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I'm beginning to realize that nobody truly knows what the cloud is. But they sure as heck understand that they need some form of it if they care to survive. And according to Netflix (NASDAQ: NFLX ) , a part of that survival is failure and doing so as often as possible.
To that end, the company has created Chaos Monkey, a service that runs in the Amazon (NASDAQ: AMZN ) Web Services, or AWS, that seeks out to terminate what is called Auto Scaling Groups. For those unfamiliar with the cloud, this is an absolutely brilliant tool. Netflix designed the software to be flexible enough to work with other cloud providers and can scale to any existing network. And you thought all Netflix did was stream movies.
However, this underscores my frustration with calling writers thinking they have fully grasped this cloud concept, to the extent that they can distinguish between what is real and what is fake, which made no sense at all. I've recently felt the urge to come to Oracle's (NYSE: ORCL ) defense after a barrage of stories surfaced launching accusations at the company's service delivery model. The nerve it requires to discredit what is still essentially a theory didn't sit well with me. Understandably, it didn't sit well with many Oracle supporters, either.
In the case of Netflix and Amazon, these two companies have a lot more in common than their high-priced stocks. They are brilliant innovators with revolutionary visionaries running their businesses. While everyone focuses on their heated streaming movie battles, behind the scenes they are eating bananas together and swinging on vines. Amazon, which has arguably one of the best cloud services on the market with AWS, has Netflix as one of its biggest customers.
Similarly, when Amazon has recently suffered severe service outages, it reached out to Netflix's Chaos Monkey for a solution. Meanwhile, conventional thinking would have you wondering, "Why would Netflix not try to capitalize on Amazon's struggles and use it as leverage for their streaming battles?" After all, Netflix CEO Reed Hastings has an ambitious goal of 60 million to 90 million domestic subscribers. It would make sense to steal what Amazon has.
Netflix is smart enough to realize that the capacity requirements of this goal would be pretty aggressive. To that end, if it can help Amazon's 121 million worldwide users stay connected, then it means Netflix would have likely figured out how to prevent its own outages in the future. Essentially, you hire a bank robber to help prevent bank robberies. It's the same concept. But now we're back to that word again.
The cloud concept is so strong that it even brings rival companies together. We are seeing this all the time. Citrix and Cisco's partnership serves as the perfect example. While these strategic alliances do further the interest of each company, it is ultimately the customer who draws the most benefit. As Netflix pointed out, "Failures happen and they inevitably happen when least desired or expected." I don't think Netflix was talking about a PowerPoint presentation here but rather its movie service. But there's really difference -- uptime is the key.
To that end, I would think that at some point Apple, which has 400 million iTunes users who buy movies and music, should reach out to Netflix. So should Twitter and especially Facebook, which has 1 billion users and has suffered a recent outage. I'm not suggesting that Netflix is going to become the next great cloud company, but Chaos Monkey highlights how there is not yet a clear-cut standard for how businesses view the cloud and the many variations that exist.
The precipitous drop in Netflix shares since the summer of 2011 has caused many shareholders to lose hope. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.