Amazon is one of the five global tech oligopoly with a global market reach aided by an equally strong foothold over technology ecosystem. By some accounts, about $1 out of every $2 spent online in the US going to Amazon.
A recent New York Times article makes an argument that Amazon – with its stronghold over the consumer market and financial prowess – is also crushing fledgling startups by either subsuming them and their innovations or buying them out. (ref: Prime Leverage: How Amazon Wields Power in the Technology World). The article also highlights Amazon’s ability to monetize open source tools and services by integrating it into its ecosystem.
How does Amazon manage to do it while continuing to expand outside its core businesses. Few other tech-companies can claim leadership in sectors as disparate as videogame streaming, online fabric sales, and facial recognition. Amazon also employs far more people than its competitors. Roughly 613,000 people work at Amazon, more than twice as many as work at Alphabet (94,000), Facebook (33,000), and Microsoft (135,000) combined. Most of those workers labor in one of Amazon’s more than 100 North American logistics centers, or at one of more than 450 Whole Foods stores.
Amazon’s AWS: Fast follower or efficient copycat?
In the NYT article Amazon has used its cloud computing arm — called Amazon Web Services, or A.W.S. for short — to copy and integrate software that other tech companies pioneered. He builds his argument by highlighting experiences of startups like Elastic, the innovative search startup and Nexla, a 14-person start-up based in Millbrae, Calif.
- Amazon’s AWS Cloud computing business has grown into one of the technology industry’s largest and most lucrative businesses, offering computing power and software to companies.
- Some of the companies have a phrase for what Amazon is doing: strip-mining software. By lifting other people’s innovations, trying to poach their engineers and profiting off what they made, Amazon is choking off the growth of would-be competitors and forcing them to reorient how they do business, the companies said.
- What Amazon is doing to software start-ups is unsustainable, said Salil Deshpande, founder of Uncorrelated, a venture capital firm.
- “A.W.S.’s success is built on strip-mining open-source technology,” said Michael Howard, chief executive of MariaDB, an open-source company. He estimated that Amazon made five times more revenue from running MariaDB software than his company generated from all of its businesses.
Amazon disputes some of these allegations in the NYT writeup. In a statement, the company said the idea that it was strip-mining software was “silly and off-base.” It said it had contributed significantly to the software industry and that it acted in the best interest of customers.
Is Amazon really crushing Startups ?
Many startups that are contributing to the open source community are also looking for ways to monetize their ideas. By engaging with an ecosystem like Amazon’s AWS gives them much needed exposure to thousands of prospects and clients.
Many tech companies said they had found more customers through A.W.S.; even some companies that have tangled with Amazon have grown. Elastic, for instance, went public last year and now has 1,600 employees.