Can enterprise computing weather the COVID-19 storm?

Number Of The Week

24%

That's how much Goldman Sachs predicted second-quarter GDP could contract by thanks to the coronavirus outbreak. The largest quarter-to-quarter drop on record was 10 percent in 1958.

The Big Story

Outlook: Cloudy, with a chance of disaster

About a month ago, when we started planning the inaugural edition of this newsletter, I assumed this first email would preview the Google Cloud Next event in early April. Over the last few weeks, the world changed.

In many ways, cloud computing was born for this moment. While there's no blueprint for managing the business crisis that now envelops the world, cloud providers seem well-placed to weather the fallout. Distance working has never been easier thanks to cloud-powered enterprise software, and managing unexpected spikes in demand is far easier to do when you don't have to scramble to find new servers.

• Sure, COVID-19 might flatten the growth curve of cloud computing, but that's still a hell of a curve. This remains a once-in-a-generation shift in how IT is purchased and managed; as Slack CEO Stewart Butterfield told me last week, few people are going to call a cab company on a telephone and sit around waiting for a ride after using a smartphone app to hail a car.
• Cloud services have been robust amid coronavirus, at least for the most part. Local ISPs might be struggling, but when all this is over, we owe the data center operators a beverage for keeping everything running smoothly.
• And the cloud procurement model will smooth an economic shock: Cloud buyers and sellers increasingly prefer multiyear contracts that call for a certain level of spending in exchange for volume discounts. If the economic impact of this outbreak is limited to a quarter or so, cloud companies should bounce back quickly.
• Plus, this experience is going to forever change the way companies manage their businesses and employees. You can already see the wheels spinning in the heads of enterprise tech entrepreneurs (from a social distance).

So cloud is likely to be one of the more resilient areas of the tech economy during any prolonged downturn. Companies might postpone the decision to modernize aging parts of their infrastructure amid a cash crunch, but this crisis is also exposing the risks of depending on aging technology infrastructure, especially at the government level.

But nothing is recession proof, even something growing as strongly as cloud computing. Companies are going out of business or laying off huge numbers of employees right now, and that will affect demand for cloud services to some extent.

And cloud providers will really feel the impact of COVID-19, which is hitting close to home. AWS and Microsoft are headquartered in the region that saw the earliest effects of the U.S. coronavirus outbreak. And every major cloud company has a significant presence in New York, which is now the worst-hit part of the country.

Whatever happens to the cloud, the tech economy will feel it acutely. The sector is much larger than it was 12 years ago, during the last global period of economic turmoil. The next few months are going to be unlike anything that anyone in this industry has ever seen. Buckle up.

A MESSAGE FROM ORACLE

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About This Newsletter

Putting that gloom behind us ... welcome to Protocol Cloud! Thanks for all your interest so far, and allow me a quick second to explain our plans for this thing.

This newsletter will focus on analysis of the week's big cloud news, along with a roundup of news from around the sector that appeared on Protocol and elsewhere. Think of it as a weekly whistle stop tour of all the most important cloud and enterprise news, with me as your guide to make sense of what it all means.

We'd love your feedback on this and future editions of the newsletter, so please don't hesitate to reach out: cloud@protocol.com.

This Week On Protocol

Physician, secure thy network: There's a special place in hell reserved for people who try to disrupt hospitals and medical facilities amid a pandemic, but chief information security officers get paid to tangle with some of society's worst. Protocol's Adam Janofsky spoke with Errol Weiss, chief security officer for the Health Information Sharing and Analysis Center, about the growth of ransomware attacks against hospitals and the need to coordinate the response.

Stewart Butterfield on Microsoft: "Go find me a company that spends more than 10% of its software budget with a single vendor." Slack's co-founder and CEO has been hearing a lot about Microsoft's plans to disrupt Slack's momentum with Microsoft Teams, and he believes that this market is big enough for the both of them.

The pipes are calling: Any weak links in the work-from-home infrastructure are likely due to your local internet service provider, as opposed to the big cloud providers. Protocol's Andrea Peterson asked FCC chief Ajit Pai how the networks were faring under the strain of this sudden, widespread event, and it sounds like (so far, anyway) the U.S. is doing better than Europe, where several providers have downgraded service quality to save bandwidth.

Around The Cloud

• AWS said it would donate $20 million in cloud credits and support to a group of researchers working on accelerating the testing process for COVID-19, which everyone can agree needs to improve.
• Microsoft also responded to the current crisis by pledging to prioritize cloud traffic coming from "first responders, health and emergency management services, [and] critical government infrastructure organizational use." It also pledged to keep Microsoft Teams, which ran into some issues in Europe last week, up and running.
• Right before the coronavirus outbreak in China took hold, the nation's businesses spent big on cloud, driving overall consumption there up 67% during the fourth quarter of last year. It's not clear yet how demand was affected in January as parts of China went into lockdown.
• Supercomputing research time is being donated to scientists and doctors by a consortium of cloud companies, including AWS, Microsoft, Google, IBM, and others. The computational resources will be used to search for potential vaccines or cures for COVID-19.
• The Department of Defense may be reviewing its decision to award the JEDI contract to Microsoft following a protest from AWS — but the department does not plan to split the contract between the two cloud leaders.
• Apparently AWS doesn't think very highly of the Pentagon's process for re-evaluating the award, saying "the DoD's proposal focuses only on providing Microsoft a 'do-over' on its fatally flawed bid while preventing AWS from adjusting its own pricing in response to the DoD's new storage criteria."
• O'Reilly Media is "permanently shuttering" its in-person events division in response to the chaos caused by the coronavirus outbreak. That shocked the cloud and open source world Tuesday: O'Reilly organized several very important and influential enterprise tech conferences each year.
• You can count the number of interesting non-financial blockchain startups on one hand, but Storj is one of them. Its new service promises "nine 9s" (or 99.9999999%) storage durability, and that is a lot of nines.

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