AWS CEO Adam Selipsky interview before re:Invent 2022

AWS CEO Adam Selipsky interview before re:Invent 2022

AWS re:Invent starts two weeks from now, an end-of-year showcase typically reserved for the dominant cloud provider’s biggest service announcements, technology sessions, and customer success stories.

This year’s event, however, comes amid global economic pain marked by soaring prices, months of tech layoffs, and a general belt-tightening among some enterprises that includes curtailing their cloud spending. And even AWS’ own growth, while still strong, has slowed.

But CEO Adam Selipsky suggested that the worst of times often are the best time when it comes to enterprises investing in new services or modernizing their IT approach. When a challenge or crisis hits, companies that are prepared and able to move fast will gain advantage, he told Protocol in a recent interview in Boston.

“So we see a lot of customers actually leaning into their cloud journeys during these uncertain economic times,” Selipsky said. “We saw it during the pandemic in early 2020, and we’re seeing it again now, which is, the benefits of the cloud only magnify in times of uncertainty.”

Amid that uncertainty, and with enterprises taking a closer look at their ROI on cloud spending, Protocol has learned that AWS is experimenting with some new approaches to billing its customers by tying its fees to whether they realize predetermined results from the cloud.

And as AWS looks to further help enterprises operate more efficiently and solve their business problems, data will be a big focus at the 11th annual session of re:Invent starting Nov. 28 in Las Vegas, along with a deeper push into industry verticals.

“Succeeding with data in today’s world really requires taking the end-to-end view of your data and not looking at point solutions along the journey,” Selipsky said. “A lot of people are drowning in their data and don’t know how to use it to make decisions.”

The spotlight on data brings to bear Selipsky’s experience leading Tableau Software and being immersed in the world of data, analytics, and business intelligence there for more than four years before returning to AWS last year. The amount of data available to companies continues to explode, and it’s both a huge opportunity and huge problem, Selipsky told Protocol.

“I’m able to bring back a real insider’s view, if you will, about where that world is heading – data, analytics, databases, machine learning, and how all those things come together,” he said. “It’s not about having a point solution for a database or an analytics service, it’s really about understanding the flow of data from when it comes into your organization all the way through the other end, where people are collaborating and sharing, and making decisions based on that data.”

Over the last 16 years AWS has churned out new cloud services, which now number more than 200, and Selipsky is adept at communicating how that technology can translate into better business outcomes for customers, according to Gartner distinguished analyst Ed Anderson, who focuses on the cloud services market.

“Adam has certainly … brought a leadership perspective that is really all his own, in fact, probably described best as really humanizing the AWS experience, really talking about benefits to businesses and benefits to people,” Anderson said. “It’s reflective of the time in the market and then the type of buyers AWS is approaching. What the C-suite is looking for is, ‘How do I take all these capabilities and translate them into business solutions or business value outcomes?’”

AWS’ cloud conversations with customers are increasingly happening with organizations’ highest-ranking executives, rather than lower-level tech leaders. It’s a dynamic that most surprised Selipsky upon his return to AWS, where, up until 2016, he was the equivalent of AWS’ chief operating officer, a direct report to predecessor Andy Jassy and one of two senior executives in place since the cloud platform’s launch.

The change is indicative of the depth and sophistication of organizations’ use of the cloud now in every facet of their businesses — running core enterprise IT applications, tapping new analytics, and deploying end-customer applications — and how fundamental it is to their success, according to Selipsky.

“The cloud and our relationship with these enterprises is now very much a C-suite agenda,” Selipsky said. “There was a time years ago where there were not that many enterprise CEOs who were well-versed in the cloud. And then you reached the stage where they knew they had to have a cloud strategy, and they were more asking their team, their CIOs, ‘OK, do we have a cloud strategy?’ Now it’s actually something that they’re, in many cases, steeped in and involved in, and driving personally.”

While the technology is sophisticated, deploying the technology is arguably the lesser challenge compared with, how do you mold and shape the organization to best take advantage of all the benefits that the cloud is providing.

The conversation with CEOs typically focuses on organizational transformation: how customers can put data at the center of their decision-making and use the cloud to innovate more quickly and drive speed into their organizations, Selipsky said.

