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Tech Is Wrong to Cut Out Cloud Costs. Here's Why Cloud stocks are underperforming, but that trend will change in the long run.

By Ariel Shapira

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Cloud stocks had some of their worst weeks ever in October, even weighing down on the broader tech market. This came on the heels of Microsoft warning of a significant slowdown in the cloud business, also projecting growth of its cloud-computing platform Azure, one of the major engines of its business, will slow down. That's partially due to the fact that companies are cutting back overall, or to use the CEO of Microsoft's terminology, "optimizing spending."

At first glance, it seems reasonable to delay certain infrastructure investments and stall moving a business onto the cloud. But that kind of short-term thinking will cost companies in the long run.

The cloud offers too many clear-cut benefits, even in a tech downturn, to be by the wayside. Cloud computing enables organizations to scale, maintain flexibility and focus their efforts on business operations, leaving complex IT infrastructure for IT workers to worry about. If AWS, Microsoft or Salesforce is managing your infrastructure, you can bet their services include state-of-the-art everything and continuous infrastructure upgrades.

And companies no longer need to hire an army of experts to run the IT department — good news considering a strong IT Department will rarely actually bring about a competitive advantage.

Entrepreneurs that fail to keep up with the cloud will lose agility in many respects. And when the tech market roars back — whether in 2023 or 2024 — they will kick themselves for lacking agility.

Business expansion can be costly, both in financial and human capital. But using cloud technology today, companies can scale on demand and stay up to date on best practices since cloud service providers employ the top levels of security, compliance, and data protection standards.

And they don't have to go it alone. Entrepreneurs who have seen the value of the cloud in recent years understand the challenges many companies face in moving their entire businesses onto it. GlobalDots, for example, helps companies scale globally by streamlining quality, regulatory, compliance, and data management—all using tailor-made cloud and web solutions. DigitalOcean, too, is one of the few cloud companies that posted better-than-expected Q3 results, which adds to a muddied picture of the actual outlook for the industry.

Related: The Tech Industry Can Be an Accelerator for Change. Here's How.

If you are serious about AI, you probably need the cloud

The importance of proper cloud infrastructure applies even more to big data and AI. Data scientists need tremendous infrastructure to train their models and don't necessarily have the infrastructure knowledge to swing it. Nor should they have to.

Data scientists, too, should be able to focus on data and statistics and outsource the IT work. And here is where cloud computing becomes integral for large users like enterprises or small users like lowly academics.

Imagine trying to train a model using the computing power of your laptop, but for some reason, you need to close the computer. Suddenly the work grinds to a halt until you're able to resume. The same principle applies on a large scale. By running the models in the cloud, you can reduce downtime and speed up the time you run the computations.

Apply that to any AI company. Much of the coming progress in the tech ecosystem will come simply because the cloud enables it.

Related: The Vicious Cycle of Overhiring and Layoffs

The benefits of the cloud are also on the front end

Entrepreneurs discussing the benefits of cloud and similar infrastructure often focus on the back end, but when implemented correctly, they directly improve customer experience. The agility and ability to crunch numbers and feed them into algorithms facilitates personalization that wasn't possible before.

Moreover, an effective cloud strategy will strongly affect a business's ability to deliver a solid visual and auditory experience. If you think this is an overstatement, think about the current leaders in the cloud community on the B2C end: Gmail, Google Drive, Google Photos, Netflix and Prime Video. All of these services have completely changed the game regarding how businesses engage with customers, and it is directly related to their effectiveness in leveraging the cloud for a supreme customer experience.

While the short-term forecast for the cloud is troubled, the tech route won't go on forever. Technologists would do well to continue their leaps onto the cloud. Change management isn't easy, and growing pains might be difficult, especially in a lousy market. But the cloud is the silver bullet that unlocks so much of tech's potential and is too good to pass up.

Ariel Shapira

Entrepreneur Leadership Network® Contributor

Founder

Ariel Shapira is a father, entrepreneur, writer and speaker.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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