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Is the Cloud Recession-Proof?
- pram 6y agoDefinitely not. My company has been drastically scaling back our AWS spend and I mean about a $10m+ a month reduction. I guarantee we're not alone. All the gee-whiz resume-driven-development type project infrastructure was the first to go lol.
- deleted 6y ago[deleted]
- jarym 6y agoA $10m/month reduction is quite significant. Question is, was your company spending $10m/month extra unnecessarily or have they had to cut down and go without important things in getting this kind of reduction?
- grey-area 6y agoA reduction in customer numbers means a reduction in the resources required. Many businesses associated with outdoor activities, sports, travel etc etc will be seeing less traffic at the moment. Many business are pretty much closed. This will then severely impact other businesses which sell to those businesses, and so on, all the way up the chain to advertising and cloud providers.
- JMTQp8lwXL 6y agoThe Ubers and Lyft's save by committing to a certain level of spend. They have paid -- might as well use the resources, anyways -- unless they've since negotiated with Amazon.
- cunac 6y agohaving a hard time to see how you scale down 120 mil a year. How much you spend yearly now
- pram 6y agoIt’s probably not for the entire year, a lot of it is just various clusters being scaled back. That said some of the stuff has been moved to colo hardware, and some of it is probably just gone forever.
- itwy 6y agoThe guy is lying, obviously.
- deleted 6y ago[deleted]
- tjr225 6y agoMaybe, maybe not. But I think I agree with you- 10m/m is a comically large number(I wonder how many companies spend even 1/100th of that a month on cloud compute?) and I have no reason to believe this person so why would I?
- pram 6y agoCorrect there is no reason to believe me. However for context and perspective our quarterly revenue is usually around $3 billion. $10 million is not comically large. I’m not talking about a startup. hth
- deleted 6y ago[deleted]
- cco 6y agoI'm shocked that some middle manager with half a technical head on their shoulders didn't use this as a VP play before this; surely, "I saved the company 120m a year with no downstream consequences to yada yada" would have been worth it for someone somewhere to climb the ladder.
- markvdb 6y ago
- EmielMols 6y agoFor those wondering as well, at 10b quarterly revenue, 10m monthly is ~.3% of all AWS revenue.
- jrockway 6y agoIt seems likely to me that a recession or pandemic affects more than just the OP's business, so while that one customer is probably meaningless to AWS, the thought process that led to scaling back spending could be meaningful.
- throwawayoverhe 6y agoInterestingly, I had the opposite takeaway. 0.3% of monthly revenue from a single customer's reduced spending only a couple months in to a multi-year recession is pretty alarming. Makes me wonder if OP's company is particularly exposed to retail, travel, or another sector severely impacted by the first order effects of the virus.
- code_duck 6y agoThat sounds like a lot to me for just one customer. But in the absence of much more data about AWS customers and revenue, it's hard to draw any meaningful conclusions.
- unfunco 6y agoAnd here I was pretty proud of myself for reducing our monthly bill from $5K a month to $2K… we have some basic sports data APIs that are hardly being used since there's no live sport being played, so I've removed most of our redundancy for the time being.
- syshum 6y ago"Cloud Scale" always promotes that you can scale up easily, but that also means you can scale down easily
- otabdeveloper4 6y agoWell, that's the marketing story, at least. In my reality, a large part of my programmers' effort is spent battling various "capacity exceeded" AWS errors.
- echelon 6y agoIf you had to do it all over again, would you still choose AWS? Or would you go with another cloud, or perhaps even non-managed bare metal?
- wskinner 6y agoIt's easy to accidentally waste a lot of money on AWS. My company cut our costs from ~20k/month to ~6.5k/month with no degradation of UX or dev velocity. It was all due to unnecessary redundant builds and integration tests and lingering unused resources. We used the CloudForecast service to identify and track costs (https://cloudforecast.io/ https://cloudforecast.io/). An underrated side effect of this service is that making costs visible to the engineers incurring the costs can encourage them to spend less.
- ashtonkem 6y agoMy team reprioritized efficiency over features during the recession, trimming a large amount of unnecessary AWS spend that wasn’t as pressing when the economy was performing well. That specific spend will never come back to AWS, because it was always unnecessary.
- cglace 6y agoI’m sure new unnecessary spending will creep in as time goes on.
- jlg23 6y agoPretty sure a typo and the million wanted to be a kilo? $120m/year for apparently unnecessary IT capacity would be hard to hide even in government contracts...
- chii 6y ago$120m is not ridiculous for a medium to large enterprise. For an engineering team of ~1000, just the build servers will cost about $1-5m a month (depending on what's being done there).
- chickenpotpie 6y ago$1000+/month/per engineer sounds way too high.
- jgalt212 6y agoseriously, that's a very beefy server per engineer, just in cloud resources. not including what they use to do their day to day work. NFW would I allocate such a spends per engineer--maybe for beefy projects/groups, but not for the org as a whole.
