UPDATED 10:41 EST / DECEMBER 02 2019

jassyreinvent2018-1-closeup CLOUD

Exclusive with Amazon’s cloud chief: Enterprises must use cloud to transform

As Amazon Web Services Inc. opens its eighth annual re:Invent conference this week in Las Vegas, it’s facing a new cloud computing landscape that it no longer has mostly to itself.

Even as some rivals such as IBM Corp. and Oracle Corp. struggle in the cloud, Amazon.com Inc.’s cloud infrastructure company now faces an increasingly credible competitor in Microsoft Corp., which recently snagged a surprise win of a $10 billion Pentagon contract, and Google LLC, whose cloud data analytics and artificial intelligence services have gotten some traction.

And although AWS staked out an early and commanding lead among cloud-native startups, some of them now-huge “unicorns” such as Lyft Inc. and Airbnb Inc., the next stage for the cloud is traditional enterprises and their workloads currently running in private data centers. At this year’s re:Invent, AWS is expected to double down on some early enterprise wins, especially given that by some estimates, not even 20% of enterprise workloads are yet in the cloud

But as AWS Chief Executive Andy Jassy (pictured) told me in an exclusive two-hour interview recently, this next stage isn’t all about the technology.

It’s about managing an increasingly complex information technology operation that involves existing data centers still needed to meet regulatory requirements or reduce data latency. It’s about an ever-increasing array of smartphones and other edge devices. And it’s about multiple cloud platforms from infrastructure to software-as-a-service.

More than all that, it’s about using cloud technologies not just to pave the old IT cow paths but to rethink processes and even corporate structures in light of new cloud-driven capabilities.

To learn more about AWS’ strategy and figure out what’s coming next for the company and the industry, I met Jassy recently for a conversation in his personal sports bar, which he calls Helmet Head, that he set up in his Seattle basement.

In this first of a three-part series to run in coming days, Jassy hints at some of the themes he’ll cover in his Tuesday morning keynote, including bringing cloud computing to private data centers and other locations at the network edge, as well as an intensified focus on data analytics, machine learning and even quantum computing. Jassy addresses the cloud-driven transformation coming to every business and what CEOs and other executives of large enterprises need to do in order to avoid getting disrupted by upstarts. The interview is lightly edited for clarity.

Look for more strategic and competitive insights from Jassy in the second and third parts of the interview over the next two days of the conference, which runs through Friday. And check out re:Invent coverage all this week by SiliconANGLE, its market research sister company Wikibon and its livestreaming studio theCUBE, now in its seventh year covering re:Invent from the show floor.

Managing the cloud transformation

Furrier: I think we’re at a time now in the industry where there’s real transformation happening. It’s not a market transition. Legacy vendors do transitions. Transitions are like an incremental improvement, but this is more of a transformational thing. What you see as the difference between a transition and a transformation?

Jassy: Transformation is more urgent, it’s more comprehensive. It requires more people in the organization to be on the same page. And so when I look at the companies that are trying to make this transformation, there’s some big differences between those who make it versus those who want that slower transition.

If you think about what the cloud enables today, just think about how many longstanding established businesses have been completely disrupted by startups. Look at what Lyft and Ola and Grab and Careem and mytaxi have done with ride-sharing or what Airbnb has done in accommodations or what Peloton has done to the spinning and cycling space and what Pinterest has done in visual search. These are big transformations of industries where enterprises got totally disrupted by someone they’d never heard of five years before.

Enterprises realize that if they want to be successful, sustainable companies over time, they can’t just make small incremental changes. They have to really think about what their customers want and decide what the customer experience is that’s going to be the one that’s demanded over time. And usually, that requires a pretty big change or a transformation. So if you really want to make that transformation, and most enterprises do, if you look at the difference between those that make it successfully versus those who just talk about it and make these slow transitions, there are three or four things that matter.

Furrier: Talk about those factors.

Jassy: The first is that you have to get the senior leadership team aligned and convicted that you’re going to make the change, because it’s so easy for people to block. Inertia is so powerful that if you’re not all really committed to it and get the issues on the table, it doesn’t happen.

The second thing that’s related is that you have to set an aggressive top-down goal that forces the org to move faster than it organically otherwise would, or not. GE is a good example [of the former], where their CIO, Jamie Miller at the time, decided that they needed to move to the cloud. She got her top technical leaders together and said, “We’re going to move 50 applications to AWS in 30 days.” And she said for 45 minutes they told her what a terrible idea this was and how it was impossible. And she said, “Well, I hear you but we’re going to do it, so let’s go.” And they got to about 42 applications moved to AWS in 30 days.

