 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hello everyone and welcome to this week's episode of theCUBE Insights powered by ETR. In this breaking analysis, I want to do a quasi-post mortem on AWS re-invent and put the company's prospects into context using some ETR spending data. First, I want to try to summarize some of the high-level things that we heard at the event. I won't go into all the announcements in any kind of great detail. There's a lot that's been written out there on what was announced, but I will touch on a few of the items that I felt were noteworthy and try to give you some of the main themes. I then want to dig into some of the spending data and share with you what's happening from a buyer's perspective in the context of budgets and will specifically focus on AWS's business lines. And then I'm going to bring my colleague, Stu Miniman, into the conversation. And we're going to talk about AWS's hybrid strategy in some detail and then we're going to wrap. So the first thing that I want to do is give you a brief snapshot of the re-invent takeaways. And I'll try to give you some commentary that you might not have heard coming out of the show. So to summarize re-invent, AWS is not big on rinsing and repeating. They have this culture of raising the bar, but one thing that doesn't change is this shock and awe that they do of announcements. It comes out each year and it's obvious. It's always a big theme. And this year, Andy Jassy really wanted to underscore the company's feature and functional lead relative to some of the other cloud providers. Now the overarching theme that Jassy brought home in his keynote this year is that the cloud is enabling transformation. Not just teeny incremental improvement. He's talking about transformation that has to start at the very top of the organization. So it was somewhat a challenge and an appeal to enterprises generally versus what is often a message to startups at re-invent. And he was specifically talking to the C-suite here. Now Jassy didn't say this, but let me paraphrase something that John Furrier said in his analysis on theCUBE. He said, if you're not born in the cloud, you basically better find the religion and get reborn or you're going to be out of business. Now, one of the other big trends that we saw this year at re-invent and it's starting to come into focus is that AWS is increasingly leveraging its acquisition of Antiperna with these new chipsets that give it higher performance and better cost structures and utilization than it can with merchant silicon and specifically Intel. And here's what I'll say about that. AWS is one of the largest, if not the largest customer of Intel's in the world. But here's the thing, Intel wants a level playing field. We've seen this over the years where it's in Intel's best interest to have that level playing field as much as possible in its customer base. You saw it in PCs, in servers, and now you're seeing it in cloud. The more balanced the customer base is, the better it is for Intel because no one customer can exert undue influence and control over Intel. It's the cons, Intel is a consummate arms dealer. And so from AWS's perspective, it makes sense to add capabilities and innovate and vertically integrate in a way that can drive proprietary advances that they can't necessarily get from Intel and drive down costs. So that's kind of what's happening here. The other big thing we saw as a latency what Pat Gelsinger calls the law of physics. You know, well, a few years ago, AWS, they wouldn't even acknowledge on-prem workloads. And Stu and I are going to talk about that, but you know, clearly sees hybrid as an opportunity now. I'm going to talk more in detail and drill into this with Stu, but a big theme of the event was moving outposts closer to on-prem workloads that aren't going to be moving into the cloud anytime soon. And then also the edge, as well as for instance, Amazon's wavelength announcement that puts outposts into 5G networks at major carriers. Now another takeaway is that AWS is unequivocal about the right tool for the right job. And you see this really prominently in database where I've counted at least 10 purpose built databases in the portfolio. AWS took some really indirect shots at Oracle maybe even direct shots at Oracle, which, you know, Oracle treats Oracle database as a hammer in every opportunity as a nail and antithetical to AWS's philosophy. Now there were a ton of announcements around AI and specifically the SageMaker IDE, specifically SageMaker Studio, which stood out as a way to simplify machine intelligence. Now this approach addresses the skill set problem. What I mean by that is the lack of data scientists to leverage AI. But one of the things that we're going to be watching here is it's going to be interesting to see if it exacerbates the AI black box issue, you know, making the logic behind the machine's outcomes less transparent. Now all this builds up to what we've been calling next-gen cloud. And we're entering a new era that goes well beyond infrastructure as a service and lift and shift workloads. And it really ties back to Jassy's theme of transformation where analytics approaches new computing models like serverless, which are fundamental now as a security and a topic that we've addressed in detail in prior breaking analysis segments. AWS even made an announcement around quantum computing as a service. They call it bracket. So those are some of the things that we were watching. All right, now let's pivot and look at some of the data. Here's a reminder of