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Sustainability is a genuine objective for many enterprises, driven by their desire to be good stewards of the planet. Other companies want to hit a specific ranking to attract more customers and investments. Regardless of the reasons, enterprises now look to cloud computing to lower costs and provide good ESG (environmental, social, governance) scores. Many pitch cloud computing to decision-makers as a technology that will help an enterprise meet sustainability objectives because cloud computing is green.

Dont take that statement at face value. Many assumptions about sustainability and cloud computing are just wrong. Lets bust some of these green myths and look at the realities of cloud computing as a technology that can drive sustainability.

Myth #1: Cloud computing is inherently green. Although cloud computing can reduce energy usage and carbon emissions, it is not automatically green. Cloud computing still requires energy to power data centers and maintain infrastructure, and not all cloud providers use renewable energy or implement energy-efficient practices.

You must look beyond the word cloud to gauge a systems sustainability. For example, if you audit a particular cloud computing implementation, you might find that on-premises systems are more carbon-neutral than many public cloud implementations, depending on what powers these systems. Some cloud deployments use coal-fired power, and some traditional systems within an enterprise data center use renewables.

Myth #2: Sustainability is based on the power consumed by the providers platforms and infrastructure. This myth lets the developers, system designers, cloud architects, and even infrastructure engineers off the hook in the fight to reduce emissions. Thats a problem.

The efficiency of applications and systems running on cloud platforms determines power consumption. Lets say you have two applications, one designed for power efficiency and one not. The application designed for power efficiency might consume one-fourth as much power as the application that did not undergo efficiency testing.

The good news? Many devops processes and toolchains now include power efficiency checks (which often align to cost efficiency checks) as part of enterprise finops programs.

Myth #3: Its the cloud providers job to provide a carbon-neutral platform and infrastructure. Much like security, sustainability is a shared responsibility model. The cloud provider certainly plays a role in that you cant control how they consume or manage power. You must trust their decisions. However, its the job of the enterprise to validate and verify the sustainability of each cloud provider they use, as well as to do their own work to ensure that their systems are near 100% in terms of energy utilization.

Im surprised at how often cloud computing pros push the responsibility for sustainability to the cloud providers. It just does not work that way. Suppose you choose a cloud provider that does an excellent job leveraging renewables. Your enterprises inefficient use of cloud resources and overprovisioning of those resources could easily counter any sustainability gains.

Well get better as time progresses. However, the most dangerous challenges to cloud and sustainability are common misunderstandings that become assumed truths.

See the article here:
3 common myths about sustainability and cloud computing - InfoWorld

HJBC

At the beginning of the year, we wrote a bullish article on Amazon.com, Inc. (NASDAQ:AMZN) highlighting the company's unique ability to surmount the challenge of labor shortages by leveraging automation. With a satisfying 20% rally year-to-date, we now approach the earnings season and are taking this opportunity to delve into two key topics - AWS and AI, and Payments - and refresh our financial analysis. Buckle up as we embark on a journey to explore the potential impact of AI/ML on Amazon's AWS division, and how Buy with Prime (BWP) could reshape the e-commerce landscape.

The growth of AI and machine learning applications has been a key driver of the next-generation computing landscape, which has led to increased investor interest in Amazon's AWS (Amazon Web Services) division. This increased focus is due to AWS's competitive positioning and the potential impact of macro-driven customer spend optimizations on its net revenue growth.

In this context, it's important to consider how AWS is well-positioned to benefit from the growing adoption of AI/ML in enterprise and consumer computing applications. AWS offers a comprehensive suite of tools and services for various applications, and as enterprises increasingly integrate AI/ML into their technology stacks, hyperscalers like AWS stand to benefit from the increased demand for compute resources required to train and generate model outputs.

The forward catalysts for Amazon shares are likely to be a combination of factors, including the bottoming of revenue deceleration for AWS, a return to pre-pandemic operating margins for its North American eCommerce operations, and stability in the consumption habits of Amazon Prime households in the coming quarters. We believe that the optimization theme, characterized by customers pulling back on cloud spending amid economic uncertainty, may have peaked around 2023 economic concerns and budget planning in late 2022. Previously, instead of increasing their budgets, customers chose to optimize their existing spending, focusing on getting the most value from their current investments in cloud services. As customers shift away from optimization, this could potentially indicate a turning point for AWS, as enterprises may soon start to increase their investments in cloud computing and related technologies once again.

Long-term potential for cloud computing remains strong, as evidenced by Amazon's $110 billion revenue backlog that grew 37% YoY. The integration of AI/ML tools into tech stacks to drive core businesses is expected to benefit both growth and margins for cloud providers like AWS, especially as the significant volume of compute required for large language models (LLM) and generative AI tools becomes more prevalent.

