One of the last, if not the last, technology conference of the year 2017 just recently came to a close. The Amazon AWS re:Invent technology conference was held from November 27 through December 1 in Las Vegas, Nevada. I’d like to share some of the key points I have gathered about the conference.
One of the key takeaways from re:Invent that I got from my research is that the demand for cloud services continues to be extremely positive. Revenue models are tracking toward the upper end of fourth-quarter targets, and outlooks for 2018 have improved based on larger deal sizes as well as more data center migration phases moving forward in the coming year. Amazon AWS reseller margins are expected to increase by 300 to 500 basis points (bps), and there should be additional incentives in the form of rebates and credits for partners and customers alike. Rumor has it that Amazon is going to really start ramping up its sales force to begin meaningfully targeting database customers in 2018, in what I see as an attempt to start challenging Oracle in the near future. Oracle, which has had near-term share loss to Amazon, was viewed as less severe than expected. I think Amazon is starting to smell blood, and I think you will start hearing more about new database offerings from Amazon sometime in 2018. Let’s see what happens. Microsoft and Google continue to grow at a pace that is faster than the market pace, and Microsoft partners are continuing to expect somewhere around a 100% growth within Azure for the fiscal year 2018.
Since the official announcement about the general availability of VMware Cloud on Amazon Web Services (AWS), I have been curious to hear some feedback. The announcement was made at VMworld 2017 back in August, and it appears the interest has been quite high, so much so that VMware Cloud on AWS might be a little oversubscribed, with more buyers than VMware originally established capacity for. It seems VMware just might have misjudged how much demand there would be from the get-go. I have heard that VMware is in negotiations with Amazon to increase capacity to support the improving demand for this initiative. I believe that VMware’s partner community will be dedicating resources and training to fully support VMware Cloud on AWS when the offering becomes available for channel resell, which should be coming late 2018. In the meanwhile, deals will be done direct with VMware. The high demand for VMware Cloud on AWS should continue to drive the growth track for products that make up vCloud Suite, namely NSX and vSAN.
I think Amazon is looking to expand its overall footprint. In preparation, Amazon has a new Solution Provider Program that has a potential for better resell margins for the partners. I have heard rumors that current resell margins of 7% (sometimes 2–6% if coming from preexisting customers) are expected to increase to 10–12%. There is no indication whether this increase will be widespread or for the high-tier partners. I have heard that currently anywhere from 20 to 30% of Amazon AWS sales come through a partner, and I believe Amazon is working hard to increase that.
I also think Amazon is enjoying the large-scale migration plans that are getting fully implemented after years of planning. To help incentivize some of the larger companies, I have heard that Amazon is offering “more” credits to customers that are willing to accelerate data center migrations and commit to a certain amount of usage, which would need to be in the range of greater than $1 million a year.
As a side note, the attendance at re:Invent is likely to have exceeded 45,000 attendees, up from 30,000 in 2016 and 18,000 in 2015. This should be a good indicator of the global interest for Amazon AWS, and with that, I believe 2018 is going to be a good year for Amazon. We will just have to see how the race to the top between Microsoft and Amazon plays out in 2018. I sense some trouble for Oracle but will hold judgment until it has made some adjustments, and that is my recap of re:Invent.