the macro financials for AWS. You know, we get some decent data around AWS financials. In this chart, I've showed before, but it's AWS's absolute revenue and quarterly revenue year on year with the growth rates. It's very large and it's growing. That's the bottom line. But growth is slowing to 35% last quarter, as you can see. But to iterate or reiterate, we're looking at a roughly $36 billion company growing at 35% a year and you don't see that often. And so this market is still as a long way to go. Now let's look at some of the ETR tactical data on spending. Now remember, spending attentions according to ETR are reverting to pre-2018 levels and are beginning to show signs of moderation. This chart shows spending momentum based on what ETR calls net score. And that represents the net percentage of customers that are spending more on a particular platform. Now, here's what's really interesting about this chart. It shows the net scores for AWS across a number of the company's markets comparing the gray, which is October 18 survey with the blue, July 19 and the yellow, October 19. And you can see that workspaces, machine learning and AI, cloud overall, analytic databases, they're all either up or holding the same levels as a year ago. So you see AWS is bucking the trend. And even though spending on containers appears to be a little less than last year, you know it's holding firm in the July survey. So my point is that AWS is really bucking that trend from the overall market and is continuing to do very, very well. Now this next slide takes these same segments and looks at what ETR refers to as market share, which is a measure of pervasiveness in the survey. So as you can see, AWS is gaining in virtually all of its segments. So even though spending overall is softening AWS in the marketplace, AWS is doing a much better job than its peers on balance. Now, the other thing I want to address is this notion of repatriation. I get this a lot as I'm sure do other analysts. People say to me, Dave, you should really look into this. We hear from a lot of customers that they moved to the cloud now they're moving workloads back on-prem because the cloud is so expensive. Okay, so they say you should look into this. So this next chart really does look into this. What the chart shows is across those same offerings from AWS, so same services, the percent of customers that are replacing AWS. So I'm using this as a proxy for repatriation. Look at the numbers, they're low single digits. You see traditional enterprise vendors overall business growing in the low single digits or shrinking, AWS's defections are in the low single digits. So, okay, now look at this next chart. What about adoptions? If the cloud is slowing down, you'd expect a slowdown in new adoptions. What this data shows is the percent of customers that are responding that they're adding AWS in these segments, so there's a new platform. So look, across the board, you're seeing increases of most of AWS's market segments. Notably in respondents citing AWS overall at the very right most bars, you are admittedly seeing some moderation relative to last year. So that's a bit of a concern and clearly something to watch, but as I showed you earlier, AWS overall that same category is holding firm because existing customers are spending more. All right, so that's the data portion of the conversation. Hopefully we put that repatriation stuff to bed and I now want to bring in Stu Miniman to the conversation. We're going to talk more about multi-cloud hybrid on-prem, we'll talk about outposts specifically. So Stu, welcome, thank you very much for coming on. Thanks Dave, glad to be here with you. All right, so let's start with multi-cloud and dig into the role of Kubernetes a little bit. Let me sort of comment on how I think AWS looks at multi-cloud. I think they look at multi-cloud as using multiple public clouds and they look at on-prem is hybrid. Your thoughts on AWS's perspective on multi-cloud and what's going on in the market. Yeah, and first of all Dave, I'll step back for a second. You talked about how Amazon has for years had shots against Oracle. The one that Amazon actually was taking some shots at this year was Microsoft. So not only did they talk about Oracle, they talked about customers looking to flee their SQL customers and I lead into that because when you talk about hybrid cloud, Dave, if you talk to any analyst over the last three, four years and you say, okay, what vendor is best positioned in hybrid? Which cloud provider has the best solution for hybrid cloud? Microsoft is the one that we'd say because there's strong domain in the enterprise of course with Windows, the move to Office 365, the clear number two player in Azure and they've had Azure stack for a number of years and they had Azure pack before that. They'd have a number of offerings. They just announced this year Azure Arc. So three, we've had at least three generations of hybrid multi-cloud solutions from Microsoft. Amazon has a different positioning. As we've talked about for years, Dave, not only doesn't Amazon like to use the words hybrid or multi-cloud for the most part, but they do have a different viewpoint. So the partnership with VMware expanded what they're doing on hybrid. And while Andy Jassy, he at least acknowledges that multi-cloud is a thing. When he sat down with John Furrier, head of the show, he said, well, there might be reasons why customers either, there's a group inside that has a service that they want, that they might want to do a secondary cloud or if I'm concerned that