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Enterprise hits and misses - Google Cloud and AWS hit macro-economic speedbumps, AI gets use cases, and layoffs get questioned

Jon Reed Profile picture for user jreed February 6, 2023
Summary:
This week - Google Cloud and AWS are the latest to face the economic headwinds - what can we learn? Tech layoffs are everywhere - but are they the best response? Your whiffs include: Valentine's Day, via ChatGPT.

loser-and-winner

Lead story - Google and AWS hit an earnings speedbump - but what does it mean?

So far, analysts remain bullish on enterprise IT spending, albeit with downgraded forecasts. So what are we to make of Google and AWS earnings? Stuart takes a closer look in Google Cloud and AWS grow, but slow - the macro-economic crisis hits home for platform providers. To be clear, Google Cloud did have revenue growth, so it's a tad complicated. Stuart explains:

Over at Alphabet, the Google Cloud business saw year-on-year growth of 32% to take Q4 revenues to $7.3 billion, with Google Cloud Platform being the best performer.

And yet, more talk of macro-headwinds. Stuart quotes CFO Ruth Porat:

In Q4, we saw slower growth of consumption as customers optimized GCP costs, reflecting the macro backdrop. Google Cloud had an operating loss of $480 million.

But Alphabet CEO Sundar Pichai still sees their AI-driven approach to cloud carrying the day:

Our differentiated products and focused go-to-market strategy continue to drive customer momentum, beginning with real-time data, analytics and AI. Customers are increasingly choosing BigQuery because we unify data lakes, data warehouses and advanced AI/ML into one system and now analyze over 110 terabytes of data per second. Customers like [grocery chain] Kroger can analyze data in multiple clouds without moving data in most cases, and MSCI processes unstructured and structured data at scale.

For market watchers, Amazon CFO Brian Olasavsky's comments on slowed growth were a wake-up call:

Starting back in the middle of the third quarter of 2022, we saw our year-over-year growth rates slow as enterprises of all sizes evaluated ways to optimize their cloud spending in response to the tough macro-economic conditions. As expected, these optimization efforts continued into the fourth quarter….As we look ahead, we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters.

What conclusions are we to draw here? On the surface, it looks like a period of tougher sledding, but the strategic importance of cloud will carry spending weight for years to come. The problem, of course, is that growth industries can't operate in isolation from harder-hit sectors. In his conclusion, Stuart quoted Olasavsky's about being in "uncharted economic territory."

The concerning aspect: we really can't rely on historical cycles to tell us what comes next. The more optimistic part: companies know they can't sit on their behinds and just ride this one out. Spending will happen; well-run technology vendors with a compelling ROI type of use case are in the better lane. VR goggles not so much.

Diginomica picks - my top stories on diginomica this week

Vendor analysis, diginomica style. Here's my three top choices from our vendor coverage:

Acumatica Summit 2023 coverage and analysis - This year's Acumatica show raised potent questions on the changing value of cloud ERP - and how modern ERP delivers value to customers. Brian and I were on the ground in Vegas:

A few more vendor picks, without the quotables:

Jon's grab bag - We sure could use a dollop of tech-for-good right now; we got that via Madeline: Going straight to digital skills - providing laptops to offer prisoners tech skills.  She also filed Save the Children experiences donor growth with Adobe. Martin issued a vintage think piece in Does the CIO need to understand technology? CASTing around for an answer to the 'how' of software

Chis looks at the one-step-forward two-steps-back awesomeness of what lies ahead for us with drone-filled skies in Drones 2023 - what enables or prevents their take-off at scale?  "Per-flight drone insurance would incentivize operators to fly over quiet spots, like parks or residential areas." Something else to look forward to... Finally, Chris found a few more AI hype balloons he had yet to puncture in Monday Morning Moan - AI: time to wear a black tie for the death of white-collar jobs?

Best of the enterprise web

Waiter suggesting a bottle of wine to a customer

My top seven

Moreover, layoffs don’t work to improve company performance, Pfeffer adds. Academic studies have shown that time and time again, workplace reductions don’t do much for paring costs. Severance packages cost money, layoffs increase unemployment insurance rates, and cuts reduce workplace morale and productivity as remaining employees are left wondering, 'Could I be fired too?'

More data points on why layoffs are problematic, via HBR: What Companies Still Get Wrong About Layoffs.

I'm not saying that all the recent tech layoffs were corporate mistakes, or just shareholder posturing. But: there is a considerable body of stats to consider here. There are also interesting - though hardly painless - alternatives, e.g. proportional pay cuts at all levels of an organization. Here's what we know for sure: a lot of talented people in a tough spot right now, and it isn't over yet. Let's hope new opportunities make up for any ill-conceived corporate decisions - or redouble our efforts to make it so.

Overworked businessman

Whiffs

This was epically goofy:

Maybe I should have done like this six year old, and ordered up $1,000 of deliveries. Then, maybe one would have arrived: Six-year-old uses father’s phone to order $1,000 worth of food on Grubhub. Mmm - shawarma (via Clive Boulton).

This piece wasn't a whiff, but the "AI sales email" within it sure was:

Once more with feeling:

We believe that our solution could potentially help solve these problems by providing seamless solutions throughout all stages of growth including post-close when needed most!

On the bright said, generative AI is just in time for Valentine's Day:

Nice slight of hand: don't risk alienating your spouse, but go ahead and give algorithmic sentiments a try on your co-workers. Something tells me my diginomica colleagues will sniff this one out... I'll let you know how it goes. See you next time...

If you find an #ensw piece that qualifies for hits and misses - in a good or bad way - let me know in the comments as Clive (almost) always does. Most Enterprise hits and misses articles are selected from my curated @jonerpnewsfeed.

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