Back in 2021, VC firm Andreessen Horowitz’s captivating think piece, “The cost of cloud: a trillion-dollar paradox,” ignited a firestorm of discussions surrounding the control (or loss of) businesses have over their costs when entrusting their operations to cloud providers. The bars and cafes in every tech hub around the world from San Jose to Singapore were buzzing as industry professionals pondered this intriguing paradox.
The crux of the paradox lies in the critical questions it raises about the optimal approach to cloud infrastructure. On one hand, businesses readily acknowledge the benefits of starting workloads in the cloud, including on-demand capacity and access to a diverse array of services. However, as companies grow and scale, the costs associated with the cloud can sometimes outweigh these advantages, exerting pressure on profit margins. This conundrum has left many businesses wondering if they would be deemed “crazy” for not embracing the cloud initially and equally “crazy” for staying on it as they expand.
As the CEO of VeUP, I disagree with a key theme in the article: the notion that large firms are “crazy” to remain with public cloud providers even after achieving significant scale. However, I wholeheartedly agree with the other contention: for growing or cash-strapped firms, public cloud providers are key to their success. This is even more relevant during economic downturns. Therefore, in this article, I will use this perspective to explore why the cloud is the way forward when the economy finds itself in the doldrums.
3 Main Reasons to start your relationship with Public Cloud
During recessionary periods, when companies find themselves in the midst of economic challenges, the most prudent action they can take is to engage in sustainable cost optimisation while retaining their core strengths. It becomes crucial for businesses to streamline their operations, eliminate unnecessary expenses, and make strategic decisions that ensure their long-term viability.Â
To achieve this outcome, software companies should embrace the public cloud where they can unlock cost savings, scale up or down based on fluctuating demands, and focus on core competencies by moving to the public cloud. I will expand on each reason below.Â
- Cost Savings: A Path to Financial Efficiency
For small firms with limited capital, avoiding large upfront infrastructure costs is essential. Cloud services offer a pay-as-you-go model, allowing businesses to scale their usage based on their needs and pay only for the resources they consume. This cost-effective approach eliminates the need for hefty investments in on-premises infrastructure, making the cloud an attractive alternative. By reducing capital expenditure and shifting to operational expenditure, businesses can allocate their financial resources more efficiently, ensuring maximum value for every dollar spent.
- Scalability: Adapting to Fluctuating Demands
During times of economic downturn, Cloud services provide unparalleled flexibility and scalability, allowing small firms to effortlessly scale their resources up or down based on demand. Whether experiencing sudden spikes in workload or navigating quieter periods, businesses can dynamically adjust their cloud usage without the hassle of procuring and managing additional hardware. This agility not only helps maintain a smooth operation but also enables businesses to optimise resource allocation, avoiding unnecessary expenses during periods of reduced demand.
- Focus on Core Competencies: Unleashing Business Potential
Managing and maintaining IT infrastructure can be a drain on a business’s limited resources, particularly for firms looking to manage costs. By embracing cloud services, businesses can offload the management and maintenance of infrastructure to the service provider. This strategic move allows them to redirect their valuable time, energy, and expertise toward their core competencies. By focusing on what they do best, businesses can increase operational efficiency, innovation, and overall competitiveness. The cloud becomes a catalyst for unlocking their full potential and driving growth, unburdened by the complexities of managing IT infrastructure in-house.
The main reason to invest in a long-term relationship with Public Cloud
During this recessionary climate, businesses are continually seeking to optimise costs while maximising their cloud investments. To support their customers, leading cloud service providers (CSPs), including AWS, are proactively releasing services with cost optimisation in mind.
During AWS Re:Invent 2022, the world’s largest cloud conference, Adam Selipsky, CEO at AWS, highlighted the crucial importance of cost optimisation during difficult economic times. Recognising the challenges faced by businesses, Selipsky emphasised AWS’s commitment to enabling partners through cost optimisation initiatives. AWS then showcased 3 new services to prove their commitment towards cost optimisation.Â
- AWS Supply Chain integrates seamlessly with existing ERP systems like SAP, providing actionable insights and eliminating manual data mapping. This empowers businesses to mitigate risks, reduce costs, and enhance transparency in their supply chain management.
- Amazon EventBridge Pipes streamline integration between AWS services and self-managed systems, minimising the learning curve and custom integration code. By leveraging built-in transformations and seamless integration, businesses can optimise resources and drive cost savings.Â
- AWS Application Composer simplifies the rapid deployment of serverless solutions through a browser-based visual canvas. Developers with minimal serverless experience can create architectures and build functions using a drag-and-drop workflow. Real-time synchronisation with infrastructure-as-code (IaaC) ensures alignment and reduces operational complexities, accelerating development cycles and enabling businesses to focus on delivering innovative products.Â
These actions from cloud providers such as AWS shows they are listening to the market and willing to develop new services that deliver additional value through cost optimisation.Â
Conclusion
In summary, the current economic climate presents a prime opportunity for businesses to invest in cloud technologies. By embracing public cloud providers, companies can unlock cost savings, adapt to fluctuating demands through scalability, and focus on their core competencies. This approach allows businesses to allocate their financial resources efficiently, optimise resource allocation, and redirect their energy towards innovation and growth. Furthermore, cloud service providers like AWS have demonstrated their commitment to cost optimisation by releasing services specifically designed to address these challenges.Â
With the continuous development of new services that deliver additional value in cost optimisation, cloud providers meeting the needs of businesses during economic downturns. Therefore, developing trusted and active relationships with cloud providers is essential for maximising the value of cloud investments and navigating the uncertainties of the market.
James Campanini is CEO of VeUP, a consultancy that specialises in helping ISVs maximise their opportunity in working with Amazon Web Services (AWS), through a programmatic and consultant led engagement. Prior to joining VeUP, Campanini served as head of Channels and Alliances, UK&I at Amazon Web Services.