Many of these companies have slashed cloud expenses by 20%-30% while some growth stage startups such as ecommerce platforms Meesho and Dealshare have brought down their cloud expenses by 50%, under pressure to control their cash burn, they said.
This has led to the top three cloud service providers – Amazon Web Services (AWS), Google Cloud Platform and Microsoft Azure – waging pricing wars to lure startups onto their platforms in the current downturn.
“Ultimately, the deciding factor for any founder for a cloud service provider is cost,” DevOps startup Hatica cofounder and CEO Naomi Chopra told ET. “AWS couldn’t provide for it in comparison to Azure and Google Cloud…but it makes up for overall efficiency and agility,” she added.
Over the past months, several startups have been approached by AWS rivals to switch over for lesser pricing, multiple founders who have been in talks with them confirmed.
In some instances, founders are using pricing quotes received from Google Cloud and Microsoft Azure to renegotiate discounted contracts with AWS, their primary cloud service provider, said one of the founders. “We were approached by Google and Azure to switch over and were even given some examples of startups that have switched to these providers. However, moving to a new cloud provider itself is a time-consuming and costly affair, keeping in mind the current market environment,” said the founder who did not want to be identified.
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The move is harder for late stage startups as several of their indigenous systems are deeply integrated with the offerings of cloud service providers (CSPs).AWS, Google Cloud and Microsoft Azure did not respond to ET’s queries until press time on Sunday.
ETtechCLOUD WARS
The choice of a cloud provider, beyond pricing, also depends on the sector and data use case that a startup is involved in.
Companies with many customer-facing deployments that involve real-time data exchange require agility – where AWS performs best, according to several founders ET spoke with.
“Cloud wars are on and some service providers are proposing to subsidise costs, in a bid to transition companies to their own platforms,” said Kailash Nadh, chief technology officer (CTO) of stock broking firm Zerodha. “Today, AWS still comes with 250 managed services, so it won’t be easy for companies to move to newer CSPs. But we see cloud companies subsidising and today they are providing deep discounts which might be unviable in the long-term,” he said in an interaction with ET.
Some founders of early stage companies said they have held discussions with AWS to extend their credits by a year in a bid to continue their partnership.
Founders said Azure has been competitive in trying to snatch technology stacks of digital natives away from AWS, as it sweetens the deal further by bundling its Microsoft 365 productivity suite to the mix.
“Azure’s enterprise sales organisation is very strong, especially since they have the whole Microsoft 365 suite,” said a CEO of a top data analytics firm who didn’t want to be named. “The same guys are able to sell the cloud offering as well.”
For AWS, global year-on-year revenue growth slowed to 20% for the quarter ended December 2022 from almost 40% a year earlier. Microsoft Azure and Google Cloud reported 7% and 32% growth for the same period against 19% and 45%, respectively, their quarterly results showed.
The slowdown in revenue growth for cloud providers comes amid job cuts at these big tech firms. Amazon’s second round of layoffs last week affected 9,000 jobs including at AWS, its chief executive Andy Jassy said.
Google parent Alphabet’s decision to shed 12,000 jobs (or 6% of its workforce) has also impacted several of its cloud employees. Microsoft, too, executed its third round of layoffs this month.
ETtechREDUCED SCALE, USAGE
Roughly, cloud service costs stacked up to 20%-35% for Indian startups’ overall technology spends during the boom period of 2021 and early 2022, which is now being brought down to 15%, founders and technology and product heads of some startups said.
Among other technology costs that startups are working to bring down are storage, monitoring, application programming interface (API) management, engineering, and third-party collaboration and productivity software.
“We have worked on cutting cloud costs by bringing down the speed and load on internal tools,” said the founder of a cloud kitchen startup who did not want to be identified. “Also, we have reduced the number of queries on our internal analytics systems and have trimmed the overall users on internal tool. Lastly, we are also looking at various databases and seeing what data isn’t relevant to store for longer periods.”
Technology heads are also pushing for server optimisations, deploying fewer but more efficient lines of code, minimising software tool partnerships, and load capacity planning.
“Meesho has reduced server costs per order by nearly 50%,” said Sanjeev Barnwal, founder and chief technology officer (CTO) of the ecommerce firm. “Over the past year, the company has systematically upgraded its tech stack, incorporating major changes in architecture. Engineers demonstrate a high level of ownership for optimising server costs, ensuring that technological advancements are executed with code and system designs that continuously enhance efficiency.”
With startups and investors moving away from the ‘growth at all cost’ mindset, reduced scale and marketing efforts (notifications to users) are also helping companies keep infrastructure expenses in check.
“Now, the focus is to sharply use only what is needed and is essential. Adding different service providers is great, but it also takes considerable time to derive value from those integrations. The focus is on return on investments (ROI),” said Vineet Rao, cofounder and CEO of social commerce grocery startup Dealshare.
Founder of a consumer startup said companies are now optimising technology – something “one wouldn’t have spent time on during the hyper growth phase”. “For several startups, scale itself may have reduced, coupled with internal tech optimisations and renegotiations with various players (CSPs) to bring costs down,” the above founder said on condition of anonymity.
Edtech Vedantu, which has been on a cost-cutting drive since last year, said it has optimised its application programming interface (APIs) to reduce the “number of calls and data transferred, which resulted in significant savings”.
“We implemented a data archival system that automatically archives data to lower-cost storage tiers after a certain period, reducing our storage expenses,” said Ajith Reddy, assistant vice president, engineering, at Vedantu. “Finally, we made the decision to purchase reserved instances, which provided us with significant cost savings compared to on-demand instances.”
Reserved instance is a discounted billing concept where a business pays and commits to a planned level of compute capacity usage on the cloud for a fixed duration of steady workloads. This can be up to 70% cheaper than on-demand instances where businesses have to pay for compute capacity by the hour or second with no long-term commitments.
Other startups have also adopted this model.
“We have engineered systems to work in a planned way… This means we cannot send notifications to everyone,” Rao of Dealshare said. “Earlier, we would see cloud usage be fully utilised for some months and only 25% on others, we have brought this to a median of 50% for better optimisation.” He said the startup has cut cloud spends by 50% from 2022 peaks.