Partners unfazed by mammoth Amazon Business public sector deal

The news that Amazon's business arm inked a £600m deal to supply Yorkshire authorities has left its new competitors unperturbed

Amazon Business' entry into the UK B2B space last year has seen "slow uptake", according to one of its partners.

That may change with the news last week that it signed a five-year £600m public sector contract to become a one-stop shop for Yorkshire's schools, social services and emergency services.

The deal is Amazon Business' first major public procurement contract in the UK.

Amazon's B2B operation caters to businesses of varying sizes, as well as universities and public sector organisations, offering a range of products from laptops and office supplies to bandages.

The Business platform provides sellers with various features including invoicing and discount capabilities, as well as the option of having Amazon fulfil the delivery on behalf of the seller.

Dan Scarfe, founder of Microsoft partner New Signature, said the news is another example of Amazon "encroaching on the turf" of others, adding that he is witnessing customer unease with Amazon's cloud service, AWS.

"It blurs the line even more between when Amazon is your partner and when it is your competitor," he said.

"We've seen lots of customers recently start to get increasingly nervous about whether Amazon is going to start coming and competing with them.

"Customers are starting to make decisions on which cloud provider they go with based on whether Amazon might be a future potential competitor to them. There are very few companies out there who wouldn't potentially come into competition with Amazon in the future."

Scarfe said the blurring of lines between partner and competitor is the "perennial challenge" for resellers, but that Amazon is especially problematic for partners.

"Amazon is bringing a whole new dimension to it as they compete with so many businesses on so many different fronts that they are a particularly dangerous competitor for a lot of organisations," he stated.

Dean Mason, MD at reseller GreenCloud IT, is one such partner witnessing this blurring. Aside from being a reseller in its own right, GreenCloud has an online sales operation via Amazon Business. However, he doesn't regard it as a competitor.

"I don't see them as a rival but they're always a threat as they have that buying power," he said. "But we also sell on Amazon Business so it's good to build that relationship."

Competitive edge
Mason believes that despite the large deal struck with Yorkshire authorities, there would be a "slower uptake" from the public sector for Amazon Business, adding that Amazon Business is a "long way off being a competitor to the channel".

"[The Yorkshire contract] is a massive deal and Amazon must have worked on it for a long time and wanted to make an impact, but I can't see them being as interested in smaller deals," he said.

"Realistically they're not going to spend time on smaller contracts, so there's still going to be plenty of opportunities out there."

Comparing the dynamic to the fast food industry, Mason said that although McDonalds is the biggest company in that sector, its rivals still manage to get a fair percentage of market share.

"Amazon is going to take a massive chunk of that business but they aren't going to win everything," he said. "So long as resellers carry on building relationships with distributors and manufacturers, there is still plenty of business out there to be won."

Alex Tatham, MD of Westcoast, agreed with Mason's assessment that Amazon Business will encourage companies in the channel to focus on its relationship with partners and customers.

"I think it is a really exciting plan of action from Amazon," he said. "It encourages people to add value to make sure their customer services are strong.

"Because they are competing on so many fronts, you'll always compete with Amazon in some fashion.

"Therefore you have to make sure that your value is well pronounced, you understand what market value you are adding, you don't overcharge, are competitive and can articulate all of that," Tatham explained.

However, New Signature's Scarfe believes that options for channel companies are limited when it comes to reducing Amazon Business' competitive edge in the sector.

"There's a limited amount you can do to stop the Amazon steamroller other than encouraging people to look at other cloud providers in the first instance, as Amazon makes most of its profits from AWS," he said.

"Anything they can do to steer customers away from AWS will have a meaningful impact on Amazon's ability to compete with them."

Andy Wright, commercial director at XMA, admitted that he is worried about Amazon's threat to the channel, but stated that the value-add that channel companies provide to customers will develop alongside it.

"As people move into the commodity end of the market, you have to move up the value chain. The reality is, where customers are just buying on price, most of us will move out of those markets anyway - our value comes out of other things," he said.

"If the value-add for customers is best price and best logistics, then they'll go to Amazon.

"But to help them install, manage and run their infrastructure, then they'll come to the value-added businesses that we have in the UK."

Wright added that companies aggressively coming into a market isn't anything new and said that the channel needs to evolve with the threat.

"We have to keep developing and shifting with the times which the successful resellers and integrators in the UK have always been good at," he said.