Genuine question (I don't know much about cloud stuff): how is providing a cloud service/platform (at scale) even remotely as hard as designing, manufacturing and selling GPU's (including drivers and firmware) at massive scale?
It feels like reading that setting up something like Facebook would be extremely challenging for a company like SpaceX.
It's certainly possible to start new cloud providers - there are a bunch of smaller-scale VM providers. In the GPU cloud business there's companies like lambdalabs and runpod.
But the fattest profit margins are in selling to big corporations. Big corporations who already have accounts with the likes of AWS. They already have billing set up, and AWS provides every cloud service under the sun. Container registry? Logging database? Secret management? Private networks? Complicated-ass role management? Single-sign-on integration? SOC2/PCI/HIPAA compliance? A costs explorer with a full API? Everything a growing bureaucracy could need. Getting your GPU VMs from your existing cloud provider is the path of least resistance.
The smaller providers often compete by having lower prices - but competing on cost isn't generally a route to fat profit margins. And will folks at big corporations care that you're 30% cheaper, when they're not spending their own money?
nvidia could definitely launch a focused cloud product, that competes on price - but would they be happy doing that? If they want to get into the business of offering everything from SAML logon integration to a managed labelling workforce with folks fluent in 8 languages - that could be a great deal of work.
I like this question. You raise a very good point. Occam's Razor tells me the simplest explanation is "core competency". Running AI-SaaS is just a very different business from creating GPUs (including the required software ecosystem). As a counterpoint: Look at Microsoft. Traditionally, they have been pretty good at writing (and making money from) enterprise software, but not very good at hardware. (XBox is the one BIG exception, I can think of.)
Except for the place where they're good at hardware, they're not good at hardware? I mean that's true, but a bit of a twist of logic, wouldn't you say?
Genuine answer: Setting up Facebook WOULD be extremely challenging for a company like SpaceX. There's a reason Facebook is worth about 10x what SpaceX is worth, and most of that value doesn't come from the ability to build software. Facebook isn't even particularly good at building software.
To give an example in a closer domain: Look at how long Google lost money on cloud services through 2022 (over $15B in loses), and now only makes money by creative accounting (bundling "cloud services" together versus breaking out GCP; Microsoft does something similar with Office 365 and Azure).
Like many potential customers, I would not consider GCP because:
1) Google "support" is a buggy, automated algorithm which randomly thwacks customers on the head
2) Google randomly discontinues products
3) I've seen a half-dozen to a dozen instances where buying from Google was penny-wise and pound-foolish, and so have many other engineers I've worked with.
Google's overall attitude is that I'm a statistic defined by my value to Google. Google can and will externalize costs onto me. That attitude is 100% right for adwords and search, which are defined by margins, but not for something like GCP. If I am going with a cloud service/platform, I'll go with Amazon, Microsoft, or just about anyone else, for that matter.
That's not that Google is a bad company. Google actually did have the skill set to build the software and data centers for a very, very good cloud provider. It's just that Google's core competencies lie very far from providing reliable service to customers, customer support, or all the things which go into providing me with stability and business continuity.
"Fixing" this would require a wholesale culture, value, and attitude change, and developing a core competency very far from what Google is good at.
I put "fixing" in quotes since if you develop too many core competencies, you usually stop being good at any of them. Focus is important, and there's a reason many businesses spin out units outside of their domains of focus. If Google is able to become good at this, but in the process loses their edge in their current core competencies, that's probably a bad deal.
FWIW: I haven't yet formed an opinion on NVidia's cloud strategy. However, their core competencies appear to be very much in the "hard" domains like silicon, digital design, machine learning rather than "soft" ones. Another relevant example for what can happen when hard skills are de-emphasized at engineering-driven companies is Boeing (if you've been following recent stories; if not, watch a documentary).
>There's a reason Facebook is worth about 10x what SpaceX is worth, and most of that value doesn't come from the ability to build software. Facebook isn't even particularly good at building software.
One is a publicly listed business with as much of an objective look at real time "worth" as possible in today's world, and the other is a private business with confidential financials.
Seems like you would be unable to even calculate SpaceX's net worth, much less compare them to a business with the most objective measure of "worth".
SpaceX raised $750M at a valuation of $137B in January 2023.
A private investment at this scale should have a lot more transparency and due diligence than disclosures from a SEC disclosures. If I were investing $750M, I'd have engineers under NDA review SpaceX technologies, financial auditors, legal auditors, etc.
Secondary sales place it a little bit higher (but those typically have all the issues you describe).
Fair enough, didn’t know about that recent round. Still, I would assume that number is higher than it would be if the business were publicly listed, but the $140B should be close enough.
Eh I mean Google moved GCP's revenue around because Microsoft was doing that to make Azure look bigger than GCP. If you can't beat em, join em. Google's got long term contracts with a lot of companies and the government, so GCP isn't going to shut down anytime soon. Their consumer products division has problems with product longevy, but we're not paying them corporation level money or signing serious contracts when buying a Stadia subscription. So it's just business.
What I've heard is Azure is a pain in the ass, and things take three times as long to set up there, for some reason. There's also Oracle cloud but you hear way less about them. out there.
These sorts of behaviors take out whole swaths of businesses wholesale. It's random, and you never know when it will happen to you.
It's the difference between managing a classroom with:
- an annoying kid throwing spitballs every day (Azure)
- the quiet kid who, one day, brings an assault rifle, a few extra mags, and starts spraying bullets into the cafeteria (Google).
Yes, one is a constant source of annoyance, but really, it's very manageable when you consider the alternative.
(Oracle, in the school analogy, is the mean kid who spreads false rumors about you. As far as I can tell, there is never a sound, long-term business reason to pick Oracle. Most of the reason Oracle is chosen is they're very good at setting up offerings which align to misaligned incentives; they're very often the right choice for maximizing some quarterly or annual objective so someone gets their bonus. In return, the firm is usually completely milked by Oracle a few years down the line. By that point, the decision maker has typically collected their bonus, moved on, and it's no longer their problem.)
Name one product that was killed by Google while they had an agreement with the US government not to. Who cares about random, unprofitable products like Google+ rightfully being shuttered? There is no killedbyapple because they barely take risks on products, especially software products.
I share your intuition, perhaps unfairly, that it's indeed not as hard in absolute terms. However, it certainly requires a different set of skills and organisational practices.
Just because an organisation is extremely good at one thing doesn't mean it can easily apply that to another field. I would guess that SpaceX probably does have the talent on hand to throw together a Facebook clone, but equally I think they would struggle to actually complete with Facebook as a business at scale.
Well, motivation would be an obvious thing lacking. People who want to work on rockets, I would guess, would find working on facebook to be a “boring” solved problem.
It feels like reading that setting up something like Facebook would be extremely challenging for a company like SpaceX.