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I've never understood why so many companies are comfortable giving Amazon such leverage over their business infrastructure. Could someone explain why this is a

I've never understood why so many companies are comfortable giving Amazon such leverage over their business infrastructure. Could someone explain why this is a good move in spite of the risk that Amazon could jack their prices up in the future?

nickff 11y ago
The free market is the basic guarantee Netflix is counting on.[1] If Amazon 'jacks up it's prices', Netflix will simply move to another provider. Amazon is also unlikely to make sudden moves which disadvantage its customers, as any such moves will come at a tremendous cost of reputation, and many customers will leave and never come back (; as Amazon has no power to compel customers to purchase their services). In a market, no one has leverage, everyone simply has a position and an offer. [1] https://en.wikipedia.org/wiki/Free_market https://en.wikipedia.org/wiki/Free_market
- knorby 11y ago
  > If Amazon 'jacks up it's prices', Netflix will simply move to another provider. Like hell they will. The switching cost for Netflix, and really most heavy AWS users, would be extreme at this point. A good portion of the engineering org would pretty much have to dedicate themselves to the task of switching. That isn't to say other organizations can't be nimble between providers, but it would be hard for Netflix at this point. AWS is already engaging in a commodity hardware market in order to run the DCs running. AWS fears becoming a pure extension of the same thing, and they have a decent bit of lock-in designed to their services for that reason.
  - hvidgaard 11y ago
    Considering how many millions Netflix pays Amazon every single month, a team of highly skilled engineers is a drop in the bucket, and if switching means they can save enough, they'll do it.
    - adrianbg 11y ago
      "The closing of Netflix’s last data center has been seven years in the making." Does that sound like a drop in the bucket?
      - hvidgaard 11y ago
        Compared to the running cost of their streaming service, yes. Besides, I like to believe (yes believe, because non of us outside of Netflix would be able to verify) that they've spend that much time such that they're far less dependent on the underlying architecture.
  - pfg 11y ago
    I remember seeing a talk by a Netflix engineer (can't find it unfortunately) where he talked about multi-cloud strategies and how they aimed towards decoupling some of the components of his project from implementation details specific to AWS. So it's quite possible they're already slowly paving the way towards becoming a cloud-agnostic or multi-cloud platform. Not to say that it wouldn't still be a huge undertaking, but I don't think this never crossed their minds before.
function_seven 11y ago
Total guess on my part, but I'd imagine Netflix has locked-in long-term pricing. Of course, there's the opposite danger of the rest of the world getting cheaper...
- Wingman4l7 11y ago
  Reminds me of how airlines have been bitten in the butt with a similar future-speculation method that they use to purchase fuel.
  - ranman 11y ago
    Except that this isn't fuel... the prices have consistently trended down for 7 years and have no indications of stopping.
- RobAley 11y ago
  If they're savvy, they'll have locked in long-term maximum pricing. Something along the lines of "prices will at most be the minimum of this discount price, or x% above the standard retail price".
Ologn 11y ago
> I've never understood why so many companies are comfortable giving Amazon such leverage over their business infrastructure. You have to be a pretty big company in order to not let another company have leverage over your infrastructure. Hosting your networked servers in your own office? You're depending on Verizon, AT&T or Qwest, even if those are not the companies selling you your pipes. Co-locating your servers, getting feeds from 2-3 carriers, while doing BGP with your high-end Cisco routers? You're depending on the hosting facility, such as Telehouse. So you want to survive a blackout in one section of the US. Now you need at least two server facilities. Your remote facility needs at least one full-time tech. Corporate infrastructure can get in the way as well. Your division of the conglomerate is in San Francisco, but another division is in New York. Perfect, your division's remote IT person can work out of that division's New York office. But the conglomerate might be structured so that is not really possible. The other division may as well be another company. So a small company can't afford to do this. A big company can get so big that it's not feasible either. If the big company has one central IT department that all divisions use, it becomes more feasible, but how many big companies only have one centralized IT department? Even if such a creature exists - the big company buys a small company, or merges with another big company - boom, two IT departments again.
ranman 11y ago
Wait... since when has AWS ever raised their prices? They've consistently lowered prices for better services... something like 50+ price reductions in the past 7 years.
bestnameever 11y ago
I wouldn't be surprised if Netflix had some sort of price lock in for at least a few years.

