https://www.economist.com/business/the-battle-of-the-computing-clouds-is-intensifying/21806813 Skip to content * Menu * Weekly edition * Search Sign in * Featured + Climate change + Coronavirus + The Biden presidency + American power + 1843 magazine + The World Ahead 2022 + Daily briefing * Sections + The world this week + Leaders + Letters + Briefing + United States + The Americas + Asia + China + Middle East & Africa + Europe + Britain + International + Business + Finance & economics + Science & technology + Books & arts + Graphic detail + Obituary + Special reports + Technology Quarterly + Essay + By Invitation + Schools brief + The World Ahead 2022 + What If? + Open Future + The Economist Explains * More + Newsletters + Podcasts + Films + Subscriber events + iOS app + Android app + Executive courses * Manage my account * Sign out Search [ ] Business Cloud atlas The battle of the computing clouds is intensifying Insurgents take on AWS, Microsoft Azure and Google Cloud Platform [20211218_wbp501] --------------------------------------------------------------------- Dec 13th 2021 LAS VEGAS * * * * HOW MUCH have you spent on the cloud today? It takes Robert Hodges only a few clicks to find out. He pulls up a dashboard on a computer in his home office in Berkeley, California, which shows cloud spending at his database firm, Altinity, in real time. The cloud represents half of Altinity's total costs. Mr Hodges's widget is a window onto the future. As bills soar, every firm of any size will need to understand not just the benefits of the cloud, but also its costs. Gartner, a consultancy, reckons that spending on public-cloud services will reach nearly 10% of all corporate spending on information technology (IT) in 2021, up from around 4% in 2017. Plenty of technophile startups spend 80% of their revenues on cloud services, estimate Sarah Wang and Martin Casado of Andreessen Horowitz, a venture-capital firm. The situation is analogous to a century ago, when electricity became an essential input (and prompted some firms to hire another kind of CEO: the chief electricity officer). For cloud companies this has been a bonanza. Giants of the industry, such as Amazon 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 competition is stirring. On December 9th Oracle, a big software-maker, reported higher revenue than expected, mainly thanks to the rapid growth of its cloud unit. Its market value shot up by nearly 15%, or over $40bn. And a vast welkin of companies is emerging to help businesses manage their computing loads. One such firm, Snowflake, 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 cloud-computing conference, held every year in Las Vegas by AWS. Panels about "cost optimisation" and "AWS billing" were among the most popular. The accompanying expo featured booths where startups with names as CloudFix, Cloudwiry and Zesty were offering to help customers manage their cloud use. Businesses' main motive for moving to the cloud was never about cost but "scalability": having access to additional computing resources with a few clicks. But cloud bills have grown more complex as well as higher, sometimes rivalling those from America's notoriously opaque health-care providers. The AWS bill of even a small customer like the Duckbill Group, another cost-consulting firm, 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 open-source software). That is only natural, says Corey Quinn, co-founder of the Duckbill Group. Big cloud providers such as AWS, Azure and GCP are amalgamations of dozens of services. AWS sells more than 200, ranging from simple storage and number-crunching to all sorts of specialised databases and artificial-intelligence offerings. Each is billed according to multiple dimensions, including the number of servers, time used or bytes transferred. Then come the discounts and special offers. Ms Wang and Mr Casado have suggested that firms should think about building their own private clouds to keep costs down. So far few firms have opted for such "repatriation", which is both costly and makes it harder for businesses to enjoy the benefits of essentially unlimited computing resources in the public cloud. Rather, cloud customers are trying to professionalise their "cloud financial operations" (or FinOps in the compulsory tech shorthand), for example making executives responsible for cloud usage feel the financial impact. For the time being, gauging this impact is an arduous manual process. As cloud use grows, it will need to be automated, says Lydia Leong of Gartner. Some will probably be outsourced to upstarts of the sort thronging the Las Vegas shindig. A number sell a mix of consulting and software tools to assess cloud use and offer advice on how to lower costs. CloudFix, which unveiled its service at Re:Invent, charges a subscription to run a customer's configuration through software that optimises the client's cloud performance. The big cloud companies have taken note, both of the upstarts and of the growing customer grumbles. Just before the Las Vegas event AWS announced that it would start charging less for data transfers to the internet, lowering the bills of millions of customers. It also helps them identify savings, for instance by offering a "Simple Monthly