Amazon.com didn’t get into the business of selling cloud computing services to make money from excess capacity. That’s a myth. Even so, Amazon.com did get into the cloud computing business because it knew quite a bit about how to manage infrastructure at scale, and made a bold bet that it could become the center of cloud developers’ universe just as it was increasingly the center of the retail universe.
So why isn’t Walmart, master of a hyper-efficient supply chain, peddling access to its supply chain expertise?
Walmart still needs to come up with a credible answer to Amazon’s dominance online, but there’s a great deal of retail business that will persist offline in brick-and-mortar stores. Even Amazon recognizes this, and has been experimenting with offline retail.
Walmart, for its part, has been scrambling to innovate online, and most recently has been talking up an open-source Big Data strategy. This strategy involves open-sourcing tools that Walmart is building to move data from legacy tools into Hadoop clusters, and should be a boon to the countless others that will have similar data management needs.
It sounds like smart strategy, and it is. But it doesn’t get to the heart of what Walmart could, and perhaps should, be doing.
Back to Amazon. Amazon Web Services was never about selling Amazon.com’s excess capacity. That’s a myth, and one that Amazon CTO Werner Vogels rejects:
The excess capacity story is a myth. It was never a matter of selling excess capacity, actually within 2 months after launch AWS would have already burned through the excess Amazon.com capacity. Amazon Web Services was always considered a business by itself, with the expectation that it could even grow as big as the Amazon.com retail operation.
What isn’t mythical, however, is that Amazon understood web applications at scale, and knew how to build the necessary infrastructure to drive them. As Amazon CEO Jeff Bezos explains, Amazon both had the knowledge and the need to create this infrastructure for its own use, and figured it could then turn this into a serious business:
Approximately nine years ago we were wasting a lot of time internally because, to do their jobs, our applications engineers had to have daily detailed conversations with our networking infrastructure engineers. Instead of having this fine-grained coordination about every detail, we wanted the data-center guys to give the apps guys a set of dependable tools, a reliable infrastructure that they could build products on top of.
The problem was obvious. We didn’t have that infrastructure. So we started building it for our own internal use. Then we realized, “Whoa, everybody who wants to build web-scale applications is going to need this.” We figured with a little bit of extra work we could make it available to everybody. We’re going to make it anyway—let’s sell it.
Now think about Walmart. While Walmart’s tagline is (or was) “Everyday low prices,” with an emphasis on delivering reasonable quality for market-beating prices, the way Walmart achieves this is through its legendary supply chain. No one beats Walmart in terms of managing the process of filling shelves. As one commentator notes:
Basically Wal-Mart runs on an entirely different road than everyone else, a sort of information data superhighway. Wal-Mart knows literally everything that any retailer could ever want to know about one of its products. It’s been said that if the US was ever in World War III, the first thing to be taken over by the government would be Wal-Mart’s supply chain. It has THAT kind of performance power.
So if the supply chain is so good, why doesn’t Walmart “open source” it? Amazon recognized early that it could build a significant business by outsourcing its expertise in infrastructure. Why can’t Walmart do the same with its supply chain? And just as web application developers have crowded into the shadow of Amazon Web Services, I suspect we’d see an army of brick-and-mortar retailers of all sizes happy to tap into Walmart Supply Chain Services.
Ultimately, retailers aren’t in the business of supply chains any more than application developers are in the business of infrastructure. Walmart should be thinking of how to leverage its supply chain expertise to become the center of an ecosystem, and not simply the center of its own P&L statement.
And while I’m dispensing all this free advice, I’ll just add: Nodeable would be happy to track and analyze all the systems that feed into the supply chain, giving users a single pane of glass to see what’s happening throughout the supply chain. Because, hey! We’re generous like that. :-)