|From: FUBHO||1/11/2019 11:18:56 PM|
|IDC: Cloud Infrastructure Revenues Surpassed Those for Traditional IT for the First Time on Record|
Vendors’ cloud infrastructure revenues grew to $16.8 billion in the third quarter of 2018, surpassing revenues from sales into traditional IT environments for the first time on record, according to International Data Corporation (IDC). The infrastructure revenue figure included servers, enterprise storage and Ethernet switches. The year-over-year gain was 47.2%.
The cloud IT infrastructure sales accounted for more than half (50.9%) of the total worldwide IT infrastructure vendor revenues, up from 43.6% in the third quarter of 2017.
However, the research firm cautioned that fourth quarter revenues were expected to be down compared to the year-earlier period, which means that spending on cloud IT infrastructure will represent less than 50% of total revenues for the full year (47.4%).
Cloud Infrastructure Revenues
Spending on all three technology segments in cloud IT environments is forecast to deliver double-digit growth in 2018, IDC added, with compute platforms to be the fastest growing at 59.1%, while spending on Ethernet switches and storage platforms will grow 18.5% and 20.4%, respectively.
“The first three quarters of 2018 were exceptional for the IT Infrastructure market across all deployment environments and the increase in IT infrastructure investments by public cloud data centers was especially strong, driven by the opening of new data centers and infrastructure refresh in existing data centers,” said Natalya Yezhkova, IDC research director, IT infrastructure and platforms, in a prepared statement. “After such a strong year we expect some slowdown in 2019 as the overall market cools down and some cloud providers work through adjustments in their supply chain. However, IDC expects the shift in IT infrastructure spending toward cloud environments will continue.”
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|From: Glenn Petersen||1/16/2019 11:54:48 AM|
|Infor gets $1.5 billion more in funding ahead of planned IPO|
January 15, 2019
(Reuters) - Cloud technology company Infor Inc said on Wednesday it received an investment of $1.5 billion from shareholders Koch Equity Development LLC and private equity firm Golden Gate Capital.
The funding builds on Koch Equity’s investment of more than $2 billion in early 2017. Infor said it is considering a potential IPO in 2019 or 2020, subject to market conditions.
New York-based Infor helps firms automate businesses by offering specialized software licenses to specific sectors as opposed to selling a product to its customers across industries.
Infor said it had revenue of $3 billion in fiscal year 2018.
Reporting by Akanksha Rana in Bengaluru; Editing by Arun Koyyur
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|From: Sam||1/29/2019 3:32:32 PM|
|Microsoft earnings: How to look for a clue about a cloud downturn |
By Jeremy C. Owens
Published: Jan 29, 2019 3:25 p.m. ET
If companies are spending less on cloud data centers, it should show up in Microsoft’s capital expenditures
The biggest drama in tech earnings so far this season is the possibility that the cloud boom is going bust, especially after Intel Corp. revealed disappointing data center sales last week.
For Microsoft Corp. MSFT, -2.06% , though, the downturn that is expected would likely cause little effect. Providers of cloud-computing power have shown no effects yet, as any downturn would be in its early stages and only affecting equipment providers far down the food chain. When Microsoft reports fiscal second-quarter earnings Wednesday afternoon, though, there could be at least one data point to test the theory.
For more: Intel’s cloud boom is no longer making it rain, and that’s a problem
Raymond James analysts pointed out last week that capital expenditure plans from Microsoft are typically “highly correlated” with Intel’s INTC, -0.48% outlook. For that reason, analysts at that bank expect Microsoft’s capex spending to be flat this calendar year, while consensus estimates call for an increase of 23% in this fiscal year and 10% in the 2020 fiscal year.
If the trend holds and Microsoft does pull back on its spending, it could back up Intel’s commentary that the entire data-center equipment market is slowing down. However, if Microsoft says that it expects to increase spending still, it could signal that the company is moving away from its “Wintel” partner in the cloud and looking at other chip vendors, which would just be an Intel problem and throw a small wrench in the talk of a cloud bust.
Either way, analysts appear confident that Microsoft is a safe bet at the moment because of its booming Azure cloud-computing business, a big reason why the company ended Monday with the largest valuation of any U.S. public company at more than $800 billion.
