Research 2.0

Thursday, November 23, 2006

Virtual Amazon?

Bezos has created some buzz and head scratching with his infrastructure initiatives lately. Last year we explored and wrote about A9 and Mechanical Turk which have not really taken the world by storm. So it is with some trepidation that investors greet initiatives like EC2 and S3. However it's hard to believe that Bezos is just being unfocused or distracted into a sideline business as the CEO of a major company.

We've been provoked by the idea that Amazon can go much further and offer a very complete array of outsourced services that might represent the kind of turn-key virtualized company often conceived and seldom realized.

Despite the efforts of eBay, Yahoo and Google it's still not very easy to instantiate a robust online business of any sort, digital or physical.

To get an inkling and have a little fun we decided to build Our Bookstore using Amazon's new store tool. The point of it is to get thinking about what Amazon could do if they really deliver on the vision of being able to offer a complete solution for a business. Although this simple example uses existing Amazon products it could be extended and generalized easily enough to support custom products or even just designs which are then sourced from global suppliers (think Alibaba), delivered to Amazon and ultimately shipped to end customers.

There's an open question about the shape of the big wave of innovation and investment around virtualization and open source. One possibility is that it will take the form of typical business process outsourcing but with much more disruptive price points and cycle times. If this is true and Amazon can execute, it would provide a real opportunity for them.

Right now it's mostly rhetoric so we're going to push on EC2, S3 and their other services with some force and see what we find. Combined with some margin analysis it will give us a foundation for measuring their progress and determining whether or not it will make a difference for the company and investors.