[Joe8Bit]

Good article, thanks for submiting!

The challenge for AWS is one lots of incumbents have experienced: they created a market and it's economics and now they're being attacked by the next generation of market entrants who've structured their businesses to _specifically_ attack those economics.

What's interesting is that challenge can be a really big problem for incumbents, as those economics can form a core (very rigid) part of their operating model; it can make it VERY hard to address without fundamental (read: risky) change to a business. There aren't many examples of incumbent businesses doing it successfully, as it needs a kind of 'self-inflicted disruption' that's very hard to do in large organisations where politics and empire building can make it difficult.

If someone could do Managed NAT Gateway next I'd appreciate it!

[jgrahamc]

they created a market and it's economics and now they're being attacked by the next generation of market entrants who've structured their businesses to _specifically_ attack those economics

https://www.amazon.com/Innovators-Dilemma-Revolutionary-Chan...

[Joe8Bit]

Hah, thanks! My comment was fairly blatantly stealing from the book!

It's so interesting from an incumbents internal POV (I saw it a few times during my time at McKinsey) as changing an organisations economics is often the unstoppable force that meets the immovable object of internal politics.

There's a really interesting ongoing example of this in the the UK as 'attacker' banks (e.g. Monzo, Starling) challenge the economics of incumbents. It's not quite the same, as these attackers are removing back-end cost (e.g. branch networks) from an already 'free' product (e.g. retail banking) but it's meant that big banks are looking at their balance sheets and seeing a set of gaping money pits that will require fundamental change in their operating models to be able to get rid of/compete with.

[MauranKilom]

Did you purposely link to it on Amazon? :)

[netcan]

This is a good point but... Innovation without disruption tends to get underlooked, being less dramatic.

Think of the old auto companies over the years. They start off making tractor-like cars. They survive through the cars-as-fashion eras, the internationalisation of manufacturing, etc. If old auto companies emerging from the 80s were new, we'd call it disruptive innovation.

That said, both disruption and innovator's dilemma are real.

The innovator dilemmas also roughly corresponds to stuff early economists wrote about. Peak markets. Markets are great as they grow. When they reach their terminal size (eg most people already own cars), profits go down, stagnation can occur. That stagnation, especially if the market declines in size, leads to crashes and new paradigms eventually emerge. Marxists sometimes take this to a systemic extreme, with "peak capitalism" and derivative concepts. On the conservative side, you'll find these ideas at the heart of austrian business cycle theories and Schumpeter's "creative destruction."

The digital economy is cushioned by tremendous potential for growth, so far. FB, for example, knows that it's not cool anymore. They can just buy whoever is cool.

[ethbr0]

Slight historical note: most Japanese auto manufacturers started off making motorized bicycles and small utility vehicles, then pivoted up into retail cars.

[ipaddr]

That reminds me of music industry and the constant buying of smaller labels. Owning distribution is the key and facebook has a massive platform for that.

[whoisjuan]

> The challenge for AWS is one lots of incumbents have experienced: they created a market and it's economics and now they're being attacked by the next generation of market entrants who've structured their businesses to _specifically_ attack those economics.

Absolutely. This exactly what Tesla has been doing with car industry incumbents. For example, the higher specs versions of the Model 3 beat +$100k cars in acceleration, raw power, torque, handling, etc.

Incumbents have been selling performance as a high-ticket price feature for decades. Traditional brands cannot compete on high-performance features against Tesla without cannibalizing their ICE offering.

[bboylen]

Too bad they shot themselves in the foot with the cybertruck design. Don't get me wrong I think it's funny/cool that a car with that design is out there, but it just won't be able to eat up the high-end performance truck market even if it has insane torque.

[handrous]

I'm seeing "truck guys" giving a shit about Ford's upcoming all-electric truck in a way they didn't about the cyber truck, except as a curiosity. I think they screwed up the marketing on that in just about every possible way, including the name and the design.

[XorNot]

I'd argue it's because the electric F150 has an actual release date and specs designed to take the Cybertruck on head first.

Has there been any follow ups on the Cybertruck recently? So far it seems like vaporware.

[sitkack]

The eF150 is going to expand the truck market. Cyberwagon is Tesla's Aztek.

[sangnoir]

What fraction of Ford's trucks are bought by individual "truck guys" vs. fleet managers? My gut says fleet managers may have more buying power - I can't find any stats online that breaks down F-150 buyers specifically, or trucks in general.

[danudey]

Fleet managers are going to love the idea of paying for electricity instead of fuel and of having extra hauling space. You take your work truck home with you? Great, you're paying to "fuel" it up while it's at home.

[c21h30o2]

I'm not a truck guy but I can imagine most of them are pretty lukewarm about a truck from a company that has never made a truck before, with a design looks more unconventional than all the concept vehicles that never make it to production, that nobody can currently buy.