- zeckalpha 6y agoDepends on how many engineers you have.
- freepor 6y agoIt’s not just costs incurred by engineers, it’s costs incurred by users. If you’re providing file storage as part of your app, then for every engineer with a dev environment in the cloud, 1000 users could be uploading gigabyte files into your S3 bucket.
- nucleardog 6y agoThat seems... excessive. Let's say we pair engineers up just to make my math a little easier here. One engineer's allotment goes to compute resources, another goes to storage. At the low end, that's a 32 core/128GB RAM build server with 10TB of storage per pair. At the high end, depending which way you spec that out, that's 96 core/385GB RAM with 50TB per pair. What the hell are you guys building?!
- gameswithgo 6y agoWe have had to scale up our AWS spend! And any gee-whiz solutions to improving efficiency and scalability are very welcome right now.
- risyachka 6y agoAt the same time, many entertainment companies are scaling like crazy, spending magnitudes more on clouds.
- appwiz 6y agotldr from the article: possibly, I don’t know.
- mbalex99 6y agoThe cloud will not be recession proof but when everything falls it’ll be less likely to fall as much as other industries or sectors.
- mjevans 6y agoMy own opinion is that "The Cloud" will fail only if things get _really_ bad. Many who are currently laid off may be getting to that point; but for the cloud to actually fail it has to be more than just some customers. It's got to be businesses and power users. Given how power users are likely to be "Essential", and how businesses might scale back but otherwise avoid major changes, those demographics will only pull out past a different inflection point. It will take things being dire on a wide scale; whole companies and industries failing. When that happens society as a whole can be seen as failing. If we do ever get to the point that "cloud fails" we should really hope for a new new deal.
- jhwang5 6y agoYou will get that answer in Amazon, Google, and Microsoft's Q2 earnings. I can't wait myself.
- MattGaiser 6y agoThe cloud is this recession proof because this recession is also a people retreat to their homes recession.
- jjeaff 6y agoMaybe. But that's assuming people will use more cloud services at home than they and their companies do when working at full capacity. I was thinking that we were going to start having blackouts due to everyone being at home during the day running their A/C, until I realized that countless businesses are now not running their A/C since no one is in the office/restaurant/mall.
- JMTQp8lwXL 6y agoIn what recession do people not retreat to their homes? Recessions are usually associated with higher levels of unemployment, presumably with that extra time spent at the home (as opposed to going out, and spending money).
- lallysingh 6y agoThey weren't mandated to stay at home by their governors before. It's quite different.
- cachestash 6y agoThe lockdown will in now way outlast or run any where near as long as the recessions we have coming ahead.
- moooo99 6y agoStay at home is a short term change in the behavior. But people losing their jobs and changing their spending habits will have long term effects as well.
- scarface74 6y agoIt depends on how many of the cloud providers customers are venture backed unprofitable startups as opposed to major corporations. I suspect that there are relatively few major corporations that would trust GCP, many who would trust Azure and AWS.
- tanilama 6y agoI would say probably. It is like electricity or water. Yes unnecessary spending will be curbed, but surge in other fronts from the system will compensate that. Overall, it is hard to imagine that Cloud business will not be hurt, but it will have some resilience to battle it.
- jjeaff 6y agoFor the big 3 cloud providers, even if their cloud did contract significantly, they are all poised to earn more on the other parts of their business to make up for it.
- 9nGQluzmnq3M 6y agoAmazon as a retailer, sure, but why would this be true for Microsoft (software licenses) or Google (ads)?
- tanilama 6y agoLest not Google. I can't think of how Google can benefit itself from the COVID situation
- tonyedgecombe 6y agoAdvertising spend is usually one of the first things to go in a recession. I expect both Google and Facebook to see revenues fall.
- jjeaff 6y agoMicrosoft is heavily invested in software that helps with remote work like office 360 and Microsoft teams. Google is getting more traffic than ever I'm sure with people stuck at home and looking to buy or do things online. All of which are advertising their services in Google.
- kortilla 6y ago
- blackrock 6y agoThe cloud appears to be a short term gain to achieve operational readiness and efficiency, but it becomes a long term loss in terms of ongoing operational costs.
- scarface74 6y agoTell that to Netflix.....
- dannyw 6y agoNetflix's CDN doesn't run on AWS.
- scarface74 6y agoRight because Netflix chose not to use all of the servers that AWS has colocated with ISPs....
- cachestash 6y ago> it becomes a long term loss in terms of ongoing operational costs. Based on what, that sounds like something you have just pulled out of the air.
