Apple Announces $1.4bn Iowa Data Center Project (Aug 24, 2017)
Google and Cisco Partner for Hybrid Cloud Environments (Aug 3, 2017)
★ Amazon Reports Strong Growth, Much Smaller Margins in Q2 (Jul 27, 2017)
To my mind, this announcement illustrates just how tough it will continue to be for standalone storage and backup companies to establish viable businesses over the long term, because their key features will continue to be embraced and absorbed by the big ecosystems. I still use Dropbox for backing up my various files and syncing them between machines, but I just know that a point will come when Google or Apple will simply build those features into their broader service offerings, and then I’ll ditch Dropbox. There’s simply very little true differentiation in this area – storage is storage, and at a certain level backup is backup. Once you get the table stakes around simplicity and universal access, it mostly comes down to trust and pricing, where the big guys are likely to have a significant edge. To get to this specific announcement from Google: it’s going to be providing an easier way to backup and sync files from your PC to Google Drive, which doesn’t require you to keep your files in a special Google Drive folder on your computer, unlike Dropbox. And although free storage maxes out at 15GB, Google will be pretty competitive beyond that on pricing.
via The Verge
I’m at Microsoft’s Build developer conference this week, and got a little preview of some of what’s being announced in a private session for analysts yesterday. Today’s day 1 keynote is focused on Microsoft’s broad vision for this year’s event and its cloud and AI business. Many of the things I cover most closely will actually be in tomorrow’s keynote, which will cover more of the consumer-facing parts of the business. But there were still several notable announcements today that are worth talking about, even on a site like this that’s more consumer tech-focused. Firstly, it’s worth noting CEO Satya Nadella’s philosophical intro, which emphasized the ethical and other responsibilities tech companies have as well as the limits of tech in solving the world’s problems. That’s an admirable stance and a theme we’ve seen more from Nadella than any other tech leader in recent years.
Secondly, Microsoft’s big push this year is a shift from Nadella’s earlier mobile-first, cloud-first vision to a new vision around intelligent cloud combined with intelligent edge. What that means is that Microsoft sees the cloud as being less centralized and more distributed, including in edge devices, and its new Azure IoT Edge concept takes cloud computing functionality and puts it in potentially tiny devices at the edge of the network. That’s a somewhat unique vision for the cloud, especially from a company that’s also strong in the core cloud context. If Microsoft is right about this vision, and I suspect it is in the industrial world especially, then that raises interesting questions for other vendors and their ability to push that capability into edge devices, where operating system companies are strong but others tend not to be.
Thirdly, Microsoft is pushing what it calls its Graph, which is a sort of backend for its own services but also opens up to developers, and began as an agglomeration of data about users and is expanding to include those users’ activities in apps and across devices. The idea is that this Graph will power continuity between apps and other activities for users through both first-party and third party features. It’s a good concept and in some versions is reminiscent of what Apple does with Handoff and Continuity in its operating systems. But the big challenge for this vision at Microsoft is that it’s got a huge gap in its Graph around mobile, because people spend the vast majority of their mobile time outside Microsoft devices, operating systems, and apps. I can’t see it changing that, and that’s going to reduce the value of the Graph significantly, especially in the consumer world. I’ll have more commentary on some of the consumer-focused announcements in tomorrow’s keynote.
Lastly, one kind of consumer-focused announcement today, which has been subtle on stage but covered somewhat in the press regardless based on pre-briefings is Cortana Skills, which were announced way back in December but are now going more generally available to developers. What’s interesting here is that unlike Amazon’s Alexa Skills, at least some of these third party capabilities will be built in even if users haven’t explicitly installed or enabled the apps, including weather app Dark Sky and Domino’s Pizza. We’re still in the very early days here, but it will be interesting to see how skills on a PC-centric assistant like Cortana evolve differently from those on speaker- or phone-centric assistants like Alexa or Siri.
via Techmeme (and about a thousand articles on different announcements made today which you’ll find linked there)
Microsoft was one of numerous big tech companies that reported Q1 2017 financial results (its fiscal Q3 results) this afternoon, and the only one of the big three to miss on revenue. That revenue miss was largely due to a shortfall in hardware revenue as Surface had its first big year on year decline in a year and a half due to a lack of new mass market hardware, and phone revenue dropped to essentially zero. However, these two businesses together make up just 4% of Microsoft’s revenue, which continues to be dominated by software and to an increasing extent services, while growth is dominated by the move to the cloud. Microsoft’s cloud revenue run-rate is now at an annualized $15.2 billion, compared to Amazon’s $14.5 billion in actual annual revenue, though Microsoft’s definition of cloud here is far more expansive than Amazon’s. The productivity business had a particularly strong growth quarter at over 20%, while the Intelligent Cloud segment also improved a little to just over 10%. But margins continue to fall overall as the newer cloud services generate less profit than Microsoft’s old massively profitable software business did, and that picture isn’t likely to change. Microsoft is growing again after both lapping the introduction of Windows 10 and the revenue deferral associated with the new business model, and also getting past the biggest drops in the phone business, but it’s mostly doing so by doubling down on enterprise products and services while its consumer and hardware businesses mostly continue to struggle to find growth.
