(upbeat music) >> Hello there and welcome to a special Cube conversation here at The Cube's Palo Alto studios, I'm John Furrier. Join with me for this special Cube Conference, Stu Miniman with Wikibon and The Cube co-host as well just up at Amazon Web Services Summit. Stu, great to see you again. Our next guest is Ben Golub, who's the executive chairman and interim CEO of Storj, pronounced storage. So it's a really hot cryptocurrency, blockchain based storage solution. I should say decentralized storage, not necessarily cryptocurrency, but tokens are involved, encryption. Great to see you. >> Great to see you, it's good to be back. >> Formerly Docker CEO and now advising at Mayfield Fund as a venture partner and also interim CEO of a hot-- >> Yeah really exciting company. And I'm really excited to talk to you about it today. >> So let's just jump into it. So obviously the ICO craze is awesome and we've always speculated that the blockchain and the decentralized applications are coming is going to be the real action. But yet it's going to create efficiencies where there's inefficiencies. >> Sure. >> Venture capital is one of them and that's why the ICO craze is going. People are raising a boatload of money that they probably wouldn't have gotten that amount. >> Wouldn't have gotten, yeah no dilution, things like that. It's interesting yeah. >> So give us an update on Storj or storage. How much in ICO did they raised, whitepapers out there? It's peer to peer, give a quick, take a minute to explain what the company's doing. >> Yeah well I guess that I should probably start by saying that I think that blockchain is bigger than just cryptocurrency, and decentralized is bigger than blockchain, and Storj is primarily a decentralized storage company. So we're about decentralized apps and the whole thing would absolutely work even if we were just using dollars. But I think it does make it a whole lot more exciting. And so the company, kind of unique in the crypto space in that we actually had a running service that was providing real value, before we did the large token sale. And the token sale raised about $30 million. Fortunately they took about 10 of that in Ethereum and Bitcoin which rose up. So there's a good deal more than that in the bank account right now. >> John: Hopefully they converted to fiat currency. >> And then they converted to fiat along the way. >> It's at an all-time high of $20,000 right now. It's like $7,000, something like that. >> Yeah, so you know, didn't sell everything at the peak, but didn't sell at the-- >> Yeah, so we've been having many blockchain and crypto or token-based economic kind of things. But the real question is what's happening? Now we know the action's been on the infrastructure side. We look at all the top hedge funds, Polychain, amongst others. They love these deals because it's infrastructure. Is that where the action is and how are you guys looking at that because at the same time, there's a wave of decentralized applications also known as Dapps coming on. So there's a relationship going on between how fast the infrastructure can go, and then how applications are going to work with either on chain or off chain dynamics. >> Sure, sure. So maybe it would be helpful to give you a sense of what it is that we do. 'Cause I think that if you do that, then I think it makes sense in the context of decentralized infrastructure, decentralized apps, but also actually traditional infrastructure as well. I've always been searching for a company that I could describe at Thanksgiving. I've never succeeded, so I always end up saying that I'm in computers, and fixing somebody's printer. (laughing) But I guess if I were to describe Storj at Thanksgiving, I'd say it's basically the Airbnb of storage, or the Airbnb of disc drives. So Airbnb, people have lots of condos or vacation properties that aren't being used all the time, and so Airbnb brings them together with people who want to rent those, and they're the largest hotel company in the world, without owning a single property. And we're kind of doing the same thing with Storj, in that there is, first of all, this explosion in the amount of data that's getting created. It would fill a stack of CD-ROMs to Mars and back this year. Yet the price of cloud storage hasn't come down. And 90% of all the disc drives that are out there are only about 10% utilized. So seems like a problem that needs a solution. And that's what we've done. We've basically brought together a very large network of individuals and companies that have spare storage capacity and matched them up with people who need storage. The really cool aspect, there are many cool aspects about it, but one of them is that basically if you want to store on the Storj network, we take your file, you encrypt it, so we never hold the keys. You encrypt it, it's all scrambled up, we break it up into between 20 and 80 pieces, and we spread those out across 150,000 or so nodes that we have in our network. So it's super cheap, but it's also super secure. Great performance because the data's way out at the edge. And super available because there's no storm or power outage or idiot tripping over a power cord that can take out your storage. >> So, Ben, you touched on, first question I was going to ask, of course, trust and security. Storage I absolutely have to worry about, so it sounds like that's at the core, but there's a number of dynamics going on in the industry. Object storage was great, let's spread it out, let's make it more decentralized, but most of the core storage industry is speeds and feeds and latency's super important, and even when you start getting to distributed architecture, I worry about that latency. So what are kind of the use cases, what are some of the key customer issues? Is price a big piece of it? Or what solutions does Storj solve that others can't? >> I always said when I was at Cluster, which was a storage company that there were four things that mattered in storage. There's certainly price; there was security; as in I don't want anybody to be able to access it; there's availability, I never want to drop or lose files; and finally there's performance, how fast I can get it. And so for a huge range of use cases that involve files, basically everything that object storage is kind of used for today, the design of our system is actually much better because we've encrypted it locally and then spread it out, you really can't attack it. First of all, you'd have to figure out... So a would-be attacker who wanted to find one of your files in the storage network would have to figure out which of the 80 or the 20 nodes out of 150,000 it's located on. If they found one of those, and they got the small portion of the file that's there, they wouldn't be able to do anything with it 'cause it's encrypted. Even if they were somehow able to decrypt it by stealing the key from you, not from us... >> So encryption and immutability... >> And immutability, right. So you get all of that. So for the security piece, it's great. For the availability piece, I never lose a file. It's really, really good, because if you just look at the math, the chances that somehow... You can basically lose 10 out of 20 nodes and still be able to recover your files. And all of our nodes are run by different people, different power supply. >> So let's take a step back. How many nodes are on the network now, you said? >> 150,000 now, run by 70,000 farmers, is what we call them. They're not miners, 'cause they're not just solving that problem, they're just producing something of value. 