In the wake of Amazon’s announcement last week that it plans to acquire Whole Foods for $13.7 billion, Walmart is asking its partners and suppliers to take their software services off of Amazon Web Services cloud network.
Fortune reported that Bob Muglia, CEO of Snowflake Computing told the Wall Street Journal that a Walmart partner wanted to use his company’s data warehouse service, but was told it had to run on Microsoft Azure cloud instead of Amazon Web Services. Snowflake only runs on Amazon Web Services.
“It is an interesting play for Walmart and strategically, it makes a lot of sense,” said Scott Webb, President of Avionos. “As a retailer, Amazon plays by a completely different set of rules because they are able to subsidize operating margins in that business through the heavy profit they make as a technology service provider, primarily through AWS. If Walmart is able to successfully impact revenues for AWS, it may very well have an impact on Amazon’s ability to price compete in retail. This is not completely out of character for Walmart either, as Walmart has long set guidelines for how they expect their vendors to work in order to gain Walmart’s business. However, it will be interesting to see if this practice goes beyond one-off colloquial examples to become more formal expectations that they place on suppliers.”
Webb said that there isn’t a shortage of cloud infrastructure services, so it wouldn’t be unheard of for tech vendors to go to other suppliers like Microsoft or Google to retain their business with Walmart. However, if Walmart were to enforce this beyond just service vendors to include retail vendor
A spokesperson for Walmart told the Wall Street Journal that some suppliers do use Amazon Web Services, but that in some cases Walmart is worried about putting sensitive data on a competitor’s servers.