By Jay Greene and Laura Stevens
The battle between the King Kong and Godzilla of retail has
moved into the cloud.
Wal-Mart Stores Inc. is telling some technology companies that
if they want its business, they can't run applications for the
retailer on Amazon.com Inc.'s leading cloud-computing service,
Amazon Web Services, several tech companies say.
Amazon's rise as the dominant player in renting on-demand,
web-based computing power and storage has put some competitors,
such as Netflix Inc., in the unlikely position of relying on a
corporate rival as they move to the cloud.
Wal-Mart, loath to give any business to Amazon, said it keeps
most of its data on its own servers and uses services from emerging
AWS competitors, such as Microsoft Corp.'s Azure.
Wal-Mart uses some tech vendors' cloud apps that run on AWS,
said Wal-Mart spokesman Dan Toporek. He declined to say which apps
or how many, but acknowledged instances when Wal-Mart pushed for
AWS alternatives.
"It shouldn't be a big surprise that there are cases in which
we'd prefer our most sensitive data isn't sitting on a competitor's
platform, " he said, adding that it's a "small number."
An Amazon spokeswoman referred to Wal-Mart's moves as attempts
to "bully" tech suppliers. "Tactics like this are bad for business
and customers," the spokeswoman said.
Snowflake Computing Inc., a data-warehousing service, was
approached by a Wal-Mart client about handling its business from
the retailer, Chief Executive Bob Muglia said. The catch: Snowflake
had to run those services on Azure.
"They influence their vendors, which has influence on us," Mr.
Muglia said of Wal-Mart.
The San Mateo, Calif., company had been developing an Azure
offering, and "Wal-Mart has expedited our work," said Mr. Muglia, a
former senior Microsoft executive. Snowflake won the business from
Wal-Mart's client.
Other large retailers also have requested, as Wal-Mart did, that
service providers move away from AWS, according to technology
vendors that work with retailers.
Retailers "are all very particular, and some are more particular
than others," said Kevin Howard, CEO of Adroit Worldwide Media
Inc., a retail-technology provider that works with sensitive data
including automated inventory tracking and provides pricing-content
management. "There are retailers that have specifically requested
that we sit on Azure," he said, declining to name them.
Amazon said a number of retailers it competes with use AWS, such
as GameStop Corp.
Wal-Mart and Amazon have sparred for years. Last week, Amazon
sent shockwaves through the grocery industry -- one of Wal-Mart's
biggest businesses -- by announcing a $13.7 billion deal to buy
Whole Foods Market Inc. That came after Wal-Mart in recent years
slashed grocery prices in part to stanch an Amazon's online
incursion into the business. More recently, Amazon lowered its
Prime membership fee by nearly half for people who obtain
government assistance, targeting a Wal-Mart stronghold.
Their cloud battle takes aim at the financial advantage AWS
gives Amazon. The company's global retail business operates on thin
margins, but they are offset by the enormous profits AWS generates.
In the first quarter, AWS posted $890 million in operating income,
accounting for 89% of overall operating income, even as AWS's $3.66
billion in net sales accounted for just 10% of the company's
total.
The notion AWS supports Amazon's retail business is incorrect,
the spokeswoman said, citing the company's operating profit in its
North American retail business.
While Wal-Mart's efforts aren't likely to staunch AWS's growth,
it could boost rivals.
"People jump through hoops to do business with Wal-Mart all the
time," said Robert Hetu, an analyst with the research firm Gartner
Inc. "That should absolutely accelerate the competition from
Azure."
It has, Microsoft said. "The nudge from Wal-Mart has been pretty
consistent," said Judson Althoff, executive vice president in
charge of Microsoft's global sales to business customers.
Microsoft had been the primary provider of cloud infrastructure
to Jet.com Inc., the online retailer Wal-Mart bought for $3.3
billion last September. The retail giant named Jet's founder as its
e-commerce chief. Today, Wal-Mart is among the largest users of
Azure, Mr. Althoff said.
The fight helped it get cloud business from the data-analytics
company Nielsen Co., he added. "That's a direct customer that came
because of Wal-Mart," Mr. Althoff said.
Alphabet Inc. declined to say whether Google Cloud, the No. 3
cloud-infrastructure provider, has benefited from the spat between
Wal-Mart and Amazon.
Lofty Labs, a software-development firm in Fayetteville, Ark.,
worked with a retail-analytics consulting company to build
cloud-based forecasting tools for Wal-Mart. To win the business,
Lofty Labs had to develop the application for Azure.
"That was a deal breaker," Lofty Labs President Casey Kinsey
said. The service is the only one Lofty Labs ever developed to work
on Azure. "Everybody knows that Wal-Mart will not play ball with
you if you use AWS."
Write to Jay Greene at Jay.Greene@wsj.com and Laura Stevens at
laura.stevens@wsj.com
(END) Dow Jones Newswires
June 22, 2017 02:48 ET (06:48 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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