Elastic is a software start-up in Amsterdam that is growing rapidly, employing 100 people. Then Amazon suddenly appeared.
In October 2015, Amazon’s cloud computing division announced that it had released a free software tool that fully replicates Elastic’s capabilities, which people can use to search and analyze data, and that they will sell the software as a paid service. When Amazon made the move, Elastic’s product, Elasticsearch, was already on sale on Amazon.
In less than a year, Amazon has outmade the product more than the startup, Elastic, because Amazon’s own products are easier to use with other services. As a result, Last year, Elastic added a number of advanced features and limited the use of those features by companies such as Amazon. But Amazon still replicates many of these features and offers them for free.
In September, Elastic began to fight back. They sued Amazon in federal court in California for trademark infringement because the product used the same name: Elasticsearch. In its complaint, Elastic said Amazon “misled consumers.” Amazon denies this. The case is pending.
Since the mid-1990s, even when Microsoft dominated the personal computer industry with Windows, it has not used the cloud computing division to instill the fear of technology platforms in its competitors. Amazon’s battle with Elastic highlights what it looks like to dominate the world of technology.
Although many people know all about cloud computing, it forms the foundation of the Internet. Cloud computing has grown into one of the largest and most profitable businesses in the technology industry, providing computing power and software to companies. Among cloud computing providers, Amazon is the only one.
Jeff Bezos, Amazon’s chief executive, has called AWS an idea that “no body is asking.”
Since its launch in mid-2000, Amazon Web Services (AWS), Amazon’s cloud computing division, has become a leader in business, growing so fast that even Amazon has been a little out of step. Although the threshold of in-depth knowledge required to develop high-performance software today has never been higher, the process of bringing new software products to market is as cheap and fast as ever.
AWS sales growth
Amazon, however, uses AWS to replicate and integrate software created by other technology companies. Amazon has built its own service advantage through a range of measures: offering products in a more user-friendly way, masking competitors’ products, and lowering the price of products by bundling discounts. The moves have led customers to Amazon, and the company responsible for building the software will be uncollected.
Even so, smaller rivals say they have no choice but to work with Amazon. Given Amazon’s broad influence among customers, startups often voluntarily share customer and product information with them in order to promote their products and only agree to Amazon’s restrictions. To gain the privilege of selling products on AWS, startups can only cede some of their revenue to Amazon.
Some companies describe Amazon’s actions as blatant exploitation of the software industry. The companies say Amazon is taking innovation slyly from others, poaching their engineers, exploiting their product profits and using the tactics to crush potential competitors and force them to re-position their businesses.
All of this has intensified the scrutiny of Amazon and its abuse of market dominance and alleged anti-competitive practices. The company’s strategy has led several competitors to negotiate antitrust lawsuits. Regulators and lawmakers are studying their influence in the industry.
Matthew Prince, chief executive of Cloudflare, a rival to Amazon’s services that protect its website from attacks.
Matthew Prince, chief executive of Cloudflare, a rival to AWS’ protection against attack son, said: “There are concerns about Amazon’s ambitions. ”
AWS accounts for nearly 50% of the public cloud consumption market. Initially it offered only a small number of services (S3, SQS and EC2), but now it has 170 discrete services covering 23 categories (these are only public domains).
AWS is just one part of Amazon’s dominance of u.S. industries. The company transformed its retail, logistics, book publishing and Hollywood operations. It also plans to change how people buy prescription drugs, how they buy real estate, and how they install monitors for homes and cities.
However, Amazon has made more indirect impacts with AWS. There is no doubt that the company is a market leader in the huge shift to cloud computing, with a market share of three times that of Microsoft, its strongest rival. Millions of people are dealing with AWS every day without knowing it, watching movies on Netflix or storing photos on Apple’s iCloud, all of which run on Amazon’s computers.
Amazon CEO Jeff Bezos has called AWS an “uninvited” idea. The service began in the early 2000s, when retailers were struggling to assemble computer systems to launch new projects and features. When Amazon built a common computer infrastructure, it realized that other companies needed similar features.
Today, even companies like Airbnb and General Electric actually rent computing systems from Amazon (also known as using the “cloud”) rather than buying and running their own systems. These businesses can store their information on Amazon’s computers and extract data from it for analysis.
AWS is critical to Amazon itself. The division generated $25 billion in sales last year, about the size of Starbucks, making it Amazon’s most profitable business. These profits provide Amazon with the money to enter many other industries.
Amazon said in a statement that it considered the idea of a blatant exploitation of the software industry “stupid and outrageous.” It says it makes a significant contribution to the software industry and that its actions are in the best interests of its customers.
Some technology companies say they have found more customers through AWS; Elastic, for example, went public last year and now employs 1,600 people.
However, we interviewed more than 40 current and former Amazon employees and competitors, many of whom said that a large part of the cost of working with AWS was hidden. They say it’s hard to gauge how much of their business has lost to Amazon, or how many investors amazon threats have been dissuaded. Many spoke on condition of anonymity because they feared it would anger Amazon.
