I try and read as much as possible when time allows. Certain topics fascinate me, over the last few years, it’s been the confluence of tech, strategy and finance. This book covers all these topics. It’s a fascinating story of his evolution from a teen wunderkind defying his parents to put together his fledgeling startup, to a mature leader making huge bets on the future of the technology industry and market as a whole. Use of analepsis, in my view, made it a more compelling read. As the various crisis points in the story are brought forth, it’s clear that his history and principles guide Dell Technologies in the new challenges it faced. Whether it was the above board handling of the go private transaction, which was uncomfortable for Michael, but ultimately saved the deal when it faced litigation, or keeping his word to honor the legacy of the EMC founders, principles mattered and principles paid a dividend. A few themes emerge, but one of the biggest is that skulduggery is short term profitable and long term fruitless. Doing business with integrity, ensuring everyone wins, is its own reward. Michael is an autodidact whose curiosity ends up being the engine of transformation for the company. From not having a good sense of his cash position in the early days, to use of more sophisticated tools (such as a tracking stock), the evolution is interesting to read. The book is full of interesting nuggets on grit, talent acquisition, retention, sales (interesting that Michael still meets with customers), innovation and a good primer on corporate finance. It’s a recommended read for anyone in business / technology.
The global cloud market has been accelerating. Estimates are that, by 2030, 90% of all computing workloads will be in the cloud. Africa has paradoxically been at the forefront – AWS was developed in South Africa – while at the same time lagged behind the global cloud movement. The first hyper-scale cloud provider to launch on the continent was Microsoft Azure (in March 2019) followed by AWS shortly thereafter.
As cloud computing adoption accelerates in Africa, I see the market becoming dominated by indigenous cloud service providers and not cloud technology providers. The difference between the two is that the technology providers write the software that runs the cloud and either sell it as an integrated service, including compute, networking and storage (AWS, Microsoft, Google) or sell the software directly to the end user (VMware, Microsoft, Citrix), whereas cloud service providers provide professional services on top of these platforms, whether it’s public or private clouds (Rackspace, Accenture, Dimension Data). The profits in the cloud technology space accrue to these few companies.
The reason for this shift is simply scale; the economics of running a cloud technology business aren’t friendly to smaller companies. AWS (Amazon.com), Microsoft (Bing, Office 365, Hotmail) and Google (Google.com, Gmail, Youtube) were able to underwrite their datacenter, network infrastructure with their own web properties. This meant that the barrier to entry was much higher, as they all had a level of scale that allowed them to have lower operating costs per unit. These providers also have large teams of engineers already running their existing properties. They negotiate directly with Intel for chipsets, have lower bandwidth costs, lower per-unit infrastructure costs, and lower human resource costs.
Cloud technology providers were able to make significant investments in their cloud platforms, building tools and APIs that allowed developers to automate on the infrastructure. This gave them scale and feedback to develop and improve their platforms, which attracted more developers and workloads, allowing them to keep pulling away from the market and attracting more and more workloads. Developers eventually specialised on one of these platforms and comitted to them.
They have now reached a level of scale that makes it a Herculean task to compete directly with them both in terms of software features and hardware scale and infrastructure. As of 2020, the top 5 cloud technology providers accounted for 80% of the market. This makes the cloud business a particularly difficult space to operate in, as there is downward margin pressure as the global providers are cutting down prices, while capital expenditure needs to grow to achieve a level of scale that allows one to compete. There just isn’t enough cashflow to invest to scale.
Additionally, most cloud providers have to contend with building a large engineering team to build out the features and automation that clients need, which is expensive, or simply using existing proprietary platforms, which generally end up acting like a tax on the cloud platform. There’s very little wiggle room for getting a competitive cloud running with enough money to build out the features needed to compete and keep growing.
So, this has led to the paradox of having very few large scale cloud vendors in Africa. The capital required to run a cloud platform at scale isn’t congruent with the demonstrable demand for the cloud platform at these cost structures. Put another way, few people are willing to pay the higher price required to keep the lights on in these cloud platforms, so the providers need to focus on an alternative path to generate profits. Ultimately, consumers are voting with their wallets and saying that latency is a less important consideration than the sticker price of the service. This means that the benefits of running the infrastructure will accrue to the largest providers who can have the lowest cost structure.
Thus, the future for indigenous cloud firms in Africa will be managed services (cloud service providers). There will be a few larger providers who run infrastructure, but they will mostly be enterprise focused and who can bundle the cost of the more expensive cloud infrastructure that they are running into the managed services they are offering their customers. Ultimately the customers will be consuming the managed services; the infrastructure will be invisible to them. Adoption will depend on how good all service providers are and how well they are able to guide clients on their journey to the cloud. Quality managed services providers will ultimately be the biggest catalyst to cloud adoption in Africa. Eventually, the hyper-scale providers will expand their datacenter footprint across the continent, as adoption accelerates, which will create even more opportunities for the managed service providers.