Accelerating Cloud Migration and Modernization: How AWS and Strategic Partners are Transforming Enterprise IT

Dion Hinchcliffe: Hello, and welcome to Six Five On The Road. We’re at AWS re:Invent 2024 here in Las Vegas. This is Dion Hinchcliffe. I’m the CIO, VP of CIO Practice at Futurum. And I have with me a special guest, Leo LaBranche, director of Global Business Innovation. And welcome, Leo.

Leo LaBranche: Thank you.

Dion Hinchcliffe: Why don’t you tell us a little bit about your role and what you’re doing at AWS first?

Leo LaBranche: Absolutely. I have a relatively unique role within AWS in that I focus on large-scale, multinational disruptive opportunities, whether that be technology opportunities, whether it be certain market segments, whether it be certain strategic domains such as infrastructure, application, outsourcing. Early years at AWS, I was globally responsible for the relationship for half of the global system integrators. Before coming to AWS, I was 16 years working for one of them myself. I did the big deals team for one of the largest ITO providers, application outsourcing providers.

Dion Hinchcliffe: Yeah, so you’re really on… I have this great front row seat on how large enterprises are applying application outsourcing to their cloud endeavors. I’ve been hearing a lot about the work that you guys have been doing lately on IT and application outsourcing. But before we get into that topic, I was wondering if you could just catch us up. What are you seeing in terms of the drive for cloud migration and modernization with AWS customers? What’s happening today?

Leo LaBranche: Yeah, absolutely. We are seeing a continued trend towards larger-scale modernization and migration. We are seeing a shift away from maybe traditional lift and shift activity towards some portion of more specific modernization activities, whether that be-

Dion Hinchcliffe: So, are they re-architecting for cloud?

Leo LaBranche: Re-architecting, re-host in some cases, or completely scrapping and deprecating applications and building cloud native in some cases. We also are seeing, however, an increasing reliance on the world’s largest outsourcing providers, both application and infrastructure outsourcing, when it comes to the modernization aspects of the mission-critical workloads.

Dion Hinchcliffe: Now, why is that? A lot of big enterprises, you would think they’d have a lot of cloud talent at this point. Why are they still leaning on those guys?

Leo LaBranche: Yeah, believe it or not, talent is actually still very much an issue. Despite everyone’s best interests and best efforts, the ability to transform and upskill a workforce is actually a very laborious and time-consuming activity. Giving someone a training one time here and there is not necessarily enough to really change the way someone works.

Dion Hinchcliffe: Well, and you guys offer that training in spades when I see any offer, the architecting blueprints, but there a big difference between somebody who’s done a cloud application once or twice versus someone who’s maybe done it 10 or 12 times?

Leo LaBranche: Yeah, absolutely. The trend towards moving, I’d say, towards the larger application outsourcing and infrastructure outsourcing providers has to do with a few things. Number one, a lot of them are incumbents within a large enterprise, meaning they have a deep understanding, sometimes a deeper understanding than the customers themselves of how certain mission-critical workloads run and operate. The other is, yes, they have done tens, hundreds, even thousands of cloud migrations and modernizations. The breadth of experience from other customers is definitely something they bring to bear to help an individual customer, particularly when it comes to specific industries. If a large outsourcing provider has done something in financial services within capital markets, well, then potentially there’s something that translates in their understanding of regulatory compliance and that sort of thing.

Dion Hinchcliffe: So, they have a deep bench of experience, talent, and best practices and lessons learned that they’ve learned across all these different-

Leo LaBranche: And then I would add domain expertise for the individual customer themselves.

Dion Hinchcliffe: Yeah, very interesting. What challenges do enterprises face specifically today when they’re doing cloud migration modernization? What’s the journey to the cloud look like? It’s gotten a lot more complicated.

Leo LaBranche: We’ve gotten through, I’d say, a couple of years of migrating and/or modernizing the surrounding applications. We’re starting to get to the meat and potatoes, so to speak, of the real mission-critical workloads, the SAP workloads, the mainframe workloads, the big VMware estates. And in those situations, to some extent, customers are turning to their same existing outsourcing providers and looking for them to drive innovation. Unfortunately, the commercial constructs that have existed within these multi-year contracts generally do not afford for large-scale modernization or innovation within a, say, five-year support contract. One of the challenges that they incur, despite both the ITO provider and the customer’s best intent, is the commercial constructs that sit within the outsourcing arrangements do not allow or afford for rapid modernization of workloads. That’s absolutely one of the areas that we are proactively investing in, which I’m sure we’ll get to later.

