Uber Technologies Inc. announced last week it will make seven-year deals with both Alphabet Inc.’s Google Cloud and Oracle Corp to eliminate its reliance on the global hardware supply chain. The move comes after Covid-19-era hardware supply shortages made data center maintenance — among other things — a challenge.
Uber has been relying primarily (95%) on its own server hardware since it launched in 2009—definitely not the norm in the tech world, and most certainly not what you’d expect from a company that disrupted the ride space. The big news here is that Uber isn’t just moving some of its tech stack to the cloud. It’s moving everything, with plans to complete the transition within just a few years—a trendline that will be worth watching as companies arm wrestle between doing more in the public cloud and keeping portions of data and workloads on-prem (aka hybrid/private cloud).
Moving to the Cloud to Mitigate Issues Makes Sense
The chip shortage and other supply chain issues over the last year have caused a lot of stress for organizations. Managing operations in a data center when it’s difficult to get IT hardware is not an ideal scenario — especially as more businesses become reliant on fast access to data to make decisions across the organization.
This was the primary reason for Uber’s move. Having the infrastructure in place to manage data processing is critical to the success of business. Uber also said that the move is a key piece of their growth strategy that will increase flexibility and scalability.
Though the benefits may appear further downstream, the move to cloud should also help Uber stay fresh on the innovation front. Whereas previously, engineers would need to focus their energy on data center management, a shift to the cloud means they’ll now be able to focus more on product differentiation and the development of new products or services. While these things can be done with a hybrid cloud architecture, the public cloud certainly offers significant services for Uber engineers to build upon. All in all, it’s a positive move, albeit actual cost impacts may not be fully realized for some time as moves to public cloud have cost efficiencies up to a certain point—however, there has been movement from public cloud back to prem this year as well as some companies have gone the other way, like 37 Signals, noting higher costs.
Cloud Providers Experiencing Strong Growth Despite Tougher Macro Environment
Cloud adoption is continuing to see encouraging growth right now, despite some deceleration that we are seeing as a result of a more cautious macroenvironment. In 2021, use of public cloud services grew 18% from the year previous. Spending and the value of the market also have continued in a meteoric fashion. And it’s forecasted to keep growing over the next few years. Providers, like Google, AWS, and Oracle are strategizing to handle the growth while also reaping the benefits.
Just this month in Alphabet’s earnings report, Google Cloud posted a 32% year over year growth. The company is working on an aggressive growth strategy to take market share from competitors like AWS and Microsoft Azure. If more deals like this one with Uber happen, it could begin to see its market share grow.
For their part, Amazon announced that AWS saw a 20% growth in the last quarter alone. While it missed analyst estimates, the growth at a time when many companies are slashing budgets is indicative of the critical nature of cloud architecture to businesses—noting that 20% at a more than $80 billion run-rate is solid despite the revenue deceleration.
Not to be outdone, Microsoft also recently announced growth in their cloud segment. The company also posted a 20% increase in cloud revenue from one year ago. And while Oracle’s piece of the cloud market is relatively small in comparison, it is still posting significant growth with $1 billion in revenue coming from the cloud infrastructure last quarter. I will be watching to see how much the cloud revenue has grown in the latest earnings report which will be released in early March.
Cloud As an Operating Model – A Pendulum from Private to Multiple Clouds
Organizations in every sector are slashing budgets. Headlines about layoffs and pay cuts have been pervasive in recent weeks, but it’s clear that reliance on the cloud is steadily increasing meaning that budgets and spend will keep increasing too. Cloud modernization is essential for business, but having said that, full lift and shift from prem to cloud, and in this case multi-cloud, like the one Uber is making is a bold move and somewhat in contrast to what other companies of this size are doing. We see more companies taking a hybrid approach keeping portions of workloads on premises while moving some workloads to the public cloud to address flexibility, compliance, residency, or other specific requirements that companies have to meet with their data landscape.
The cloud provides the necessary agility to run business operations at the speed that is needed in today’s business environment. Speed and agility can be the difference between competitors. The difference maker for winning business. The difference maker for driving growth. While the exact utilization of public cloud versus prem-based continues to flex across organizations, the move by Uber to go all-in on public and the choose Oracle and Google specifically can be seen as a strong testimonial for greater investment in public cloud for large enterprise, and a nice validation of the number 3 and number 4 cloud providers by revenue in the U.S.