Philippa Kaur

FOR THE past decade few aspects of modern life have made geeks drool more than the cloud, the cumulus of data centres dominated by three American tech giants, Amazon, Microsoft and Google, as well as Alibaba in China. In America some liken their position of impregnability to that of Detroit’s three big carmakers, Ford, General Motors and Chrysler, a century ago. During the covid-19 pandemic they have helped transform people’s lives, supporting online medical appointments, Zoom meetings and Netflix binges. They attract the brightest engineering talent. Amazon Web Services (AWS), the biggest, is now part of business folklore. So it is bordering on heresy to argue, as executives at Andreessen Horowitz, a venture-capital firm, have done recently, that the cloud threatens to become a weight around the necks of big companies.That possibly explains the defensiveness of Andreessen Horowitz’s Martin Casado, co-author of the blog post titled “The cost of cloud: a trillion-dollar paradox”. On June 24th he described it in a gathering on Clubhouse, a social-media app, as “one of the more misread, misquoted things I’ve ever done”. At the risk of further mischaracterisation, Schumpeter would summarise it as follows. It uses paltry evidence and baffling numbers (where, for instance, does the “trillion dollars” come from?) to propose an excessively all-or-nothing business conundrum: “You’re crazy if you don’t start in the cloud; you’re crazy if you stay on it.” Yet for all its flaws, it is well-timed. It poses a question that businesses will have to think about for years to come. If they entrust all their data—the lifeblood of the digital economy—to an oligopoly of cloud providers, what control do they have over their costs?It is a problem many companies are already grappling with. On June 29th the Information, an online tech publication, reported that Apple, maker of the iPhone, is poised to spend $300m on Google Cloud this year, a 50% increase from 2020. It is also using AWS and its own data centres to handle overflowing demand for services such as iCloud, a data-storage app. On the same day the chief operating officer of a big software firm told your columnist that the current trajectory of cloud costs is “unsustainable” but that it does not make sense just to leave the cloud. “It is very hard. One can’t be so simplistic as to say it’s all cloud for ever or it’s no cloud.” Jonathan Chaplin of New Street Research likens acquiring flexible data storage on the cloud to flexible office space such as WeWork. Both are similarly expensive, he says. He knows—his boutique firm of analysts is considering renting both.One reason Andreessen Horowitz has stirred up a storm is because it went a step further. The blog post raises the prospect of “repatriation”, arguing that companies could save considerable sums of money by bringing back their data from the cloud to their own servers. It uses the example of Dropbox, a file-sharing firm that in 2017 said it had saved $75m in the two years before its initial public offering chiefly by clawing back workloads from the cloud. Mr Casado and his colleague, Sarah Wang, estimate that a group of 50 such publicly traded software firms could halve their cloud bills by doing the same, collectively saving $4bn a year. That could, using generous price-earnings multiples, improve their market value by around $100bn. You don’t have to be a super-sleuth to suspect an ulterior motive: if Silicon Valley unicorns take the hint, higher valuations could make venture capitalists like Andreessen Horowitz more money when they go public.This is an oversimplification, however, in several ways. First, the cloud is not just a cost. It can also boost revenues by providing young companies with the flexibility to scale up rapidly, accelerate new product launches and expand internationally without having to build their own mishmash of racks, servers, wires and plugs. Moreover, cloud providers offer more than storage and spare capacity. Increasingly their most valuable services are data analytics, prediction and machine learning, made possible by the vast troves of data they can crunch. They may also be more difficult to hack. The question is whether a company gets a better return on its investment by paying for cloud services, or by paying to bring data centres, engineers and cyber-security in house.Second, the supply of engineers is finite. Whereas in the past coders were trained to work with on-premise servers, the latest generation knows more about working with cloud providers. That makes repatriation harder. In a recent podcast about its decision in 2015 to shift entirely from its own servers to Google Cloud, Spotify, a music-streaming app, highlighted the opportunity costs of having engineers tied up managing its own data centres rather than working on new products. (As a geeky relic, it keeps pieces of its last big server in an urn.)Third, profits are in the eye of the beholder. A company may hope to improve margins by reducing the cost of renting cloud servers. But