re:Invent 2018: What to Expect and What I’ll Be Looking For

Four Trends — The Enterprise’s Time has Finally Arrived

Amazon is hosting their 7th Annual re:Invent conference this week with over 50,000 attendees expected. AWS is approaching $30 billion in annual revenue run rate with a growth rate just shy of 50%. Amazon is the market leader in public cloud services and this year’s re:Invent conference comes at a fascinating time. Enterprise customers are embracing a broad definition of the cloud that is leading to more rapid adoption of both the public cloud and various edge cloud use cases. IBM is buying RedHat for $34 billion, Microsoft has emerged as the clear #2 player in the cloud market and Google is struggling to find their way (as evidenced by Diane Green relinquishing the Google Cloud role to former Oracle executive Thomas Kurian).

The four themes below highlight areas that Amazon will emphasize at re:Invent and provide a roadmap for the world of cloud computing from both a technology and go-to-market perspective in the years ahead. These themes will be highlighted and discussed in the main keynotes, working sessions and conversations throughout the week:

  1. Cloud computing is now the pervasive software model everywhere
  2. Data’s role has been transformed from system of record to system of action and intelligence
  3. Enterprise customers are finally ready to embrace the full potential of cloud models
  4. Partnership alignment is emerging as the key competitive dimension for cloud platforms

Cloud Software Models Are Everywhere

In the past several years terms like public cloud, private cloud, hybrid cloud, edge cloud and more have been used to try and distinguish between types of cloud deployments. But, increasingly any modern application is a cloud application in some form. The core technologies popularized in the public cloud like object stores, event driven functions, and scalable data services are being used everywhere. Those applications may still live “on premise” in a virtualized environment or they may live on a “thing” at the edge connected to massive computing resources at the cloud core. Regardless of where the application was developed or lives, it is based on technologies and processes that were built for the cloud. The pervasive development methodology is agile and iterative. And, the lines have blurred between developers and technology operators for the DevOps that keep these apps running. In that context, “clouds within cloud” and increasingly specialized cloud solutions are emerging for specific customer needs.

My expectation is the emphasis this year at AWS will be on expanding capabilities across several technology categories that make it easier for enterprises to adopt cloud. Compute instance types for CPU’s, GPU’s, FPGA’s and specialized deep learning processors will be expanded. Improved data management, databases and data warehousing capabilities will get launched. AWS’s suite of IoT offerings like Greengrass, CloudFront and FreeRTOS (operating system for microcontrollers) will be enhanced and highlight the growing opportunities for cloud at the edge. And, the capabilities popularized by the public cloud, including containers, event-driven functions, and EC2 instances will increasingly be available “on premise” to enable more hybrid application scenarios.

Data Unlocks Systems of Action and Intelligence

Even more important than “cloud everywhere”, is the transformation of applications through the power of data. Public clouds like AWS are a compelling place for data aggregation, preparation, manipulation, training and automated actions. Once your data systems are enabled in the cloud, you can evolve legacy “systems of record” into “systems of action” that are increasingly automated. From there, your data systems can expand to “systems of intelligence” that increasingly “know” the next best action to take. AWS, Azure, Google Cloud and others understand that if your data is stored and managed in the cloud, the next step is leveraging more advanced data intelligence services offered by your cloud of choice.

I expect that AWS will announce new or improved underlying data services in data streaming, data integration, data management and databases.They will also improve their machine learning application training and deployment capabilities (SageMaker) and their finished ML services (Rekognition, Translate, Comprehend (NLP)). Some of these services are built upon open source platforms and that community has raised concerns about how AWS leverages open source to build their own services. Finally, while subtle, AWS’s data services messaging will focus more on the benefits of AWS versus Azure rather than Oracle.

As it relates to data services, there are two key questions I will be looking to get answered:

  1. How will AWS position new and improved services relative to data services partners like Databricks, MongoDB and Snowflake who offer managed services on AWS today?
  2. Will AWS’s new data service offerings focus more on discrete services or integrated services that focus on holistic customer use cases and needs?

