From: Glenn Petersen | 7/7/2022 5:09:10 AM | | | | Amazon, Microsoft, Google Strengthen Grip on Cloud
Three companies account for about two-thirds of cloud spending and are using their size to maintain their hold on rapidly growing market
Big tech firms are investing in data centers as they compete for the $214 billion cloud computing market. WSJ explains what cloud computing is, why big tech is betting big on future contracts.
By Aaron Tilley Wall Street Journal July 5, 2022 7:03 am ET
The pandemic period has been a boon for the trio of companies that dominate cloud computing. Now as the economy enters another tumultuous phase, Amazon.com Inc., AMZN 0.73%? Microsoft Corp. MSFT 1.28%? and Google appear poised to extend their strength.
The three companies accounted for 65% of the $53 billion in global cloud-service spending in the first quarter of the year, according to Synergy Research Group, up from 52% of global sales four years ago. And their control of the crucial, rapidly growing market is expected to continue as their size makes them better able to keep investing and attract clients seeking stability in turbulent times, executives and analysts say.
Though well established, the cloud units of Amazon, AMZN 0.73%? Microsoft, and Alphabet Inc.’s GOOG 1.16%? Google have been expanding like startups, with sales growing by more than 30% year over year in recent quarters while smaller cloud services have seen their market share drop as more cloud spending migrates to the largest platforms, according to Synergy.
The pandemic drove spending broadly on the remote computing services known as the cloud as more of life and work shifted online. The top cloud players have consolidated their dominance in part because of the economics of the industry, which requires massive investments in servers and the facilities that house them, analysts say.
The bigger those networks of server farms get, the lower the average costs for building and running them, giving an edge to the three companies. They also gain advantages in their ability to develop homegrown chips, software and other technology for the cloud.
“We’ve been investing pretty significantly in this business for 15 years, and it’s not something that’s easy to catch up to,” said Matt Garman, senior vice president of sales and marketing at Amazon Web Services, the e-commerce giant’s cloud-computing unit.
Meanwhile, smaller companies in the sector are expected to face a more challenging fundraising environment, analysts say, as sliding stock prices mean investors are less willing to take big risks. In addition, they say, customers are looking to consolidate their spending and are more likely to pick and stick with the biggest players that often offer more reliability and a broader set of features.
Travel software company Sabre Corp. has decided to do more on the cloud, a move it says saves money and provides more flexibility for its business. It has increasingly done more through Google’s cloud, as using one cloud provider helps simplify the technology for its engineers and other employees.
Google’s capacity to analyze large amounts of data and its large menu of capabilities allow Sabre to focus spending on one vendor, saving it time and effort of juggling too many, said Joe DiFonzo, Sabre’s chief information officer.
“We’re going from managing hundreds and hundreds of individual third-party software relationships to centering on using more and more Google Cloud,” he said. He estimates that while Google most recently accounted for about 28% of the company’s spending on cloud services, it will take up 65% of Sabre’s cloud budget by year-end.
Combined revenue from cloud services at the top three companies grew more than 33% last year and is expected to grow close to 29% this year, according to analysts surveyed by FactSet.
“The big three really are running away with the game,” said Synergy chief analyst John Dinsdale.
As other tech sectors are staring at postpandemic slowdowns, demand for cloud services has stayed strong, said Thomas Kurian, chief executive of Google Cloud, whose global market share has increased from 1.5% in 2015 to 7.1% in 2021, according to Gartner Inc.
“We still see significant demand and interest from customers around the world in virtually every industry,” he said.
In recent years, some new and older cloud companies have grown their businesses by providing software and services to help customers interact with the cloud. However, the three companies’ dominance in hosting the cloud means the other cloud companies usually still have to work with them—and it positions the three to offer competing products later.
Box Inc. Chief Executive Aaron Levie says the heft of the big three companies helps drive down prices for Box, but it also indicates their control of the market.
“You have these players that have economies of scale, and scale begets more scale,” Mr. Levie said. Box sells cloud-based content-management and collaboration software, making it a user of as well as a competitor to the big three cloud companies.
Snowflake Inc. is one of the cloud-service providers that have risen quickly in recent years but faces growing competition from the cloud platforms it uses. Snowflake’s annual sales doubled for each of its past two fiscal years but the company expects growth to slow to 66% this year.
The company, which helps customers analyze business data across different clouds, has accused Google of trying to undercut its sales by pushing its competitive data analytics product, BigQuery.
“Google is not an open platform,” said Michael Scarpelli, chief financial officer at Snowflake, at an event earlier this year. “They don’t like to partner very well, especially if they feel threatened.”
Google said it has proven it can work well with competitors and some customers are choosing its product over Snowflake’s because it is better.
Other software startups have accused Amazon of developing competing cloud software. Amazon has said it is just reacting to its customers’ needs.
Cloud platform newcomers such as startup Sushi Cloud LLC are attempting to break through by focusing on niche areas like making running artificial intelligence software in the cloud cheaper. Others such as Cloudflare Inc. are trying to appeal to customers by offering low fees to shift data out of their clouds. The top cloud companies often make it expensive to move data.
“The unfortunate reality is the big three aren’t going anywhere, they’re going to continue to grow,” said Sushi Cloud Chief Operating Officer Shauna O’Flaherty. “I just hope that there is more room for challenger companies to emerge and not be intimidated.”
