
Is the Cloud Recession-Proof? - ceohockey60
https://interconnected.blog/is-the-cloud-recession-proof/
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pram
Definitely 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.

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jlg23
Pretty 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...

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chii
$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).

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chickenpotpie
$1000+/month/per engineer sounds way too high.

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jgalt212
seriously, 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.

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hnarn
The 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
On-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
On 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
I'm going to use that in my daily conversations if that's OK. Truer words have
never been spoken.

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Hokusai
Right 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
I 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.

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MattGaiser
The cloud is this recession proof because this recession is also a people
retreat to their homes recession.

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JMTQp8lwXL
In 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).

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lallysingh
They weren't mandated to stay at home by their governors before. It's quite
different.

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moooo99
Stay 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.

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tanilama
I 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.

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jjeaff
For 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.

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9nGQluzmnq3M
Amazon as a retailer, sure, but why would this be true for Microsoft (software
licenses) or Google (ads)?

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jjeaff
Microsoft 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.

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kortilla
Google doesn’t make money from increased traffic, they make money in ad spend.
It doesn’t matter if more people are staying at home if the bottom falls out
on the ad buyers.

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lallysingh
Somewhat compensated by other ad venues moving online. I don't think all the
signs and billboards in Times Square will be as popular as they were before.

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9nGQluzmnq3M
Nobody's going to be advertising movies or Broadway shows online _or_ offline
for a while.

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blackrock
The 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.

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cachestash
> 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.

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dannyw
AWS 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_.

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phinnaeus
> If you don’t find this analysis unsatisfying, you are not alone. I’m not
> either.

What?

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redwood
What 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.

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scarface74
It 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.

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simonebrunozzi
Cloud 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.

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cosmodisk
Short 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.

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remus
I 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.

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dnautics
Before investing in equinix keep in mind it is an reit and operates under
different rules (I think; someone should double check me).

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bryanrasmussen
Is 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.

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mbalex99
The cloud will not be recession proof but when everything falls it’ll be less
likely to fall as much as other industries or sectors.

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mjevans
My 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
You will get that answer in Amazon, Google, and Microsoft's Q2 earnings. I
can't wait myself.

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nojito
Yup. The way cloud sales works makes it seem almost impossible to justify
restructuring your infrastructure to your management.

It's a genius sales strategy.

~~~
grey-area
It's pretty easy to cut down clusters to the minimum number of nodes for them
to function (say cutting 10 servers to 2), or downgrade the size of instances
to compensate for lower traffic. There's no need to restructure infrastructure
in most cases, if anything using a cloud provider makes this easier.

~~~
icedchai
It's "easy" to do this, but it's also just as "easy" for your service to fall
over when you do it wrong. Capacity planning and performance engineering is a
lost art in a world where you would simply throw money at the problem until it
went away.

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grey-area
It's not that hard (I've done this recently for clients). If your traffic is
90% of normal for a few months, scaling down with load makes a lot of sense,
then you can scale back up when ready. There are also autoscaling solutions
like serverless.

~~~
icedchai
This is true for simple services. It's different when you're dealing with
something like a Cassandra or Elasticsearch cluster, where the system isn't
stateless and scaling up takes some time for re-balancing.

~~~
grey-area
Sure, it won't apply to all services, particularly datastores are best left
alone, but if you need a quite few web workers say which sit in front of your
search or db to service millions of users, and can cut that in half during low
traffic times, you may save significant money, as the user pram above has
noted.

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irjustin
Is 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.

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JackPoach
Different 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.

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nitwit005
I 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
There'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.

~~~
neuronic
Just to put out a reference here because I have seen numbers in German news
yesterday. Alcohol sales for wine and beer are up around 20-30%. In grocery
stores. But is that really a hint at _overall_ alcohol sales growing?

For me, I know I buy way more alcohol now in grocery stores. But what about
all the alcohol not spent in bars and restaurants??

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tedk-42
only 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.

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appwiz
tldr from the article: possibly, I don’t know.

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CaptArmchair
The "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.

