Amazon, the Tech Company

by Jesse Farmer on Tuesday, April 15, 2008

Larry Dignan over at ZDNet writes:

Amazon on Monday announced persistent storage for its EC2 service and what’s notable is how quickly the e-tailer is running ahead of the competition. In fact, Amazon’s real business down the line will be its cloud services. Amazon will be like a book store that sells cocaine out the back door. Books will be just a front to sell storage and cloud computing.

I've been speculating about this for a while. Why is Amazon pushing their technology so hard? Their business has been in retail and has been profitable since Q1 2002, if I recall correctly.

But it hit me over lunch with Andrew Chen when we were talking about what it means to "be an X company," where X is media, retail, technology, or whatever.

Think of it like this: what is Amazon's core competency? Andrew mentioned how Amazon uses technology to save money at every corner. They have their warehouses right next to FedEx and use technology to plot the shortest route to pick up all the books needed for a shipment.

In short, their core competency is their ability to develop and leverage their technology stack, including SimpleDB, EC2, and S3, towards making retail ultra-efficient.

All these advantages are worthless in a world where the retail business is mostly digital. Amazon knows this and that's why they're opening their technology stack.

It would make no sense otherwise, since it's precisely that technology which gave Amazon a competitive advantage in a world where books and music were shipped to your doorstep rather than downloaded to your iPod.