Enterprises Fully Embracing Cloud Models

With most central IT organizations and senior management now embracing the cloud, the products and messaging at re:Invent will be heavily focused on the enterprise “abilities”. These capabilities include securability, scalability, manageability and, increasingly, flexibility. While it is valid to assert that cloud security is better than most on premise data centers, security issues remains a risk to cloud adoption. Security offerings in the cloud and between the cloud and on-premise offerings are becoming more sophisticated. AWS will highlight their new offerings, but so will technology partners like Palo Alto Networks, F5, Tigera, and ExtraHop who can help enterprises secure workloads and enhance security operations on premise and in the cloud.

Central enterprise buyers also care about simplicity, transparency and standardization in the provisioning and management of workloads. I expect AWS to announce some new offerings in these areas as well. To do this, AWS will leverage their substantial investment in the AWS Marketplace which helps customers find, try, buy, deploy, measure and bill different cloud services to become a full-fledged services catalog and automated provisioning offering. AWS will also improve their broader billing and monitoring services to help enterprise customers address the increasingly complex world of Enterprise Discount Plans (EDP’s), Reserved Instances (RI’s) and various cloud migration incentive programs.

Despite not being part of the main keynote this year, VMWare will continue to have a major presence focused around enterprise customers. They have purchased CloudHealth and Heptio and increasingly partnered with companies like Apptio to assist enterprises with their journey to the cloud. Those services could be bundled with VMWare offerings to address the enterprise’s desire to have an independent partner’s perspective on cloud costs, management and innovation.

Partner Alignment Becoming Core Cloud Competition

With cloud deployments everywhere, data transforming applications and enterprise readiness high, the emerging competitive framework for major cloud providers is around how they partner with other technology-driven companies to meet the needs of customers. This is especially true in the enterprise, but the competition between clouds, cloud services and service providers exists across use cases.

AWS is the market leader and that position creates some advantages and challenges for them. On the advantage side, they can buy at sufficient volumes to partner well with infrastructure technology companies. Chip companies like Nvidia and Intel will undoubtedly have new offerings on AWS in the form of modern CPU and GPU service offerings. Contract manufacturers like ZT Systems will benefit from the massive scale and growth of AWS as a behind-the-scenes provider of infrastructure. And, while owned by Microsoft, a service like Github will continue to benefit from AWS’s early and ongoing deep relationship with the cloud developer community who offer ongoing feedback and insights to AWS product teams.

AWS’s relationship with other software providers, systems integrators and modern managed services providers are more complex. Some software companies, like the data services ones referenced earlier, face competing AWS offerings. And, sometimes those AWS offerings are built on open source software shaped by a community that favors “openness”. Established software companies like AppDynamics/Cisco, Splunk, and NewRelic are trying to make it easy for an enterprise to manage workloads whether they are in the public or private cloud. And, larger companies like VMWare and IBM/RedHat will increasingly be emphasizing how their software and services work and can help move workloads across the different cloud providers. Of course, hundreds of smaller, private companies will be attempting to leverage the AWS core infrastructure to deliver new solutions across application areas and vertical solutions with many of them building “intelligent applications” that leverage data, cloud compute and domain knowledge to solve specific customer problems.

In addition, enterprises are still trying to determine which workloads they can “lift and shift” in to the public cloud, which ones they can extend/expand to the cloud, and which ones are just not ready for the cloud (because of their proprietary hardware, high latency requirements or privacy/security concerns). These enterprises are looking for help from AWS directly and from a growing mix of cloud-native and traditional systems integrators. Those systems integrators are shaping the cloud strategies of enterprise customers by delivering more value in professional and modern-day managed services.

These realities lead me to focus on two key questions around cloud partnering:

  1. What role will AWS Marketplace play in aligning AWS with other technology partners and their end user customers?
  2. How do different partners view the quality of alignment they have with AWS relative to Microsoft as well as other cloud providers?

Beyond these four core areas, it will be exciting to see a broad mix of customer use cases at re:Invent. The agility and flexibility of the public cloud have unlocked innovations for private, non-profit and public sector customers of many shapes and sizes. Work done on AWS is helping people collaborate more effectively, improve their customer relationships, bring intelligence to automobiles, and even cure cancers. In the “cloud everywhere” world that exists today, AWS, their customers and their partners are only getting started!

