Despite the uncertain economy with the threat of a recession, MicrosoftScott Guthrie, top cloud executive at , hasn’t seen companies slow down in their efforts to move software programs to the cloud in recent months.
His remarks suggest that demand for cloud computing services, which a handful of big tech companies are providing to governments, schools and businesses, remains strong.
Lower consumer spending is raising fears a recession may be imminent. In July and August, retailers such as Dollar Tree and Walmart lowered their earnings estimates to reflect consumers being more careful with their money due to higher prices for groceries, gasoline and other products.
Businesses are slowing spending on some types of software in anticipation.
Cloud Software Manufacturers UiPath and Veeva have called for lower earnings in the coming quarters due to a stronger US dollar and difficult economic conditions. Budget discussions are taking longer and top executives are becoming involved in business talks, Rob Enslin, a co-CEO of UiPath, told analysts in a conference call last month.
However, Guthrie said that doesn’t appear to be the case with Azure, Microsoft’s cloud infrastructure service.
“I haven’t seen the current situation cause people to pause the cloud,” Guthrie, Microsoft group executive vice president of cloud and artificial intelligence, said in an interview with CNBC.
An energy crisis has erupted across Europe this year following Russia’s invasion of Ukraine, with Russia claiming sanctions have caused problems with pumping. Gasoline and electricity prices skyrocketed. Those responsible for information technology have become aware of this.
“Are we seeing people pushing into the cloud because of the energy crisis? I think the answer is definitely yes,” Guthrie said. “Similar to Covid I think what we saw especially in the beginning with Covid.”
Guthrie said he hasn’t heard companies say they are slowing down their use of cloud computing because of higher energy costs.
“Now if you think about the current situation in Europe, where energy prices are rising dramatically, if you can scale down your on-premises workloads and move them quickly to our cloud, you can reduce the power consumption you need and that translates into real economics savings,” he said.
That was a topic of discussion among executives at the Paris-based healthcare company Sanofithat uses cloud services from Amazon, Google and microsoft. “Year over year, we’ve seen energy costs increase by over 65% in some regions,” said Sam Chenaur, vice president and global head of infrastructure and cloud at Sanofi.
An efficiency metric called power-usage effectiveness, or PUE — the energy needed for a facility divided by the energy consumed for computing power — is very high at Sanofi while it’s much lower at Azure, Chenaur said. Microsoft’s global PUE number is 1.18, according to a recent blog post.
“If anything, I think the economics of cloud from a data center migration perspective are a lot more compelling today than they’ve probably been even in years past, and they were already compelling, you know,” Guthrie said.
Sanofi began a major transition to cloud 18 months ago and has become increasingly dependent on cloud-based virtual desktops, which contractors and employees could use from any computer after Covid started, Chenaur said. Now Sanofi intends to add Azure resources in five locations around the world, said Hamad Riaz, CEO of Mobiz, a technology services provider working with Sanofi.
“I would say that we’re looking to bring down the overall cost in IT so we can free up that money so we can develop more medicines and medicines for patients,” he said.
Other companies could turn to the cloud to provide more services due to higher demand in a recession. For example, Zoom video communicationwhich competes with Microsoft’s communications app Teams, leaned on the cloud to deal with millions of new users looking to make Zoom video calls in 2020.
“I think we’re going to see different companies in different regions responding to challenges, and not just the energy crisis, but if you think about the supply chain and a lot of the supply chain reconfiguration that’s happening around the world, or when You think about inflation and interest rates,” Guthrie said.
Still, not every company is moving to the cloud so quickly, as many are struggling financially, Guthrie said. coin base, snap and Shopify are among the companies that have each shed at least 1,000 employees this year. Coinbase CEO Brian Armstrong told employees in June that a recession appears to be beginning and a recession could spark a new digital currency bear market.
Meanwhile, Microsoft CFO Amy Hood was more cautious when announcing the company’s results in July. She told analysts they expected Azure’s growth to slow to 43% in constant currencies from 46% in the second quarter. Microsoft is not immune to current economic forces, said CEO Satya Nadella.
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