nickff 11y ago

The free market is the basic guarantee Netflix is counting on.[1] If Amazon 'jacks up it's prices', Netflix will simply move to another provider. Amazon is also unlikely to make sudden moves which disadvantage its customers, as any such moves will come at a tremendous cost of reputation, and many customers will leave and never come back (; as Amazon has no power to compel customers to purchase their services). In a market, no one has leverage, everyone simply has a position and an offer. [1] https://en.wikipedia.org/wiki/Free_market https://en.wikipedia.org/wiki/Free_market

knorby 11y ago
> If Amazon 'jacks up it's prices', Netflix will simply move to another provider. Like hell they will. The switching cost for Netflix, and really most heavy AWS users, would be extreme at this point. A good portion of the engineering org would pretty much have to dedicate themselves to the task of switching. That isn't to say other organizations can't be nimble between providers, but it would be hard for Netflix at this point. AWS is already engaging in a commodity hardware market in order to run the DCs running. AWS fears becoming a pure extension of the same thing, and they have a decent bit of lock-in designed to their services for that reason.
- hvidgaard 11y ago
  Considering how many millions Netflix pays Amazon every single month, a team of highly skilled engineers is a drop in the bucket, and if switching means they can save enough, they'll do it.
  - adrianbg 11y ago
    "The closing of Netflix’s last data center has been seven years in the making." Does that sound like a drop in the bucket?
    - hvidgaard 11y ago
      Compared to the running cost of their streaming service, yes. Besides, I like to believe (yes believe, because non of us outside of Netflix would be able to verify) that they've spend that much time such that they're far less dependent on the underlying architecture.
- pfg 11y ago
  I remember seeing a talk by a Netflix engineer (can't find it unfortunately) where he talked about multi-cloud strategies and how they aimed towards decoupling some of the components of his project from implementation details specific to AWS. So it's quite possible they're already slowly paving the way towards becoming a cloud-agnostic or multi-cloud platform. Not to say that it wouldn't still be a huge undertaking, but I don't think this never crossed their minds before.

function_seven 11y ago

Total guess on my part, but I'd imagine Netflix has locked-in long-term pricing. Of course, there's the opposite danger of the rest of the world getting cheaper...

Wingman4l7 11y ago
Reminds me of how airlines have been bitten in the butt with a similar future-speculation method that they use to purchase fuel.
- ranman 11y ago
  Except that this isn't fuel... the prices have consistently trended down for 7 years and have no indications of stopping.
RobAley 11y ago
If they're savvy, they'll have locked in long-term maximum pricing. Something along the lines of "prices will at most be the minimum of this discount price, or x% above the standard retail price".

Ologn 11y ago

> I've never understood why so many companies are comfortable giving Amazon such leverage over their business infrastructure. You have to be a pretty big company in order to not let another company have leverage over your infrastructure. Hosting your networked servers in your own office? You're depending on Verizon, AT&T or Qwest, even if those are not the companies selling you your pipes. Co-locating your servers, getting feeds from 2-3 carriers, while doing BGP with your high-end Cisco routers? You're depending on the hosting facility, such as Telehouse. So you want to survive a blackout in one section of the US. Now you need at least two server facilities. Your remote facility needs at least one full-time tech. Corporate infrastructure can get in the way as well. Your division of the conglomerate is in San Francisco, but another division is in New York. Perfect, your division's remote IT person can work out of that division's New York office. But the conglomerate might be structured so that is not really possible. The other division may as well be another company. So a small company can't afford to do this. A big company can get so big that it's not feasible either. If the big company has one central IT department that all divisions use, it becomes more feasible, but how many big companies only have one centralized IT department? Even if such a creature exists - the big company buys a small company, or merges with another big company - boom, two IT departments again.

ranman 11y ago

Wait... since when has AWS ever raised their prices? They've consistently lowered prices for better services... something like 50+ price reductions in the past 7 years.

bestnameever 11y ago

I wouldn't be surprised if Netflix had some sort of price lock in for at least a few years.