In this episode we talk with Todd Persen on the topic of monitoring cloud-native applications with Pivotal Cloud Foundry Metric. We discuss the changing nature of monitoring in cloud-native platforms, how developers can now turn black-boxes into white-boxes, why time-series dominates the thought-technology in this space now, and the benefits of open source taking over most innovation in systems management. Richard is out this week, so Andrew Shafer returns to fill in as co-host.
Let the Old Gods bellow and rage in the distance.There are likes to like and pages to page-view. Swipes to swipe. Items to be ordered and thought-leaders to be thought-followed. We’ve got our own temples, up in The Cloud, to be decorated with selfies and festooned with a million paeans to ourselves, our personal brands and our experiences. Our chauffeured chariots to be summoned, literally, on-demand. The app as finger-snap. People are favoriting us as we sleep. At least, they’d better be.Google is doing the work that priests and rabbis used to do. It has answers. Curious children are learning to consult with Alexa and Siri in kindergarten.And our New Gods have found a way to extract tribute from each and every one of these activities.We’re carrying their altars in our pockets.
“American Gods,” Josh Brown
There’s a quandary in there about why the market is up despite all the craziness in DC. The two reasons seem to be: (a.) in this craziness, customers of major companies are escaping into the comfort of the golden arches, Marriott(?), and iPhones, so, (b.) the Pareto minority who actually does all the investing goes to where the customers are going. For the investing group, there’s also some brand-driven devotion to big companies.
Sure: smoke ’em if you got ’em!
Owning half of all advertising is a good business
The Attention Merchants can fill in the gaps of how companies like Google and Facebook are doing so well here: they’re essentially gobbled up the advertising market, this life-blood of most all business, i.e.:
Information cannot be acted upon without attention and thus attention capture and information are essential to a functioning market economy, or indeed any competitive process, like an election (unknown candidates do not win). So as a technology for gaining access to the human mind, advertising can therefore serve a vital function, making markets, elections, and everything that depends on informed choice operate better, by telling us what we need to know about our choices, ideally in an objective fashion.
You could hang a figure on the value of that over 1, 5, 20, 50 years…but, let’s just say it’s a fuck-load lot of money and, thus, valuation in a company. Controlling what people, businesses, and governments spend their attention and money on? Priceless.
Good companies often have good products
Next, you can get the sense with this kind of talk that what’s being valued in companies is “nothing,” just a feeling, a sense. In reality, for example, with companies like Apple and, now, Amazon, long-term strategies (often risky) that result in cash-spewing machines is what’s being valued. The iPhone and it’s software makes a ton of money; AWS throws off cash.
Google has an 88 per cent market share in search advertising. Facebook (including Instagram, Messenger and WhatsApp) controls more than 70 per cent of social media on mobile devices. —“Silicon Valley has too much power,” Rana Foroohar
In the pure “dot.com” category, it’s easy to get beguiled and think that “likes” and baby pictures in Facebook, or putting dog-faces on teens, is the thing being valued. Of course they’re not, people’s attention and the ability to keep those people paying attention (“a culture of innovation”) is what’s valued. Advertising is what’s being valued, not whatever “social” is.
Trading on perception…which is built by good products
Now, I don’t actually know how investing works – I’m one of those hoards of Vanguard-drones – but it’s clear that all the interesting stuff is based on predictions about how other buyers will price/value a share. You can sit around and collect dividends (or wait for a company to be bought by another) as your “payout” in equity investing, but that seems to be the boring game (unless you’re an “activist” investor who hype-engineers those two). So, of course, paying attention to people’s perception of a company’s value is what the investing insiders get all worked up about.
But, again, if you look at “the new gods,” most of the companies have actual, valuable businesses. I can speak to the tech companies like Apple, Amazon, Google, and (a bit) Salesforce. They have good things to sell and good strategies backing them.
