Wal-Mart to Vendors: Get Off Amazon’s Cloud

Wal-Mart to Vendors: Get Off Amazon’s Cloud

To do business with Wal-Mart, the retailer requires some tech providers to build the services on AWS cloud rivals

June 21, 2017 5:30 a.m. ET

The battle between the King Kong and Godzilla of retail has moved into the cloud.

Wal-Mart Stores Inc. is telling some technology companies that if they want its business, they can’t run applications for the retailer on Amazon.com Inc.’s leading cloud-computing service, Amazon Web Services, several tech companies say.

Amazon’s rise as the dominant player in renting on-demand, web-based computing power and storage has put some competitors, such as Netflix Inc., in the unlikely position of relying on a corporate rival as they move to the cloud.

Wal-Mart, loath to give any business to Amazon, said it keeps most of its data on its own servers and uses services from emerging AWS competitors, such as Microsoft Corp.’s Azure.

Wal-Mart uses some tech vendors’ cloud apps that run on AWS, said Wal-Mart spokesman Dan Toporek. He declined to say which apps or how many, but acknowledged instances when Wal-Mart pushed for AWS alternatives.

“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,” he said, adding that it’s a “small number.”

An Amazon spokeswoman referred to Wal-Mart’s moves as attempts to “bully” tech suppliers. “Tactics like this are bad for business and customers,” the spokeswoman said.

Snowflake Computing Inc., a data-warehousing service, was approached by a Wal-Mart client about handling its business from the retailer, Chief Executive Bob Muglia said. The catch: Snowflake had to run those services on Azure.

“They influence their vendors, which has influence on us,” Mr. Muglia said of Wal-Mart.

The San Mateo, Calif., company had been developing an Azure offering, and “Wal-Mart has expedited our work,” said Mr. Muglia, a former senior Microsoft executive. Snowflake won the business from Wal-Mart’s client.

Other large retailers also have requested, as Wal-Mart did, that service providers move away from AWS, according to technology vendors that work with retailers.

Retailers “are all very particular, and some are more particular than others,” said Kevin Howard, CEO of Adroit Worldwide Media Inc., a retail-technology provider that works with sensitive data including automated inventory tracking and provides pricing-content management. “There are retailers that have specifically requested that we sit on Azure,” he said, declining to name them.

Amazon said a number of retailers it competes with use AWS, such as GameStop Corp.

Wal-Mart and Amazon have sparred for years. Last week, Amazon sent shockwaves through the grocery industry—one of Wal-Mart’s biggest businesses—by announcing a $13.7 billion deal to buy Whole Foods Market Inc. That came after Wal-Mart in recent years slashed grocery prices in part to stanch an Amazon’s online incursion into the business. More recently, Amazon lowered its Prime membership fee by nearly half for people who obtain government assistance, targeting a Wal-Mart stronghold.

Their cloud battle takes aim at the financial advantage AWS gives Amazon. The company’s global retail business operates on thin margins, but they are offset by the enormous profits AWS generates. In the first quarter, AWS posted $890 million in operating income, accounting for 89% of overall operating income, even as AWS’s $3.66 billion in net sales accounted for just 10% of the company’s total.

The notion AWS supports Amazon’s retail business is incorrect, the spokeswoman said, citing the company’s operating profit in its North American retail business.

While Wal-Mart’s efforts aren’t likely to staunch AWS’s growth, it could boost rivals.

“People jump through hoops to do business with Wal-Mart all the time,” said Robert Hetu, an analyst with the research firm Gartner Inc. “That should absolutely accelerate the competition from Azure.”

It has, Microsoft said. “The nudge from Wal-Mart has been pretty consistent,” said Judson Althoff, executive vice president in charge of Microsoft’s global sales to business customers.

Microsoft had been the primary provider of cloud infrastructure to Jet.com Inc., the online retailer Wal-Mart bought for $3.3 billion last September. The retail giant named Jet’s founder as its e-commerce chief. Today, Wal-Mart is among the largest users of Azure, Mr. Althoff said.

The fight helped it get cloud business from the data-analytics company Nielsen Co., he added. “That’s a direct customer that came because of Wal-Mart,” Mr. Althoff said.

Alphabet Inc. declined to say whether Google Cloud, the No. 3 cloud-infrastructure provider, has benefited from the spat between Wal-Mart and Amazon.

Lofty Labs, a software-development firm in Fayetteville, Ark., worked with a retail-analytics consulting company to build cloud-based forecasting tools for Wal-Mart. To win the business, Lofty Labs had to develop the application for Azure.

“That was a deal breaker,” Lofty Labs President Casey Kinsey said. The service is the only one Lofty Labs ever developed to work on Azure. “Everybody knows that Wal-Mart will not play ball with you if you use AWS.”


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