enemies, and other people.
Tesla's layoffs are like an endless rally.
On May 6, local time, Tesla issued another layoff notice. According to the American media "Business Insider", some employees received a notice early on the 6th that the team would be further laid off. Several Tesla employees said on the professional social platform LinkedIn that they received layoff notices over the weekend. Technical teams have not been spared, with layoffs spanning areas such as software, services, and engineering.
In fact, Tesla CEO Elon Musk announced for the first time as early as April this year that Tesla would lay off more than 10% of its workforce. He attributed the layoffs to "duplication of roles and job functions in certain areas." There is also news that Musk wants Tesla to lay off 20% of its workforce because the company's quarterly car deliveries fell by 20%.
1. More layoffs
Four consecutive weeks of layoffs have put employees on edge. And Musk is even more nervous, as the competition becomes fiercer, Tesla's dominance in the electric vehicle market is challenged, and Musk wants to control costs.
In fact, Tesla's layoffs are not unexpected. Since the end of 2022, the number of layoffs in the tech industry has risen dramatically. According to incomplete statistics, 1,186 technology companies around the world will say goodbye to 262582 employees in 2023, which is a staggering number.
And so far in 2024, layoffs in the tech industry continue.
According to a survey by Gartner, an internationally renowned information technology research and analysis, in the face of continuous operating pressure, technology leaders of technology companies have also begun to balance the need to meet the needs of the business while meeting financial responsibilities.
This means that the CTO/CIO of a technology company is not only a technology leader, but also has a business perspective. Economic uncertainty, increased competition, sustainability concerns, shareholder expectations and regulatory challenges...... More and more decision-making factors are influencing IT budgets.
Jay Upchurch, executive vice president and CIO of SAS, said, "Think carefully about costs over the long term and make sure you're spending for the future, not just the past." Jon Pratt, CIO of 11:11 Systems, a managed security service provider, said, "While it's critical to keep costs under control, it's even more urgent in times of economic stress.
Tight budget control gives companies the flexibility to make strategic decisions when they need a new platform, a new project, or to achieve growth. "They started paying only for the service level IT that the business needed, and using the IT budget as the area of return.
Against this backdrop, Musk finally optimized the way X (formerly Twitter) used cloud services and began to move more workloads to on-premise infrastructure, which ultimately reduced X's overall cloud data storage by 60% and reduced cloud data processing costs by 75%.
Google, on the other hand, increased its profits through financial tricks, extending the lifespan of its servers and network equipment from 4 and 5 years to 6 years, respectively, saving $3.9 billion in 2023 and increasing its net profit by $3 billion for the year.
In the Chinese market, the competition for cloud computing is more fierce and straightforward: price reduction.
2. Price reduction
In order to win more customers in the cycle of compressing IT budgets, at the beginning of 2024, Alibaba and JD.com, two large manufacturers with deep roots, are "pulling" in the field of cloud computing.
On February 29, Alibaba Cloud announced its largest price reduction in its history, including Elastic Compute Service (ECS), Object Storage Service (OSS), ApsaraDB RDS, and other core cloud products. On the same day, JD Cloud released the news of price reduction overnight, announcing that "it will be reduced casually and compared to the end".
On March 28, JD Cloud announced the "Spring Breeze Plan". In terms of price, a "1 billion price comparison fee" was set up to benchmark specific cloud vendors, and promised to "discount 10% on the basis of the lowest transaction price of specific cloud service providers"; In terms of service experience, we promise to respond to customer needs in minutes, including free migration for customers, ultra-long product trials, etc.
On March 31, in the Taobao live broadcast room for the fourth anniversary of making a friend, Luo Yonghao sold Alibaba Cloud for the first time in the live broadcast room. At almost the same time, JD Cloud started broadcasting in its own live broadcast room and forcibly lowered the price, indicating that "hard and rigid friends", Alibaba Cloud made a friend, and JD Cloud made a true friend.
After the live broadcast of the day, according to the information compiled by JD Cloud, the prices of the two virtual machines of JD Cloud are 10% and 11% lower than those of Alibaba Cloud respectively, and the price of 1TB of nationwide object storage products is 15% less than that of Alibaba Cloud. "From the perspective of live broadcast sales, JD Cloud's price comparison strategy may attract more price-sensitive users," said Guo Tao, an angel investor, in an interview with the media.
As cloud computing products become more and more mature, price has indeed become an important factor in the choice of enterprises. In a previous IDC survey on the IT procurement behavior of small and medium-sized enterprises in the Asia-Pacific region (including China), attractive prices and flexible and transparent billing methods are the most important influencing factors for small and medium-sized enterprises in the final procurement stage. They often need to compare service packages and pricing from different vendors.
"For the choice of cloud service providers, my thinking logic is very simple, easy to use, cheap is the most important." Zunyi Dongpei Commercial Management Co., Ltd. said that they operate a commercial complex, the company is not large, and a total of 5 cloud hosts are used to deploy the company's internal management system and member applets.
