Why cloud is the best defense against AWS

Amazon CTO Werner Vogels once famously said the company is "in the business of pain management for enterprises." That broad mission has given AWS ample excuse to tackle everything from data warehousing to storage to email services. In the process, it has also given plenty of startups angst over how to compete.

Intriguingly, some of the companies most threatened by AWS's cloud services have found the key to competing and, yes, beating AWS: They're fighting cloud with cloud.

 It's not about a license

It's become fashionable for open source companies to introduce proprietary licenses as a way to ward off AWS. Most recently, CockroachDB introduced a new license that keeps its code to everyone except those that want to "offer a commercial version of CockroachDB as a service without buying a license."

Or, as CockroachDB co-founder Spencer Kimball put it, "We're basically putting a kind of patent protection against Amazon-like behavior." They're also making their code expressly not open source. Hurray for progress!

To this defensive posturing, VM (Vicky) Brasseur offers a sharp response: "These projects are not being relicensed to protect them from Amazon. Claiming that they are is at best naive and at worst wilfully lying. These companies are relicensing projects to cover for the fact that they are ignorant of how to run a successful business."

And yet a few, like MongoDB and Elastic, absolutely do know how to run a successful business. Both companies keep seeing their stocks soar with positive earnings. What's their secret?

It's called cloud.
Fight cloud with cloud

Asked about the difficulty of fighting AWS, MongoDB CEO Dev Ittycheria was sanguine:

    We see no impact.... In fact, I think it's frankly raised MongoDB's awareness….We feel very confident about our ability to go head-to-head with any other alternative out there. And so, we think that [AWS' introduction of a MongoDB-compatible DocumentDB service] actually has been great for awareness and great for customer education and we see no impact on a negative basis whatsoever.

How's that? "No impact on a negative basis whatsoever"? It helps that for the last few quarters the percentage of MongoDB's cloud revenue keeps climbing, and most recently saw revenue growth of its Atlas cloud service top 340%. From 0% cloud revenue to 35% today, MongoDB has established the game plan for taking care of customers while holding off would-be competitors. As mentioned in MongoDB's latest earnings call, the company now releases new functionality first on Atlas and later to the on-premises product.

MongoDB, in short, is becoming cloud-first.

Or take Elastic, a company with an even more direct competition from AWS. AWS, long criticized for not being friendly to open source, actually has sought to out-open the open source Elastic by releasing the Open Distro for Elasticsearch to combat what it perceived as "significant intermingling of proprietary code into the [open source Elasticsearch] code base."

Elastic isn't quite as far along in its cloud journey as MongoDB, with 16.5% of its revenue derived from its cloud business. That percentage, however, roughly corresponds to where MongoDB was just a year ago in its own cloud business. While Elastic CFO Jansen Moorjani was quick to declare Elastic "agnostic to customer preferences on how to purchase our subscriptions" on the company's most recent earnings call, he also acknowledged the cloud business is expected to keep expanding as a percentage of revenue.

And why? Well, partly because it makes good business sense, but that "business sense" has much more to do with what customers want to buy than it does with any anti-AWS pressure. If AWS is a threat, it's simply because AWS knows how to deliver software services better than the companies hoping to profit from "their" open source software. For companies like MongoDB and Elastic, they've recognized that cloud is an opportunity to better serve customers. That superior customer experience is what is protecting them from AWS, and not some new license gymnastics routine