70,000 farmers, and then we have on the network right now, over 50 petabytes of data, which is a really large amount, and yet, we don't run a single data center. >> Have you guys raised any venture at all, or is it all ICO proceeds? >> There was a small seed round that was done, before the ICO craze. But other than that, it's all-- >> And how many people are working on the company? >> 25. >> So you guys are a classic startup. The working product, how does that look now? Is it on the blockchain, is it off the chain, how's it working, Bitcoin? >> So I've described to you what the product does. So far nothing I've described to you involves blockchain. The way the economics work is that as a user, somebody who wants to store on our network, we quote a price in dollars. You can either pay us in dollars or in the Storj token, and as a farmer, you get compensated with a Storj token. And that's done, of course, using blockchain we're actually part of Ethereum. >> Is that ERC-20 token? >> ERC-20 token, yeah. There are also interesting things that we are working on using blockchain for things like you just mentioned, data integrity, so I can make sure that if I'm doing a snapshot of a database, and I want to make sure that it's exactly what it is, nobody can tamper with it, et cetera, then that's a perfect use of blockchain. But using blockchain for the stuff I was talking about before, like figuring out where the shards are and making sure that they're uptime and reliable, that's actually stuff where blockchain isn't the best answer. >> Ben, tell us a little bit about the customers that you find there, 'cause storage administrators, that role's been changing a lot, but the typical storage administrator, if you tell them, "Oh yeah, I'm doing some distributed thing, "somewhere else, and paying in crypto-currency," they'd be like, are you kidding me? I want this thing that I can lock and hold and guard with a gun. >> This is like anything else, there's an adoption curve, and right now it's clearly very much early adopters. And actually similarly to Docker and similar to the cloud in general, it's developers who are leading the way. Developers are saying, oh, wow, I can write to the storage network in the same way that I would have written to S3, only it's cheaper, for many use cases, more performing, and not centralized, so I'm not trusting one cloud provider. So for certain use cases, this is fantastic. >> Are there certain cloud native apps that you're finding have strong affinity here? >> Yeah, so basically what we have affinity with right now, and let's be clear, this is early days. I wouldn't recommend that people store their most sensitive data on this, but-- >> Not Oracle certified yet, is what you're saying? >> We're not Oracle certified, no. (laughing) Basically anything involving a large file that you're not writing to very frequently, but you're reading a lot, or that's getting read by lots of people around the world, we're a really good solution. It's one of the things I think I mentioned to you. So we've got 150,000 nodes. They're located in I think it's now 180 countries, and all over the U.S. So if you want to get your data close to the edge, the people who are consuming your data are really close to the edge, this is actually really good. And because it's spread across so many, you get the benefit of parallelism, so it's super fast, in addition to being super safe and super secure. >> How does it work for the farmers? Because we have video files, so we would love to spread our video files on the Storj network. So let's just say... >> I'd do a special deal for you, too, you know. >> Of course, yeah, get a little token action going on both sides, Cube coins. But the availability thing is concerning. Whose computers is it being stored on? Is it extra capacity? Is it servers? Is it people's home computers? What's the, is it that kind of model? >> Sure, so basically yeah, we, just as Airbnb measures reputation, we measure reputation, too. And so if you don't have a good reputation, certain characteristics, we won't send data to you. What it basically means is you've got to have dedicated hardware and a dedicated connection. So we do have people who are running things in their home, but it's not a laptop, it's not on your phone. But if you have a disc drive that's connected with reasonably high capacity and reasonably well connected, then you'll establish good reputation. But what we are seeing is we are seeing a lot of universities, a lot of small businesses, some data center operators who have spare capacity or just want to use us as like, be both a farmer and a user. So backup and get stuff on their capacity as a good idea. And interestingly enough, we also are getting a lot of people who were Bitcoin miners and bought equipment, which is good quality equipment, but there's such an arms race in doing that. >> So they abandoned, because it was too hard for them to get coins. >> It's too hard to make money, right, and very expensive, specialized equipment, and in our case, basically general high quality equipment works well. >> What's the profit model? How do the farmers make money? Take our Cube videos, as an example, so I'm paying you guys, and you're distributing those tokens? >> You're paying us and you're paying us either in dollars or tokens. And then farmers get compensated in tokens. Right now, about 60 cents on every dollar goes to farmers. And farmers get more storage based off of their reputation. We charge people based on both how much you're storing as well as how much bandwidth egress that you're doing, and we compensate farmers exactly the same way. >> It's handled through a consensus protocol that you guys have? >> Yeah, yeah, so the payment and assessing reputation we actually use good distributed blockchain as well there, right, so you're not counting on Storj to be in the middle there. Now, with the remaining 40 cents, which I think is actually the really interesting part, we keep some of that, we put some back into the network, but what I'm really excited about is that this is now a way for us to economically empower demand partners as well. The first thing we announced was FileZilla, but we have lots of other open source projects waiting in the wings, and we're happy to share with them. So as opposed to centralized cloud, where it's really hard to make money as an open source company, we're not an open source project in our case, right? We're happy if you're sending us users and data, to give you a really meaningful percentage. >> Any kind of freemium model you guys are playing with? I can imagine this being pretty interesting, because S3 democratized and lowered the cost barrier, obviously with cloud. >> S3 has been great for many things. >> How low are you in terms of the disruption? You guys are probably going to have to come in and undercut S3, is that the strategy? Or is that the price value? >> I think what I learned from my time in storage, is price is important but you have to be really safe and available and reliable, 'cause people's data is really important. But we looked across a pretty broad set of use cases, in comparing us to the traditional cloud providers we're probably a third. And we could go lower. What I think is really interesting in our case is that the economics just work really well. So from our perspective, if you're a farmer, you've already got, it's spare capacity, you don't need any more electricity to run this thing, you've got bandwidth, right? You don't need to hire any more people. So it's almost pure margin for a farmer, which is great for them. And so we can give economic value to farmers, we