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Chapter 3 Strategy and Information Systems
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zon began to lease some of that capacity to other companies. Elastic Cloud 2 (EC2) enables organizations to expand and
In the process, it played a key role in the creation of what are contract the computer resources they need within minutes.
termed cloud services, which you will learn about in Chapter Amazon has a variety of payment plans, and it is possible to
6. For now, just think of cloud services as computer resourc- buy computer time for less than a penny an hour. Key to this
es somewhere out in the Internet that are leased on flexible capability is the ability for the leasing organization’s computer
terms. programs to interface with Amazon’s to automatically scale
Today, Amazon’s business lines can be grouped into three up and scale down the resources leased. For example, if a news
major categories: site publishes a story that causes a rapid ramp-up of traffic,
that news site can, programmatically, request, configure, and
• Online retailing
• Order fulfillment use more computing resources for an hour, a day, a month,
• Cloud services whatever.
With its Kindle devices, Amazon has become both a ven-
Consider each. dor of tablets and, even more importantly in the long term, a
Amazon created the business model for online retailing. It be- vendor of online music and video. And to induce customers to
gan as an online bookstore, but every year since 1998 it has added buy Kindle apps, in 2013 Amazon introduced its own currency,
new product categories. The company is involved in all aspects of Amazon Coins. In 2014, Amazon opened a 3D printing store
online retailing. It sells its own inventory. It incentivizes you, via from which customers can customize their own toys, jewelry,
the Associates program, to sell its inventory as well. Or it will help dog bones, and dozens of other products. It also made a push to
you sell your inventory within its product pages or via one of its provide video services by introducing Fire TV. 12
consignment venues. Online auctions are the major aspect of on- In 2015 Amazon introduced WorkMail, a potential cloud-
line sales in which Amazon does not participate. It tried auctions based replacement for Microsoft Exchange. It also introduced
in 1999, but it could never make inroads against eBay. 11 Amazon Home Services (local professional services), Amazon
Today, it’s hard to remember how much of what we take Destinations (travel site), and Amazon Dash (a one-button reor-
for granted was pioneered by Amazon. “Customers who bought dering device). 13
this, also bought that;” online customer reviews; customer rank- Finally, Jeff Bezos announced in 2014 that Amazon was
ing of customer reviews; books lists; Look Inside the Book; auto- experimenting with package delivery using drones, a service
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matic free shipping for certain orders or frequent customers; and called Prime Air. In March 2015, the U.S. Federal Aviation
Kindle books and devices were all novel concepts when Amazon Administration gave Amazon permission to start testing its
introduced them. drones in the United States. But drone delivery is something
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Amazon’s retailing business operates on very thin margins. that will happen in the future; consider a business service that
Products are usually sold at a discount from the stated retail price, Amazon.com is offering right now.
and 2-day shipping is free for Amazon Prime members (who pay
an annual fee of $99). How does it do it? For one, Amazon drives Fulfillment by Amazon (FBA)
its employees incredibly hard. Former employees claim the hours
are long, the pressure is severe, and the workload is heavy. But Fulfillment by Amazon (FBA) is an Amazon service by which
what else? It comes down to Moore’s Law and the innovative use other sellers can ship goods to Amazon warehouses for stock-
of nearly free data processing, storage, and communication. ing, order packaging, and shipment. FBA customers pay a fee for
In addition to online retailing, Amazon also sells order ful- the service as well as for inventory space. Amazon uses its own
fillment services. You can ship your inventory to an Amazon inventory management and order fulfillment business processes
warehouse and access Amazon’s information systems just as if and information systems to fulfill the FBA customers’ orders.
they were yours. Using technology known as Web services (dis- FBA customers can sell their goods on Amazon.com, sell
cussed in Chapter 6), your order processing information systems them via their own sales channels, or both. If the FBA customer
can directly integrate, over the Web, with Amazon’s inventory, sells on Amazon.com, Amazon will provide customer service for
fulfillment, and shipping applications. Your customers need not order processing (handling returns, fixing erroneously packed
know that Amazon played any role at all. You can also sell that orders, answering customer order queries, and the like).
same inventory using Amazon’s retail sales applications. The costs for Fulfillment by Amazon depend on the type and
Amazon Web Services (AWS) allow organizations to lease size of the goods to be processed. The FBA fees for standard-size
time on computer equipment in very flexible ways. Amazon’s products as of February 2015 are shown in the table.