Market Hill | a northdoor group company |

Working on big, expensive, complicated technology problems.

Market Hill

It’s not easy being green.

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Are carbon emissions now on the Private Equity radar?

Last week Blackstone announced plans to cut carbon emissions by 15%. This is within the first three years for new investments.

That’s a good start.

Green savings are often overlooked in tech, particularly the cloud.

Cloud providers are doing most of the heavy lifting reducing emissions for you.

1) Planting trees to offset carbon
2) Putting data centres underwater
3) Using AI to decided when to cool servers

Even with the cloud providers doing you a favour, the cloud still has a big impact on your green credentials.

Being green has the added benefit of saving big $’s.

A few weeks ago I mentioned that most companies are using 50-70% more cloud capacity than they need. This also means spending 50-70% more than they need to.

Let me take you on a journey through time.

It’s the year 2013.

  • Richard III is found under a car park in Leicester
  • Hugo Chávez, Margaret Thatcher and Nelson Mandela have passed away
  • The ‘walkie-talkie’ skyscraper in London melted some cars.

There was a younger Thomas. Living with his not yet wife in a flat in North London (with blue carpet) spending his evenings trying to work out the impact of technology on carbon emissions.

Working with Insurance companies at the time meant seeing considerable data centre overspend.

For fun, I’d started to think about what the green impact was.

117,000 propane gas barbecues

Or 9,995 barrels of oil if you prefer.

That was how much carbon each year one company used on servers. The same is true in the cloud.

If green isn’t on your firms agenda yet, it will be soon.

green cloud kermit

Thomas

You can sign up for more ‘unconsidered needs’ below.

P.s. If you haven’t watched the new David Attenborough documentary, A Life On Our Planet on Netflix. You should. It is excellent.

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An uncommon ‘Unconsidered Need’. Market Hill join forces with Northdoor.

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Thanks to those of you who helped keep this hush whilst we sorted the ins and outs over the last few months. Market Hill are now in the strongest position to help our private equity operating partners and their portfolio company CEOs to achieve tech value creation.

As of 1st Oct 2020, Market Hill has become a Northdoor Group Company.

It’s been a rollercoaster and we couldn’t be more excited about the relationship with Northdoor.

We work in the same office on the 3rd Floor, Bentima House, 168-172 Old Street, London, EC1V 9BP and share a supply of Pink Grapefruit Fanta.

(Somewhere here)

Market Hill | Northdoor | Private Equity | Value Creation
Market Hill | Northdoor | Head office

Whilst Market Hill operate independently we can and do access Northdoor’s knowledge, expertise and scale. Northdoor’s core mission is to get the most out of IT using the power of data. You can find out more at www.northdoor.co.uk

Northdoor has excellent relationships with IBM, Microsoft and Oracle. Having worked together for 20 years.

James Cherry and Rob Batters from Northdoor both on the Market Hill board of directors alongside founder Thomas Ballard.

Market Hill are in the strongest position to help our private equity operating partners and their portfolio company CEOs to achieve tech value creation.

Market Hill | a northdoor group company |
Market Hill | a northdoor group company |

Thomas

You can sign up for more ‘unconsidered needs’ below.

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How many potatoes do you want in the cloud?

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This week Google announced its ‘round the clock’ clean energy for the cloud. This came just 1 week after they announced their carbon footprint was now zero, meaning Google has compensated for all the carbon it has ever created.

This is a great start.

Deepmind, AI, Google

However, the announcement has some really interesting themes for the cloud beyond green.

70% of all enterprise cloud customers pay for but do not consume at least 3x more in the cloud that they need.

A further 10% using at least 2x more. Google’s green ambitions are in direct competition with its 5-year cloud growth plan.

Why is that the case? You could imagine it like this for example.

You ask your partner to get some potatoes for the supermarket for a recipe you are cooking. They ask “how many?”, you’d probably say 2 or 3.

What they might not ask is:

  1. How big?
  2. What type?
  3. Will you boil, bake or fry?
  4. Organic, finest?
  5. What’s the budget?

After all, they are just potatoes.

For your recipe you actually needed 1 potato, you asked for 2 or 3 and they got you 4. We believe more potatoes, more excess will surely result in even more ‘personal’ security.

Organisations do exactly the same with the cloud.

All of the cloud big players are there waiting to sell you your own comfort, your own safety net.

The problem of having too much is it can slow innovation.