building its own data centres requires investment. Labour costs will also rise to pay for engineers to manage them.The silver lining?There is little to suggest that the stampede into the cloud is slowing. Gartner, a data-gatherer, predicts that worldwide spending on cloud services will increase by almost a quarter this year, to more than $330bn. Repatriation is “an urban myth”, says Sid Nag, Gartner’s research vice-president. “We just don’t see it.”Continuing to write blank cheques to cloud providers is not sustainable, either. The more firms embrace cloud-computing, the more carefully they must manage its costs. The biggest users, such as Apple, bargain for huge discounts. Smaller ones lack the clout. To keep costs down, they may need to run basic storage in house, diversify into the “multicloud” by spreading computing across several clouds, and make engineers responsible for cloud expenditures. With luck, a low-cost alternative to the biggest clouds will emerge, much as Japanese car companies challenged Detroit’s big three. That took half a century, though. ■This article appeared in the Business section of the print edition under the headline “Raining on the parade” More

EIGHT YEARS ago Google’s then finance chief, Patrick Pichette, recalled being asked how many of the tech giant’s employees telecommuted. His answer was simple: “As few as possible.” Despite the fact that Google was busy churning out apps that enabled remote work, his comment was also unremarkable. From Silicon Valley and Wall Street to the Square Mile in London, La Défense in Paris, Potsdamer Platz in Berlin and Hong Kong’s Central, the world’s business districts welcomed millions of office grunts every workday. Congregating in one place was believed to spur productivity, innovation, camaraderie. It enabled bosses to keep a beady eye on their underlings. Work from home was something to be done only if it couldn’t be avoided.In March 2020 it suddenly could not. The covid-19 pandemic forced governments around the world to impose strict lockdowns. Overnight, most of the world’s offices became off limits. To survive, companies everywhere embarked on a gigantic experiment in home-working. City workers swapped suits for jogging trousers and city-centre flats for the suburbs. In a typical corporate change of heart, Google gave each employee globally $1,000 for home-office furniture, offered them virtual fitness videos and cooking lessons, and urged everyone to “take good care of yourselves and one another”.As vaccination rates rise in the rich world the home-working experiment is being unwound (see chart 1). But the speed of the unwinding, and its scope, has become a matter of hot debate among chief executives, and between them and their staff. The strategies that emerge out of these debates will shape not just what happens in the next few months but also the longer-term future of office work.One change is already obvious. The generalised anti-remote-work mindset of yesteryear is gone, replaced by a range of attitudes that vary by industry and region. At one extreme, some companies now expect all workers to be back at their desks. At the other, certain firms are doing away with offices altogether (see next article). Most businesses fall somewhere in the middle.The most ardent supporters of status quo ante can be found on Wall Street. David Solomon, boss of Goldman Sachs, has called remote work an “aberration”. His opposite number at Morgan Stanley, James Gorman, recently quipped, “If you can go into a restaurant in New York City, you can come into the office.” Jamie Dimon, chief executive of JPMorgan Chase, has conceded that “people don’t like commuting, but so what?” The three bank bosses worry that remote workers are less engaged with the company, and potentially less productive.Whether or not they agree with the Wall Street titans deep down, their counterparts in Europe see such intransigence as an opportunity to lure disaffected bankers who prefer greater flexibility. UBS, a Swiss lender, is reportedly about to allow two-thirds of employees to pursue “hybrid” work, which combines days at home and at the office—in part as a recruitment tool. NatWest, a British bank, expects just one in eight workers back at the office full-time, with the rest on hybrid schedules or primarily home-working. Personnel at Germany’s Deutsche Bank will work remotely up to 60% of the time. Noel Quinn, chief executive of HSBC, has described drifting back to pre-pandemic patterns as a “missed opportunity” and wants the Asia-centric bank’s staff to embrace hybrid arrangements.So do many tech CEOs, who fret that strict return-to-office mandates will put off restless software engineers. Dylan Field, co-founder of Figma, which helps firms create and test apps and websites, worries that employees will jump ship if the rules are too restrictive. Tech workers may indeed be getting more footloose, with quit rates seemingly higher and poaching more rampant than usual. Perhaps in recognition of this in June Facebook said that all the