What to expect
continues at marketwatch.com
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|From: Glenn Petersen||2/1/2019 9:47:40 AM|
|Amazon Web Services reports 45 percent jump in revenue in the fourth quarter|
Jordan Novet | @jordannovet
- Amazon Web Services said revenue reached $7.43 billion in the fourth quarter.
- The segment remains Amazon's dominant source of profit.
Published 17 Hours Ago Updated 14 Hours Ago CNBC.com
Amazon's cloud-computing division said revenue jumped 45 percent in the fourth quarter, as the company continued to cement its lead over Microsoft and Google.
Sales at Amazon Web Services climbed to $7.43 billion from $5.11 billion a year ago, topping the $7.29 billion consensus estimate among analysts polled by FactSet. AWS revenue represented 10 percent of total quarterly sales at Amazon.
The cloud business has become crucial to the success of its parent, not only for revenue but also for profits.
Operating income for AWS in the quarter was $2.18 billion, exceeding the $2.09 billion FactSet consensus estimate. The unit accounted for 58 percent of Amazon's overall operating income. AWS' operating margin was 29 percent, shrinking from 31 percent the prior quarter.
"We are getting more and more creative around getting efficiency up and getting our cost of acquisition down," Amazon's chief financial officer, Brian Olsavsky, told analysts on the company's quarterly earnings call on Thursday.
AWS beat Microsoft and Google to the market for cloud infrastructure, which companies use to outsource their computing and data storage needs, and has held onto its lead.
However, Microsoft's business is growing faster, even though it's still smaller than AWS. The software company said on Wednesday that Azure cloud revenue grew 76 percent in the latest quarter.
Brian Weiser, an analyst at Pivotal Research Group, had estimated that AWS would generate fourth-quarter revenue of $7.41 billion.
"With substantial upside potential for AWS and a strong track record, we think we can safely assume significant ongoing revenue growth for the foreseeable future," wrote Weiser, who initiated Amazon coverage with a "buy" rating earlier this month.
AWS' big announcements in the period included the introduction of new computing instances that rely on ARM-based server chips, custom-built chips for accelerating artificial-intelligence work and a plan to offer hardware equipped with AWS software for corporate data centers.
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|To: Sam who wrote (1497)||2/1/2019 10:05:24 AM|
|From: Glenn Petersen|
|Microsoft slips on revenue miss|
ordan Novet | @jordannovet
- Microsoft's revenue was slightly below consensus as revenue from Windows device makers fell.
- Azure's revenue growth was flat sequentially at 76 percent.
Published 3:30 PM ET Wed, 30 Jan 2019 Updated 6:30 PM ET Wed, 30 Jan 2019 CNBC.com
Shares of Microsoft stock fell as much as 4 percent Wednesday after the company issued its fiscal second-quarter earnings report with slightly lower revenue than expected.
Here are the major numbers:
Revenue increased 12 percent year over year in the quarter, which ended on Dec. 31, Microsoft said in a statement.
- Earnings: $1.10 per share, excluding certain items, vs. $1.09 per share as expected by analysts, according to Refinitiv.
- Revenue: $32.47 billion, vs. $32.51 billion as expected by analysts, according to Refinitiv.
While Microsoft again declined to disclose exact revenue for the Azure cloud business that's contributed to the company's success in recent years, Microsoft did say Azure grew 76 percent, which is flat sequentially from the previous quarter.
Given comments from Intel, Juniper and other companies related to spending on infrastructure, Microsoft investors had reason to be concerned about what that means for Azure, said Brent Bracelin, an analyst at KeyBanc Capital Markets who has a "buy" rating on the stock. Bracelin had predicted around 74 percent growth, or $2.85 billion in revenue.
Microsoft said it collected $9 billion in revenue from its Commercial Cloud category, which includes the Azure public cloud, commercial subscriptions to the Office 365 productivity software bundle, the Enterprise Mobility and Security products and commercial LinkedIn services.
The unit was up 48 percent, reflecting a sequentially higher growth rate from 47 percent one quarter ago. Bracelin had estimated it would rise 44.8 percent this time around. The gross margin for Commercial Cloud held steady sequentially at 62 percent.
Azure is second to Amazon Web Services in the market for cloud infrastructure, which lets companies offload their computing and data storage. Bracelin predicted Azure would contribute $2.85 billion in the quarter, implying around 74 percent growth, down sequentially from the prior quarter. Amazon, which publishes results tomorrow, is expected to report AWS revenue of $7.3 billion, according to analysts surveyed by FactSet.
