Does the Cloud Make Customer Loyalty a Thing of the Past?
Snap is planning to spend $3 billion on cloud services between Amazon Web Services and Google over the next five years, an update to its initial public offering documents indicates.
Snap will pay Amazon $50 million in 2017, spending progressively more on AWS cloud services through 2021, to a total of $1 billion over five years, Bloomberg says.
The company, which filed for an IPO last week, has said previously that it will spend $2 billion with Alphabet Inc. over the same period on Google cloud services. According to Bloomberg, Snap is required to spend at least $400 million a year on Google cloud services. In return for the multi-year commitment with Google, Snap said it will receive discounted cloud services.
Up until recently, a commitment from a company the size of Snap would likely be more exclusive; cloud vendors’ stack up enterprise commitments and customer wins against each other like collector cards. But the times have changed, and a multi-cloud approach has become the norm for enterprises who can’t afford vendor lock-in or lengthy downtime – a risk when one relies on a single vendor.
In its initial public offering filing last week, Snap warned investors of its heavy reliance on Google cloud services, noting that “any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business.”
“Splitting the work between Google and Amazon decreases the company’s reliance on a single company. The filing also states Snap could still build its own infrastructure,” Bloomberg writes.
It’s not just enterprises the size and scale of Snap who are fearful of the impact of vendor lock-in. A recent study found that more than three-quarters of decision makers do not make the most of their cloud because of vendor-lock in concerns.
A separate study, released in December, found that 1 in 4 respondents are concerned with vendor lock-in or data portability when they switch cloud providers.
Many companies are using a multi-cloud approach to offset these concerns, and its something that the industry could see more of in 2017, according to experts.
This year, according to Rackspace CTO John Engates, will “see more companies formulate explicit multi-cloud strategies to best leverage and coordinate multiple cloud providers. However one gets there, a multi-cloud world comes with a unique set of challenges, including the need for expertise across a larger range of cloud technologies. It also requires managing multiple vendor relationships and more complicated cost tracking. One of the most critical needs is multi-cloud security — and my predictions for the near term are a mixed bag.”