Write to Aaron Tilley at aaron.tilley@wsj.com
Appeared in the July 6, 2022, print edition as 'Cloud’s Big Players Strengthen Grip'.
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From: Glenn Petersen | 8/1/2022 5:31:23 AM | | | | Microsoft Asks Google, Oracle to Help Crimp Amazon’s U.S. Government Cloud Leadership
Software companies trying to get the U.S. to share its cloud-spending more widely by embracing multicloud approach
By Aaron Tilley Wall Street Journal July 27, 2022 9:00 am ET
Microsoft Corp. MSFT 1.57%? is rallying other big-name cloud-computing providers such as Alphabet Inc.’s GOOG 1.79%? Google and Oracle Corp. ORCL 1.04%? to press the U.S. government into spreading its spending on such services more widely, taking aim at Amazon.com Inc.’s AMZN 10.36%? dominance in such contracts.
The software giant has issued talking points to other cloud companies aimed at jointly lobbying Washington to require major government projects to use more than one cloud service, according to people familiar with the effort and a document viewed by The Wall Street Journal.
Microsoft also approached VMware Inc., VMW -0.14%? Dell Technologies Inc., DELL 1.26%? International Business Machines Corp. IBM 1.21%? and Hewlett Packard Enterprise Co., HPE 1.14%? said the people familiar with the effort. It hasn’t yet asked Amazon to join the loose alliance, the people said.
Amazon dominates the cloud-infrastructure industry with a 39% share of the 2021 global market ahead of Microsoft at No. 2 with a 21% share, according to research firm Gartner Inc. Amazon looms even larger in the business of selling cloud services to governments. Amazon’s cloud had a 47% share of the 2021 U.S. and Canada public-sector market orders, ahead of 28% for Microsoft, according to Gartner.
The National Security Agency last year picked Amazon as the sole vendor for a cloud contract that could be worth potentially as much as $10 billion over the next decade, renewing an existing business relationship.
An Amazon spokesman called the lobbying effort a self-serving campaign that could end up requiring customers to use inferior technology.
“Public-sector customers should have the freedom and flexibility to determine how to obtain secure, reliable and cost-effective cloud services and software—from the vendor or vendors of their choice—without mandates or unfair software licensing restrictions,” the Amazon spokesman said.
Microsoft’s push calls for the U.S. government to establish a preference for multicloud, an industry term that means using the services infrastructure of more than one company. It views multicloud as an urgent imperative for the government to get the best and most affordable cloud technology.
The Redmond, Wash.-based company has a history of making policy pronouncements. It has issued principle statements on unions, as well as its cloud policies in Europe recently. Its latest effort that hasn’t yet been made public is titled “Multi-Cloud Vision Statement and Principles.”
Cloud business is critical to Microsoft’s earnings, representing roughly half of its total sales. The company Tuesday posted lower-than-expected growth for Azure and other cloud sales.
Microsoft has grown frustrated about its lack of progress selling its Azure cloud services to the U.S. federal government with its rival’s Amazon Web Services continuing to win most of those contracts, said some of the people familiar with its efforts.
A Microsoft spokeswoman said the company “has consistently advocated a multicloud approach as a commercial best practice, and almost all companies have adopted this.” The company, she added, works “with other companies and trade associations to encourage the federal government to adopt the same strategy.”
Multicloud has become a popular approach for clients who seek to pick technologies from different vendors to optimize the service they receive and keep costs in check. In the document, Microsoft said the U.S. government should follow this example.
Oracle said it is backing the effort. “Microsoft is exactly right advocating for a multicloud strategy in government,” said Ken Glueck, executive vice president at Oracle. “We support their efforts wholeheartedly and plan to assist them in any way possible,” he said.
Whether to mix cloud-service providers has become a sticking point with some big government projects. The Pentagon embraced a multicloud approach last year after an earlier effort to pick one vendor was mired in controversy. Amazon was long considered the favorite for a massive Pentagon cloud-computing deal, though lost out to Microsoft. Amazon contested the award to its rival, and the Pentagon scrapped the contract, saying it would award contracts to multiple vendors in its future contract.
The Pentagon’s shift came after the Central Intelligence Agency, which had worked with Amazon for its cloud services, last year said it would embrace a multicloud strategy as it expands use of the technology.
Microsoft, in the document sent to others, has played down those government multicloud efforts as exceptions to the rule.
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Write to Aaron Tilley at aaron.tilley@wsj.com
Appeared in the July 28, 2022, print edition as 'Microsoft Presses Effort To Blunt Amazon'.
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From: Glenn Petersen | 8/2/2022 4:55:42 AM | | | | Microsoft extends life of cloud servers from four to six years
Banks billions by making servers last even longer than AWS or Google
Simon Sharwood, APAC Editor The Register Tue 2 Aug 2022 // 02:30 UTC
Microsoft has extended the life of the machines powering its cloud by two years and will bank billions as a result.
"We are extending the depreciable useful life for server and network equipment assets in our cloud infrastructure from four to six years," chief financial officer Amy Hood told investors last week during Microsoft's Q4 2022 earnings call.
"Investments in our software that increased efficiencies in how we operate our server and network equipment as well as advances in technology have resulted in lives extending beyond historical accounting useful lives," she added.