- dannyw 6y agoAWS bandwidth costs, even with their volume pricing tiers, are >10x as much as you'd pay than if you'd bought it directly. On a small enough scale, it doesn't matter so much. When you're paying millions a month, it matters a huge deal. Even on a micro scale: * Vultr, DigitalOcean are 2-4x cheaper than AWS (and they are established companies with a track record of reliability, as well as 20+ locations around the world) * Even AWS offers "Lightsail" which are significantly discounted VPSes with included bandwidth that costs more than the Lightsail price! Their ToS prevents you from using it as proxies... lol. * Want to save money on S3? Get some colo space, buy some Enterprise HDDs and set it up on RAID, and your opex is going to be 5-10% the cost of S3. Or SSDs if your access patterns require it. Set up some SMART-based email alerts and an offsite backup procedure, and it's absolutely reliable enough for the vast majority of business use cases. P.S. even S3 silently loses files... * Using CloudFront? It might be easy and integrated, but it's absolutely not going to be the cheapest or best value. It's really marked up, heavily. Spend a few hours talking to leading competitors and you'll get a quote for half your CloudFront bill, if not less; often for a better CDN. * Trying AWS Rekognition, or other ML-as-a-service products? Hire some data science intern and they can copy/paste the leading open source project from GitHub, train it on your data, and you'll quite possibly get better results than generic ML solutions... for as low as 1/100th the cost. (Real example). Yes, you gotta maintain it, but I find that people generally think maintenance is a bigger monster than it actually is. AWS has huge profit margins: where do you think it comes from? Hint: it makes it from you.
- nojito 6y agoYup. The way cloud sales works makes it seem almost impossible to justify restructuring your infrastructure to your management. It's a genius sales strategy.
- yipbub 6y agoCan you explain how that works please?
- carlio 6y agoThe short version is lockin. Unless you get very careful ops engineers making it truly cloud-agnostic, you can't even move from AWS to GCP without a huge amount of overhead. I'm a contractor and several of the companies I've worked with recently have almost hard-coded their services to expect certain things available to them on GCP or AWS that aren't as easily available on the other. You can argue that they should use 12facter and real DevOps and portability and so on but that's just not what people are actually doing so they've locked themselves in and for companies that are struggling to pay their hosting bill already, saying "We need 3 months of 6 developers' time to move" isn't going to go down well.
- scarface74 6y agoNo matter how careful you are to avoid lock-in, infrastructure has weight. You have data, network infrastructure, security audits, IAM permissions, Infrastructure as code (no Terraform is not a magic bullet), training, DNS entries etc. I wonder how many people who think they have a large “cloud agnostic” infrastructure have actually sat down with project managers and come up with a project plan and cost analysis of a large migration. I have witnessed how much it costs to do just a Workday migration.
- cachestash 6y agoThis is why we choose to sit everything on top of OpenShift, we get Red Hat support 24/7 to run it and if we needed to migrate to a different provider its far less painful as OpenShift abtracts the cloud providers API's away from us. The only real changes we need to make our admin based. Technical changes are very minimal.
- CaptArmchair 6y agoThe "cloud" has always held a fluid definition. If you ask someone "what's the cloud?" you'll get different answers depending on who they are. So, just being a generic term makes it to give this a clear "yes" or "no" answer. What should be clear is that anything denoted by "cloud" quite literally comes down to leveraging computing power provided by someone else in one arrangement or another. Anyone providing or relying on a "cloud-based" service is directly part of a marketplace and it's innate dynamics which includes recessions and the complex fashion in which those play out. While it's highly unlikely to see Amazon shutter AWS overnight because demand implodes entirely, I wouldn't be surprised to see changes in their pricing or offering to offset macro-economic effects in the long term. The other side of the spectrum would be specific niches disappearing. For instance, small companies that leverage cloud infrastructure and resell hosting as an offering to small businesses. Many of them might find themselves out of business if their customer portfolio consisted of recession sensitive businesses as well.
- Hokusai 6y agoRight now a more important question is how fast is the Cloud growing? Will it outgrowth the recession? The Cloud is still growing as many businesses are still moving towards it. If the natural growth of the Cloud is bigger than how much the economy shrinks then the growth will still be positive or flat. I work for a tech company in this situation. It has grown a lot the past years and was expected a lot of growth in 2020. Now the expectations are more close to a flat growth with heavy losses in some quarters and growth in others. It is a similar case to the Cannabis industry. It may shrink from the reduction in economy, but still grow to the end of the year as it is just starting its growth path.
- jhwang5 6y agoI think growth of cloud business - net / net - will decrease in 2020. 1) The basket of customers who may do a big Cloud migration may shy away from big CAPEX projects (unless it's a very low hanging fruit that saves money). 2) It's not completely obvious whether cloud saves money, it really depends on the customer case by case. 3) The big sales pitch for cloud migration was so it can add features faster. Adding new features isn't on top of people's minds right now 4) Existing cloud customer will find ways to optimize their cloud spend.
