{"id":4989,"date":"2019-12-15T14:09:25","date_gmt":"2019-12-15T12:09:25","guid":{"rendered":"https:\/\/www.dazzlepop.net\/site\/?p=4989"},"modified":"2019-12-15T14:14:19","modified_gmt":"2019-12-15T12:14:19","slug":"prime-leverage-how-amazon-wields-power-in-the-technology-world","status":"publish","type":"post","link":"https:\/\/www.dazzlepop.net\/site\/prime-leverage-how-amazon-wields-power-in-the-technology-world\/","title":{"rendered":"Prime Leverage: How Amazon Wields Power in the Technology World"},"content":{"rendered":"
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Software start-ups have a phrase for what Amazon<\/a> is doing to them: \u2018strip-mining\u2019 them of their innovations.<\/p>\n\n\n\n

SEATTLE \u2014 Elastic, a software<\/a> start-up in Amsterdam, was rapidly building its business and had grown to 100 employees. Then Amazon came along.<\/p>\n\n\n\n

In October 2015, Amazon\u2019s cloud computing arm announced it was copying Elastic\u2019s free software tool, which people use to search and analyze data, and would sell it as a paid service. Amazon went ahead even though Elastic\u2019s product, called ElasticSearch, was already available on Amazon.<\/p>\n\n\n\n

Within a year, Amazon was generating more money from what Elastic had built than the start-up, by making it easy for people to use the tool with its other offerings. So Elastic added premium features last year and limited what companies like Amazon could do with them. Amazon duplicated many of those features anyway and provided them free.<\/p>\n\n\n\n

In September, Elastic fired back. It sued Amazon in federal court in California for violating its trademark because Amazon had called its product by the exact same name: ElasticSearch. Amazon \u201cmisleads consumers,\u201d the start-up said in its complaint. Amazon denied it had done anything wrong. The case is pending.<\/p>\n\n\n\n

Not since the mid-1990s, when Microsoft dominated<\/a> the personal computer industry with Windows, has a technology platform instilled such fear in competitors as Amazon is now doing with its cloud computing arm. Its feud with Elastic illustrates how it brandishes power in that technical world.<\/p>\n\n\n\n

While cloud computing may appear obscure and wonky, it underlies much of the internet. It has grown into one of the technology industry\u2019s largest and most lucrative businesses, offering computing power and software to companies. And Amazon is its single-biggest provider.<\/p>\n\n\n\n

\"Jeff
Jeff Bezos, Amazon\u2019s chief executive, once called A.W.S. an idea \u201cno one asked for.\u201dCredit…Sean Gallup\/Getty Images<\/figcaption><\/figure>\n\n\n\n

Amazon has used its cloud computing arm \u2014 called Amazon Web Services<\/a>, or A.W.S. for short \u2014 to copy and integrate software that other tech companies pioneered. It has given an edge to its own services by making them more convenient to use, burying rival offerings and bundling discounts to make its products less expensive. The moves drive customers toward Amazon while those responsible for the software may not see a cent.<\/p>\n\n\n\n

Even so, smaller rivals say they have little choice but to work with Amazon. Given the company\u2019s broad reach with customers, start-ups often agree to its restrictions on promoting their own products and voluntarily share client and product information with it. For the privilege of selling through A.W.S., the start-ups pay a cut of their sales back to Amazon.<\/p>\n\n\n\n

Some of the companies have a phrase for what Amazon is doing: strip-mining software. By lifting other people\u2019s innovations, trying to poach their engineers and profiting off what they made, Amazon is choking off the growth of would-be competitors and forcing them to reorient how they do business, the companies said.<\/p>\n\n\n\n

All of this has fueled scrutiny of whether Amazon is abusing its market dominance and engaging in anticompetitive behavior. The company\u2019s tactics have led several rivals to discuss bringing antitrust complaints against it. And regulators and lawmakers are examining its clout in the industry.<\/p>\n\n\n\n