Those investments will save Microsoft billions every year. Hood predicted the change will make a $3.7 billion difference to Microsoft's bottom line during FY 2023 alone, which is now underway, with a $1.1 billion benefit in Q1.
Google and AWS have already announced extended lifespans for their cloudy infrastructure. Google announced an extension of its lifecycle for servers from three to four years in February 2022. In the same month, AWS detailed plans to run servers for five years and networking equipment for six – a one-year increase to both lifespans.
All of which may not be welcome news for Intel, AMD, and the manufacturers that kit out and build the millions of servers that big clouds consume. Extended hardware lifecycles mean some purchases will be deferred.
It's not all gloom for those suppliers, though. Last week Facebook and Google signaled they'd each spend billions on new servers to enable growth and catch up with purchases that were impossible during COVID-19-related supply chain messes.
But news that Microsoft may run servers for six years is surely something cloud buyers need to consider. Microsoft has made three-year server reservations its best-priced offer for both IaaS and some of its software licences. With the software giant now sweating assets for longer – and banking massive savings – users surely need to ask for their share of that bounty when next negotiating a cloudy deal.
Customers will also need to ask themselves if they’re happy running on six-year-old kit. Microsoft's silicon suppliers – Intel, AMD, and Ampere – will have produced perhaps three generations of processor across that span of time, not to mention other worthy innovations in networking et cetera. Intra-cloud migrations may well become necessary for some users, if only to avoid being tied to old hardware.
On the upside, keeping old servers around for longer might help Microsoft ameliorate Azure's capacity shortages. ®
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From: Glenn Petersen | 9/23/2022 5:01:41 AM | | | | Alibaba pledges $1 billion to cloud computing customers to reignite growth
Published Thu, Sep 22 20227:16 PM EDT Arjun Kharpal @ArjunKharpal CNBC.com
Key Points
- Alibaba said it will invest $1 billion over the next three fiscal years to support its cloud computing customers as the Chinese e-commerce giant looks to reignite growth after a historical slowdown.
- The investment consists of "financial and non-financial incentives, such as funding, rebates and go-to-market initiatives," Alibaba said.
- While cloud is a small part of Alibaba's overall business currently, the company's management sees it as a critical component to future growth and profitability.
Alibaba said it will invest $1 billion over the next three fiscal years to support its cloud computing customers as the Chinese e-commerce giant looks to reignite growth after a historical slowdown.
The investment consists of "financial and non-financial incentives, such as funding, rebates and go-to-market initiatives," Alibaba said in a press release on Thursday.
The company said it is also setting up a program to help its customers localize their cloud computing business needs depending on the market.
Alibaba is the world's third-largest cloud computing player behind Microsoft and Amazon, according to Gartner. While cloud computing is a small part of Alibaba's overall business currently, the company's management sees it as a critical component to future growth and profitability.
However, Alibaba has seen an unprecedented slowdown in growth amid Chinese economic malaise due to the resurgence of Covid in the world's second-largest economy and a stricter domestic regulatory environment. In the April to June quarter, Alibaba reported its first flat revenue growth on record.
Revenue growth in its cloud computing business also slowed down from the previous quarter.
Alibaba's investment announcement is also part of a broader push by the Hangzhou, China-headquartered company to expand its cloud computing business overseas.
Over the past few years, Alibaba has opened new data centers outside of China to win customers in other markets such as Singapore and Thailand.
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From: Glenn Petersen | 11/3/2022 5:43:39 AM | | | | Cloud stocks creamed as Fed indicates more rate hikes are coming
PUBLISHED WED, NOV 2 20225:29 PM EDT UPDATED WED, NOV 2 20225:47 PM EDT Jordan Novet @JORDANNOVET CNBC.com
KEY POINTS
-- The Federal Reserve said it would raise its benchmark rate again and indicated that the “ultimate” rate would be higher than it had previously expected.
-- One fund of cloud stocks is now down 51% for the year, compared with a 21% decline for the the S&P 500.
Investors pounded cloud software stocks on Wednesday on concern that interest rates will rise for longer than previously expected.
Initially stocks moved higher as the Federal Reserve announced it would increase its benchmark rate by 75 basis points. But after Powell began speaking at the central bank’s press conference, equities reversed their gains and fell to session lows.
Jerome Powell, chair of the Federal Reserve, said data showed the “ultimate level” of rates will be higher than the U.S. central bank had projected.
Cloud stocks have been particularly sensitive to rising rates as investors prefer to own stocks with stronger current earnings that are less reliant on future growth. Bill.com, Twilio and Cloudflare each lost 10% of their value on Wednesday and are down at least 53% so far this year.
In 2022 central bankers in the U.S. and abroad have repeatedly pushed up rates to stave off quickly rising prices of food, energy and other goods. For companies that pay cash dividends to investors, such as IBM, which is the lone large-cap tech stock up for the year, the risk is lower.
But for money-losing companies — and many cloud stocks are not profitable — the calculus is completely different. Valuations stem from the present value of future cash flows. Higher interest rates imply lower cash flows.
When interest rates were low, particularly during the onset of Covid-19 in early 2020, cloud software ballooned in popularity and the stocks soared. Revenue at high-growth companies doubled or even tripled year over year. But sentiment has changed.
