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
- Real world AI use cases - we published a couple revealing "applied AI" use cases, starting with Phil's JAGGAER brings AI and automation to streamline direct spend processes. Also see: BT Group connects with AI to get a grip on procurement spend, by Mark Samuels. Standout quote, via Phil: "In the past year, Bosch has done 11,800 online negotiations using automated interactions between buyers and sellers... This frees up sourcing professionals to focus on more complex requirements."
- Healthcare needs to inject digital therapeutics - Mark Chillingworth on the potential for dramatic health care changes - and the resistance to it: "The next generation of digital natives is already using digital therapeutics on a simple level, measuring their exercise, ovulation, and diets and caring for their mental well-being via digital means. If the healthcare sector doesn’t reflect this change in lifestyle, then it will be disintermediated."
- Getting insight to buyers - G2's VP of Market Research Chris Voce on an enterprise challenge - Barb explores what G2 hopes to achieve with buyer data: "If the data is accurate and reliable, then there is a massive opportunity for the research team to create research that helps buyers, sellers (and investors) make truly data-driven decisions on software."
Vendor analysis, diginomica style. Here's my three top choices from our vendor coverage:
- Confluent delivers strong growth and has big plans for Flink - but workforce cut by 8% - Derek reports on Confluent results as complicated earnings (and layoffs) news continues.
- Software AG FY2022 Q4 results on target but guidance disappoints, workforce cut 4% - Yep, it's complicated at Software AG also. Phil: "Software AG takes a further step on its journey to a cloud-first SaaS model but investors are spooked by the margin hit as the transition continues."
- The ‘Godfather of Process Mining’ explains why the future of the technology is an object centric approach - Derek digs into how Celonis' process mining method is evolving: "Understanding processes in isolation is one thing, but mapping them across an organization and seeing how they interact with each other is another."
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:
- Acumatica Summit 2023 - a fast event recap - Brian
- Acumatica Summit 2023 - Acumatica stakes its claim to modern ERP. Here's how it defines it - Jon
- How Key Code Media turned economic headwinds into business growth - an Acumatica cloud ERP story - Jon. Plus, my show podcast: ERP as a data platform? BI pitfalls and potentials - with Joni Girardi.
A few more vendor picks, without the quotables:
- Integration challenges as the price of digital transformation failure rises - new data from MuleSoft - Stuart
- Here's to the future! PTC CEO Jim Heppelmann on the changing PLM market and where the $1.46 billion ServiceMax takeover fits in - Stuart
- Siemens CTO bets on smart infrastructure - Mark Chillingworth
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
My top seven
- How to tie CX to business success in three simple steps - CRM vendors are under the macro-economic microscope right now - what better time to revisit how to build an effective CX business case? Thomas Wieberneit issues the best CX post of the year.
- Key Planning Trends for 2023 In the Face of Economic Uncertainty – Over at Amalgam Insights, Hyoun Park is getting it done this year, including this very sharp post on getting planning right.
- What To Watch Out For As GPT Leads a New Technological Revolution - Park also put ChatGPT through its paces in this practical-not-sensational view of generative AI use cases: "If your point of view is something that ChatGPT can provide in two seconds, it is neither interesting or new. To stand out, you need to provide greater insight, better perspective, or stronger directional guidance."
- Most Common Digital Transformation and ERP Implementation Myths and Mistakes - Eric Kimberling deconstructs everything from the idealization of agile methods, to the questionable over-reliance on quadrants.
- How Can We Break Our Obsession with Meetings? I love that Shopify calls meetings "a bug, not a feature."
- What explains recent tech layoffs, and why should we be worried? Or, more accurately, do layoffs even work? It's about time we had a debate about this:
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.
This was epically goofy:
Amazing botomated service fail from UberEats:
1. We botched your order so we want to sell you something
2. We botched so we want you to deepen your commitment
3. We aren't refunding anything
4. Messing up is a chance to get you in our loyalty program
— Jon Reed (@jonerp) February 6, 2023
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:
AI sales copy insanity: idiocy at scale - without bullshit https://t.co/dW3EHwzRAz
"AI can write now, but it needs supervision. And failing to supervise it will make you look very stupid."
-> yep, and the need for human involvement changes the ROI calculation dramaticalliy
— Jon Reed (@jonerp) February 5, 2023
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:
From the inbox:
"ChatGPT AI Valentine’s Day Cards for your co-workers"
Why share thoughtful sentiments with a few people when you can blast out to many more with AI, and be a much more incredible person
— Jon Reed (@jonerp) February 3, 2023
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.