- simonebrunozzi 6y agoCloud providers are not recession proof; they would have a hard time collecting money if most other businesses are doing badly. Chapter 11, and voilà, AWS needs to stay in line with countless creditors and get a tiny fraction of what the customer owes them.
- hnarn 6y agoThe cloud is the opposite of recession proof. Why do you use the cloud in the first place? Flexibility, scale, ease of operations. What are you gonna do with your servers during a recession, put them on Craigslist? Are you gonna put your entire datacenter on there too? The same mechanic that makes the cloud attractive in the first place is what will bring the hammer down in a serious recession. Companies will turn every stone to use less capacity and save money, and they will easily be able to do it.
- 9nGQluzmnq3M 6y agoOn-prem servers don't run themselves: there's hardware maintenance, depreciation, security, networking, license renewals etc etc. The typical customer I see who's moving from on-prem to cloud has a clear trigger/deadline in the form of hardware reaching EOL or licenses being up for renewal, and these aren't going away with COVID.
- toomuchtodo 6y agoOn prem equipment can be depreciated, and you can drag out the useful life of the equipment you own if necessary. Cloud opex evaporates each month, never to be seen again. CTOs/CIOs call the shots when times are good, CFOs when times get lean.
- W-Stool 6y agoI'm going to use that in my daily conversations if that's OK. Truer words have never been spoken.
- reilly3000 6y agoThere are a whole love of reservations on instances and lock-in to databases, serverless, networking infrastructure, etc. Its hard to leave.
- hnarn 6y agoNobody mentioned leaving. It's about the ease of scaling down operations and spending less money, compared to an on-prem alternative.
- cosmodisk 6y agoShort term winner in this game will be Salesforce-most of their stuff is on 12 month or 3 year agreements,so it will take time to propagate.
- deleted 6y ago[deleted]
- remus 6y agoI wonder with contracts like that whether the short term gains from having people tied in to contracts also has some longer term negative consequences? Fortunately I've not had to work with salesforce before, but if Id just signed a big contract with them on the expectation of a growing business and then they were inflexible and enforced the contract to the letter while the rest of the business suffered then it'd leave a bit of a sour taste. Having said that, I guess if you've got your shit together you'd write clauses in to the contract to protect you from stuff like that e.g. early termination with a bit of a fee.
- redwood 6y agoWhat everyone is missing here is that cloud is a secular growth trend. It's not that it's recession proof but rather that it will be growing less fast in a down economy but still growing.
- phinnaeus 6y ago> If you don’t find this analysis unsatisfying, you are not alone. I’m not either. What?
- dnautics 6y agoBefore investing in equinix keep in mind it is an reit and operates under different rules (I think; someone should double check me).
- irjustin 6y agoIs anything 'recession proof', 'crash proof'? I dislike articles like this because nothing is "proof/immune" if the hurt/pain is strong enough. I 100% believe that many cloud companies are recession resistant, but it really depends what market forces that recession is driven by. If this was 2008 crash again, we'd say all real estate cloud companies were not recession proof.
- JackPoach 6y agoDifferent industries are affected by recession in different ways. Generally speaking, recession proof industries are affected much less than the general economy. Some examples of recession-proof industries include grocery stores, alcohol manufacturers, gas stations (funny in today's reality), some entertainment segments (movie making and music business), national defense. Generally speaking, if it's a necessity (food) - it's considered to be much more recession proof than discretionary spending industries. IT or cloud are two general terms but parts of them can definitely grow during recession.
- nitwit005 6y agoI wouldn't count on even supposed essentials like food being all that resistant. It used to be that people couldn't cut their food spending significantly because it was mostly the basics of bread or rice to survive. Those days are gone across much of the world. I could cut my food spending to a fairly small fraction of what I am now if I truly needed to.
- JackPoach 6y agoThere's a big difference between what you CAN and what you WILL cut. Alcohol and tobacco aren't necessary to survive. But alcohol consumption is some countries have actually gone UP during the lock down. Not sure about cigarettes, didn't see any stats. We'll see what happens to the food industry. Milk consumption is WAY down, because up to 50% of milk products were sold through restaurants. But wheat and rice producers may not be negatively affected or may even gain on the recession. Think about this in the following terms. Yes, you can cut your food BUDGET by 30% and survive. But you won't be able to cut your CALORY intake by 30% without starving.
- tedk-42 6y agoonly scrubs call it 'the cloud' it's about as recession proof as it is idiot proof. As long as people are around, I'm sure businesses will bounce back and overtime, things will begin to return to normal.
- bryanrasmussen 6y agoIs anything recession proof? I remember a blog post, I think from Tim Bray, about 15 years ago or so arguing that the people in IT who had great careers went into government during recessions or down periods and out of government during boom times to work on the things that they had specified during the down period. So maybe Government is recession proof. Seems about right.