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Is AWS Coming for Your Startup? Notes from re:Invent 2019


    I’m back from re:Invent 2019, Amazon Web Service’s annual user conference. The big news at this year’s conference turned out to be the lack of big news. We didn’t see the splashy product announcements that have dominated recent conferences.

    What we did get, however, was a real sense of how the company decides whether or not to enter new markets. You have to piece together details to see this larger picture, but there was a lot to glean from how Amazon positioned CodeGuru and SageMaker as well as the high-level principles it discussed at the closed-door VC Briefing.

    Decoding the CodeGuru and SageMaker Announcements

    Reading between the lines on the CodeGuru and SageMaker announcements gives us two important details about the AWS strategy.

    CodeGuru: AWS likes the pay-per-request model. The most interesting part of the CodeGuru announcement was not the product itself (other cloud platforms have Cloud Profilers) but how it is being offered: as the pull request path and paid for on a per-request basis. Comments from the VC Briefing suggested that Amazon likes this point of integration and I expect that this is the first of many such offerings.

    SageMaker: AWS likes customers mixing and matching APIs (for now). AWS repositioned SageMaker from a product to a federated brand addressing end-to-end ML tooling. The company sees SageMaker as an umbrella of related APIs and — importantly for startups in this space — supports AWS users mixing and matching first-party and third-party solutions. For now, at least, the door is open to integrating with SageMaker as a third-party service.

    Highlights from the VC Briefing

    The highlight of the conference for me was the VC Briefing, a closed-door session for a small group of venture investors featuring presentations by AWS senior executives. As an investor in companies that are — or may one day become — competitive with AWS, it was incredibly valuable to hear directly from leadership how it evaluates market opportunities.

    The session boiled down to 5 takeaways relevant to investors and founders of technology companies that deliver services through APIs. Amazon did not share a literal checklist (we should all be so lucky) but did provide several points of valuable insight into its strategic and tactical considerations for entering new markets.

    1. AWS isn’t working from a fixed playbook of market targets. The good news for startups is that the company doesn’t have a hit list of market targets. The bad news is that it’s clear there aren’t any limits to how narrow or how vertical Amazon will go with its AI services.
    2. AWS wants to leverage its unique view of internet traffic and activity. One of its stated criteria for entering new markets is whether it has data and insight that no one else has. When that is the case, it then looks at whether it can leverage that data to provide value to its users. This seems particularly relevant in security, which was one of its stated focus areas for 2020.
    3. AWS will not launch managed service providers. The company emphasized their focus on providing better tooling rather than becoming a “body shop” with a consultative offering.
    4. Internal solutions can become products. AWS may enter a market after developing an internal solution of sufficient quality to compete with existing solutions. We saw this with Amazon Connect, the call center product that launched two years ago after Amazon realized they weren’t satisfied with existing call center solutions.
    5. AWS will opportunistically target markets where users are dissatisfied. AWS is monitoring adjacent markets for customer dissatisfaction — in terms of functionality or price — and would consider entering into such a market opportunistically if it feels it can deliver a better solution. Scale discussed similar dynamics, which we refer to as “adjacent behemoth bundling“, in an article on the cloud transition over the next five years.

    This list isn’t comprehensive, nor should anyone take it as such. But given its reach and proven ability to enter markets quickly, any insight into whether a particular market is likely to face a new AWS offering is valuable.

    My hat goes off to AWS for pulling back the curtain on its thinking during the VC Briefing. At the end of the day, it’s encouraging to see there are still plenty of spaces where startups can thrive alongside the AWS juggernaut.

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