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Amazon and the network effect: Why would ISVs go elsewhere?

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A common question surrounds AWS and the Yankees: Are they evil empires, the best places to be, or both?

I recently did at a bit of remodeling at home and as part of the process got rid of about half of my book collection. I only kept those that I had a special attachment to or would be hard to find online. After I got a Kindle, physical books started looking “old” all of a sudden. Amazon (s amzn) has managed to make paper books pretty much obsolete in the span of a few years. This week’s announcement of the AWS Marketplace is going to make you feel the same way about running your own server hardware.

Why use a marketplace?

Traditionally, the cloud hype has been mostly around infinite storage capacity, scaling up, load balancing, elasticity, and capex vs.opex. I am going to let you in on a little secret: most companies out there are neither Zynga (s znga) nor Netflix (s nflx) and their applications do not require scaling to hundreds or thousands of servers to accommodate peaks of demand. If capacity requirements grow over time, the pattern tends to be predictable.

However, nearly every company needs to run document management systems, CRMs, wikis, bug trackers, project management tools and other web-based software. Server applications tend to be tricky to setup and require a non-trivial amount of sys-admin knowledge to run and maintain. The AWS Marketplace encapsulates all that complexity and allows end users to discover, purchase and deploy complete server applications with one click. Though a CRM system is certainly more complex than a game that slings birds around, the marketplace concept does a good job of bringing the simplicity of the Apple (s aapl) App Store model to server applications running in the cloud. It has the potential to revolutionize how most businesses consume IT.

At, we package open source applications so they are easy to install in any environment, including the Amazon cloud. These packages are available free of charge, but no matter how much we try to simplify the experience, there is still significant friction in the process in terms of just making the decision to give an application a try. The AWS Marketplace removes this friction by making it easier to discover and deploy applications.

This significantly lowers the barrier of adoption of cloud computing at the departmental level, making it easier for business units to bypass traditional IT. Why wait weeks to have a server delivered and setup when you can get pretty much the same result by whipping out your credit card and paying $50 a month for a small instance running the app you need now?

It’s now or never to challenge Amazon

However, the initial version of the AWS Marketplace is not perfect and there are still issues that will need to get ironed out around licensing, payment and support, including how to handle upgrades or integrating existing activation schemes with the  one-click deployment model. But the first stake has been put in the ground.

There are other cloud providers, though, some of whom have their own libraries of applications. Predictably, after this announcement, the rest will look into following suit and launching their own marketplaces. But most of them lack both the huge customer base and momentum of Amazon, making it harder to convince ISVs to come onboard. Once the network effects fully kick in, there will be even less incentive for application vendors to support other platforms.

The thought of a single player dominating an industry is always uncomfortable. However, unless its competitors get their act together soon, the dominance of Amazon in the cloud market will continue to grow; it’s already starting to look eerily similar to that of Microsoft in the 90s.

Application vendors have limited resources, and if they only have the bandwidth to participate in one or a handful of app stores, they are going to choose the ones that offer the greatest revenue potential. Typically, that means the ones with the greatest number of users. Amazon is clearly in the lead with respect to user adoption, and is therefore going to be the most attractive marketplace for most vendors.

Daniel Lopez is the CTO of BitNami, a leading provider of application images for Amazon Web Services and other cloud and virtualization platforms. 

Image courtesy of Flickr user Eric Beato.

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