Dion Hinchcliffe: Yeah, exactly. Just to make sure people understand, because I think you guys have a lot of deep-seated experience in this, in that organizations have been using outsourcing providers, but they haven’t necessarily situated them to move as quickly as they need to now in today’s cloud. And that’s the big difference you’re seeing today?

Leo LaBranche: If you look at decades’ worth of cost-cutting that’s come as a result of multi-year contracts, year over year, 20% to 30% cost reductions, et cetera-

Dion Hinchcliffe: It’s been dramatic.

Leo LaBranche: What we’ve encountered is a position where now there’s only so much more you can cut to save costs. And what’s happening is both the provider and the customer are looking for opportunities to drive innovation within these contracts that traditionally have not been very innovative, to be honest.

Dion Hinchcliffe: Well, now we get to talk a little bit about IT and application outsourcing. And actually, I follow partner programs a lot because they generally have proven over the years to greatly accelerate the cloud deployments’ increased agility if they’re not done in that long-term contract you’re talking about. But it’s my understanding that you’ve been working on rethinking IT and application outsourcing, transforming it from inside out. Can you walk us through that?

Leo LaBranche: Yeah, absolutely. We recognize that there was this inflection point happening within this market segment. Customers were looking to drive innovation as fast as humanly possible. They were potentially locked in multi-year agreements where innovation was not necessarily really prevalent. At the same time, the big outsourcing providers were actually very interested in providing innovation and providing this transformation, but they actually couldn’t afford to do so. What we looked at were really the three key pain points for customers and for the ITO providers simultaneously. Number one is we looked at assets. What is the asset position? Meaning, a data center, infrastructure, hardware, networking, IPv4 blocks, whatever the actual assets are that are prohibiting a customer from moving.

Because a lot of times, the total TCO calculation has a lot to do with depreciation of assets. Number one, we looked at assets as one of the key pillars that we were considering investing in. Number two is around people. Some of the largest outsourcing providers have tens of thousands of people that are focused on what we would consider to be legacy workloads, legacy infrastructure management, plugging in network cables and hard drives. The reality is, and once the workloads do move to the cloud, that workforce needs to focus more on DevSecOps and CloudOps rather than physically plugging in hard drives. We invest pretty heavily in what we consider to be workforce upskilling and transformation.

Now, that can be both for what we consider to be an asset-heavy provider, meaning an IT application provider who has their own assets. They own their own data centers. They own their own facilities. They own their own hardware. We also have the asset-light providers, those who have really divested of most of the infrastructure over the last several years. In those scenarios, one may actually own the assets, meaning one of the ITO providers may own the assets, but in another scenario, the customer may own the assets.

The other unique thing that we’re doing right now is we’re looking holistically at who has the responsibility from an asset perspective to ultimately get out of a data center, as example. It might be the customer. It might be the provider. Number two is the workforce. Again, we either upskill or re-skill the workforce that’s directly tied to an individual customer implementation, or we do the same thing with an end customer’s workforce. We look at a very segment of a business and say, “Okay, if these workloads were to move to the cloud, who are the resources that are impacted by that? And how do we make sure they have the right skills to support this once it does move?”

Dion Hinchcliffe: And traditionally, technology’s been a little bit easier to change than people.

Leo LaBranche: Yes.

Dion Hinchcliffe: And so I was wondering, can you elaborate a little-

Leo LaBranche: Still is.

Dion Hinchcliffe: Exactly. Elaborate on-

Leo LaBranche: Still is.

Dion Hinchcliffe: … the special sauce on how you’re actually achieving that kind of workforce transformation?

Leo LaBranche: Yeah, so when it comes to the workforce specifically, it’s not just about a single training course or going through a boot camp or spending a week here and there, it’s about real experiential learning. What we’re doing with both the IT providers and for end customers is we’re taking the very strong content that both we produce and our partners produce, but then we’re wrapping that in, what does a career progression look like for the individual? How do we figure out what the right career destination is for someone today who is managing physical infrastructure to a destination in the future? And then we not only do the training associated, but we actually do job shadow and reverse job shadow with those who do know how to do this work today, eventually getting to the point that they can start to take on responsibility themselves. This is not a one-stop afternoon activity. It really is-

Dion Hinchcliffe: Yeah, alerting and hope for the best.