"Within the next five years I don't envision Azure catching up," Bracelin said in an interview this week. He said that within 10 years, Azure could be bigger if AWS is still part of Amazon.
"The debate becomes at some point, do Amazon.com's ambitions limit the opportunities for AWS because of the competitive aspirations they have, that just limits the ability for AWS to grow," Bracelin said.
Microsoft's top business segment, More Personal Computing -- which encompasses gaming, search advertising, Surface and Windows -- hit $12.99 billion in revenue, below the $13.08 billion consensus estimate among analysts polled by FactSet.
Revenue from Windows device makers fell 5 percent year over year in the worst results there in more than two years. On a conference call with analysts, Microsoft's chief financial officer, Amy Hood, attributed those results in part to the timing of the supply of processors to PC partners. Meanwhile, Microsoft's Surface revenue, at $1.86 billion, was up 39 percent.
The company's Productivity and Business Process Segment -- including Dynamics, LinkedIn and Office -- generated $10.10 billion in revenue, coming in barely over the $10.09 billion FactSet analyst estimate. Office revenue from consumers was affected by the PC environment, along with "some execution challenges we had," Hood said.
And the Intelligent Cloud Segment, which includes Azure, enterprise services, SQL Server and Windows Server, posted revenue of $9.38 billion, beating the $9.28 billion estimate. In the past few years Microsoft's capital expenditures -- to support Azure and other products -- has risen sequentially from the fiscal first quarter to the fiscal second quarter, but this time it fell sequentially, going from $4.3 billion to $3.9 billion.
In the quarter Microsoft had 33.3 million Office 365 consumer subscribers, up from 32.5 million in the fiscal first quarter. In December Microsoft had 64 million monthly active Xbox Live users, up from 57 million in September.
Microsoft announced some notable cloud deals in the quarter including Gap and Walgreens. The company also acquired Glint and disclosed a change to its Edge browser strategy, a market where it competes with Google Chrome.
In terms of guidance, Hood said Microsoft expects between $29.4 billion and $30.1 billion in revenue in the fiscal third quarter. The midpoint of that range is just below the Refinitiv consensus estimate of $29.87 billion. She said Microsoft expects "continued market impact" because of a more limited supply of chips, and she said the PC conditions could also hinder Office consumer revenue growth. Microsoft's stock rose slightly in extended trading after Hood provided guidance.
Microsoft has been going back and forth with Amazon in recent weeks for the title of world's most valuable company by stock market value. The shares are up about 4 percent so far this year.
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|From: Sam||2/4/2019 2:06:14 PM|
| Enterprise Cloud Adoption Rates Rising With Microsoft, Amazon Leading Ahead of JEDI Award|
MT NEWSWIRES 2:04 PM ET 2/4/2019
Symbol Last Price Change
|MSFT ||105.44 ||+2.66 (+2.59%)|
|AMZN ||1636 ||+9.77 (+0.6%)|
|QUOTES AS OF 02:04:30 PM ET 02/04/2019 |
02:04 PM EST, 02/04/2019 (MT Newswires) -- Adoption rates in the cloud are rising among businesses, with Microsoft's(MSFT) Azure and Amazon's(AMZN) Web Services leading the way as anticipation grows ahead of the awarding of a key government contract, Wedbush Securities said on Monday.
Azure revenue grew 76% year-on-year and AWS was up 45%, quarterly reports last week showed, with Alphabet's (GOOGL) a "distant third" with more details to be given later Monday in its own earnings, analysts Daniel Ives and Strecker Backe said in a note.
Microsoft (MSFT) "continued to be in the midst of shifting its business from traditional, slow growing PCs, into a leader in the fast-growing cloud market on the shoulders of its core Azure platform," the analysis said. The cloud battle versus AWS "remains front and center" for Microsoft(MSFT) in 2019 and beyond, especially as other companies come at the cloud market aggressively from different angles, Wedbush said.
"While this will be a pivotal year ahead for Google and its key GCP endeavour, we believe Azure and AWS remain miles ahead of the nearest competitor," Ives and Backe said.
But anticipation is growing for the winner to be announced likely in late March or early April for the US Department of Defense's Joint Enterprise Defense Infrastructure, or JEDI, Cloud contract, which Wedbush said is worth $10 billion.