Netflix, for example
Netflix, which is on the list of “new gods,” is another example. First, it was a better mouse-trap to browse for DVDs online, queue up ones to get, and have them mailed to you rather than going to the rental store. Then, as streaming became technically possible (queue those endless Mary Meeker decks), simply doing that was better than living at the whim of cable companies that seemed like they were over-serving and over-charging. (And meanwhile, TiVo just sort of shit-the-bed on their go at this market-window – maybe the cable companies gleefully starved TiVo with their own DVRs and lack of partnerships).
And, once all of Netflix’s customers had watched that 5% of the streaming catalog that was actually good (I kid! I kid! It’s probably more like 15%, right?), Netflix had to make it’s own original content (and put in exclusive licensing deals). In each round, they had a good product and re-arranged their strategy accordingly (and sometimes it didn’t go well).
(If I knew this industry better, I’d know if my hunch that HBO is the Microsoft here [“fast follower” who was sort of there the whole time with a good product and even evolving, just not getting the glory] was helpful or not.)
“Old Gods” fall
HP(E) and IBM are negative examples here, and Microsoft provides a more positive example. For a long, long time, both HP and IBM were perceived as being rock-solid – their products and services were trusted, worked well, and, thus, were purchased a lot. (I’ll spare you the old IBM adage.)
They had good businesses. But over the past 10 (or even 15) years, each fell behind the times, seemingly willingly: they didn’t evolve their business model, product portfolios, and corporate strategies fast enough. They didn’t change quickly enough, and the worse mistake was that they didn’t realize they needed to change faster and, then, that management didn’t make it happen. HP had got hit up with The Curse of Most M&A Doesn’t Work, But Some of it Really Doesn’t work. In each case, the financials of the company suffered, and so did everyone’s perception of the company.
The point with HP and IBM is: in large, older tech companies you need not only a good product, but you need to a good everything.
Microsoft shows that you can turn that around, and adds more confusion to how investors actually value companies. From what I know, Microsoft has always been a financially good company, but it languished starting in the Internet era, which it barely battled through (to much financial glory after the late 90s).
But as it continued to biff on mobile, SaaS, shoring up desktop sales (I might be wrong on this point), and even cloud (where it’s now considered one of the “top three”), the perception was that Microsoft had lost it, strategically. An early warning sign was screwing up the Danger acquisition, which was a prelude to whatever Nokia was. And, I always found Bing to be overly quixotic: why try? But, really, I suppose you’d want to try to go after that pool of “priceless” advertising money above that Google and Facebook now steel-fist, and analysts would have discounted Microsoft’s share price even more if they didn’t try for a slice of that TAM-pie.
Despite all that, Microsoft seems to have turned it around. Their perception is pretty good now, and they’re out of that share-price plateau of the 2000’s. And, again, what did they do? They made good products, they built a good business, they changed almost everything.
Luck is handy too
You can throw more negative and positive examples on the pile: Yahoo!, how SUSE blossomed after it go out from Novell’s thumb, how AOL lost its way (though, maybe that’s getting better?), SAP & Oracle (deciding which and how each is good or bad is left as an exercise to the reader), etc.
In each case, companies just have to do the simple thing of trying to build a good business, make good products and services, and, well, catch a substantial stream of lucky breaks.
Since I don’t know burgers, payments, and hotels, I can only assume that in Josh’s list of new gods, McDonald’s, Visa, and Marriott are following a similar, annoyingly common sense approach.
Gods become “old god” because they suck versus the new gods
To hop on the American Gods metaphor train, sure, some of the old gods fell into disfavor out of whim (Johnny Appleseed don’t seem half-bad, and Easter seems pretty nice!), but most of them were dumped because they were shitty: blood sacrifice, mind-control, and otherwise treating humans like shit sure seem like a raw deal compared to TV, free-market-money, Jesus, and Paul Bunyan. The old gods stopped trying to innovate, as it were, and got all stuck on hammering in people’s heads, child sacrifice, and hanging humans.
That shit don’t sell now-a-days. So, you know, like the doctor says: don’t do that.
Meanwhile, back to the point
So, still, why’s the money-hole going so well?
You’re wondering how it could be possible that the S&P 500, the Nasdaq 100 and the Dow Jones Industrial Average could be climbing to record highs day after day, given, well, everything.
