I sense a disturbance in the cloud. Thousands of organizations that supply goods and services to Walmart cried out in terror when the retail giant put its foot down on Amazon last week (to paraphrase Star Wars’ Obi Wan Kenobi).
Citing data security, Walmart told its suppliers to get off of the cloud – the Amazon Web Services cloud to be exact – if they want to keep doing business. This decision appears to have come after Amazon announced its plan to acquire Whole Foods, taking Amazon’s grocery business model closer to that of Walmart’s. Walmart has previously tried to even up the online odds with its purchases of Jet.com and Bonobo’s.
Walmart is known for its aggressive tactics with suppliers, although this is usually focused on price cutting. But it has also been known to throw its weight around in technology. There is story that, at Walmart’s HQ, there was a giant bar code on the wall of reception. The sign below it reading: “If your product doesn’t have one of these, don’t take a seat.”
Whether that story is true or not we don’t truly know, but in 2004 Walmart did take it one step further, requiring its suppliers to provide microchips which would service radio frequency identification, or RFID. This time the retailer took on Amazon’s highly profitable and dominant cloud business, AWS.
This is not to be taken lightly. AWS controls 44% of web services hosting and makes a cool $3.1 billion profit from just over $12 billion in revenue. Analysts and competitors have long suspected that AWS subsidizes Amazon’s far less profitable retail business. One could argue that the $13.7 billion Amazon spent on Whole Foods was paid out of AWS profits.
It would not be a stretch to say that Walmart may have had the same thought. Executives there may have come to the conclusion that, by allowing suppliers to use AWS, it inadvertently subsidizes the competition.
Walmart said it was about data: “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."
But I believe its decision had a lot more to do with money flowing to the competition. And it could set a precedent with other large retailers. So, anyone considering buying technology that is hosted on a single vendor’s cloud platform may need to think again. This could be the next bar code sign.