Amazon today announced its earnings for Q1 2017. Revenues grew strongly, but as with Q4 the rate of growth was slower than it had been for most of last year. Operating margins also continue to fall, driven by a slight dip in AWS margins in the last couple of quarters and continued big losses in the International business. The feeling I have is that e-commerce growth is just a little slower than Amazon anticipated – several metrics it normally keeps within very narrow bands have crept out in the past couple of quarters. I take that as a sign that retailers like Walmart are fighting back more effectively, sacrificing margins in pursuit of higher growth, and that this is affecting Amazon’s growth rate (though it still remains far higher than any other retailer’s organic growth, online or otherwise). Following some additional disclosure in its 10-K last quarter, Amazon has now shaken up its reporting segments for the non-AWS business and provides a little more visibility into its subscription and fulfillment businesses. The subscription business – mostly Prime but also other smaller businesses like Audible – generated 5% of revenue. Fulfillment and related businesses generated 18% of revenues, and the growth of that third-party seller business on Amazon, which now accounts for 50% of units sold, continues to be an important driver of higher gross margins along with AWS. From the 10-K, I estimated that Amazon had roughly 70 million Prime subscribers at the end of last year, and though the quarterly numbers are a little harder to pass it looks like it may have seen decent growth this past quarter too. Prime continues to be one of Amazon’s greatest strengths as a driver of stickiness and revenue growth.
Huawei to Create Cloud Business Unit, US Remains a Secondary Focus – Mobile World Live (Apr 11, 2017)
Huawei is holding its annual analyst summit in China this week, at which it offers an update on the different parts of its business. Two notable items are mentioned in this summary of the first day presentation by the CEO. Firstly, the company is creating a cloud business unit, which will sit alongside existing carrier, consumer (device), and enterprise business units. That’s a sign of the growing commitment of the company to the cloud, but also of the close ties between network equipment (and the telecoms operators who deploy it) and the cloud services which run over it. Separating cloud in this way is a public signal to operators that Huawei wants to provide more than just the guts of cloud services and wants to establish more of a partnership relationship, something which may be challenging, especially given its home base of China, which has already created issues in the US and elsewhere for its network business. Secondly, the CEO stated that (partly for the reasons I just mentioned) the US isn’t a focus for the network business, and even for the devices business it’s not a major focus, as Huawei continues to struggle to break into the mainstream here with its smartphones. Lastly, though there was strong growth in parts of Huawei’s business, the CEO didn’t address the lack of margin expansion, something which was reported on previously and was likely due to aggressive growth of the smartphone business at the expense of margins in 2016.
The recent downtime for Microsoft’s various cloud services hasn’t got nearly the attention Amazon’s recent outage did, in part because it’s more of a brownout than the total blackout AWS experienced, and in part arguably also because fewer third party services rely on Azure and related services. But Microsoft has had a couple of recent issues, and as of right now they’re happening again. There will always be issues here and there with any large scale infrastructure, but that they’ve been lasting for hours and repeating at Microsoft recently is a little worrisome, and it’ll be good to see the explanation when Microsoft finally shares it.
Amazon makes it cheaper to host Alexa skills on AWS – ZDNet (Mar 16, 2017)
This is clever tie-in by Amazon of two of its valuable assets: its Alexa skills engine and its AWS cloud infrastructure. It’s offering developers of Alexa voice skills a better deal on hosting through AWS as a way to remove the barriers to developing smarter and more sophisticated skills for its Echo devices (and the small number of third party devices using Alexa). Amazon has touted its number of third party skills repeatedly since launching them as a sign of Echo and Alexa’s capability, but the reality is that many of those skills are very basic, and the model is clumsy to use. If it’s able to attract better skills to the platform, those numbers will start to be more meaningful as signifiers of the platform’s capabilities.
Google is having its big enterprise cloud event, Next, this week, and making lots of announcements of both new features and new customers. I got a briefing on the new features on Monday ahead of the announcements, and it looks like a decent set of mostly incremental improvements, many of which are about closing the gap competitively with Amazon and Microsoft and a few of which are more unique. But all the new features and customer wins Google announces won’t change a basic fact outlined well in this WSJ report: Google is way behind the two big players in this space in terms of scale. Even with rapid growth, Google is unlikely to close the gap because both AWS and Azure are growing fast too. Google claims that it’s winning a good share of the engagements it competes for, which then implies that it’s still not being considered for many engagements where Amazon and Microsoft are competing, something that’s also reinforced by a (somewhat self-serving) comment from Microsoft in this article. Its job at this point is, then, to ensure higher consideration when companies are looking for a cloud provider.
