Why AWS is the biggest threat to SaaS

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Amazon web services started off as an internal Amazon project as a way to cover up expenses of Amazon’s growing server and datacenter expense, a means to lease out the capital intensive servers that Amazon was aggressively investing in to support its exponentially traffic of ecommerce business. It was , and critics would agree, one of the smartest business decision pulled by a company in recent past. Most of other players were talking about cloud and had some offerings to customers, but it wasn’t taken as a standalone business opportunity before aws arrived to the scene. And before players like Google or Microsoft could make sense of what was happening, it had swept the lion’s share of the market which it created in the first place. Driven by the Bezoic ethos of of earning small amount of from large number of customers instead of large amount of money from small number of players, the rules of the cloud game were changed for ever. AWS became the go to cloud vendor for small startups to big enterprises who hosted their entire infrastructure on it. Companies started doing what was important for them , focussing on their customers and applications and not the arduous dilapidated process of hosting and managing their own servers and infra.

The AWS blitzkrig didn’t just stop there, it was just the ‘day 1’. After having all these companies hooked and lockedin on to its cloud platform , what followed was series of complementary services like application analytics, amazon’s db services etc. which developers could just plug and use with tight integrations to their existing stack. It was orders of magnitude better experience for tech teams which also happened to be incredibly cost effective. But in the words of CEO ‘ customers are eternally and beautifully dissatisfied’ and dissatisfied they were because devOps as a process was still shackled in the clutches of old painful and convoluted deployment processes. Recently, AWS announced the launch of CodeStar which is their amazingly simple managed deployment and scaling service for major tech stacks. It was a knockout punch – the scale , cost effectiveness , reliability of AWS and convenience of Heroku or Python Anywhere. It gives you toolset and workflow process to manage your entire devOps lifecycle. Starting from managing different versions of your code, to continous deployment, to creating and managing the entire environment. As one of the extension add ons it gives option to connect to Jira , the quintessential issue tracker. More than the integration it displaces three other products of Atlassian ( the parent company of Jira) namely – Bitbucket – their version controlling service, bamboo – their continous integration Jenkins killers. This gives out an evident pattern that AWS wants to own your entire development workflow and it is moving up the stack  from just bare metal servers. What does this means for other development tools in the toolbelt of developers, will AWS build and claim top market share in them as well ? What does this mean for all the companies selling add ons on the AWS Marketplace, are they doing just market research for AWS and they suffer the eventual death or wait in helplessness till the time the ‘master’ will come for their lunch too. It is a delicate balance, always is, to build the entire ecosystem. There are hundreds of forces and powerplays happening at various levels, you have to empathetic to the stakeholders and your platform partners whose revenue depend upon you. And if the experience of strongarmed tactics that Amazon has displayed in handling the interests of its retail partners, and historical ambition and philosophy of being focussed on customers and not so much on partners – companies have all the reason to worry.

Not only this, AWS recently launched Business Productivity category among list of its services with products like docs , mail and videoconferencing which again brings about the topic conflict of interest. But this is not something new, Microsoft has been doing it with its office and google has its business productivity suite and parallely they have their own enterprise cloud offerings. But the scale and reach of AWS is what makes this trend something to worry about for Saas companies. Amazon connect is the perfect example of why AWS would be coming soon for your Saas product’s bread and butter. It is the product which Amazon uses to manage its own customer service. Connect directly targets companies like Zendesk or Zoho Desk which 1000s of businesses use to manage their customer service operation and ironically use AWS to host their services. Now the interesting part is that AWS doesn’t charge you for the use of software , but its pricing is based on the underlying cloud infra you’d be using. The business model of al these saas companies which charge customer for their hard made web software and make a profit after paying the hosting cost to AWS – goes to dump. The flywheel of scale is rolling and crushing everything small or medium that comes its way.  If you are a SaaS company this is something that should make you paranoid and as the master of management and platform play Andy Grove has said ‘ Only the Paranoid Survives’.

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