Your flexibility to change as an organisation can be severely limited by long term commitments, reserved instances, cloud credits etc. These are all offered to make you more comfortable to sign a ‘big’ cloud deal.

Great companies think about creating small, flexible and portable applications in the cloud with very specific outcomes. They want a smaller cloud estate, not a bigger one.

A final thought…

An example of a real migration to AWS. This company was on the verge of signing a $100m multi-year cloud deal. Looking at the data you could very clearly that they only needed to spend in a worst-case $50m. Best-case $25m.

This would have meant less ‘personal’ security, less chance of a meeting with Andy Jassy, less of an empire.

What would you have done?

Thomas

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TikTok is the most exciting big tech buyout in recent years.

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Could you have ever imagined an executive order from the president of the United States, saying that in 45 days all firms have to stop working with a Chinese run app?

After speculation that Microsoft would get the deal, it seems like Oracle have found the formula that works for both the US and China.

Oracle was ‘OK’ with not becoming TikTok’s parent company and was content becoming its cloud services provider, keeping US data in the US.

You can’t help but feel if it goes ahead, Oracle has got a great deal.

TikTok spends almost as much with Google Cloud as Netflix do with AWS.

Netflix’s recent earnings report showed they have committed $900m “primarily related to cloud computing costs,” over the next three years.

In 2019, TikTok signed a three-year agreement with Google Cloud (GCP) to buy more than $800 million in cloud services.

A deal anything close to the Google deal could be huge for Oracle, it represents a 5% increase in their cloud services business which had only grown 1% in 2020.

However you cut it that’s a lot of cloud services.

$ Cloud Spend p.aMonthly Users (m)$ per user
Netflix$300m200m$1.5
TikTok$266m500m$0.5
Simple $ per user model

If you asked these companies how much they spend per user on the cloud, they wouldn’t know. A crude model is taking subscribers and dividing by cloud spend.

There are much better ways to do this but even some of the biggest companies don’t even use this basic model.

So, do those numbers sound alright or like a lot of money?

On the surface they both sound like very reasonable numbers.

The reality is they are both excessively high. Nearly all organisations are spending between 50-70% more with their cloud providers than they need to. For Netflix, this could see their cloud spend per user down to 45c and TikTok to 15c.

Why should I care about the cost per user?

You could look at this two ways: 1) Spending more liberally means potentially faster products, more innovation 2) Less efficient code, less understanding of how your tech works, less innovation.

Either way, a cost per user is a good place to start. The more you understand your systems at a deep level, the fewer incidents and outages and the less they cost.

TikTok might be more worried about operating in the US or not.

What’s Netflix’s excuse?

Performance testing is a waste of time.

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Performance testing on its own isn’t useful, it’s a waste of time and money. Testing can be a great method to understanding at a deep level where you can make radical, innovative and disruptive business change. But few use it this way.

Almost every dev/product team out there can at some level of run automated performance testing, it might be very basic but it’s a start. They’ll typically:

  1. Setup a JMeter or python script
  2. Run x iterations of a user journey
  3. See if it was as quick as the last time
  4. Check-in code

If you are lucky you might get a meaningless report with response times and throughput, maybe even on a graph. But what does good actually look like?

Good companies know what response times ‘should’ be and the relationship to the throughput (users/traffic/something) on the system.

Great companies measure of application efficiency. Monitor and fix stability issues in dev. Consistently instrument their design, using data to influence the future. Create small, flexible, mutable services and applications that scale up, down and across. Forecast and provision the right type, level and placement of capacity, moving with the sun. Build scalable resilience into applications before it’s needed. And of course, know how fast their application should be and how many things it should do at any time.

I’ve talked previously about creating logical maps of systems, end to end. Using business>service>infrastructure data and map this to customer behaviours. Then using this to influence the new products that you bring to market.

Test for insight.

Testing for the sake of testing is wasting everyone’s time. Test for insight. The insight you gain will let you create great products, market to the right audience and stay ahead of the future.

Those who really understand their systems and how they work will have a superior understanding of their customer’s needs and wants. They will be able to make whatever changes they want without worrying about what the underlying tech stack is doing. How liberating would that be?

Testing is often used as a tick box exercise and in most cases, the results you get aren’t even good enough for that. Forget about testing, start thinking about how and where can I get the insight that will let me do something nobody has done before.

Thats where the real value is.

Thomas

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