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The generative AI provides more <keyword id="20069513" type="General" weightage="20" keywordseo="opportunity" source="keywords">opportunity</keyword> to the Indian IT sector contrary to the believe of being a threat, highlighted a report by Nuvama Wealth Management. The report noted that although AI <keyword id="19901571" type="General" weightage="20" keywordseo="technology" source="keywords">technology</keyword> may initially disrupt the sector, especially in terms of business operations and billing models, the long-term benefits far outweigh the risks. "We, on the contrary, expect the Indian IT industry to come out stronger from the <keyword id="19906101" type="General" weightage="100" keywordseo="Gen-AI" source="keywords">Gen AI</keyword>-led disruption. We dig deep into various facets of Gen <keyword id="20037918" type="General" weightage="20" keywordseo="AI-adoption" source="keywords">AI adoption</keyword> for enterprises and find that Gen AI would create a mammoth incremental opportunity for <keyword id="20617562" type="General" weightage="20" keywordseo="Indian-IT-services" source="keywords">Indian IT services</keyword>," said the report. The report noted that as more enterprises adopt AI, the need for services such as upgradation of legacy code and data readiness for AI integration will increase, offering Indian IT firms new streams of revenue. The report mentioned one of the most significant opportunities lies in the modernization of <keyword id="21835113" type="General" weightage="20" keywordseo="legacy-systems" source="keywords">legacy systems</keyword>, particularly core banking systems (CBS). It stated that many <keyword id="19912054" type="General" weightage="20" keywordseo="financial-institutions" source="keywords">financial institutions</keyword> still use mainframe systems and outdated programming languages like COBOL. Gen AI enables automated code modernization, which will drive a major demand for Indian IT services to upgrade these systems, creating a long-term revenue stream. "Since most non-Indian (read European) do not have the scale to hire and deploy employees with the ability to code in COBOL (not to mention supply crunch)--they have ceded this opportunity to <keyword id="21817095" type="General" weightage="20" keywordseo="Indian-IT-Services-companies" source="keywords" meta.keywordsubtype="org" meta.entityname="Indian IT Services companies" meta.hostid="261" meta.entityid="Indian IT Services companies">Indian IT Services companies</keyword>" said the report. The report specifically highlighted the "upgradation of legacy code" as a key area of opportunity for IT companies as businesses prepare their systems for AI integration. Gen AI is expected to create new service lines for Indian IT companies, including AI-based <keyword id="19945906" type="General" weightage="20" keywordseo="customer-service" source="keywords">customer service</keyword>, fraud detection, predictive maintenance, and knowledge processing. These AI-driven solutions will allow IT firms to offer higher-value services to clients, boosting revenue and profit margins. "Indian IT companies have always repositioned themselves to continue to do what they do best--service customers. That has provided them with the longevity they have commanded for multiple decades now. We do not see that changing this time as well" the report added. Comparing Gen AI to "a hammer looking for a nail," the report suggested that the technology's applications are still being discovered, but its potential is undeniable. Looking ahead, the report forecasts a strong start to FY25 for Indian IT companies, with growth driven by an optimistic outlook for the Banking, Financial Services, and Insurance (BFSI) sector, increasing technology spending, and large deal ramp-ups.

Gen AI to unlock a "mammoth incremental opportunity" for Indian IT services: Report

In an era where customer experience is a primary business differentiator, the role of service hubs has evolved from merely answering calls to becoming innovation centers. With the infusion of advanced technologies like <keyword id="107950" type="General" weightage="20" keywordseo="artificial-intelligence" source="Orion">Artificial Intelligence</keyword> (<keyword id="6355999" type="General" weightage="20" keywordseo="AI" source="Orion">AI</keyword>) and Generative AI (Gen-AI), the service hub industry is now undergoing a transformation that promises to redefine customer interactions, according to experts. “The nature of the industry will change. I think even calling it <keyword id="19945906" type="General" weightage="20" keywordseo="customer-service" source="keywords">customer service</keyword> or service industry may be a very different outlook 5 years from now,” said Sameer Bapat, SVP and COO of Cognizant IOA, during a panel discussion on “Revolutionsing Customer Experience Innovating Service Hubs Through Technology,” hosted by Business Insider India. Leaders in the industry believe that India is entering the golden age of customer service, one powered by data-driven insights, AI-driven empathy, and evolving human-machine collaboration. “The net amount of venture capital and private equity capital that you’re going to see in the customer service industry going forward is going to 5-10x of what it has been in the last 5 years,” predicted panelist Vijay Narsapur, SVP and Business Head of Infosys BPM. <div type="Youtube" id="E23CeECUh9A" title="Revolutionizing Customer Experience: Innovating Service Hubs Through Technology" thumbUrl="https://i.ytimg.com/vi/E23CeECUh9A/mqdefault.jpg"><url><![CDATA[https://www.youtube.com/watch?v=E23CeECUh9A]]></url></div> <h2>The evolution of service hubs: More than customer service</h2>No longer just centers for addressing customer complaints or technical issues, today’s service hubs are integrating innovative technologies to become the nerve center of business operations. According to Sanjay Kukreja, Global Technology Head at Eclerx, tools like data engineering and cloud computing have shifted customer service into real-time interactions, allowing businesses to assist customers faster and more efficiently than ever before. For Narsapur, service hubs are now the lifeblood of the business process management (BPM) industry. End customers have become increasingly comfortable interacting with AI and automated systems. However, they still crave human connection, especially when complex or emotionally charged issues arise. Narsapur points out that this blending of technology and human touch is crucial for refining the customer journey. As businesses scale, service hubs are expected to balance these elements more tightly to deliver both efficiency and empathy. <h2>AI and Gen-AI: Disruptors or Enhancers?</h2>Arguably, the most significant driver of change in the service hub industry has been the integration of AI and Gen-AI. Bapat explains that these technologies have transformed how service hubs operate. Automation tools have led to productivity gains ranging between 20% to 60%, primarily by streamlining mundane tasks, improving scalability, and delivering more personalized customer interactions. This isn’t just an incremental improvement—it’s a deep, domain-led transformation of how companies interact with their customers. But, as Abhinandan Jain, Chief Growth Officer at Startek, notes, AI doesn’t just enhance efficiency—it also amplifies empathy. Service hubs are learning how to use AI as an "empathy amplifier," where AI-driven systems handle routine queries, and human agents step in for more complex, emotionally charged interactions. This helps agents focus on delivering the high-touch experiences customers expect when they escalate an issue to a real person. While there has been some anxiety surrounding AI replacing jobs, the experts argue that this technology will instead create more high-value roles. ““There is going to be an increase of anywhere between 2x to 5x in the number of jobs that are going to be created in this particular industry,” said Narsapur. For example, there will be an increasing demand for professionals skilled in data science, machine learning, and algorithm management to maintain and improve AI systems. According to a <a href="https://www.mckinsey.com/mgi/our-research/generative-ai-and-the-future-of-work-in-america">McKinsey</a> report, AI will automate 25-30% of jobs in customer service, but the technology will also create new roles in AI supervision, data analysis, and customer experience management. <h2>Data-driven insights and the role of <keyword id="23232621" type="General" weightage="20" keywordseo="CRM-tools" source="keywords">CRM tools</keyword></h2>One of the most promising developments in the service hub sector is the increasing reliance on data to drive customer interactions. Jain explains that service hubs are now equipped with sophisticated Customer Relationship Management (CRM) tools that can mine both structured and unstructured data, enabling companies to gain a holistic view of customer behavior. This level of insight allows businesses to not only address customer queries more efficiently but also predict future needs, making the customer journey more proactive than reactive. These CRM platforms are evolving, too. Narsapur notes that many service hubs, particularly in industries like banking and telecom, now use platforms that integrate various aspects of customer interaction, from onboarding to relationship management. These platforms provide a unified view of customer interactions, allowing agents to access the information they need quickly, which ultimately drives faster resolution times and higher customer satisfaction. A <a href="https://www.gartner.com/en/newsroom/press-releases/2021-01-12-gartner-predicts-80--of-customer-service-organization">Gartner</a> study revealed that by 2025, 80% of customer service interactions will be handled by AI and CRM systems, up from 52% in 2020. <h2>The economic impact of AI on service hubs</h2>The rise of AI and Gen-AI is also fueling an economic boom in the service hub sector. Jain predicts that the influx of venture capital and private equity in AI research for customer service hubs will increase five- to ten-fold in the coming years. This investment is primarily driven by the need for businesses to remain competitive in an increasingly tech-driven market. The economic growth potential is massive, especially in regions like India, where the talent pool for AI and data science is unmatched. Kukreja echoes this sentiment, noting that India’s service hubs are well-positioned to lead this transformation due to their depth of talent in areas such as data engineering, mathematics, and AI development. This gives Indian service hubs a competitive edge as companies look to scale their customer service operations with tech-driven solutions. Global spending on Gen-AI is expected to reach $26 billion by 2027, with Japan and India set to become the most rapidly expanding markets in the forthcoming years, according to <a href="https://www.idc.com/getdoc.jsp?containerId=prAP52048824">IDC</a>. <h2>What lies ahead for service hubs?</h2>As we look to the future, the role of service hubs will likely expand even further. Narsapur warns that while platforms and AI will drive efficiency, businesses should not rely solely on technology. Competitive advantage will come from the integration of human expertise, technology, and industry-specific solutions. Different sectors, such as banking, telecom, and retail, each have unique needs that service hubs must adapt to in order to provide effective, personalized customer experiences. AI will play a central role in this transformation. But as Jain points out, it won’t replace human agents entirely. Instead, it will coexist with them, moving people up the value chain to focus on higher-value tasks. AI will handle the routine, while humans will step in where emotional intelligence and complex problem-solving are required. In the end, the future of service hubs is not just about technology; it’s about blending tech and humanity in a way that elevates customer experiences to new heights. We are at the dawn of a new era for customer service hubs. The infusion of AI and Gen-AI, along with data-driven insights and sophisticated CRM tools, is transforming the industry from the ground up. Far from being a threat to jobs, AI will create new opportunities, leading to a more dynamic, efficient, and empathetic customer experience. With significant economic growth on the horizon, particularly in regions like India, the service hub industry is set to play a pivotal role in the future of business. The golden age of customer service is here, and the best is yet to come. This article is part of a four-part webinar series in partnership with nasscom. These monthly webinars aim to delve deep and offer insights into the evolving BPM landscape. You can watch the full video of the second session <a href="https://www.youtube.com/watch?v=E23CeECUh9A">here</a>. Disclaimer: This article is generated and published by the Insider Studios team. You can get in touch with them on insiderstudios@businessinsider.in

