Amazon is acquiring Kiva Systems for $775 million in cash. Kiva makes robotic systems for picking, packing, and shipping products in fulfillment centers for distribution operations. It seems clear that Kiva is intended to play a dual role at Amazon: supporting Amazon’s own distribution centers, and generating expanded revenues through the sale of Kiva systems to other companies.
There is a parallel with what Amazon has been doing in cloud services: Amazon developed an extensive set of capabilities for data center operations, which it needed to support its massive e-commerce business, and several years ago began selling these capabilities to other companies as well as using them internally. Amazon Elastic Compute Cloud has now become a leading provider, perhaps the dominant provider, in the cloud services marketplace.
Use of a technology investment both to support internal operations of a company and as the base for an externally-saleable product or service has a strong appeal; however, it can be fraught with problems. Priority decisions in product development are likely to become highly politicized due to the conflicts between internal needs and the demands of the external marketplace, and potential external customers can be scared off by fear of being put in the position of competing with their supplier. Amazon’s success with Cloud, however, builds confidence in their ability to navigate these tricky waters successfully.
Interestingly, Kiva is backed by Bain Capital Ventures.