The Big 3 chug along

I have been meaning to write about the now famous article on the Trillion Dollar Paradox authored by Sarah Wong and Martin Casado. In the 6-7 months since it was first posted on the Adreesen-Horowitz website, their findings and research has resulted in much discussion and debate. The Economist carried an article a few months ago, based on their analysis. A simple Google search for the Trillion Dollar Paradox results in 31 million hits. Businesses have pivoted on the idea, offering services towards cloud repatriation and infrastructure cost optimisation. As I sat down to write on the topic now, with the benefit of many months since the original posting of the content, I looked at the financial results of the big 3 cloud service providers (CSP), who are all, much more than just CSPs. Their latest financial results are robust, to say the least and they are all bullish on the future.

In the article Wong and Casado stated what many in the industry recognise as a truism – “you are crazy if you don’t start building any new applications in the public cloud and you are crazy if you do start building every new application in the public cloud.” It is a complex decision to take either way. Regardless, every survey and report out there states that anywhere between 80% – 95% of respondents have indicated that they are either present already or are planning for presence in multiple public clouds and/ or a combination of an on-premises data centre and the public-cloud infrastructure. There are many reasons for this and I will look at those reasons in another blog post later. For now, let’s look at the latest earning results of the big 3 – AWS, Microsoft Azure and Google Cloud Platform.

  • AWS posted a YoY revenue growth of 39.5%, coming in at $17.78 billion in the quarter ending December, 2021.
  • Microsoft reported a revenue growth of Azure and cloud services of 46%. Although the company does not disclose Azure only revenue, the revenue from Microsoft’s Intelligent cloud segment which contains Azure public cloud, generated $18.33 billion in revenue in their latest earnings report.
  • Google Cloud reported a 45% YoY increase in revenue, to $5.5 billion in Q4 ’21.

All three companies were extremely bullish on their prospects for the coming year. The AWS CEO spoke about how they are seeing “almost insatiable demand for computing power”. AWS is investing in new chipsets with their Graviton processors reportedly being used by 48 of their top 50 EC2 customers. Microsoft was similarly bullish on the prospects of Azure and associated services. The Alphabet CFO said that they would continue to invest aggressively in the Google Cloud because of the “huge opportunity”. Their CEO, Sundar Pichai, spoke about the GCP customer spend doubling through channel partners in 2021.

Going by the results and the forecast by the Big 3, it is hard to see their growth slowing, at least in the next few quarters. While it may be true that enterprises will realise the huge expense of being only in the public cloud and repatriate some workloads to their private Datacentres, the public clouds are not going anywhere in a hurry. I think the more likely outcome is a future where Enterprises will rely on either one or more of the Big 3 and also maintain a presence in a private cloud. The private cloud will be needed for any of the following reasons:

  • Regulations would dictate that certain data/ applications/ workloads need to be in a company-owned data centre
  • Throughput/ bandwidth requirements in the connectivity to the public cloud
  • Latency in connecting users to the applications hosted in the public clouds
  • Cost benefits to be realised in continuing to maintain privately managed data centres as opposed to the hidden costs of the public clouds, including the cost of training staff in the intricacies of the different clouds

In any industry, there is usually a consolidation of the vendors into a few big players. In the public cloud domain, we already have a Big 3 that account for more than 50% of the TAM. All three continue to offer new, shiny features every quarter including those tailored towards 5G and catering to the present and future demands of their customers. The trillion dollar paradox provides a useful contrarian view on the migration of workloads to the public cloud. It provides good food for thought for those inclined to pay attention. The reality is that the majority of enterprises will continue to invest in their presence in the public cloud environments.

What do you think? Are you seeing enterprises shying away from public clouds? Or are they embracing these clouds more than ever?

Residing in Bengaluru, I am a Techie by profession and a thinker and doer by birth. I muse about any topic under the sun and love to share my thoughts in print when I am not doing something with them. I love reading and at some point, thought that maybe others would like to read what I have to write, too!

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