Hyperscale is a weekly newsletter on cloud computing, developer tech, and all things enterprise IT. You can subscribe on LinkedIn here.
Hello, and welcome to the first edition of Hyperscale — a new weekly newsletter from Business Insider’s enterprise tech team, covering the latest developments in cloud computing, developer technology, cybersecurity, and all the other stuff that makes the modern internet economy shake, rattle, and hum. I’m Matt Weinberger, deputy tech editor in our San Francisco bureau, and the head of our enterprise coverage.
“Hyperscale” is the term for the incredibly, absurdly massive data centers that Amazon, Microsoft, Google, and a very few others use to power their cloud computing services. To be hyperscale is to reach a level of efficiency such that you can offer access to fundamentally unlimited supercomputing power to anybody on the planet with an internet connection for pennies per hour.
This model changed everything. Startups like Pinterest or Snapchat could get their businesses off the ground without having to buy or rent servers. Companies like Netflix could get into the video-streaming business, assured that they’d have access to the right computing infrastructure to serve an audience of millions. Even established companies in industries like finance and insurance have embraced the cloud as a way to speed up their operations — and ditch their long-standing legacy software. Developers, too, have had to change with the times, adopting new methodologies like DevOps to keep up with the incredible speed at which software is now released.
I could go on, but the point is that this notion of hyperscale computing has changed literally everything about the software industry, from how it gets made, to how customers to use it, to how the good guys protect it from the bad guys.
It’s a concept that’s come into the limelight amid the ongoing pandemic: Every “Fortnite” player, Zoom user, and Netflix watcher is taking advantage of these technologies, whether they know it or not.
Every week, I’ll be bringing you the latest dispatches from this hyperscale world, featuring the latest stories from the Business Insider tech team. Our goal is to make this as useful to you, our readers, as possible, so if you have any feedback, don’t hesitate to get in touch at firstname.lastname@example.org, or reach out on Twitter.
Without further ado, this week’s dispatch from the hyperscale world:
It’s Zoom’s world, and we just live in it. That’s what it feels like, anyway — by now, you’re probably very familiar with how it’s being used from the boardroom to the living room. The Zoom boom has Wall Street all kinds of excited, with the 9-year old company’s stock price just about doubling since January 1st, giving it a market cap of some $40 billion.
Last week, though, Zoom’s riches-to-more-riches story took a weird turn. As Business Insider’s Paayal Zaveri reported, the company quietly edited a blog post to clarify that it didn’t have 300 million daily active users, as first claimed, but rather 300 million daily meeting participants. Zoom says it was an error, and never meant to claim that it had that many daily active users.
This incident seems likely to haunt Zoom for a while. Not only did news media outlets — including Business Insider — report the wrong figure based on the original blog entry, Zoom never actually issued a correction or called attention to the edit, meaning that the inaccuracy spread far and wide.
Even giving Zoom the benefit of the doubt that this was an honest mistake, keep in mind that it’s not the first time that Zoom has gotten in trouble over misleading marketing claims — see also: the firestorm over its misleading marketing claims of end-to-end encryption.
Combine that with Zoom’s various and well-documented security problems — which, in fairness, it has taken steps to address — and trust in the company is at a deficit. It’s hard to imagine Wall Street, at least, forgetting this incident any time soon, especially with questions lingering over whether the company will be able to live up to its heightened valuation once we get back to something resembling normalcy.
The bigger picture
Zoom’s quiet retraction also makes it that much harder to gauge its progress against its much larger rivals, specifically Microsoft and its Teams app, which comes bundled in the Office 365 cloud suite. Microsoft this week said that Teams is seeing 200 million daily active meeting participants in videoconferences. That’s still fewer than Zoom, to be sure.
But Microsoft also disclosed that Teams has 75 million daily active users — up from 44 million in mid-March. In the present state of confusion over Zoom’s user numbers, it’s hard to say for sure, but it seems to indicate that Microsoft is gaining plenty of ground on Zoom, even without the benefit of being the video chat tool of choice for birthday parties and socially-distant workout classes. Later this year, Microsoft will launch a consumer version of Teams, so maybe we’ll see some change there, too.
On that subject, Google last week opened up Google Meet — its lesser-loved but still popular enterprise videoconferencing tool by making it entirely free for consumers and businesses alike. G Suite boss Javier Soltero told Business Insider that it was part of a play to make sure that its tools appealed to both parts of users’ daily lives.
It’s a smart move, as Google tries to make a bigger mark on the remote-work conversation, but for the moment, it sure looks like this is a two-horse race for first place between Microsoft and Zoom.
Which is a good segue to…
Microsoft, Alphabet (which is to say, Google), and Amazon all reported earnings last week, giving an important glimpse into their cloud businesses.
Nothing big has changed in the cloud wars: Amazon Web Services reported over $10 billion in quarterly revenue, affirming its status as the dominant cloud in the market.
Look to second- and third-place Microsoft and Google Cloud, instead, as a sign of things to come.
Microsoft still doesn’t break out specific revenue for its own cloud platform, but it posted $13.3 billion in what it calls commercial cloud revenue. That metric includes Azure, the business versions of Office 365, and other cloud services for business. CEO Satya Nadella said that the company’s strong overall growth was attributable to big growth in those cloud businesses, as Microsoft customers undergo “two years’ worth of digital transformation in two months.”
Indeed, Microsoft said that it hasn’t seen much negative impact to its business from the COVID-19 crisis, aside from a reduction in advertising spend on Bing and LinkedIn, and some supply chain issues that resulted in some difficulty in scaling up its data centers enough to meet the insanely high demand for its cloud services — causing some capacity issues, as Business Insider’s Ashley Stewart notes. It promises that those supply chain issues are largely resolved, as China’s manufacturing sector gets back up to speed as the pandemic passes in the country.
Google Cloud, for its part, reported quarterly revenue of $2.8 billion, up 52% from the same period last year. That’s far less than either of its main competitors, but as Business Insider’s Rosalie Chan reports, Wall Street is emboldened by the results nonetheless — its strong growth rates stand to help the company deal with a downturn in its advertising business.
The big takeaway is that as the economic downturn takes its toll on both consumer spending and marketing budgets, Wall Street is going to peg all its hopes for Amazon’s, Microsoft’s, and Google’s future on their cloud businesses. This will likely prove to be a double-edged sword: While each cloud is both a high-revenue and high-margin business, Amazon and Microsoft have both seen their cloud growth rates slow down, for the simple reason that their revenue bases only keep getting larger.
Showing growth will be easy for these companies, amid the broader trend of cloud migration in businesses large and small. But showing enough growth to offset the unpredictability of everything else, enough to sate the investor crowd when so much else is going awry? Well, that part remains to be seen.
Farewell, for now
That’s it for this first edition of Hyperscale. Thanks for reading, stay sane and stay safe, and don’t hesitate to reach out to me at email@example.com with questions, comments, concerns, and tips for next week’s newsletter.
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