can give economic value to our customers, we can give economic value to partners. >> Any kind of economic models you can share in terms of what someone would make? Let's just say that I had this big music library that's not being used anymore, and I had a-- >> Well, as a customer of course, if you've got data that you want to store on our network, you'll save a lot of money, and it's probably a third of what you might pay. >> But is there any kind of, if I'm a farmer, I want to join the network? >> But if you're a farmer. >> How much am I going to make? >> It really depends on how much you're storing and how good your connection is, but as a farmer, I think you can make decent money. This could probably be I don't know off the top of my head, $20, $30 a month per drive, which isn't bad, and certainly much easier than making money-- >> So it kind of depends like the Airbnb model, depends how well you're using-- >> How well you're used. So some people earn less, some people earn more. And again, for most of the farmers, this is pure margin. >> Great, we got a couple back to back rooms, Stu. We should get some drives up there and get on board. We could pay for the cameras. >> And look, I think for videos, you guys would actually be a perfect use case with a lot of the stuff that's going to be coming out later this year. You get both storage and CDN like things for free, in the sense that because-- >> I'm really glad you brought that up, 'cause I want to ask you about Videocoin, 'cause Halsey Minor has Videocoin, another ICO, he raised $50 million. We covered that on Silicon Angle. But he's trying to democratize Acromi. Is that similar to what you guys are doing? >> I guess you could say yeah, we're further democratizing object storage, democratizing S3, but I think we can also democratize Acromi, we can democratize Isilon, there's certain other really exciting things that are-- >> What other services, you mentioned CDN, so it's not just storing the information, but that global dispersion, what does that enable? >> It used to be that people had a really big difference between archival which is slow, hard to get at, and CDN, right? And but actually, given the way that we're doing this thing, we can be pretty seamless. Pay archival for stuff that's staying in archival, but go up market if you're going to be having a lot of people read it. >> So I got to ask you about the, obviously, security. You're looking at it for additional services around redundancy, I can see that being a nice headroom for you. On a personal note, you've been involved in a lot of industry companies that have done very well, entrepreneurial success. >> Ben: Why am I doing this? (laughing) >> I can tell you're having fun. How could you not have fun, it's a whole 'nother generation of innovation, disruption coming, a whole 'nother price point. So what's it like, are you having fun? And if you could talk to your 22-year-old self right now, 'cause I wish I was 22 right now in this market-- >> Are you saying I'm not 22? >> How do you explain this? And when you go to parties, even in the Valley, and people say, "Man, you're crazy, it's a fricken' "scam out there," how do you explain to 'em this revolution? Because this is like a special, unique wave. How would you talk about that? >> Actually I describe it the same way to people in the Valley the same way that I described at the beginning, which is that blockchain is bigger than cryptocurrency, and decentralized is much bigger than blockchain. And Storj is first and foremost decentralized. It's about decentralized computing, decentralized storage, supporting decentralized apps, keeping the internet from ending up in the hands of just three people, three companies, which I think is really important. But also I feel very good that, to the extent that Storj does touch on cryptocurrency, that we've done it the right way. We had the service working first before we did the token sale. We raised what now appears to be a modest amount in the token sale, tried to be very transparent and at the forefront. >> You probably could've gotten more if you wanted to. >> Probably, right? But we were trying to be forefront in terms of governance and transparency, and I think that it'll probably be a good thing, just as it was kind of a good thing that the bubble burst in the late '90s and you got rid of a lot of such not great companies and not such great operators. I think that the current corrections, or whatever, in the crypto market I think will-- >> Like pets.com is gone, but DogeCoin still exists. (laughing) >> So I'm sure that somebody has a crypto base pets.com or webvan lurking in the wings somewhere. Kodak just did it. >> I got to ask you, you're super smart. You went to some really good schools, I think Princeton, Harvard Business School. So you got a good education, so I got to get your take on the whole token economics vision. 'Cause this is, if you look at outside the tech trends, there's actually new economic models that are coming out. Have you looked at token economics? New liquidity on the one side, you've got sovereignty, you've got consensus. These are not just tech issues, these are society issues. What's your vision around that? How are you viewing it? What's the upside? How is this shaping the future? >> Yeah, I think if you're a token network, you sort of have to have some central bank chops as well, right? And we actually have a central banker. >> John: So you have a chief economic officer? >> So we don't, no, we have an advisor-- >> John: Public policy. >> I actually had a degree in public policy at one point. But we need to think about the token supply in the same way you'd think about the money supply. We're backed by something real, so it's sort of like having currencies backed by gold. We need to make sure that the market grows and the network grows. And my fundamental belief is that the more the network grows, the more people use it, the more value that we're able to provide, that'll be good for token economics in the long run. In the short run, though, what we've done, is again, we price based off of dollars, and we compensate farmers based off the token based off of the spot price. So for farmers, we've tried to remove any need to worry about volatility or things like that. >> So I want your reaction-- >> Or the price. >> I've said on The Cube multiple times that in the old days of venture startups, the CTO was everything. You had to have a great CTO or VP of engineering and great senior executive team on the entrepreneurial team. Now it's almost like the chief economic officer is a critical piece, 'cause you've got public policy intersecting with economics. You've got new kinds of math that's not technical algorithm but it's kind of business algorithms. >> It is, business algorithms. Just like any economy, the money supply matters. And people's trust in that money matters. And the supply matters. All that stuff like that, and stability matters. So I think absolutely this new breed of network based token companies will have to worry about that, and probably should think about a chief economics officer, but it doesn't mean that you don't also have to have a great CTO and great technology, 'cause that's how you make the network valuable and grow. And one of the reasons that gave me both excitement and comfort about going to Storj is that the economic model works, fundamentally, even if the crypto's not there. >> John: 'Cause technology is decentralized. >> Decentralized storage makes sense even if you're buying and selling it with dollars or pounds or rubles, or whatever. >> Ben, great to see you, thanks for coming in and sharing the Ben Golub School of Economics, Public Policy for Tokens. You can give a class at Stanford on that soon, although that's the competition's school. >> Maybe, yes. Slightly different. We still like them. >> Great to see you, congratulations. Storj, pronounced storage. Great, successful ICO, hot startup, really, an example of the infrastructure opportunities of a new decentralized infrastructure that can be and will soon, we think, it will be critical infrastructure in a whole new way. Great to see you. >> Ben: Really good to see you, great to be back with you. >> It's the Cube Conversation, I'm John Furrier, Stu Miniman, thanks for watching. (upbeat music)