I might fall out of love with the primary supplier I have, I might need a second one. Andy said, and not so, just exactly, said, look, we understand multi-cloud is a thing. Now, architecturally, Amazon's positioning on this is that you should use Amazon and they should be the center of what you're doing. You talked a lot about outposts, outposts critical to what Amazon is doing in this environment. And we're going to talk about that. So, but you're right, Amazon doesn't like to talk about multi-cloud as a term. However, and by the way, they say that multi-cloud is more expensive, less secure or more complicated, more costly and probably true, but you're right. They're acknowledging at least, and I would predict just as hybrid, which we want to talk about right now, they'll be talking about, they'll be participating in some way, shape, or form, but before we go to multi-cloud or hybrid, what about Kubernetes? So, right, first of all, we've been at the KubeCon show for years. We've been watching Kubernetes since the early days. Kubernetes is not a magic layer. It does not automatically say, hey, I've got my application, I can move it willy-nilly. Data gravity is really important. How I architect my microservices solution absolutely is hugely important. When I talk to my friends in the app, Dev World, Dave, hybrid is the way they are building things a lot. If I took some big monolithic application, I start pulling it apart. If I have that data warehouse or data store in my data center, I can't just migrate that to the cloud. David Floyer for years has been talking about the cost of migration. So, microservice architecture is the way most customers are building. A hybrid environment often is there. Multi-cloud, we're not doing cloud bursting. We're not just saying, oh, hey, I woke up today, and cloud A is cheaper than cloud B, let me move my workload. Absolutely, I had a great conversation with a good Amazon customer that said two years ago, when they deployed Kubernetes, they did it on Azure. You wanna know why? The Azure solution was more mature and they were doing Azure, they were doing things there. But as Amazon fully embraced Kubernetes, not just sitting on top of their solution, but launched the service, which is EKS, they looked at it and they took an application and they migrated it from Azure to Amazon. Now, migrating it, there's the underlying services and everybody does things a little bit different. If you look at some of the tooling out there, great one to look at is HashiCorp has some great tooling that can span across multiple clouds. But if you look at how they deploy to Azure, to Google, to AWS, it's different. So you gotta have different code, there's different skill sets. It's not a utility and just generic compute and storage and networking underneath. You need to have specific skills there. So Kubernetes, absolutely, when I've been talking to users for the last few years and saying, why are you using Kubernetes? The answer is, I need that eject lever so that if I want to leave AWS, with an application, I can do that and it's not, press a button and it's easy, that easy, but I know that I can move that because underneath the pods and the containers and all those pieces, the core building blocks are the same. I will have to do some reconfiguration as we know with a migration. Usually, I can get 89% of the way there and then I need to make the last commitment. So it's a viable hedge on your AWS strategy. Okay. Absolutely and I've talked to lots of customers. Amazon shows that most cloud Kubernetes solutions out there are running on Amazon and when I go talk to customers, absolutely, a lot of the customers that are doing Kubernetes in the public cloud are doing that on Amazon and one of the main reasons they're using it is in case they do wanna, as a hedge against being all in on Amazon. Let's talk about outposts specifically as part of Amazon's hybrid strategy and now their edge strategy as well. Right. Azure Stack I mentioned earlier from Microsoft has been out there for a few years. It has not been doing phenomenally well. When I was at Microsoft Ignite this year, I heard basically certain government agencies and service providers are using it and basically acting, delivering Azure as a service. But Azure Stack is basically an availability zone in my data center and Amazon looked at this and says that's not how we're going to build this. Outposts is an extension of your local region. While people look at the box and they say, oh, I took a picture of the box and it was like, hey, who's server and what networking card and the chipset and everything? I said, hold on a second, you might look at that box and you might be able to open the door but Amazon is going to deploy that, they're going to manage that. Really, you should put a curtain in front of it and say, pay no attention to what's behind here because this is Amazon gear. It's an Amazon as a service in your data center and there are only a few handful of services that are going to be there at first. If I want to even use S3, day one, the Amazon native services, well, you can just use S3 in your local region. Well, what if I need special latency? Well, Amazon's going to look at that and see what's available. So it is the Amazon hardware, the Amazon software, the Amazon control plane reaching into that data center and very scalable. It's, Amazon says over time, you should be able to go to thousands of racks if you need. So absolutely that cloud experience closer to my environment, but it's where I need certain applications, certain