I expect it will sell like any other Tesla as soon as people get to try it in real life.

[majormajor]

Rivian seems to be getting nice buzz, there, though.

I wonder if the Cybertruck in current form makes it to market if Rivian and Ford have a lot of success.

[KingMachiavelli]

Really? Assuming the cyber truck actually ships I think it will be crazy popular. It's a very competitive price for pretty great truck at least on paper. Sure there is a market segment that isn't going to buy anything but an F150 but they probably aren't going to get a electric car anyway. Plus the cybertruck will probably attract as many or more hummer/mall-crawler enthusiasts.

[staticassertion]

It's an extremely weird looking truck with terrible marketing and a hilarious meme of its window shattering repeatedly. It'll be an incredible uphill battle to sell that thing imo.

[jml78]

Tesla and every other EV maker is battery constrained.

Tesla will sell every Cybertruck they can make as fast as they can make them.

Tesla still doesn’t sell that many cars overall per quarter. But they can’t keep up with their demand.

Ford will not be able to sell many electric F-150s because they won’t have the batteries to do it

[danudey]

Tesla's most recent profits were a staggeringly high $9.22bn.

Ford's most recent profits were a startlingly middle-of-the-road $19.934bn.

The Cybertruck is going to sell to nerds who think they're a handyman, but the eF150 is going to sell like crazy, and Ford has the money to buy up capacity that Tesla can't really match up.

[majormajor]

Tesla is selling amazing straight-line performance unlocked by their electric motors, but I wouldn’t rate the Model 3 a better handling car than a 70K Porsche 718.

Much of the mechanicals of handling well still have to be pretty complex even with electric power.

[whoisjuan]

I'm not an expert so I believe you when you say a Cayman/Boxster can handle better. But my understanding is that Tesla's heavy battery pack combined with their dual motor, produces exceptional low center of gravity / traction combination.

I know that most car enthusiasts dismiss Teslas as straight-line acceleration novelty cars, but Tesla is clearly not going after Porsches 718 market. They are going after the German Sedan market where performance has been always their upsell for higher prices (think M-Series or AMG)

[nixass]

> They are going after the German Sedan market where performance has been always their upsell for higher prices (think M-Series or AMG)

The German Sedan market has something Tesla does not nor it will in next 10 years or longer - the build quality. They are just laughingly bad comparing to German trio, in every assembly/build aspect. Once they reach somewhat comparable level of quality (and that's a big if), the trio will have well established EV offering

[rsj_hn]

German luxury sedans are known for comfort and handling, but not build quality.

They break down a lot and are moneypits. Part of the problem is the heavy reliance on plastics that break down with wear, therefore modern German sedans are much less reliable than they used to be.

Another problem is the extreme complexity which also translates to poor reliability.

Another is the high prices of parts. A battery replacement on a BMW costs $300 because the computer system needs to be reprogrammed. A Mercedes fuel pump assembly runs $600 (for a Camry it's $200-300). An Audi headlight assembly is $1100 (for a Camry, it's $250). These are OEM prices.

The high maintenance costs are capitalized as depreciation and are reflected in the resale value.

In my zip code, the private party sale value (accoring to KBB) of a 2012 Honda Accord SE in Good condition with 120K miles is $7K (median). For a 2012 Audi A4 with the same miles and condition, it's $4.8K - basically one of these tricked out new macbook pros with the M1 max chip.

A 2017 Audi A4 with 60K miles sells for 20K - it loses half its value. The 2017 Honda Accord sells for 19K. So it overtakes the A4 in value in year 6.

None of the above is a prediction that an out of warranty Tesla wont also be considered a money pit. Maybe it will -- we don't really have the reliability data yet, and there isn't a robust network of independent repair shops yet, it's all very new. But the German sedans do not constitute a high bar to surpass, the Japanese sedans do.

[nixass]

Build quality does not equate mechanical reliability. I'm talking about the way the cars are built, the chassis, frames, gaps, interior and the rest. Not the engines

[EdwardDiego]

> The German Sedan market has something Tesla does not nor it will in next 10 years or longer - the build quality.

Eh? German cars are renowned in my country for becoming giant money pits once they're 4 - 6 years old.

[c21h30o2]

The low center of mass is definitely an advantage but sportscars are pretty low to the ground anyway. It makes a much bigger difference in SUV size vehicles where a Tesla handles way better than its fossil competitors.

The heavy battery is a disadvantage for handling because heavier things have more inertia. The physics are pretty complicated and I'm not an expert either but if pressed I would point to aerodynamic downforce as completely independent of weight.

[mooreds]

> If someone could do Managed NAT Gateway next I'd appreciate it!

Yes please! Such a useful networking tool, but so expensive to run as a managed service.