>> Announcer: Live from Washington DC, it's CUBE Conversations with John Furrier. >> Well, welcome to a special CUBE conversation here at Amazon Web Services headquarters in public sector, in Washington DC, actually, in Arlington, Virginia. It's a CUBE coverage on the ground in Washington DC. Our next guest is Shannon Kellogg, who's the Director of AWS Public Policy in Americas, here, joining us. Thanks for spending the time with us. >> It's a pleasure to be here. >> So obviously, public policy is a big part of public sector, hence the success you guys have had. Amazon's had great success. I mean, you go back four years ago, the shock heard all around the cloud was the CIA deal. >> Shannon: Indeed. >> And since then, there's been this gestation period of innovation. You guys have been penetrating, doing a lot of hard work. I know how hard it is. And kind of knowing the DC culture, how hard was it, and hard is it for you guys now? Is it getting easier? I mean, policies, got a lot of education involved, a lot of moving parts. >> Yeah, well, I joined over five years ago. And when I joined, there was very little understanding that Amazon was even in the cloud computing business. And so we really had to start from scratch. And so it was just basic education and awareness work. And I wouldn't call that easy, but it certainly was in a different time where people were curious about Amazon, AWS, and cloud. What is cloud computing? The cloud computing directive of the Federal Government, Cloud First Policy, had just come out a year prior, and so there was a lot of curiosity. So people were willing to talk. People were curious, but they didn't really understand what cloud computing was. And again, they didn't even realize AWS was in that business. >> And back at that time, and I know you have a tech history over at EMC before and RSA. You know the tech game. You've seen many waves of >> Shannon: I have. >> innovation, and it's almost a time where you saw some interesting shadow IT developing. Shadow IT term referred to kind of a in-the-shadows experiment. You put your credit card down and get some Amazon, get some cloud, and test, kick the tires, if you will, kind of, without anyone seeing you, called shadow IT. That became a big part of the growth. How much shadow IT has been involved to kind of force Amazon to the table? Did that help? Was that a help-driver for you guys? Was it going on? >> Yeah. Well, it's interesting, because when you look back four or five years ago, there were a lot of first movers in departments and agencies, folks in little units that I had actually even never heard of in some of the big agencies, customers that I would speak to that were experimenting with AWS and commercial cloud. In those days, they were able to take out their credit card and experiment a little bit with it and discover what was possible. And we saw a lot of uptake in interest as a result of some of that experimentation. But really, things started to change in a big way when AWS won the contract to build the community cloud for the intelligence community. And following that win, and as that project was implemented, and in the six months to a year after that award, we saw a lot more interest by agencies to not just experiment, but to go bigger. >> I couldn't get Amazon to confirm. I've tried many times on the CUBE, Jassy and Teresa, to get them to confirm that that was certainly a shadow IT effort, that someone within the CIA came out of the woodwork and said, "Hold on IBM, we have an alternative." >> Yeah, well I can't-- >> (laughing) Conferment denied. I can't comment on that either, but I can tell you that it was a very open, competitive process that we won. And it was a very big deal for the community and a very big deal for us. And that's when we really started to see a number of other agencies and organizations, really, not just experiment with cloud, but how can we leverage this to get the same benefits that the intel community needs? >> And IBM didn't help either. They got cocky. They figured they're going to sue you guys and ended up amplifying it, where the judge actually said on the ruling, "Amazon is a better service." >> Shannon: Yeah. >> I mean, you couldn't get a better testimony. But let's talk about that move. >> There was a resounding public, or resounding legal opinion, and I would encourage your viewers who haven't read it to read it. >> It's well doc, but at SiliconANGLE. Search SiliconANGLE, AWS, IBM, CIA deal, you'll find it. But I think what's notable about that is it's kind of cocky, because the old way of doing things was schmooze, win the ivory tower, have that relationship, lean on that relationship. And the IT just, they were just like going through security at the airport, just whatever, right? >> Shannon: Right. They just checked the boxes. You got to win the C level. That now has changed, where not only at the buying and evaluation process bottoms up, there's a lot of consensus involved. There's now new stakeholders. >> You bet. >> Talk about that new dynamic, because this is a modern trend. It's not just send it to the department for a check box, it's truly agile. Talk about this new, modern procurement process that people are going through. >> You bet, and it's still evolving. But over the last few years, we've seen a lot of interest by federal organizations to shift from what is traditionally a capital expense model to an operational expense model. And you'll probably laugh at me that I actually even remember this. But in the 2015 budget, with the previous administration, President Obama's budget request in 2015, there was, actually, on page 41 of that budget, a line, or actually a paragraph, that talked about how the Federal Government would need to continue to move to commercial cloud services. And in the language, in the budget, it actually talked about the consumption model, the operational expense model versus the traditional capex model. >> Shannon, what is commercial cloud, because, I mean, again, back to the old days, kind of back in my days when I was growing with the industry, you had a federal division that managed all the government stuff, sometimes separate products, right, I mean, absolutely different, unique features >> Yeah, you bet. >> in the government. Now with the cloud, I'm I hearing that this is the same cloud that Amazon runs? Is it a different product. I know there's different private clouds. >> Certainly, our cloud >> But what is the commercial cloud? >> is one option. >> Explain what the commercial cloud is. >> Yeah, our cloud is one option in this area of commercial cloud services. And we think it's a great option. But if you look at the different types of solutions, NIST actually talked about this when they put out the definition on what cloud computing should be described as several years ago. I think the final definition came out in 2011. And at the time, they called public