To further optimize its operations, Amazon recently announced its intention to eliminate 9,000 positions across AWS, Advertising, People, Experience and Technology ("PXT"), and Twitch. These headcount reductions, which follow a previous reduction of 18,000 positions, are expected to result in annual savings of around $2.2 billion. This move is anticipated to protect AWS EBIT soon and drive better long-term leverage.

Buy with Prime is a promising service that allows retailers with online stores outside the Amazon platform to leverage Amazon's best-in-class warehousing, fulfillment, and payment solutions. With over 200 million Prime subscribers and a significantly expanded fulfillment capacity, Amazon is well-positioned to capitalize on this initiative and transform the e-commerce landscape.

BWP offers significant benefits for consumers by providing free 1/2-day shipping for Prime customers on participating retailers' websites. Our analysis suggests that BWP could lead to a substantial increase in checkout conversion rates, by 25% on average, as it addresses consumers' pain points related to minimum thresholds for free shipping. This is likely to result in higher sales conversions and a more satisfying shopping experience.

For merchants, BWP simplifies inventory management, payment processing, storage, packing, delivery, and return policies. Merchants can selectively offer BWP for specific products and use one pool of inventory to fulfill both Amazon orders and BWP orders. This flexibility streamlines the fulfillment process and addresses a significant pain point for merchants, especially with regard to return fees.

If successful, BWP represents a $50 billion opportunity in the U.S., tied to a $200 billion Gross Merchandise Value (GMV). We estimate that Amazon's net take-rate for BWP is around 22% of GMV, which, although seemingly high, compares favorably to other competitive fulfillment services such as Shopify's Fulfillment Network. Merchant adoption is likely to be closely tied to conversion rate improvements and simplified cart functionality.

Buy with Prime has the potential to disrupt the e-commerce landscape, benefiting consumers with faster shipping times and potentially driving merchant adoption through sales uplift. While the impact on payment buttons like PayPal Holdings, Inc. (PYPL) remains uncertain, we believe that the continued evolution of the e-commerce ecosystem will drive value-added services beyond the checkout button. The introduction of cart functionality and the growth of BWP adoption could further revolutionize the e-commerce landscape, offering significant benefits to both consumers and merchants.

Our financial analysis of Amazon reveals that the company benefited significantly from the Covid-19 shutdowns, with sales growing by 38% in 2020 and 22% in 2021, reaching $470 billion. During this period, earnings per share (EPS) rose by 82% and 55%, reaching $3.24, resulting in a CAGR of approximately 27.6% for sales and 65.8% for EPS. However, 2022 proved to be a correction year as sales growth slowed to 9.4%, leading to overinvestment and a decline in EPS to -$0.27.

In response, Amazon initiated aggressive cost-cutting measures to right-size its cost structure. Our analysis anticipates a rebound in 2023, with revenue growth at 8.4%, reaching $557 billion, and EPS recovering to $1.46. Consensus estimates project sales growth of 12.7% in 2024 and EPS further recovering to $2.53. The free cash flow is also forecasted to recover from -$12 billion in 2022 to $21 billion in 2023 and $38 billion in 2024.

At a price of $133 per share, the stock is trading at a multiple of 52.6 times the projected 2024 EPS of $2.53, which is at the lower end of Amazon's five-year range of 48 to 144 times the projected next 12 months' EPS. This suggests that the stock's current valuation might be relatively attractive, as it is trading closer to the lower end of its historical P/E range.

In conclusion, Amazon's improving financial performance, aggressive cost-cutting measures, and comparatively lower valuation suggest potential investment opportunities for investors seeking exposure to the company. However, it is essential to consider the risks associated with the recent overinvestment and the possibility of continued moderation in growth rates.

One notable risk is the recent failure of Silicon Valley Bank of SVB Financial Group (OTC:SIVBQ), which has negatively impacted many startups and venture capital funding. AWS, having more exposure to startups than other cloud providers such as Microsoft (MSFT) Azure and Alphabet's (GOOG, GOOGL) Google Cloud, may be more significantly affected by SVB's collapse.

Furthermore, increasing macro concerns could slow down spending on AWS and e-commerce, which could hinder the adoption of Buy with Prime. Economic uncertainty may cause enterprises to pull back on cloud spending, thereby affecting AWS revenue growth. Additionally, as consumer spending on e-commerce slows down, Buy with Prime's adoption rate may face challenges, impacting Amazon's overall financial performance.

In addition, the AI and machine learning market is rapidly growing, and competition is intensifying. Amazon's AWS division faces stiff competition from other leading cloud providers such as Microsoft Azure and Alphabet's Google Cloud. These companies are continuously expanding their AI/ML offerings and investing heavily in research and development. As the market evolves, AWS might face challenges in maintaining its competitive edge, which could impact its growth and profitability. We are particularly concerned with Microsoft's lead in AI, driven by its partnership with OpenAI.

