We examine how Amazon.com is now starting to demonstrate the strategic advantages delivered from its Web Services strategy and relate this to CBDI guidance.
"In the service-based economy, the core business model is no longer based on the conversion of raw materials into finished goods. The enterprise buys in services and sells services, and the core value proposition is the conversion of input services into output services. This calls for a very different kind of business process model, which allows us to see how services combine and interact to make other services." CBDI, Modeling for SOA, February 2003
"Just as most folks have come to view Amazon as a retailer that happens to sell online, guess what? It's morphing into something new. In ways few people realize, Amazon is becoming more of a technology company -- as much Microsoft Corp. That's right: Bezos hopes to create a Windows for e-commerce. And bit by bit, just as its Washington neighbor did two decades ago, Amazon is building what techies from Silicon Valley to Redmond call a platform: a stack of software on which thousands or millions of others can build businesses that in turn will bolster the platform in a self-reinforcing cycle." Business Week December 2003.
"In the traditional economy, the enterprise is dependent upon the supply of raw materials and components. Companies pay considerable attention to the supply chain, not merely to drive down costs but also to deal with various risks such as interruption or contamination of supply that would threaten business efficiency and continuity. In the service-based economy, we need to pay similar attention to the service supply chain – making sure that dependencies on service providers are properly managed." CBDI, Modeling for SOA February 2003
"If Bezos' new plans work, Amazon could become not just a Web site but a service that would allow anyone, anywhere, to find whatever they want to buy -- and to sell whatever they want almost as easily. For Amazon, that means its finances could look considerably better than traditional retailers'. . . . many of the merchants who use applications spawned by Web services end up selling their wares to the 37 million customers assembled at Amazon.com. When that happens, Amazon takes a commission of about 15%, and these revenues have much higher margins than Amazon's own retail business. Already, 22% of Amazon's unit sales are by other merchants -- and the Web-services push hasn't had a significant impact yet." Business Week December 2003.
"A service should be designed to operate in as many different contexts as possible. This requires some modeling of the service context. It may also require some modeling of the differentiation policies to be applied when executing the service." CBDI, Modeling for SOA, February 2003
"By beefing up its technology and distributing it more freely, Amazon could bust out of the conceptual prison of stores and the virtual confines of a single Web site. Already, Amazon has applied its own technology to forge an identity as an online mall -- a piece of business that generates gross margins about double its 25% retail margins." Business Week December 2003.
"Even service industries, such as finance, are often based on business processes constructed on the same principles and assumptions: linear, chronological, cumulative and synchronous. This is the normal basis for defining workflow and controlling work, so that an increasing proportion of the workforce may be working within some kind of virtual or abstract production line – converting blank application forms into mortgages, say." CBDI, Modeling for SOA, February 2003
"To design a set of services . . . we need to start by identifying a set of requirements. This is not as simple as it seems. The obvious approach is to start with our own business process, and design the services . . . to support this process. However, this approach typically fails to produce reusable services. Even the domain modeling approach, where the process model is generalized will be limited in the reuse it can achieve. Much higher levels of reuse can be achieved by taking a much larger scope, and thinking about the broader requirements and opportunities of the ecosystem in which the . . . is to be situated." CBDI, Modeling for SOA - Worked Example , April 2003
"Web services, unfettered by logistical challenges or business model conflicts, may offer the most expansive potential of all Amazon's tech initiatives. Nowhere is the potential more apparent than among the small merchants and independent programmers who are flocking to Amazon Web Services. 'It's like an ecosystem,' says Bezos." Business Week December 2003.
AFTER WORDS
I took a quick look at some conventional catalog companies - they are not even acting like rabbits in the headlights - they are just doing normal business with nice conventional catalogs and websites. There's an express train coming down the track, but perhaps they haven't even heard the whistle roaring yet.
eBay understands this, and in many ways is going into head to head competition with Amazon. "eBay has announced the expansion of its Web Services offering to software developers . . . . . Through the eBay Developers Program, software developers are able to access the eBay SDK family and other technical resources. Today, there are more than 4,000 software developers who are members of the eBay Developers Program compared to less than 200 just one year ago. These developers are creating innovative third-party software solutions that automate and accelerate business processes, and create greater efficiencies for buying and selling on eBay." But they will be aware that Amazon has 35,000 developers in their ecosystem.
Amazon's use of Web Services presents us with some hard evidence that Web Services really can deliver the strategic advantage because they enable the real time, ubiquitous interop, that simply breaks apart conventional business models . Another good example which also demonstrates innovative thinking in this area is GrandCentral Communications; see reference to our recent report below. The real lesson for all enterprises is if you haven't figured out your Web Services strategy yet, it's probably not too late. |
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