Customer service hubs: Entering the golden age with Gen-AI and tech-driven solutions

<ul class="summary-list"><li>AWS's Graviton CPU chips are used by over 90% of its 1,000 largest data center customers.</li><li>Graviton chips, launched in 2018, are becoming an important part of AWS's overall business.</li></ul>In 2018, <a target="_blank" class="" href="https://www.businessinsider.com/amazon-nuclear-power-strategy-ai-2024-10">Amazon</a> Web Services launched Graviton, its own line of homegrown central processing unit chips for <a target="_blank" class="" href="https://www.businessinsider.com/amazon-data-centers-delays-costs-power-labor-shortages-aws-ai-2024-10">data center</a> servers. Just six years later, the vast majority of AWS's largest server customers have become Graviton users.Rahul Kulkarni, AWS's director of compute and AI/ML, told Business Insider that more than 90% of the 1,000 largest elastic compute cloud (EC2) customers are running Graviton chips. Customers can only access Graviton chips through AWS's EC2 servers."It just continues to show how Graviton is gaining traction," Kulkarni said.The new data point is the latest indication of Graviton's growing success. AWS previously said that over 50,000 customers, including the 100 largest EC2 users, run Graviton-based servers.Graviton is a key part of AWS's data center business. Designing its own chips allows AWS to reduce data center operating costs because it no longer has to buy CPUs solely from other vendors, like Intel or AMD. Graviton also uses Arm-based designs, which are more cost and energy-efficient than conventional x86-powered chips.Amazon doesn't disclose the size of revenue from its custom silicon business. The company is scheduled to announce its third-quarter earnings on Thursday.Kulkarni said Graviton's price value, energy efficiency, and general performance drive more customer adoption. Big enterprises, such as Epic Games, Databricks, and Pinterest, are all major Graviton customers, he said."We have a lot of engagement going on in custom silicon, and that's an area that we will continue to invest in at a very aggressive pace going forward," Kulkarni said.<h2 id="7b568770-d1b9-4b81-ba12-d502621d504a">AI inference</h2>AWS started considering designing its own custom chips after its SVP and distinguished engineer, James Hamilton, wrote an internal 6-page strategy document in 2013. In 2015, AWS doubled down on this plan by acquiring Israel-based chip designer Annapurna Labs.Bernstein Research wrote last year that Amazon is the "most successful" Arm-based server chip designer, supplying over 50% of the Arm server chips worldwide. It estimated Graviton accounted for roughly 20% of AWS's CPU usage as of mid-2022. AWS offers access to other processors, including Intel or AMD chips.AWS's Kulkarni said Graviton is still mostly used for general computing purposes, but a growing number of customers are using it for CPU-based AI inference and machine learning frameworks. He said that Graviton, now in its fourth generation, has added new features and capabilities that enable unique use cases, like AI inference, that don't necessarily need dedicated machine learning processors."It's a new revenue channel that goes beyond what AWS had anticipated Graviton to be used for," Kulkarni said.In the past couple of years, Amazon has been <a target="_blank" class="" href="https://www.businessinsider.com/amazon-layoffs-10000-employees-grand-challenge-team-dramatic-changes-2022-11">cutting costs</a> across the company, shuttering dozens of projects or scaling down unprofitable units. AWS's chip-designing business appears safe from those cutbacks.During an analyst call in August, Jassy said Graviton has been "very successful" for AWS. He added that <a target="_blank" class="" href="https://www.businessinsider.com/aws-ai-chips-wider-regional-availability-microsoft-google-2024-9">AWS's custom AI chips</a>, Inferentia and Trainium, are expected to follow a similar growth trajectory, even though they are seeing mixed results due to Nvidia's early head start, as <a target="_blank" href="https://www.businessinsider.com/amazon-nvidia-aws-ai-chip-dominance-gpu-trainium-inferentia-2024-5">BI previously reported</a>."It's one of the most strategic areas for us," Kulkarni said. "We will absolutely continue to drive innovation in custom silicon as we have been doing for the past 10-plus years."Do you work at Amazon? Got a tip?Contact the reporter, Eugene Kim, via the encrypted-messaging apps Signal or Telegram (<a target="_blank" rel="noopener noreferrer nofollow" class="c-link">+1-650-942-3061</a>) or email (<a target="_blank" href="mailto:ekim@businessinsider.com">ekim@businessinsider.com</a>). Reach out using a nonwork device. Check out Business Insider's <a target="_blank" rel="" href="https://www.businessinsider.com/insider-guide-to-securely-sharing-whistleblower-information-about-powerful-institutions-2021-10">source guide</a> for other tips on sharing information securely.

Over 90% of AWS's biggest data center customers are now using its homegrown Graviton chips, executive says

