Why is Uber Investing in Data Centers instead of Running Everything in the Cloud?

You might think that Uber, AirBnB, Pinterest, and all the other unicorns of the cloud native age are all about cloud; the notion of of building data centers is old school.

Not so fast

Avoiding assets by owning no cars is a key part of Uber’s strategy, so why would Uber invest in data centers? (Links here and here)

1. Data is a major source of competitive advantage (when used strategically).

Google understands that, Facebook understands that. What else do they have?

Data centers

Uber’s digital platform collects an incredible amount of data:  Mapping information, our movements, preferences, connections are just a few of the elements in Uber’s data stores. This amount is massive, unique to Uber, and when combined creatively with other sources of data becomes a competitive weapon. Uber, like many others, is actively investing in developing additional capabilities, many of them digital; data is the critical piece underlying that strategy.

2. Data Gravity is at work

Data Gravity, a term coined by Dave McCrory (@mccrory) the CTO at Basho Technologies is a term used to describe the tendency for applications to migrate toward to the data as it grows. The idea is that as data grows, the difficulty of moving it to applications that use it becomes more difficult for several reasons, among them network costs, difficulties in accurately sharding the data, and so on. As time go on, data sets get bigger, and moving it becomes more difficult, leading to switching costs & lock in.

Because data is such a strategic asset to enterprises with digital strategies, it makes sense that they would build their own infrastructure around it (not the other way around. New digital capabilities in Social, Mobile, Analytics, and Cloud will certainly utilize different services providers, but data will continue to be central.

Amazon was the first to figure this out, but the list of companies utilizing a data first digital strategy is growing. Most recently, GE announced its Predix cloud service, a clear indication that they intend to launch many specialized cloudy IoT (or Industrial Internet) centric offerings that augment their existing businesses and create customer value and intimacy across both the physical and virtual world. As a $140+ Billion company that likely spends at least $5+ Billion on IT, it makes no sense that they would look to leverage a service provider, given that their internal IT services are larger than any service provider except for AWS.

GE won’t be the only one. In the not to distant future a big chunk of the Fortune 500 will have and internal, multi-tenant public cloud that delivers APIs, platforms, software and other cloudy services tightly aligned with their other offerings. Basically the definition of a Digital Enterprise.

Most people think Hybrid Cloud is about connecting private clouds to public clouds. I think private clouds will eventually be multi-tenant, meaning more and more companies like Uber and GE (yes I did use them both in the same sentence) will start to look just a little more like Amazon and Google.

 Do you agree or disagree?  Let's have that discussion in the comments below.