Yes, you can run your own EC2 instance (searching turned up this guide, which looks useful: http://evertrue.github.io/blog/2015/07/06/the-right-way-to-s... ) but it'd be great to have this run by a cloud provider, yet be affordable.

[matsur]

We (Cloudflare) have got some things cooking here :)

I'd love to hear more about what problems you're trying to solve/features you'd like to see besides "cheaper" — can you email me at rustam at cloudflare ?

[outworlder]

Not OP but I'll add:

AWS can only have a single NAT gateway per subnet/availability zone(they are usually added in the route table as 0.0.0.0/0). Nat GWs can only scale up so much. If we blow past the limits, then the only option is to use resources from a different subnet. I realize things cannot scale vertically forever, but the fact that one can scale horizontally (by adding more NAT GWs in different subnets) tells me that there could be an architecture that would make this a non-issue to customers.

Also if a NAT Gateway has issues (see the outage on Aug 31st) we, the customers, have to figure out how to route around it.

In Google Cloud you can (easily) add multiple NAT gateways as your requirements grow, while staying in the same subnet. Not sure how far one can go (didn't go past 20 Nat GWs or so). We still have to worry about that (specially since in GCP the number of allowed connections is much smaller), ideally we shouldn't have to worry about this either :)

Azure does not have the same concept because they are bonkers (outgoing traffic goes out of your load balancer (?!))

[matsur]

Are you running TCP/UDP workloads or is NAT for any IP protocol needed?

[mooreds]

This is our major need right now:

https://github.com/FusionAuth/fusionauth-issues/issues/1393

Basically, providing a static IP to some EC2 instance traffic so that folks can add an IP to their firewall.

[outworlder]

A single EC2 instance might not cut it. The AWS Managed NAT GW scales up to 45Gbps. They can also support 55k connections to a single destination (multiply that by the number of permutations on your triple - IP addr, destination port, protocol).

If you have single EC2 instance doing the job of a managed NAT, another equivalent EC2 instance is enough to max it out.

You may need a fleet of instances if your requirements are large. Which means that you have a bunch of operational aspects to worry about and the NAT Gateway calculation starts to become more palatable (once you start adding the human cost of maintaining your own, etc).

Pricing is still outrageous though. AWS has economies of scale that we don't.

[bambax]

> they created a market

Yes they did, but they also reportedly have a 30%+ net margin. How is it surprising that other players who are in the position to do so, will attack them on price? While of course offering full API compatibility, which is what challengers have to do.

Do we need board game analogies to explain that some components of AWS are going to get commoditized?

The response from AWS will be innovation.

[adventured]

It has been fascinating to watch the price freeze, the collusion, between the three majors in AWS, Azure and Google Cloud. They stopped hatcheting each other on price years ago. The downward price competition used to be very common in the earlier years, they'd frequently undercut one right after another. They like their profitability and oligopoly, so they stopped doing it (among the giant companies only more desperate Oracle continued to aggressively slash at things like egress fees).

Enter Cloudflare.

[peytoncasper]

Isn't this to be expected though?

Early on, optimizations are everywhere which allow you to pick the low hanging fruit. Ideally, this gets passed onto the consumer.

However, over time, the optimizations become more costly to develop and less of them exist.

Just the other day I got a notification from GCP about new Spot Instances driving prices down by 80% which exceeds their existing preemtible instances.

Similarly with AWS releasing Graviton instances offering better performance and cheaper pricing.

I think egress fees have always been the catch, and I don't think they've seen much price changes over time. So I am excited to see it, but I wonder how much of that is due to the current one directional nature of cloud migration.

Most people are moving to a single cloud. As a result, there probably hasn't been a ton of demand to negotiate the outbound movement. We can debate the merits of the lock in nature, but I don't think that technological improvements really help here. This is just a decision to charge for bandwidth or not.

[nhumrich]

Google cloud has a managed nat gateway.

[McScrooge]

Are there any examples of an org creating an internal competitor to disrupt external competitors and potentially replace itself?

[dehrmann]

Netflix streaming killed Netflix by mail.

[dnautics]

not totally killed; you can still do it!

[jopsen]

Was streaming cheaper? Or rather didn't streaming have higher margins?

[adventured]

No. The Netflix mail business was very significantly profitable and the streaming business was losing a ton of money for years. The mail business carried, paid for, the streaming business.

That's because of the the entirely different business model of the disc rental business (first sale doctrine) vs streaming licensing business (you're screwed, the content owners will squeeze you to the wall). The horrible licensing costs of the streaming business is what prompted Netflix to push into production (basically direct those fees equivalent into assets they'd own outright instead of paying all their revenue back out to licensing fees forever).

The horrible streaming licensing cost problem is why Spotify struggles to earn a decent profit despite how much they've grown and having a zillion subscribers. You get no benefit of scale on your margin, because the content owners always squeeze you as you grow.

