Today’s fast-growing cloud computing giants are defying gravity

Isaac Newton, the English scientist known for promulgating the laws of motion and gravity and inventing the telescope, among other accomplishments, wrote to a colleague many centuries ago that “if you see more, it is by standing on the shoulders of giants.” He intended it as a metaphor that, over time, came to symbolize scientific progress and innovation.

Today, I humbly assume that we stand on the shoulders of cloud computing giants. Many of these fast-growing mega-corporations thrive, despite the technology market’s current swoon, using cloud software—largely out of public view—to process and analyze incredible amounts of data and fundamentally transform the ways we live and work.

Cloud companies are poised to create billions, possibly trillions, in global economic value and represent a bright spot in an otherwise dismal economic landscape characterized by geopolitical turbulence, rising inflation and persistent supply chain problems.

Simply put, Marc Andreessen was right in his assessment of 2011 The program will devour the world. Software has already consumed the world of high tech, but there’s more to the list.

Inflation leads to innovation

We are at a historic inflection point in the market. “Cloud penetration,” which means the amount of corporate technology spending attributed to cloud-based software rather than legacy technology running on onsite servers, is expanding, with ample room for growth. In 2022, as we predicted in A A report released earlier this monthCloud spending will account for about 25% of the $919 billion in total technology infrastructure spending.

If history is any guide, today’s inflationary market dynamics will lead to a step increase in technology adoption as companies take advantage of increasingly sophisticated software to make their operations more efficient and reduce costs. Wherever there is an economic slowdown, market dynamics gravitate towards technological innovation.

We saw this just under six decades ago, in the 1960s, with the advent of satellite navigation systems, electronic spreadsheets, and the personal computer; Then more than 30 years ago, after peak inflation in the early 1980s, with advances in programming languages ​​and multimedia platforms. And we see it now with the cloud.

Future growth will come in industries and economic sectors that have so far lagged behind in the Andreessen-led software party a decade ago. But they can still benefit from the ability of the cloud to capture and analyze data.

Indeed, today, many of the largest and most profitable companies in the world are run by major cloud vendors. It includes Amazon Web Services – a now existing subsidiary The most profitable part of the company And it could soon overtake Amazon’s core e-commerce business — as well as Google Cloud and Microsoft Azure. Just last month, Google said that its cloud computing unit had been created $6.9 billion in revenue for the just-ended quarter, up 38%, while Microsoft said revenue in Azure and its related cloud services business up 35% Despite the slowdown in consumer spending.

These core cloud services help provide the infrastructure for modern data cloud startups such as Databricks* (in which Battery is an investor), Snowflake, MongoDB, Twilio, Okta, and others, which are very fast growing companies that are still mostly unknown to non-specialists but are being Increasingly recognized for its ability to deliver critical and operational efficiencies contractionary effects to their clients.

Four of those five companies total revenues of $1 billion or more, and all continue to post double-digit growth rates in today’s otherwise uncertain economy, according to the company’s earnings reports and data.

From drugs to ketchup to clothes

Cloud technology has wide-ranging applications that benefit consumers and businesses alike. They range from Walgreens Using predictive data analytics to forecast demand for specific drug prescriptions, to Kraft Heinz Calculating the optimal amount of spice stocks on supermarket shelves across the country, to Runway rental Leveraging automation-driven, cloud-enabled bots to rapidly accelerate processing time for returned designer garments.

These early adopters of the corporate cloud are standing on the shoulders of cloud giants, and the view from this height is impressive. Many junior cloud software providers are waiting to provide services for large corporate clients. There are about 15 private software “unicorn” companies – those valued at a billion dollars or so – that are now worth $10 billion Or more, based on data from Pitchbook and my company’s research, even after the recent stock market plunge.

Are these reviews crazy? Maybe, or maybe not, given the cloud opportunity. There is still a large part of the world left behind by intractable data problems: terabytes upon terabytes of information that no one is collecting, cleaning, or analyzing at an exorbitant opportunity cost. The cloud is the only place with enough computing power to enable the storage, security, and analysis required on such a massive scale.

This disconnect is exacerbated by the fact that very few workers have data literacy, and most have low levels of confidence when it comes to making data-driven decisions, according to Accenture Report 2020. This means that the majority of the world’s workforce is not fully aware of the potential power of data – and this lack of understanding comes with huge costs.

The true potential of the cloud

Despite these challenges, I firmly believe that we will soon witness the proverbial quantum leap in accuracy and productivity, required by an amplified environment and enabled by cloud innovation. Consider Newton’s law of inertia: everything remains in a state of rest or uniform motion, in a straight line, unless it is forced to change that state by forces acting on it. There are significant forces at play today that indicate that we are entering a technological growth spurt.

We’ll soon see cloud-enabled software like “generative AI” transforming industries that currently require humans to produce original work—computer coding, social media posts, sales materials, legal briefs—through more complex support by machines, with the potential to generate trillions in Economic value and improve labor productivity.

Cloud data will also transform areas such as medicine and patient care. Disciplines such as genomics will use massive amounts of data to transform the way diseases are treated, ushering in a new era of precision medicine that leverages the cloud to analyze complex genomic and patient information, including social determinants of health. The cloud revolution in healthcare will soon lead to highly customized treatments, promising fewer side effects for patients; faster, more effective treatments; and improving health equity.

Access to home ownership will also be improved as part of the new cloud data revolution, allowing more families to build wealth. Mortgage lenders are moving to the cloud It will make it easy to analyze a borrower’s income, employment, assets, property valuation, payment history, and detailed loan terms, among other data points. This, in turn, will improve the productivity and accuracy of lenders and the fairness of the system to consumers. We could get to a point where non-traditional metrics (rent or student loan payments, for example) can be incorporated into mortgage lending or credit score tracking, with huge and transformative benefits for consumers.

As science fiction author William Gibson said: “The future is already here. It’s not evenly distributed.” Data, manipulated in the cloud, is an incredibly powerful resource, but we have to use it well. Cloud technology will help us get there, and it may even help get us out of our current economic straits.

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