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Summary:

Their story arcs aren’t exactly the same, but the strategies employed by Apple and Amazon Web Services to reach their respective pinnacles seem very similar, with result being that users are willing to pay a premium and accept some lock-in as consequences of choosing either company.

iphone happy

Their story arcs aren’t exactly the same, but the strategies employed by Apple and Amazon Web Services to reach their respective pinnacles (not that either is there yet) seem very similar, with result being that users are willing to pay a premium and accept a certain degree of lock-in as consequences of choosing either company. But why, when the core technologies in their respective spaces are all but commodities at this point? In both cases, it’s about building products so feature-rich and reliable that once people experience them, it’s difficult to go back. It’s about adding to and packaging those commodities in such a way that they’re greater than the sum of their parts.

On a personal level, for example, I recently replaced my old (and questionably reliable) Dell PC with an iMac, and I couldn’t be happier. Yes, I paid a premium in terms of horsepower — I could have purchased a PC with identical processor and memory specs, and a huge hard drive, for less money — but I learned in a hurry that what I’ve heard so many times about Apple product really is true: it’s all about the experience. My iMac came loaded with helpful tools — not just a lot of bloatware — and the performance is second to no PC I’ve ever used. I’d complain about the lack of an HDMI output, but the 27-inch screen — which I didn’t have to buy separately — does the job of an HDTV just fine if I really can’t make the short walk to my living room to watch a movie. Unlike even the supposedly great Windows 7, which has been an absolute nightmare for me, Mac OS X just works, and is very intuitive even after years of slavish PC patronage on my part. Certainly, the story has been the same for millions of Mac, iPod, iPhone and, now, iPad users around the world. There’s a reason so many people are willing to pay the Apple premium, every new mobile release is greeted with coverage comparable to a presidential election and the growth of Apple’s computer sales significantly outpaced the competition in 2010, and it’s not just to be part of the hip crowd.

Source: Cloudscaling

AWS appears to be taking the same tact in the cloud computing space: build a product that works and keep making it better.  I wrote yesterday about AWS’s new Virtual Private Cloud features, which are just the latest in an endless parade of new features, price adjustments and services coming out of the cloud computing leader. At last week’s Cloud Connect event, Cloudscaling CTO Randy Bias presented his case that AWS is running away with the cloud market based in large part on its rapid release cycle of, in the past two years, an average of five to six “significant” additions each month (it’s on pace for 66 in 2011). (His numbers map closely with a count I did before last year’s Structure event, so I know they’re accurate.) The result of AWS’s rapid release cycle is a platform that takes cloud computing beyond mere VMs, storage and a database, instead, giving developers quite literally anything they might need for their particular applications. Amazon CTO Werner Vogels hosts his entire blog within the Amazon S3 storage service, while others, like Netflix, are running serious number-crunching tasks using Elastic MapReduce. Want GPUs, a CDN or a custom DNS service, AWS has those, too, and everything is designed to work together. Depending on the use case, AWS users might end up paying more for their cloud computing than if they went elsewhere or if they ran it in-house, but it might require a lot more effort to achieve even a comparable experience.

Aside from potentially higher prices, Apple and AWS users also must concede to a certain degree of lock-in, although it’s not necessarily technological. In Apple’s world, it might come in the form of apps designed solely for its devices that either aren’t available elsewhere or for which users might have to repurchase for another platform, or it might be the considerable effort required to learn the Android OS and calibrate your device after years of iOS use. In AWS’s world, I would argue that lock-is primarily of the latter type. To the degree it’s possible to build the same type of application architecture in another provider’s cloud, it likely will require using more third-party services (through a partner program or otherwise) and, possibly, having to learn entirely new skill sets (e.g., Hadoop) in order to just run software atop the other provider’s resources where AWS offered a service. Still, there are plenty of innovations happening outside of Apple’s and AWS’s relatively closed worlds, but users considering making the switch have to decide whether it’s worth giving up the proprietary features they’ve come to rely upon. Is it better to live withing the safety of the walled fortress or to be free?

In many situations, it’s probably a lot better to be free. There are countless very valid reasons to choose other options, price-performance ratios, an avoidance of any real lock-in and security (especially in the case of cloud computing) being chief among them in most cases. There’s definitely something to be said about being able to open up that big PC tower and being able to tweak until your heart’s content, or about being able to hardware manufacturers while keeping the same OS, or about knowing that you could simply pick up, so to speak, your application or data and move it elsewhere without much effort. But for users  — and that includes a growing number of large business — that just want a single product that just makes their lives easier, price and consequences be damned, it’s getting very difficult to compete with Apple and AWS.

Image courtesy of Flickr user jyri.

  1. > users considering making the switch have to decide whether
    > it’s worth giving up the proprietary features they’ve come to
    > rely upon.

    You can simplify your article: Apple and Amazon have studied B.F. Skinner and figured out how to create addicts (Pavlov would be impressed). We’ve seen this refrain before. Humans with long-term horizon investment thinking skills, and who are capable of controlling rat-like behavior, will succeed by choosing open platforms and systems that give them real options.

    1. Isn’t it possible, though, that a large number of people or organizations don’t need all those options, and that a product that just works, or that keeps adding targeted features, more than makes up for any increase in price or lock-in? It might depend on just how important the IT really is to achieving any larger objective.

      1. @Derrick

        Of course not, Derrick… when Eddie says the word “open”, it just sounds so pure and right, it almost makes me tear up! Who cares about pesky business requirements when you have “open”.

        All things considered though, terms like “open platforms” and “open systems” don’t make much rational sense, unless they’re extremes portrayed in a Venn diagram. Otherwise, it’s only so much empty ideological posturing. And a shame. Words have to mean something.