“Those are cultural characteristics, not technology characteristics, and those have organizational implications about how they organize and what teams they need to have,” he said. “It turns out that while the technology is sophisticated, deploying the technology is arguably the lesser challenge compared with, how do you mold and shape the organization to best take advantage of all the benefits that the cloud is providing.”

‘Not done building’

AWS’ pioneering entrance into cloud computing in 2006 and rapid pace of innovation catapulted it ahead of its subsequent cloud competitors. Today, it has an industry-leading 34% share of the cloud infrastructure services market. Microsoft follows at 21% and Google Cloud at 11%, according to the most recent data from Synergy Research Group.

There’s no one-size-fits-all solution to what customers want, Selipsky said, and that’s why AWS will continue to develop products and services at all levels of its stack and fill out existing services with new features.

“We’re not done building yet, and I don’t know when we ever will be,” he said. “And one of our focuses now is to make sure that we’re really helping customers to connect and integrate between our different services.”

Customers continue to want basic AWS building blocks — or so-called “primitives” — to operate in the cloud, according to Selipsky.

Adam Selipsky CEO of Amazon Web Service (AWS), speaking at the Keynote: Delivering a new World, during the Mobile World Congress (MWC), in Barcelona, Spain, on March 01 2022. (Photo by Joan Cros/NurPhoto via Getty Images)
Adam Selipsky speaking at GSMA’s 2022 Mobile World Congress in Barcelona

Photo: Joan Cros/NurPhoto via Getty Images

“We absolutely have customers who very much want to have their hands ‘on the wheel,’ if you will, and to be working with our services at the deepest layer, at the most primitive level — so EC2 for compute, S3 for storage, one or more of our database services — and they want to be interacting with those services directly,” he said. “It is interesting, and I will say somewhat surprising to me, how much basic capabilities, such as price performance of compute, are still absolutely vital to our customers.”

But AWS is also seeing more and more customers who want to interact with its cloud at a higher level of abstraction — more at the application layer or with broader solutions such as Amazon Connect, its customer contact center service, Amazon HealthLake, or IoT services to monitor industrial equipment for maintenance.

In August, Dilip Kumar, who was vice president of physical retail and technology at parent company Amazon, moved over to AWS as vice president of applications, reporting to Selipsky. While at Amazon, Kumar oversaw the development of technologies including Just Walk Out, which enables checkout-free stores, and Amazon One, a biometric identity and payment service used at Amazon stores. He also had a stint as technical adviser to Amazon founder and former CEO Jeff Bezos, which is also how Jassy rose through the Amazon ranks to become the first CEO of AWS.

“We have lots of capabilities we’re building that are either for … horizontal use cases like [Amazon Connect] or industry verticals like automotive, health care, financial services,” Selipsky said. “We see more and more demand for those, so Dilip has come in to really coalesce a lot of teams’ capabilities who will be focusing on those [areas]. You can expect to see us invest significantly in those areas and to come out with some really exciting innovations.”

Supporting hybrid environments

“Multicloud” might not be a term in its regular vocabulary, but Selispky said AWS is also committed to supporting customers in their hybrid infrastructure environments — which include other clouds as well as on-premises data centers — with a caveat as to where he says they’ll find the most success.

“In general, when we look across our worldwide customer base, we see time after time that the most innovation and the most efficient cost structure happens when customers choose one provider — when they’re running predominantly on AWS,” Selipsky said. “[There are] a lot of benefits of scale for our customers, including the expertise that they develop on learning one stack and really getting expert, rather than dividing up their expertise and having to go back to basics on the next parallel stack.”

That said, Selipsky acknowledged many customers operate in a hybrid state, running their IT in different environments whether by choice or due to acquisitions and inherited technology.

“We understand and embrace the fact that it’s a messy world in IT, and that many of our customers for years are going to have some of their resources on premises, some on AWS,” he said. “Some may have resources that run in other clouds. We want to make that entire hybrid environment as easy and as powerful for customers as possible, so we’ve actually invested and continue to invest very heavily in these hybrid capabilities.”

Those include visibility and management capabilities, according to Selipsky.

We understand and embrace the fact that it’s a messy world in IT, and that many of our customers for years are going to have some of their resources on premises, some on AWS.

“The first thing that customers ask for is, ‘We want to be able to see and have visibility into and in some cases manage resources on AWS, on my own premises and in some cases on other clouds,’” he said. “So we’ve built capabilities, many of our management services, to see and in some cases control what’s going on across those environments.”