Amazon Explains its Massive S3 Outage (Mar 2, 2017)
Amazon’s S3 service went down in part of the US on Tuesday, something I commented on at the time. But we now have an official explanation, which is that an employee attempting to debug an issue with the billing system for AWS accidentally took down more servers than he/she intended to, which in turn had a knock-on effect on several other services which manage other aspects of the S3 system (including the dashboard which reports whether the service is performing as expected). Restarting several of the servers took far longer than anyone had expected, which meant Amazon’s contingency planning turned out not to be adequate after all. It sounds like it has now put in place some protections to prevent similar things from happening in future, but once again it’s just a reminder of how vulnerable big chunks of the Internet are to an AWS outage, something we discussed in depth on this week’s Beyond Devices Podcast, recorded earlier today shortly after this announcement was made.
Amazon cloud issues send Web publishers scrambling – Axios (Feb 28, 2017)
I might update this or post a follow-up later, since the outage is still underway and there isn’t yet an official explanation. But it’s already clear that this outage is having very widespread impacts, not just on a couple of big tech companies but on a variety of news sites and other businesses too. This is a great illustration of the enormous power a single player can have when it takes a dominant market share position, and conversely the danger customers put themselves in by failing to secure adequate redundancy. One of the changes between Snap’s original S-1 and its S-1/A filing was the inclusion of a deal with Amazon (ironically) to provide redundancy for its Google Cloud services, and I think it’s very unlikely the timing was a coincidence: I suspect the investors Snap talked to first were wary of its massive dependence on a single cloud provider. But of course that kind of redundancy can cost an awful lot, especially at scale – Snap’s contractual commitment to Amazon five years out is almost the same as its commitment to Google in the same year, which is not to say it will actually end up spending the same, but it’s indicative of the problem here. Of course, the Snapchat app hasn’t gone down today while many other services and sites have – if it had single-sourced based on Amazon, perhaps it would have done, which would have been disastrous the week of its IPO.
It’s not just Google — Snap has a $1 billion cloud services deal with Amazon, too – Recode (Feb 9, 2017)
Snap has filed an amended version of its S-1 IPO filing, and it’s added a few extra tidbits here and there. This Recode piece picks up on the most notable: earlier this month, Snap signed a deal with Amazon’s AWS which is worth at least $1 billion over 5 years, for redundant infrastructure (i.e. as a backup to its primary reliance on Google’s Cloud). Unlike the Google commitment, which requires a steady minimum of $400m spent per year, this deal ramps from a minimum of $50m in 2017 to $350m in 2021 (which is probably about how much Snap spent with Google in 2016). That’s a rapid growth rate, and implies that this level of redundancy may be new for Snap, perhaps triggered by investor concerns over its sole reliance on Google. Combined, that’s a minimum $3 billion commitment for just these two infrastructure companies over the next five years, which is about seven times its 2016 revenue – that’s a big commitment and increases the risks associated with slowing growth. Also new in the S-1/A are a couple of paragraphs intended to reassure investors about the multi-class stock structure and the disclosure they will receive with their Class A shares, as well as some expansion on its slowing user growth and the lower engagement levels its Rest of World users exhibit relative to its US and European users.
Amazon Reports Fourth Quarter 2016 Financial Results (Feb 2, 2017)
Amazon had a somewhat disappointing quarter relative to analyst estimates, as growth slowed in its core e-commerce business. Unit shipment growth, which had been above 25% for the last five quarters, dropped suddenly to 24%, which impacted overall growth rates, as those dropped for the second quarter in a row. The International business had significant losses for the second straight quarter as Amazon invests more heavily overseas in fulfillment, market entry, and extending services like Prime video globally. AWS grew at a healthy clip, though margins are flattening at around 26% lately. As usual, executives on the earnings call were not helpful in understanding or predicting the big swings in both growth rates and investment levels, though guidance for Q1 looks fairly light. The official explanations are the anniversary of a leap year in 2015, which added 150 basis points to growth, and currency headwinds, which are being mentioned more frequently again on earnings calls lately. But it looks as though Amazon may be expecting slightly slower growth in Q1 too. Dropping back down to the high teens and low twenties growth rates Amazon saw in 2014 and 2015 wouldn’t be the end of the world, but it would be a rather different trajectory from the one it’s been on for the past year and a half, and investors would react accordingly.
Apple Adds Public Transport Maps for Great Britain (Dec 23, 2016)
It appears Apple now has public transit maps for the whole of Great Britain (but not the whole of the UK – Northern Ireland is missing). I’ve been seeing lots of cities and countries added recently – the public transit data seems to be getting more and more complete (my nearest big city, Salt Lake City, was added last week).
Apple’s iCloud website has been the solution for users of its products who don’t own a Mac, but it’s often been a poor second class citizen to the Mac experience (arguably deliberately). This is an interesting change in a key area, and it’s possible that it portends more robust iCloud.com offerings for other products and services.