One gauge of cloud stocks, the WisdomTree Cloud Computing Fund, is now down 51% for 2022, compared with a 110% rise in 2020. The S&P 500 is down 21% this year.
On Wednesday the WisdomTree fund fell 7.5%, the sharpest decline since June. The technology-heavy Nasdaq Composite index fell 3.4%, while the S&P 500 was down 2.5%.
The biggest loser was ZoomInfo, a provider of data for salespeople and other workers. Henry Schuck, ZoomInfo’s founder and CEO, said on Tuesday that despite delivering 46% year-over-year revenue growth, the company has run into challenges in connection with macroeconomic conditions.
“As we made our way through Q3, we began to see increased macro pressure on deals, causing the level of deal review to increase and sales cycles to elongate further,” Schuck said on a conference call with analysts on Tuesday. “Since this started very late in the quarter, it only modestly impacted Q3 results. This elongation trend has continued into Q4, and we do expect it to impact growth in the short term.”
CrowdStrike, Qualtrics and other cloud software stocks have reported more scrutiny of deals in recent months.
On Wednesday human resources software maker Paycom announced its 33rd consecutive quarter of profitability. The stock still fell about 8% in Wednesday’s selloff.
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From: Glenn Petersen | 11/19/2022 7:34:02 AM | | | | Growth in global cloud services spend slows to lowest rate ever in Q3 2022
Shanghai (China), Bengaluru (India), Singapore, Reading (UK) and Portland (US) – Tuesday, 1 November 2022
Worldwide cloud infrastructure services expenditure increased 28% year on year to reach US$63.1 billion in Q3 2022, up US$13.8 billion on the same period a year ago. With the negative impact of inflation and rising energy prices, companies are responding to market uncertainty by reducing spending, which may hit demand for cloud services in the short term. Coupled with the strong US dollar, the annual growth rate fell below 30% for the first time. Amazon Web Services (AWS), Microsoft Azure and Google Cloud remained the top three providers in Q3 2022, together accounting for 63% of global spend after growing 33%.

Long-term demand for enterprise digitalization remains strong, as the move to cloud remains the best way for today’s businesses to do more with less. But the impact of inflation and recession on the cloud services market was evident, with most top cloud vendors missing revenue targets in the quarter.
“Under economic pressure, enterprise customers are choosing to reduce operational risks by lowering their IT budgets,” said Canalys VP Alex Smith. “Despite winning large deals and having a backlog of contracts to fulfill, the growth of cloud vendors will be constrained because of inevitable project delays as some customers get skittish about the economic outlook. Hyperscalers will face a period of rising costs and lower revenue growth, which may lead to more conservative planning in 2023. We predict the hyperscalers will need to increase their prices in Europe by 30% to account for rising energy costs.”
AWS was the leading cloud service provider in Q3 2022, accounting for 32% of total spend after growing 27% on an annual basis. Despite slower-than-expected growth this quarter, AWS announced new commitments and migrations from customers across many industries and geographies. It continues to expand its infrastructure footprint worldwide to support customers, with the opening of its second region in the UAE and plans to launch new regions in Thailand.
Azure came second with a 22% market share after growing 35% annually. Growth was driven by strong renewal execution. Historically, Microsoft’s cloud business unit has seen stable revenue performance, with a declines brought about only by quarterly variations. Microsoft continues its push to host more of its own services on Azure. It announced the launch of its new data center region in Qatar, marking a major achievement for the company as the first hyperscaler to deliver enterprise-grade services in the country.
Google Cloud’s growth rate accelerated once again, up by 48%, boosting its market share in the global cloud services market to 9%. In addition to its strength in the consumer sector, it gained opportunities from the public sector and governments this quarter. It announced new Google Cloud regions in Asia Pacific, located in Malaysia, Thailand and New Zealand.
“Hyperscalers are continuing to roll out new infrastructure to reach new customers globally. At the same time, they are trying to find the next products and technology advances that will drive business growth,” said Canalys Research Analyst Yi Zhang. “The increased adoption of cloud services has stimulated thoughts about the value that can be extracted from data in the cloud. Both Google and Microsoft emphasized their development of products around data and AI. The future cloud service market is expected to achieve value creation with the introduction of data and AI.”
Canalys defines cloud infrastructure services as those that provide infrastructure-as-a-service and platform-as-a-service, either on dedicated hosted private infrastructure or shared public infrastructure. This excludes software-as-a-service expenditure directly but includes revenue generated from the infrastructure services being consumed to host and operate them.
For more information, please contact:
Alex Smith (US): alex_smith@canalys.com Yi Zhang (China): yi_zhang@canalys.com
About Canalys
Canalys is an independent analyst company that strives to guide clients on the future of the technology industry and to think beyond the business models of the past. We deliver smart market insights to IT, channel and service provider professionals around the world. We stake our reputation on the quality of our data, our innovative use of technology and our high level of customer service.
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From: Glenn Petersen | 12/7/2022 6:34:16 PM | | | | Pentagon Splits $9B Cloud Effort Among Amazon, Google, Microsoft, Oracle
All four had been shortlisted for JWCC, DOD's do-over of its giant JEDI cloud contract effort.