"All investor eyes are trying to decipher if this is an AWS win or potentially Azure given Microsoft's(MSFT) long standing DOD relationship," the analysts said. "While both Amazon(AMZN) and Microsoft(MSFT) have their proponents and critics within government circles from an IT and security perspective, based on our discussions it appears this battle for JEDI is more of (about) 60%/40% AWS vs MSFT chances to win." But that's different than the "runaway" 80%/20% for AWS a year ago, they said.
JEDI's underlying goal is to deliver a cloud services solution to support unclassified, secret and top secret requirements across the department of defense, Wedbush said.
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|From: Glenn Petersen||2/22/2019 5:16:09 PM|
|Using Notecard, devices can connect to cloud providers like Amazon's AWS or Microsoft’s Azure without ever having to cross the public internet, offering additional security benefits.|
Exclusive: Ray Ozzie wants to wirelessly connect the world
February 22, 2019
Photo illustration: Axios Visuals
Ray Ozzie, the man who created Lotus Notes and helped usher Microsoft into the cloud era has a new goal: helping devices in the home get smarter by hooking them up directly to the cellular airwaves. In an exclusive interview, Ozzie said his startup has started trials with AT&T on a module that securely connects all sorts of products, from appliances and alarms to vending machines and construction equipment.
Bottom line: There's no doubt that many more devices are going to be connected wirelessly in coming years and that not all device makers will want to handle connectivity themselves. Ozzie's startup is likely to be just one of many companies willing to take on that task.
The premise behind Ozzie's new company, Blues Wireless, is that everyone from appliance makers to logistics companies will want their products to have a secure wireless connection without the hassles or risks of doing it themselves.
"Customers ate trying to connect virtually everything that exists to the cloud," Ozzie told Axios. "It’s fairly a no-brainer as compared to a technology in search of a problem."
Current and forthcoming cellular networks will be able to compete favorably with Wi-Fi, Ozzie said, offering several benefits.
-- Unlike with Wi-Fi, devices can be set at the factory to connect wirelessly. Many Wi-Fi-equipped devices today never get connected because consumers either don't see enough benefit or get frustrated with the set-up process.Yes, but: The problem is more than a technical one, Ozzie acknowledges: Cellular connections cost money, and efforts to connect devices in the past left customers to manage the data costs themselves.Blues Wireless hopes to take that hassle away by using a Kindle-like business model, selling the modules at enough of a profit to cover the cost of the device and the wireless data the devices will use. It isn't saying just how much it expects to charge.Also, Blues is still small, using mostly contractors and bankrolled by Ozzie.
-- Everything is encrypted, with secure credentials stored on the device itself.
-- Using Notecard, devices can connect to cloud providers like Amazon's AWS or Microsoft’s Azure without ever having to cross the public internet, offering additional security benefits.
History lesson: In the past, Ozzie's brainstorms have typically been directionally correct but ahead-of-their-time products looking to capitalize on shifts in the way people and computers interact. This time around, Ozzie says he's banking on making it easier for companies to get on board an inevitable hardware trend.
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|From: Glenn Petersen||3/11/2019 9:54:10 AM|
|Nvidia to Buy Mellanox for $6.9 Billion in Data Center Push|
By Ian King
March 11, 2019
-- Mellanox holders offered $125-per-share in all-cash deal
-- Graphics chipmaker trying to further embed itself in servers
Jensen Huang holds a Nvidia Drive Xavier Autonomous Machine Processor at CES.
Photographer: David Paul Morris/Bloomberg
Nvidia Corp. agreed to buy chipmaker Mellanox Technologies Ltd. for $6.9 billion, gaining expertise to help it push into the growing market for data center components.
The $125-a-share cash offer for Mellanox is a 14 percent premium to Friday’s close of $109.38. But traders may not be sold on the idea that the deal will go through, with Mellanox trading up 8.6 percent to $118.80, still short of the bid from Santa Clara, California-based Nvidia.
Nvidia’s biggest-ever acquisition is aimed at accelerating momentum for one of Chief Executive Officer Jensen Huang’s most successful initiatives. The company’s founder built a multi-billion-dollar business in under three years by persuading owners of data centers that his graphics chips are the right solution for processing the increasingly large amounts of information needed for artificial intelligence work, such as image recognition.