<ul class="summary-list"><li>If you've ever been frustrated that a customer service rep can't help, you may be a victim of an "accountability sink."</li><li>Economist Dan Davies uses the term to describe how companies avoid responsibility by deferring decisions to algorithms.</li></ul>It's one of every traveler's worst nightmares: You arrive at the boarding gate to be told your flight is overbooked and you've been <a target="_blank" class="" href="https://www.businessinsider.com/what-to-do-if-airline-bumps-you-from-overbooked-flight-2023-8">bumped</a>.You complain at the counter — you have an important business meeting or you don't want to miss your friend's wedding. Can't they bump someone else?However, the <a target="_blank" class="" href="https://www.businessinsider.com/things-people-should-never-do-on-airplanes-flight-attendant-2023">attendant</a> tells you there's nothing they can do to help. <a target="_blank" class="" href="https://www.businessinsider.com/best-and-worst-airlines-us-canada-customer-satisfaction-delta-southwest-2024-5#:~:text=Southwest%20Airlines%20took%20top%20honors,three%20spots%20from%20last%20year.">Company</a> policy is final.While frustrating, the gate attendant is not at fault — and that's the whole point. Companies create algorithms to decide who is bumped from a flight, ensuring that the system's decision is final and no one employee is accountable.It's an example of what economist Dan Davies calls an "accountability sink" in his new book "<a target="_blank" class="" href="https://affiliate.insider.com?h=b89b4850e05bd4939f2d9e7a8caa9cc0c31a3471114ff89757b06b527d0810cd&amp;postID=668d8a0b7d643e28300bcef5&amp;postSlug=flight-refunds-customer-service-accountability-sinks-dan-davies-2024-7&amp;site=bi&amp;u=https%3A%2F%2Fwww.amazon.com%2FUnaccountability-Machine-Systems-Terrible-Decisions-ebook%2Fdp%2FB0CGFWBFD6">The Unaccountability Machine: Why Big Systems Make Terrible Decisions — and How the World Lost its Mind.</a>"Corporations absolve their employees of responsibility by delegating decision-making to an <a target="_blank" class="" href="https://www.businessinsider.com/forget-ai-algorithm-apocalypse-driving-humans-lives-data-stock-market-2024-4">algorithm</a> or deferring to company policy. No one person is empowered to make a judgment call, and the customer's frustrations are moot. It's not just at airlines; technology and an increased focus on streamlining processes to cut costs have allowed companies in all kinds of industries to create accountability sinks.Davies told Business Insider that once a decision like bumping someone from a flight is made, "then it's just natural to create an accountability sink.""You don't want any accountability there because you don't want to have pressure put on anyone to change the decision," Davies said.While technology can optimize decision-making processes, it can also prevent customers from reaching someone with the power to make a decision that strays from the corporate script.In the case of the sympathetic gate attendant telling the disgruntled customer, "'We've got a policy, there's nothing that can be done,'" Davies said, the customer's negative emotions are ignored and poured into a void — or an accountability sink."That's the situation that people find so incredibly frustrating," Davies said. "Because it's bad to have decisions go against you, but it's absolutely psychologically intolerable to feel like you're not being listened to."<h2 id="c8302fe0-a4b6-458a-b9d4-856b4b4c93cb">Sorry, it's company policy</h2>According to Davies, accountability sinks emerged over the past decades of privatization and technological innovation.In the 1980s, he said, free-market capitalism and profit maximization became the norm, spearheaded by economist Milton Friedman and championed by Ronald Reagan in the US and Margaret Thatcher in the UK. Since then, companies have focused on profits, growth, and maximizing shareholder value, according to Davies, which in turn has created accountability sinks.Following the technology boom of the 1990s, Davies said companies developed computer systems to make decisions for them because of the volume and complexity of information.In addition, middle management and customer service jobs were cut or outsourced as corporations prioritized profits, optimizing costs, and delivering strong quarterly earnings."The big problem with cutting the feedback link is that you're cutting off all of your own sources of information," Davies said. "And so your customers can be getting steadily more and more annoyed with you, and you won't really know that."In the case of the person at the airport, Davies said ideally, any customer bumped from a flight should be able to talk directly with an employee with some level of decision-making power."The answer is usually there are no more flights going, and there's nothing that can be done, but just simply having that experience of someone listening to you, in my view, is just really, really important," he said.Of course, accountability sinks aren't just at the boarding gate. You may have experienced similar frustrations when calling your internet or cellphone provider, bank, or credit card company. It often looks like a customer service representative working within a system with limited options to help.Accountability sinks can range from customer service to decision-making at major corporations. According to Davies, <a target="_blank" class="" href="https://www.businessinsider.com/boeing-to-plead-guilty-isnt-out-woods-yet-government-contracts-2024-7">Boeing</a> is a company rife with accountability sinks. The airline manufacturer is at the center of legal troubles stemming from two deadly <a target="_blank" class="" href="https://www.businessinsider.com/boeing-crashes-groundings-timeline-737-max-777-air-force-tanker-2024-1#737-max-crashes-2">crashes</a> in 2018 and 2019, and an incident in January when a <a target="_blank" class="" href="https://www.businessinsider.com/fbi-tells-boeing-737-blowout-passengers-may-be-victims-crime-2024-3">Boeing 737 Max's</a> door plug came off mid-flight.Davies said decision-makers at Boeing have been too focused on share buybacks and optimizing costs in recent years while accountability sinks developed around <a target="_blank" class="" href="https://www.businessinsider.com/boeing-disaster-american-businesses-greedy-broken-stock-market-wall-street-2024-2">manufacturing</a> quality.In March, when Boeing CEO Dave Calhoun announced his <a target="_blank" class="" href="https://www.businessinsider.com/boeing-dave-calhoun-failed-to-turn-boeing-around-737-max-2024-3">resignation</a>, he told CNBC that Boeing had a "bad habit" of focusing too much on delivery time, which might have given the message that "the movement of the airplane is more important than the first-time quality of the product."Nonetheless, Davies said accountability sinks will eventually catch up with companies."Over time, it degrades the brand, and the resentment builds up," he said. "At some point, there's just going to be this huge bump where you get back to reality, and all of the accountability you've been pouring into this sink for the last 10 years comes back and hits you in one massive lump."Do you see accountability sinks elsewhere in life? This reporter wants to hear from you. Please reach out at <a target="_blank" href="mailto:jtowfighi@businessinsider.com">jtowfighi@businessinsider.com</a>.

Finally, an explanation for why it's so frustrating to deal with customer service

<ul class="summary-list"><li>As the chief AI and innovation officer of <keyword id="20663742" type="General" weightage="20" keywordseo="Anaconda" source="keywords" meta.keywordsubtype="org" meta.entityname="Anaconda" meta.hostid="261" meta.entityid="Anaconda">Anaconda</keyword>, Peter Wang helps the programming-language distributor improve <keyword id="20110666" type="General" weightage="20" keywordseo="AI-solutions" source="keywords">AI solutions</keyword>.</li><li>This includes supporting on-prem IT and running AI models locally to boost security and efficiency.</li></ul>Peter Wang is the chief AI and innovation officer of <a href="https://www.anaconda.com/about-us" target="_blank">Anaconda</a>, a company he cofounded in 2012 with the goal of democratizing business-data analytics by making <keyword id="23150763" type="General" weightage="20" keywordseo="Python-tools" source="keywords">Python tools</keyword> easier to use. With Python established as a leading language for <keyword id="21065919" type="General" weightage="20" keywordseo="AI-workloads" source="keywords">AI workloads</keyword>, Anaconda is broadening its focus to <keyword id="19897745" type="General" weightage="20" keywordseo="data-science" source="keywords">data science</keyword> and artificial intelligence, with the goal of becoming a common software layer for high-performance AI. Anaconda has introduced tools to help companies and people get started with AI <keyword id="19897804" type="General" weightage="100" keywordseo="large-language-models" source="keywords">large language models</keyword>. One such tool is <a target="_blank" class="" href="https://www.anaconda.com/products/ai-navigator">AI Navigator</a>, a desktop app that can run AI models locally on Windows and Mac, with Linux support coming soon. The company has 300 full-time employees and 40 million users worldwide. Business Insider spoke with Wang to learn more about how AI workloads are prompting companies to think about bringing more of their <a target="_blank" class="" href="https://www.businessinsider.com/artificial-intelligence-data-privacy-on-premises-information-technology-solutions-2024-8">IT infrastructure on-premises</a> — and the hardware and software challenges that come with making such a move. The following has been edited for clarity and length. Can you talk about on-premises infrastructure and what that term means to you in 2024? On-premises initially meant servers within the company's physical location. Now it's more about the governance of infrastructure, including data, networking, and servers. Who manages it? Who gets to say, "No, absolutely, you can't do that," or, "Yes, you can do that?" At Anaconda, we see customers across the spectrum. Some have what we call air-gapped systems, not connected to the internet at all. These might be a box in a building somewhere, oftentimes guarded by people with machine guns, where you go in with a flash drive. That's the hardcore level of secure on-prem. On the other end, we see businesses that use a lot of cloud resources. But even they need stricter boundaries. They work with cloud providers to set up virtual private clouds or to provision resources with specific governance rules and policies. Why are companies interested in on-premises solutions for AI and large language models? We see a lot of interest from companies wanting control over their own destiny. They want to fine-tune models on their own data, connect them to internal databases for <a target="_blank" href="https://www.businessinsider.com/retrieval-augmented-generation-making-ai-language-models-better-2024-5">retrieval-augmented generation</a>, and use agent-based models. If a company can only consume AI as a cloud end point, you have to tie all your internal systems to that cloud AI service, which is difficult. And many of these cloud AI companies, while they are well capitalized, are still relatively new as enterprise-software players. There are a lot of concerns about data leakage and compliance. Running locally gives more control and reduces the risk of accidental data exposure. You don't have to worry about a junior IT person at a cloud startup accidentally misconfiguring something and causing a data breach. The risks of a data breach are clear, but many companies seem concerned about any external use of their data for AI. Why is that? People have said that data is oil. If your data is oil, LLMs are like the internal-combustion engine, meaning they provide a much more interesting way to use that oil. Companies want to use their sensitive "crown jewel" data with LLMs to gain insights and improve predictive analytics. These use cases are central to their business, so they're protective of this data. They don't trust putting it on external systems where it could leak valuable information like customer insights or product preferences. When people think of "on-prem," they tend to focus on hardware. But much of what you are describing seems like software. Can you explain that in more detail? The hardware for AI work is often similar across setups. It's typically high-end <a target="_blank" href="https://www.businessinsider.com/nvidia-gpu-chips-ai-branding-popularity-2024-6">Nvidia GPUs</a>, though not always the latest or most expensive versions. On top of that hardware stack, the software needed to run an LLM isn't exotic if you know what you're doing. But there's a big asterisk here. The challenges often come from internal IT policies, organizational competencies, and the dynamic nature of AI workloads. For example, if your organization is familiar with Docker or Kubernetes, great. But if you're a Java shop used to deploying with Maven, or a Ruby shop unfamiliar with Python, that creates hurdles. When these companies want to start an internal LLM, that's where they can use help. AI workloads require varying amounts of computing power at different times. When you're training, you might need a lot of GPUs, fewer, or different kinds — or <a target="_blank" class="" href="https://www.businessinsider.com/guides/tech/what-is-a-cpu">even just CPUs</a>. This dynamic set of hardware requirements, sometimes very bursty in terms of when and how long you need it, creates an orchestration challenge. That becomes a software challenge, and then an organizational one. Are you saying the challenge is optimizing software for efficient and dynamic use of hardware? I actually think it's more of a broad competency challenge for a company. In traditional software development, the IT group talks to the software-development group. The developers specify their needs for memory, bandwidth, storage, and IT provisions for them. But data scientists and machine-learning teams have dynamic needs. They require newer, more advanced hardware, and the software they run is Python with many dependencies, like specific GPU-driver versions. The challenges organizations face in on-premises AI relate to the dynamic nature of server and machine orchestration and the open-source-software ecosystem they're tapping into. This is especially true for compliance and security requirements. Speaking of open source, what are your thoughts on open versus closed LLMs? I've tried to stay out of the fray on social media, but my take is that current LLMs, especially the frontier models, have a lot of overlap in capabilities. Some are better than others in certain aspects, but at their core, once you throw enough data at them, these models start to become similar to each other. Making open models like Meta's Llama freely available is a game changer. The original Llama release was significant, and <a target="_blank" class="" href="https://www.businessinsider.com/mark-zuckerberg-meta-llama-ai-model-praise-open-source-musk-2024-7">the latest Llama 3.1 model</a>, with 400 billion parameters, is a massive step forward. It will increase interest in running models on-premises, especially for fine-tuning on sensitive data. But while these models are often called open, they're not open in the traditional open-source sense. You can use them freely, but you can't rebuild them from scratch or modify them at will. The training data, scripts, and hyperparameters are often not disclosed. It's a complex issue that involves considerations of safety and licensing. The data used for training is a particularly big issue that no one really talks about. How should a company looking to implement on-premises AI get started? Anaconda has an <keyword id="23150764" type="General" weightage="20" keywordseo="AI-Navigator" source="keywords">AI Navigator</keyword> tool that is a great way to get started. It's a simple graphical interface where you can download appropriate models for your computer. We're currently running this in beta, and we're eager to get feedback from users. Our tool connects to our curated model repository. We've quantized models to make them smaller and more efficient for different machines, which is important because downloading models from public repositories can pose security risks. For example, we've seen attacks where someone uploads a fine-tuned code-generation model that hallucinates nonexistent Python packages. It generates code that tries to import or install these fake packages, and then the attacker creates malicious versions of these packages in the real world. When users try to run the generated code, they install these malicious packages. Our tool helps users get past many initial hurdles in setting up and running AI models locally. It accelerates the process of getting the software running correctly for a given machine, making it easier and safer for businesses to start exploring on-premises AI solutions. Correction: August 28, 2024 — An earlier version of this story misstated Peter Wang's title. He's the chief AI and innovation officer of Anaconda, not the CEO. He was the CEO from October 2019 to January 2024.

