From the Publisher: Relax, Your Data Is In The Cloud…Or Is It?

By Eric Miscoll, EMSNOW Publisher

Eric Miscoll

Language does matter. How we think about technology is shaped by the words we use. For example, using ‘cloud’ to describe the shared storage model for data implies an unlimited and ephemeral – dare we say, ‘spiritual’ – feature of software functionality. Most people aren’t aware of the hardware necessary for the exponential increase in data storage required by applications like YouTube, Instagram, and now ChatGPT. It just magically appears to accommodate  the explosion of images, videos, connected Internet of Things devices, and so forth. Self-driving cars connected to the cloud? What could go wrong?

The earliest reference to the cloud comes from an internal Compaq document in 1996, according to… the cloud. Developments in operating system compatibility, data storage, networking and novel applications like wire transfers between financial institutions all worked together to enable what is now known as ‘cloud computing.’

But calling it a ‘cloud’ is misleading. What is a cloud? It has no shape or stability. No edges or dimensions. It’s weather, and in Texas where I live, the weather seems to change almost daily. Yet the cloud in technology has very real and physical requirements. You have to have massive computing power to generate this type of cloud, and it requires stability to give assurance to its users. People are starting to realize that exactly where the data is stored is critical to developing a strategy for when things go wrong. And where it is stored is not necessarily one location; your data could be bouncing between multiple locations, thus invoking the image of a cloud.

Cyber-security breaches have shaken our faith in the cloud.  It turns out that the cloud actually requires hardware. As of March 2024, the U.S. had by far the most data centers: over 5000, with Germany, U.K. and China at around 500 each. This is in support of cloud computing and while the designs are getting more efficient and environmentally sustainable, there is a need for more.

Companies like Amazon and Google are scrambling to build their own proprietary ‘hyperscale’ data centers. Meanwhile, companies that are worried about data security favor ‘edge computing,’ processing their data in a closed system closer to where the data is generated.

All this is good news for the EMS industry.

Hardware is in the spotlight again! Governments are throwing billions at the semiconductor ecosystem, including boards and packaging. NVIDIA’s stock price is through the roof and their latest chip set, the ‘Blackwell’ will cost tens of thousands of dollars. (FYI…It’s named after David Blackwell, the first African American elected to the National Academy of Science.)

In their press release, NVIDIA quotes many important software titans. Sundar Pichai, CEO of Alphabet and Google said, “Scaling services like Search and Gmail to billions of users has taught us a lot about managing compute infrastructure. As we enter the AI platform shift, we continue to invest deeply in infrastructure for our own products and services, and for our Cloud customers. We are fortunate to have a longstanding partnership with NVIDIA and look forward to bringing the breakthrough capabilities of the Blackwell GPU to our Cloud customers and teams across Google, including Google DeepMind, to accelerate future discoveries.”

The EMS/ODM model is shifting to accommodate these storage trends. Omdia’s report from 2022  outlines the shifts:

“Cloud server provider (cloud SP) organizations purchase IT equipment differently than on premises data centers (DCs). Cloud SP operators purchase directly from a group Omdia calls white box equipment vendors. White box storage equipment comes directly from electronics manufacturing services (EMS) providers and original equipment manufacturers (ODMs). While definitions have blurred, EMS tends to focus on manufacturing other’s designs, while ODMs start with their own designs and then manufacture a customized version.

“Changing IT equipment acquisition strategies by cloud SP buyers have given rise to tremendous growth in ODM and EMS market segments. Originally, EMS companies largely did contract manufacturing for OEMs who own their brands (traditional storage vendors). As hyperscalers started buying white box equipment directly from manufacturers to save costs, EMS providers have added design and customization services and ODM’s have learned to fully customize its portfolio of designs.”

So while your data may be ‘in the cloud,’ your business will still require hardware to function, and this hardware will most definitely be “on the ground.”