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.
“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.
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.”
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