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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