“The data center is more important than ever,” Huang said in an interview. “This combination allows us to innovate faster.”
Nvidia is said to have won a bidding process for the American-Israeli company, which makes chips used to speed the flow of information across computer servers, beating out rivals including Intel Corp. Mellanox’s market value, now at about $5.9 billion, started to run up last year when activist investors took stakes and talk that it was up for sale emerged. Shares of the company, which is based in Yokneam, Israel and Sunnyvale, California, have risen 66 percent from their October trough and 18 percent this year before the deal was announced. Nvidia shares were up 1.5 percent Monday in New York to $152.89.
The acquisition process was ‘‘very competitive,’’ Huang said. Once complete, the combination is expected to be immediately accretive to profit and free cash flow, Nvidia said.
The growing reams of data generated means work on AI and large databases needs to be split between multiple computers. Simply using a faster processor isn’t enough, Huang said. To deal with this, data centers in future will be built as though they are single giant computers “with tens of thousands of compute nodes,” requiring inter-connections that let them work in parallel. Nvidia will use its newly acquired technology to make those giant warehouses full of machinery more efficient and effective, he said.
The deal may signal a resumption of consolidation in the $470 billion semiconductor industry, which has been reshaped over the past five years as companies combined to gain scale while battling rising costs and shrinking customer lists.
“This could reinvigorate M&A discussions across the entire sector. Net Net: while the transaction would be a positive, given the size of the company, we wouldn’t view it as a transformation,” RBC Capital Markets analyst Mitch Steves wrote in a note to clients. “A deal would be more impactful for the broader semiconductor industry.”
Mellanox’s technology is crucial in transferring information from one component to another, both within and between computers. Chips that direct that traffic have become increasingly pivotal as corporate networks and internet-based cloud service providers try to make sense of the plethora of data.
Multiple companies have an interest in adding such capabilities to their own products as they try to court major buyers of servers and other computer infrastructure, such as Alphabet Inc.’s Google, Amazon.com Inc. and Microsoft Corp.
Nvidia is the largest maker of graphics chips used by computer gamers. Such chips excel at executing multiple small calculations in parallel at high speed. Under Huang, the company developed the Cuda programming language now widely adopted by the industry, which helps tailor chips for artificial intelligence processing. The Nvidia unit that serves that market has tripled sales in the past three years.
Mellanox’s revenue surged 26 percent in 2018, topping $1 billion for the first time. Nvidia had $2.9 billion in sales from its data center unit last year, up from $830 million two years earlier.
The transaction now needs approval from regulators. That process has become more complicated as the U.S. faces off with China over trade. The Trump administration has blocked deals over concerns about China’s ambitions to acquire new semiconductor technology, and Beijing -- the world’s largest consumer of chips -- has in turn made it harder to secure its approval for transactions.
Huang said Nvidia studied carefully how the deal would be reviewed by regulators and believed it wouldn’t face significant hurdles because the two companies are complementary. Goldman Sachs served as exclusive financial adviser to Nvidia, while Credit Suisse Group and JPMorgan Chase & Co. advised Mellanox.
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|From: Glenn Petersen||3/21/2019 10:15:02 AM|
|Google Just Showed Us the Future of Gaming|
Data centers could make individual game consoles obsolete
Photo: Justin Sullivan/Getty
On Tuesday at GDC 2019, Google announced Stadia, a new game-streaming service that will let you play AAA video games—the industry’s blockbusters—on almost every device you own, including your laptop, phone, TV, or even a Chromecast. If it works as advertised—a big “if”—it could end the gaming hardware market as we know it.
With Stadia, which is slated to launch later this year, Google is aiming for nothing less than entirely detaching video games from the hardware you own. Instead of downloading a game to your computer or putting a disc in your console, the game would be installed on a remote server that Google owns and operates.
You won’t have to buy a new console or build a new PC to run the latest generation of games. Instead, Google can upgrade Stadia servers entirely behind the scenes. You’ll just wake up one day and find that you can play games with better graphics. This presumably means high-end gaming is about to get a lot cheaper—a top-of-the-line PlayStation 4 Pro costs about $400—though Google declined to share pricing details with OneZero.
