>> Live from Washington D.C.
It's theCUBE, covering the AWS Public Sector Summit 2018.
Brought to you by Amazon Web Services,
and its eco-system partners.
(upbeat music)
>> Welcome back to the nation's capitol.
I'm Stu Miniman and you're watching theCUBE's
coverage of AWS Public Sector Summit 2018.
Joining me for the wrap-up of day one,
John Furrier, Dave Vellante.
So John, thanks for bringing us down.
So you were here last year.
We've interviewed Teresa Carlson a number of times
at Reinvent, but we've got to start with you.
Since you were here last year, watching this explode.
I said, this reminds me of Reinvent three years ago,
how big it is, 14,500 people, wow.
>> Yeah, so you're right on.
This is definitely a Reinvent kind of vibe,
in a way to describe what happened with Amazon Reinvent,
their annual conference which we were at the 2nd year,
2013, and have been every year.
Reinvent got bigger every year,
and just became more prominent, and the solutions scaled,
the number of announcements, as we know Amazon today
is packed, it's bigger than ever.
The public sector market, which is defined as
government, education, and global public sector countries
like Bahrain and other countries, are really the target.
They have unique requirements.
So what's happening is that that market is being disrupted,
and there's been similar moments in the public sector
here in the United States, as well known.
The fail of the website that Obama.
You know, the health care sight was one.
The government initiatives that have been going on.
The government is not modern and people are frustrated.
The IT workers are living in cages, they're strapped in.
It's like, not good.
The tooling's old, old client server,
old vendors like Oracle and IBM
and others that are trying to keep
that business, and they're not modernizing.
So, this modernization wave has hit the public sector
across the board, and what's happening is
they can actually build newer systems faster,
and get lower cost, more efficiency, done faster.
And this is disrupting not only
their business model, but how they buy technology,
the role of the supplier in that piece of the equation,
and also just overall faster innovation.
So, this is driving it.
The shocker of all of it is the security conversation
has been up leveled, meaning it's not a real issue.
Certainly the security is a real issue,
but in terms of a barrier that stops
everything, that's not the case anymore.
The CIA is really the most notable that came on and said
the worst day in cloud security is better
than anything we got working today.
So that's a really interesting thing
and the Department of Defense Jedi project
is billions of dollars that would have gone to say,
an Oracle, IBM, and all the incumbents,
or, beltway bandits, as they've been called.
Those days are over.
So that to me is a really exciting thing for the country.
But, Amazon is running the tables too.
So again, this year, more of the same, bigger.
Big agencies.
Small partners and big, all riding the wave of growth.
And, it's a new operating model,
and again, we'll predict it here in theCUBE,
as we always say, and then we'll be right again.
This is going to be a special market
for Amazon going forward.
>> I think government market is definitely a microcosm
of the overall marketplace as John said.
It's very bureaucratic, they're slower to move,
you got to regime change every four
or eight years, so a lot of turnover.
It's really hard to get.
Okay, we're going to go with strategy,
cause the strategy as they start stop,
it's a near to mid term strategies
are affected in the government.
Obviously, there's a greater focus on security.
Cloud addresses a lot of those.
We certainly heard that from the CIA.
I don't think you can talk about cloud and federal,
without talking about that milestone CIA deal.
That really was a watershed moment.
It was a wake up call to the old guard.
IBM, as you might recall, tried to fight the government,
because the CIA awarded the contract to Amazon.
IBM lost that case, they were eviscerated by the judge.
It forced IBM to go out and pay
two billion dollars for software.
It was years later that Oracle really got in.
So, Amazon, to an earlier guest's point, has a huge lead.
The estimate was five to 10 years, I heard,
over some of the legacy suppliers.
Interesting, not sure exactly where Microsoft fits in there.
Stu, I'd love to get your thoughts.
The thing about cloud that we've,
John, you talk about being right, for years,
we've talked about the economics of cloud,
the scale of cloud, the marginal economics,
looking much more like software.
That's clearly been to Amazon's advantage.
And, they're mopping the floor
with guys who can't keep pace.
And so, that's played out in a big way,
and this seems to be a winner take all market.
Or, a few companies take all market.
>> Yeah, the thing that I actually wanted to comment on
that's really interesting to dig in here,
is if you talk about application modernization.
Yes, it is super challenging, and it's not
happening overnight, but, have heard
universities, non profits, they're moving.
It's not just mobility, moving to the web,
but talking about how they are decoupling
and creating cloud native microservices environments.