Note: ExtraHop, Tigera and Snowflake are Madrona Venture Group portfolio companies.

Re:Invent: 2017 Preview & Predictions

AWS is another year older, bigger and more diverse and so will be the 6th Annual Re:Invent conference. Over 40,000 attendees are expected to attend the event reflecting the success of AWS and the cloud movement that the company kick-started. If AWS was a standalone company, it would be recognized as the software company that hit a $20 billion annual revenue run rate in the shortest amount of time. From a branding perspective, AWS appears focused on courting “builders” including business leaders, product managers and developers who want to create, or recreate in the cloud, solutions that solve real world problems. From a thematic perspective, I anticipate five broad areas to be highlighted:

  1. Modern services for modern cloud apps
  2. ML/AI everywhere!
  3. Hybrid workloads go mainstream
  4. Enterprise agility exceeds cost savings
  5. Customer focus balanced with competitive realities

Modern Services and ML/AI

The first two themes – Modern services and ML/AI are targeted at the grass roots builders and innovators who have long been associated with AWS. Modern services include containerized or “serverless” workloads that work individually or in conjunction with other microservices and event-driven functions like AWS Lambda functions. These technologies deliver greater flexibility, interoperability and cost effectiveness for many applications. And, they can be used to either build new applications or help modernize traditional applications. I have spoken to several smaller businesses and small teams at larger companies who are leveraging these capabilities to build more responsive and cost-effective applications.

Credit to @awsgeek, Jerry Hargrove

At Re:Invent we expect to see AWS embracing community standard like Kubernetes for orchestrating modern containers like Docker. Above is a visual highlighting AWS Elastic Container Service and the use of related services on AWS. AWS will also highlight innovative approaches in the cloud and at the edge that build on Lambda functions to ingest data and automatically produce a functional output. I wouldn’t be surprised to see a “developer pipeline” for building, testing and developing these types of event-driven applications.

ML/AI will likely be broadly highlighted in both Andy Jassy’s Day One keynote and the second keynote on Thursday. This category is where the most disruptive innovation is taking place and the fiercest platform competition is occurring. AWS will feature enhancements or new offerings at four levels.

At a platform level, they are expected to highlight Ironman as a unifying layer to help developers ingest and organize data and then design, test and run intelligent (ML/AI powered) applications. This platform leverages MXNet, which is a machine and deep learning framework originally built at the University of Washington, which has properties similar to Google’s Tensorflow framework. Ironman will leverage a new developer tool framework called Gluon that AWS and Microsoft recently launched.

At a core services level, AWS will continue to enhance AWS ML services and infrastructure processing services like GPU’s and FPGA’s that support the data scientists who can build and train their own data models.

For teams that need more finished ML/AI services, AWS will highlight improved versions of ReKognition, Lex and Polly. I also expect new finished services that leverage pre-trained data models the existing offerings to be announced.

The fourth area of ML/AI will be in the context of leveraging other services either built by AWS or AWS partners that deliver solutions to customers. AWS will likely focus on a combination of running cloud services (AWS, Non-AWS) as well as simplifying ML/AI at the edge. For example, third parties are increasingly building security services like Extrahop’s Addy or Palo Alto Network’s cloud firewall and SAAS security services on AWS. Other services using data stored or processed in AWS, often in data warehouses like Snowflake or Redshift, are rapidly growing for vertical markets and for specific use cases like customer personalization, fraud detection or health recommendations. Seeing what AWS and partners announce in ML/AI powered services across the platform, core services, finished services and solutions layers is likely to be the most exciting area of news at Re:Invent this year.

Matt McIlwain-Madrona Venture Group

“Seeing what AWS and partners announce in ML/AI powered services across the platform, core services, finished services and solutions layers is likely to be the most exciting area of news at Re:Invent this year.”

Hybrid Workloads and Enterprise Agility Solutions

While there are pockets of enterprise innovation in ML/AI and “serverless”, the biggest areas of enterprise focus are going to be hybrid applications and enterprise solutions. These areas also highlight some intriguing partnerships between AWS and other technology companies like VMWare, Microsoft and Qumulo.

