Cloud Economist Corey Quinn - CTO Dose
Transcript
hey keith townsend i'm on the road you you see the airstream in the background but uh this is not a cto advisor road show or road trip interview this is actually just a traditional skype slash zoom phone call with our good friend corey quinn from i i want to say screaming in cloud uh in the cloud fame cory because i saw a kid this morning at the camp that we're at and he literally had the corey quinn look on his face as he was running by
like three of them all and then the way just the cory quinn screaming i'm like kid you're right on brand corey welcome to the show thank you it is always a pleasure to talk to you keith i hope you know that by now you know what i don't think we've officially done content together we've talked quite a bit but i don't think we've actually published anything long past time let's hopefully we'll eventually hit publish on this until i go sufficiently far off script that it's better
that we bury it in the middle of the desert and warn people to avoid the 20 mile radius around it all right so we're not above clickbait and we're not above talking about the hottest thing in or the most interesting thing in tech right now which has kind of been this uh sarah wayne and i don't know if it's sarah wayne or sarah wong i i might get in trouble if i don't get that right wang and uh martine casado uh i have learned how to
pronounce martin's name correctly because earlier in my career as an analyst i wrote this scathing uh review of his uh baby which became which went on to become nsx and i just happened to be in silicon valley at the time and he invited me out for a burrito and then uh over a burrito martine proceeded to kind of dismantle my whole argument and uh pretty much put me in my place but he did pay for the burrito so we take what we can get i mean
i i would never deign to imagine a world in which i tried to explain networking to the guy that basically invented sdn but now he's stepping a bit into my world of cloud economics i mean the screaming in the cloud podcast is great and all please don't think otherwise and of course making a scene out of myself on twitter and the last week in aws newsletter is great but i am first and foremost the chief cloud economist at the duckbill group i fix horrifying aws bills
for very large companies and this is a problem in the space i've been thinking about fairly deeply for four years and change now and with that let's jump right into it me and you have talked about workload repatriation which wasn't the center of their conversation they they touched on relo workload repatriation but you know i commented this is maybe about a year year and a half ago we talked about it how i had seen some workload repatriation people aren't going to call it that they're not
going to advertise it but i've seen it in the background now i think this is the perfect time to just talk amongst kind of like two normal folks you know we're not we're not from a 16 z we don't have the power of billions of dollars of investment behind us we just we're just two small business entrepreneurs trying to make sense of this whole cloud world i'll just open up the discussion what have you seen not just workload repatriation but as enterprises start to truly figure
out or maybe not an embrace cloud what have you seen in your practice i think that there's a disconnect in some respects between how different companies view cloud it it speaks on some level to aspects of the now thoroughly debunked gartner bimodal i.t distribution the problem is is that some companies view cloud in the sense of oh this is part of the good or service that we are selling it empowers what we sell an example of this well we're having a zoom conversation zoom would be
a terrific example of that where the cloud services empower the video conferencing discussion that we're able to have whereas on the other side of the world in the shall we say the more big e enterprise style companies very often what they sell is a little bit more prosaic think of large blue chip manufacturing companies where they ship boxes full of things somewhere and invariably a lot of the way that they approach all of their spend in cloud and i.t across the board is through the lens
of purely being a cost center rather than a contributor to anything that is higher level or differentiated if you'll forgive the dramatic over symbolization oversimplification on this think these are the people that need to run the sharepoint server over in the corner i know i know most folks aren't doing that anymore but but that's the general ethos in general direction and in that world cost counts for an awful lot i don't see a whole lot of my client base playing in those waters by and large
because at that point it's a pure cut the cost story and that's where things like repatriation start to make an awful lot of sense when it is a pure model of unit economics and you've already in many cases made significant to capital expenditure investments in data centers whereas when you're looking at shipping something that is a digital product where the cloud services form an integral part of what you're presenting to customers the cost it always takes a secondary back seat to the idea of feature velocity
of being able to ship new features sooner improve your time to market because unless you're a company in decline you're focused on growth and you will wind up being able to make far more than the theoretical 100 of your it spend that you could cut as a cap if you launch the right feature to the right market soon enough so i don't disagree with your assessment at all especially from your lens my lens is from that more traditional i.t perspective you know my customers are still
running sap on premises they're trying they're trying to service the growing parts of the business that are out in the public cloud so i talk a lot about how about hybrid how do you make this boat anchor of an sap or hp ux integrate with services in aws so lambda et cetera so i'm not on the bleeding edge of cloud technologies uh as an enablement for my core audience but my core audience needs to understand how these things interoperate and uh the tensions behind it the
bimodal i.t thing i agree was a bad idea it didn't work uh at the end of the day you especially in the big e enterprises as you described it they have to just do all of it and it's just another thing that they manage but i think you're in a unique position to answer a question that's been gnawing at me since this report hit which was cloud proper the way that aws has delivered cloud has been around for about 10 years that's enough time to have