But in that process they figured out their governance model, their security model. They figured out how to build in the cloud. They had some successes and it built a lot of momentum such that the ideas for what else they should move to the cloud came pouring in and now they’re three quarters of the way through moving 7,000 applications to AWS. But it wouldn’t have happened if they didn’t have that top down aggressive goal, which forced them to move faster.

Furrier: But other companies still take a lot longer to do that.

Jassy: If I compare that to a large pharmaceutical company I went to visit a few years ago, and we got there and the CIO and his infrastructure leader were caught in this meeting with the CEO and the CIO came out early, and he said, “OK, before my infrastructure guy gets in the room, tell me what’s really happening. How are we doing?”

And I said, “Well I think everything’s going okay, but you’re not really doing anything with us.” He said, “That’s not true. I’ve heard we’re doing lots of experimenting.” I said, “Well, you’re using two EC2 instances.” He said, “Really?” And then the infrastructure guy came into the room and he said, “Are we doing a lot with AWS?” His infrastructure guys answered, “Oh yes, we’re doing a lot in the cloud and with AWS.” “How many EC2 instances are we using?” He said, “I don’t know, three or four.” And the CIO said, “Well, that’s not really what I mean by a lot.”

But the reality is that he would have never known if we hadn’t had that meeting. And if you don’t have aggressive top-down goals that force the org to realize that you’re serious, you can really be dipping your toes in the water for three, four or five years and not making that transformation.

That CIO, by the way, went away after that meeting and set his own really aggressive top-down goal. Now they’re one of our top few pharmaceutical customers.

You’ve [also] got to train people, because a lot of times you get leaders get very excited about it and they come back to the company and say, “Good news, here’s the cloud.” But nobody is trained or knows how to use it yet. And it’s why we train hundreds of thousands of customers a year.

Then you’ve got to really make sure that you don’t allow your organization to get totally paralyzed if they can’t figure out how to move every last application. And that’s sometimes what happens. For most customers who are serious about moving to the cloud, we will do a full portfolio analysis with them and we’ll characterize their applications into those that are easy to move.

Furrier: How do you decide which applications are easier and which are the hardest and how to proceed with each?

Jassy: There are those that are maybe medium-hard, those that should go last because of the legacy and dependencies, and those that you can easily lift and shift versus those that should be re-architected before they go to the cloud.

And then you build the sequential tranches and workloads that move over a few years. What you often find is that the hardest applications that should go last get informed by what you do early on. There’s so many of your applications that can benefit from the cloud.

So a transformation is a much broader move to take advantage of a new technology that’s transforming the customer experience in your space.

Cloud-native or cloud-naive?

Furrier: It’s interesting you mentioned the pharmaceutical example because the guy thinks he’s working with Amazon from a few EC2 instances, which is really nothing. Sounds like he’s just placating the boss. Cloud-native has become a term, but if you take away the T, it’s cloud-naive. I think you’re seeing a set of vendors playing to the naivety of IT. Where someone says, “No, we got it covered. We’re doing cloud, we’re working with this company here.”

Jassy's keynote tease. Image: Andy Jassy/Twitter

Jassy’s keynote tease. Image: Andy Jassy/Twitter

Jassy: I agree with you. I don’t know if it’s naivete or just not having visibility into the detail to really know what’s real or what’s not. I still think we’re in the early stages of mainstream enterprise and public sector adoption. But today, one big difference is that the CEOs are much more involved than they used to be. In the first 10 years of AWS, a lot of the movement, a lot of the experimentation, a lot of the migrations were driven by frustrated developers, frustrated engineering managers, architects, line-of-business managers, which all still happen today. The CIO will get involved a little bit later and the CEO wasn’t really that involved in the decision in the early days. 

But today this is being driven much more top-down than it was before. They’re big strategic decisions. Most leaders at the top who are serious about their company’s transforming their technology capability have to make sure that when they’re told that, “Oh yes, we have a cloud strategy. Oh yes, we’re doing things in the cloud,” they inspect it and say, “Well show me, tell me what.”

Furrier: When I broke into the business, there was a phrase, “You never get fired for buying IBM.” You can say Microsoft’s playing that card: “We’ve got you covered, we have sales relationships. You won’t get fired if you stay with Microsoft.” But you guys are more like, “You get promoted with Amazon.” If I’m a company and I see these new things popping up and I’m an existing enterprise, how do I change my mindset?

Jassy: The most important things by far are, No. 1, to make sure you understand what customers want. You have good feedback loops to understand what customers care about and what they really want. And then you have to have a technology platform that allows your builders to meet whatever those demands are that customers want and to invent on their behalf.  And I don’t know of any other way. Unless you’re in an industry where you own a monopoly, which are very few, you’re going to have a significant amount of competition.

Today virtually all your competitors are going to be using the cloud, which means that they’re going to have a lot more capability and iterate and innovate at a much faster clip. So you have to equip yourselves with the same opportunity to experiment and innovate quickly.