So, was talking to a large, government
healthcare organization that was super excited to show me
how he was going to take his really old application,
and start pulling together services at a time.
And, he's like, I've got 130 services.
And here's how I'll stick a router in here
and I'll start pulling them off to the cloud.
Talked to a big university and said,
how are they going from, my data center,
which I'm out of power, I'm out of capacity.
I'm going to use the VMWare thing, but over time,
I'm moving to containers, I'm moving to serverless.
That modernization, we know it's not moving all of it
to the public cloud, but that migration is happening.
It is challenging and as I've said many times
in many of these Amazon shows, Dave and John,
it's the companies that come here.
They're the ones that are trying cool stuff.
They're are able to play in some
of these environments and they make progress.
So, the thing that really excites me too,
is when you hear government agencies
that are doing innovative, cool things.
It's like, how do I leverage my data
and give back to the communities I serve.
Help charities, help our communities,
and do it in cost effective ways.
>> Stu, I got to say, Dave, Theresa Carlson
just came by theCUBE, we gave her a wave.
She's the CEO of Public Sector, as I call her,
she's the chief, she's in charge.
Andy Jackson's the CEO of AWS, but again,
public sector's almost its own little pocket of AWS.
Her leadership, I think, is a real driving force
of why it was successful so fast.
Theresa Carleson is hard charging,
she knows the government game.
She's super nice, but she can fight.
And she motivates her team.
But she listens to the customers,
and she takes advantage of that Amazon vibe,
which is solve a problem, lower prices,
make things go faster, that's the flywheel of the culture.
And she brings it to a whole nother level.
She's brought together a group
of people that are succeeding with her.
She leans on her partners, so partners are making money.
She's bringing in cloud native kind of culture.
I mean, CrowdStrike, you can't get any better than seeing
guys like CrowdStrike raise 200 million dollars, Dave,
today announced, worth over three billion dollars,
because they built their system to work for cloud scale.
CloudChecker, another company.
Purpose built for the cloud and is extremely successful
because they're not trying to retrofit
an enterprise technology and make it cloudified.
They actually built it for the cloud.
This, to me, is a signal of what has to happen
on successful deployments, from a customer standpoint.
And I think that's what attracting the customers
and they will change their operations
'cause the benefits are multifold and they're pretty big.
Financially, operationally, culturally, it's disruptive.
So I think that's a key point.
>> Yeah, and I think again, this a microcosm of
the larger AWS, which is a microcosm of the larger Amazon,
but, some of the things we heard today,
some of the benchmarks and milestones
from Theresa on the keynote.
60 consultancies that she put up on the slide,
200 ISVs ans SAAS companies, 950 third-party software
providers, this is all GovCloud.
And then Aurora now in GovCloud, which is, you know,
you see here, it lags. >> Database.
>> Amazon and Specter, you've heard a lot about database.
Amazon and Specter, which manages security configurations.
We heard about the intent to go forward
with the VMWare partnership, the VMWare cloud in GovCloud.
So, a little bit behind where you see
the Amazon web services in commercial.
But, taking basically the same strategy as John said.
The requirements are different.
I also think, Stu and John, it's important
to point out just the progress of AWS.
We're talking about tracking
to 22 billion dollars this year.
They're growing still at 15 percent, that massive number.
26 percent operating income.
Their operating income is growing at 54 percent a year.
So, just to compare Amazon web services to other
so called infrastructure providers,
HPE's operating income is eight percent,
IBM's is nine percent, VMWare, which is a software company,
is at 19 percent, Amazon's at 26 percent.
It's Cisco level of profitability.
Only companies like Oracle and Microsoft
are showing better operating income.
This is that marginal economics,
that we've talked about for years.
And Amazon is crushing it, just
in terms of the economic model.
>> Yeah, and they bring in the public sector.
Can you imagine that disruption for that incumbent mindset
of these government kind of agencies
that have been the frog in boiling water
for so many years around IT.
It's like Boom, what a wake up call.
If you know IT, you know what it's like.
Older tools, huge budget cycles, massive amounts
of technology trends in terms of time to value.
I mean, Stu, you've seen this buoy before.
>> Yeah, absolutely, and it's interesting.
Some of the things we heard is there's challenge
in the government sometimes, moving from capex to opex.
The way that government is used to buying is they buy
out of the GSA catalog, they are making that move.
We actually had on the federal CTO for Cohesity,
came from the GSA, and he said we're
making progress as an industry on this.