Anaconda's chief AI and innovation officer says Python can make on-premises IT solutions 'easier and safer' as companies seek stronger data protection

<ul class="summary-list"><li>VMware customers face steep <a target="_blank" class="" href="https://www.businessinsider.com/vmware-customers-report-massive-price-increases-since-broadcom-deal-2024-8">price hikes</a> and late fees post-Broadcom acquisition.</li><li>Under Broadcom, VMware now focuses on strategic clients and subscription models.</li></ul>VMware customers have been experiencing sticker shock since <a target="_blank" href="https://www.businessinsider.com/vmware-chaos-broadcom-acquisition-layoffs-conference-employees-customers-2022-8">Broadcom acquired</a> the software company nearly a year ago.Besides <a target="_blank" href="https://www.businessinsider.com/vmware-customers-report-massive-price-increases-since-broadcom-deal-2024-8">massive price increases</a>, some customers are being hit with a late fee of around 20%, according to two partners. They said customers have been caught off guard because these are net new subscriptions. The exact late fee charge depends on factors like their specific deal with Broadcom and which products they use.Under <a target="_blank" href="https://www.businessinsider.com/broadcom-ceo-vmware-new-remote-work-policy-2023-11">Broadcom</a>, <a target="_blank" href="https://www.businessinsider.com/broadcom-memo-kkr-acquiring-vmware-euc-division-2024-2">VMware</a> now focuses on its largest or most <a target="_blank" href="https://news.broadcom.com/news/vmware-by-broadcom-business-simplification">"strategic" customers</a>, and its customers must also convert from a perpetual licensing model to a subscription model— moves that Wall Street analysts are optimistic about.It's unclear when these late fees started. The partners who spoke with Business Insider said that it's impacting some customers transitioning to a subscription when they miss renewals and even customers who still have existing support and subscriptions (SnS) that haven't expired but haven't yet signed up for new subscriptions.Additionally, some customers are charged this fee if they initially dropped support but then resumed it when they upgraded to a new version. "Two customers I was talking to last week said, 'Out of nowhere, it seems, a VMware sales rep sent me a note and said, hey, if they don't renew before SnS expires, there will be a 20% late renewal fee," said Dean Colpitts, CTO at Members IT Group. "My response was, how can there be a late renewal fee?"Likewise, Ignacio Llorente, CEO of OpenNebula Systems, said in an email that his company has received "numerous emails from companies expressing concerns over VMware's recent changes in contractual terms, licensing models, and pricing policies.""Many customers who transitioned from perpetual licenses to VMware's subscription-based services are finding the new model challenging, as they are unaccustomed to the ongoing renewal process," Llorente said." This has led to some being caught off guard by unexpected additional costs, especially when renewals are missed."Colpitts said that the text about the late fee in the email was bolded, making it seem like a "scare tactic." He added that customers did not get any previous warnings or communication about this late fee."They're not giving customers any discount or consideration for what they currently have," Colpitts said.Rick Vanover, vice president of product strategy at Veeam, said it's common for companies to charge a fee if customers don't renew on time. Although this is not always enforced, it can be used to negotiate a deal with customers to get them to renew before the price increases, he added.Broadcom did not respond to requests for comment from Business Insider.<h2 id="9e52b290-865c-4a7f-8421-be68e3da4e71">Changes to VMware under Broadcom</h2>Several <a target="_blank" href="https://www.businessinsider.com/broadcom-ceo-hock-tan-vmware-consolidation-2023-11">VMware</a> partners and customers previously told BI that they are seeing <a target="_blank" href="https://www.businessinsider.com/vmware-customers-report-massive-price-increases-since-broadcom-deal-2024-8">price increases</a> up to 10 times as high as their previous contracts when they renew, largely due to product bundling. "This shift has proven particularly difficult for organizations that have long relied on VMware, especially cloud service providers," Llorente said.<a target="_blank" href="https://www.businessinsider.com/broadcom-vmware-new-policy-remote-work-leaked-email-2023-11">VMware</a> partners have also faced several changes in how they sell their software. Colpitts said there's been less tech support, and partners no longer get early access to VMware's software as they previously did. This means they'll have to buy their own copies to test it before rolling it out to customers."I think Broadcom went about it completely the wrong way and left a bad taste in people's mouth," Colpitts said.<h2 id="ddada1f5-0f4f-4154-82b9-83eda4179d1a">Switching to VMware alternatives</h2>Some <a target="_blank" href="https://www.businessinsider.com/broadcom-vmware-new-era-begins-2023-11">VMware competitors</a> have seen the <a target="_blank" href="https://www.businessinsider.com/vmware-broadcom-acquisition-deal-leaked-email-options-employees-2023-9">acquisition by Broadcom</a> as an opportunity to win over <a target="_blank" href="https://www.businessinsider.com/broadcom-ceo-hock-tan-vmware-reorganization-software-defined-edge-acquisition-2023-11%5C">VMware</a> customers."This frustration with VMware business practices is causing massive demand for alternative virtualization solutions," Bruce Kornfeld, chief product officer at StorMagic, said in an email.A <a target="_blank" class="" href="https://www.forrester.com/blogs/predictions-2025-cloud/">recent Forrester report</a> said that <a target="_blank" href="https://www.businessinsider.com/broadcom-vmware-reviews-business-units-2023-11">VMware</a> revenue would continue to drop. While customers will invest further in the private cloud or hybrid cloud for regulatory compliance, they likely won't increase business with <a target="_blank" href="https://www.businessinsider.com/broadcom-vmware-layoffs-employees-face-job-cuts-acquisition-2023-11">VMware</a>, the dominant private cloud player, because of bundling and price increases. Still, "many VMware shops will renew at a limited scale," the report said.The report said alternatives like Nutanix or open-source software like OpenStack will see increased interest, although OpenStack will require improved tech sales processes.Llorente said <a target="_blank" href="https://www.businessinsider.com/broadcom-vmware-deal-employees-concerned-carbon-black-euc-2023-5">VMware's changes</a> have made customers concerned about being locked into one vendor and driven increased interest in similar offerings that are available as open source.Still, other partners say there's no other viable alternative. Plus, it's a difficult, costly process for customers to switch to a different provider, Colpitts said."What other really good options are there?" Colpitts said.Got a tip? Contact this reporter via email at <a target="_blank" href="mailto:rmchan@businessinsider.com">rmchan@businessinsider.com</a>, Signal at rosal.13, or Telegram at @rosaliechan. (PR pitches by email only, please.) Other types of secure messaging are available upon request.