How is it that stocks can break through to new heights while the country at large seemingly sinks to new depths?
Who really knows why “the market” is “up” when it should be “troubled,”. In general, the way companies are valued and the way businesses run doesn’t seem effected much by cultural strife, change, and, chaos (in the short to medium term, at least). So, if the ruling hill-billy class wants to make a big to-do out of bathrooms, what does “god money” care? If anything, money likes contained chaos, constant change that makes cash turn over and change hands.
Also, of course, Republicans are in power, which makes money-focused people hopeful for tax reductions, repatriation, regulation reduction, and things that are otherwise the opposite of “Democrats wanting to use money to help poor people.” Most investor class people seem to stop reading that sentence after the word “money.”
Finally, you can’t exactly trust anything that Trump and friends say – sure, that 35% border tax would tank huge sectors of the economy, but come on, he’s caved on so many other things…well, actual important, money-related things (though, hey, how am I going to do my pivot tables if I can’t use my laptop on the way back from Zurich?)
There’s an argument to be made that if people can’t maintain steadily, growing salaries, there won’t be enough consumer money sloshing around to spend on things …but if ‘400 wealthiest Americans had “more wealth than half of all Americans combined,”‘ what do they need that other half for but to packaged up their prepared meals and old-man groaning mattresses to be drone delivered?
More, how much influence does the social chaos of state and local government really effect “the market,” and Congress doesn’t seem to actually do anything (nor want to), and we’ve got a little under two years until the next gut-wrenching election night – what if we elect more crazies, but this time they can actually get shit done?!
Which is to say: in politics, so far, there hasn’t been much more than talk about money. It’s all been able people and culture. Investors don’t invest in people and culture (maybe they use their own cash to buy expensive art, sure), so why should the market be down?
In a too rare spate of social commentary, we start talking about the price of hipster avocados in Australia and US health insurance. With one of our favorite analysts moving over the enterprise side, we talk about what it’d be like going through that door. We then wrap up talking about Canonical’s IPO talk, related OpenStack market discussion, and then use CyberArk’s acquisition of Conjur to discuss the state of privileges access management (PAM). We end, as always, with recommendations, including some CostCo discussion.
Check out the full show notes for more.
A nice way of explaining Amazon’s success in charts, e.g., as compare to Wal-Mart:
Just thinking aloud without any analysis, it seems liken Amazon is an example of how difficult, long, and confounding doing continual innovation as your business is. Many companies claim to be innovation-driven, but most can just eek out those “incremental innovations” and basic Porterian strategy: they improve costs, enter adjacent marketers, and grow their share of existing TAMs, all the while fending off competitors.
Amazon, on the other hand, has had decades of trying new business models mostly in existing businesses (retail), but also plenty of new business models (most notably public cloud, smart phones and tablets, streaming video and music, and whatever voice + machine learning is).
All that said, to avoid the Halo Effect, it’s important to admit that many companies tried and died here…not to mention many of the retailers who Amazon is troubcibg – Wal-Mart has had several goes at “digital” and is in the midst of another transformation-by-acquisitions. Amazon, no doubt, has had many lucky-breaks.
This isn’t to dismisss any lessons learned from Amazon. There’s one main conclusion, thought: any large organization that hopes to live a long time needs to first continually figure out if they’re in a innovation/disrupting market and, if they are, buckle up and get ready for a few decades of running in an innovation mode instead of a steady-state/profit reaping mode.
Another lesson is that the finances of innovation make little sense and will always be weird: you have to just hustle away those nattering whatnots who want to apply steady-state financial analysis to your efforts.
You can throw out the cashflow-model chaff, but really, you just have to get the financial analysis to put down their pivot tables and have faith that you’ll figure it out. You’re going to be loosing lots of money and likely fail. You’ll be doing those anti-Buffet moves that confound normals.
In this second mode you’re guided by an innovation mindset: you have to be parnoid, you have to learn everyday what your customers and competitors are doing, and do new things that bring in new cash. You have to try.
Shareholders will also be asked to approve a $500m return of value, approximately $2.09 per share,” the statement to the City added.
Well, who doesn’t like money?