BY FRANK KONKEL EXECUTIVE EDITOR, NEXTGOV Defense One DECEMBER 7, 2022 05:34 PM ET
The Pentagon on Wednesday announced the awardees of the Joint Warfighting Cloud Capability—or JWCC—contract, with Amazon Web Services, Google, Microsoft and Oracle each receiving an award.
Through the contract, which has a $9 billion ceiling, the Pentagon aims to bring enterprisewide cloud computing capabilities to the Defense Department across all domains and classification levels, with the four companies competing for individual task orders.
Last year, the Defense Department had named the four companies as contenders for the multi-cloud, multi-vendor contract.
“The purpose of this contract is to provide the Department of Defense with enterprise-wide, globally available cloud services across all security domains and classification levels, from the strategic level to the tactical edge,” the Defense Department said in a Wednesday announcement.
The awards come after a years-long effort to provide enterprisewide cloud computing across the department, with a significant delay in March as the DOD conducted due diligence with the four vendors.
JWCC itself was announced in July 2021 following the failure and cancellation of the Joint Enterprise Defense Infrastructure—or JEDI—contract, DOD’s previous effort aimed at providing commercial cloud capabilities to the enterprise.
Conceptualized in 2017, JEDI was designed to be the Pentagon’s war cloud, providing a common and connected global IT fabric at all levels of classification for customer agencies and warfighters. A single-award contract worth up to $10 billion, JEDI would have put a single cloud service provider in charge of hosting and analyzing some of the military’s most sensitive data. Ultimately, JEDI was delayed for several years over numerous lawsuits that ultimately caused the Pentagon to reconsider its plan, opting for a multi-cloud approach more common in the private sector.
For many years, Amazon Web Services—by virtue of its 2013 contract with the Central Intelligence Agency—was the only commercial cloud provider with the security accreditations allowing it to host the DOD’s most sensitive data. In the interim, however, Microsoft has achieved the top-secret accreditation, and Oracle and Google both achieved Impact Level 5—or IL5—accreditation, allowing the two companies to host the department’s most sensitive unclassified data in their cloud offerings.
JWCC is just one of several multibillion-dollar cloud contracts the government has awarded over the past few years. In late 2020, the CIA awarded its Commercial Cloud Enterprise, or C2E, contract to five companies: AWS, Microsoft, Google, Oracle and IBM. The contract could be worth “tens of billions” of dollars, according to contracting documents, and the companies will compete for task orders issued by various intelligence agencies.
Last April, the National Security Agency re-awarded its $10 billion cloud contract codenamed “Wild and Stormy” to AWS following a protest from losing bidder Microsoft. The contract is part of the NSA’s modernization of its Hybrid Compute Initiative, which will move some of the NSA’s crown jewel intelligence data from internal servers to AWS’ air-gapped cloud.
Pentagon Splits $9B Cloud Effort Among Amazon, Google, Microsoft, Oracle - Defense One |
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From: Glenn Petersen | 12/30/2022 4:39:38 AM | | | | Europe Taps Tech’s Power-Hungry Data Centers to Heat Homes
Rising energy prices and new regulations contribute to an increase in projects
By Sam Schechner Wall Street Journal Dec. 29, 2022 5:32 am ET
With an energy crisis hitting Europe, governments are exploring ways to recycle electricity used in social-media scrolling, conference calls and video streaming to help heat homes and offices.
Electricity-hungry data centers are seeing huge growth in usage, leading to pressure from European officials to funnel the excess heat generated by their computer chips into municipal heating networks.
After years of discussions about putting residual heat to work rather than simply venting it outdoors, more such projects are becoming a reality.
In the past year, Amazon.com Inc., Apple Inc. and Microsoft Corp. have started connecting, or announced plans to connect, major data centers to district heating systems in Ireland, Denmark and Finland. Alphabet Inc.’s Google has said it is assessing opportunities to recover heat from its data centers across Europe.
Meta Platforms Inc. has been recovering excess heat from its data center in Odense, Denmark, since 2020. The Facebook parent is currently expanding that base, with plans to provide enough excess heat to warm about 11,000 homes as of next year.
Other data-center operators are providing heat to networks, particularly in Northern Europe, including Equinix Inc., which is expanding its district heating project in Helsinki, and working on new ones in Germany and other countries.
In the Netherlands, there are 10 data centers already supplying heat, and another 15 projects are being built or researched, according to the Dutch Data Center Association, a trade group.
Higher energy prices, stemming from Russia’s decision effectively to cut off natural-gas deliveries following its invasion of Ukraine, have boosted the financial incentive for tech companies to invest in systems necessary to sell off their excess heat, according to energy and tech-sector officials.
“All of a sudden, the business case for a heat network fueled by residual heat is much more interesting than a couple of years ago,” said Stijn Grove, the Dutch Data Center Association’s managing director.
Public pressure to increase energy efficiency at data centers has been a major driver, as well, according to industry executives. The European Union is in the final stages of negotiating a new energy-efficiency directive that would, according to the latest drafts, require center operators to conduct feasibility studies of using their excess heat for homes and offices.
In addition, national and local governments from France to Denmark have introduced tax incentives, or even made recapturing waste heat a requirement for some new building permits.
“The basic idea is good, and it’s now spreading,” said Timo Piispa, vice president of heating and cooling at the partly state-owned Finnish energy company Fortum Oyj. The company is involved in a project to collect waste heat from an Amazon data center in Dublin and is working with Microsoft to recycle waste heat from two large planned data centers in Finland.
