Paul Wallbank – Brilliant Communications

Tag: amazon

  • Monopolies and innovation

    Monopolies and innovation

    An interview with Media scholar Jonathan Taplin, author of the new book Move Fast and Break Things, on the Pro-Market website poses some interesting questions about the direction of the digital economy and innovation as market power coalesces around the big four internet giants. 

    This power is particularly marked in online media with Facebook and Google pocketing most of the global advertising spend which leaves little for content creators.

    I kept coming back to these three—Google, Facebook, and Amazon. All have extraordinary market shares. Google has an 88 percent market share in search advertising and an 80-plus percent market share in Android. Amazon has a 74 percent market share in e-books, and Facebook controls 70-plus percent of mobile social media when you add Instagram, Messenger, and WhatsApp. What more empirical evidence does one need to prove concentration?

    Over the past decade we’ve seen the power of the big four online gatekeepers growing although ironically Apple’s light seems to be dimming as the company’s innovative vision fades following Steve Jobs’ passing.

    The monopoly problem is broader than just the tech industry though, as The Atlantic pointed out last year, market dominating corporations are suppressing innovation throughout the US. The problem is even greater in Australia and some other countries.

    The rise of the monopolies shouldn’t be a surprise as the neo-liberal policies of the United States and most of the western world for the last 40 years have been largely focused on increasing the wealth and power of corporations and their managers. It’s fair to say those policies have been successful.

    Where we go next is the big question. An economy dominated, and suffocated, by a handful of well connected and powerful corporations is not going to drive wealth creation, particularly in a world where more businesses functions are being automated.

    One short term step may be to break up the monopolies, something that Taplin himself suggests.

    This just goes to show how quickly the ground is shifting. I now have a piece coming out in the New York Times that explores the idea of breaking them up, but when writing the book, I tried to be reasonable. I thought no one would buy the idea of breaking them up. And now people are raising that idea.

    While that’s a start there’s vastly more that needs to be done from bankruptcy reform – the last 40 years have seen governments make it harder for small businesses and households to seek financial protection – through to intellectual property reform.

    Generational change may turn out to be the solution though as the lucky generation of business and government leaders – those born between 1935 and 55 – responsible for the ideology and policy that allowed such an accumulation of corporate power move on.

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  • Surviving Amazon’s onslaught

    Surviving Amazon’s onslaught

    The long awaited launch of Amazon in Australia seems to be finally happening with reports the giant is scouting locations for logistics centres for a late 2018 launch.

    While some are predicting a retail apocalypse, not all are convinced Amazon will do well. Australia doesn’t have a catalog culture buying culture like the United States and, as german supermarket chain Aldi found, the nation’s high property prices and restrictive zoning rules makes acquiring sites difficult.

    A further impediment for Amazon in Australia is the last mile with Australia Post dominating the delivery business, despite its mediocre service, and the dominance of incumbent retailers in the suburbs where most Australians live means the US giant isn’t guaranteed success.

    Whether Amazon’s entry into a market does mean a retail apocalypse is also another question, while its clear the mall era is drawing to close there are plenty of success stores with chains like Ulta Beauty, Sephora and Kiehls – not to mention the Apple Store – thriving despite Amazon’s growth over the past twenty years.

    In the Australian context, a bigger question should be around why local equivalents haven’t thrived with Billabong, Pumpkin Patch and Kathmandu all failing while the established majors have barely glanced at overseas markets – Harvey Norman and Westfield being the stand out exceptions, although the former hasn’t been a great success.

    Even in Amazon’s original market of bookselling, big chains like Borders have fallen victim but local independent bookshops have survived and grown despite the online threats. So local retailers can weather an Amazon onslaught.

    Another benefit of Amazon starting in Australia is to encourage new business, particularly given the US giant is rumoured to be focusing on groceries as it gives new entrants to the market an opportunity to enter without having to deal with the stultifying duopoly that dominates the market.

    One thing is clear though, Australian retailers have been slow in moving into online and international markets, probably due to the luxury of catering to consumers in an economy that hasn’t been troubled by recession for a generation.

    The year’s warning that Amazon will be opening shop is a warning for Australian business to lift their game and compete. Those who don’t won’t have any excuses.

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  • Uber’s grand experiment

    Uber’s grand experiment

    Yesterday reports emerged that the icon of the disruptive economy, ride sharing service Uber, lost 1.2 billion dollars in first six months of this year.

    Those losses show disruption doesn’t come cheap, although settling the damaging and costly battle with China’s Didi Chuxing will help the company’s cash burn.

    Despite on track to lose at least two billion dollars this year, the company still has a substantial war chest having raised $8.7 billion dollars in debt and equity raisings over the last eighteen months.

    While impressive, that war chest will only last four year at current rates and, given Uber’s already sky high 60 billion dollar valuation and the increasingly hostile Silicon Valley fund raising environment, it will be a relief to investors that the China battle appears settled.

    There remains though an ongoing weakness in Uber’s business however with the company reportedly spending hundreds of millions a year in subsidies to drivers in key markets. How sustainable their business is remains to be seen.

    In many respects Uber is following the Amazon example of beating down competitors by selling products at deep losses thanks to its access to capital and investors’ tolerance for building marketshare.