cloud, which we in federal agencies, now, really refer to as commercial cloud, as one of the deployment models. But it also is really emphasizing commercial solutions and commerciality, versus having an agency go out and try to build its own cloud, or to issue a special contract that is controlled by that agency, that does a traditional private-cloud type of build, like for example, California did with CalCloud several years ago. We're seeing more and more agencies move away from that model and into procuring-- >> Why is that? Why are they moving, costly? >> Well, because, yeah, it's-- >> Just like HP and everyone else backed out of the cloud, same reason? >> It's costly, and one thing, looking at CalCloud, and if you haven't sort of looked at what they did with their policy, in 2014 they issued a policy, California did, which basically created a preference for CalCloud. And by August of 2017, they moved away from that preference reversing the policy and then doing sort of a about-face and saying not only is there not a preference for CalCloud, this privately built cloud, anymore in California, but there's going to be a preference for commercial cloud services and leveraging commercial solutions and technologies. >> Is that, again, the same reasons why a lot of commercial vendors like HP, even VMware, and others who kind of backed out of the cloud. It's expensive, it's complicated, right? I mean, is that main driver, or is it of talent? I mean, why did CalCloud move from that to the (mumbles). >> Yeah, I mean, I obviously can't speak for what other >> Well generally speaking. >> companies have done, but I think, based on our observations at the federal level, at the state level, and even internationally, we're seeing more and more governments in their cloud policies focus on how to leverage commercial cloud services, versus build their own, or go out and spend a billion dollars in trying to build their own through a contractor or traditional contractor. >> I talked to Teresa Carlson. >> And by the way, just for the record, in California, it was IBM who actually ended up building CalCloud. >> Nice dig on IBM there, good one. >> So I just talked to Teresa Carlson, and she and I, we talked about the notion of commercializing ecosystem, to bring in tech in with government kind of the mash up or integration culturally among other things, technology. I had an interview with an executive of New Relic, one of Amazon's top customers. I think they were saying they were getting FedRAMP certified. But there's a variety of certifications that you guys offer, essentially, people in the ecosystem, non-governmental, but they can come in and provide solutions. Can you talk about that dynamic, because we're seeing that become a trend now, where folks in the Amazon, or in general tech ecosystems, that says, "Hey, you know what? "I can go in through Amazon and do some business "with the public sector." >> Sure. >> What do you guys offer? Is there a playbook? Is there a roadmap? Is there check boxes? What's the playbook? >> Well, first of all, if you don't, if your viewers don't know what FedRAMP is, it's a Federal Government security evaluation process for cloud computing providers and service providers who want to sell to the US Federal Government. And the framework itself was created on international security standards as well as existing, and evolving in some cases, NIST security standards. And so it's a common security framework that any company of any size can align to. And AWS, because we believe so strongly in security, and because we had a lot of first-mover customers in the Federal Government marketplace, we really invested in that process early. And as a result of that, we meet the FedRAMP requirements at the different security levels that exist. And we were one of the first providers to actually do that. And then partners started working with us and leveraging that. And not just-- >> So what does that mean to the partner? >> resellers or systems integrators. >> They piggyback on your certification, or they have to do some modifications? It's like the stamp of approval. You can't get into the party without it, right? >> Yeah, you have to have FedRAMP certification in order to provide certain types of services to the US government. A lot of agencies now require some type of FedRAMP certification to do business with them. It's very common now. >> Any other certifications that they need? >> Well, that's the most common one at the federal level. But there are some department-specific requirements too. So for example, when you look at the Defense Department, they've added additional requirements on top of FedRAMP. And providers like us have to go through those additional processes, and then again, if you're partnering with an AWS, and we've gone through that process, and we made the investments, and you have some software that's based on AWS, that's going to be favorable for you in order to sell to that market segment. >> Take a step back and zoom out, and talk about the big landscape in DC. Obviously, DC's the center of the action for policy and this, obviously, public sector all around the world, as well in the United States. What's the trend that you're seeing? I mean, obviously Amazon is kind of like its own black swan. If you think about it, lowering prices, increasing functionality on a daily basis is the business model of Amazon. They win on scale. Customers are happy with that, and government seems to be happy. Yet, the competitive landscape couldn't have been at an all-time high, certainly Oracle, IBM, Microsoft, the others are competing for the same dollars, potentially. So you have the old guard, as Andy Jassy would say, and you guys, self-described, new guard. What's the landscape look like? How are you guys competing? What observations can you share and the role of policy makers in the middle of it? Are they stuck between all this? >> Well, it's been quite a ride over the last seven or eight years. Again, going back to when the First Cloud Policy was issued by the Federal Government CIO at the time, Vivek Kundra. Very early days, they talked about each agency trying to move three applications to the cloud. And so we're in a much different time now. And there a lot of agencies who are going all in on cloud services. That's actually been really fast forward and emphasized even more over the last couple years, starting with the previous administration and the emphasis that they had. I talked about the 2015 budget, but we also saw a number of other policy initiatives in the previous administration during President Obama's eight years. And then you had the new administration come in and really emphasize this early too. And one of the cornerstone things that's happened by the new administration over the last year has been the development and then the release of the President's report on IT modernization. And they set up a new Office of American Innovation and a new tech council to advise on the development of that report. And they went out, the administration did, and got a lot of input from the industry. And then they came out with a final report of recommendations in December. And they're already moving to actually implement a number of those recommendations and pilot a number of recommendations in agencies. And they're really emphasizing shared services and commercial cloud services as a key part of that effort. And then in tandem with that, and this is probably going to shock you, but in tandem with that, Congress actually worked with the administration to also make a number of changes to law, including in December of 