Outburst: Oh really ?! Telstra throws AU$800m at clouds – The Register.

In this article on the Register, someone is repeating a press release without giving it too much thought Telstra throws AU$800m at clouds • The Register

Telstra is spending over AU$800 million in cloud computing over the next five years to meet emerging demand in the enterprise space. The carrier claims use of its infrastructure cloud-based services has increased by 50 percent this year, while take-up of voice and video services hosted in the cloud is up 80 percent, delivering more than 100,000 IP telephony services.

So, $800 million you reckon. Thats sounds like rather a lot so I lets look into it. For background, Telstra is the incumbent service provider in Australia with more than 60% of the total marketshare with revenue1 of around AUD$25 billion per year.

  • Lets assume that they allocated $25 million as the project budget in the FIRST year.
  • Lets project 100% growth every year for the next five years ( optimistic, they aren’t getting that growth now – hosted voice and video is growing at 80% per annum after years of market development)
Annual Spend from Initial Project Funding of 25 million
Year 1 Year 2 Year 3 Year 4 Year 5 Total 5 Year Spend
Yearly Spend 25 50 100 200 400 775

Oh, wow. Look at that, the power compound interest — a little bit of rounding and you have $800 million over five years from just $25 million up front.

Anyone want to take a bet that 100% growth every year for five years is grossly unlikely ? Do you think that allocating 0.01% of their gross annual revenue to a “cloud” project is big money ? Then consider that their broadband rollout projects is measured in the billions, every year.

Therefore, not such a big cloud project at all. Not even really committed, just pocket money for a big company where some executive has convinced the business it’s the “next big thing”. Compare this with the money spent at Amazon / Google / Facebook for a single data center. Telstra is doing cloud here but it’s just some servers in a few racks of their existing data centers. Big deal.

  • Ben Jencks

    Unless I’m misunderstanding, I think $25 million is 0.1% of $25 billion, not 0.01%. Still a small fraction, but an order of magnitude larger.

    • http://etherealmind.com Etherealmind

      That’s an imperial billion, not a metric billion.

  • http://blogstu.wordpress.com stu

    Big numbers make big headlines – did you see HP is investing $2B (of financing) for cloud? http://www.hp.com/hpinfo/newsroom/press/2011/110606xb.html
    Is that Instant On and Pay Later?

  • DavidT

    “Telstra is doing cloud here but it’s just some servers in a few racks of their existing data centers. Big deal”

    Sounds like Greg is having an outburst without giving it too much thought. Sure $800 million is pocket money for them over 5 years but this is no a new business, it’s additional money being spent on an existing business. I’ve been in some of their data centres, they are hardly “just a few racks”. If you bothered to read anything about the press release you would have seen that it’s more than just some servers in racks in their existing data centres.

    Also, to make a comment like “Then consider that their broadband rollout projects is measured in the billions, every year” shows how out of touch you are with what’s going on here.

    • http://etherealmind.com Etherealmind

      The press release makes it sounds like they are investing more than Google or Facebook – this is patently untrue. Telstra is a biggish company, they have big data centres but they aren’t building dedicated facilities for hosting their cloud – just taking up some more space.

      Don’t overload it, this isn’t a big deal. Just a medium one.