Airbnb details roadmap to reduce cloud costs

The San Francisco company has started investigating its cloud-related costs in 2019 in preparation for an IPO, said David Nagle, director of cloud infrastructure at Airbnb, realizing savings of $63.5 million in 2020 over the previous year by closely monitoring its use of the cloud, moving some of its data to low-cost cloud services and working with

Amazon.co.uk Inc.

cloud enterprise, Amazon Web Services.

While Airbnb’s home-sharing business was seriously affected by the Covid-19 pandemicMr. Nagle said the company’s cost savings measures at the time, including cloud budgeting, prepared it for today’s economic climate environment where its technological peers are located lay off dozens of workers or suspend hiring. A company spokesperson said it was on track to reduce cloud costs in 2020 by 27% from a year earlier and cut its cost of revenue by 26% to $666.3 million. dollars, in part by revamping its cloud budget.

Airbnb released its most profitable quarter to date with $2.88 billion in revenue for the quarter ended September 30.

Many companies that have moved their business technology tools to the cloud in recent years are also looking to reduce their cloud-related costs, especially during a downturn in the market. Enterprise cloud spending will decline from recent highssay analysts, as companies seek more discipline in spending.

Mr. Nagle said that Airbnb formed a cost efficiency team early on, which now numbers around seven people, dedicated to monitoring cloud costs “like a hawk”.

This helped the company determine which cloud services to use, including Amazon S3 Glacier, Amazon’s lower-cost storage service. “It reduced a significant amount of our storage costs right off the bat,” Nagle said.

Airbnb, one of Amazon’s biggest cloud customers according to Amazon, also worked with the cloud provider to determine what it was overpaying. For example, the company replaced its in-house data backup system with Amazon’s service at a “nearly free” price, he said.

Nagle said Amazon has also created a flat network, or a network in which all servers are connected to a single network to minimize cost and maintenance, for Airbnb. Such a network had never been established for a customer the size of Airbnb, he said, and required Amazon to fit each machine into its own data centers.

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

Forrester Research Inc.,

but other companies can still follow his example. 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, research analyst at S&P Global Market Intelligence.

Shaown Nandi, chief technology officer at Amazon Web Services who works with customers on their cloud budgets, said businesses of all sizes can cut bills almost immediately using its savings plans, where they pay a lower rate than upfront for a certain amount of 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 one-year contracts in exchange for sometimes deep discounts, said Raj Bala, vice president and cloud analyst at an IT research and consulting firm.

Gartner Inc.

While such contracts can commit a client to spending millions of dollars a year, that shouldn’t stop them from optimizing how those dollars are used, Bala said.

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

By shifting its spending to lower-cost cloud services that it uses more often, Airbnb allocates its cloud budget “smarter,” Bala said.

Write to Belle Lin at [email protected]

Corrections & Amplifications
S3 Glacier is one of Amazon’s lower cost storage services. An earlier version of this article incorrectly listed it as one of Amazon’s most expensive storage services. (Corrected November 8)