Hopefully today’s column will spur some healthy debate.
I personally would love to know why Amazon should be in the hardware business. Initially I thought the idea made a lot of sense. What I expected with the Kindle Fire tablet was that it would be the best possible implementation of software, hardware and Amazon’s retail services — both physical-retail and digital-media sales. However, the Kindle Fire was not a better tablet for doing any of those things. In fact in many cases, there are better devices than the Fire for consuming many of Amazon’s services.
So if Amazon is not creating the best device for accessing and consuming its services, then why is Amazon in the hardware business? That is the question. Until Amazon shows me that it can make a piece of hardware that’s far and away the best device to consume its services on, I’ll keep asking this question.
For the record, I believe that consumer hardware is a short-term value proposition. As we get closer and closer to fully featured cloud- and browser-based computing, hardware simply acts as the physical gateway to the cloud services we use. I have said this many times, but I believe the Internet is the platform of the future.
Hardware will still be important, of course, and a few players may make decent margins on hardware, but they will be in the minority, not the majority. Hardware-only businesses have a very tough road ahead of them.
Initially for Amazon, an exclusive piece of hardware made sense as a gateway to the company’s cloud services. But the more I use non–Kindle Fire devices to consume Amazon’s services, the more convinced I am that Amazon shouldn’t be in the hardware business. I use many different devices and software platforms in my day-to-day life because I test so many different products and technologies. I know I am unique in this manner, but the point remains that I find significant value in the Amazon apps and Kindle apps that let me consume Amazon’s services on whatever device I choose.
This, of course, is what Amazon wants. It’s unlikely that Amazon wants me to have to buy its hardware to consume its services. It just wants me to consume its services. Yet this strategy needs to be extended to more of Amazon’s services. Take Amazon Prime for example, which offers streaming movies and TV shows similar to Netflix. Why is Amazon not integrating Prime into its applications more? What about other types of media that Amazon sells? Why is Amazon not creating apps that would extend its media services to as many hardware devices as possible?
In my opinion, the smartest thing Amazon can do is focus on being hardware agnostic and develop a full walled-garden app that encompasses all of Amazon’s services in one place. Not only would this save the company from spending large amounts of money on hardware research and development, it would also allow Amazon to focus on being a better service provider, which is exactly the business it’s in.
In fact, I see no difference between Amazon making an extremely great application and Amazon making a slab of hardware with its services integrated. I used my Kindle Fire for one day, then never again, yet I have consumed Amazon’s services heavily on my iPad and the Nexus 7. I am an Amazon power customer, one who probably spends in the top tier and is embedded in the company’s ecosystem. Yet Amazon’s own hardware failed me while others did the job.
I’ll end with this: fundamentally for Amazon, it all comes down to the jobs-to-be-done philosophy. What job would a consumer hire a proprietary piece of hardware from Amazon to do that couldn’t be done by another company’s hardware? If Amazon can’t sufficiently answer this question and truly deliver a compelling value proposition (beyond cheap, since it’s my conviction that growing numbers of consumers in mature markets aren’t interested in cheap), then the company shouldn’t be in the hardware business. And from what I can tell, observing this industry from a big-picture standpoint, the answer to the question I just posed is nothing.
Bajarin is a principal at Creative Strategies Inc., a technology-industry-analysis and market-intelligence firm in Silicon Valley. He contributes to the “Big Picture” opinion column that appears every Monday on Techland.