The Economist - USA (2021-12-18)

52 Business TheEconomistDecember18th 2021

Informationtechnology

Cloud atlas

H

ow muchhave you spent on the cloud

today?  It  takes  Robert  Hodges  only  a

few clicks to find out. He pulls up a dash­

board on a computer in his home office in

Berkeley,  California,  which  shows  cloud

spending  at  his  database  firm,  Altinity,  in

real time. The cloud represents half of Al­

tinity’s total costs. 

Mr  Hodges’s  widget  is  a  window  onto

the  future.  As  bills  soar,  every  firm  of  any

size  will  need  to  understand  not  just  the

benefits  of  the  cloud,  but  also  its  costs.

Gartner,  a  consultancy,  calculates  that

spending  on  public­cloud  services  will

reach nearly 10% of all corporate spending

on information technology (it) in 2021, up

from around 4% in 2017. Plenty of techno­

phile startups spend 80% of their revenues

on  cloud  services,  estimate  Sarah  Wang

and  Martin  Casado  of  Andreessen  Horo­

witz, a venture­capital firm. The situation

is  analogous  to  a  century  ago,  when  elec­

tric power became an essential input (and

prompted some firms to hire another kind

of ceo: the chief electricity officer). 

For cloud companies this has been a bo­

nanza. Giants of the industry, such as Ama­

zon  Web  Services  (aws),  Microsoft  Azure,

Google Cloud Platform (gcp) and, in China,

Alibaba  and  Tencent,  have  been  adding

business  briskly.  Gartner  expects  global

sales  of  cloud  services  to  rise  by  26%  in

2021,  to  more  than  $400bn.  But  competi­

tion is stirring. On December 9th Oracle, a

big  software­maker,  reported  higher  rev­

enue  than  expected,  mainly  thanks  to  the

rapid  growth  of  its  cloud  unit.  Its  market

value shot up by over 15%, or nearly $40bn.

And a welkin of companies is emerging to

help  businesses  manage  their  computing

loads. One such firm, Snowflake, is worth

$108bn.  Another,  HashiCorp,  went  public

in  New  York  on  December  8th  and  now

boasts a stockmarket value of $15bn, three

times its last private valuation in 2020. 

The  latest  cloud  formation  and  the

winds  shaping  it  were  on  full  display  this

month  at  Re:Invent,  the  world’s  largest

cloud­computing  conference,  held  every

year in Las Vegas by aws. Panels discussing

“cost optimisation” and “awsbilling” were

among the best attended. The accompany­

ing  expo  featured  booths  where  startups

with  names  such  as  CloudFix,  Cloudwiry

and Zesty were offering to help customers

manage their cloud use. 

Businesses’ main motive for moving to

the cloud was never about cost but “scala­

bility”:  having  access  to  additional  com­

puting  resources  with  a  few  clicks.  But

cloud  bills  have  grown  more  complicated

as  well  as  higher,  sometimes  rivalling

those  from  America’s  notoriously  opaque

health­care providers. The awsbill of even

a  small  customer  like  the  Duckbill  Group,

another  cost­consulting  firm,  can  run  to

more  than  30  pages,  listing  in  detail  the

cost  of  every  single  service  it  has  used,

from bandwidth in India ($0.01 per request

to its website) to a virtual server in Oregon

($83.59  for  “Amazon  Elastic  Compute

Cloud” running open­source software). 

That is only natural, says Corey Quinn,

co­founder  of  the  Duckbill  Group.  Big

cloud  providers  such  as  aws,  Azure  and

gcpare  amalgamations  of  dozens  of  ser­

vices.  awssells  more  than  200,  ranging

from  simple  storage  and  number­crunch­

ing to all sorts of specialised databases and

artificial­intelligence  offerings.  Each  is

billedaccordingtomultipledimensions,

includingthenumberofservers,timeused

orbytestransferred.Thencomethedis­

countsandspecialoffers.

MsWangandMrCasadohavesuggested

that firms should think about building

their own private clouds to keep costs

down.Sofarfewfirmshaveoptedforsuch

“repatriation”, which isboth pricey and

makesit harderforbusinessestoenjoythe

benefitsofessentiallyunlimitedcomput­

ingresourcesinthepubliccloud.Rather,

businesses are trying to professionalise

their“cloudfinancialoperations”(orFin­

Opsinthecompulsorytechshorthand),for

exampletyingbonusesofexecutives re­

sponsibleforcloudusagetocostcontrol.

Forthetimebeing,gaugingthecloud’s

financial impact is an arduousmanual

process.Ascloudusegrows,itwillneedto

beautomated,saysLydiaLeongofGartner.

Somewillprobablybeoutsourcedtoup­

startsofthesortthrongingRe:Invent.A

numbersella mixofconsultingandsoft­

waretoolstoassessclouduseandofferad­

vice on how to lower costs. CloudFix,

whichunveiled itsservice inLasVegas,

chargesa subscriptiontoruna customer’s

configurationthroughsoftwarethatopti­

misestheclient’scloudperformance.

The big cloudcompanies havetaken

note,bothoftheupstartsandofthegrow­

ingcustomergrumbles.JustbeforetheLas

Vegaseventawsannouncedthatitwould

startcharginglessfordatatransferstothe

internet,loweringthebillsofmillionsof

customers.Italsohelpsthemidentifysav­

ings, forinstance by offering a“Simple

MonthlyCalculator”(thoughitlooksrath­

er complex and sports a web interface

straightoutofthelate1990s).

At  Microsoft,  Azure  cloud  costs  are  of­

ten  rolled  into  the  “enterprise  agree­

ments”,  all­encompassing  subscriptions

that  big  companies  typically  sign  up  to.

gcp,  being  the  smallest  of  the  top  three,

“strongly  believes”  in  the  “multi­cloud”,

says  Amit  Zavery,  a  senior  executive.  In

other words, it aims to enable customers to

choose the best and cheapest cloud servic­

es from different providers (thus making it

easier for them to pick Google).

Costly, with a chance of discounts

Yet  the  big  providers  are  not  making  life

easier  for  customers  everywhere.  Having

customers  pay  only  for  the  itthey  use,

while  combining  different  services  as

needed,  is  the  whole  point  of  cloud  com­

puting. At awsthe complexity is seen as a

competitive  advantage.  Its  assortment  of

services is mostly created by independent

teams  that  can  innovate  faster  (including

by changing how clients are charged). “We

decided  to  let  our  developers  build  what

they  build—and  unleash  their  creativity,”

says  Matt  Garman,  who  heads  sales  and

marketing at aws.

L AS VEGAS

The battle of the computing clouds intensifies—andthebattlefieldgrows

more complex

Clouds in the stratosphere

Global public-cloud spending

Source:Gartner

12

9

6

3

0

22212019182017

Publiccloudas%oftotalITspending

FORECAST

500

400

300

200

100

0

22212019182017

By type, $bn

Managementandsecurity

Platformservices Businessprocesses

Web-based applications Infrastructure hardware

FORECAST

CorrectionIn “The great reallocation” (December

11th) we mixed up the chart scale. The value of

Chinese assets held by foreign entities is measured

in trillions of yuan, not tens of trillions. Sorry