AWS Outposts With VMware: Admission That Public Cloud Is Not 'Be-All, End-All'

Amazon Web Services decision to move firmly into the on-premises server business side by side with VMware with AWS Outposts-branded rack system offerings is an admission that public cloud is not the "be-all, end-all," said solution providers.

AWS Outposts -- fully configured compute and storage racks built with AWS designed hardware- throws up the white flag up on the AWS perennial public cloud only stance and formally acknowledges the power of the hybrid cloud model and channel partners supporting those on-premises server environments, said Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech, a Dell EMC Titanium partner.

"This is an admission by AWS that public cloud is not the be-all and end-all and on-premises and hybrid is here to stay," said Venero. "AWS has been saying for years that public cloud is the only way to go. This is AWS throwing up the white flag on public cloud only and recognizing there is tremendous value in on-premises solutions and offerings. AWS going into the on-premises business is a testimony to the power of channel partners delivering on-premises solutions."

AWS CEO Andy Jassy and VMware CEO Pat Gelsinger introduced the AWS Outposts rack system offerings - which will be sold through AWS and VMware partners- at AWS reInvent 2018. AWS said it will “deliver the racks to customers, install them (if customers prefer), and handle all maintenance and replacement of racks.”

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Venero said AWS has an uphill battle with the on-premises hardware given that the solution is not slated for general availability until the second half of 2019. "That is decades in the computer industry," he said. "In my opinion they are putting out a trial balloon to see what the reaction is going to be from partners and customers. One thing is clear: AWS is recognizing there’s tremendous value for on-premise infrastructure."

AWS and VMware – which have both thrived as software providers – face big challenges in service and support as they bring on-premises infrastructure solutions to market, said partners.

"If AWS was smart they would engage the channel and allow the AWS architecture to be deployed on multiple hardware OEM offerings like Dell EMC, HPE, and Cisco," said Venero. "That would bring more value to customers who have existing infrastructure and investments in place with those infrastructure providers. My message to AWS and VMware is: engage the partner community and understand what we would need to help make this successful."

Raymond Tuchman, CEO of Experis Technology Group, a fast-growing Potomac, Md, HPE private cloud powerhouse, said AWS is going to find big issues as it attempts to support on-premises hardware.

"The big issue with AWS is who is going to support this on-premises hardware?" he asked. "I have never seen a software company be successful selling and supporting hardware. Hardware services and support is just not in AWS' DNA. Who is going to install it, support it and go on site to do break/fix? There are a lot of issues that have to be addressed here."

AWS may be making the on-premises move because it sees private cloud as significantly less expensive than public cloud, said Tuchman. "Every deal we are in private cloud comes in at 25 to 50 percent below the cost of public cloud," he said. "That is why hybrid cloud is predominant model."

Ultimately, the AWS on-premises entry means another competitor in the market beside long standing infrastructure providers like HPE, Dell EMC and Cisco, said Tuchman. "This is just another competitor for us," he said. "AWS is going to face a lot of operational and supply chain issues that HPE, Dell EMC and Cisco have mastered over the last 30 years. They are not going to come out of the block instantly and have a phenomenal support organization. You can't just turn that on."

Ron Dupler, the CEO of GreenPages Technology Solutions, one of the top digital transformation cloud consulting companies in the country, said AWS Outposts is recognition of the importance of "hybrid cloud" to enterprise IT customers.

"This is not as simple as private or public cloud, it is all about what is the right strategy based on the customer's legacy application portfolio and data strategy," said Dupler. "That is what determines what the blend of private and public cloud should be. The majority of the customers we talk to would prefer to get out of the data center business, but there is a good reason they are going to be in the data center business or have someone running their data center business for years to come and that is because of their legacy application portfolios and data strategy."

GreenPages, for its part, is seeing a booming business advising customers on private and public cloud and digital transformation, said Dupler. "We have been working on hybrid cloud for many years and are seeing a significant acceleration of our digital transformation practice in 2018," he said. "The key with the cloud paradigm right now is there is a whole new set of problems customers need to solve when they move to cloud at scale particularly with the public cloud."

Douglas Grosfield, CEO of Five Nines IT, a fast-growing Kitchener, Ontario, strategic service provider, said he couldn't help but laugh when he heard that AWS was getting into the on-premises hardware market.

"I can't stop laughing about it," said Grosfield. "To me this is a ricochet biscuit. For so long AWS was pushing the concept of driving on-premises workloads to the public cloud. Now they have come full circle and they are pushing workloads in the cloud and from the cloud back to on-premises. AWS is extending the public cloud based workloads back to on-premises environments."

Grosfield said he sees the AWS on-premises move opening up a "two-way street" that raises big cybersecurity and management challenges. "This muddies the waters for securing and managing workloads," he said.

That said, Grosfield sees the AWS on-premises hardware as a "cool" offering that provides customers "control" with their own on-premises hardware. "This is a marriage of the best of both worlds," he said. "It allows customers to keep on-premises control and the flexibility that cloud services provides."

Grosfield said he sees AWS Outposts as an affirmation of the power of the hardware solutions being offered by infrastructure providers like HPE, Dell EMC and Cisco. "All of a sudden there is an on-premises story to tell again with on-premises equipment going back into small data centers or server rooms again," he said. "All of a sudden we are having conversations with SMB customers about investing in on-premises hardware. That is really cool from a strategic service provider's perspective. That is going to drive more services revenues for us."

With AWS Outposts, Grosfield said he is hoping that AWS will embrace channel partners. "They have an opportunity to really regain lost ground in terms of market confidence if they can start to deliver a product and services like this with a channel program attached to it that keeps strategic service providers as part of the ecosystem rather than trying to cut us out," he said. "The big winner if AWS does embrace the channel will be the customer who will have a much better experience with the technology. That would be a home run for AWS. I'm hoping they get the message that the channel is an important part of the ecosystem for them. If they go direct they'll become like a cell phone or telecom provider where customer acquisition takes precedence over customer retention."

The CEO for a large national solution provider, who did not want to be identified, said he sees AWS Outposts as AWS's equivalent of Microsoft's Azure Stack which is gaining momentum in the market. "Everyone – including AWS – is realizing that it is a hybrid cloud world and is trying to adjust their strategies to be relevant in a hybrid cloud world," he said."Microsoft has done a better job up to this point with hybrid cloud than AWS."

AWS and VMware are betting that AWS Outposts will provide a "shot in the arm" to VMware Cloud on AWS, the CEO said. "By announcing this now even though it is not available until the second half of 2019, AWS is hoping this keeps them in the game – even though they don't have a live and ready solution - at a time when CIOs are making hybrid cloud bets," he said.

The CEO for another national solution provider, who did not want to be identified, said AWS is in for a rude awakening as they move to provide support services for the on-premises hardware business in a thin margin business. "Support is going to be the biggest challenge for them," he said. "They are not set up for that. I don't know how AWS crosses that bridge.If they do get to the other side I don't think they are going to like the economics."

Experis' Tuchman, for his part, says AWS is going to find the margins in the hardware market a far cry from the high margin software business. "There is not a lot of money in hardware compared to software," he said. "The valuation of hardware companies is a lot different than the valuation of software companies. I just don't know why a software company would want to get into the hardware business."