VMware customers are seeing massive late fees since Broadcom acquired the company

<ul class="summary-list"><li>Data centers and large commercial buildings waste a lot of heat.</li><li>The utility Con Edison plans to capture the heat to help power underground thermal energy networks.</li></ul>Less than a block from the bustling Chelsea Market on the west side of Manhattan, data centers hum 24 hours a day in a nondescript building.All that computing power generates an enormous amount of heat, which has to be removed to keep the equipment cool and prevent outages. That heat becomes wasted energy when it's vented out the roof.All that computing power generates an enormous amount of heat, which has to be removed to keep the equipment cool and prevent outages. That heat becomes wasted energy when it's vented out the roof.The utility Con Edison wants to capture the heat and pipe it to a nearby affordable-housing complex, in a system known as a thermal energy network. A closed-loop network of water pipes and electric heat pumps circulates energy through buildings, creating an efficient heating and cooling system that avoids burning fossil fuels in residents' homes.The pilot could be one of three that ConEd builds in and around New York City to test a cleaner way of delivering energy to customers. The proposals are in the design phase and likely won't be fully approved by regulators until late 2025, Gregory Koumoullos, ConEd's department manager of thermal energy networks, said. But the intention is to eventually scale the networks to help New York achieve its climate goals, because burning fossil fuels in buildings accounts for 32% of the state's greenhouse-gas emissions — the largest single source.The pilot could be one of three that ConEd builds in and around New York City to test a cleaner way of delivering energy to customers. The proposals are in the design phase and likely won't be fully approved by regulators until late 2025, Gregory Koumoullos, ConEd's department manager of thermal energy networks, said. But the intention is to scale up the networks to help New York achieve its climate goals, because burning fossil fuels in buildings accounts for 32% of the state's greenhouse-gas emissions — the largest single source.If the pilots go well, they could prove a business model for other gas utilities to follow to decarbonize entire neighborhoods, and potentially lower energy bills along the way."These pilots are just the first phase," Koumoullos said. "The larger the network you have, the lower the cost is because you can connect more customers with less infrastructure and they are sharing more waste heat. Thermal networks really bloom at a larger scale."The technology isn't new. But ConEd is among the first utilities in the country to propose thermal energy networks after New York enacted a law two years ago requiring the utility to try it. Six other states, including Colorado and Massachusetts, have enacted similar laws either allowing or mandating pilots. Gas utilities have legal mandates to sell gas, so states have to pass laws allowing them to expand into new systems.In Framingham, Massachusetts, the utility Eversource is leading the way. The utility already connected dozens of residential and commercial buildings to a geothermal network for a two-year pilot, <a target="_blank" href="https://www.wbur.org/news/2024/03/08/networked-geothermal-eversource-framingham-pilot-project-decarbonization">WBUR reported</a>. The project involved drilling boreholes hundreds of feet below ground, where the temperature is usually a constant 55 degrees Fahrenheit. Water pipes are connected to ground-source electric heat pumps in buildings, which exchange and push energy around the system.ConEd is proposing its own geothermal network for Mount Vernon, a suburban neighborhood north of New York City where up to 76 buildings, including homes, apartment complexes, churches, and fire stations, could be hooked up. But drilling boreholes isn't always feasible in densely packed cities, which is why capturing waste heat from data centers and other buildings is being tested. Rockefeller Center in NYC is the other proposed site.<h2 id="7f12dc53-e013-48cb-ae17-f381e823311d">High upfront costs, but long-term benefits</h2>Retrofitting buildings and laying new pipes is expensive. The estimated price tag of all three pilots combined is $255 million, which would be spread across ConEd's customer base, Koumoullos said. For those participating in the pilots, ConEd would guarantee that energy costs won't go up during a 5-year test period. The utility is also looking at tax breaks under the Inflation Reduction Act to offset the cost to customers. ConEd would use the pilots to find out the actual costs of building thermal energy systems and test different ways to charge customers.The high up-front costs are a barrier to wider adoption. But climate advocates point out that an increasing amount of money is also being spent on replacing old gas lines every year. Between 2011 and 2022, gas utilities' capital expenditures on distribution infrastructure tripled from $7 billion a year to nearly $21 billion, according to a report by HEET, <a target="_blank" href="https://assets-global.website-files.com/649aeb5aaa8188e00cea66bb/663a27270c0fa4fffcfe447d_Leaked-and-Combusted-May-2024.pdf">a climate-solutions nonprofit</a> that spearheaded the push for thermal energy networks.Whether utility-scale projects can recoup the upfront costs in energy savings remains to be seen. That was the case at Colorado Mesa University, which built a geothermal network in 2008. Kent Marsh, the university's vice president for capital planning sustainability and campus operations, said switching to geothermal saved $1.5 million a year. The system paid for itself within about 11 years.Morgan Hood, the manager of new product development at Vermont Gas, told Business Insider that some utilities are looking for new business models. Vermont Gas aims to be net zero by 2050, so is considering community geothermal as a way to get there. Hood helped launch the Utility Networked Geothermal Collaborative, which now includes 27 gas utilities in North America that serve about half the customers in the US, so they can keep tabs on pilot projects and share information."All eyes are on New York, in large part because it will show how these systems can be regulated within a utility environment," she said.

How New York City's data centers and Rockefeller Center could help power a climate solution.