  2. Mohammad Neyaz hasan Thursday, March 17, 2011

    sure they will follow the trend go reach the users. Nice comment Eddie.

  3. Thanks for the piece of comedy. I made the mistake once of downgrading to a Mac never again. Over priced, lack of freedom and overall poor user experience. I am sure that Amazon would not want to be compared to Apple a company that spiked in the phone market and is now stagnant and being out paced by Android. A dead end in the computer market where it has never been more than a bit player. In the slate market it has an early advantage missed the ball with the version 2 device and is likely to lose to Android in this market as well. I would suggest Amazon would rather be compared to a winner.

    1. How accurate is comparison between Apple and Android, though, given that one is available on one device and the other is available on countless devices? If Apple can maintain a large chunk of market share against dozens of competitors, that’s saying something. Same thing with AWS: it’s growing competition might keep have more users in aggregate, but no one can touch it in on a one-on-one comparison.

      1. Perhaps the title of the article should be changed from “rule cloud computing” to “maintain a chunk of the market”.

      2. Not “countless devices”, but “countless manufacturers”. While it didn’t stop Apple with the iPod, there also didn’t need to be MP3 player subsidies and exclusivity arrangements to effectively address distribution partnerships and competitive consumer availability. Regarding the iPhone, Apple was effectively faced down an entire industry of veterans competitors (some, like Samsung, who are even manufacturing partners). It’s a pretty amazing story, only constrained by their inability to fulfill an excess of demand.

  4. Let’s be real, when the dust settles Microsoft is going to be king in cloud computing. Microsoft’s infrastructure is light years ahead of apple and google when it comes to hosted apps, cloud services, online storage, market share and market penetration. Microsoft just needs to get better at marketing and pushing these already established enterprise products to the average consumer and google and apple won’t stand a chance. In fact I won’t be one bit surprised if Windows 8 is highly cloud dependent and will truly make cloud computing a mainstream feature of the average person’s daily tech experience.

  5. If that is you in the picture, then you arethe very epitome of a Mac fanboy, so none of your statements mean anything. First off..since when does Apple “rule hte cloud?” and when do people actually are about hte cloud? I mean REAL people…not social outcasts like you who waste your lives online. (Seriousy….when you are dying, on your deathbed, you will NOT say “I wish I had spent more time online while I was alive.” but you will say “I really wish I had kissed a girl just ONCE in my life.”)

    If you had problems with Windows 7, blame your parents and school system. Becuase they did not prepare you to be functional in society. MILLIONS of people use Windows 7 every day and neverf have a problem. Yet you are unable to do so. PRetty simply really. When you hve two people and one can do something that hte other can’t, then the one who can’t is the idiot.

  6. Hey Derrick, I respect your intensions but this story is misleading and factually incorrect:
    1. The heading is wrong. Apple doesn’t really have a lead in Cloud Computing. What you probably wanted to say was Amazone is following Apple’s example.
    2. “In both cases, it’s about building products so feature-rich”: Apple is notorious for not providing features, at least not in the first iteration. It left out a front facing camera in the first ipad, it left out multitasking in the iphone and we can go on like this forever. Similarly, Amazon isn’t really known for features. Many people in fact recommend it as a do-it-yourself solution as many features have to be implemented by the developer. That said both Apple and Amazon have several plus points on their side and are unarguably the market leaders in many ways. So, neither Apple nor Amazon are consistently feature rich.
    3. “There’s a reason so many people are willing to pay the Apple premium”: It’s not true about all Apple products. The Ipad2 costs less than the Motorola Xoom. iPhone 3Gs is available for under $50. iPhone 4 costs the same as any top of the line smartphone. No doubt Apple sells on quality and not price but if people would have been ready to pay the premium, Apple would have charged accordingly. Similarly Amazon isn’t at the costlier side of Cloud Computing. Microsoft Azure is a whole lot costlier.
    4. “It might require a lot more effort to achieve even a comparable experience.”: You mentioned the depending upon use case phrase while mentioning that Amazon might be more expensive but comfortably left it while mentioning this line. Depending on the use case you might find Windows Azure or Google App Engine easier to implement for the same developer/user experience.
    5. The lock-in point that you talk about doesn’t make sense. Lock-in because you might have to repurchase apps you have is equally true for an Android or Windows Phone 7 device. Or lock-in if you are developing for the cloud is probably equally true about Azure as it is about Amazon.
    6. “it likely will require using more third-party services”: I am not sure but I think that people on Microsoft Stack will have to use less third party tools on Azure than on Amazon EC2.

    There are several more things I can talk about but the very foundation of the article is baseless. I would highly recommend that you get the facts and figures that backup the stuff that you mention.

    1. Very good response, Syed. I’m especially keen on your thoughtful observations about Apple pricing. The interesting thing to me however, is that I believe Apple is still charging a premium for their iPhone and iPad products. They’re simply masking it from the consumer. In the case of the iPhone, they are able to pass that on to the carriers, so the consumers aren’t impacted on the front end, but for the iPad, they at least appear to be making rich margins on the product due to their home-grown distribution, production process and purchasing power. Other manufacturers are disadvantaged by not having the level of infrastructure in place to form the same synergies. Because Apple’s advantage is so lopsided, Apple’s calculus has been to be “aggressive”, even though Tim Cook made it clear with the release of the original iPad, that they were open to lowering the price if need be. The undesirable idea of a “price umbrella” opening up under an important product, is one Steve Jobs has openly alluded to before. Apple plays a highly strategic game that’s fascinating to watch, and not easily boiled down to single-dimensions.

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