latency, certain pieces of data that I need to store there. And we've seen Amazon dip its toe into the hybrid on-prem market with snowball and green grass and stuff like that before, but this is a much bigger commitment. One might even say capitulation to hybrid. Well, right. And the reason why I even say, this is hybrid, but it's all Amazon. It is not take my private cloud and my public cloud and tie them together. It's not, I've taken clouded customer or IBM solution where they're saying, I'm going to put a rack here and a rack there and it's all going to work the same. It is the same hardware and software, but it is not all of the pieces. And VMware, and I'll post, is hybrid. Really interesting, Dave, as the native AWS solution is announced first here in 2019 and the VMware solution on Outpost isn't going to be available until 2020. Draw what you will. It's been a strong partnership. There are exabytes of data in the VMware cloud on AWS now, but yeah, it's a little bit of a Amazon- Quo, I think is what you call this. I'd say Amazon is definitely, we're going to encroach a little bit on your business and we're going to woke you into our environment too. Okay, let's talk about the Edge and Outpost at the Edge. They announced WaveLength, which is essentially taking Outpost and putting it into 5G networks at carriers. Yeah, so, right, Outpost is this building block and what Amazon did is they said, this is pretty cool. We actually have our environment and we can do other things with it. So sometimes they're just taking pretty much that same block and using it for another services. So one that you didn't mention was AWS Local Zones. So it is not a whole new availability zone, but it is basically extending the cloud, multi-tenant. The first one is done for the TME market in Los Angeles and you expect, how does Amazon get lower latency and get closer and get specialized services? Local zones are how they're going to do this. The WaveLength solution is something that built specifically for the telco environment. I actually got to sit down with Verizon. This was at least an 18-month integration. Anybody that's worked in the telco space knows that it's usually not standard gear. Neb certification, there's all these things. It's often even DC power. So it is leveraging Outposts, but it is not them rolling the same thing into Verizon that they did in their environments similar how they're going to manage it. But as you said, it's going to push to the telco edge and in a partnership with Verizon, Vodafone, SK, Telecom and some others that will be rolling out across the globe. They are going to have that 5G offering and it's a little bit, I actually buy it from Amazon but you still buy the 5G from your local carrier. It's going to roll out in Chicago first and enabling all of those edge applications. Well, what I like about the Amazon strategy at the edge is, and I've said this before on a number of occasions on theCUBE, break analysis, they're taking programmable infrastructure to the edge. The edge will be won by developers in my view and Amazon obviously has got great developer traction. I don't see that same developer traction at HPE, even Dell EMC proper, even within VMware. Now they've got Pivotal, they've got an opportunity there but they've really got a long way to go in terms of appealing to developers whereas Amazon I think is there obviously today. Yeah, absolutely true Dave. When we first started going to the show seven years ago, it was very much the hoodie crowd and all of those cloud native. Now as you said, it's those companies that are trying to become born again in the cloud and do these environments because I had a great conversation with Andy Jassy on air Dave and I said, do we just shrink wrap solutions and make it easy for the enterprise to deploy or are we doing the enterprise to disservice? Because if you are truly going to thrive and survive in the cloud native era, you've got to go through a little bit of pain. You need to have more developers. I've seen lots of stats about how fast people are hiring developers and I need to, it's really a reversal of that old outsourcing trend. I really need IT and the business working together, being agile and being to respond to the leverage data. It's that hyperscaler mentality that Jassy has. We got engineers, we'll spend time on creating a better mousetrap on lowering cost whereas the enterprise, they don't have necessarily as many resources or as many engineers running around. They'll spend money to save time so your point about solutions I think is right on. We'll see, I mean look, I never say never with Amazon. We've seen it certainly with on-prem hybrid, whatever you want to call it and I think you'll see the same with multi-cloud and so we watch. Yeah Dave, the analogy I gave in the final wrap is finding the right cloud is like Golgi Locke's finding the perfect solution. There's one solution out there, I think it's a little too hot and you're probably not smart enough to use it just yet. There's one solution that yeah, absolutely you can use all of your credits to leverage it and we'll meet you where you are and it's great and then you've got Amazon trying to fit everything in between and they feel that they are just right no matter where you are on that spectrum and that's why you get 36 billion, growing at 35%, not something I've seen in the software space. All right, Stu, thank you for your thoughts on, and thank you for watching this episode of theCUBE Insights powered by ETR. This is Dave Vellante for Stu Miniman. We'll see you next time.