Why Amazon is eating the world

Zack Kanter, a startup founder contributing to Techcrunch has clearly studied Amazon in detail.  As a result, his analysis is better and more subtle than the usual Amazon guff.  The idea of using an external market to avoid internal bloat is fascinating.  Compare and contrast with companies that want to “outsource”.

In the 10+ years since AWS’s debut, Amazon has been systematically rebuilding each of its internal tools as an externally-consumable service. A recent example is AWS’s Amazon Connect – a self-service, cloud-based contact center platform that is based on the same technology used in Amazon’s own call centers. Again, the ‘extra revenue’ here is great – but the real value is in honing Amazon’s internal tools.

If Amazon Connect is a complete commercial failure, Amazon’s management will have a quantifiable indicator (revenue, or lack thereof) that suggests their internal tools are significantly lagging behind the competition. Amazon has replaced useless, time-intensive bureaucracy like internal surveys and audits with a feedback loop that generates cash when it works – and quickly identifies problems when it doesn’t. They say that money earned is a reasonable approximation of the value you’re creating for the world, and Amazon has figured out a way to measure its own value in dozens of previously-invisible areas.

But this much is obvious – we all know about AWS. The incredible thing here is that this strategy – in one of the most herculean displays of effort in the history of the modern corporation – has permeated Amazon at every level. Amazon has quietly rolled out external access in nooks and crannies across their entire ecosystem, and it is this long tail of external service availability that I think will be nearly impossible to replicate.