 Live from London, England, it's theCUBE, covering AWS Summit London 2019. Brought to you by Amazon Web Services. We're here at the Excel Center in London. This conference really is huge, isn't it? Dave Alante is my co-star today on theCUBE. We're going to be extracting the signal from the noise and there is a lot of noise. Just trying to register here was an event in itself one guy in the queue with me earlier said, this is like an army of young technologists backing one particular platform and we've had the main keynote speeches already in the conference hall. There are breakout sessions going on as well as we speak and in those keynote speeches, it really was a focus again on AI and machine learning and the huge array of services that AWS now provide because of course every tech company, every company is a tech company these days whether you work in transportation or defense or retail. Let's talk though, Dave, a little bit about AWS and the exponential growth that it's seen over the past few years because it just keeps on getting bigger and you can see Testament really out there just so many people are here. You know, Suzanna, when AWS announced its first service in 2006, very quietly announced EC2 which is a compute service. Nobody really paid much attention but AWS has permanently changed the landscape of the technology business and we're here in London, 12,000 people at a one day summit. I mean, that's as large as many or larger than most US based three day conferences. And there are many thousands more watching the live streaming as well. Right, and when you talk to the people over here, they're AWS refers to them as builders and it was interesting to hear some of the keynotes this morning talking about some of the innovations that occurred in the UK. You know, obviously UK, very prideful country. The first lights, you know, electric lights were at the Savoy Theater, the Colossus, you know, code breaker and many, many others, home computing originated in the UK. And so AWS are connecting that invention and what they call reinvention. AWS talks about its differentiation, the number of regions that it has around the world. I believe they said 21 regions, 64 availability zones which are little mini regions inside of the regions. In case there's a problem, you can fail over. 14 database services. You know, what's happening is all the traditional IT which is 80% of the marketplace are trying to sort of hang on to their legacy install bases. So they're trying to substantially mimic AWS. The problem is AWS moves faster, has more services and it's just growing at such a phenomenal rate. And it's really kind of bottom up as well. It's got that head start. So it's learning from its current customers and those who it's had in the past really to find out what new services they want. So it has this wealth of data, of course, to build on. Doesn't it? So every, it seems every month, it's another step ahead. Well the data is critical. Amazon is in a dogfight, I always say, for your data. With Google and Microsoft and Oracle, they all want your data. Why? Because data is the most valuable resource today. Right, people talking about data is the new oil. We think data is more valuable than oil. You can put oil in your car, you can put it in your house, but you can't put it in both. Data is reusable in a way that we've never seen a natural resource before. So it's extremely powerful, applying machine intelligence to data. So Amazon knows if it can get your data into the cloud and do so cost effectively and deliver services that make you happy and delight you, that they have a perpetual business model that's really unbeatable. The company now is at a $30 billion run rate. Growing at a constant currency rate of 42% per year. Now, people will say, well, Microsoft is growing faster. Microsoft is growing at 72% a year. But it's a much, much smaller base. We're talking about single digits, a few billion versus 30 billion. So Amazon each year is growing at a nine to $10 billion incremental rate. Even more importantly, the operating income is phenomenal. I mean, AWS is only 12% of Amazon's revenue, but it accounts for 50% of its operating income. AWS's operating income is in the high 20s, 28, 29%. Higher than Cisco, higher than EMC, when EMC was a public company. And those are very profitable companies. The only companies that are more profitable on a percentage basis than Amazon are pure place software companies like an Oracle. So Amazon, who's an infrastructure company, is as profitable almost as a software company. It's astounding. Really interesting to see some of the partners that were invited on as public keynote speeches. For example, Sainsbury's, a real traditional retailer and they're proud to state that they've been a business for 150 years. And some would say in many ways, a competitor to Amazon Marketplace because they sell a vast array of goods and services to the customers. But they talked about how they're using around 80 AWS services. It's almost like a pick-and-mix sweet shop or as you would say, a candy store, isn't it? And I think that's some of the benefits that some customers view for AWS. Some would say, actually, I would prefer all of my products being one place or the cloud that access and services in one place. And so it's this pick-and-mix idea that I think really is taking off, isn't it? I'm glad you brought up the Sainsbury example because essentially in a way they are an adjacent competitor to AWS. And yet they've chosen to put their data and leverage Amazon services. It's like Netflix. Everybody uses Netflix as the example. I mean, they compete vigorously with Amazon Prime Video. And yet they choose to run in the AWS cloud. Now, this is one of the areas where you heard at the Google Cloud Next show a lot of talk about retail companies considering using Google because of course they're concerned about Amazon eating their lunch. And so it's a hard decision for retail companies to make. Sainsbury obviously has said, okay, we can compete. We have a unique advantage with Amazon retail. But it's something worth watching for sure because Walmart obviously doesn't want to run in the AWS cloud because it's fearful. At the same time, Amazon would tell you, Andy Jassy often says, look, there's a brick wall between AWS and the retail side. We don't share data. So it's just a matter of that trade-off. Is the risk of running in AWS and potentially running at a competitor site worth the extra value that you get out of the services? And that's what the market has to decide. Yeah, it certainly does. Interesting as well. We had the Department of Justice on the UK Department of Justice because there has been real concern about security, about putting all