In February, seven software company chief executives met in Silicon Valley to discuss antitrust lawsuits against the tech giant, four people familiar with the matter said. Their complaint reflects the dissatisfaction of many of Amazon’s suppliers: once it becomes a direct competitor, it will no longer be neutral.
The chief executives of the companies did not take legal action, people familiar with the matter said, in part because of concerns that the process would take a lot of time.
Now, regulators are reaching out to some of Amazon’s software rivals. The House Judiciary Committee, which investigates large technology companies, asked Amazon about AWS’ practices in a letter in September. The Federal Trade Commission is also investigating Amazon, asking AWS’ competitors about two software companies that were subpoenaed but not allowed to discuss the matter.
Salil Deshpande, founder of venture capital firm Uncorly, says Amazon’s approach to software startups is unsustainable.
“Amazon has taken advantage of their wealth, forcibly taken control of the software from its owners and attracted customers to use its proprietary services,” he said. ”
“AWS’ success is built on the blatant exploitation of open source technology,” said Michael Howard, chief executive of MariaDB. ”
Ten years ago, Amazon has been struggling to make a lasting profit since it started its AWS business. Services that provide computing power seem a bit confusing.
However, startups have embraced AWS because the service saves them money, they don’t have to buy their own computing devices, they just have to pay for the software they need. Soon, more and more companies flocked to Amazon for computing infrastructure and software that would eventually run on its computers.
In 2009, Amazon created a template to accelerate AWS growth. In the same year, it launched a database management service, an important piece of software to help companies organize information.
While the AWS Database Service has won over many users, it doesn’t run the software created by Amazon, which has chosen a free-to-use software, open source software.
Open source software and Amazon have little business. It’s like a coffee shop handing out free coffee in the hope that people will pay for milk, sugar or pastries.
However, open source is a proven real model cultivated by the software industry that can quickly deliver technology to customers. Communities with large contributors often emerge with shareable technologies, and there are people who make improvements and disseminate technical information. In general, open source companies can make money later through customer service support or paid plug-ins.
Initially, technicians didn’t notice what Amazon was doing in the database software. Then, in 2015, Amazon’s comeback, they copied Elasticsearch and offered a competitive service.
Their behavior has attracted a lot of attention.
“There’s a company that builds a business based on open source products that people like to use, and all of a sudden a competitor is using your product against you. Todd Persen said. He started a non-open source software company this year with the goal of not giving Amazon the opportunity to take advantage of its products. His former startup, InfluxDB, is open source.
The open source software industry is used by Amazon time and time again. When Amazon replicates open source software and integrates it into AWS, it doesn’t need a license or pay startups, which is a blow to people’s ability to innovate.
Many of these companies have no recourse, and they can’t suddenly start charging for free software. As a result, some have had to change the rules on how to use their products in the hope of restricting Amazon and others who try to turn the products they create into paid services.
Amazon’s ideas sidestepped some of their changes.
Last year, Elastic changed its software rules, and Amazon said in a blog post that open source software companies restricted access to users and that what they were doing “polluted the open source world.”
Shay Banon, Elastic’s chief executive, wrote at the time that Amazon’s actions were “invain for the sake of others.” Elastic declined our interview.
Last year, MongoDB, a popular technology that organizes data in the form of documents, also announced that any company that uses its software as a Web service must share its underlying technology for free. It is widely believed that this is aimed at AWS because it does not publicly share the technology it uses to create new services.
AWS quickly developed its own technology, which is very similar to MongoDB, and the new software is not limited to MongoDB.
This year, when Dev Ittycheria, the chief executive of MongoDB, attended a dinner with the heads of six other software companies, the story of MongoDB was first brought about. They had a heated conversation at the home of a venture capitalist in Silicon Valley about whether to publicly accuse Amazon of a monopoly.
At the dinner, chief executives, including the heads of software companies Confluent and Snowflake, said they faced an unfair competitive environment, according to people familiar with the matter. They have nowhere to complain.
“AWS’ success is built on the blatant exploitation of open source technology,” said Michael Howard, chief executive of MariaDB. He estimates that Amazon’s use of MariaDB software is five times the revenue it makes from all of its businesses.
Andi Gutmans, vice president of AWS, says some companies want to be “unique” to make money from open source projects. Amazon, he said, is “committed to ensuring that open source projects remain truly open, and that customers have the right to choose how to use open source software, whether or not they choose AWS.” ”
In 2012, at AWS’s inaugural developer conference, Amazon was no longer the only cloud computing giant. Microsoft and Google are competing for a competitive platform.
To that end, Amazon has introduced more software services to ensure that AWS is integral. Speaking at the event, Andy Jassy, the head of AWS, said they wanted to “take advantage of all the conceivable use cases.”
Since then, Amazon has grown its AWS service at an alarming rate, from 30 in 2014 to 175 in December. In addition, it has home-field advantages: simplicity and convenience.
Customers can add new AWS services with the click of a mouse and manage them with the same system. And these new services are added to the same bill and do not require additional permission from Finance or Compliance.
By contrast, using non-Amazon services on AWS is much more complex.
Today, when customers log in to AWS, they see a home page called the Management Console, which lists about 150 services in the center of the page, all of which are AWS’ own products.