social-media giant’s full-time employees could apply for permanent remote work. Firms like Spotify, a music-streamer, Square, a fintech firm, and Twitter have told many of their staff they can work remotely for ever if they please.Across industries evidence suggests that people like the ability to work from home at least occasionally. A poll of 2,000 American adults by Prudential, an insurer, found that 87% of those who worked from home during the pandemic wanted to be able to continue doing so after restrictions ease. According to the same survey, 42% of remote workers said they would search for a new job if they were asked to return to the office full time. Only one in five American employees say they would seldom or never want to work from home (see chart 2). In a recent poll of more than 10,000 European office workers, 79% said they would back legislation prohibiting bosses from forcing people to work from the office.Young workers, often seen as casualties of remote working, have warmed to flexible schedules. Members of Gen-Z, now aged 16-21, were more likely than any other age group to cite personal choice rather than employers’ policies as the main reason for continuing to work remotely, according to a study by Morgan Stanley. At the same time, many workers of all ages are still keen to come to the office every now and again—not least to enjoy reliable air-conditioning during what is shaping up to be a scorching northern summer. Salesforce, a business-software giant itself implementing a work-from-anywhere model, found that although nearly half its employees are opting to stay home most of the time, four in five want to maintain a physical connection with the corporate office.The public sector, often the largest employer in a country, faces similar considerations. Britain’s tax authority is offering all employees the right to work from home two days a week. In America the federal government predicts many civil servants will want to maintain flexible schedules. Ireland, which wants 20% of its 300,000 public servants working remotely by the end of the year, is offering financial support to encourage civil servants to relocate outside cities. It will create more than 400 remote working hubs, allowing staff work closer to home. Indonesia has set up a “work from Bali” scheme for civil servants, to help revive the island’s tourism industry.All this suggests that hybrid arrangements will persist in most places (with the possible exception of Wall Street). They present their own challenges, however. They blur the lines between work and family life. Virtual meetings can be even more tedious than in-person ones; people who have admitted to Zoom fatigue include Eric Yuan, the video-conferencing app’s billionaire founder. And hybrid schedules make managing office space tricky, especially at a time when many companies, including HSBC, are planning to reduce their office footprint.Given a choice, most Australian workers would prefer to work from home on Mondays and Fridays, according to EY, a consultancy. Even if managers’ suspicions that this is a thinly veiled effort to extend the weekend prove unfounded, that means that offices would be far busier on Wednesdays, the least popular choice for home-working, than at the start and end of the work week.Some firms still intend to let people come in whenever they want. But others are getting inventive. Mr Field of Figma gives his staff a choice: work remotely full-time or, if you come in at least twice a week, get a desk in an office. Snowflake, a data-management firm, will let individual units decide how to organise themselves. Many, including Apple, have got around the problem by mandating days when employees are required to be present.Predictably, the sudden reconfiguring of work life is leading to friction. Workers who want more flexibility are finding themselves at odds with employers calling for a return to something closer to pre-pandemic normal. Some of Apple’s employees have criticised the tech giant’s requirement to work in-person three days a week as tonally “dismissive and invalidating”. The AFL-CIO, America’s biggest trade-union group, is facing health and safety complaints from its own staff over measures to bring workers back to the office in the absence of improved ventilation and continued risk of infection while commuting.Such disagreements are spilling over into boardrooms. Some shareholders, including big institutional investors, are keen to promote flexible working not only to retain talent but also to burnish companies’ environmental, social and governance (ESG) credentials. S&P Global, an analytics firm, says that under its assessments, the ability to work from home is one measure of employees’ health and wellbeing, which can influence up to 5% of a company’s ESG score. This is roughly the same weighting attached to risk and crisis management for banks, or human-rights measures for miners. It may also affect things like gender and racial diversity. Studies find that mothers are likelier to favour work from home than fathers are. Research by Slack found that only 3% of black knowledge workers want to return to the office full-time in America, compared with 21% of their white counterparts.That is a lot for companies to ponder, even as they deal with short-term controversies, such as whether or not to bar unvaccinated workers from the office. Ironically, last year’s abrupt transition to remote work may prove considerably smoother than the shift to whatever counts as normal in the post-pandemic era. More