"We have tried the products of several cloud service providers, and the performance and stability are similar, and in the final analysis, what I am most concerned about is the price of these basic products." Shenzhen Daye Industrial Equipment Co., Ltd. is more direct, "In order to save 20% of the cost, we will also consider changing cloud service providers." ”
Cui Tingting, research manager of IDC China Enterprise Research Department, said that the IaaS market is gradually maturing and the market is highly homogeneous. Even the previous large cloud users, "Internet, government, and finance" have gradually begun to saturate demand, and the growth of IT budgets is weak.
3. The third option
As the IDC report said, domestic financial institutions have also begun to "tighten the day", including one of the leading commercial banks, China Merchants Bank.
At the 2023 annual results conference of China Merchants Bank held not long ago, the person in charge of China Merchants Bank said in the face of questions about the current operating pressure of the banking industry, "This year, in accordance with the requirements of the board of directors to live a tight and strict life, we will reduce various costs and expenses, and promote revenue growth by reducing costs and increasing efficiency."
China Merchants Bank is a leading commercial bank in China, and it is not surprising that it proposes to "live a tight life". According to financial data, China Merchants Bank's operating income in 2023 will show negative growth for the first time in 14 years. In the first quarter of 2024, CMB's operating income decreased by 4.65% compared with the same period last year, and the net profit attributable to shareholders of the parent company decreased by 1.96% year-on-year.
In order to cope with sluggish growth, China Merchants Bank has adopted a series of measures such as optimizing the asset-liability structure, strengthening risk management, and improving operational efficiency. So, will CMB's reliance on technological advantages to bring excellent customer experience be affected?
China Merchants Bank's investment in information technology is a big deal. According to public data, in 2020, China Merchants Bank's information technology investment exceeded 10 billion yuan for the first time, reaching 11.912 billion yuan, a year-on-year increase of 27.25%, accounting for more than 4% of revenue. In 2022, China Merchants Bank's investment will reach 14.168 billion yuan, accounting for 4.51% of revenue, and it is also the only bank among the 10 joint-stock commercial banks to invest more than 10 billion yuan in technology.
In 2023, China Merchants Bank's information technology investment will be 14.126 billion, accounting for 4.59% of revenue. According to this calculation, China Merchants Bank will also be in a stable state in terms of technology investment under the condition of stable revenue.
Under the condition of stable investment, how can China Merchants Bank achieve a "tight life" and "improve service efficiency"? In addition to the procurement of GPU resources and the intelligent project of the headquarters building, a piece of information titled "JD.com won the bid for the ACS off-line hybrid project of China Merchants Bank" aroused the author's interest.
Mixed deployment refers to hybrid deployment. Banking hybrid applications typically include both online and offline applications. The core idea of hybrid technology is to deploy and run different types of workloads on the same physical or virtual resource to improve resource utilization and reduce costs. Online and offline applications differ in resource requirements and usage patterns, making them ideal candidates for hybrid deployments.
Online applications usually refer to services that need to respond to user requests in real time, such as online banking, trading platforms, mobile banking applications, etc. These services tend to have a higher load demand during daylight hours or during peak business hours. Offline applications typically include tasks such as batch jobs, data analysis, report generation, backup operations, etc., which do not require immediate response and can be scheduled to be performed during periods of low system load, such as nighttime or weekends.
It is well known that mixing can improve the utilization of computing resources. JD Cloud, which won the bid, had previously applied the mixed department technology to the 24 Spring Festival Gala Red Envelope project, and the media said that it had achieved an overall CPU utilization rate of about 60% during the Spring Festival Gala event, with a maximum peak of 85%. The mixed department technology has helped JD Cloud reduce the IT cost by at least 50% compared with the 2022 Spring Festival Gala. Another well-known example is Google's ability to increase resource utilization from 10% to 60% through hybrid technology, saving hundreds of millions of dollars per year.
Nowadays, China Merchants Bank has also adopted the "off-line mixed department" technology, which means that the cost can be reduced by improving the utilization rate of computing resources while the computing resources remain unchanged. Since there is no public information, we have no way of knowing how much China Merchants Bank has reduced costs by mixing departments. However, the idea of technology cost reduction is undoubtedly the best model for living a "tight life" at present. It allows CMB to spend its budget on customer experience-related systems and improve the efficiency of customer service to customers, rather than spending money on servers.
End
With the ever-changing global economy and intensified market competition, large technology companies in China and the United States are facing unprecedented challenges. Layoffs and price wars are just one of the strategies for companies to survive in the fierce market competition. In contrast, although the path of "technology cost reduction" is quite challenging, long-term technology investment can be transformed into technology assets to promote product and service innovation.
In the tide of economic globalization and digitalization, this is a protracted battle. Only by constantly adapting to changes and actively seeking changes can enterprises be invincible in the competition and achieve long-term stable development.