What's the number one thing people financial talking heads with bow ties
get wrong about the cloud? What is it?
You know, we all said the cloud this and what do we get wrong?
So it is the next wave of however you're going to build applications.
It's just a very simple way of seeing that, you know, that is the Ferrari
where everything is going to run later on.
Now, the question is, do you are you investing in that right now or are you
going to wait a little bit? Now, you know, we talked about growth
rates going into the quarter. They said they will do 14 percent in
Amazon in constant currency. And the next quarter, consensus figures
were 20 percent. They did 16 and guided to 11.
And that's what really caused a big mess.
And, you know, we've been seeing for a while that part of the magic of cloud is
that your cost structure becomes variable compared to a fixed cost
structure as an enterprise. And that is another big driver growth
driver in the long run. So talk to me a little bit more about
that. Are you saying that basically these
companies don't have much clarity about the future and the way that they used
to? Is that is that how you'd explain?
The Amazon businesses? Yes, but that's the question is, you
know, we don't have that much clarity over the next six months.
I have a very good clarity for the next five years.
I'd have no problem, you know, sticking my neck out and says this business over
the next five to six years will double from where it is today.
I'm very confident in that that that statement, because majority of tech
spending over two trillion dollars of that still resides on large companies
and that internal data centers. That's where the bulk of the
applications are and that's where the big movement is.
And again, you can't run generative A.I. on older infrastructure.
So this is as an industry group. Well, what about the specific sectors?
What about the specific players? And I think about Microsoft delivering
better than expected Web product back cloud projections, as well as what we
saw from Google Alphabet. Also saw profits for the first time from
their cloud services. So how much is this an Amazon specific
story versus a broader even six month story?
Amazon has over 40 percent market share and interest on cloud infrastructure.
Nobody else comes close to it. Even Microsoft and Google are far
behind. Now, they have been closing the gap over
the years. And for Microsoft, they've been closing
the gap from their legacy businesses. Companies that have been around for a
while and that used Microsoft products in their own data centers.
They they're moving their own workloads to the cloud is what's driving their
business. But frankly speaking, Amazon has not
been losing market share, at least for the past five, six years.
When you look to just the next six months, the idea of companies maybe not
investing as much in their infrastructure, in their tech.
How broad does that go? Who else does that affect?
It affects the entire software schema. 10 days, the entire 80 services schema
in the entire hardware area. Because what's happening right now is
people are saying I cannot spend at that same rate that I was in the last five to
six years. I want to look at CloudFlare.
You know, Matthew Prince is the one that's made that wonderful firm.
It's something we never talk about. Getting hammered this morning is is is.
Well, what is the symbol from the tangential companies around these big
names? We talk to them.
And if I see CloudFlare flare out. Yeah, you should see like somebody like
a snowflake also get hurt today. Data dog, Mongo, D.B., all these
companies that really bounced back very strongly in the last for just two days.
So, you know, if Amazon would have reported before Microsoft, things
wouldn't have been sounded that badly. I think the expectations really rose
very high after Microsoft was sort of the load the boat time.
And you've got this three and five year wisdom here.
Are you taking. Are you seeing cloud with the carnage
this morning as a mass of overweight? So the question is how?
What is your time horizon? If your time horizon does the next six
months, like most investment firms, then you've got to pull back.
But if you have a three to five year horizon, you shouldn't be looking at it.
Can we finish on a topic? We touched on it earlier and I think
we'd love your view on it. How did the guy that decided to sell
books online? IBM's lunch.
How did that happen? I was inside one of the most phenomenal
stories. I would urge all of you to read Brad
Stone book on it. It is.
You know, he basically said, I want a computer within finite computing power.
They said, well, how many data centers do you want?
Says Infinity. So what does that mean?
You said, I need more and more capacity. So we are going to have a very large
computer where most of the world will do their computing services.
It will be like a utility business. There are no companies that generate
their own electricity. Companies should not be running their
own data centers too. What was it about Amazon that led to
that moment? What was it about the nature of the
business that led to that moment in a way that it didn't happen?
Companies like IBM in quite the same way because the scale they wanted for their
retail business, online business was not available with the older tools they
needed to do it in-house. Everything needed to talk to each other
very rapidly, whether it was the server, the software, the networking equipment.
And they said we will just build it in-house and we will use open source
software to create it. Just amazing, Tom, how this story
happened. Just absolutely phenomenal.
Rogue mentioned this briefly. But folks, a definitive book on this is
Brad Stone. You don't see him on surveillance.
He's a rockstar on the West Coast. Listed in Battersea.
Still just as he should be. And the rest of them, they don't even
want to talk to us. It's like we don't exist on a record
Dani Burger. Just the cloud business exists at IBM.
The answer to that is yeah, kinda. But what's happening with it?
But it's a different business for them. So initially they wanted to compete head
on with, you know, the likes of Amazon and Microsoft, but once they figured out
it's not going to work. I think the new CEO did a very good job
by equating great hack. So what was going to happen, let's say,
for a company? I'm just going to make up, let's say
PepsiCo. They've been investing in technology for
the past 20, 30, 40 years. They have a very massive on premise
footprint. They need to move to the cloud.
And their strategy is going to be I'm going to keep some workloads on the
cloud. I'm going to keep some in-house.
And that's why Red Hat, along with IBM, has this hybrid cloud strategy where you
can have an infrastructure that would work on any cloud on the background.
But my applications can run seamlessly in both places, and that's their
business model now. So these secular tailwinds that we've
talked about for a long time, you don't think it's over?
Oh, no, not. Not even close to it.
I mean, we just we just saw the biggest next.
You know, you could say big growth driver in technology.
That's all enabled, you know, applications.
You did run at a speed you can't even think of.
You need processing power on the cloud to run that.
The current footprint is we are I in my view, less than 20, 25 percent
penetrated in the cloud. We have a long way to go.
You sound incredibly bullish. Just to go back to something you said
about understanding, have a better understanding of the next five years, in
the next six months. You're basically saying any cyclical
headwinds that affect cloud spend and these companies ignore them.
Is that is that the message? Not for the six months.
I think things could get very tough. And I think, you know, Tom asked me this
two weeks ago, what's my view on cloud? I said very negative going into, you
know, these this earning season. I was proven wrong with Microsoft.
But last night, you know, we are, you know, aren't on point that this thing is
going to continue to have really massive pressures because companies are not
spending on cloud.