Zooming back on-premises

Welcome to Runtime! Today: Zoom is increasing the use of its own infrastructure after relying on the cloud during the pandemic, Databricks says it is growing faster than its larger rival, and this week's enterprise moves.

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Repatriation games

A clear pattern is emerging among enterprise tech companies that are rethinking their use of cloud infrastructure services; they have a deep understanding of the behavior of their workloads, and they are growing at slow, predictable rates. After scrambling for cloud servers during the early days of the pandemic, Zoom plans to rely more heavily on its own infrastructure going forward.

On Wednesday DCD spotted a paragraph in Zoom's 2023 ESG report that discussed how the company relies on a mix of self-managed data centers and cloud providers — AWS and Oracle — to serve those hour-long video calls during which half the attendees are paying attention. In the future, however, Zoom wants to rely more heavily on its own infrastructure for production customers.

• "Our data center strategy is to migrate more into the leased colocation data centers, decreasing our dependence on cloud services to support our customers," Zoom said, noting that it will still have some level of presence on cloud servers as needed.
• At the end of 2023, Zoom maintained 29 data centers across the world.
• Zoom doesn't construct its own data centers; instead, it rents space from "top-tier global data center providers" like Equnix and Digital Reality, with Equinix hosting around half of that co-located infrastructure.
• It is also in the process of launching "NextGen" data centers, five of which have arrived to date to replace older infrastructure.

Cloud providers crowed about their integral role supporting Zoom as the world locked down while trying and failing to prevent the spread of Covid-19 in 2020, but the reality was a little different.

• Brendan Ittleson, who was CTO at Zoom during those frantic days, told me in late 2020 that Zoom had 19 co-located data centers running at 50% capacity serving 10 million customers a day in December 2019, heading into the pandemic. (Please donate to the Internet Archive.)
• By March 2020 Zoom was serving 200 million customers a day, and while Ittelson said Zoom's application was designed to scale quickly on its own hardware, it still needed some help and turned to previous partner AWS and new partner Oracle.
• But Zoom depended on its own data centers to host most production traffic, and it still does: Zoom only turns to cloud providers when it needs "a specific capacity," it said in the ESG report, calling AWS its "preferred provider."
• That makes Oracle co-founder Larry Ellison's 2020 claim that "the majority of Zoom meetings — these tens of millions of Zoom meetings that happen every day — happen in the Oracle cloud" look even more ridiculous in retrospect.

Zoom beat Wall Street expectations for revenue growth last week, but it's only growing at 3.1% these days and operates at margins far lower than the cloud providers.

• Dropbox wrote the playbook for Zoom's approach back in 2015, when it realized that it could save millions by standing up its own servers thanks to a deep understanding of the needs of its application and a relatively predictable growth pattern.
• More recently, venture capitalists tired of paying the AWS Tax have tried to convince startups under their influence to adopt their own infrastructure, otherwise known as "cloud repatriation."
• Zoom's story is a little different, given that it has always relied heavily on its own infrastructure.
• But as DCD noted, this week Zoom CFO Kelly Steckelberg might have laid out the new infrastructure strategy for established enterprise tech companies: "We have cloud providers that we work with, especially when you launch something new to make sure there's enough capacity, but then as quickly as possible getting that back into our data centers."

A MESSAGE FROM CANVA

As enterprises rush to embrace AI, CIOs are grappling with how to merge their enterprise’s IT past and future. Increasingly, in-house technology leaders are tasked with the seemingly impossible mandate of reaping the benefits of next-generation systems while simultaneously reducing legacy technical debt and costs and managing risk. Read more about The CIO Paradox on Runtime.

Waiting on IPO

Databricks doesn't need much more to prove it will be an enterprise tech company for the long haul, given its pivotal role helping companies and researchers manage the explosion of application data even before the generative AI boom kicked in. But after years of teasing a public offering, CEO Ali Ghodsi still isn't quite ready to pull the trigger.

According to the Wall Street Journal, Databricks recorded $1.6 billion in revenue during its last fiscal year, a 50% increase compared to the previous year. That's a faster rate of growth than the 38% clip Snowflake posted last year, but its already public rival pulled in $2.7 billion during its last fiscal year.

Asked about its IPO plans, Ghodsi told the WSJ that "we’re certainly ready as a company: The way we’re operating, the way we’re doing our audits, the way our financials are, the CFO, the board structure." But enterprise tech companies on the verge of IPOs keep eyeing each other from a distance, waiting for somebody else to go first and break the logjam.

Enterprise moves

Tim Bertrand is the new president of HAProxy Technologies, joining the open-source load balancer company from project44.

Kjell Hedstrom is the new chief technology officer at Onfleet, following two years as head of engineering at Ganaz.

Portland's own Ali Tierney is the new chief revenue officer at Cribl, after several years as senior vice president of sales for Snowflake.

Don Foster is the new chief commercial officer at Panzura, a promotion from his previous role as vice president of global technical services.

Julie Irish is the new senior vice president and chief information officer at Couchbase, a newly created role that builds on her experience as vice president of business applications and IT at New Relic.

The Runtime roundup

MongoDB beat Wall Street estimates for revenue and earnings, but investors were displeased with its lighter-than-expected outlook and sent the stock down 8% in after-hours trading.

Salesforce's low-code Einstein Studio platform is now known as Einstein 1 Studio, and now comes with a generative AI feature that can create code from prompt engineering.

In related news, AI prompt engineering is dead, according to IEEE Spectrum.

PlanetScale conducted what some employees called "mass layoffs" in order to "prioritize profitability," according to CEO Sam Lambert.

Cloudflare acquired Nefeli Networks and announced a new service designed to connect multicloud networks.

Lots of companies experimented with generative AI technologies in 2023, but only 9% rolled it out widely, according to a new survey from MIT and Telestra.

Thanks for reading — Runtime is off for a week of spring training baseball in Arizona — see you next Thursday!