Selipsky singled out Amazon EKS Anywhere as an example. It became generally available last September as a deployment option for Amazon Elastic Kubernetes Service, which allows customers to run Kubernetes on AWS without dealing with their own Kubernetes control plane or nodes.

“[EKS Anywhere is a] distribution of Kubernetes that customers can take and run on their own premises and even use to boot up resources in another public cloud and have all that be done in a consistent fashion and be able to observe and manage across all those environments,” Selipsky said. “So we’re very committed to providing hybrid capabilities — including running on premises, including running in other clouds — and making the world as easy and as cost-efficient as possible for customers.”

Customer cost-cutting and experimental billing

Cost-efficiency is front and center now for some AWS customers, thanks to the state of the economy. During Amazon’s earnings call last month, chief financial officer Brian Olsavsky acknowledged an uptick in AWS customers focused on controlling costs. Customers are looking to save money versus their committed spend, and AWS is proactively working to help them cost-optimize, “just as we’ve done throughout AWS’ history, especially in periods of economic uncertainty,” he said.

“There are some industries that have lower demand that’s showing up in our volumes,” Olsavsky said, highlighting financial services, the mortgage industry, and the cryptocurrency market. “We’re very strong in some of those industries, and that’s part of it.”

AWS revenue slowed in the last quarter, growing 27% year-over-year to $20.5 billion, compared with 39% growth from the same quarter a year earlier.

“We’re an $82-billion-a-year company last quarter … so we have, of course, every use case and customers in every situation that you could imagine,” Selipsky said. “Some customers are doing some belt-tightening. What we see a lot of is folks just being really focused on optimizing their resources, making sure that they’re shutting down resources which they’re not consuming. You do see some discretionary projects which are being not canceled, but pushed out.”

AWS continues to see a strong customer appetite for signing longer-term commitments, according to Selipsky, which was part of a big push under the last several years of Jassy’s tenure as CEO.

“Many of our larger customers want to make longer-term commitments, want to have a deeper relationship with us, want the economics that come with that commitment,” he said. “But every customer is welcome to purely ‘pay by the drink’ and to use our services completely on demand.”

AWS has been open to renegotiating long-term contracts for customers with multiyear commitments through AWS’ Enterprise Discount Program, or EDP, according to Simon Anderson, founder and CEO of Mission Cloud Services, a managed cloud services provider and AWS consulting partner. Anderson attributes that flexibility to Amazon’s “customer obsession” leadership principle. Under an EDP, customers commit to a predetermined amount of high-volume annual AWS spending in return for contractually outlined discounts.

Fees are tied to the client realizing the benefits. If you told me you’re going to save me a million bucks, I’ll pay you when I see the million bucks.

“We have renegotiated those deals,” Anderson said. “Typically they involve, as you would expect, an extension of the term of the new deal beyond the term of the old deal. For example, if someone has one year to go on their EDP, if the customer is prepared to make a forward commitment for two years or three years from that point in time, then there’s definitely room to accommodate the customer’s current situation from a financial perspective.”

AWS has also been experimenting with Deloitte Consulting, its largest global systems integrator partner, on new customer contracting approaches that involve value-based billing, according to Jonathan Bauer, Deloitte’s lead U.S. AWS alliance partner.

“We’re starting to talk to AWS about, and they are exploring, new contracting approaches that focus on value creation,” Bauer told Protocol. “Fees are tied to the client realizing the benefits. If you told me you’re going to save me a million bucks, I’ll pay you when I see the million bucks. It’s sort of like saying, do you really stand behind what you’re selling. It’s something that we use, and it’s been enormously successful.”

Several such deals have been consummated between customers, Deloitte, and AWS, according to Bauer.

“I have good faith that we’ll make some progress,” he said. “As deals get larger and larger, clients are demanding more than just ‘yeah, we’ll deliver it for you.’ They want some skin in the game. It’s a three-way conversation. Deloitte has to make some commitments; AWS has to make some commitments that perhaps they weren’t accustomed to making five years ago. That’s exactly what an environment like this needs.”

Customers ultimately care most about the value they get from AWS, according to Selipsky.

“Those benefits have been dramatic for years, as evidenced by customers’ adoption of AWS and the fact that we’re still growing at the rate we are given the size business that we are,” he said. “That adoption speaks louder than any other voice.”