Globally, data centers are estimated to account for roughly 1% of electricity use, according to a 2020 paper in the journal Science, a level that has remained more or less constant despite an explosion in cloud services in recent years. In the EU, however, policy makers say the higher density of data centers and increased usage in recent years mean they use more—accounting for closer to 3% or more of electricity consumption in some countries.
Data centers in proximity to district heating systems could provide as much as roughly 50 terawatt-hours a year of excess heat, according to a study from ReUseHeat, an EU-funded project aimed at promoting waste-heat reuse. That would work out to between 2% and 3% of the energy that EU households used on space heating in 2020, according to data from Eurostat.
Tech companies have for at least a decade touted the idea of funneling the heat generated by their enormous racks into such systems as a way to make their operations more energy-efficient, which helps them meet emissions targets. But the systems have faced technical and legal challenges in putting them into practice.
Most data centers are cooled with air, and the warm air they expel isn’t as hot as that required by most municipal heating systems. That means a tech company or the power company it partners with must install heat pumps to further warm the air to usable levels.
Energy companies also often want commitments to provide heat energy for 10 or more years—longer than the financial-planning horizon for some data center owners, according to industry experts.
Another major issue is that data centers must be near a heat network to make sure the heat doesn’t dissipate. And in many parts of the world, residential and office heat are only needed six months a year or less, potentially making much of the production wasted.
“Often mayors tell us, there is a data center. Can’t we use it to heat a building or a pool? But it isn’t always possible unless there is the right infrastructure nearby,” said Yannick Duport, international director for Dalkia, a subsidiary of France’s EDF SA.
Mr. Duport, whose company has built or operates several networks that use data-center heat, said new tax breaks and energy-efficiency requirements from localities are changing the calculus.
In the Danish town of Viborg, local officials pushed for Apple to connect a 485,000-square-foot data center there to the local heat network. This year, the company said it would do so as part of an expansion. Apple says it is working with local officials on how to use heat from the plant, which is powered by renewable-energy projects.
“The pressure is growing,” said Niels Fuglsang, a Danish member of the European Parliament who is leading negotiations on the energy-efficiency legislation. “If we can make sure we utilize the heat from data centers, we can save on our energy bills and do something good for the climate.”
Write to Sam Schechner at sam.schechner@wsj.com
Europe Taps Tech’s Power-Hungry Data Centers to Heat Homes - WSJ |
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From: Glenn Petersen | 1/14/2023 7:00:02 AM | | | | Google Cloud Introduces Shelf Inventory AI Tool for Retailers
An image database of more than a billion products helps power the tool
By Isabelle Bousquette Wall Street Journal January 13, 2023
Google Cloud said it has developed a new artificial intelligence tool designed to help big-box retailers better track the inventory on their shelves, aiming to improve a technology that has struggled to work well in the past.
Google Cloud said Friday its algorithm can recognize and analyze the availability of consumer packaged goods products on shelves from videos and images provided by the retailer’s own ceiling-mounted cameras, camera-equipped self-driving robots or store associates. The tool, which is now in preview, will become broadly available in the coming months, it said.
Alphabet Inc.’s cloud business unveiled the technology, along with a series of artificial intelligence tools aimed at e-commerce, ahead of the National Retail Federation conference in New York City.
Lack of timely, accurate information about shelf inventory is a major problem for retailers and so difficult to manage that it is industry standard to just make guesses, said Robert Hetu, VP analyst for retail at IT research and consulting firm Gartner Inc. Having that information would help retailers pad their lines in a variety of ways, including giving them the chance to replenish out-of-stock items faster, and lose fewer sales opportunities, according to Carrie Tharp, Google Cloud’s vice president of retail and consumer.
“If every retailer just knew what they had in their stores and how much was left on the shelves, their lives would be so much simpler,” she said.
The idea of computer vision-enabled shelf-checking technology has been around for several years, but has not taken off in that time. In part, retailers have been deterred by the cost and complexity of large-scale camera deployment, said Mr. Hetu.
Data has also been a problem, said Ms. Tharp. Retailers have not historically had access to thorough, organized and labeled data on all their product offerings, she said. Another challenge has been building the AI model itself, which needs to understand how to recognize a product in imperfect, real-life conditions, including from different angles, in different lighting and when seasonal packaging changes, Google Cloud said.
Google Cloud said its product is trained on a database of over a billion products, including images that are publicly available, licensed and provided directly by manufacturers. Its algorithm is also designed to recognize those products, whether the image is coming from a ceiling-mounted camera or mobile-phone video—the same way the human eye understands it is seeing a cereal box regardless of whether it is looking at the box from above or from head on, Google Cloud said. But there are still challenges.
“It’s probably not entirely solved yet,” said Graham Watkins, executive vice president of supply-chain transformation and retail innovation at supermarket chain Giant Eagle Inc. He said the Google Cloud product has shown above 90% accuracy during early tests in a Giant Eagle innovation lab, which is designed to replicate store conditions. That is high enough to generate continued interest from the supermarket chain, but not high enough for the company to consider deploying it at scale yet.