built up technical debt and as you work with some of your earliest customers now today versus then what's what's the what's what's the change what's the delta what's changed over the years for them it varies based upon customer three reference customers that were named in a news article and they haven't objected their name being dropped and we do have logo rights are the washington post epic games and ticketmaster all three of those companies predate the era of modern cloud in fact most large cloud installations do
if for no other reason then it takes time to build up hundreds of millions of dollars a year in spend and without having been doing it for a little while it's very rare to spend that spend that kind of money in the first two years a company's been in business so there's always technical debt i have technical debt from things i wrote six months ago i look at things and what fool wrote this and get blame says it's me so then we need never speak about
that ever again and but there's a constant story of continuing to evolve the washington post is a great classical example where originally they were a print newspaper still are in many respects but my subscription is purely digital because i don't have a parakeet i don't need a physical piece of paper showing up every day that i can then wind up getting spilling coffee on i want the content but i don't need the physical delivery infrastructure and they like every other major print publication have a plan
that winds up working for me in that respect journalism has changed all of these industries have changed and legacy is often a condescending term that engineers use to mean it makes money when it's revenue bearing great there's nothing inherently wrong with the way that things were built this this idea coming out of silicon valley that anything that is more than 18 months old that doesn't work it isn't designed to run on the latest version of chrome on the current generation apple macbook pro is somehow a
failure and i think that is one of the more toxic attitudes to come out of our entire ecosystem so funny enough i talked to a manufacturer a small manufacturing company first week of the cto advisor road trip the guy had equipment in his in production that was 50 years old then he showed me this super slick laser cutting machine that was a few weeks old that was a half a million dollars and the way that he looked at technology was very refreshing and eye-opening when i
first one of my first impressions was going into the office space and the graphics the graphics artist that takes the requirements from the customer and then creates a layout etc etc printing organization he had a cheese grater mac and i'm not talking about the new cheese grater mac he had the old cheese grater mac from 2008 on his uh desktop and i thought wow this business owner looks at the cheese grater mac the same way that he looked at the 50 year old piece of equipment
and the three week old piece of equipment does it do the job and will it earn me money sure i can upgrade the guy to the latest and greatest widget but what does that mean and i love to use this forklift scenario because i think we intuitively understand the value of new forklifts he could literally look at i could literally look at the old forklift on his plant floor and think wow he has to make the decision on whether or not to buy a new forklift
or upgrade his graphics artist to the latest version of mac mac os etc and at the end of the day does it make him money or does it reduce risk or does it save the money and when you're in a manufacturing company it's not like working in a software company as you look out across your manufacturing floor that is what 100 million dollars worth of equipment sitting on it and you look at the 10 million dollars a year in payroll you're paying people to work on
these things and then you look at your what two million dollar a year in cloud spend you it sort of disappears in a way that it doesn't in a software company you take a company like zoom for example that is streaming video all over the planet all the time yeah a meaningful reduction in percentage base on a percentage basis of their i.t spend is massive for them but in the context of the manufacturing floor it's one of those yeah i could spend all that time and
effort reducing my cloud bill or i could buy another one of those five million dollar pieces of equipment and actually speed up my ability to increase my throughput increase my ability to ship things faster sooner and bid for larger contracts it it's the same type of approach and i think that on some level one of the most valuable services i tend to provide to my customers has been telling them when to stop cutting it's yeah you can keep throwing engineering effort at reducing this bill but
past a certain point it's not going to add any business value you're stepping over dollars to pick up pennies so with that i would love to in on kind of this concept of what's real like we i think man you whenever we get together we get to talk about what's real what's real from my lens what's real from your lens you're coming at it from uh typically the the type of organization that sarah and martine wrote about in their report their their software company they're making
money from software and software is part of their cost of goods and cloud is part of their cost of goods rather and then i'm coming from a more traditional sense and i think there's a sense of it meeting in the middle a little bit at least it's starting to as enterprise companies are adopting cloud that was built in departments other than centralized i.t and they're kind of waking up to from one a cost perspective perspective into a government governance perspective this is where i see it
so i'm not seeing you know i don't work with the cmo to build a new cloud app i worked with the vp of it infrastructure after the cmo has thrown it over the window to them to maintain it because they've gotten the initial value where are you in your practice seeing these seeing the collision of big enterprise e and cloud and cost or innovation sure we can even take the dropbox example because that is the most well-known story of cloud repatriation and i don't think that
