It is important to note that some investors are pressuring Jeff Bezos to spin out Amazon Web Services or AWS as a standalone company, which is a valid concern and demand considering the multifaceted domination of the company in many key industries. AWS, as “the largest cloud computing provider, has morphed into an indispensable backbone of the internet. Many organizations, ranging from the CIA to Wikipedia and Netflix, cannot function without AWS” (Rothaermel, 2019, p. 9). In other words, there is a clear conflict of interest when it comes to ensuring that AWS is not used as powerful leverage over not only its direct competitors but also rivals in online retailing or streaming. It is difficult to be trustful in Amazon’s ability to be able not to consider using its business relations as a pressure point on other important matters for the company. For example, Netflix uses AWS, but Amazon also has a streaming service, which puts Amazon in a position of wanting to use the former’s dependency on AWS. Amazon can easily use data about Netflix stored in AWS servers to improve Amazon’s streaming service.
Moreover, AWS is the most lucrative and profitable business element of Amazon, which is used to fund and invest in other company endeavors. Therefore, the most significant implication of creating this standalone company for Amazon would mean that other businesses of the company need to become self-sufficient and not reliant on AWS’s profits. The biggest pitfall would be reflected in an increase in prices of goods on non-AWS since they would need to make them at least not lose money. Subsequently, with increases in prices, Amazon would lose its key competitive advantage over other companies, such as Walmart, because the former was at least comparable with the latter in the price department. However, now, the only competitive advantage would be centered around customer experience and satisfaction as well as quick delivery.
In the case of positive implications of creating AWS as a standalone company, it would become one of the most valued and profitable enterprises. Since it is evident that AWS itself is able to source the entirety of the company, such as retail, which is essentially either losing money or making no substantial profit, the lack of necessity to fund their flawed business models would free AWS from this burden. It could even conduct a major reinvestment activity to expand its existing servers, make the service even cheaper, and monopolize the entire sector.
Another major advantage of breaking down Amazon by separating AWS is the fact that it would remove the current hostility towards a monopoly-centered strategy of the company. It is possible that AWS might be regarded as a public good, which would experience a specific set of regulations. However, Amazon without AWS would be faced with mostly fair competition, which would undoubtedly improve its current reputation as a brand and make the company to be perceived less in a negative light, especially by lawmakers. Considering all the benefits and drawbacks of dismantling the company into AWS and Amazon, it is evident that it will not happen. AWS is too valuable and too important for Amazon to lose and allow others to regulate it as a public good. Amazon’s strategy depends on having something, such as AWS, not only to fund its business endeavors but also to make other parties reliant on it.
Reference
Rothaermel, F. T. (2019). Amazon.com, Inc. McGraw Hill.