For now Giant Eagle provides continuous feedback to Google Cloud about where the tool isn’t working so that it can fine-tune, he said. For example, if the camera is too high or too low and the algorithm can’t identify the product, Giant Eagle would provide that image to Google Cloud so it can train the algorithm to recognize that angle the next time, said Mr. Watkins.
The supermarket chain said it plans to begin piloting the technology in an actual store in the next several months, but a deployment across the full chain would take several years to come to fruition, if in fact the company decides to pursue a broad rollout, Mr. Watkins said. In part that is because of the high degree of expense involved, he said.
Camera visibility into every shelf on every aisle—whether it is coming from ceiling cameras or inventory robots that stroll around stores—is a complicated and expensive proposition, said Gartner’s Mr. Hetu.
Walmart Inc. notably ended its effort to use roving robots in store aisles to keep track of its inventory in 2020 because it found different, sometimes simpler solutions that proved just as useful, said people familiar with the situation.
Mr. Hetu said he expects investment in shelf-checking technology to continue, despite cost barriers, because of the growing need to digitize the in-store experience
But it won’t happen overnight. It could take three to six years for computer-vision shelf checking to become more mainstream, he said.
Giant Eagle’s Mr. Watkins said the algorithm may never be perfect and there will always be some unique conditions that it won’t work in.
“There’s going to be a give and take between technology and operational business processes. Anytime you’re in a new space, you’re always going to be balancing. How close is good enough?” he said. “It is just a bit of an iterative process.”
Write to Isabelle Bousquette at isabelle.bousquette@wsj.com
Google Cloud Introduces Shelf Inventory AI Tool for Retailers - WSJ |
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From: Glenn Petersen | 3/12/2023 7:50:45 AM | | | | Biden admin’s cloud security problem: ‘It could take down the internet like a stack of dominos’
The Biden administration is embarking on the nation’s first comprehensive plan to regulate the security practices of cloud providers.
By JOHN SAKELLARIADIS Politico 03/10/2023 03:12 PM EST Updated: 03/10/2023 06:17 PM EST
Governments and businesses have spent two decades rushing to the cloud — trusting some of their most sensitive data to tech giants that promised near-limitless storage, powerful software and the knowhow to keep it safe.
Now the White House worries that the cloud is becoming a huge security vulnerability.
So it’s embarking on the nation’s first comprehensive plan to regulate the security practices of cloud providers like Amazon, Microsoft, Google and Oracle, whose servers provide data storage and computing power for customers ranging from mom-and-pop businesses to the Pentagon and CIA.
The cloud has “become essential to our daily lives,” Kemba Walden, the acting national cyber director, said in an interview. “If it’s disrupted, it could create large potentially catastrophic disruptions to our economy and to our government.”
In essence, she said, the cloud is now “too big to fail.”
The fear: For all their security expertise, the cloud giants offer concentrated targets that hackers could use to compromise or disable a wide range of victims all at once. The collapse of a major cloud provider could cut hospitals off from accessing medical records; paralyze ports and railroads; corrupt the software that help financial markets hum; and wipe out databases across small businesses, public utilities and government agencies.
“A single cloud provider going down could take down the internet like a stack of dominos,” said Marc Rogers, chief security officer at hardware security firm Q-Net Security and former head of information security at the content delivery provider Cloudflare.
And cloud servers haven’t proved to be as secure as government officials had hoped. Hackers from nations such as Russia have used cloud servers from companies like Amazon and Microsoft as a springboard to launch attacks on other targets. Cybercriminal groups also regularly rent infrastructure from U.S. cloud providers to steal data or extort companies.
Among other steps, the Biden administration recently said it will require cloud providers to verify the identity of their users to prevent foreign hackers from renting space on U.S. cloud servers (implementing an idea first introduced in a Trump administration executive order). And last week the administration warned in its national cybersecurity strategy that more cloud regulations are coming — saying it plans to identify and close regulatory gaps over the industry.
In a series of interviews about this new, tougher approach, administration officials stressed that they aren’t giving up on the cloud. Instead, they’re trying to ensure that rapid growth doesn’t translate to new security risks.
Cloud services can “take a lot of the security burden off of end users” by relieving them of difficult and time-consuming security practices, like applying patches and software updates, said Walden. Many small businesses and other customers simply lack the expertise and resources to protect their own data from increasingly adept hackers.
The problems come when those cloud providers aren’t providing the level of security they could.
So far, cloud providers have haven’t done enough to prevent criminal and nation-state hackers from abusing their services to stage attacks within the U.S., officials argued, pointing in particular to the 2020 SolarWinds espionage campaign, in which Russian spooks avoided detection in part by renting servers from Amazon and GoDaddy. For months, they used those to slip unnoticed into at least nine federal agencies and 100 companies.
That risk is only growing, said Rob Knake, the deputy national cyber director for strategy and budget. Foreign hackers have become more adept at “spinning up and rapidly spinning down” new servers, he said — in effect, moving so quickly from one rented service to the next that new leads dry up for U.S. law enforcement faster than it can trace them down.
On top of that, U.S. officials express significant frustration that cloud providers often up-charge customers to add security protections — both taking advantage of the need for such measures and leaving a security hole when companies decide not to spend the extra money. That practice complicated the federal investigations into the SolarWinds attack, because the agencies that fell victim to the Russian hacking campaign had not paid extra for Microsoft’s enhanced data-logging features.