Leo LaBranche: … an extended activity. And that’s the other thing I think is super important to think about, is that the infrastructure and outsourcing business is a long-term business. We need to think strategically and long-term about the resource allocations and the transformation of that. The final other investment that I hadn’t mentioned yet is really around the migration modernization itself. If we’ve got the assets sorted out, we figure out when the right compelling event is associated with maybe renewal of hardware or exiting of a data center, then you have the right people with the right skills. Then finally, what’s the cost to actually move the workloads to the cloud? And then finally, even beyond that, what’s the cost of managing and maintaining those workloads once you’re done? The third key pillar of investment that we’re driving right now through this initiative is really around the modernization activity, more so even than the migration activity, with the understanding that it is more costly to modernize from a legacy solution into a completely-

Dion Hinchcliffe: You have to do it right. AWS is one of the very first in cloud. I’ve been tracking what you’ve been doing for almost 20 years now that you’ve been doing it. Does this transformation take advantage of that full depth of learning? You’re talking about getting into assets and getting into the workforce and issue designing the cloud career path the way it probably should be based on what you guys have seen across thousands, hundreds of thousands of customers.

Leo LaBranche: Millions.

Dion Hinchcliffe: Millions of customers.

Leo LaBranche: Now millions, yeah. Yes, absolutely. We are seven-plus years ahead when it comes to the competition as far as being in this particular business. We are now at millions of customers. A lot of what we learned comes from real-world experience, for sure. And one of the things we’ve learned is there are roughly 30 companies around the world that generally control 60% to 70% of the world’s infrastructure outsourcing and application outsourcing business. And so if we’re not doing something strategic and impactful with those players, then we’re probably going to miss the boat.

Dion Hinchcliffe: Yeah, no, exactly. Well, and this brings us to what is the tangible customer value that this all brings? You’ve created this next-generation partner program around IT and application outsourcing. It’s using all up-to-the-minute lessons in the industry. What customer value are you specifically delivering that you can point to? Do you have some examples?

Leo LaBranche: Yeah, absolutely. As I mentioned, this is really a pivot, not a pivot, but a focus toward mission-critical applications and workloads that are managed and controlled by the world’s biggest providers. One of the examples is one of the world’s largest manufacturing companies, they had an SAP estate that was being managed by one of these ITO providers. The contract originally did not account for migration or modernization of SAP. Through the investments that we’re making through this partner, they were able to proactively propose… This is a key point also, proactive proposal versus reactive proposal. They were able to proactively propose that they modernize the SAP estate.

Dion Hinchcliffe: And that’s take it from on prem, which is probably what the old contract was to on the cloud.

Leo LaBranche: Correct, from SAP HANA on AWS. They saw some real tangible value, 50% almost price performance improvement associated with a lot of their data synchronization, et cetera. This was a case where the customer really wanted to innovate. The partner really wanted to innovate. The financials didn’t make sense, so we came in and ultimately helped absolutely with the technology, because we have some of the biggest instances, et cetera, to support SAP. But that was table stakes. It was also, how do we figure out the commercial and economic viability of moving these workloads?

Dion Hinchcliffe: Well, yeah, and you don’t really hear about cost-cutting that large anymore these days, so it shows you that if you have a properly architected program for this-

Leo LaBranche: There’s still space.

Dion Hinchcliffe: … there’s still room there. But they also receive other benefits, including now they have better agility, they have more modern application architecture, they’re more better positioned for the future.

Leo LaBranche: Absolutely. And actually, it was the first, as we all know, large enterprises of multiple instances of SAP. As an example, it was the first of potentially many that they could do once they proved it worked. A big part of this space is also, hey, prove that you can move a mission-critical workload without affecting my business. If you can prove that you can do that, then we’ll consider doing it at a grander and more accelerated pace. Other examples, big oil and gas, sizable multi-year contract, again, with a large outsourcing provider, a different one than the previous example. There was seven years left on that particular arrangement. We came in, figured out what the total TCO value was, looked again at the assets and the people and all sorts of things, and we were able to essentially do a relatively quick amendment to a multi-year contract that allowed them to incorporate the scope of this mission-critical workload. It was one of their core business applications. In this case, then we were able to migrate and modernize potentially five years before they would have otherwise.

Dion Hinchcliffe: And those large companies have a very hard time changing. Cutting five years off is no small thing for them.

Leo LaBranche: Yeah. And again, the provider continued to provide ongoing support and management of the solution once it was modernized, so it was a benefit for the partner. The customer is able to innovate on one of their critical business applications. They actually have over a hundred more now that they’re interested in doing through a similar model.

