Airbnb details Roadmap to lower cloud costs

Moving by Airbnb Inc.

lowering its cloud storage costs in the run-up to its December 2020 IPO has made it better prepared for the possibility of an economic downturn, the home-sharing company said. Analysts say its efforts offer a template for other companies looking to get a handle on spending as more IT shifts to the cloud.

The San Francisco company began examining its cloud costs in 2019 in preparation for an IPO, said David Nagle, Airbnb’s director of cloud infrastructure, which achieved savings of $63.5 million in 2020 over the previous year by closely monitoring its cloud usage, moving some of its data to cheaper cloud services and work with Amazon. com Inc.’s

cloud company, Amazon Web Services.

While Airbnb’s home-sharing business was hit hard by the Covid-19 pandemic, Nagle said the company’s cost savings measures at the time – including cloud budgeting – prepared it for the current economic situation environment where its tech peers are laying off dozens of employees or putting hiring on hold. A company spokesman said it was able to reduce cloud costs in 2020 by 27% compared to the previous year, and lowered its operating costs by 26% to $666.3 million, in part by revamping its cloud budget.

Airbnb on Tuesday posted its most profitable quarter to date, with $2.88 billion in revenue for the quarter ended Sept. 30.

Many companies that have moved their enterprise technology tools to the cloud in recent years are similarly looking to reduce their cloud costs, especially in the market downturn. Enterprise cloud spending will moderate from recent highs, analysts say, as companies seek more discipline in that spending.

Mr. Nagle said Airbnb early on formed a cost efficiency team, which now has about seven people, dedicated to watching cloud costs “like a hawk.”

That allowed the company to decide which cloud services it didn’t need, including S3 Glacier, one of Amazon’s highest-cost storage services. “It reduced a significant portion of our inventory costs right from the start,” said Mr. Nail.

Airbnb, one of Amazon’s biggest cloud customers according to Amazon, also worked with the cloud provider to find out what it was overpaying for. For example, the company replaced its homegrown data backup system with Amazon’s service at a cost that is “almost free,” he said.

Mr. Nagle said Amazon also created a flat network, or one where all servers are connected to a single network to minimize costs and maintenance, for Airbnb. Such a network had never been established for a customer of Airbnb’s size, he said, and required Amazon to adjust every machine in its own data centers.

To be sure, Airbnb receives a special level of service from Amazon’s cloud, said Tracy Woo, a senior analyst who covers cloud at market research firm Forrester Research Inc.,

but other companies can still follow it. Cloud providers have a vested interest in helping their customers spend less because they know cloud purchases are a long-term commitment, said Jean Atelsek, a research analyst at S&P Global Market Intelligence.

Shaown Nandi, a director of technology at Amazon Web Services who works with customers on their cloud budgets, said businesses of all sizes can almost instantly lower their bills by using their savings plans, where they pay a lower rate up front for a certain amount. cloud usage over one or three years, rather than paying for these services as they use them.

For large customers, cloud providers like Amazon offer year-long contracts in exchange for sometimes significant discounts, said Raj Bala, a vice president and analyst who covers cloud at IT research and consulting firm Gartner Inc.

While such contracts may commit a client to millions of dollars in spending a year, that shouldn’t prevent them from optimizing how those dollars are spent, Mr. Bala.

For example, Airbnb has a contract with an unspecified data hosting provider to spend at least $1.2 billion through 2027, according to its initial public offering in November 2020. Airbnb’s primary hosting provider is Amazon Web Services, its filing states.

By using its spending on cheaper cloud services that it uses more often, Airbnb is allocating its cloud budget “in a smarter way,” Mr. Bala.

Write to Belle Lin at belle.lin@wsj.com

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