Scott Guthrie Says Inflation Mounts, But Companies Aren’t Holding Off on Cloud Spending


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Cloud services are still gaining momentum as more companies choose to outsource their IT services instead of maintaining them in-house, said Scott Guthrie, the executive vice president at Microsoft who oversees the company’s cloud business.

Microsoft’s senior cloud executive Scott Guthrie hasn’t observed enterprises slowing their attempts to shift software applications to the cloud in the previous several months, despite an unsteady economy and mounting concerns of a recession.

His comments imply that there is still a high demand for the cloud computing services that a few major technology corporations offer to businesses, schools, and government agencies.

Fears of an impending recession are rising as consumer spending slows. Retailers like Dollar Tree and Walmart reduced their profit forecasts in July and August to reflect people becoming more frugal with their money as a result of rising food, petrol, and other product costs.

In preparation, businesses are reducing their investment on some categories of software.

The developers of cloud software UiPath and Veeva have predicted decreased revenue in the upcoming quarters due to a stronger currency and difficult economic conditions. Rob Enslin, a co-CEO of UiPath, told analysts on a conference call last month that budget negotiations are taking longer and that top executives are being brought into discussions regarding agreements.

However, according to Guthrie, Azure, Microsoft’s cloud infrastructure provider, doesn’t seem to be the case.

In an interview with CNBC, Guthrie, executive vice president of Microsoft’s cloud and AI business, stated, “I haven’t seen the present scenario drive customers to halt cloud.”

Following Russia’s invasion of Ukraine this year, there has been an energy crisis in Europe, with Russia alleging that sanctions caused pumping problems. Electricity and gas prices skyrocketed. Information technology-related executives have taken note.

“Is the energy crisis causing people to migrate more quickly to the cloud? “I believe the response is unquestionably yes,” Guthrie said. “I think what we witnessed with Covid at the beginning, in especially, is similar to Covid.”

Guthrie claimed that despite the rising energy prices, he hasn’t heard of any businesses suggesting they will reduce their usage of cloud computing.

If you can lower your workloads on-premises and swiftly migrate them to our cloud, you can minimise the power draw you require, which translates into actual financial benefits, he added. “Think about the present scenario in Europe right now, where the energy prices are going up substantially,” he said.

Executives at the Paris-based health care giant Sanofi, which employs cloud services from Google, Amazon, and Microsoft, have been debating this issue. According to Sam Chenaur, vice president and global head of infrastructure and cloud at Sanofi, “we experienced increases in energy expenditures upward of 65% in some locations year over year.”

PUE, a measure of efficiency that compares the energy needed for a facility to the energy utilised for computation, is extremely high at Sanofi but significantly lower at Azure, according to Chenaur. According to a recent blog post, Microsoft’s overall PUE score is 1.18.

The cloud economics, according to Guthrie, are “if anything, a lot more appealing now than they probably were even in years past, and they were already compelling, you know,” from the standpoint of data centre relocation.

After Covid launched, Sanofi increased its reliance on cloud-based virtual desktops that contractors and employees could use from any computer, Chenaur said. Sanofi started a significant transfer to the cloud 18 months ago. According to Hamad Riaz, CEO of Mobiz, a technology services company that collaborates with Sanofi, Sanofi now plans to deploy Azure resources in five sites throughout the globe.

In order to free up funds to create additional treatments and therapies for patients, he stated, “I would argue that we are on a mission to cut total expenses in IT.

Due to increased demand during a recession, other businesses may turn to the cloud to provide additional services. For instance, Zoom Video Communications, a rival to Microsoft Teams, relied on the cloud to handle the millions of additional customers who would like to make Zoom video conversations in 2020.

“I think we will see various organisations in different geos kind of adapt to issues, and not only the oil crisis,” said Guthrie. “Think about supply chain and a lot of the supply chain reconfiguration that’s occurring throughout the world. Or think about inflation and interest rates.

However, not every business is adopting the cloud as swiftly as others since many are having financial issues, according to Guthrie. Among the businesses that have each shed at least 1,000 staff this year are Coinbase, Snap, and Shopify. In June, Brian Armstrong, the CEO of Coinbase, informed staff that it appeared like a recession was beginning, and that this may signal the beginning of a new bear market in digital currencies.

On the company’s earnings call in July, Amy Hood, the finance director at Microsoft, was more circumspect. She advised analysts to anticipate a slowdown in Azure growth, from 46% in the second quarter to 43% in constant currency. According to CEO Satya Nadella, Microsoft is not immune to the present economic conditions.


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