We don’t tend to think about it too much, but video games have an unusually intimate connection with the hardware they run on. Every few years, Sony, Microsoft, Nintendo, and PC hardware manufacturers release new devices that add more power and features to the games you play. Microsoft made 4K gaming possible with the Xbox One X, NVIDIA launched graphics cards capable of ray tracing, and Nintendo had that weird expansion pack that made Donkey Kong 64 not crash. For as long as they’ve existed, video games and their hardware have been intrinsically linked. Think The Legend of Zelda: Ocarina of Time, for instance, and you’ll picture the Nintendo 64 it ran on.
But while this relationship is widely accepted in gaming, the same isn’t true for most other kinds of software. A professional video editor might need a better machine to squeeze more out of Adobe Premiere, but no one has to upgrade their phone every couple years to use Gmail or buy a new laptop to run the latest version of Microsoft Word.
Photo: Justin Sullivan/Getty
This kind of cloud gaming service has been tried many times before, from the failed OnLive to PlayStation Now and to the still-in-beta NVIDIA GeForce Now. But two key factors set Google’s attempt apart. First, you may already own a device capable of running Stadia. GeForce Now is the closest to this platform-agnostic dream, with support for both Mac and Windows computers, but Stadia goes a step further by including Chromebooks, phones, and even the modest Chromecast streaming device. If you have a gadget capable of running YouTube, Google says you can play the newest high-end games using Stadia.
Second, the servers these games will run on are owned by Google. And Google is very good at building servers. Video games, especially the visually rich AAA games that most modern consoles can play, are among the most resource-hungry applications any computer can run. For an individual player, keeping up with the pace of hardware innovation can be a Sisyphean task—and an obscenely expensive one at that. For Google, upgrading massive systems with the latest hardware is done routinely.
Consider the current gold standard of gaming: 4K resolution, running at 60 frames per second. If you have a 4K TV today, you have a few options available to play games that can get the most out of it. You can buy an Xbox One X or a PlayStation 4 Pro, or you could build a PC capable of playing 4K games.
According to Google, Stadia will launch with support for playing games at 4K HDR at 60 fps right off the bat. For a new service launching in 2019, perhaps that’s to be expected. However, the company went a step further, announcing that it would scale up to 8K and 120 fps in the future. The company didn’t give a timeline for when this would happen, but since the first consumer-level 8K TVs were only just announced this year, few consumers are likely to be in any rush.
This approach also removes the roadblock for more subtle innovations. For example, NVIDIA’s new ray-tracing graphics cards simulate the way light works in the real world, creating instant shadows and realistic reflections and simplifying a lot of the work game developers have to do to make a game look good. The benefit is so immediately obvious that it spawned its own meme.
But ray tracing presents a problem for game developers: It only works on NVIDIA graphics cards that support the feature. The company is expanding the list of supported cards, but that still leaves a potential audience that’s limited to a subset of PC gamers who have a small selection of relatively high-end graphics cards. With such a minuscule audience, few outside of the biggest studios will invest resources into developing games for it. It’s just not worth it yet.
Were that technology to be incorporated into Stadia servers, however, the potential audience would be massive. Instead of waiting for consumers to slowly migrate to new hardware, bigger and better games can be shipped as soon as Google’s data servers are upgraded. Companies like NVIDIA would also be more likely to sell their new high-end hardware directly to Google, rather than trying to incrementally sell $600-plus cards to average consumers.
There are still a lot of potential stumbling blocks for Stadia. The biggest bottleneck is home internet speeds, which, in the United States, have not always had the bandwidth to support something as intense as 4K game streaming. There’s also the price: $20 a month for access to a library of games?—?as is the case for PlayStation Now?—?might be reasonable, but if the company makes users pay separately for additional features like 4K streaming or ray tracing, it might end up a wash compared to just buying a console.
What’s not in question is the earth-shattering effect Stadia will have on gaming hardware in the home if the service works as advertised. To use a soon-to-be-timely pop culture analogy, the industry has resembled the endlessly turning wheel of power in Westeros that Daenerys Targaryen describes in Games of Thrones: Nintendo, Sony, Microsoft, NVIDIA, each taking their turn on top with successive and expensive upgrades. Consumers have accepted the need to buy new consoles or graphics cards every few years, because there has been no other way to play the latest games. In a world where you can play the newest Tomb Raider in perfect 4K HDR on something as simple as a Chromecast, however, the endlessly turning wheel of hardware upgrades won’t just stop—it will break altogether.