Dion Hinchcliffe: Yeah, no, exactly. And so you talk about this strategic plan, this partnership program that you have, and that you’re collaborating at a very high level with these outsourcers, but the tech business is very competitive, but cloud and outsourcing in particular are hyper-competitive. And these folks, they fight tooth and nail for their business. How is this program going to specifically help providers compete with other providers?

Leo LaBranche: We’re very conscious of any investments we make in any of our partner programs and how they affect the channel. And so, one of the ways we create channel separation by default is we lead with incumbency for the most part, meaning if a large outsourcing provider has an existing relationship with an existing customer, we believe that means they have domain expertise and knowledge about their systems and their people and their organization that makes them more effective when it comes to migrating or modernizing their workloads.

The other thing is if one provider has a multi-year contract, no other provider has the exact same contract generally. Maybe a large enterprise will have two or three of these in the entirety of their IT, but the scope that they control is the scope that they control. We do lead the conversations with incumbency. The other thing we do is we really lean hard into proactive proposals. Rather than using this as a mechanism to go win that next RFP, we actually use as a mechanism to partner much earlier in the life cycle to, again, leverage the domain expertise that these partners have of this particular customer to come up with something that’s really compelling for that customer, proactively bringing them a proposal on how to modernize the workloads that they manage and control. By proactively doing it, again, you’re not in an RFP situation, so you’re not necessarily in this world of just lowest bidder of wins type of situation. One thing we are seeing, which I actually don’t believe is in the customer’s best interest, is a lot of large enterprises are separating the decision to choose a cloud from the decision to choose an SI.

Dion Hinchcliffe: Oh, that’s interesting.

Leo LaBranche: They’ll bid cloud separately. They’ll bid SI separately. That may work from a procurement perspective to squeeze each provider as much as humanly possible. What you completely eliminate when you do that though, is those two partners working together to bring the best outcome for a customer. And so we have some of these agreements today with a number of different providers, and we want to proactively bring a large-scale modernization proposal that has by far the biggest TCO, but we’re not allowed to because-

Dion Hinchcliffe: Because they want to separate those concerns out.

Leo LaBranche: Yeah. They want to choose TCS or Accenture separately from AWS and others. When we have the opportunity, we actually encourage customers not to do that. It, again, may make sense-

Dion Hinchcliffe: Because integrated transformation is better, or?

Leo LaBranche: Because if you can get a cloud provider and the SI that’s responsible, the outsourcing provider responsible for doing the actual work, the two of them can combine their investments for the right possible outcome for a customer. Otherwise, you have to basically bid the best possible cloud bid and the best possible SI bid. And if you don’t allow those two to talk, then they’ll-

Dion Hinchcliffe: Yeah, they’re a vacuum. They don’t have the right context.

Leo LaBranche: Absolutely.

Dion Hinchcliffe: Yeah. Interesting. It sounds like you have a very carefully thought-out process that you’re not just trying to create a lot of churn in the outsourcing provider’s world. You’re trying to create a more orderly, more organized, more integrated, more contextually aware approach to cloud migration. Is that fair to say?

Leo LaBranche: It is fair. It’s also really not a one-size-fits-all type program. We may know that AWS and Amazon are very good at building repeatable, scalable, structured initiatives and programs. The reality is not every single one of these providers are identical. They have their own issues around their asset positions, maybe their financial positions, their people are in different stages of evolution when it comes to being cloud ready. And so while we do have the three different areas of investment conceptually, we don’t necessarily apply all three equally.

An Accenture needs a very different set of investments than an Atos does. While we have a framework for going top-down, these are very much top-down, CEO-down type arrangements that we do, but we bring a framework to bear and then we take a step back and say, “Okay, ITO provider, what do you need most? What will help you provide the most value to your customers? Is your asset position your biggest problem? Is your people your biggest challenge?” And then we essentially cater the framework to work more appropriately with whatever the particular provider is.

Dion Hinchcliffe: Yeah, no, it sounds like a greatly matured approach compared to the early days, where just trying to do land grabs in the cloud space was so interesting for some-

Leo LaBranche: I think it really comes with a deeper understanding of this particular business. I personally spent 15 years on the other side of the house. Understanding how their P&L functions. Understanding, yes, how the technology can accelerate, certainly what we’re announcing in GenAI this week will be part of that, but deeply understanding their business helps a lot when it comes to building a framework that really works for them.

