29th June 2021. Drought | Cloud
The American drought; the mounting costs of cloud storage
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The American West is suffering from a long drought and record high temperatures—a drought that is most intensive in the Western but extends all the way to the Pacific coast. More than 55% of the West is now under 'extreme' or 'exceptional' drought conditions, the most since the US Drought Index began in 2000.
(Source: US Drought Monitor)
The coverage of this has probably been best on CNN. The biggest effect has been to reduce the water supply from the Colorado River, in particular. Reservoirs are at historically low levels, and the government is expected to declare the first-ever water shortage on the Colorado River later this year.
Lakes Mead and Powell, both on the Colorado River, are close to their lowest ever levels. Mead, the largest reservoir in the US, is at 37% of capacity, Powell at 34%. This matters because the Colorado River and its reservoirs supply water to 40 million people across seven Western states and Mexico.
The problem is caused by a combination of climate change and increasing water demand. The climate change effects create a vicious circle: there’s less snowpack melting into the basin area, while the drier soils absorb more of the water that is available. In addition, the summer heatwaves come earlier and also hotter, creating more evaporation.
Nor is this a anew problem—the area between the Rockies and the Sierra Nevada mountains have been technically in drought for twenty years now. The short-term outcomes of the present drought will be water restrictions across the region.
But it’s also worth reading the descriptions that define that “exceptional drought” category—the deepest red on the map—to see how extreme they are:
Fields are left fallow; orchards are removed; vegetable yields are low; honey harvest is small
Fire season is very costly; number of fires and area burned are extensive
Many recreational activities are affected
Fish rescue and relocation begins; pine beetle infestation occurs; forest mortality is high; wetlands dry up; survival of native plants and animals is low; fewer wildflowers bloom; wildlife death is widespread; algae blooms appear
Policy change; agriculture unemployment is high, food aid is needed
Poor air quality affects health; greenhouse gas emissions increase as hydropower production decreases; West Nile Virus outbreaks rise
Water shortages are widespread; surface water is depleted; federal irrigation water deliveries are extremely low; junior water rights are curtailed; water prices are extremely high; wells are dry, more and deeper wells are drilled; water quality is poor.
There’s been speculation since the mid-2010s that prolonged drought might create migration—to cooler and wetter parts of the United States. In other words, the long migration to the Sunbelt might reverse. That hasn’t happened yet, and there’s probably some way to go yet. As in Cape Town people will learn in the short-term how to use less water. But, unlike in Cape Town, it seems less likely that the rain will return, at least in the quantities required.
We probably won’t see the kinds of migration we saw in the Dust Bowl era in the 1930s. Expect, instead, a slow exodus.
#2: The mounting costs of cloud storage
One of the bits of received wisdom of the digital world is that being able to buy services when you need them—such as cloud storage—is a source of business advantage. As could spending increases, it turns out that this might not be so.
(Source: A16z)
An article in A16z’s Futures blog says says that as digital companies become larger, the share of revenues taken up by cloud storage increases.
The official version of the cloud proposition is summarised by A16z like this:
This shift is driven by an incredibly powerful value proposition — infrastructure available immediately, at exactly the scale needed by the business — driving efficiencies both in operations and economics. The cloud also helps cultivate innovation as company resources are freed up to focus on new products and growth.
However, as digital companies mature, it tuns out that this is only true for smaller companies. The article suggests that as companies grow, the cost of cloud storage starts to put pressure on margins. As the company scales, and growth slows, the costs of cloud start to outweigh the benefits.
As a result, some companies have taken their storage back in-house.
As the cost of cloud starts to contribute significantly to the total cost of revenue (COR) or cost of goods sold (COGS), some companies have taken the dramatic step of “repatriating” the majority of workloads (as in the example of Dropbox) or in other cases adopting a hybrid approach (as with CrowdStrike and Zscaler). Those who have done this have reported significant cost savings: In 2017, Dropbox detailed in its S-1 a whopping $75M in cumulative savings over the two years prior to IPO due to their infrastructure optimization overhaul, the majority of which entailed repatriating workloads from public cloud.
What I take from this is that some of the noise about being digital being different—partly influenced by service-based models such as cloud storage—turns out to be less compelling. As the tech sectors and tech businesses become mature, it starts to look more and more like other sectors.
(H/t John Naughton)
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