "primarily driven by automakers," he said.

It seems car manufacturers prefer to avoid patronizing Google since they see the parent company, Alphabet, a competitor through its autonomous vehicle division.

Partners need to know about these industry biases, which can manifest themselves in a plethora of ways.

Webb said he's even seen one partner lose business with the U.S. Postal Service because the company sent a proposal by FedEx. He added that he knew a partner who was once left with the impression that a technology deal had been pushed aside by an Apple rival because an employee pulled out an iPhone during a pitch.

"Why would they spend money on someone who wants to put them out of business?" said a partner, who asked not to be named.

That partner said he's even heard of large financial services companies that tell their IT staff to use Azure over AWS because their mutual fund invests in Microsoft.

"Happens all the time," he said.