\"Matthew
Matthew Prince, chief executive of Cloudflare, competes with Amazon to offer services that protect websites from attacks.Credit…Jason Henry for The New York Times<\/figcaption><\/figure>\n\n\n\n

\u201cPeople are afraid that Amazon\u2019s ambitions are endless,\u201d said Matthew Prince, chief executive of Cloudflare, an A.W.S. competitor that protects websites from attacks.<\/p>\n\n\n\n

A.W.S. is just one prong of Amazon\u2019s push to dominate large swaths of American industry. The company has transformed retailing, logistics, book publishing and Hollywood. It is rethinking how people buy prescription drugs<\/a>, purchase real estate<\/a> and build surveillance<\/a> for their homes and cities.<\/p>\n\n\n\n

But what Amazon is doing through A.W.S. is arguably more consequential. The company is the unquestioned market leader \u2014 triple the size of its nearest competitor, Microsoft \u2014 in the seismic shift to cloud computing. Millions of people unknowingly interact with A.W.S. every day when they stream movies on Netflix or store photos on Apple\u2019s iCloud, services that run off Amazon\u2019s machines.<\/p>\n\n\n\n

Jeff Bezos, Amazon\u2019s chief executive, once called A.W.S. an idea \u201cno one asked for<\/a>.\u201d The service began in the early 2000s when the retailer struggled to assemble computer systems to start new projects and features. Once it built a common computer infrastructure, Amazon realized other companies needed similar capabilities.<\/p>\n\n\n\n

Now companies like Airbnb and General Electric essentially rent computing from Amazon \u2014 otherwise known as using the \u201ccloud\u201d \u2014 instead of buying and running their own systems. Businesses can then store their information on Amazon machines, pluck data from them and analyze it.<\/p>\n\n\n\n

For Amazon itself, A.W.S. has become crucial. The division generated $25 billion in sales last year \u2014 roughly the size of Starbucks \u2014 and is Amazon\u2019s most profitable business. Those profits enable the company to plow money into many other industries.<\/p>\n\n\n\n

In a statement, Amazon said the idea that it was strip-mining software was \u201csilly and off-base.\u201d It said it had contributed significantly to the software industry and that it acted in the best interest of customers.<\/p>\n\n\n\n

Some tech companies said they had found more customers through A.W.S.; even some companies that have tangled with Amazon have grown. Elastic, for instance, went public last year<\/a> and now has 1,600 employees.<\/p>\n\n\n\n

But in interviews with more than 40 current and former Amazon employees and those of rivals, many said the costs of what the company was doing with A.W.S. were hidden. They said it was hard to measure how much business they had lost to Amazon, or how the threat of Amazon had turned off would-be investors. Many spoke on the condition of anonymity for fear of angering the company.<\/p>\n\n\n\n

In February, seven software chief executives met in Silicon Valley and discussed bringing an antitrust lawsuit against the giant, said four people with knowledge of the gathering. Their grievances echoed a complain<\/a>t by vendors who use Amazon\u2019s shopping site: Once Amazon becomes a direct competitor, it is no longer a neutral party.<\/p>\n\n\n\n

The C.E.O.s did not press forward with a legal action, partly out of concern that the process would take too long, the people said.<\/p>\n\n\n\n

Now regulators are approaching some of Amazon\u2019s software rivals. The House Judiciary Committee, which is investigating the big tech companies, asked Amazon in a September letter<\/a> about A.W.S.\u2019s practices. The Federal Trade Commission, which is also investigating Amazon<\/a>, has questioned A.W.S. competitors, according to officials at two software companies who were called in but were not authorized to discuss the matter.<\/p>\n\n\n\n

What Amazon is doing to software start-ups is unsustainable, said Salil Deshpande, founder of Uncorrelated, a venture capital firm.<\/p>\n\n\n\n

\u201cIt has intercepted their monetization, it has forcibly wrestled control of software from their owners and it has siphoned customers to its own proprietary services,\u201d he said.<\/p>\n\n\n\n