Another Travis Kalanick legacy is disappearing from Uber. The ride-hailing and food-delivery firm revealed on Monday that it was shifting most of its computing work off its own data centers to the public cloud, reversing an Uber policy that has been in place since the company’s earliest days under co-founder Kalanick. That’s a big deal, and it’s likely to revive a long-simmering debate in tech: whether the cloud is cheaper for companies than running their own data centers. It’s also significant for Oracle and Google Cloud, which are picking up Uber’s business.
The two firms are the runts of the cloud business, particularly Oracle. Thanks to its late start in cloud, Oracle’s market share is so small that it didn’t make the top five firms in Gartner’s most recent global market analysis (which includes Amazon, Microsoft, Google, Alibaba and Huawei). Instead Oracle got lumped in with also-rans like IBM in the “other” category. But Oracle’s had a couple of other cloud wins lately, including participating with AWS, Microsoft and Google Cloud in a Defense Department cloud deal, as well as winning TikTok’s business as the social media app tries to distance itself from its Chinese parent, ByteDance. Perhaps it’s time for rivals to take it more seriously.
How did Oracle and Google Cloud get the business? After all, Amazon Web Services handles the computing workload of Uber’s main U.S. rival, Lyft, which means it knows the industry. And AWS was the main outside cloud firm to do any work for Uber in the past, so it should have had an advantage over everyone else. But it’s a good bet Oracle and Google Cloud underbid AWS on pricing, which for Uber has to be key. Given CEO Dara Khosrowshahi’s commentary today—and comments by an Uber tech executive in this Wall Street Journal report—there’s little doubt Uber will argue it is saving money by shifting its computing work out of its own data centers.
And yet, as we noted in this 2020 report, Uber executives had previously calculated they spend at least 25% less by using their own infrastructure than if they were on the public cloud. Things may have changed. It’s also possible Uber will save money in the near term but not necessarily over the long run. As we have reported in the past, there’s a lot of debate in tech about whether shifting to the cloud ends up being costlier for companies over many years. And there’s more involved than just costs. Our report today about the investment that Google and AWS are making in custom-designed chips for their data centers shows one advantage of using those firms’ cloud services. So this isn’t a clear-cut issue. But among newer web companies, Uber was an outlier in operating its own data centers, so you can understand Khosrowshahi’s thinking.
Twilio’s Not So Significant Layoffs
Enterprise software firm Twilio is doubling down on layoffs. Just five months after saying it would cut 11% of its workforce, it said today it was letting go of another 17%. Here’s a question, though: How meaningful are the two rounds of cuts compared with how fast Twilio’s workforce grew during the pandemic?
Not as significant as you might think. Twilio said last September that before its first round of cuts, it had 8,992 employees. Cutting 11% of that would shrink its workforce to about 8,000. Lopping off another 17% would shrink it to 6,640, which is still hundreds more than the 6,334 Twilio had in the middle of 2021. At the end of 2020, the company employed 4,629, which gives a sense of how fast it staffed up.
And it’s not clear where Twilio’s workforce stands now, before this round. When The Information’s Aaron Holmes asked the company, it referred him to disclosures from last September, before the first round of cuts. We’ll know more when Twilio reports for the fourth quarter. For now, though, it’s worth keeping the ups and downs of Twilio’s workforce in perspective.