2017, a really important piece of legislation called, The Modernizing Government Technology Act. And that was added to the Defense Authorization Bill for 2018. You know in this town, that's often how legislation moves at the end of the year is through the Defense Authorization Bill. So that legislation was passed, and it really is focused on helping agencies in their IT modernization efforts move again from legacy IT systems to the cloud. And they're not doing that just because it lowers cost, and it's a good thing to do. They're actually doing that as part of a way to improve the Federal Government cyber security posture. And that's the last thing I'll talk about that's happened in the last year is I mentioned what the administration did about its IT Modernization Report. I mentioned also what Congress did with the Modernizing Government Technology Act. Well, there was also a new cyber security executive order that was issued during the year by the President that married those two things. And basically, it made very clear that there's very little possibility to actually improve the security of federal systems without moving forward with the IT modernization efforts and moving to cloud. >> And the cyber warfare we're living in it truly is a cyber war. This is not just hand-waving, IT modernization. It's beyond that, because it's critical infrastructure now being compromised. This is our security, right? It's the state of the security of our people. >> You bet, and quite frankly, we're seeing this trend internationally too. You see more and more governments making this link between IT modernization and improving the country's cyber security posture. We've seen that in the UK. We've seen that in Australia. >> It takes cyber war to fix IT. I mean, is that what we're coming to? Okay, final point is obviously IT modernization is key. I love that that's driving it. We need to go faster. Question for you, Cloud First, certainly a big, initial orientation from the government to go Cloud First. Question for you is do you see the expectations yet in the agencies and throughout public sector for cloud speed, meaning not only like speed in feeds, like moving to an agile outcome, faster delivery, under budget, on time, lower prices. Is that expectation now set, or is it still getting there? >> No, we believe it is being set. And if you look at developments over the last six months I mean, you now have the Department of Defense that has come out with changes to policy to move faster to the cloud. And if you look at the Secretary, I'm sorry, the Deputy Secretary of Defense's memorandum in September of last year, he talked a lot about leveraging cloud computing as part of a way to make improvements in the implementation of technology, such as artificial intelligence and machine learning. And in that memo they talked about that's a national security imperative to do that. And so they're seeing technology, not as the end result, but as a way to enable a lot of these developments and changes. And we've already seen many of those steps forward in the intelligence community. So it's very encouraging to us that we're also seeing now the Department of Defense move in this direction. >> So they're running towards the cloud. They're running towards AI. >> Shannon: They're trying to. >> They're going as fast as they can, because they need to. >> They're trying to. >> Final word on security. What do you hope to have happen in our government in America to really crack the code on cyber security and surveillance all these holes? Especially with IoT, their surface area couldn't be bigger. >> So before I answer that question, one thing I did want to say, because we were talking about the Department of Defense. And you had added a question in earlier about what some of the legacy proprietors may or may not be doing. Well, these two things are married. What we're seeing at the Department of Defense is that they really do want to move faster to the cloud. But you probably noticed in the press that there are many different legacy providers out there. And as our boss would say, Andy Jassy, a lot of the old-guard community, who want to try to slow that transition down. And so that is really something that's going on right now. There's a lot of effort out there to pursue the status quo, to continue to keep the lights on. And if you look at what amount of the federal budget that is being spent on keeping the lights on in IT, it's over 80% is what the number is commonly referred to. And so a lot of companies are making traditional companies, old-guard companies, as Andy Jassy would say, are making a lot of money following that same path. And you know what? The taxpayer can't afford that anymore. The mission owners can't afford that anymore. And so it's really time to move forward into the 21st century and leverage commercial cloud technology and some of these advanced capabilities, like artificial intelligence and machine learning. And then to answer your final question-- >> Hold on, on the DoD thing, because I did see that in the news. It's obviously clearly FUD, fear, uncertainty, and doubt, as they said, in the industry from the old guards to slow down the process. That's classic move, right? Hey, slow down. >> It is. >> We're going to lose this thing. If we don't put the brakes on-- >> It's a classic move that some companies have been practicing for a few decades. >> Decades, decades, we all know that, I mean, it's called Selling 101 when you want to secure the ivory tower. Okay, so papa, this is the tactic, and I want to get your opinion. This is a policy question. It's not in the best interest of the users, and the society, and the citizens to have a policy injection for political warfare on deal selling. So that's, essentially, what I see happening. >> Yeah, we agree. >> I want to get your comments on this, because it comes up to a very political topic, technically, multi-cloud. >> Shannon: Right. So the move is, whoa, you can't go to one cloud. We're putting all our eggs in one basket, so we have to spec it to be multi-cloud. That's the policy injection. What's the impact of that in your opinion? Does it matter? Does the government say, "Hey, we should do multi-cloud"? You actually want to have one cloud. That's what Andy Jassy >> Well, actually... >> wants, right? >> you know, that's not true. What I'll say, and take a step back here, is that what we want is what the customer wants. And a lot of companies are forgetting the customer in this debate about multi-cloud versus single cloud. >> So you're jump ball. Your philosophy is to say jump ball. >> We welcome open competition. >> So multi-cloud, >> We want to serve the customer. >> and single cloud. >> What happened with the intelligence community is they had an open competition for a single-cloud approach. One thing that's happening right now as part of this broader discussion is some of the old-guard companies are spreading a lot of misinformation about-- >> John: Like what? >> the different types of contracts, and so there's been a lot of misinformation about DoD trying to pursue a sole-source contract for this JEDI program that they're trying to do to implement cloud. And what DoD has said in the stories that I've read on the record is that they want to have an open competition. And whether or not they choose a single award, which is different than a sole source that's not competed, if they choose a single award that's competed like the intelligence community did, or they choose a multi-award, it's going to be their preference. And let me tell you something, the policy space, what we've heard