your eggs in one basket, effectively putting your data into a cloud that's not operated by you. And it does, though, seem as though, little by little, some of those security fears are being allayed, aren't they? Well, there was this seminal moment in AWS's history was in 2013 when it won the CIA contract. Who was more security conscious than the CIA? And they beat Big Blue, IBM, for that contract, way back in 2013. And the analysis that came out of that, because IBM contested that contract, what came out of that was information that suggested that AWS had the far superior solution. It forced IBM to go spend $2 billion on a company called SoftLayer to actually get into the public cloud because it couldn't really compete with its own sets of services. And since then, Amazon has only accelerated its lead. IBM, of course, has a public cloud and it's competitive in its own right. But the point is that the CIA determined that security in the cloud was better than it could do on-prem. Now you're seeing the big battle for the Jedi contract, the Joint Enterprise Defense Initiative. Absolutely. It's the biggest story in DC. Amazon is the front runner, it's down to Amazon and Microsoft. Not surprisingly, Oracle has contested that because the government uses these sources from multiple suppliers and they're contesting it saying, hey, that's not fair to use one cloud. When a vendor contests a bid, a lot of information comes out. The General Accountability Office and the DOD determined that a single cloud was more secure, more reliable, more cost effective and less complex to run. So there's this big debate around multi-cloud, versus single cloud, and again, Amazon continues to lead in the marketplace and in many, many instances is winning. And there were a few comments made in certainly one of the keynotes today, trying to kind of blow the competition out of the water again, with a few specific references, in fact, to Oracle and Microsoft. Well, right, and so they called it database freedom, they had hashtag database freedom. Again, as they say, Microsoft, IBM, Oracle, Amazon, they're in a fight for your data. That's why Oracle has launched 14 database services. Now, it's not trivial. So Sainsbury and the Ministry of Justice both talked about moving Oracle databases into the AWS cloud. It's not trivial. It's much easier for data warehouse and stateless applications for online transaction processing, things like banking, much, much more difficult to migrate into the cloud. So it's interesting, Sainsbury talked about RAC, it stands for Real Application Clusters, a very high-end complicated Oracle database that they migrated to Aurora. The Ministry of Justice talked about moving Oracle into RDS. This is a battle I tweeted today earlier, Suzanna. You pick up the Wall Street Journal, there's a quarter-page ad on the front page, cut your Amazon bill in half. Now, of course, what Oracle doesn't tell you is that they two X the price when you're running on Amazon versus Oracle. So they're playing pricing games. Having said that, Oracle has a very good database, the best database in the industry, the most reliable. So for mission-critical applications, Oracle continues to be the leader. However, Oracle strong-arms people, they'll raise prices, they'll get you in a headlock and do audits, and that's what Amazon was referring today about Microsoft and Oracle will do audits. So they position, they try to deposition Oracle as an evil company. Well, Oracle, of course, says, hey, we add value, we have the best database, then they're trying to add value for their customers, build their own cloud. So it's quite a battle that's going on and you see the instantiation of that battle manifests itself in the Jedi contract. Absolutely. Interesting as well what we heard from, really, both Sainsbury's and the Ministry of Justice, really talking about the end users and how they're so different. So for public sector organizations, this isn't about making more money, making a profit. It's about the experience for the user. But in fact, that came up from Sainsbury's as well, making sure that the right products are the right part of the store, and that's how AI can help them do that and efficient use of all the data they currently have. I think every enterprise really wants to have a consumer app-like experience, and very few do. I mean, we all know, we use these enterprise apps from large brands, and often times not that great. So, but you're seeing a closing of the gap. People see what's happening with Facebook and Instagram and WhatsApp and so forth and say, we should be able to have apps that run that simply, and so you're seeing that gap close. I don't see how you can do that without some kind of public cloud infrastructure because of the massive scale that's required. And so companies like Sainsbury are moving in that direction. Mobile has been critical for the last decade, and so that's what the consumer wants. That's what the cloud can provide. Is that what every consumer wants though? Because increasingly we're hearing a lot more concerns about privacy, about people not wanting to give all of their data across to private companies. And do you think this could be the sticking point really going forward and could actually hold back the growth of AWS and its competitors? What's a great point? Because you have, one of the problems you have is app creep. I mean, I can't tell you, I have dozens and dozens and dozens of apps on my phone. I don't know if I trust them with the data. So, having said that, one way to simplify that is to eliminate the need to do heavy lifting and patching of your infrastructure. Let AWS take care of that and build value up the stack by focusing, reshifting your resources on value added services. Could it be a problem? I think no question. When Snowden came out in the US, people in Europe for sure, as you know, were concerned about putting their data in the cloud. That seems to have attenuated. I don't hear as much about that anymore. But if the NSA can come in and demand access to my data, well, that could be problematic. That's why AWS is putting so much, or one reason why they're putting so much emphasis on setting up regions, not just AWS, Amazon and Google and Microsoft as well. For many reasons, privacy, GDPR compliance, and of course latency, the laws of physics. Absolutely. Okay, Dave Valenti, thank you very much for being with me here at the AWS Summit here in London at the Excel Center. There is still so much going on here. Lots of breakout sessions, many more kind of individual keynotes taking place with the various different subsections of the AWS business and also its partners. So we will be keeping across all of those on theCUBE. Thanks for watching.