Isaac Newton, the English scientist known for promulgating the laws of motion and gravity and inventing the telescope, among other accomplishments, wrote to an associate centuries ago that “If I have seen further, it is standing on the shoulders of giants”. He understood it as a metaphor that, over time, came to symbolize scientific progress and innovation.
Today, I would humbly say that we stand on the shoulders of the cloud computing giants. Many of these huge, fast-growing companies are thriving, despite the current tech market slump, using cloud-based software – largely out of public view – to manipulate and analyze incredible amounts of data and fundamentally transform our ways of living and working.
Cloud companies are poised to create billions, if not trillions, of global economic value and represent a beacon of hope in an otherwise dismal economic landscape marked by geopolitical turmoil, rising inflation, and ongoing issues across the chain. supply.
Simply put, Marc Andreessen was right in his 2011 estimate that software will eat the world. Software has already eaten up the tech world, but there’s more on the menu.
Inflation leads to innovation
We are at a historic inflection point in the market. “Cloud penetration,” i.e. the amount of enterprise technology spending attributable to cloud-based software instead of old-school technologies running on on-premises servers, is growing rapidly with room for growth sufficient. In 2022, as we projected in a report released earlier this month, cloud spending will account for approximately 25% of the $919 billion in global technology infrastructure spending.
If history is any guide, today’s inflationary market dynamics will lead to a gradual increase in technology adoption as companies take advantage of increasingly sophisticated software to make their operations more efficient and reduce their costs. Where there are economic downturns, market dynamics gravitate toward technological innovation.
We saw it a little less than six decades ago, in the 1960s, with the creation of satellite navigation systems, the electronic spreadsheet and the personal computer; then more than 30 years ago, after the peak of inflation in the early 1980s, with advances in scripting languages and multimedia platforms. And we see it now with the cloud.
Future growth will come from industries and economic sectors that have so far lagged behind Mr. Andreessen’s decade-old software spree. But they can still benefit from the cloud’s ability to capture and analyze data.
Already today, many of the largest and most profitable companies in the world are powered by leading cloud providers. These include Amazon Web Services, a subsidiary that is now the company’s most profitable segment and could soon eclipse Amazon’s core e-commerce business, as well as Google Cloud and Microsoft Azure. Google last month said its cloud computing unit generated $6.9 billion in revenue for the just-ended quarter, up 38%, while Microsoft said revenue from its business Azure and related cloud services jumped 35% despite slowing consumer spending.
These core cloud services help provide the infrastructure for new cloud data startups like Databricks* (in which Battery is an investor), Snowflake, MongoDB, Twilio, Okta, and others, extremely fast-growing companies that remain mostly unknown to non-geeks but are increasingly recognized for their ability to deliver critical operational efficiencies and deflationary effects to their customers.
Four of those five companies have at least $1 billion in revenue and all continue to post double-digit growth rates in today’s otherwise uncertain economy, according to reports and statements. on business results.
From drugs to ketchup to clothes
Cloud technology has a wide range of applications that benefit both consumers and businesses. They range from Walgreens’ use of predictive data analytics to predict demand for specific drug prescriptions, to Kraft Heinz calculating the optimal amount of condiment inventory on supermarket shelves across the country, to Rent the Runway by leveraging automated, cloud-enabled robotics to rapidly speed up processing time for designer apparel returns.
These early enterprise cloud users stand on the shoulders of cloud giants, and the sight from that height is awe-inspiring. Many other cloud software providers are waiting in the wings to provide services to large enterprises. There are about 15 “unicorn” private software companies – those valued at around $1 billion – now worth $10 billion or more, based on data from Pitchbook and my company’s research, even after the recent stock market crash.
Are these valuations crazy? Maybe, or maybe not, given the cloud opportunity. Much of the world remains left behind with intractable data problems: terabytes upon terabytes of information that no one collects, cleanses, or analyzes at incalculable opportunity cost. The cloud is the only place with enough computing power to enable the storage, security, and analytics required at this monumental scale.
This lag is compounded by the fact that very few workers are data savvy and most have low levels of confidence when it comes to making data-driven decisions, according to a 2020 Accenture report. majority of the global workforce is not fully aware of the potential power of data – and this lack of understanding comes with high costs.
The true potential of the cloud
Despite these challenges, I firmly believe that we will soon see a proverbial leap forward in accuracy and productivity, necessitated by an inflationary environment and enabled by cloud innovation. Consider Newton’s law of inertia: every object persists in its state of rest or uniform motion, in a straight line, unless forced to change that state by forces imposed upon it. There are significant forces at play today that signal that we are entering a technological growth spurt.
We’ll soon see cloud-based programs like “generative AI” transform industries that currently require humans to produce original work – computer coding, social media posts, sales materials, legal briefs – through support more sophisticated by machines, with the potential to generate trillions in economic value and improved labor productivity.
Cloud data will also transform fields such as medicine and patient care. Specialties like 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 genetic and patient information, including the social determinants of health. The cloud revolution in healthcare will soon lead to highly personalized treatments, promising reduced side effects for patients; faster and more effective treatments; and improving health equity.
Access to property will also improve under this new cloud data revolution, allowing more families to build wealth. Mortgage lenders moving to the cloud will make it easier to analyze borrower income, employment, assets, real estate appraisals, payment histories, and detailed loan terms, among other data points. This will in turn improve the productivity and accuracy of lenders and the fairness of the system for consumers. We may reach a point where non-traditional metrics (rent or student loan payments, for example) can be integrated into mortgage lending or credit score tracking, with huge transformational benefits for consumers.
As science fiction writer William Gibson said, “The future is already here; it’s just not evenly distributed. Data, manipulated in the cloud, is an incredibly powerful resource, but we need to put it to good use. Cloud technology will help us achieve this and could also help us out of our current economic malaise.
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