    As we’ve seen with Amazon, that tactic has been wonderfully effective both in retail and in providing cloud services. For customers and the economy though, the reduced choices in the marketplace may end up not being in their interests.

    Uber is an interesting experiment in how far the Amazon model can be pushed, for cities and states dealing with a deeply disrupted taxi and city transport network the results of that experiment may be telling.

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  • How cloud computing is making innovation a commodity

    How cloud computing is making innovation a commodity

    Being on the public cloud is a competitive advantage believes Xero CEO Rod Drury.

    Over the past few weeks I’ve been writing a lot about cloud computing. One of the themes being pushed by many incumbent IT companies – such as Dell and EMC recently at their Las Vegas conference – is that a hybrid model of computing is developing where certain functions are given to public cloud providers while others are bought back in house.

    Rod Drury, the CEO and founder of Xero, has been one of the greatest critics of this ‘hybrid’ model of computing and during an interview with him yesterday I asked him about this view that companies are bring IT services back in house.

    “I completely disagree with that,” says Drury. “We’ve been on a two year journey moving from our own hosted environment to AWS. The reason for that is important.”

    “We have a trillion dollars worth of transactions for the last twelve months sitting on our servers, the next stage is to apply some of  the Big Data, machine learning and artificial intelligence type services. If you’re sitting there with your own private cloud, you have to invest in those technologies.”

    “The benefit of being on the Amazon cloud – and this is part of the big battle between Amazon, Microsoft and Google – is you really have to be on that platform to take advantage of the commodity innovation that is in those platforms.”

    “Our understanding is our incumbent competitors are still working on migrating their desktop platforms and their own data centres to cloud and haven’t made that investment where they get access to the next generation of technology.”

    “So we think we’ve built a sustainable competitive advantage by being on AWS, we see Salesforce have announced they are getting on AWS, and you really have get in there because of what’s happening.”

    That’s a clear view from Rod Drury and one that most ‘cloud native’ businesses will endorse. Despite the risks of vendor lock-in, companies like Xero are choosing the cloud vendors because of the access to tools and services.

    For Amazon’s competitors, from the small services to the major providers such as Microsoft Azure and Google, the challenge is going to be developing and offering services that can compete with AWS.

    In many respects the cloud computing world is beginning to resemble the desktop marketplace 25 years ago where Microsoft dominated and controlled the sector. Whether Amazon dominating today is in the interests of today’s cloud native companies remains to be seen, certainly though Xero’s Rod Drury seems to be happy about it.

    Drury’s point though about innovation as a commodity is important though and key for businesses like his that have to adapt to changing markets quickly. Maybe that increased flexibility is the key tradeoff when dealing with the AWS juggernaut.

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  • Getting academics onto the cloud

    Getting academics onto the cloud

    Offering free products to students and academics has long been a tactic used by software companies to build their market presence. The current fight for dominance in the cloud is seeing the same tactics being used.

    Last week I had the opportunity to talk to Amazon Web Services’ Glenn Gore about his company’s academic support program.

    Part of that conversation ended up in a story for The Australian about how researchers are now using cloud computing services and it’s worthwhile looking at how AWS are using this program to cement their products’ market positions.

    “We work with the majority of universities across Australia,” Gore said. “It’s part of an international focus around how we support the education sector in general.”

    In some respects AWS’s behaviour isn’t new, for years Microsoft, Autodesk and Adobe have had programs offering free or deeply discounted products for academic or student use. The success of those schemes in becoming defacto industry standards is no small reason why these companies have dominated many sectors.

    Microsoft themselves have the similar Bizspark program for tech startups and it’s easy to see how that initiative is helping push Azure’s adoption into a field that has been dominated by AWS.

    One of the drawbacks though with cloud computing services is the risk of ‘sticker shock’ where customers end up with big bills. One of the universities I spoke to in researching the story recounted how 0ne of their faculties was presented with a huge AWS invoice because their engineers didn’t provision the services correctly.

    This is where AWS’s team steps in with advice for researchers, “in the case of Koala Genome Project use the on-demand model, the standing pricing model for the cloud,” recounts Gore in pointing out the nature of their work could use spot-pricing to take advantage of cheaper prices in off-peak times. “As a result of making that one change they were able to do eighty percent more research.”

    Getting more research time is always attractive for researchers and Dr Rebecca Johnson who leads the Australian Museum’s part of the koala consortium was particularly effusive about the support from AWS staff,

    “What we have been able to access via this partnership with AWS is compute time and compute capacity that we just would not have had access too,” Dr Johnson said in a media release. “It would have cost us thousands and thousands of dollars to create and we just would not build such a computer system these days. You would not create your own computer infrastructure as we would only use a fraction of it anyway. So, it is great for us to piggy back off these already built systems.”

    Being a relatively small institution, the Australian Museum is a good example of how cloud computing can work for those without the resources of big universities or corporations in the same way small businesses and startups can access resources formerly only available to enterprises.

    Amazon’s programs though show the Microsoft model of getting students and startups onto their systems early pays dividends. It’s good for academic institutions but one wonders whether it’s also another form of vendor lock in.

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