consistently from members of Congress and other policy makers is they don't want to be in the business of telling the Department of Defense or any other federal agency, specifically, what they should do or shouldn't do in a technology procurement. What they want is an open competition. And I'll tell you on the record, we embrace an open competition, and that will serve the customers well. But don't tell the customer if you're an old-guard company what they should or shouldn't do. And don't ignore the customer. >> Well, I would, from just a personal standpoint, industry participant, I would say that that's going backwards. If you have the companies doing old-guard tactics injecting policy and FUD to slow a deal down just to save it, that's really bad, bad form. >> Yeah, it's- >> That's going backwards. >> It's bad policy, but it's also bad for the taxpayer, and it's bad for the mission owner. So let there be open competition. Let the customers, like DoD, make the decisions that they're going to make, which is going to be best for their mission. >> Well, Shannon, as Teresa, a basketball fan, would say, "Jump ball," make it fair. >> Let's do it. >> Let the chips fall where they may. >> Let's do it. >> All right. Open competition, that is Amazon's position here in DC. Policy, no problem, we can play that game, but it's all about the customers. Shannon, thanks for your insight and observations. >> You bet. >> Shannon Kellogg, who's in charge of policy at Americas for AWS. This is CUBE Conversations. I'm John Furrier, thanks for watching. (rhythmic electronic music)

>> Announcer: Live from the Washington D.C. It's the CUBE covering AWS Public Sector Summit 2017. Brought to you be Amazon Web Services and it's partner Ecosystem. >> Welcome back here on the CUBE as we continue our coverage of the AWS Public Sector Summit 2017. Along with John Furrier, I'm John Walls we're in the Walter E. Washington Convention Center. For the sixth show, of almost 10,000 attending. somewhere in that ball park. It's come along way in a very short period of time. AWS has a lot to feel good about. >> It's a good reinvent for Public Sector. It's huge. >> And not just to think about government. We think about education as well. We had a couple of segments about that. We are going to talk about government with our next guest. If we get a name wrong on this segment shame on us, John Stephenson with John Walls and John Furrier. John's a senior manage at Public Policy at AWS. John nice to have you with us we appreciate that. >> Thank you for having me. >> Thank you for your time. So your focus primarily state and local governments. What exactly as the conduit do you want to bring to their table from of AWS? >> Well I'm Senior Manager, of Public Policy for Amazon Web Services in the Eastern United States. I handle state and local government relations in the Eastern U.S. from Texas to Main and then South Florida. I help our business and also our partners in government to understand how public policy can enable cloud and modern technologies. It's a very exciting place to be because there's a lot going on in state and local government when it comes to IT modernization and cloud right now. >> I think about government too. There's that big umbrella we can put on (mumbles). It's public service. But federal government has a place and state and local. I think much more responsive, much more grass roots. So those applications are much more immediate. I would think. Does that come into play with you? That you need to be a little more nimble. Or you're helping your clients to be a litter more nimble or more agile? >> Absolutely, if you look at what state and local governments are doing. Essential services from delivering health care to taking out the trash, providing public safety, providing education it's handled at the state and local government. If you look at the number of times you touch government. It is state and local. Think about renewing a driver license. Think about paying a parking ticket. Think about getting a zoning permit for remodeling of your house. You're dealing with state and local government. The demands on state and local government are also higher. They're holding more data on citizens than the Federal government. They are undergoing massive population changes. It's either positive or negative. State and local governments which have budget constraints. Need to be more nimble, more innovative. They are natural early adopters and first movers of technology. If you look at some of the more exciting things about technology that are happening in the government space. I think it's happening at state and local government in the U.S. >> Smart cities by the way is the hottest trend. Intel one of the key sponsors of this show. We had two folks on here. AI is going to be a real nice gateway for some of these innovations on their side. They have 5G opportunities. They have transformation. Lot of technology going on under the covers, under the hood if you will. One of them is smart cities and that is something that is just mind blowing. Just from a technology stand point but even more mind blowing from a policy perspective. Who sets the rules? What side does the car run on? What digital services are the citizens going to get? Who pays for them? What does the government do? What does the private sector do? These are issues that need to be grappled with. Your thoughts on how you guys look at that? And how are your constituents engaging with that and thinking about it? >> I'm glad you mentioned smart cities because there's a lot of activity going on in that space. If you look at the internet of things technologies alone. One of the enablers of smart cities. As many as 53% of state and local government according to NASCIO are looking at these technologies or deploying them. It's great to see that because that will enable a lot of potential from smarter government services, better government services, improving service delivery and improving constituent fulfillment. Which resonates with us, as part of Amazon. We're all about our customer fulfillment and delighting our customer. >> Lower prices and ship things faster that's Bezos' ethos. That's Amazon's culture. >> Exactly. >> And you could deliver services any digital service. >> Everything we do starts with the customer and we work backwards. In the conversations I've had with policy makers in the state and local governments. They see smart cities as a way to do that. Everything from improving transportation in places like Columbus, Ohio. To improving connectivity and engagement with the internet in places Kansas City, Missouri. And new ways of delivering services in places like New York and Los Angeles. It's very exciting stuff. Policy makers are coming to us and others in the industry. What are the policies? What are the best practices that can enable these technologies? We've been working with them. Providing information on what we're seeing around the world. How open data can be made (mumbles). How security and compliance can be built into applications. And we're happy to provide that because we know from working in the cloud ourselves. The potential that's there for state and local government. >> You want to foster innovation but at the same time you don't want to create this restrictive environment. Or have legacy be the baggage that holds things back. In fact you look at some of the best smart cities implementation. It's Singapore. It's Dubai. It's areas all over the world. In some cases it didn't have real strong infrastructure. So now come back to your role. As you look at the U.S. which has