What does Amazon's latest purchase mean for the channel?

Consumer acquisition leads to 'grey area' of access point into business space - analyst

Amazon's latest acquisition of home WiFi vendor eero may, on the surface, appear inconsequential to the channel, but as ever with the internet giant, still waters run deep.

US-based eero specialises in mesh WiFi networking systems, and has been acquired by Amazon in order to bolster its smart home portfolio.

Its systems communicate with the cloud to receive instructions and updates, and it claims to be self fixing, self-updating and self improving.

Rumours circulated last year that Amazon was making a play for the networking space, and though the vendor was quick to quash these rumours at the time, this latest purchase could indicate that there was perhaps a nugget of truth to them.

Matthew Ball, principal analyst at Canalys, told CRN that although this acquisition is to increase the vendor's connected home portfolio, there is nothing stopping Amazon from making a connected office play.

"In the future, once they've conquered the home environment there is a possibility that they could expand into businesses," he said.

"If you look at the WiFi market, a lot of the home WiFi access router vendors that dominate in that environment are also strong in the small business market, for example Netgear and Ubiquiti Networks.

"There is a grey area where those consumer access points will find their way into businesses.

"Today, I don't think Amazon will enter the networking market, but maybe in a few years' time - once that tech ratio has evolved - then they could enter the small business market."

Ball views this move as a threat to the consumer networking vendors, and Netgear - which is one of eero's main competitors in the space - saw its share price drop five per cent after news of the acquisition emerged.

Paul Stringfellow, technical director at Gardner Systems, is of the same opinion as Ball.

He agrees with Ball's statement that the vendor market is probably more likely to be threatened by the eero acquisition than the reseller community is.

He added that its cloud arm, Amazon Web Services (AWS), is making enough of a splash in the channel without it having to move into the networking field.

"I don't think this purchase is any great signal that Amazon are making a shift," he stated.

"I think those signals that they are coming to eat the channel's on-premise infrastructure play have already been made.

"I think the way that AWS - as well as Microsoft Azure, Google and the other cloud providers - is building out its hyperscale cloud platform is going to change the way the channel operates.

"Where this impact has been - and will continue to be - felt is in the channel vendor market rather than the channel reseller market."

However, the tech giant is already in the B2B space, with its Amazon Business unit, which launched in the UK in 2017, and landed its first major contract - worth £600m - in August last year.

It claimed in September that it had reached $10bn in global annual sales, of which third-party sellers contributed more than 50 per cent to that figure.

When CRN spoke with partners at the time, they seemed unfazed by the vendor's B2B play, but analyst Ball said there is a cause for concern about Amazon's overall channel presence.

"Amazon - with AWS and Business - paints a really complex picture about whether it is a threat or a route to market," he explained.

"Amazon is becoming more and more important not just in the consumer retail market, but also in businesses.

"Look at the adoption of AWS, and Amazon Marketplace is becoming increasingly important in terms of software distribution.

It's not black and white whether they are a threat or an opportunity, I think it boils down to the individual channel partner business model."