Google, Amazon and Microsoft are the landlords. In the midst of the Coronavirus economic crisis, startups need a break from renting. You are in a money crisis. Revenue no longer flows in, capital markets such as risk indebtedness hesitate, and startups and small to medium-sized companies run the risk of either firing and / or closing a large number of employees.
The technology giants are now rich in cash. Their success in this decade means that they can weather the storm for a few months. Your customers can’t.
The cost of the cloud infrastructure is one of the main costs of many startups, along with payroll. The option to pay these cloud bills later could prevent some from doing business or firing large sections of their employees. Both would harm the technology industry, the economy and the layoffs. The most worrying thing for the giants, however, is that this could destroy their customer base.
The mass layoffs have already started. We will soon hear from significant companies that will be closed due to COVID-19. However, there is still the possibility of preventing a larger bloodbath.
So I have a suggestion: Cloud relief.
The platform giants should allow startups and small businesses to defer their cloud infrastructure payments by three to six months until they can pay them back in installments. Amazon AWS, Google Cloud, Microsoft Azure, these companies’ additional infrastructure products, and other platform providers should pause customers until the worst of the first wave of COVID-19 economic disruption is over. Profitable SAAS providers like Salesforce could also offer customers an extension.
There are many altruistic reasons for this. They have the resources to help companies in need. In these difficult times, we all have to support each other. This could protect tons of families. Some of these startups offer important services to the public and even discount them, which increases their bills and at the same time reduces their income.
Then there are the PR reasons. After years of techlash and antitrust review, the giants have the opportunity to prove their size here, which can be beneficial to the world. Recruiters could use it as a topic of conversation. “We are the company that helped save Silicon Valley.” There’s an explanation for throwing away so much money: the rainy day is finally here.
However, the capitalist truth and story they could sell to Wall Street is that it is not good for our business if our customers give up their business. Take a look at what happened to infrastructure providers in the dotcom crash. When tons of startups evaporated, profits evaporated for those who sold them as hosting and tools. Any government incentive for companies would be better if they pay employees than if they pay the cloud companies that are not at risk. Saving a future Netflix before shutting it down could cover short-term losses through the support of 100 other companies.
This is not a handout. These startups will still owe the money. You could only pay it a little later, spread out on your monthly bills for a year or so. As soon as mass accommodation orders wane, businesses can at least operate a little closer to normal, and investors become less cautious. Customers have the money they need to pay their fees. Plus interest when needed.
In the meantime, they will be tied to loyal customers for the foreseeable future. Cloud providers could only forward the move to customers who have been with them for X months or have already spent Y amounts on the platform. The providers could also offer the deferral on the condition that customers extend their existing contracts by one year or more. The founders will remember who gave them the benefit of the doubt.
Think of it as a marketing cost. Platforms often offer discounts or free trials to new customers. Now existing customers need a break. Instead of airport advertisements, the giants could spend the money to ensure that many developers will build on them by the end of 2020.
In addition to deferring payment, platforms could postpone the due date of all outstanding invoices to three or six months. Alternatively, they could offer a low discount of, for example, 50% for three months if they do not deal with the creation of debt and then want to service it. Customers with multi-year contracts could offer the opportunity to downgrade or renegotiate their contracts without penalties. All of this may require sales representatives to forgive their sales quota.
It would probably be far too complicated and risky to accept equity instead of cash, reduce earnings in the future, or provide credit or lines of credit to customers. The clearest and easiest solution is to let startups skip some payments and pay more each month later until they have paid off their debts. When asked for a comment or whether to consider deferring payment options, Microsoft, Amazon and Google declined did not answer.
Deferment management is not easy or free. There are certainly gaps that cloud economists can put in this proposal, but my goal is to get the conversation going. The giants may need to change their profit forecasts. Rewriting contracts with customers of large size will require work at both ends and there is a possibility that contract disputes may be violated. Giants would face the risk of customers ruthlessly using cloud resources before closing or skipping the city.
Most taxes would be to determine and enforce eligibility criteria. Providers would need to determine which customers are too large so that they don’t accidentally postpone a cloud-intensive but healthy media company that they don’t need. Companies that are questionably excluded may stink in public. Implementation of the plan requires staff when the giants are thin to deal with logistical disruptions, misinformation, and accelerating usage from home.
However, this is the moment when happiness has to help the vulnerable. Not a hand out, but a hand up. Companies with billions in cash in their coffers could save those who have difficulty paying salaries. All fundraisers, information centers, and hackathons are great, but this is how the technology giants can live up to their high ideals.
We all live in the cloud now. Don’t drive us away. #CloudRelief