The Bankwatch

Tracking the consumer evolution of financial services

FT announces a new series on Amazon beginning Monday July 9th, 2012

This article is a good introductory analysis of the power of Amazon, but there is one point made that is worth analysing deeper because it goes to the core of the internet commerce revolution.

This quote struck me as critical (emphasis mine)

Amazon economy: From warehouse to powerhouse

At a macro level, hub businesses such as Amazon improve efficiency, which is good news for small players, says Marco Iansiti, a professor at Harvard Business School. “The bad news is your destiny is shared with a bunch of other people,” he says. “If Amazon has a catastrophe, if the website goes down, then a lot of people are affected. It is a source of systemic risk that we didn’t have before.”

So lets talk about systemic risk.  First off Amazon does represent a new systemic risk.  On that we agree.  But lets place that in perspective;  what other technology systemic risks exist for business?

  • telephone system going down
  • ISP / internet access going down

There are others but lets analyse these together.  In Canada and in most / all nations there is one or at most three telephony providers that provide the underlying phone and internet infrastructure.  You may think you are buying an alternative telephony or internet provider service, but the underlying ‘pipe’ is always from BT, Bell, AT&T, Telus, or provider for your country.

We sometimes forget that the phone provider is the internet provider, and is a private company and is no different in that respect than Amazon.  Amazon is just new is all.

Who do you trust;  Amazon or Bell or BT?  Is there really a difference?

This is just one point on the power of Amazon.  I must declare on the side of Amazon as a power for good and benefit of commerce. But there are many elements to consider, and I look forward to the series which is somewhat unique in focussing on a company rather than a vertical.

In a series starting on Monday, the Financial Times is charting Amazon’s ability to reinvent industries, drawing on over 50 interviews with former employees, clients, software providers, rival retailers, academics, bankers and consultants.

Written by Colin Henderson

July 9, 2012 at 00:56

Posted in Uncategorized

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