And then the platforms are pretty different today that are out there. So picking the right foundation on which to build so that you can not only migrate all your existing applications, but at least as important, allow your builders to build quickly almost anything they can imagine. Those are the ways as senior leaders that you’ve got to make sure that your company can keep growing.

A strategic conversation

John: The modernization of tech is not just an IT thing anymore. It’s a business thing. And now a new era is coming in where it’s not just the compute and the scale of what’s coming, it’s what happens on top of it. So this modernization of the business models is much more of a strategic conversation.

Jassy: I just think of it as: You can try any idea that you can possibly imagine for the cost of a development team and then a few dollars a month, until you actually have an idea that has some customer traction. And so I gave you a bunch of examples of industries that are being disruptive, but you can keep going. Look at how Stripe has totally changed the payments industry and then everybody else has to think about how do we actually match what Stripe is doing. Look at what Robinhood is doing in the financial services space. My son is a very loyal and coveted customer for a lot of these food delivery services, the DoorDashes of the world.

These models are totally different, but in the old days, if you want to try something really different, you would have to sell a bunch of VCs on your idea and they would have to be willing to give you $5 million and you’d take all that money and spend on the data centers and servers and you get one shot at your idea, which made VCs much more reluctant to fund new ideas.

Today that model has been totally flipped on its head by the cloud. VCs are much more willing to take risks on new business ideas because the cost of trying a bunch of different iterations of it is so much lower in AWS and the cloud. So I think that if you are an existing enterprise and you are just seeing your world as your current market segment share, and you’re not thinking that there’s an opportunity that a startup that you’ve never heard of, or maybe doesn’t even exist today, might disrupt your business with a better idea, if you’re not experimenting and iterating quickly, you’re going to find yourself on the wrong end of that equation.

Furrier: But there’s more needs in this architectural shift. People are recognizing that they have to rearchitect their business models and have them match a technical platform, not just have IT. Maybe they need to integrate technology more into their core business?

Jassy: One of the interesting things is more enterprises are deciding to really mass-migrate and bet on the cloud, and when they make that decision, all bets are off. So everybody they’ve been using before, everything they’ve been using before, everything’s on the table to be reconsidered. It throws the world upside down and it’s a great opportunity, not just for us but for the entire ecosystem. We see some things that are coming at it.

Furrier: A full reset?

Jassy: No, they don’t necessarily reset everything but a full reset consideration. They consider everything anew. One of the first things we see is that, you can’t believe how many mainframes are still out there and people desperately want to get away from the mainframe. It might’ve been a good solution 30 or 40 years ago, but it’s expensive and clunky and slow and not great with a lot of data.

So we spend a surprising amount of time with enterprises helping them move away from their mainframes. It kind of always cracks me up now when I see these press releases from some of these older-guard vendors with new mainframe features.

One of our enterprises that basically migrated away from their mainframe and built microservices, moving to AWS. They were the later stages of this migration. And nobody at the company had the passwords to decompile and get this thing done. They had to go find this woman who had been retired for 10 years, who’s living in another city. She was the only person who had the password. Thank God they could find her.  So I think that the first thing is just people moving away from mainframes.

The partner picture

Furrier: What about the role of the broader ecosystem in cloud-driven transformation?

Jassy: When you’re making this big transformation, you totally change who you consider using for your independent software vendors, your software-as-a-service providers. It’s a great opportunity. But also, it’s pretty interesting to us how the systems integrators space is changing too. I think that a lot of the large SIs have been careful not to cannibalize themselves and they’re outsourcing businesses and they’re also beholden to lots of older-guard providers and they want to upset those practices. There’s a couple of them that I feel like have really embraced the cloud in a differentiated way. Maybe the Accentures and the Deloittes.

Furrier: Are you worried you might have a blind spot in your ecosystem? That may be Amazon’s partners, aren’t they ready to be packaged up into solutions for other clouds? An example is Salesforce.com’s Marketing Cloud allying with Microsoft.

Jassy: I think in that case, it wasn’t a solution. I think it was just an announcement that they’re going to move a small part of some of their workloads there, but the overwhelming majority of what Salesforce runs in the cloud is on AWS.

Most every area that is a solution or a packaged software solution, ISVs and SaaS providers are all going to be reinvented in the next five to 10 years. And many of them will be reinvented by the existing leaders. If you’re an existing leader, you have the advantage that you can see a lot of different new ideas.

Some of the leaders are going to reinvent themselves and be the solutions of the future. And then some of them are going to be brand-new startups. Some exist today in a very early stage. Many of them don’t exist today. Our goal is to be the infrastructure technology platform underneath all of them, and to enable them to be able to invent and to build a better customer experience and to help them grow.

Photo: Robert Hof/SiliconANGLE

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