Dave, you mentioned a whole lot of stats here.
I mean, year after year, Q1 Amazon
was up 49 percent revenue growth.
So, you know, you always hear on the news, it's like,
oh well, market share is shifting.
Amazon is still growing at such a phenomenal pace,
and in the GovCloud, one of the things
I thought Kind of interesting that gets overlooked
is the GovCloud is about five years,
no it launched in August of 2011,
so it's coming up on seven years.
It's actually based out of the West Coast.
They have GovCloud, US East is coming later this year.
And we talked in the VMWare interview that we did today
about why some of the lag and you need to go through
the certification and you need to make sure
there's extra security levels.
Because, there's not only GovCloud,
then they've got the secret region, the top secret region,
so special things that we need to make sure that you're
FedRAMP compliant and all these things.
Amazon is hitting it hard, and definitely
winning in this space. >> Yeah, and they have
a competitive advantage, I mean,
they're running the table, literally.
Because no body else has secret cloud, right?
So, Amazon, Google, others, they don't have
what the spec requires on these big agencies, like the DOD.
So, it's not a sole source deal.
And we saw the press that President Trump had dinner
with Safra Catz, the CEO of Oracle.
And, that Amazon, that people are crying foul.
Making a multicloud, multivendor kind of,
be fair, you know fairness.
Amazon's not asking for sole source,
they're just saying we're responding to the bid.
And, we're the only ones that actually can do it.
You know, John Wood, the CEO of Telos,
said it best on theCUBE today,
Amazon is well down the road, five years
advantage over any cloud, five years he said.
>> There's no compression algorithm for experience, right?
>> Right, right, but this is a real conundrum
for the government buyers, the citizens, and the vendors.
So, typically, let's face it, technology, IBM, HPE,
Oracle, Dell, they can all pretty much do the same thing.
Granted, they got software, Cisco, whatever.
They got their different spaces, but head to head,
they all pretty much can do what the RFP requires.
But what you just pointed out John,
is Amazon's the only one that can do a lot of this stuff,
and so, when they say, okay let's make it fair,
what they're really saying is,
let's revert back to the mean.
Is that the right thing for the citizens?
That's the kind of question that's on the table now.
As a citizen, do you want the government
pushing the envelope... >> That's what he
said from CrowdStrike, why go backwards?
>> Right, right, but that's essentially
what the old guard is saying.
Come back to us, make it fair, is that unfair?
>> You're too successful, let the
competition catch up, so it can be fair.
No, they've got to match up the value proposition.
And that fundamentally is going to put
the feet to fire of government and it's going to be
a real critical tell sign on how much teeth to the mission
that the government modernization plan is.
If that mission to be modernizing government
has teeth, they will stay in the course.
Now, if they have the way to catch up, that's great.
I can already hear it on Twitter,
John, you don't really know what you're talking about.
Microsoft's right there.
Okay, you can say you're doing cloud, but as they teach you
in business school, there's diseconomies of scale,
to try to match a trajectory of an experienced cloud vendor.
Stu, you just mentioned that, let's explore that.
If I want to match Amazon's years of experience,
I can say I'm up there with all these services,
but you can't just match that overnight.
There's diseconomies of scale, reverse proxies,
technical debt, all kinds of stuff.
So, Microsoft, although looking good on paper,
is under serious pressure and those
diseconomies of scales creates more risk.
That more risk is more downtime.
They just saw 11 hours of downtime
on Microsoft Azure in Europe, 11 hours.
That's massive, it's not like,
oh, something just happened for a day.
>> Here's the behind the scenes narrative
that you hear from certain factions.
Is, hey, we hire people, let's say
I'm talkin' about Microsoft, we hire people
out of Amazon too, we know where they're at.
We think we've narrowed that lead down to six months.
You and I have both heard that.
When you talk to people on the other side of the table,
it's like, no way, there's no way.
We're movin' faster, in fact, our lead is extended.
So, the proof is in the pudding.
In the results that you see in the marketplace.
>> Well, and just to build on that, the customers.
Amazon has the customers, you talk to anybody
that's in these agencies, you know,
like any industry, they're all moving around.
Not only the federal, but, I had a great interview
with Nutanix this morning, he said this was the best
collection of state and local government that I ever had.
It's like I got to meet all my customers in person
last year when they came here.
So, the fed kind of sets the bar,
and then state, local, education, they all learn there.