<ul class="summary-list"><li>Electricity and labor headwinds slow Amazon's data center buildout.</li><li>The company's predicament highlights challenges faced by the broader cloud industry.</li></ul><a target="_blank" class="" href="https://www.businessinsider.com/amazon-big-tech-cash-king-wall-street-wants-a-piece-2024-10">Amazon</a> is spending heavily on <a target="_blank" class="" href="https://www.businessinsider.com/ai-data-energy-centers-water-energy-land-2023-10">data centers</a> to support booming <a target="_blank" class="" href="https://www.businessinsider.com/amazon-ai-sales-machine-aws-google-microsoft-pressure-pay-speed-2024-9">AI</a> workloads, putting it on pace to build 240 new facilities by 2040, according to one estimate.These plans are increasingly running into physical constraints that are slowing the buildout, according to an internal document, people familiar with the matter, and emails obtained through a public-records request."Across the AMER region, we are experiencing headwinds in power, zoning and permitting, water, and workforce/labor that are providing challenges to our long-term capacity growth," the internal document stated, referring to the Americas market, Amazon's largest.As the biggest cloud provider, Amazon's predicament highlights broader <a target="_blank" href="https://www.businessinsider.com/ai-data-energy-centers-water-energy-land-2023-10">problems</a> facing the tech industry as generative <a target="_blank" class="" href="https://www.businessinsider.com/amazon-ai-sales-machine-aws-google-microsoft-pressure-pay-speed-2024-9">AI</a> upends the status quo. While more companies want access to cloud computing for AI initiatives, there's only so much power, water, and labor available to support these services.It's not just an Amazon problem. Sequoia Capital general partner David Cahn recently predicted data center delays across the sector."The need for more power and a better functioning grid was clear before AI," he wrote in a blog post. "Now, it is becoming urgent."<h2 id="4e19455f-0a20-458d-a775-e305cc9aed23">Energy demand is growing</h2>It may be natural for a company like Amazon, one of the largest and fastest-growing data center operators, to face these challenges when it is expanding at breakneck speed.Marc Wulfraat, president of consulting firm MWPVL, told BI that Amazon is probably rolling out even more than 240 data centers in coming years. That's because the cloud giant also leases space in buildings shared with other companies. Collectively, this building spree amounts to almost 75 million gross square feet of space, according to his estimates. That's the equivalent of roughly 27 Empire State Buildings.In an email to BI, Amazon's spokesperson said customers' energy demand "continues to grow," and the company is continuously working on ways to "efficiently build and operate data centers" to meet their needs."Nobody knows better than we do that building data centers is exceptionally complex, and by embracing that challenge, we've become really good at it over the years," the spokesperson added. "We're confident we can continue to build at a rapid pace to provide the cloud capacity our customers will need."<h2 id="3ffef594-735b-4945-a7b0-176832400209">Doubts about electricity supply</h2>Power might be the most scarce resource. US data center electricity consumption is forecast to triple by 2030, according to <a target="_blank" rel=" nofollow" href="https://www.linkedin.com/posts/bcg-on-energy_the-impact-of-genai-in-electricity-activity-7112787574032674816-uDEX/">Boston Consulting Group</a>, much of it to power generative AI. Bernstein Research recently <a target="_blank" href="https://www.businessinsider.com/ai-data-centers-us-power-grid-gpu-nvidia-cerebras-amazon-2024-7">estimated</a> that electricity demand for AI data centers could exceed supply in just two years without action.At Amazon, electricity shortages have been a major concern and a topic of almost every leadership meeting in recent years, according to the people familiar with the matter.Amazon is experiencing power-supply issues in Oregon, Ohio, and Northern Virginia, according to the internal document from May. For example, it noted that PacifiCorp, Amazon's Portland-based utility partner, has electricity shortfalls and generation constraints forecasted until 2030.This is leaving Amazon with unpredictable energy supply in some markets and a possible loss of "bridging" solutions that help maintain power during the early stages of construction."With the utility power headwind, we are seeing continued risk driven by transmission constraints as well as unexpected changes to committed/available generation, gaps in promised vs delivered incremental power, and potential loss of bridging power as utility infrastructure projects are delayed," the document explained.<h2 id="e085ef5b-5190-4456-935c-6cab05b23795">'Zombie' data centers</h2>In some markets, so-called "zombie" data centers exist. That's a term used by some Amazon employees who spoke with Business Insider about the electricity-supply problems.These facilities are also described internally as "operationally blocked" because the data centers can sometimes sit idle as they don't have access to enough power to run them, according to the people familiar with the matter.Amazon's spokesperson told BI the company is not familiar with these terms, but said there are a "very small number of cases" where the company decides to complete data center construction before building power is available. "These situations are all managed as part of the standard course of business," the spokesperson added.<div type="image" title="AWS CEO Matt Garman" height="4320" width="6751" msid="114502575" hostid="261" sizebytes="742626"></div>Amazon Web Services CEO Matt Garman recently spoke publicly about challenges related to AI data center buildouts, including accessing enough GPUs and power.During a podcast interview in August, he said customer demand is "mind boggling," which is requiring "a lot of investment.""We're probably going to be tight for the next little bit of time," Garman added.<h2 id="d47a3f17-b6c1-4c0c-91d9-5918b3a4761f">'Mosquitoes to light'</h2>The company is on the hunt for more energy. It's conducting "power studies" with utility partners to evaluate additional transmission capacity, which could result in more power allocation, according to the internal document.The company is also working on ways to reclaim stranded and retired power, the document said, likely in reference to the practice of redeveloping old power plants that have become inactive for economic or sustainability reasons.Amazon has been more actively seeking partnership opportunities with third-party colocation data center providers, one of the people said. At these facilities, Amazon would simply lease space, transferring the need to secure power to the data centers' owners.Additionally, Amazon has started looking beyond well-established data center markets, such as Northern Virginia and Arizona, and is expanding into newer regions like Indiana. Crowded data center regions are running out of power and other resources, making newer locations <a target="_blank" class="" href="https://www.businessinsider.com/ai-data-centers-energy-cloud-microsoft-chatpgt-amazon-google-2023-7">more appealing</a>.The company is also more aggressively pursuing alternative energy sources. Last week, Amazon <a target="_blank" href="https://www.businessinsider.com/amazon-invests-in-nuclear-for-aws-following-google-and-microsoft-2024-10">unveiled</a> a plan to lead a $500 million funding round to develop small modular nuclear reactors, following an earlier announcement to purchase a nuclear power plant in rural Pennsylvania."It's almost like mosquitoes to light — we are attracted to power," one of the people familiar told BI.Amazon's spokesperson said the company's data center expansion strategy considers several factors, including system resiliency and latency, the availability of renewable energy, and the local government's long-term commitment. Amazon is also constantly seeking ways to make its data centers more energy efficient by using carbon-free resources, in-house processors, and natural air cooling systems, the spokesperson said.<h2 id="82c2fbef-48d1-4af8-8635-cf74ee12697d">Higher costs in Silicon Valley</h2>In some cases, Amazon is paying higher prices to get its new data centers up and running.One example is an Amazon facility in Santa Clara, California, in the heart of Silicon Valley. For the last 2 years, Amazon has held talks with the city of Santa Clara to secure power for a new data center located near Levi's Stadium, the home of the San Francisco 49ers, according to a <a target="_blank" href="https://santaclara.granicus.com/player/clip/2140?view_id=1&amp;meta_id=190407&amp;redirect=true">city council meeting</a> held in July.Amazon is in talks for a 15-year, 20-megawatt proposal for this facility under the condition that the company pays the full cost of the energy, whether it uses the power or not, Manuel Pineda, the chief electric utility officer of the City of Santa Clara, said during the meeting. Amazon will have to pay up to 50% higher rates than normal and will be entitled to additional "financial assurances" to cover any contractual risks, Pineda added.As part of the deal, Amazon also plans to use the 20-megawatt power agreement for a second building on-site, which currently has no electric capacity, according to Pineda.Amazon's spokesperson told BI that this arrangement has not been finalized, and the project is progressing as expected.<div type="image" title="AWS Santa Clara data center planning slide" height="586" width="1056" msid="114502585" hostid="261" sizebytes="101810"></div><h2 id="5e7acce5-2a9c-4e0c-873a-74b683e1b0a3">Amazon escalates Santa Clara delays</h2>Amazon appears to be dealing with further delays in Santa Clara. On August 28, an AWS employee wrote to a city official about another facility, a former Owens Corning factory the company purchased in 2023. The email discussed delays at the site and noted that the problems are raising concerns internally at Amazon."Delays as significant as this unfortunately impact our ability to serve our customers which has resulted in escalation," said the email, which was obtained by BI through a public-records request.The next day, another Amazon employee wrote to a Santa Clara city official. "This is time sensitive," the staffer said. "AWS executives are highly concerned about the constant push in the results."<h2 id="a5ae3cc3-4484-42c7-a232-b1135b2bd3e0">'Straining' water infrastructure</h2>Another problem is water supply. A growing number of data centers rely on water instead of air to cool the servers and other equipment inside the facilities. This liquid-cooling technology <a target="_blank" href="https://www.businessinsider.com/arizona-running-out-of-water-data-centers-blame-microsoft-google-2023-6">requires a lot of water</a>.Amazon is "straining local jurisdictions' existing infrastructure" for water in some regions and is "dependent on long-term infrastructure upgrades or building our own solutions" to mitigate the issue, the internal document stated.There are zoning and permitting problems, too. Some local jurisdictions are not supporting the re-zoning of industrial property for data center use and have stricter environmental regulations, the document explained. Amazon is "working proactively" with local municipalities to solve these challenges, as they can impact its "future capacity options," the document added.Amazon is "one of the world's most water efficient operators" and its data centers are much more water efficient than the industry average, the company's spokesperson told BI.<h2 id="74b62895-25bd-411f-8890-035613989c55">'Lack of available skilled labor'</h2>An even bigger problem may be a lack of skilled electricians to build and run these data centers, according to the internal document and people directly involved in these Amazon projects.Electrical work is a major part of data center construction. But Amazon has struggled to find enough people to do the jobs, especially in rural areas, these people said. Amazon has talked to local colleges, general contractors, and labor unions in certain markets to increase the supply of electricians, one of the people said.<div type="image" title="amazon data center oregon" height="3072" width="4608" msid="114502582" hostid="261" sizebytes="883326"></div>A <a target="_blank" href="https://www.cnbc.com/2024/07/27/americas-demand-skilled-electricians-boom.html">shortage of skilled electricians</a> is a growing industry problem. According to last year's <a target="_blank" href="https://datacenter.uptimeinstitute.com/rs/711-RIA-145/images/2023StaffingSurvey.Report.12152023.pdf">Uptime Institute Data Center Staffing Survey</a>, more than half of respondents said they struggled to fill open positions due to demand outstripping supply."For workforce/labor, we are seeing a lack of available skilled labor," Amazon's internal document stated. "Which requires us to prioritize where we allocate these resources, and we are becoming increasingly reliant on more expensive travelling [primarily] electricians."Amazon's spokesperson shared <a target="_blank" href="https://www.aboutamazon.com/news/workplace/our-upskilling-2025-programs">blog posts</a> detailing its <a target="_blank" href="https://aws.amazon.com/government-education/workforce-development/aws-fiber-optic-fusion-splicing/">training programs</a> in this space, adding, "AWS has established a number of workforce development programs and collaborations with education institutions to help ensure a strong pipeline of talent."Do you work at Amazon? Got a tip?Contact the reporter, Eugene Kim, via the encrypted-messaging apps Signal or Telegram (<a target="_blank" rel="noopener noreferrer nofollow" class="c-link">+1-650-942-3061</a>) or email (<a target="_blank" href="mailto:ekim@businessinsider.com">ekim@businessinsider.com</a>). Reach out using a nonwork device. Check out Business Insider's <a target="_blank" rel="" href="https://www.businessinsider.com/insider-guide-to-securely-sharing-whistleblower-information-about-powerful-institutions-2021-10">source guide</a> for other tips on sharing information securely.

