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The biggest threat to DigitalOcean is that AWS, Google, and Microsoft are all going vertical by designing and manufacturing their own chips. Over times they'll

by emgo 6y ago

The biggest threat to DigitalOcean is that AWS, Google, and Microsoft are all going vertical by designing and manufacturing their own chips. Over times they'll be able to get hardware for cheaper, and also more specialized hardware that uses less power. DigitalOcean will have to buy CPUs from Intel or Nvidia/ARM at a higher cost, and eventually maybe even from AWS or Microsoft, essentially giving money to their competition. If DigitalOcean doesn't get into semiconductors quickly, the only two logical outcomes are to either go bust, or to be acquired by a major cloud provider as a low-cost branch, like airlines do.

natchy 6y ago
> the only two logical outcomes are to either go bust, or to be acquired by a major cloud provider Or acquired by a chip maker, like Intel.
libria 6y ago
> AWS, Google, and Microsoft are all going vertical by designing and manufacturing their own chips What are the GCP and Azure equivalents of AWS Nitro?
- roland35 6y ago
  Here is an article about Azure at least: https://www.theverge.com/2020/12/18/22189450/microsoft-arm-processors-chips-servers-surface-report https://www.theverge.com/2020/12/18/22189450/microsoft-arm-p... “Because silicon is a foundational building block for technology, we’re continuing to invest in our own capabilities in areas like design, manufacturing and tools, while also fostering and strengthening partnerships with a wide range of chip providers,” says Microsoft’s communications chief Frank Shaw.
- mywittyname 6y ago
  For GCP, it depends. GCP doesn't have a Nitro competitor, but they offer Tensor Processing Units (TPUs). TPUs are more of a competitor to nVidia chips, but they are still custom silicon in the sense of the GP comment. GCP, AWS, and Azure seem to all be diverging in their specialization. GCP is focusing more on AI/ML/Big Data offerings while AWS is more security-aware, and Azure is more hybrid-cloud focused.
  - robertlagrant 6y ago
    GCP feels the most R&Dish, with the K8s and ML innovations. AWS seems to just be pushing on every front very well. Azure feels as though it's catching up, but a bit more sales led/engineering later than the others.
jmull 6y ago
I think there's a lot of doubt whether, in the long run, doing your own hardware makes sense for a cloud provider. If you work yourself into a performance dead-end, you can spend billions and end up with a chip that isn't particularly competitive. Whereas if your supplier does that, you can switch suppliers. You could spend $X billion, end up with a chip that isn't particularly competitive and just have to eat those billions. You bring up airlines... airlines don't build their own airplanes.
- mywittyname 6y ago
  Plus you have to provide most, or maybe all, of the support for software. Not just making compilers and related dev tools, but also building and testing of pre-compiled binaries for popular OSS. That's fine for a few major pieces of OSS, and for internal, cloud-only software (Redshift, BigQuery), but I don't think that concept scales well, or is particularly quick to adapt to market shifts.
  - mritchie712 6y ago
    Also, to pile on, for any company that runs a real sales process, Redshift and BigQuery are losing to Snowflake. So the argument for custom chips doesn't seem that compelling.
- veltas 6y ago
  Although the difference with airlines is nobody is pooling the wealth of the world into airlines, investors think tech is going to take over everything. Your cloud providers are being valued like they are going to either run the world at some point or get some compensation for being dismantled by international policy. And when your investors think this way, and you make as much money as these companies do, you might as well make your own chips.
- tekno45 6y ago
  All the cloud providers also USE their huge infrastructure for other purposes as well. So when they do hit, it has a big effect. make a chip 2% more efficient in your public cloud AND your private cloud, that is also generating money? You've got BIG savings.
dusing 6y ago
Interesting theory, maybe DO should partner with Apple.
- xuki 6y ago
  Assuming that Apple want to sell their chip to you. And that’s almost certainly a no.
sabalaba 6y ago
> the only two logical outcomes are to either go bust, or to be acquired by a major cloud provider Or just continue to build a profitable, cash flow positive business that continues to grow for years and years to come. Business outcomes are often not binary.

by emgo 6y ago

natchy 6y ago

> the only two logical outcomes are to either go bust, or to be acquired by a major cloud provider Or acquired by a chip maker, like Intel.

libria 6y ago

> AWS, Google, and Microsoft are all going vertical by designing and manufacturing their own chips What are the GCP and Azure equivalents of AWS Nitro?

roland35 6y ago
Here is an article about Azure at least: https://www.theverge.com/2020/12/18/22189450/microsoft-arm-processors-chips-servers-surface-report https://www.theverge.com/2020/12/18/22189450/microsoft-arm-p... “Because silicon is a foundational building block for technology, we’re continuing to invest in our own capabilities in areas like design, manufacturing and tools, while also fostering and strengthening partnerships with a wide range of chip providers,” says Microsoft’s communications chief Frank Shaw.
mywittyname 6y ago
For GCP, it depends. GCP doesn't have a Nitro competitor, but they offer Tensor Processing Units (TPUs). TPUs are more of a competitor to nVidia chips, but they are still custom silicon in the sense of the GP comment. GCP, AWS, and Azure seem to all be diverging in their specialization. GCP is focusing more on AI/ML/Big Data offerings while AWS is more security-aware, and Azure is more hybrid-cloud focused.
- robertlagrant 6y ago
  GCP feels the most R&Dish, with the K8s and ML innovations. AWS seems to just be pushing on every front very well. Azure feels as though it's catching up, but a bit more sales led/engineering later than the others.

jmull 6y ago

I think there's a lot of doubt whether, in the long run, doing your own hardware makes sense for a cloud provider. If you work yourself into a performance dead-end, you can spend billions and end up with a chip that isn't particularly competitive. Whereas if your supplier does that, you can switch suppliers. You could spend $X billion, end up with a chip that isn't particularly competitive and just have to eat those billions. You bring up airlines... airlines don't build their own airplanes.

mywittyname 6y ago
Plus you have to provide most, or maybe all, of the support for software. Not just making compilers and related dev tools, but also building and testing of pre-compiled binaries for popular OSS. That's fine for a few major pieces of OSS, and for internal, cloud-only software (Redshift, BigQuery), but I don't think that concept scales well, or is particularly quick to adapt to market shifts.
- mritchie712 6y ago
  Also, to pile on, for any company that runs a real sales process, Redshift and BigQuery are losing to Snowflake. So the argument for custom chips doesn't seem that compelling.
veltas 6y ago
Although the difference with airlines is nobody is pooling the wealth of the world into airlines, investors think tech is going to take over everything. Your cloud providers are being valued like they are going to either run the world at some point or get some compensation for being dismantled by international policy. And when your investors think this way, and you make as much money as these companies do, you might as well make your own chips.
tekno45 6y ago
All the cloud providers also USE their huge infrastructure for other purposes as well. So when they do hit, it has a big effect. make a chip 2% more efficient in your public cloud AND your private cloud, that is also generating money? You've got BIG savings.

dusing 6y ago

Interesting theory, maybe DO should partner with Apple.

xuki 6y ago
Assuming that Apple want to sell their chip to you. And that’s almost certainly a no.

sabalaba 6y ago

> the only two logical outcomes are to either go bust, or to be acquired by a major cloud provider Or just continue to build a profitable, cash flow positive business that continues to grow for years and years to come. Business outcomes are often not binary.