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Silicon Valley antitrust lawyer Gary Reback
- Gary Reback, the veteran Silicon Valley lawyer who fought big antitrust battles against Microsoft, Google and Oracle says the FTC has reached out to Amazon's cloud rivals in what could be the start of an antitrust probe of the tech giant's cloud business.
- Reback, who was once called "Bill Gates's worst nightmare," said the probe appears to be focused on Amazon's attempts to tighten its grip on the cloud platform where many companies that give customers more options, helping them avoid being locked in to Amazon.
- "This is an enormously important investigation for the government," Reback told Business Insider. "The cloud is literally the future of everything. It would be hard to overstate the significance of any kind of antitrust inquiry into the cloud because it's going to compose so much of our future."
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The renowned Silicon Valley lawyer who led major antitrust battles against Microsoft, Oracle and Google says the Federal Trade Commission has reached out to Amazon's cloud rivals in what he sees as technology's next "big fight."
Gary Reback, who was once known as "Bill Gates's worst nightmare," told Business Insider that the FTC is looking into how Amazon may be using its dominant position in the cloud to stifle competition. He said the probe appears to be focused on Amazon's attempts to tighten its grip on the platform segment of the cloud where many companies are giving customers more choices that make it easier for them to avoid being locked in to Amazon.
Bloomberg had reported last week that the FTC was widening an antitrust probe beyond Amazon's retail business. Business Insider reached out to Reback for his insights into a looming antitrust case based on the role he played in the biggest antitrust battles in tech.
Reback is a veteran of the biggest technology antitrust battles of the past 25 years. He spearheaded the legal effort that led to the Justice Department antitrust suit against Microsoft, which was accused of abusing its dominant position in the PC market. He was also involved in the antitrust case against Oracle after the tech giant launched a hostile takeover of PeopleSoft, and in another push against Google which was accused of abusing its dominant position in search.
Reback said the looming battle with Amazon could have a bigger impact than other recent cases. "It's bigger than any one of those other issues because it's the future of the cloud," he said.
He said an antitrust battle involving Amazon's cloud will be more significant than most.
"This is an enormously important investigation for the government," Reback told Business Insider. "The cloud is literally the future of everything. It would be hard to overstate the significance of any kind of antitrust inquiry into the cloud because it's going to compose so much of our future."
The FTC declined to comment. Amazon also could not immediately be reached for comment.
Amazon dominates
The cloud made it possible for businesses to set up their networks on web-based platforms, allowing them to scale down or abandon private data centers. It's composed of three key segments.
Amazon is the biggest player in the cloud segment called infrastructure as a service (IaaS), which covers the basic components of a cloud platform, including access to servers and storage. Amazon controlled 47.8% of the $32.4 billion market in 2018, followed by Microsoft with 15.5%, Alibaba with 7.7% and Google with 4%, according to Gartner.
Amazon is also a strong player in platform as a service (PaaS), the segment that makes it easier for business customers to write and run cloud software by removing the need for developers to worry about individual servers and other aspects of infrastructure, focusing instead on the programming tools and processes they need.
But the competition is tighter in this arena. Amazon had 29.4% of the $26.4 billion market in 2018, followed by Microsoft with 15.1% and Salesforce with 10.5%. A key hurdle for Amazon is that it's an insignificant player in a major cloud arena, software as a service, which is dominated by Microsoft, Salesforce and Oracle.
The next big fight
That is why platform as a service has become a key growth area for Amazon - and an aspect of the business that's come under scrutiny. Companies in this space, which includes startups and major tech players, offer products that give businesses options on what cloud infrastructure to embrace.
The antitrust concerns stem from the view that Amazon would suffocate competition and innovation by offering its own platform as a service products in ways that limit the choices of customers who end up being locked in to the Amazon infrastructure and platform.
Reback drew comparisons with the Microsoft case. The tech giant was accused of anticompetitive behavior when it bundled its Internet Explorer web browser with its Windows operating system. The tactic was seen as an aimed squarely at crippling Netscape, which offered an alternative to Microsoft products.
"Microsoft went to such great lengths to try to kill Netscape because that was the threat," he said. "It was accused of doing bad things to Netscape because Netscape would permit customers not to be not to be locked into the Microsoft operating system. This is a similar issue. And that's why it strikes me at least as being very important from an antitrust perspective."
Reback said the "big fight is not so much in the infrastructure layer, which Amazon dominates. The fight now is in that middle layer."
Technologies like Kubernetes, an open source project started at Google, give customers the ability to package up their applications in such a way that they can run the same way on Amazon's cloud as they do on Microsoft's, Google's, or even their own servers. That means more flexibility for customers, with fewer barriers to switching clouds.
"It's a huge area because it could provide freedom for customers not to be locked in to Amazon's infrastructure," he said.
This has put the burden on Amazon to provide platform services that are unique to its cloud, as a way to entice customers to stick around. It's an area where Amazon has been "growing aggressively," according to Gartner.
That said, its push into that arena has sometimes alienated other tech companies whose software provides similar services on the Amazon cloud. A William Blair analyst this week wrote that companies who attended Amazon's re:Invent cloud conference "grumbled about their love-hate relationship with a company that simultaneously serves as their technological or go-to-market partner and their primary competitor."
Stakes are high
The stakes are high in the competition in platform as a service, Reback argued. With Amazon so dominant in infrastructure, a thriving platform market could provide a vital hedge against abuse of its power - and allow competition to thrive, by giving customers freedom of choice.
"What's at stake is the future of the cloud," he said. "Are we going to be locked into one or two competitors, or one big competitor Amazon and some fringe competitors? Or are we going to have the kind of stuff that we had, in some cases, some other aspects of competing where customers can pick and choose, there's a lot of freedom, there's a lot of competition, there's a lot of innovation?"
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