Amazon's AI data center dream runs into the reality of 'zombie' facilities, higher costs, and labor shortages 

<ul class="summary-list"><li>Microsoft told customers that a software bug caused inconsistent collection of log data.</li><li>The bug affected key security products, including Microsoft Sentinel and Entra.</li></ul><a target="_blank" class="" href="https://www.businessinsider.com/microsoft-punts-365-ai-bundle-pilot-tests-copilot-2024-9">Microsoft</a> is telling customers that it failed to consistently collect log data for several important cloud services, according to an update viewed by Business Insider.A log is a record of events within a program, such as account sign-ins. This record of events could include instances of unauthorized access to networks and accounts. If logs are not recorded properly, then any records of potential problems are lost and the company and its customers may have missed intrusions.Between September 2 and September 19, "a bug in one of Microsoft's internal monitoring agents resulted in a malfunction in some of the agents when uploading log data to our internal logging platform," Microsoft wrote in the customer notification.There's no evidence of cyberattacks stemming from this incident."This issue did not impact the uptime of any customer-facing services or resources -- it only affected the collection of log events. Additionally, this issue is not related to any security compromise," the notification explained.Affected products included Microsoft Entra, an identity-management service. Microsoft Sentinel, a security information and event-management product, was also impacted, along with Microsoft Defender for Cloud and Microsoft Purview, a data loss prevention product."Microsoft Sentinel customers may have experienced potential gaps in security related logs or events, possibly affecting customers' ability to analyze data, detect threats, or generate security alerts," the update warned.BI asked Microsoft to comment on this episode on Thursday and Friday. Spokespeople Frank Shaw and Jill Austin, along with the company's outside PR firm WE Communications, didn't respond to multiple requests for comment. This is a particularly a big deal for Microsoft because the company has been saying that <a target="_blank" class="" href="https://www.businessinsider.com/internal-microsoft-email-shows-security-leadership-shakeup-2023-12">security</a> is a top priority. It recently introduced a Security Futures Initiative, largely in response to its mishandling of security incidents, including what the Department of Homeland Security called "<a target="_blank" class="" href="https://www.businessinsider.com/microsoft-security-issues-government-report-chinese-hacks-2024-4">cascade</a>" of errors that allowed Chinese hackers in 2023 to access thousands of cloud customer emails.The idea was that Microsoft would make security its first priority in everything. It's become so important that every Microsoft employee will be evaluated on a "core priority" of security in performance reviews, according to an excerpt of an email shared with BI."If you're faced with the tradeoff between security and another priority, your answer is clear: Do security," Microsoft CEO Satya Nadella wrote in an email to employees in May."In some cases, this will mean prioritizing security above other things we do, such as releasing new features or providing ongoing support for legacy systems," the CEO added. "This is key to advancing both our platform quality and capability such that we can protect the digital estates of our customers and build a safer world for all."Are you a Microsoft employee or someone else with insight to share?Contact the reporter, Ashley Stewart, via the encrypted messaging app Signal (+1-425-344-8242) or email (<a target="_blank" href="mailto:astewart@businessinsider.com">astewart@businessinsider.com</a>). Use a nonwork device.

Microsoft tells customers it lost log data for key security products

They're building <a target="_blank" href="https://www.businessinsider.com/data-centers-ai-artificial-intelligence-farmland-power-2023-7">data centers</a> pretty much everywhere these days. The<a target="_blank" href="https://www.businessinsider.com/prologis-warehouse-compass-data-centers-industrial-real-estate-2024-3"> sprawling, windowless buildings</a> are the physical engines of the internet and the cloud; more are now <a target="_blank" href="https://www.businessinsider.com/microsoft-invest-billions-into-japan-ai-data-centers-2024-4">under construction</a> than ever before, and the<a target="_blank" href="https://www.businessinsider.com/ai-data-energy-centers-water-energy-land-2023-10"> new breed is bigger and hungrier</a>. A typical center used to consume 10 megawatts of electricity; now they're being built to suck up 10 times that much. Last year all the data centers in the world had room for <a target="_blank" href="https://www.businessinsider.com/how-scientist-invented-new-units-measurement-ronna-quetta-2023-1">10.1 zettabytes</a> of information — roughly 456 billion Wikipedias. And with the rise of artificial intelligence, which requires vast quantities of data and power, <a target="_blank" href="https://www.us.jll.com/en/trends-and-insights/research/data-center-outlook">the global capacity of data centers is expected to double</a> by 2027. If you don't live <a target="_blank" href="https://www.businessinsider.com/virginia-data-center-boom-power-grid-utility-2023-11">near a data center</a>, <a target="_blank" href="https://www.businessinsider.com/viral-tiktok-anger-data-centers-northern-virginia-2024-3">you will soon</a>.But cloud computing and AI aren't the only things driving the push for "<a target="_blank" href="https://www.businessinsider.com/top-stocks-to-buy-for-ai-data-centers-power-demand-2024-5">hyperscaled</a>" data centers. About 65% of the capacity in global centers is <a target="_blank" href="https://www.srgresearch.com/articles/quarterly-cloud-market-once-again-grows-by-10-billion-from-2022-meanwhile-little-change-at-the-top">owned by just three companies</a>: Amazon, Google, and Microsoft. Like the railroad magnates of old, they're racing to control the market, because they understand something that has eluded the rest of us. Data centers are more than just vast digital warehouses. They're the <a target="_blank" href="https://www.businessinsider.com/data-centers-electricity-consumers-discounts-utilities-2024-4">essential infrastructural technology</a> on which pretty much every other company in the world must run. When companies need pretty much any computing service these days — networking, security, data processing, platforms, you name it — it's easier and cheaper to <a target="_blank" href="https://www.businessinsider.com/aws">just rent it</a> from Amazon Web Services, Google Cloud, or Microsoft Azure. The more data centers those companies have, the more of those services they can offer, and the more storage and number-crunching capacity they can provide. By trying to corner the market on data centers, they're not just creating bigger warehouses for data — they're aiming to be a one-stop shop for all of the tech a company needs.That's even more true of AI startups. When an innovative newcomer needs access to the large language models that are required to train and run generative AI, they pretty much have to go through Big Tech to get them. And now the tech giants are making venture investments in those startups by offering them "credits" for using the company's cloud. That's how Microsoft made a <a target="_blank" href="https://www.semafor.com/article/11/18/2023/openai-has-received-just-a-fraction-of-microsofts-10-billion-investment">chunk of its investment in OpenAI</a>, for example — by giving the startup access to its data centers. It's a lucrative inducement to join a proprietary ecosystem."This is where the real business is," says Cecilia Rikap, an economist who is the author of <a target="_blank" href="https://www.common-wealth.org/publications/dynamics-of-corporate-governance-beyond-ownership-in-ai">a new report</a> called "Dynamics of Corporate Governance Beyond Ownership in AI." "The more AI is consumed, there's more cloud consumption, and therefore not only more money for these companies but more digital technology that is intertwined and tangled inside their infrastructure."And that entanglement is what worries many economists and legal scholars. Regulators call the problem "locking in." Changing from one data ecosystem to another isn't like moving your office to a new building; the programming interfaces between Microsoft Azure, say, don't just port over to Amazon Web Services. Getting into one is easy, but like the Hotel California, you can never leave. Once a tech giant gives a startup access to its cloud services and its large language models, it has pretty much assured itself a form of control over a fledgling firm that might one day have grown into a competitor. "Market leaders benefit from early-mover advantage coupled with network effects and high switching costs that lock-in customers," a congressional subcommittee warned in a <a target="_blank" href="https://democrats-judiciary.house.gov/issues/issue/?IssueID=14921">450-page report</a> back in 2020. The rush to build data centers is, in no small part, a move by Big Tech to secure the keys to the coming AI kingdom.In the short term, the rise of data centers has actually been a good thing for startups. "Until recently, the perception among academics was that the rise of cloud computing was great for startups and innovation," says Matthew Wansley, a law professor at Yeshiva University who studies competition and regulation. "It used to be that if you were a startup, you had to build your own servers. That's a huge, fixed up-front cost."That's not true anymore. The price of cloud-computing services has fallen every year since 2006, when Amazon opened its cloud. And it absolutely crashed in 2014, as <a target="_blank" href="https://www.nber.org/books-and-chapters/measuring-and-ac%20counting-innovation-twenty-first-century/rise-cloud-computin%20g-minding-your-ps-qs-and-ks">a team of economists noted</a>, when Microsoft and Google started advertising their competitive prices. From 2010 to 2014, AWS database prices dropped by 11%. Over the next two years, they plunged by 22%.Cloud computing also made it easier for startups to get funding. Venture capitalists adopted a <a target="_blank" href="https://doi.org/10.1016/j.jfineco.2018.03.001">"spray and pray" approach to investing</a>, meaning they placed bets on more companies but put less money into each one. They also ratcheted back their direct involvement in running the companies, trusting the marketplace to sort out the winners from the losers.The whole scene has been especially great for AI startups. "Smaller companies like us could get access to compute power and the scalability that the larger service providers offer," says Jonas Jacobi, CEO and cofounder of ValidMind, a fintech company. "You have a few large players dominating the AI space, but there are startups trying to compete with them as well. The only reason they can is because of the cloud vendors."The trick, Jacobi says, is to write code that can work with any of the three providers, so you don't get locked in to a single company. You have to stay "neutral to the tech stack," he says. Sure, one of the tech giants can always swoop in and build their own version of your software. There's data suggesting that Amazon has made it a standard operating procedure to "<a target="_blank" href="https://www.zdnet.com/article/amazon-and-commercial-open-source-in-the-cloud-its-complicated/">engulf</a>" the products of small, open-source competitors and repackage them as part of its own suite of services, as it did with the <a target="_blank" href="https://www.businessinsider.com/elastic-open-source-licenses-amazon-elasticsearch-kibana-2021-1">Elastic search engine</a>. "But that's part of the journey as a startup," Jacobi says. "It's just up to us as a company to be faster and nimbler."But over time, economists warn, nimble won't be enough. In the battle to create foundational tech — the "<a target="_blank" href="http://www.nber.org/papers/w32474">key complementary assets</a>" of the business — AI startups will inevitably lose out to the tech giants that control the data centers. "AI is a general-purpose technology," says Rikap. "It's being applied to everything. But what type of AI we get and what type we don't get is going to be affected by the power of just three companies. It's an intellectual monopoly. What they are controlling is data and knowledge." By locking startups into their systems, Google and Amazon and Microsoft can effectively play favorites, offering better deals and cheaper services to the companies <a target="_blank" href="https://www.businessinsider.com/big-tech-sabotages-new-startups-businesses-coopting-disruption-2024-3">in which they have the largest stake</a>. Rikap has also found that their growing control of data centers also gives Big Tech an incentive to work together to share information and protect their joint interests. In a paper with Bengt-Åke Lundvall, an economist at Aalborg University in Denmark, Rikap notes that articles in technical and academic journals from researchers at Microsoft, Google, and Amazon consistently had <a target="_blank" href="https://doi.org/10.1007/978-3-030-89443-6">coauthors employed by their competitors</a>. Now, for sure, computer science is a small world. But the joint authorship, Rikap says, is "a pure way to tell they are collaborating and know what each other are doing" — a hallmark of anticompetitive behavior.For the moment, there is still reason to hope that innovation can win out over monopolization. Amazon, Google, and Microsoft are still competing on price and features, which is good for everyone. And in Europe, where regulators are taking a more aggressive approach to tech generally and <a target="_blank" href="https://techmonitor.ai/technology/cloud/is-cloud-computing-market-anti-competitive-antitrust">cloud computing in particular</a>, the Big Three are busy pointing fingers at one another. A Google Cloud exec recently <a target="_blank" href="https://finance.yahoo.com/news/exclusive-google-steps-microsoft-criticism-194847058.html">denounced Microsoft as a "monopoly"</a> and a "walled garden," and a trade group that includes Amazon <a target="_blank" href="https://www.reuters.com/technology/microsoft-talks-end-trade-bodys-cloud-computing-complaint-2024-02-07/">filed an antitrust complaint</a> over Microsoft's cloud-computing licenses. As they vie for market share, the companies aren't in lockstep yet — and that creates an opening, albeit a small one, for nimble, faster competitors.There's also a tendency, over time, for mature technology companies to shift from trying to innovate themselves to simply charging other people who innovate. Among economists, that's known as "<a target="_blank" href="http://www.nber.org/papers/w32359">rent-seeking behavior</a>," and it looks an awful lot like what Amazon, Google, and Microsoft are doing with cloud computing and data centers.So what's the best way to make sure Big Tech doesn't use data centers to short-circuit innovation? Researchers point to Google, which is offering a friendlier kind of partnership to startups. "The Google Cloud Division partners with promising database start-ups, contributes to open-source projects, and collaborates with open-source foundations," two scholars <a target="_blank" href="https://doi.org/10.1177/00323292231183806">recently observed</a>. It's an "architecture of participation," they say, that enables Google to profit while fostering the growth of new companies and ideas.Even more important, the Federal Trade Commission, aware of the threat posed by data centers, has ordered the Big Tech companies to <a target="_blank" href="https://www.ftc.gov/news-events/news/press-releases/2024/01/ftc-launches-inquiry-generative-ai-investments-partnerships">hand over information on their AI investments</a>. Just as new laws eventually caught up to the pricing practices of the railroads in the 1880s, today's regulators may well catch up to the futuristic, technological tangles of cloud computing. One reason to think so: The lead author of that 450-page House subcommittee report about Big Tech's anticompetitive behavior was a lawyer named <a target="_blank" href="https://www.businessinsider.com/ban-noncompete-agreements-approved-ftc-challenges-await-2024-4">Lina Khan</a>. Today's she's the hard-charging head of the FTC.<a target="_blank" href="https://www.businessinsider.com/author/adam-rogers">Adam Rogers</a> is a senior correspondent at Business Insider.

