Amazon is kicking off its annual cloud fest a bit early this year, with news that Matson, the big freight shipping company has moved all of its critical operations to Amazon Web Services, closing four data centers in the process.
The news comes early Monday morning, just before AWS re:invent, Amazon’s annual tech conference, is set to kick off in Las Vegas.
This was not an overnight decision for Matson
, which owns and operates ships that carry freight between the west coast of the continental U.S. and Alaska, Hawaii, Guam, and China. The Honolulu-based company has about $2.2 billion in annual revenue and 1,500 employees.
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Matson chief information officer Peter Weis said the company started down this road a few years ago when it started rewriting its key software to run in the popular Java enterprise environment. Then, when Matson purchased an Alaskan company to broaden its reach in 2014, it was time to move that software to the cloud from internal data centers, he said.
Matson evaluated a few options before “sticking its toe in the water” with AWS, Weis told Fortune.
He did not name other contenders other than to say that they included “large traditional companies” that had already offered IT hosting options. “In general, I found that those companies with DNA in infrastructure hosting that were now trying to offer cloud stuff don’t get it the way Amazon does,” he noted.
Matson isn’t the only big win AWS will claim this week. Xero, a Wellington, New Zealand-based provider of online accounting software used by customers in Australia, Asia, and the U.S. has just completed a migration to AWS from a Rackspace hosted environment
“We just saw a huge opportunity in public cloud,” Mark Rees, general manager of platform, architecture and delivery for Xero told Fortune. The overall goal was to ensure that Xero could deliver new features and functions quickly.
Towards this end, Xero moved 1.4 petabytes of data, 3,000 application servers and 120 databases into Amazon’s cloud, making this, Rees said, one of the largest AWS migrations in the Asia-Pacific region.
To be sure Amazon, which launched its first cloud storage service more than ten years ago, blazed this trail. Basically the public cloud model it pioneered requires the aggregation of massive amounts of storage, computing, and networking capacity running at data centers around the world. Customers can rent those shared resources and many see this as a way to augment or even replace their own data centers, cutting their own capital expenditure budgets.
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Microsoft, VMware, IBM, Hewlett-Packard, Enterprise
, and virtually every other traditional IT company has been playing catch up ever since as more business customers discovered they liked the notion of paying only for the resources they run when they run them and turning them off when they don’t.
In the intervening decade, AWS—once dismissed as a loss leader for parent company Amazon
Inc.—has proven to be not just a huge business, but a profitable one. For it’s most recently reported quarter ending September 30, 2016, AWS profit, excluding employee stock compensation, was about $1.02 billion (or $821 million including that compensation.) As of that quarter, AWS was on track to log more than $12 billion in annual revenue.
Amazon would dearly like more big customers to go “all in” to AWS like Matson. Two years ago, Charles Phillips, chief executive of Infor, a business software maker, took center stage at AWS Re:invent to announce that his company was putting all its eggs in the AWS basket, shutting down its own data centers. “Friends don’t let friends build data centers,” Phillips famously told AWS attendees at that time.
But to be clear, most large AWS business customers still keep some key applications and data on internally controlled data center gear. Some worry that using shared infrastructure doesn’t meet regulations for data privacy (a contention AWS disputes).
Still old beliefs die hard, as does the reluctance of large companies to commit too much of their technology budget to a single provider. And, when it comes to public cloud, AWS is far and away the largest public cloud entrant, with Microsoft Azure coming in a distant second, according to Gartner
and other researchers.
Most big customers, after all, have seen the downside of vendor lock-in with their existing software vendors and don’t want to repeat that painful experience. Enterprise software companies are infamous for getting customers to use their software at attractive prices, only to jack up those prices when it becomes difficult for the customers to move elsewhere.
By playing different cloud vendors off each other, the buyer can retain some leverage. So just as big customers wield the threat of switching to Google Apps from Microsoft
Office in negotiating licenses and pricing, they will likely parlay Microsoft Azure, Google
Cloud Platform, or IBM SoftLayer against AWS when it comes time to set the terms of their deals.
Ironically, the same enterprise software vendors that customers have complained about in the past over those practices, are now trying to woo AWS cloud customers, warning them not to sink too much of their IT budget into the cloud giant. These companies include VMware
, and Oracle
VMware, which launched a cloud partnership with Amazon last month, said it will soon offer software to let customers run some workloads on AWS and others on other public clouds, thus alleviating worry of locking into one cloud provider.
Pivotal Cloud Foundry also says its software will let customers divvy up applications between AWS, Google Cloud Platform, and Microsoft Azure public cloud.
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Of course to attain that multi-cloud mobility, the customers do have to commit to using VMware or Cloud Foundry on all their clouds, so they may be swapping out one form of lock-in for another.
Weis acknowledged the concern that large companies have of locking too much of their IT into one provider. Matson, he said, is sticking pretty much to Amazon EC2 compute, S3 storage and other basic services, not the higher level databases or other offerings that would make moving to another cloud difficult in the future.
“We are looking at their database and business intelligence tools, yes, but we wouldn’t blindly move to all those tools,” he said. The issue is that the more a company uses those higher level tools in any particular cloud it increases the potential cost of moving to another provider if that becomes necessary.
“At the platform level, we have no concerns about lock-in,” Weis said. “Our technology stack is pure enough that if we wanted to leave we could. To the extent we go to more proprietary services, then we would have more switching costs.”
Xero’s Rees said companies of course should evaluate how many services they use: “You have to go into these platforms with your eyes open.”
On the other hand, by not using new value-added services, the customer can miss out on some of the benefits of AWS.
Note: This story was updated with details of Xero’s AWS migration.