If you type “MongoDB,” the search results don’t get information about the MongoDB service on AWS;
Even if a customer chooses a product that is not Amazon, the company continues to market its products from time to time. When someone creates a new database, you see an ad about Aurora, Amazon’s own product. If they choose something else, Amazon will still “recommend” its own products in particular.
Gutmans says AWS works closely with many companies to integrate its products “as seamlessly as possible.”
Amazon’s AWS Las Vegas Developer Conference is the biggest event in the cloud computing industry today.
Amazon’s AWS Developer Conference is one of the world’s biggest events in the world, attracting thousands of people to Las Vegas every year.
The conference’s pressure line item is Jassy’s presentation of the new service. Because new AWS features often bring disaster to startups, the demo also earned the title of “Blood wedding” – a famous scene in the third season of “Game of Thrones.”
“No one knows who the next to die. Corey Quinn of the Duckbill Group says he helps companies manage AWS bills and has written a news report titled “Last Week in AWS.”
At last year’s conference, Amazon launched a new tool, Amazon CloudWatch Logs Insights, to help customers analyze information about their services.
Daniel Vassallo, a former AWS software engineer who helped the company develop the product, said executives wanted to enter the market, but they were worried that people would think Amazon was targeting another company called Splunk, which offers similar tools and is a major consumer of AWS.
Vassallo said Amazon had Splunk preview the new product before the meeting and agreed that Jassy would not announce it during the presentation.
“They are not particularly happy. Of course, who’s going to be happy to be on this? Vassallo , who left Amazon in February , said of Splunk, “But we kept doing it.” ”
Splunk said they had a “solid partnership” with AWS and declined to comment further.
Amazon also has rules for the Developer Conference. Companies have to pay tens or hundreds of thousands of dollars to get a booth, and they must submit banners, brochures, and press releases to Amazon for approval.
Amazon prohibits the use of words or phrases such as “cloudy” (the concept of using two or more cloud platforms), according to a document released by AWS in August setting out marketing guidelines for their work with other companies. An Amazon spokesman said they had stopped the practice.
Companies cannot call themselves “best,” “first,” “unique, ” and “leaders” unless confirmed by an independent research organization.
“Love and hate interweaving relationships”
Saket Saurabh, chief executive of Nexla, a software start-up in Milbray, California, said he had reservations about the partnership with Amazon.
Founded in Tel Aviv, Israel, in 2011, Redis Labs manages free software called Redis, which people can use to quickly organize and update data. Amazon soon offered competitive paid services.
While Redis Labs has a strong competitor, Amazon’s move also confirms the solidity of Redis technology. Since then, the startup has raised $150 m, a clear illustration of the “unpeaceful but close-up” relationship between many software companies and Amazon.
Former Redis Labs employees estimate that Amazon earns $1 billion a year from Redis technology, at least 10 times redis Labs revenue. They say Amazon is also trying to poach employees and sell Redis technology at ultra-high discounts.
AWS promises customers to receive discounts for spending more than a certain amount, but they don’t treat their own and competitor services fairly. Consumption of external services accounts for only half of the consumption of their own services. According to AWS customers, their discounts do not apply to non-Amazon products.
If the customer still selects Redis Labs through AWS, Redis Labs must return 15% of its revenue to Amazon.
For a while, former employees said, Amazon was eager to hire Redis Labs employees, and executives even removed some of Redis Labs’ technicians from the site. But a spokesman for Redis Labs said they did not remember the incident.
Some Redis Labs executives are considering filing antitrust lawsuits against Amazon this year, the former employee said. Others objected, as 80 percent of the startup’s revenue came from AWS customers.
“It’s a love-hate relationship,” says Lena Joshi, a former vice president of marketing at Redis Labs. At the same time, we know that AWS has taken away our business. ”
Redis Labs declined to comment on company revenue or AWS action. It says Amazon offers “important services.”
Not every company sees AWS as a threat. San Francisco-powered startup Databricks uses artificial intelligence to analyze data, and CEO Ali Ghodsi says AWS sales people are increasing sales of their company’s products.
“I didn’t see them doing tricks to stop our development,” he said. ”
But Nexla, a start-up based in Milbray, California, with only 14 employees, and its chief executive, Saket Saurabh, said he had reservations about Amazon.
In August, Amazon began offering a data processing and monitoring service to compete with Nexla. Investors warned him not to give too much information to the tech giant.
However, Saurabh signed a contract with Amazon in September. Why? Because Amazon’s huge sales team can bring a bigger audience to Nexla.
“Do we have a choice?” he said. ”
If Amazon launches competing products, where do startups go from here?
This is an unavoidable problem for all startups. I’m not too worried about tech giants running against startups. In my experience, the threat of tech giants is not the main reason for the failure of start-ups. That said, this is a worrying factor for developer-oriented start-ups.
AWS’ relationship with open source is complex. It’s important to note that both Mongo and Redis must take action against AWS. In addition, these companies face this problem when it comes to making money, and that doesn’t prevent others from using your products. In other words, we should all be thankful that startups can reach such scale and level. Many times, AWS won’t compete with these companies until they reach this scale.