Dion Hinchcliffe: Looking ahead, where is outsourcing and application outsourcing, where is it going? What’s going to happen next, using your position, your seat in industry?

Leo LaBranche: Yeah, it’s been interesting. The pendulum definitely shifts from insourcing back to outsourcing-

Dion Hinchcliffe: It does.

Leo LaBranche: … and back again. Lately, we’ve actually been seeing customers turn to the outsourcing providers more and more, just even within the last 18 months. While insourcing is absolutely necessary, building the skills necessary, knowing your own domain, your own workloads very well as a customer is very important.

Dion Hinchcliffe: Well, there’s over 300 different AWS services alone. Just having the bench for that is beyond even some of the-

Leo LaBranche: Back to the impossible.

Dion Hinchcliffe: … largest organizations.

Leo LaBranche: Frankly impossible.

Dion Hinchcliffe: But not impossible for those larger outsourcers.

Leo LaBranche: Not for the outsourcers that have hundreds of thousands of employees and spend their day in and day out training on this particular technology. I do continue to see customers, particularly the largest of them, turning to big SIs and outsourcing providers to help them with the mission-critical transformation. We do see interesting trends that differ a bit between what we consider to be asset-heavy and those asset-lights. A lot of the asset-heavy providers, those again who own the infrastructure, who own the data centers, by and large, they are actively trying to move more towards asset-light. Not a hundred percent of them, but the majority.

Dion Hinchcliffe: Well, that was always the vision.

Leo LaBranche: It was always part of the vision. I’ve seen a number of the providers who claimed to want to do that maybe five years ago are actually taking the steps necessary to do so. What that means, though, is they have to secure the right debt, they have to do the right things ultimately to get out of the physical asset game and move more towards the transformation and consultative side of the house, which they’re all pretty much universally-

Dion Hinchcliffe: Well, and that’s where the value is. I think we’ll still always have the assets because you have to do things like data sovereignty and data residency and regulations. And unless you have a region in every little micro niche in the world-

Leo LaBranche: Nope.

Dion Hinchcliffe: … you can’t do it. Very interesting.

Leo LaBranche: And then finally, future-wise, the obvious is there certainly, but how is AI going to transform the migration and modernization of workloads? It’s a hundred percent going to. There’ll be announcements even this week that I think will be eye-opening.

Dion Hinchcliffe: I’m meeting with all those-

Leo LaBranche: I can’t preview unfortunately as of this date, but each one of the providers are actively looking at how is AI going to change not only the workload move activity, but their run and manage and maintain activity. And to be honest, they’re not sure in some cases how much it’s going to impact a people-based business, a P times Q business where you’re billing for every human every hour. There’s a lot of discussions we’re having with them and what is their transformation in the context of AI?

Dion Hinchcliffe: Yeah, I’m having those same conversations, and that’s very much what I’m hearing. They know it’s their future. They’re just trying to figure out how to do it.

Leo LaBranche: Exactly.

Dion Hinchcliffe: I work with chief information officers around the world, Fortune 500, Global 2000. If you really had one clear message from this whole conversation that you’d want them to take away, what would that be?

Leo LaBranche: I’d say, number one, don’t underestimate the organizational change necessary to run and operate a cloud-based business. And there’s a certain amount of acceptance, I think, that has to come from leaning on your strongest, most strategic partners to take on a more outcome-based role in the transformation. A hourly-based, staff-aug type model generally I have not seen be very successful when it comes to larger-scale modernization.

Dion Hinchcliffe: It won’t get you the outcome-based-

Leo LaBranche: No, the outcome-based model, again, the more mature partners, those who are moving up the evolutionary curve of consulting, they’re the ones who generally will be able to commit some sort of outcome. And there’s no reason why a CIO couldn’t get some level of guarantees around the outcomes. And as you see the evolution going even further, you can be not just about outcome, meaning a workload gets moved, but outcome meaning there’s actually some sort of top-line revenue benefit or some sort of bottom-line profitability increase. The outcomes are becoming a lot more mature because, again, we’ve all been in this business for 20, 30 years. And for those partners who are not willing or able to make the leap, well, they should definitely consider that.

Dion Hinchcliffe: They’re thinking about their future.

Leo LaBranche: Yeah, exactly.

Dion Hinchcliffe: Well, thanks, Leo, very much. I really appreciate you stopping by.

Leo LaBranche: Absolutely. Thank you.