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|From: Glenn Petersen||3/23/2019 9:25:12 PM|
|Giant Military Contract Has a Hitch: A Little-Known Entrepreneur|
By Karen Weise and Thomas Kaplan
New York Times
March 20, 2019
Deap Ubhi is a restless guy. At 26, he quit his job in private equity in Northern California, where he had grown up and gone to college, and then moved to India to found Burrp!, a local search site similar to Yelp. He sold the company in 2009 and along with other alums became what they called the Burrp! mafia, seeding and growing other start-ups in India.
“Fast and is extremely straightforward,” one Indian entrepreneur wrote about Mr. Ubhi in an online reference. “Not for the faint of heart.”
After returning to the West Coast, he joined Amazon in 2014 to encourage start-ups to adopt the company’s cloud-computing products. But in less than two years, Mr. Ubhi left to start a company that provided technology to restaurants, inspired by his family’s experience running an Indian-Jamaican-Mexican fusion joint.
He then shifted his career in a new direction, taking his Silicon Valley mentality to the heart of the Washington bureaucracy. He joined a Pentagon effort to recruit techies, and turned the restaurant start-up into a side hustle. He wanted to use his skills not “to make a search engine more performant, or help a box of stuff get to a customer faster; but rather towards service of the American people,” Mr. Ubhi later wrote.
But that circuitous career has landed Mr. Ubhi, now 39, in the center of a Washington drama. The question of what roles he played inside the Pentagon, and when, is holding up one of the largest federal information technology contracts in history. It is a scuffle with an unusual mixture of tech industry rivalries, national politics and the obscure world of government procurement.
Deap Ubhi in 2009. His short time working in the Pentagon has put him at the center of a Washington drama.CreditSattish Bate/Hindustan Times, via Getty Images
The project, a $10 billion deal to bring modern cloud computing to the Pentagon’s arsenal, drew the attention of the biggest tech companies from the moment it was announced in 2017. Amazon, Microsoft, Google, IBM and Oracle all wanted the prize.
But it had a hitch: The contract would go to only one cloud vendor, even though many big companies prefer to work with multiple cloud providers. Amazon, the runaway leader in cloud computing, appeared to be perhaps the only company capable of fulfilling the Pentagon’s huge demands. And that is where Mr. Ubhi’s connections to the company, where he now works again, have thrown a wrench into the process.
The software giant Oracle, which is widely considered ill equipped to land the deal, has aggressively criticized the one-vendor approach. As part of its opposition, the company is arguing in federal court that Mr. Ubhi’s ties to Amazon shaped the contract in the company’s favor.
Before the case was filed last year, the Pentagon found that Mr. Ubhi had no improper influence, and it continued evaluating the proposals despite Oracle’s lawsuit. But in late February, the government said it had received “new information” about Mr. Ubhi that it needed to investigate, essentially delaying the process.
A Pentagon spokeswoman, Elissa Smith, declined to say what new information about Mr. Ubhi had been brought to the department’s attention. The Pentagon had said that the winner of the contract was projected to be announced in April. But Ms. Smith said the inquiry into Mr. Ubhi was “expected to impact the award date.”
Mr. Ubhi, contacted through Amazon, declined to comment, as did the company.
Oracle also declined to comment. But in its lawsuit, Oracle has highlighted Mr. Ubhi’s outspoken enthusiasm for Amazon. In early 2017, he took to Twitter to thank Jeff Bezos, the Amazon founder, for opposing President Trump’s travel ban. “Once an Amazonian, always an Amazonian,” he wrote.
Safra A. Catz, a co-chief executive of Oracle, which has has aggressively criticized the Pentagon’s approach to a giant cloud computing contract.CreditKevin Hagen for The New York Times
The comments touch on an issue floating around discussions about the contract: whether Mr. Trump would put his finger on the scale. The president’s disdain for Mr. Bezos and Amazon is well documented on his Twitter feed. At a private dinner with Mr. Trump, one of Oracle’s co-chief executives, Safra A. Catz, discussed the contract, Bloomberg reported last year. After that report, the White House press secretary, Sarah Huckabee Sanders, said Mr. Trump was “not involved” in the contracting process.
By the standards of most administrations, it would be extraordinarily unusual for the president to insert himself into the competition for a government contract. But when Mr. Trump was president-elect, he drew attention for taking on Boeing over the cost of a new Air Force One aircraft and pressing Lockheed Martin over the cost of the F-35 fighter jet.