great infrastructure. Except for broadband connectivity, we'd be faster. They have some pre-existing conditions. They're under pressure. The cloud is a prefect vehicle for them. Because they can come in with their existing stuff. Get apps and services online quicker. How are you dealing with the challenge of? OK, calm down we're not going to take over the world. No, skynet's not coming. You know terminator reference. That's a concern, privacy. Lot of in policy issues, to be dealt with. How do you handle those? >> I think with any policy issue. I've been in public policy for a while now. It really starts with education. Understanding in really simple layman's terms. What the cloud is. And what it is not. It is a very transformative technology. It is not an end all one size fits all technology. What we've done is help educate policy makers by understanding the potential of cloud. What it can do in terms of cost savings, improved security, and being more agile. And to tell that story, we don't use PowerPoints at Amazon. We're not coming in and giving PowerPoint presentations. >> Good ole flesh pounding, hand shakes, and hit the streets. >> We'll more importantly it's sharing the customer's stories We're talking with them about what's happening at the New York City Department of Transportation. We're talking with them about what's happening at the city of Los Angeles with their emergency operation center. About how cities are using cloud technologies to deliver far superior products and services faster. >> So what is New York doing and what is L.A. doing specifically? >> New York city they have their iRide application to help citizens get from one point to the other much more quickly and safely as part of their Vision Zero campaign. Anyone who's been in New York, and I've been in New York quite a few times. Knows that traffic and be a real pain getting from part of Manhattan to the other. So what iRide does, is it helps people navigate Manhattan and the other boroughs much more quickly and efficiently using all the modes of transportation available to them. The city of New York was able to deploy that much more quickly, to many more people. They're able to update it, keep it secure thanks to cloud technology offered by AWS. The city of Los Angeles. They face cyber attacks everyday. Then there are the huge cost of maintaining that security. But with cloud they're able to build out event management systems and integrate those with their Homeland Security technologies and practices. And to be able to do it for a fraction of the cost using traditional systems, traditional IT, and traditional practices. It's very exciting. Suddenly local government can move at the speed and agility of a startup. Which has made Amazon very innovative. Last year we launched over a thousand new services and features. Local governments are seeing that. They want to be more like us and others in the industry. That are using cloud to deliver new products and services. And be better at their job. >> And the education, I say it probably patience in the educational role. You think about just the civil liberties of the citizens. That's really job one. Because I think most people get spooked. Whoa all this surveillance. The thing about it, just watching Patriots Day with my family. You know the Boston bombing, Boston strong with Mark Wahlberg. These things actually happen all the time. And we take for granted the some of the things we have in the surveillance community for the kinds of data that's out there. The same time that's the balance. Can you bring me value with my liberties. It's the same compliance scheme. Same governance game. This is the public sector. >> Well, that's where I think cloud has a great story to tell With cloud you get the benefits of economies of scale. Of Amazon with security and also with privacy. We have multiple compliance frameworks. Everything from HIPPA, FERPA, CJIS, Criminal Justice Information Systems. We are zealous guardians of security and our customer's privacy. We don't look at data. We don't share data about with out our customer's permission. We have very strong safeguards. That's why if you look a the customer base of Amazon from banks to government agencies, health care companies. Even companies like Netflix and you would think they're a competitor of ours. They're running their IT in AWS. They trust us even though with Amazon video and Amazon prime. You would think they're a competitor. But they've put that level of trust in us and our systems and our practices that they can put their data there. And we're hearing it from customer after customer. That they feel more safer and more secure with their data in the cloud offered by AWS. And we've shared that with government officials. And they take great comfort in those statements. >> You hit on something earlier. When you said that state governments and local governments have more data at their disposal than the federal government has about their consumers. Because of that, how much higher do find their concerns to be, in terms of cyber security, in terms of hack proof secured networks and systems as opposed to what might happen at the federal level. Cause we think federal. We think big. About what happened with the U.S. government's payment systems last year OPM. State and local they've got a lot more data they're protecting >> I've had a great opportunity in my current job to talk with a lot of IT officials and policy makers in the state. And, often times a meeting will start. And they'll say I've read about this. I've heard about this. And we're often able to say that's not an issue with the cloud offered the AWS. Or that's something we've already addressed through our security and compliance frame works. For example, I was in one meeting and a state policy maker asked me, well what do you do about HIPPA compliance. We have HIPPA compliance in AWS. And then he tried to ask questions, well what about this, what about that. And each time our team was able to tell the state policy maker. We meet that. We exceed that. We actually help write the standard for that compliance frame work. What we've been able to show that policy maker and others. The cloud just offers a far superior security posture than what they can do on their own. It's taken some time because the cloud is new. And as we like to say, it's still day one in this field. But we are very confident as word gets out. More and more people will be trusting particularly in state government their data to the cloud. Because of the superiority it offers on so many different levels. >> Well certainly the words getting out. This event here is just as big as it's ever been (mumbles). Use to be a little summit, now it's grown. There's a lot of interest. >> It's very exciting for me. I've been to reinvent now twice. And this is just so delightful to see so many people from government from the U.S. from internationally here to learn about the cloud share their stories. It's really inspirational to see what's possible. >> That's a testament to Teresa Carlson. Who was just years ago knocking on doors. That was before cloud was cloud. Now it's just come a long way. Congratulations to the whole team. >> Thank you. It's really to delightful to see. And I can't wait to see what's in store for next year and after that. >> We still got a little bit here to go John Don't kick us out. John Stephenson, Public Policy at AWS. Thanks for being with us we appreciate that. >> Thank you. >> Thank you. With John Furrier, I'm John Walls and we'll be back with more here on the CUBE from Washington D.C. right after this. (upbeat music)