This, and related topics, always makes me laugh a bit. Mostly because people and companies will defend either move, with terms such as "focusing on the core business" or, opposite that statement, as "vertical integration".
From my mostly uninformed POV, a company can do whatever they want with respect to this and be on good ground, making it an arbitrary decision with little basis in actual objectivity.
Things scale differently in different markets and products... It might be trivial to spin up extra cloud capacity within Google's system and benefit from all the robustness and redundancy they've already designed out. Meanwhile, Amazon is building their own UPS competitor because their infrastructure needs in the real world are specialized enough to be able to benefit.
Each case is different and the details drive the decision.
TLDR (for my comment) : Amazon are building their own UPS because they can. Any othe arguments in favor of it be it efficiency or costs are secondary.
Longer version:
Not sure how Amazon deliveries by UPS are in the US but in the U.K. there are carriers which offered far better delivery service than what is known as Amazon Logistics here in the U.K. Once Amazon started using Amazon Logistics, the level of service dropped significantly. False deivery attempts were common and Prime Next Day were not happening next day 3 out of 5 times. I cancelled my Prime membership.
After about a couple of years I have resubscribed to Prime since it is now much better value AND Amazon Logistics have noticably improved. Next day and even Same day deliveries are indeed happening.
They didn't need to setup Amazon Logistics and suffer poor service quality. There were near perfect couriers (for e.g. DPD they even offer tracking your courier driver on a map in near real time).
That wouldn't be surprising at all. Alibaba has long been building its own logistics for Taobao in China as well. It's quite a natural development of affairs I guess.
> Things scale differently in different markets and products.
This is vague.
Running on the cloud is always more expensive than running your own infrastructure past a certain size and always provides less predictable performance.
That doesn't seem obviously true. If you operate a service and I operate a service and their loads are out of phase the cloud provider can serve us both with one set of hardware, halving the price. If I own my hardware, and I'm not a cloud computing provider, I pay the full cost 24x7.
That both directions can seem like a good idea to a speculating outsider doesn't mean the decision is an arbitrary one. It means the deciding factors aren't something we're privy to.
It's actually about whether or not it would cost more, over the long term, for a company to develop such capabilities themselves, or to outsource it.
Generally, due to economies of scale, a big, established provider will be able to provide such a service much cheaper than it would cost you to run an equivalent service.
However, it depends on how much that provider is charging you, on top of their cost of sales. It's pretty basic in that if it costs more to do it yourself, it's easier to let someone else do it. Especially when you take into account the considerable R&D costs that it would take to provide an equivalent service. Google's services would, I'm sure, be highly developed. This statement says as much, in that it claims Google has services offered by no other company.
From my mostly uninformed POV, a company can do whatever they want with respect to this and be on good ground, making it an arbitrary decision with little basis in actual objectivity.