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.a
|Monthly Users (m)
|$ per user
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?