that was a foolish decision either i think at the time they had one very well understood very large workload storing user files that at the time s3's economic model didn't lend itself to tr horribly well they were looking at what they could do with all these engineers and because they were sort of out of ideas at that point they'd hit product market fit as a folder that syncs everywhere and what they hadn't quite uh figured out yet is what else can we do frankly if they
hadn't done the cloud migration we would have been and had that we've had that horrible dropbox app and all the collaboration services no one wants inflicted on us years sooner so there is that but in their s1 where they talk about this about how they reduce their operating expense and cost of goods sold by something like 2 was it 75 million dollars over a two year span look at that same two year span they had a effective 200 million dollars charge in capex which does not
flow through to cogs it's partly accounting trickery not trickeries if they're doing something disingenuous but which pocket it comes out of at the large enterprise scale matters to how a company is perceived in the market at least in theory in practice it seems that the market is so far divorced from fundamentals that whether a company is doing well or not is almost beside the point you can look at companies that there's starting to be emerging analyst consensus where their valuation is larger than their total addressable
market how's that going to work exactly it's we're in something of the wild times we are in something of the wild times and as a cloud economist and as a former pwc guy i can't help but look at these things and think about and make the connection what does that mean for the guy in the trenches like the guy that needs to make technical architectural decisions how does the financial amplifi implications of the market impact their day-to-day and i'll leave that question to you to kind
of uh uh end us off on why should the cloud architect care beyond their stock options care about the evaluation or the the the market's view of their organization the honest real answer is because their boss does and they are being they are the tool with which the corporate strategy is being carried out and when something matters to a company ideally that winds up echoing down throughout the rest of the organization uh we saw some negative impacts of this until somewhat recently where companies that were
used to doing significant amounts of capital expenditure were looking at how they could classify their cloud span as as capex instead of opex and there were a bunch of accounting tricks you could do until the auditors caught when exactly what they were doing and what the implications were issued additional guidance on two regulations that govern this and now you see a bunch of companies backing away from doing it it it comes down to this idea historically of well if we shift a bunch of capex to
opex that'll affect our earnings per share and that in turn is going to basically get us all fired yes and no take a look at how your competitors are doing it by this point because i assure you whatever market you're in a number of competitors already have and see how they've weathered those storms we haven't seen the dramatic swings in market price based upon what a cloud environment looks like the only time we start to see it having serious impact for the stock and even that
is generally a short-term process from from the architecture view is when there's a security breach and then you have this sort of ablative cso that burns through and gets replaced and life goes on a year goes past and generally speaking the company is a higher valuation than they did at the time of the breach was discovered so ironically i'm going to visit hpe financial services later on this week as part of the road trip and this absolutely matters i can't tell you how many times in
my career that architecture was dictated by opex versus capex and not the what was the best technical solution and companies need we're starting to see those shackles loosen starting to see them loosen and uh companies need help with that transition we'll do some content and maybe me and you'll talk about the economics of moving from an opex to a capex model or a capex to opex model it is surprisingly diff difficult because from architecturally you have to there has to be a tipping point where you're
spending less in one bucket and more in another and overall i.t span you're spending more in the middle and doing that transition and how to accommodate that architecturally so for my audience who just simply they've gotten this this bill thrown over to them and now it's part of their expense thing and they don't know anything about public cloud and welcome to the club what how do they how do they get a hold of the duckbill group well duckbillgroup.com is probably the easiest way to find us
and the fun thing that we've noticed is that despite whoever it is that we talk to and however wherever they fall on whatever maturity curve you'd like to put them on no one takes a step back and says oh yeah we've got a great handle on our cloud spend or even all of our i.t spend as a whole everyone always asks well how are the people who are good at this to handling this and you talk to the people who are legitimately ahead of the curve
and they have the exact same perspective and the exact same questions well it feels like we're not quite doing this right that's normal as the old line goes there's a support group for that it's called everyone and we meet at the bar it's the this is a very common story it's a very common occurrence no one really feels that they have this stuff on lock yet but practices continue to emerge around this on how to do these things it's easy to forget that given that despite
the fact that cloud is 10 maybe 15 years if old if you're depending on how you want to view it great it's still new there's some new times it's it's not exactly clear how these things work and it's definitely evolving a lot faster than the on-premises world did all right so if you want to learn more about corey in general like subscribe to his newsletter it's legit something that i tried to do and i just i don't know he says it's simple but it's high quality
one of the most high quality newsletters uh you can find in this space wealth of information uh you want to learn more about the cto advisor you can find me on the web the ctoadvisor.com at ctoadvisor's twitter handle dms open i do not have the ability to help you in your family of five find housing not really my uh cup of expertise and my essential expertise but if you have questions about enterprise i t dms are open talk to you next cto does