Calculator" (though it looks rather complex and sports a late-1990s-type web interface). At Microsoft, cloud costs are often rolled into the "enterprise agreements", all-encompassing subscriptions of sorts, which big companies typically sign up to. GCP, being the smallest of the top three, "strongly believes" in the "multi-cloud", says Amit Zavery, a senior executive. In other words, it aims to enable customers to choose the best and cheapest cloud services from different 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 IT they use, while combining different services as needed, is the whole point of cloud computing. At AWS the complexity is seen as a competitive advantage. Its assortment of services is mostly created by independent teams that can innovate faster (including in what and how they charge). "We decided to let our developers build what they build--and unleash their creativity," says Matt Garman, who heads sales and marketing at AWS. The three big providers also have a habit of making it cheap and easy to transfer data onto their clouds but expensive to move them out again. Critics accuse AWS, and to a lesser extent Azure and GCP, of being digital versions of the "Hotel California", where you can check out any time you like, but you can never leave. Locking customers in this way may push them to use other services. Mr Garman counters that the higher price of moving data off a cloud ("egress" in the jargon) reflects the higher costs of that exercise. Almost by definition, customers leave with more data than they entered with. Whatever the truth, cloud providers' fat gross-profit margins--more than 60% in AWS's case, according to Bernstein, a broker--are attracting competition. In September Cloudflare, which helps customers serve up online content and deflect digital attacks, launched a new data-storage service which does not charge for digital outflows. Matthew Prince, Cloudflare's boss, says this should "unlock the true potential of the cloud". That will allow firms to mix and match services from different providers. "Each cloud provider has different strengths and weaknesses," says Mr Prince. Investors still see Cloudflare's strengths: despite a recent slide amid a cooling on upstart tech stocks, the firm's market value of $45bn is nearly eight times what it was after its initial public offering in September 2019. If bets like Mr Prince's pay off, the industry will become more competitive. As for Altinity, its dashboard is an outgrowth of its product--a cloud-based database that lets users sift through information, including bills, in real time. It is now considering releasing the dashboard's code for anyone to use and adapt. Fair weather to it. For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. Reuse this contentThe Trust Project The Economist today Handpicked stories, in your inbox A daily newsletter with the best of our journalism [ ]Sign up More from Business Bartleby The shortcuts to Theranos [20211211_WBD001_0] The great reallocation Want to own shares in Chinese companies? [20211211_wbp501] Psyber Boom Dramatic growth in mental-health apps has created a risky industry [20211211_WBD002_0] How can we be heroes? Why Germany is such tough terrain for food delivery [20211211_WBP002_0] More from Business [20211211_WBD001_0] The shortcuts to Theranos The trial of Elizabeth Holmes contains lessons for decision-makers of all kinds [20211211_wbp501] Want to own shares in Chinese companies? Come to China --------------------------------------------------------------------- [20211211_WBD002_0] Dramatic growth in mental-health apps has created a risky industry Customers' "emotional data" can be hacked, and no one is checking if the apps work --------------------------------------------------------------------- [20211211_WBD001_0] The shortcuts to Theranos The trial of Elizabeth Holmes contains lessons for decision-makers of all kinds [20211211_wbp501] Want to own shares in Chinese companies? Come to China --------------------------------------------------------------------- [20211211_WBD002_0] Dramatic growth in mental-health apps has created a risky industry Customers' "emotional data" can be hacked, and no one is checking if the apps work --------------------------------------------------------------------- Why Germany is such tough terrain for food delivery Complex labour laws, organised labour, pricey workers and stingy consumers all play a part --------------------------------------------------------------------- * Subscribe * Group subscriptions * Reuse our content * Help and contact us Keep updated * * * * * * Published since September 1843 to take part in "a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress." The Economist * About * Advertise * Press centre * Store The Economist Group * The Economist Group * Economist Intelligence * Economist Impact * Economist Events * Working Here * Which MBA? * GMAT Tutor * GRE Tutor * Executive Jobs * Executive Education Navigator * Executive Education: The New Global Order * Executive Education: Business Writing * Terms of Use * Privacy * Cookie Policy * Manage Cookies * Accessibility * Modern Slavery Statement * Do Not Sell My Personal Information Copyright (c) The Economist Newspaper Limited 2021. All rights reserved.