On the surface, the cloud computing world seems to be going through a rough patch. Businesses that relied on cloud services during the pandemic are now trying to reduce expenses, which is affecting businesses in the cloud computing industry.
For instance, after a large hiring influx during the pandemic, Salesforce Inc., a cloud-based software firm that is held by the Fund, recently revealed that the company will now cut 10% of its workforce and close some of its offices in Canada. This would result in about $1.4 billion to $2.1 billion in charges for the company. Currently, Salesforce employs 1,800 people and has offices in Toronto, Vancouver, and Halifax.1
Amazon.com has also been laying off a large number of employees. At last count, the retailer and parent company of Amazon Web Services (AWS) was planning to cut its workforce by 18,000 employees. These cuts have been primarily in retail, human resources, and other departments.
For the most part, Amazon.com’s cloud computing unit, AWS, has been spared from the layoffs. Full-time workers at AWS have been relatively unaffected, while contractors were let go.2
However, it’s not as bad as it seems. There are some positive developments in the cloud computing industry, as well.
Recently, Microsoft Corporation, held by the Fund and one of the leaders in cloud computing globally, said it will add OpenAI’s intelligence bot ChatGPT to its cloud-based Azure services. It has also been reported that Microsoft is taking a $10 billion stake in OpenAI.
Microsoft announced the broad availability of its Azure OpenAI Service back in 2021, which has been available to limited customers. Adding OpenAI provides Azure’s customers with access to tools like the GPT-3.5 language system and Dall-E, a tool for generating images from text prompts. These tools can also be accessed by Azure’s customers in other applications running in the cloud.3
COMPANY SPECIFIC UPDATES
SAP SE, Expanding Into Cloud
SAP SE, known for its enterprise application solutions globally, is also an emerging cloud computing company. In an interview with CNBC Squawk Box Europe, SAP chief Christian Klein said that the world is entering into a new phase of globalization where companies will focus on building stronger supply chains and work to improve their sustainability credentials.
Regarding the company’s outlook, Klein added that he’s optimistic.
He also mentioned that SAP’s shift away from traditional computing infrastructure and expansion into cloud computing has helped grow the company, and as a result, it is in a very strong position. Furthermore, the company may not be as affected by economic headwinds as other companies in the tech industry since SAP is more focused on cloud computing and recurring revenue streams.4
However, the company recently announced that it will cut 3,000 jobs or 2.5% of its workforce. The company also said it will explore the sale of its remaining investment in Qualtrics—an experience management company.5
Descartes Systems Group Inc, Adding a New Cloud Customer
Descartes Systems Group Inc. engages in providing cloud-based logistic and supply chain management solutions with a focus on improving productivity, performance, and security.
The company recently announced that it added Topps Tiles—a leading U.K. tile retailer with 300 stores, as a customer. The retailers will use Descartes’ cloud-based route planning and optimization solutions.
While explaining the advantages of Descartes’ solutions, Simon Macdonald, National Transport Manager of Tops Tiles, said that the company has replaced manual and spreadsheet-based processes with automated route planning. The company’s solutions are also helping Topps Tiles to build delivery scenarios and make more informed strategic decisions—something that’s impossible with traditional analytics methods.6
Investing in the Cloud with Evolve ETFs
Cloud Computing is transforming the global economy. Over the past decade, the Cloud has fundamentally changed the way businesses and individuals access data. From physical servers to portable drives, the Cloud has helped eliminate the need to store information on-premise. For more information visit the fund page here: https://evolveetfs.com/data/.
DATA ETF PORTFOLIO STRATEGY AND ACTIVITY
For the month, Salesforce Inc. made the largest contribution to the Fund, followed by Amazon.com Inc. and SAP SE. The largest detractors to performance for the month were Zoominfo Technologies Inc., followed by Vmware Inc. and Coupa Software Inc. On the last rebalance, these securities were added to the portfolio: Coupa Software Inc., Descartes Systems Group Inc., and UiPath Inc.
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- “Salesforce ‘hired too many people,’ will lay off 10 per cent of workforce,” CBC, January 4, 2023; https://www.cbc.ca/news/business/salesforce-layoffs-ten-per-cent-1.6703586.
- Moss, S., “AWS employees among latest round of Amazon layoffs impacting 18,000 staff,” DCA, January 19, 2023; https://www.datacenterdynamics.com/en/news/aws-employees-among-latest-round-of-amazon-layoffs-impacting-18000-staff/.
- Bass, D., “Microsoft to Add ChatGPT to Azure Cloud Services ‘Soon’”, Bloomberg, January 16, 2023; https://www.bloomberg.com/news/articles/2023-01-17/microsoft-azure-to-add-chatgpt-to-cloud-services.
- Browne, R., “SAP CEO says the world is entering the ‘next phase of globalization’”, CNBC, January 17, 2023; https://www.cnbc.com/2023/01/17/sap-ceo-says-the-world-is-entering-the-next-phase-of-globalization.html.
- Knolle, K. and Mukherjee, S., “SAP to cut 3,000 jobs, explore Qualtrics stake sale,” Reuters, January 26, 2023; https://www.reuters.com/technology/sap-cut-3000-jobs-efficiency-move-explores-qualtrics-stake-sale-2023-01-26/.
- “Topps Tiles Transforms Fleet Delivery Operations and Strategic Modelling with Descartes’ Route Optimisation Solution,” Yahoo! Finance, January 23, 2023; https://finance.yahoo.com/news/topps-tiles-transforms-fleet-delivery-114500613.html.