Ultimately companies that abdicate their informatics operations like this will give their profits to their data-center operators, who will be empowered to charge them whatever price they want. Because what's their BATNA? Migrating from Azure to AWS when Microsoft doesn't want to let them? Renting your information infrastructure is a great way to reduce startup costs, but down the road, that information infrastructure…
> companies that abdicate their informatics operations like this will give their profits to their data-center operators
Is the expectation data centre operators will see margin expansion? (Genuine question.) I had thought data centres were increasingly becoming commoditised.
Fedex will continue to charge as much as they can to boost their profits. This move will increase their profits, making $1.50 on each of 100 million deliveries instead of $1, boosting profits from $100m to $150m However if they were to undercut UPS and others they might be able snap up UPS business, dropping the profit to $1, but on 200 million deliveries, and thus they'll make $200m instead, you the customer will ha…
Until it becomes a race to the bottom and UPS drop their prices as well. Then both companies suffer
> becomes a race to the bottom and UPS drop their prices
Are they really going to save 400 m$, or was it the figure "promised" by the shop that will handle the migration?
There's not a company in the world that spends more than $1m annually on cloud costs that has saved money by doing so. You don't go to the cloud to save money, you go to the cloud to reduce technological risk. If you go to the cloud you don't need to fire anyone for choosing IBM, you're not getting strangled by any Oracle contracts, you're not gonna lose all your data because of security holes in your use of Microsof…
Article says they're going Azure and Oracle. I actually use Oracle myself, but only their free tier because it's very generous. It probably works as marketing because I'd be inclined to throw them in the mix if I was looking for a real provider.
Ultimately companies that abdicate their informatics operations like this will give their profits to their data-center operators, who will be empowered to charge them whatever price they want. Because what's their BATNA? Migrating from Azure to AWS when Microsoft doesn't want to let them? Renting your information infrastructure is a great way to reduce startup costs, but down the road, that information infrastructure…
I think it depends. There is certainly a long-term cost risk, but future costs are unpredictable and it is not likely a core competency of FedEx anyway. FedEx likely will never invest enough to be great at managing their own data centers so why not remove the complication.
You can say the same thing for hundreds of parts of a company like FedEx. For example FedEx flies Boeing jets. It's completely reliant on Boeing for parts for those jets. Presumably Boeing can charge whatever it wants. Your company is always going to be reliant on other suppliers and contracts. Unless you're planning on building your own independent country in some location that has all the natural resources you need…
> For example FedEx flies Boeing jets. It's completely reliant on Boeing for parts for those jets. Presumably Boeing can charge whatever it wants. Nobody said that FedEx should build their own server hardware. And that's what you are comparing it too. FedEx could just buy server appliances from e.g. Dell (buying the Boeing jet) and operating it. Because paying some other air cargo company will eat a lot of their marg…
I'm simplifying here, but it feels to me like you are making the assumption that FedEx is a mostly static business, whose IT needs should be all about minimizing the cost per IO or compute operation.
In the real world, business needs are rarely static, and moving fast and innovating is extremely valuable, even for a company as large as FedEx.
They are choosing to move resources from managing their IT infra to AWS, but what they're really gaining is not a reduction in labor costs or CAPEX, but rather the ability to move faster.
Sure - given some headcount and sufficient CAPEX, a good engineering+SRE team can create and maintain a nice bit of infrastructure, but it is a significantly harder goal to truly deliver the benefit most leading cloud providers can provide an engineering org.
So do you feel FedEx should make their own trucks, ships, and planes?
FedEx essentially does make their own trucks - they buy from white box suppliers who have very narrow margins. Ships are similar. Planes probably have slightly higher margins, but they still will buy used. Getting computers from the cloud companies is very different: most cloud products (aside from server rentals) are not in competitive markets.
I would be surprised if FedEx or UPS or any last mile delivery company owned any ocean going ships.
$400M sounds huge, but why do I think it’s trivial next to FedEx’s operating budget? A couple years ago they were making 18 Billion* a quarter. * edited from million (meant to type billion)
Is there any gain here aside from cost saving? Will this saving be passed on to the customer? ( laughs ). What happens when the inevitable AWS outage then causes a global shipping bottleneck? Have we still not learnt that having sovereignty is better than saving money? Has COVID taught us nothing? sigh
The immediate gains I can see are: * In-house development teams have more agility in standing up new services, since they can just use EC2/ECS/one of the other 1500 container runtimes AWS has, rather than having to wait for someone to provision new physical servers for them. * An extensive suite of complementary products are available from cloud providers, it's not just about being able to start a VM, in many cases y…
> In-house development teams have more agility in standing up new services, since they can just use EC2/ECS/one of the other 1500 container runtimes AWS has, rather than having to wait for someone to provision new physical servers for them.
How many people run physical servers 'raw' anymore? I would hazard their current stack involves VMware, Hyper-V, Open Stack, or a combination of the three.
You can have an API system spin-up just as effectively in a private cloud as a public one.
> For example FedEx flies Boeing jets. It's completely reliant on Boeing for parts for those jets. Presumably Boeing can charge whatever it wants. Nobody said that FedEx should build their own server hardware. And that's what you are comparing it too. FedEx could just buy server appliances from e.g. Dell (buying the Boeing jet) and operating it. Because paying some other air cargo company will eat a lot of their marg…
I'm simplifying here, but it feels to me like you are making the assumption that FedEx is a mostly static business, whose IT needs should be all about minimizing the cost per IO or compute operation. In the real world, business needs are rarely static, and moving fast and innovating is extremely valuable, even for a company as large as FedEx. They are choosing to move resources from managing their IT infra to AWS, bu…
Probably the right amount of rented data center capacity for FedEx is not zero, yes. But it's not 100%, either, because what they're giving up is the ability to move faster when their outsourced system administration vendor isn't meeting their needs.
The better analogy would be that Fedex, since they need to transport things from city to city, could choose to buy jets to transport with instead of renting them or contracting a company to fly for them, which they already do. To remove datacenters is more like removing the jets. Edit: removed rude phrasing.
> The comparison you meant No that’s not what I wrote. You don’t buy a jet outright and forget about the supplier - you’re eternally reliant on their service, certification, parts, etc, as regulation is so high.
Yes but you are comparing to having a datacenter vs removing the datacenter completely. In this example FedEx has removed the datacenter completely, instead relying on someone else’s servers. So the correct comparison is to remove the jets and let someone else fly for you.