If Mr. Trump went so far as to say “who should compete, or how one company should be evaluated compared to another, that would be a first,” said David A. Drabkin, a former procurement official at the Defense Department.
A Defense Department procurement official is formally overseeing the cloud contract, known as the joint enterprise defense infrastructure, or JEDI. But Ms. Smith declined to identify the officials who would be involved with choosing the winner.
A White House official reiterated on Wednesday that the president was not involved.
The military has lagged behind the private sector in adopting cloud computing, but officials have made clear that they know the stakes. The Pentagon’s move to the cloud has been led by the chief information officer, Dana Deasy, a former global chief information officer at JPMorgan Chase.
“Battlefield advantage is driven by who has access to the best information that can then be analyzed to inform decision making at the point and time of need,” Mr. Deasy wrote last year.
Amazon’s chief executive, Jeff Bezos, left, at the Pentagon in 2015 with Ashton B. Carter, right, the defense secretary at the time.CreditSenior Master Sgt. Adrian Cadiz/Department of Defense
Adopting technologies widely used in the private sector is key to the mission of the defense digital service, the Pentagon tech team Mr. Ubhi joined in 2016. It is unclear what Mr. Ubhi worked on during most of his time in government. But in his last two months, during fall 2017, he did market research for JEDI, according to the Pentagon.
In court documents, Oracle argues that Mr. Ubhi worked on JEDI when the Pentagon decided to take the approach of hiring a single cloud provider. Oracle cites internal documents in which Mr. Ubhi expressed support for a single cloud. When the Air Force awarded a different cloud project to multiple vendors, Mr. Ubhi wrote that the contract “makes me weep.”
Oracle says Mr. Ubhi clearly favored Amazon over other tech companies. In an online chat conversation on Slack about another cloud-computing provider, he sent a closed-eyes, tongue-out emoji.
Amazon has countered that the Pentagon identified 72 people substantially involved in developing the contract and its requirements, and that Mr. Ubhi worked on JEDI for only seven weeks, in the early stages.
At the end of October 2017, Mr. Ubhi recused himself from JEDI, saying Amazon and his restaurant start-up, Tablehero, “may soon engage in further partnership discussions.” Two weeks later, he resigned and then rejoined Amazon, where he still works on the commercial, not government, side of the business, the company said.
There is no evidence that Amazon bought Tablehero. Dheeraj Jain, an investor in Tablehero, said Mr. Ubhi has not responded to emails. “We have written off this investment, unfortunately,” he added. “And we are not happy about it.”
Dana Deasy, the Pentagon’s chief information officer, has been leading its move to the cloud.CreditSarah Silbiger/The New York Times
The Pentagon released the JEDI request for proposals nine months after Mr. Ubhi recused himself. It said a single cloud would let it move faster and with more security, a decision the Government Accountability Office later affirmed.
Because Amazon appeared to have a leg up, the contract immediately became a point of contention among tech contractors. Both Oracle and IBM filed protests with the Government Accountability Office, which adjudicates federal contract challenges. The office denied Oracle’s protest and later rejected IBM’s on procedural grounds. Oracle, whose cloud market share is small enough to be grouped in the “other” category in several leading research reports, took its fight to the United States Court of Federal Claims.
The delays from the Oracle lawsuit could help Microsoft. In the months since the request for proposals went out, the company, which has supplied the Pentagon for decades, has improved its capabilities to the point that some experts believe it is an increasingly credible competitor to Amazon.
But even if Mr. Ubhi is found to have tainted the contract, it is not clear that it would change the Pentagon’s plan to use a single cloud provider. The Government Accountability Office in November found that the Pentagon’s justifications “reasonably support” the decision. The office said it would be “improper” to go against what the Pentagon determined was best for the country, even if Mr. Ubhi had shaped the contract.
When he was working on the project, Mr. Ubhi said that bolstering national security was the point.
In October 2017, he wrote in a blog post that he believed his work on JEDI would “be a unique asset to help our men and women in uniform make more data-driven decisions, and to allow our leadership to be more effective.”
Little did he know, it seems, that his work on it could put the project on pause, or, if Oracle has its way, in jeopardy.
Kate Conger contributed reporting. Alain Delaquérière contributed research.
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