Finally, Amazon's dominant position in the e-commerce market and the rapid growth of its cloud services have attracted the attention of regulators worldwide. There is a possibility of increased regulatory scrutiny and potential antitrust actions in the future, which could result in fines, forced divestitures, or other restrictions on Amazon's operations. Such regulatory actions may hamper the company's ability to expand and innovate, ultimately affecting its growth prospects and financial performance.

Amazon's financial performance, strategic cost-cutting, and relatively attractive valuation present a compelling case for investors seeking exposure to the tech giant. Nevertheless, it is crucial to weigh the risks associated with overinvestment, potential slowdowns in growth rates, and increased competition in the AI and cloud markets. As we continue to navigate the ever-evolving e-commerce landscape, we remain cautiously optimistic about Amazon's ability to stay ahead of the curve and capitalize on growth opportunities.

Link:
Amazon: Navigating The Cloud, AI, And Payments Revolution (NASDAQ:AMZN) - Seeking Alpha

Iowa will pay multinational firm CGI Technologies and Solutions nearly $40 million over 10 years for a cloud-based financial management system after dumping previous vendor Workday.

Gov. Kim Reynoldss office says the state sunk nearly $16 million into the multiyear Workday implementation before pulling the plug last month because of implementation issues affecting many state business processes.

Since the review period of the (Workday) project went into effect last summer, there have not been any implementation costs to the state since the contract was paused last summer before the testing phase started, Kollin Crompton, a Governors Office spokesman, said in an email to The Gazette.

Had the state continued with testing, there would have been an additional cost of $3.5M for Workdays services. With the shift to CGI, the state estimates that even with the $15.7 million sunk cost, the total savings will be $8.6 million over 10 years.

The states contract with CGI, signed March 24 by Department of Management Director Kraig Paulsen, calls for the company to provide Iowa with cloud-based computer systems to handle financial management, inventory, procurement and budgeting, among other functions, for up to 1,500 state government users.

The state will pay CGI nearly $4.5 million per year in fiscal years 2025 through 2032, with lesser amounts for fiscal 2024 and fiscal 2033 because those will not be full service years. The total contracted amount of $38.82 million over 10 years includes cloud services and quarterly planning sessions.

Headquarters: Montreal, Quebec, Canada

Founded: 1976

Consultants and professionals: 90,250

Locations worldwide: 400

Fiscal 2022 revenue: $12.87 billion

End-to-end services clients: 5,500

Source: CGI

If the state wants to buy additional consulting, it will pay CGI escalating rates from up to $235.50 per hour in fiscal 2024 to $286.50 per hour through February 2033, according to the contract.

If the cloud-based system doesnt go live as scheduled, Iowa doesnt have to pay. But if the state breaks the deal after implementation, the contract calls for early termination fees of up to $650,000.

CGI had been the states longtime computer services provider before the Office of Chief Information Officer chose Workday in 2019. But CGI didnt have a software-as-a-service model in 2019, the Governors Office said last month.

Since then, multiple state and local governments have successfully implemented it and are now leveraging the benefits of a public sector solution, a March 24 news release said. A preliminary review suggests this option is more compatible with the states requirements and current business operations and will result in less disruption to internal functions and lower ongoing costs over 10 years.

Iowa chose Workday, a California-based company, in September 2019 to convert the states aging human resources and financial management systems to the cloud. That contract was worth $21 million. The state signed another deal with Workday in February 2020 for $28 million.

Instead of seeking proposals from multiple companies to see which best met Iowa's needs and was most affordable, state officials chose a generic contract Workday had signed in 2015 with a for-profit procurement organization in Texas, The Gazette reported in 2020.

The state still will use Workdays human resources system, which can exchange information seamlessly with CGIs platform, the state reported March 24.

By stopping implementation of the financial management system last year, Iowa avoided paying subscription costs and ongoing implementation costs, together totaling $6.4 million in savings, Crompton said. The original contract period for Workday ran through June 30, 2024.

Cloud computing sounds like programs and data are somewhere overhead in an invisible cloud. Actually, anything based in the cloud actually is on another computer located somewhere else. Instead of buying and maintaining computer programs and storing vast amounts of data on a home or work computer, we can hire companies with large data centers to provide the services to us through the internet.

Comments: (319) 339-3157; erin.jordan@thegazette.com

The Workday logo is seen at the Workday Championship golf tournament Sunday, Feb. 28, 2021, in Bradenton, Fla. (AP Photo/Phelan M. Ebenhack)

See the original post here:
Iowa's new cloud-computing deal costs nearly $40M over 10 years - The Gazette