So, as you said, John, Theresa and her team
have really built a flywheel of customers,
and those customers, they understand the product.
They're going deeper on that.
>> But look, Microsoft has success
where it has a software state.
Clearly there are a lot of Microsoft customers
in the government, and they're going to do very well there.
But it's really different.
We're talkin' about the inventor, essentially,
of infrastructure as a service in Public Cloud
and Amazon with a clean sheet of paper.
>> Microsoft, Google and the others, they have to catch up.
So, really if you look at, let's compare and contrast.
Amazon, first mover, they did the heavy lifting up front.
They win the CIA deal three, four years ago.
Now they're going to win the DOD deal and more.
So, they've got the boiler plate,
and they've got scale, economies of scale.
Microsoft's got to catch up, so,
they've got diseconomies of scale.
Google is kind of backing out, we heard.
Some Google employees revolting
cause they don't want to work on these
AI projects for drones or what not.
But, Google's approach is not tryin' to match Amazon
speed for speed, they're thing is they have leverage.
Their Android, their security, the data.
So, Google's staying much more pragmatic.
And they're humble, they're saying,
look, we're not tryin' to match Amazon.
But we're going to have a badass cloud
from a Google perspective.
Microsoft hasn't yet said that, they just try to level up.
I think if Microsoft takes that approach, they will do well.
>> Well, you got to give Microsoft a lot of credit,
obviously for the transformation that's occurred.
Again it's still tied to the company's
software estate, in my view anyway.
>> All right Stu, what's your impression, what's your take?
>> So, John, like every Amazon show I've been to,
I'm impressed, it set a high bar.
We go to a lot of shows and not only
are there more people here, but the quality of people,
the energy, the passion, the discussion
of innovation and change, is just super impressive.
>> You and I cover cloud data pretty deep.
We go to all the shows, obviously the Lennox Foundation
and Amazon Reinvent, and others.
Does the Public Sector have that vibe in your opinion?
What's your sense of it?
>> Oh, yeah, no, I've already had a couple of conversations
about Kubernetes and Lambda, you know,
more serverless conversations at this show
than almost any show I go to, other than probably
KubeCon or the Serverless conf.
So, no, advanced users, these are not the ones,
a couple of years ago, oh I'm checking what this is.
No, no, no, they're in, they're deep, they're using.
>> Yeah, I notice also, near the press room, they had
the certification stickers, now levels of certifications.
So, they're just movin' the ball down the field at Amazon.
Dave, I want to go to you and ask you what your impression is.
Obviously, you know, we've done shows
like HPE Reinvent, which we didn't do this year.
That's goin' down its own path.
We've got other shows. >> HPE Discover you mean.
>> What did I say?
>> You said Reinvent.
>> Okay, every year they break.
>> There's two ends of the spectrum.
>> You know, there's is going to try to transform.
What's your take of this show, Public Sector?
What's your view?
>> Well, first of all, it's packed.
And, the ecosystem here is really robust.
I mean, you see the consultancies,
you see every technology vendor, I mean, it's quite amazing.
They got to figure out the logistics, right?
I've never seen a line so long.
The line to get into registration
was longer than Disney lines this morning.
I mean, really, it was amazing.
>> It's a Disneyland for Public Sector.
>> It really is, and people are excited here.
I think you were touching upon it before.
They've sort of been hit with this bureaucratic,
you know, cemented infrastructure.
And now, it's like they're takin'
the gloves off and they're really excited.
>> Stu and Dave, I really got to say,
I'm not a big federal person, over the years in my career
but my general impression over the past couple years,
diggin' in here, is that most of the people
in the agency want to do a good job.
I saw that last year, it's like, these are real innovators.
And finally they can break away,
right, and do some real, good.
Not do shadow IT, do it legit with a cloud.
So, good stuff.
Guys, thanks for commentating, Stu?
>> Yeah, so let me bring it on home.
I just want to say, this goes up in a podcast,
if you go to your favorite podcast player
and look for theCUBE Insights,
you'll find this as well as the key analysis
from our team from all of the shows.
Of course, as always, go to theCube dot net
to get all the research.
If you want the exclusive, more detail
on Theresa Carlson, just search John Ferrier
in Forbes and you'll find that article.
This is the end of Day One of two days
live coverage from AWS Public Sector.
Of course, theCUBE dot net, come find us,
we've got stickers if you're at the show.
For Dave Vellante, John Furrier, I'm Stu Miniman.
And as always, thanks so much for watching theCUBE.
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