“THIS IS one of the healthiest buildings in San Francisco.” Giving a tour of the new headquarters of Uber on a recent afternoon, Michael Huaco, the ride-hailing giant’s global head of “workplace and real estate”, does not hide his pride. And he has plenty to be proud of. Employees make their way to their work stations up a wood-panelled staircase, then through a sun-filled atrium which doubles as the conduit for the building’s natural ventilation. Meeting rooms and nooks with couches abound; desks are scarce. This being tech central, there is, naturally, a juice bar and a yoga studio. There is only one niggle. Many Uber employees may prefer to keep working from home and come in only a couple of days a week, if at all. “No one really knows,” concedes Mr Huaco. His firm is not alone. Up and down Silicon Valley technology companies are wondering what will happen when they fully reopen after the summer break. Where they go, others often follow. How tech solves its HQ conundrum may therefore once again blaze the trail for new work spaces and practices in other industries, says Charlton Hutton of M Moser Associates, a design agency. When it comes to offices, Silicon Valley has been an odd, some would say ridiculous, place. For an industry whose avowed goal is to digitise all of life by having software “eat the world”, most big firms’ work practices looked remarkably analogue. Before the pandemic, daily presence in the office was expected. Many spent hundreds of millions of dollars on headquarters to accommodate a large part of their workforce. Uber’s new San Francisco digs reportedly cost $130m to build; the company has told investors it will spend $1bn over 20 years on leases in the city. Salesforce, a business-software giant, is paying the developer of Salesforce Tower nearly $560m over 15 years to lease 30 of its 61 floors. Apple’s spaceship-like base in Cupertino, which can accommodate up to 13,000 people, cost $5bn, or $385,000 per employee.Tech is not the first to suffer from the “edifice complex”. From the Chrysler Building and Sears Tower to the Bank of China’s iconic Hong Kong headquarters, companies have always erected monuments to their success. Technology firms have reasons beyond self-aggrandisement to covet posh quarters. Fancy workplaces help such businesses, which live and die by the quality of their human capital, to attract employees, in effect becoming a key part of the pay package. They enable teamwork, which most founders believe, rightly or wrongly, to be indispensable for innovation. And since many fast-growing startups lack a long history, offices where everyone congregates can help imbue the troops with the corporate mission. It may be no coincidence that Airbnb’s feel like a high-end Airbnb.Even so, tech temples had begun to seem anachronistic before covid-19 washed up on California’s shores. Traffic was making the daily commute an insufferable two-hour ordeal. Most computer programmers came to the office but really worked elsewhere—in the cloud, managing projects with Trello, on Zoom and Slack. Designed to be lively, tech offices were often eerily quiet. Realising this, companies began to open more of them beyond the Valley, and into the virtual realm. The pandemic then gave the shifting equilibrium a shove, notes Nicholas Bloom of Stanford University. Although it is hard to predict where exactly all the bits will land, the contours of tech HQs of the future are coming into view. For starters, most will be smaller. As in many other sectors, tech firms will blend remote and office work. When Andreessen Horowitz, a leading venture-capital firm, recently asked its 226 portfolio companies to describe work in the future, two-thirds said “hybrid”. Uber is reportedly trying to lease out a third of its new headquarters to other tenants.Offices will also look different. Firms are throwing out desks and creating spaces for employees to socialise and collaborate. Okta, a digital-identity manager, is becoming a “dynamic working” space. In its remodelled headquarters most rooms will be easy to reconfigure, and let people gather more easily. M Moser Associates expects the pre-pandemic ratio of half of office space reserved for individual work and less than a third for meetings to flip. The daily battle for meeting rooms, legendary in tech, will be less fierce. As physical space shrinks the virtual sort will expand. The pandemic has already set off a battle among Google, Microsoft and Salesforce over which will be the dominant platform for online work. Some less well-known