“The reality is that today cloud security is often separate from cloud,” Anne Neuberger, the deputy national security adviser for cyber and emerging technology, said last week during a roll-out event for the new cyber strategy. “We need to get to a place where cloud providers have security baked in with that.”
So the White House is planning to use whatever powers it can pull on to make that happen — limited as they are.
“In the United States, we don’t have a national regulator for cloud. We don’t have a Ministry of Communication. We don’t have anybody who would step up and say, ‘It’s our job to regulate cloud providers,’” said Knake, of the strategy and budget office. The cloud, he said, “needs to have a regulatory structure around it.”
Knake’s office is racing to find new ways to police the industry using a ‘hodgepodge’ of existing tools, such as security requirements for specific sectors — like banking — and a program called FedRAMP that establishes baseline controls cloud providers must meet to sell to the federal government.
Part of what makes that difficult is that neither the government nor companies using cloud providers fully know what security protections cloud providers have in place. In a study last month on the U.S. financial sector’s use of cloud services, the Treasury Department found that cloud companies provided “insufficient transparency to support due diligence and monitoring” and U.S. banks could not “fully understand the risks associated with cloud services.”
But government officials say they see signs that the cloud providers’ attitude is changing, especially given that the companies increasingly see the public sector as a source for new revenue.
“Ten years ago, they would have been like, ‘No way,’” said Knake. But the major cloud providers “have now realized that if they want the growth that they want to have, if they want to be within critical sectors, they actually not only need to not stand in the way, but they need to provide tools and mechanisms to make it easy to prove compliance regulations,” he said.
The push for more regulations isn’t getting immediate objections from the cloud industry.
“I think that that’s highly appropriate,” said Phil Venables, Google’s chief information security officer.
But at the same time, Venables argued that cloud providers are subject to plenty of regulation already, pointing to FedRAMP and the requirements cloud providers must satisfy in order to work with regulated entities such as banks, defense industrial base companies and federal agencies — the very tools Knake described as “hodgepodge.”
The White House outlined a more aggressive regulatory regime in its new cyber strategy. It proposed holding software makers liable for insecure code and imposing stronger security mandates on critical infrastructure companies, like the cloud providers.
“The market has not provided for all the measures necessary to ensure that it’s not being inappropriately used, that it’s resilient, and that it’s being good caretakers of the small and medium-sized business under its umbrella,” said John Costello, the recently departed chief of staff in the Office of the National Cyber Director.
Cloud computing companies are “eager” to work with the White House on a “harmonized approach to security requirements across sectors,” said Ross Nodurft, executive director of the Alliance for Digital Innovation, a tech trade group whose members include cloud giants Palo Alto Networks, VMWare, Google Cloud and AWS — the cloud computing arm of Amazon. He also said that companies already comply with existing “extensive security requirements” for specific industries.
A spokesperson for Microsoft, which is not a member of ADI, referred POLITICO to a Thursday blog post from a Microsoft executive making similar assertions that the company looks forward to working with agencies on crafting appropriate regulations. AWS said in a statement that it prioritizes security but did not address the question of whether it supports additional regulation. Oracle did not respond to a request for comment.
If the government fails to find a way to ensure the resilience of the cloud, it fears the fallout could be devastating. Cloud providers have effectively become “three or four single points of failure” for the U.S. economy, Knake said.
According to a 2017 study from the insurance giant Lloyds, an outage at one of the top three cloud providers lasting between three and six days could cause $15 billion in damages.
Such a collapse could be triggered by a cyberattack on a major cloud provider, a natural or human-caused disaster that disrupts or cuts power to a major data center, or simply a failure in the design and maintenance of a core cloud service.
If the White House can’t get the results it wants through using existing regulations and cajoling companies into improving practices voluntarily, it will have to hit up Congress. And that could be its biggest hurdle.
Some Republicans have already criticized the White House’s national cybersecurity strategy for its heavy emphasis on regulation.
“We must clarify federal cybersecurity roles and responsibilities, not create additional burdens, to minimize confusion and redundancies across the government,” Rep. Mark Green (R.-Tenn.), the chair of the House Homeland Security Committee, and Rep. Andrew Garbarino (R-N.Y.), head of its cyber and infrastructure protection subcommittee, said in a statement last week.
As gatekeepers of the House Homeland Security Committee, Garbarino and Green wield de facto veto power over any major cybersecurity legislation that the White House might send Congress.
In the short term, that eliminates the possibility of the more ambitious cloud policy proposals outlined or hinted at in White House’s new strategy
That could mean that the administration will have to increase pressure on the companies to do more on their own.
Trey Herr, a former senior security strategist who worked in cloud computing at Microsoft, said cybersecurity agencies could, for example, require the heads of the major cloud providers to appear before top government cyber brass on a semi-regular basis and prove that they’re taking adequate steps to manage the risk within their systems.
The major cloud providers “have plenty of ways to talk about the security of one product, but few to manage the risk of all those products tied together,” said Herr, who is now the director of the Atlantic Council’s cyber statecraft initiative.
“It’s one thing to do a good job building a helipad on the top of your house,” he said. But “no one is asking if the house is built to handle that helipad in the first place.”
Biden admin’s cloud security problem: ‘It could take down the internet like a stack of dominos’ - POLITICO |
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