The scary secret behind the boom in data centers

<ul class="summary-list"><li>Delta is still canceling and delaying flights days after the botched CrowdStrike update.</li><li>Customers can expect a refund at best, legal experts say.</li></ul>After Friday's global meltdown caused by <a target="_blank" class="" href="https://www.businessinsider.com/crowdstrike-terms-conditions-limits-damages-to-refund-2024-7">a botched CrowdStrike software update</a>, most airlines rescheduled the vast majority of flights and have largely resumed normal operations.Except for Delta.The airline is still <a target="_blank" class="" href="https://www.businessinsider.com/delta-is-manually-resetting-systems-affected-by-the-it-outage-2024-7">struggling to repair its computer systems</a>. <a target="_blank" class="" href="https://www.flightaware.com/live/cancelled/today">According to FlightAware</a>, it canceled 466 flights Tuesday, more than any other airline in the world.The best Delta customers can hope for is a refund.Compensation policies for cancellations and delays are in the fine print of contracts between airlines and customers buying tickets. They're further governed by the Federal Aviation Administration within the US Department of Transportation.Transportation Secretary Pete Buttigieg categorized the CrowdStrike failures — caused by a bug in an update to its Falcon security software on Microsoft Windows computers — as a "controllable" failure, which means <a target="_blank" class="" href="https://www.businessinsider.com/airline-delay-canceled-flights-customer-service-dashboard-microsoft-crowdstrike-2024-7">the airlines are responsible for compensating customers</a> for canceled flights.The "controllable" designation means airlines have more responsibilities than if there were delays or cancellations due to weather or some other "force majeure" issue, according to Mary Schiavo, a former Department of Transportation inspector general."The airline is responsible for refunds, rebooking, delays, et cetera," Schiavo, now an aviation law attorney at Motley Rice, told Business Insider. "And then that means that any payments that you're entitled to under federal aviation regulations for the delay would kick into effect."Those refunds also must include any additional fees, like for luggage or seat designation, Schiavo said.Airlines are also responsible for some compensation for delays, the amount of which varies depending on the airline and the amount of delay, <a target="_blank" class="" href="https://www.businessinsider.com/airline-delay-canceled-flights-customer-service-dashboard-microsoft-crowdstrike-2024-7">Business Insider previously reported</a>. If customers reject rebookings that airlines offer, they're entitled to a "prompt refund," Schiavo said.According to Schiavo, Buttigieg's "controllable" designation made sense. The CrowdStrike failure was akin to an aircraft equipment failure, where the airline is responsible for proper maintenance, she said."When they have an airplane gets taken out of service, that airline owes the passengers all the rights and things that they're entitled to because their equipment failed," she said. "This is no different than an airplane being broken down."Customers can take airlines to small claims courts in cities where the companies are based, but bringing lawsuits would likely be pointless, Schiavo said. Federal aviation regulations protect airlines from being sued for "consequential damages," like missed business meetings or medical appointments, she said."Airline passengers have very few rights," she said.The best bet for frustrated customers is to just deal with customer service rather than resort to courts, according to Justin T. Green, an aviation law attorney at Kreindler LLP, who said he personally suffered through Delta delays on a trip this past weekend.American regulations differ from those in Europe, which require airlines to compensate customers for delays. For airline customers in the US, Green recommended keeping receipts for tickets, cabs to connecting flights, and other expenses that Delta may reimburse for rebooked flights. But they can't get money for their time."It's really to make sure you're whole financially," said Green, who is also a licensed airplane and helicopter pilot. "They're not going to be able to give you your time back."Mark Dombroff, an aviation attorney at Fox Rothschild, said the Department of Transportation's "controllable" designation was "inappropriate and unfair" to airlines, which he said were victims of CrowdStrike. Ordinary airline customers, he said, ought to consult their travel insurance policies."These have to do with computer systems," he said. "These are not airline-generated delays, cancellations, or anything. And maybe the DOT has no role in this."As for CrowdStrike, its standard terms and conditions <a target="_blank" class="" href="https://www.businessinsider.com/crowdstrike-terms-conditions-limits-damages-to-refund-2024-7">limit liability to "fees paid"</a> — basically, a refund for its services — for companies that use it. Large companies like Delta may have negotiated individualized terms with CrowdStrike, or may rely on cyber insurance for situations like the software update disaster.On Tuesday, Buttigieg announced the Department of Transportation's Office of Aviation Consumer Protection was investigating Delta's flight delays."We remain entirely focused on restoring our operation after cybersecurity vendor CrowdStrike's faulty Windows update rendered IT systems across the globe inoperable," Delta said in a statement provided to Business Insider following the investigation announcement. "Across our operation, Delta teams are working tirelessly to care for and make it right for customers impacted by delays and cancellations as we work to restore the reliable, on-time service they have come to expect from Delta."But even if the agency issues any fines, customers won't see a penny."Fines go to the government," Schiavo said. "They don't go to the passengers."

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