services have seen user numbers go through the roof, among them Figma, a tool for prototyping apps and website, Miro, a virtual whiteboard, and Envoy, which helps firms conduct health screenings, order food or book a desk.To avoid remote workers feeling like second-class citizens, many companies are pursuing a “digital first” policy for meetings. When Salesforce’s employees can meet digitally, they should, says Brent Hyder, the corporate-software giant’s human-resources chief. Or, as he puts it, “We’re all equal on Zoom.” Many firms are planning more off-site meetings to compensate for the extra screen time (and rekindle social bonds). “Since we will pay much less for real estate, we will have lots of budget for such things,” says Marco Zappacosta, boss of Thumbtack, a marketplace matching customers with local plumbers, dog walkers or other service providers.The most radical firms are doing away with headquarters altogether—becoming fully “distributed”, in the jargon. Snowflake, a data-management firm, now only maintains an “executive office” in Bozeman, Montana. The firm’s centre of gravity has moved from its former base in California to local offices around the world. This makes sense given that, as Denise Persson, its chief marketing officer, points out, “95% of our customers are outside of Silicon Valley.” In May Coinbase, a cryptocurrency exchange, said it no longer had a headquarters and that it would shut its San Francisco office next year. As these shifts unfurl they will reshape tech’s Californian heartland. More firms will hire remote workers outside the region. More will follow Oracle, Tesla and others, and move their head offices to cheaper, less congested and lower-tax jurisdictions such as Texas or Florida. Silicon Valley will persist, though perhaps less as a place and more as a global network. More

HIGH IN THE mountains of southern Peru lies Quellaveco, a vast open-pit copper mine. It is one of the world’s largest untapped deposits of the red metal. Anglo American, a mining giant and its majority owner, has, along with another investor, spent over $5bn getting it up and running. It is expected to come online in 2022. Once operational it will add more than 10% to the copper output of Peru, the world’s second-biggest producer of the stuff.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

FOR THE first time in its august history of more than 100 years, the Adlon, a glitzy hotel within sight of Berlin’s Brandenburg Gate, used Kurzarbeit, a scheme in which the German government pays the bulk of wages of people who temporarily stop working or work reduced hours. “Our business was almost completely gone,” explains Daniela Welter, the hotel’s head of personnel, referring to the hard lockdown imposed last November that banned hotel stays for leisure travellers. Thanks to Kurzarbeit, the Adlon was able to save the jobs of all its 347 staff. Today it is hiring again.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

THE CHANCE to take a summer holiday after the long lockdown is very appealing. So Bartleby was excited to book rooms in a pub-cum-hotel in the beautiful Yorkshire Dales in July. Not long after the booking, however, the manager called to warn that the restaurant and bar would be closed on the Wednesday night. “As you probably know”, she said, “it is impossible to find staff at the moment.”Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

“I THINK THIS will be theatrical, and we are concerned that it will be sensational,” a senior official at Japan’s Ministry of Economy, Trade and Industry (METI) warned an activist fund last year. The investors were pushing to put more outside directors on the board of Toshiba, a titan of Japanese industry. In the event, it was Toshiba’s management that caused a sensation. An independent investigation published this month alleges that the company worked with government officials to squeeze shareholders ahead of its annual meeting in 2020. The fallout from the pressure campaign has already helped fell the chief executive, Kurumatani Nobuaki, and several board members. As the 145-year-old conglomerate prepares for this year’s shareholder meeting on June 25th, its fate hangs in the balance.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More

WET MARKETS in China have suffered more than most businesses in the pandemic. After one in Wuhan was blamed as the source of covid-19, officials ordered others to shut. Shoppers have been reluctant to frequent bustling outdoor stalls selling fresh meat and vegetables. Many may never reopen—not least because they are being rapidly displaced by online rivals. The value of online sales of fresh produce in China, which amounted to 293bn yuan ($45bn) in 2019, before the pandemic, may rise to 570bn yuan by the end of 2021 (see chart). That would put e-grocers’ share of fresh-food spending at 11%, double what it was before covid-19. It could hit 18% by the middle of the decade.Listen to this storyYour browser does not support the element.Enjoy more audio and podcasts on More