“Clown-1-1” (CC BY-SA 2.0) by americanbulldogbully007
There are hyperclouds and there are hyperclowns. Hyperclouds have globe-spanning infrastructure upon which they lavish many billions of dollars every year. Hyperclowns pursue a far more asset-light approach to the same problem, but try to compensate with hot air.
It has been just over two years since we last checked in on self-proclaimed public cloud powerhouses IBM and Oracle. Are they closing the gap with the hyperclouds? Have their capital expenditures (CAPEX) on cloud infrastructure (datacenters, CPU cores by the million, transoceanic cables, etc.) caught up with their bombast, never mind the actual hyperclouds? How secure is their hyperclown status?
IBM
Since our last installment, IBM chose to spend $34 billion buying Red Hat instead of spending it on CAPEX. Needless to say, we are disappointed. And for what? An increasingly proprietary Kubernetes distribution? A not-so-scarce asset that the CNCF trumpets as one of “over 90 certified Kubernetes offerings”? Spending $34 billion on CAPEX would have edged out Amazon ($31.95 billion) in 2019. So how much did IBM spend on CAPEX?
2019 was the year IBM simply gave up even pretending to compete in cloud. Expect stealth layoffs (a rare discipline where IBM is still best in class) and lots of multi hybrid private hosted Watson blockchain cloudwashing from here out from the company.
Oracle
Oracle, meanwhile, was on a roll last we looked. They had a nice hockey stick going, tripling their CAPEX spend over the previous five years. The press tell us Oracle is putting the “pedal to the metal” on infrastructure investment. Oracle Cloud is even getting some unexpected plaudits from pundits, particularly for network pricing (they don’t appear to own any network themselves so this cost presumably is a marketing line item). And, of course, they had 60,000 idle cores when Zoom came calling (though AWS was quick to point out that 60,000 cores is but chump change in an actual hypercloud’s couch).
Alas, Oracle’s CAPEX spending topped out in 2017. They’ve pulled back almost 20% since our last installment (the annual data above maps their quarter ending in February to the calendar year). Yet their marketing clamor has ratcheted up more than 20%, as Larry runs his time-honored strategy of picking a verbal fight with the market leader in hopes some kind of equivalence rubs off. CAPEX tells us several things about cloud businesses: whether you have actual customers, whether you’re ready for new customers, and how you’re keeping up with the competition. On all three counts, Oracle’s CAPEX tells us the company isn’t playing the hypercloud game.
Meanwhile in Cloud City
A cursory look suggests the hyperclouds continue to move up-and-to-the-right with their CAPEX investment while the hyperclowns are in a tight race to be the x-axis.
On a relative basis as a percentage of revenue, the hyperclowns also continue to lose ground.
New Clowns in Town
But IBM and Oracle shouldn’t get complacent about their hyperclown status, as there are some new entrants throwing their clown hats into the ring.
The announcement of “the world’s first financial services-ready public cloud” prompted an immediate check to see what kind of CAPEX was behind it. What did we see?
This is not the CAPEX chart of a new public cloud player. It looks like the CAPEX of a company that migrated completely to someone else’s cloud in 2012. The chart belongs to Bank of America, who made the financials services cloud announcement in conjunction with IBM. It appears their effort is really just IBM Cloud with a very thin veneer (roughly the thickness of a press release) on top. Perhaps a face-saving cloud migration strategy for a bank that previously has been one of the most prominent remaining cloud hold-outs (and rumor has it the pandemic has increased the enthusiasm for cloud amongst other companies in the ever-shrinking group of hold-outs). It is interesting that Bank of America and IBM believe the financial services industry has a higher tolerance for unexplained outages and opaque customer communication than other industries.
Since this is mostly an effort to obscure the IBM brand (not such a bad idea given their performance over the last decade), and Bank of America’s CTO ran off to lead IBM’s cloud “business” shortly thereafter, this particular cloud fantasy doesn’t yet warrant finding a new picture featuring a trio of clowns to grace the top of this post.
“The cradle of an open, transparent digital ecosystem…”
But perhaps the most ambitious new effort of potentially epic hyperclown proportions comes from a newly formed Belgian non-profit: GAIA-X. Emboldened by their global success in inflicting trillions of “something, something, privacy” pop-up notices on unsuspecting web users (pay no attention to the actual consequences), the French and German governments have decided it is time to “do something” about the cloud.
From the original Belgish:
With GAIA-X, representatives from politics, business and science from France and Germany, together with other European partners, create a proposal for the next generation of a data infrastructure for Europe: a secure, federated system that meets the highest standards of digital sovereignty while promoting innovation. This project is the cradle of an open, transparent digital ecosystem, where data and services can be made available, collated and shared in an environment of trust
This bottomless serving of word salad seems to boil down to defining a set of protocols that allow computers to exchange information (oddly, the word Internet never appears in the manifesto), but is well-tossed with a creamy dressing of GDPR and European “values” (which seem to have some strong Chinese influences these days). Their audacious breakthrough is declaring CAPEX unnecessary. GAIA-X will magically federate the spare servers of the European continent into a digital infrastructure that can fend off the barbarian hypercloud horde and preserve European “digital sovereignty”.
Hyperclown status is best thought of as the ratio of cloud rhetoric to CAPEX spending. The most efficient hyperclowns maximize their marketing while minimizing actual spend. GAIA-X is reported to have an annual budget of 1.5 million Euros ($1.71 million), which is characterized as “not huge, but sufficient.” Sufficient for what remains to be seen.