Spotify is up to $8.6b in revenue and still losing money. Their business has no margin at all, and that's essentially all due to the music licensing costs. That's why they're desperate to push into anything else, other lines of business, where they can not have to pay all their revenue out in licensing fees.

[jopsen]

Makes sense..

[oblio]

iPhone killed the iPad.

Netflix streaming killed Netflix DVDs-by-mail.

Azure-cross-platform-support-is-king is sort-of killing Windows-only-tools.

It's still super hard to do, but every CEO post-2000 has read the innovator's dilemma and you can see that in their actions.

[filereaper]

>iPhone killed the iPad. I think you meant iPod here.

[ipaddr]

Both would apply. The iPod in the late 2000s and somewhat later the iPhone got bigger screens and killed the iPad craze.

[machinerychorus]

Maybe google does something like this, with their myriad services? but then everyone complains about them constantly killing off products

[sitkack]

No they just fracture and kill markets.

[8ytecoder]

They don't have a cohesive long term strategy. They do have the capability to disrupt with internal innovation.

[htrp]

Many have tried .... no one has succeeded because internal venture innovation is hard.

[ksec]

>internal venture innovation is hard.

Only CEOs. Which are mostly stuck with politics. Founders tends to have it easier. But that is assuming they see it coming.

[oblio]

Any day now Google Allo, Hangouts, Talk, Chat, Plus, Wave, Messages, Voice, Duo, Meet will displace Facebook Messenger/WhatsApp! Just you wait!!!

[jhawk28]

Apple's products regularly cannibalize themselves.

[ksec]

Intel transition from NAND to Chip.

[badinfo]

Google had a relatively good chat product, Google Talk. Then they invented Google Hangouts, Google+, Wave, Allo, Messenger, Meet, and Chat.

Now IRC is dead. Who gets the last laugh, huh?!

[PeterCorless]

You could also argue that Google tried to reinvent Skype, Slack, Discord, and a million other chat apps, and they cannibalized their own offerings because they were feckless and mercurial.

[badinfo]

Yeah, and also cuz they kinda sucked. 1st-gen iMessage, or even old-school Trillian, was loads better than Google's graveyard of shitty chat products.

Google had no overarching chat strategy, just threw gobs of money and different teams at reinventing different spokes of the wheels, never thinking about the cart as a whole.

[dang]

Could you please stop creating accounts for every few comments you post? We ban accounts that do that. This is in the site guidelines: https://news.ycombinator.com/newsguidelines.html.

You needn't use your real name, of course, but for HN to be a community, users need some identity for other users to relate to. Otherwise we may as well have no usernames and no community, and that would be a different kind of forum. https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...

Also: please don't post unsubstantive and/or flamebait comments to HN. We're trying for a different sort of site here.

[delecti]

Google Talk evolved into Hangouts which then evolved into Chat. It's all one continuous line with a terrible marketing strategy. From what I can tell, Meet seems to be just a confusing way to access Hangouts video chats.

[j16sdiz]

"Evolve" here meant removing compatibility with xmpp clients AND losing all chat history.

Chat history matter a lot, really.

[delecti]

I can still see all of my Talk/Hangouts/Chat history going back years. Removing XMPP sucks, and I was annoyed by that too, but the chat history is still there.

[c21h30o2]

The grizzled IRC veterans. We are finally free of the deluge of clueless plebs.

[anitil]

> There aren't many examples of incumbent businesses doing it successfully

Can you think of any that have? I'd be interested to see any counter examples

[bezosjuice]

Bezos can spin up a greenfield cloud team and specifically target the new competition if he needs to.

AWS has nothing to fear making 45 billion last year.

[treis]

It does seem like CF is coming in and burning down the market instead of capturing part of it. Free is cool for developers but not exactly great for profits.

I can see a long term strategy where the next unicorn starts on CF and eventually pays them money. But it also feels like the big fish will migrate to AWS leaving CF with the cheap clients.

[coenhyde]

I feel your view of CF is about 4 years old. Combine CF's Cloud strategy with their IT/Security offerings (eg Cloudflare One), they are effectively building a new layer on the internet. Very sticky and hard to replicate unless you cover all bases like Cloudflare. Though, it might usher in a dark age if they are too successful. They could end up owning the internet.

[treis]

I'm talking specifically about R2 and other offerings where they're competing more directly with AWS.

Their other stuff is where you want to be in business. Market leading technology that you can charge a premium for.

[coenhyde]

Fair enough. Though I think these cloud products need to be viewed in the context of their other services. The value you from of using these cloud products isn't necessarily their direct feature set. It is that the network activity stays within Cloudflare and when combined with their other products, can't really be done easily with other services.

[brightball]

IMO the services that Cloudflare offers more than justify the price when you have even a minimal budget to pay for them.

[headphoneswater]

Free at a small scale sure, my company pays CF a bundle and we're not a unicorn