Kroger Joins Retail Giants in Snubbing AWS
As Amazon.com's e-commerce business continues to expand, its massive Amazon Web Services (AWS) cloud business is feeling the brunt of its rivalry with other retail giants.
CNBC reported this week that grocery giant Kroger, which operates nearly 3,000 grocery stores in 35 U.S. states, is actively choosing to partner with AWS rivals Microsoft Azure and Google Cloud Platform (GCP) to avoid lining Amazon.com's pockets.
Kroger CIO Chris Hjelm told CNBC that while Kroger still runs most of its workloads on-premises, it does have a cloud budget in the millions of dollars that it mostly plans to split between Azure and GCP, both of which have been Kroger partners since late 2016. Hjelm said Kroger does use AWS minimally by way of companies that it has acquired, but that Kroger does not intend to deepen that relationship further.
"For obvious reasons competitively, it doesn't make sense for us to do a ton to help grow that business for them," CNBC quoted Hjelm as saying.
That's doubly true now that Amazon.com has officially acquired Whole Foods, a high-end grocery chain and a competitor of Kroger. (Interestingly, Whole Foods had been a prominent Azure customer prior to its acquisition by Amazon.com this summer, though that partnership will surely take a back seat to AWS in the future.)
Adding another wrinkle is the fact that Amazon.com is reportedly mulling an expansion into the pharmacy market. A report by the St. Louis Post-Dispatch in late October suggests that Amazon.com is positioning itself to become a wholesale pharmaceutical distributor. If true, that would once again put Amazon.com in the competitive path of retailers like Kroger, which operates over 2,000 pharmacies inside its stores.
Kroger is not the first retailer to spurn AWS because of competition with Amazon.com. The world's largest retailer, Wal-Mart, reportedly told its IT partners to use alternatives to AWS or risk losing Wal-Mart's business. Target is also said to be in the midst of moving most of its cloud-based applications and workloads off of AWS.
However, none of this competitive maneuvering seems to be having a significant impact on AWS' bottom line, at least not yet. AWS earned $4.6 billion in revenue in Amazon.com's latest earnings report, representing a 42 percent year-over-year increase.
And while AWS' growth does appear to be slowing down -- especially compared to Azure and GCP, which are both working off of a much smaller base -- AWS is still the top cloud provider by a significant margin. Recent data indicates that AWS has a worldwide market share approaching 40 percent, more than its five closest competitors combined.