Last year AWS on VMWare announced a major partnership where AWS created a dedicated, “bare metal” region for VMWare hypervisors, management tools and more running on AWS. This offering has been in beta all year and appears to be gaining strong enterprise traction. It simplifies moving VMWare-based workloads to AWS and enables hybrid workloads when a portion is on AWS and another portion remains on-premise. Customer examples and new capabilities will likely be announced for this partnership. We don’t expect major announcements around bare metal offerings outside VMWare, but enterprise customers are asking for them to be launched in 2018.

While AWS and Microsoft compete for cloud customers on many levels, there has also been a spirit of partnership between the two companies driven by both enterprise customer demand and competitive realities. Microsoft Windows operating system and applications (SQL Server, ActiveSync Directory, Sharepoint and more) are common applications on AWS in addition to their substantial on-premise installed base. AWS is increasingly enabling their defacto cloud standards like S3 object store and EC2 compute instances to run on-premise. AWS has a service called CodeDeploy that enables EC2 instances to run on-premise or for hybrid workloads ( This enables AWS standard services to work with other Microsoft products on-premise. These examples highlight the growing customer demand for hybrid workloads and services across public cloud and on-premise. And, combined with services like Gluon and the Amazon/Microsoft Voice Assistant partnership, the two Seattle-based technology giants are finding ways to work productively together (often to counteract Google).

Beyond the technology giants, smaller companies like Qumulo will be highlighting hybrid workload flexibility and use cases. Qumulo offers a universal, scale-out file system that allows enterprise customers to scale across on-premise and cloud infrastructure. Technology sectors such as storage where Qumulo is focused, application management where New Relic, DataDog and AppDynamics run, along with databases and security and networking will all see “hybrid” highlighted at Re:Invent.

Beyond individual services and workloads, enterprises continue to look for solutions that help them embrace the agility and cost-effectiveness of cloud computing while mitigating the technology and compliance risks and skill-gaps they may face. AWS will continue to highlight their own professional services as well as a cloud-native solution providers like 2nd Watch and Cloudreach and established “systems integrators” like Accenture and CapGemini. But, I expect AWS will emphasize the growing role of the AWS Marketplace this year as a place to find, buy, deploy and bill first and third-party services from. Finally, more software services will be delivered on AWS in a “fully managed” mode. These modern “managed software services” like the aforementioned cloud data warehouse, database/datastores or storage services will help enterprises embrace cloud native applications.

Balancing Customer Focus with Competitive Realities

All four above themes are driven by customer needs and real technological innovations. But, there are also embedded competitive realities across these themes. Microsoft’s Azure adoption continues to grow rapidly. They have also successfully moved customers to Office365 pulling key services like Azure Active Directory and mobile device management with them. In addition, Microsoft is leveraging their on- premise advantage with hybrid solutions and Azure Stack. These offerings help enterprises embrace agility while cost effectively managing legacy hardware and software. Microsoft also continues to invest and promote their ML/AI and serverless capabilities.

Google has emphasized their ML/AI strength with both the Tensorflow open source adoption as well as leveraging differentiated data sources to build and offer data models “as-a-service”. These image, translation and text recognition models have the opportunity to be strategically disruptive for years to come. Of course, Google also operates broadly adopted cloud apps like Gmail and Google Docs where AWS does not. And, the defacto standard for serverless container orchestration and management, Kubernetes, was created inside Google.

These competitors, as well as other enterprise software and hardware incumbents like Oracle, VMWare/Dell, IBM and and emerging Chinese competitors like Alibaba will continue to invest and challenge AWS in the years ahead as the enterprise gets more fully engaged in the cloud. While I am confident that AWS will remain the clear market leader for years to come, even they will need to continually “re:Invent” themselves to meet growing customer needs and competitive realities. I will be looking for clues about AWS’s future strategy and approach to emerging competition this week.

Note: Extrahop, Qumulo, 2nd Watch and Snowflake are portfolio companies for Madrona Venture Group, where Matt McIlwain is a Managing Director.