Can Big Clouds Squeeze Tiny Clouds?

July 27, 2021

I think that big clouds absorb or push smaller clouds out of the way. More accurately, the forces allowing clouds to grow are money, customers, and a desire to be the biggest, most capable cloud in the sky. Agree or not, the decimation of Rackspace suggests that being a mid tier cloud providers is a difficult slot to make work. To get the details on the outfit which once hired the surprising Robert Scoble as an evangelist, navigate to “Rackspace Cuts 10% Of Workforce In One Of Largest Employee Shake-Ups.” The write up states:

The company announced one of the largest layoff rounds in company history today, as it will terminate about 10% of its workforce over the next 12 months, according to a filing with the U.S. Securities and Exchange Commission Thursday (July 22, 2021). The company says it will “backfill” or absorb about 85% of the roles to its offshore service centers, likely a cost-cutting measure. It doesn’t list where those roles will go specifically. The company did partner with Tech Mahindra — an India-based firm — in 2019.

From my vantage point in Harrod’s Creek, this appears to be an IBM-type play. The expensive US workforce can go away after some of the soon-to-be-RIFfed train their lower cost replacement. Yep, MBA and bean counter infused efficiency.

What the story does not address is why. There may be a very small clue in Cloudflare’s blog post “AWS’s Egregious Egress.” The idea is that Amazon AWS makes it easy to enter the nifty AWS Hotel and its walled garden. In fact, getting a room doesn’t cost much at all. However, once in the walled garden, one finds small bladderworts, pitcher plants, sundews, and the venus flytrap. There are some critters basking in the warmth of the AWS servers too. I thought I spotted the technical equivalent of the inland taipan, a couple of king cobras (you know, the ones with the cool cowls), and a family of banded kraits. To get out of the walled garden, there is a modest fee charged. This is similar to the exit visa sold to some departing travelers to the wonderful and exotic Zimbabwe.

This pay-to-leave is described in the Egregious Egress write up. I continue to believe everything I read on the Internet, so let’s assume that the information is spot on. I learned:

image

To sum up, it costs a lot to leave AWS. The write up points out:

During the last ten years, industry wholesale transit prices have fallen an average of 23% annually. Compounded over that time, wholesale bandwidth is 93% less expensive than 10 years ago. However, AWS’s egress fees over that same period have fallen by only 25%. And, since 2018, the egress fees AWS charges in North America and Europe have not dropped a penny even as wholesale prices in those markets over the same time period have fallen by more than half.

The article suggests that the approach is like a Hotel California. (I was disappointed that the author did not seize upon what is called a roach trap.) The insect cannot get out at least easily and may leave a leg behind as a memento:

image

The article ends with an appeal to Amazon AWS:

We remain hopeful that AWS will do the right thing, lower their egress fees, join the Bandwidth Alliance — following the lead of the majority of the rest of the hosting industry — and pass along savings from peering with Cloudflare and other networks to all their customers.

To sum up, Amazon’s market presence and its pricing power may be sparking the Rackspace terminations. Will other cloud providers, like those in the Bandwidth Alliance, be thinking about similar actions or hoping that the US government will view Amazon as a 2021 manifestation of the pre Judge Green AT&T? My suggestion is to ask a retired Bell head about those similarities.

Stephen E Arnold, July 28, 2021

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