That said, performance is declining:
The [HPE Software?] business has shrunk in recent years, with turnover dropping from $4.06bn in fiscal 2012 ended 31 October to $3.19bn in fiscal 2016. Profit before tax during that period slipped too. In HPE’s Q1 ended January, sales in the software arm fell 8 per cent year-on-year to $721m.
All that M&A didn’t work out too well:
The software division at HPE is made up of a collection of separate units including Autonomy, Mercury Interactive, ArcSight, three businesses that alone cost HPE more than $16bn to acquire. Other elements include Vertica (buy price undisclosed) and relatively smaller IT management ops outfits.
For more context, see my notebook on the HPE/Micro Focus merger back in September, 2016.
According to a recent research report from eMarketer, 60.5 million Americans will talk at least once a month to their virtual personal assistants named Siri, Cortana, Alexa, and other as-yet unknowns this year. “That equates to 27.5% of smartphone users, or nearly one-fifth of the population,” eMarketer said. Link
More details on the study:
- “The e-commerce giant’s Amazon Echo and Echo Dot devices will claim a 70.6 percent share of the U.S. market this year, the study found.”
- That 60.5m figure is more like “penetration,” people who have tried voice stuff but aren’t active users. By device ownership (I don’t know if this includes or excludes phones with Siri and such): “The number of active U.S. users will more than double for the devices this year, to 35.6 million, eMarketer said.”
Personally, I still find all this obnoxious. But (a.) I’m more of a podcast and text person, and, (b.) hey, the Echo is a really nice Bluetooth/Spotify speaker.
There’s a few stories out about Canonical, likely centered around some PR campaign that they’re seeking to IPO at some time, shifting the company around appropriately. Here’s some highlights from the recent spate of news around Canonical.
Testing the Red Hat Theory, competing for the cloud-native stack
Why care? Aside from Canonical just being interesting – they’ve been first and/or early to many cloud technologies and containers – there’d finally be another Red Hat if they were public.
Most of the open source thought-lords agree that “there can never be another Red Hat,” so, we’ll see if the Ubuntu folks can pull it off. Or, at the very least, how an pure open source company wangles it out otherwise.
That said, SUSE (part of HPE/Micro Focus) has built an interesting business around Linux, OpenStack, and related stuff. Ever since disentangling from Novell, SUSE has had impressive growth (usually something around 20 and 25% a year in revenue). All is which to, the Red Hat model actually is being used successfully by SUSE, which, arguably, just suffered from negative synergies (or, for those who don’t like big words, “shit the bed”) when it was owned by Novell.
As I’m perhaps too fond of contextualizing, it’s also good to remember that Red Hat is still “just” a $2.5bn company, by revenue. Revenue was $1.5bn in 2014, so, still, very impressive growth; but, that’s been a long, 24 year journey.
All these “Linux vendors,”like pretty much everyone else in the infrastructure software market, are battling for control over the new platform, that stack of cloud-y software that is defining “cloud-native,” using containers, and trying to enable the process/mindset/culture of DevOps. This is all in response to responding to enterprises’ growing desire to be more strategic with IT.
Shuttleworth said “in the last year, Ubuntu cloud growth had been 70 percent on the private cloud and 90 percent on the public cloud.” In particular, “Ubuntu has been gaining more customers on the big five public clouds.”
Its OpenStack cloud division has been profitable, said Shuttleworth, since 2015
Al Sadowski has an extensive report on Canonical, mentioning:
[Canonical] now has more than 700 paying customers and sees a $1bn business for its OS, applications and IT operations software. Time will tell if this goal is realized.
Canonical claims some 700 customers paying for its support services on top of Ubuntu and other offerings (double the 350 it had three years ago), and to have achieved more than $100m in bookings in its last financial year…. [Overall, it’s] not yet a profitable business (although its Ubuntu unit is). We estimate GAAP revenue of about $95m.
On focusing the portfolio, shoring it up for better finances for an IPO:
we had to cut out those parts that couldn’t meet an investors’ needs. The immediate work is get all parts of the company profitable.
To that end, as Alexander J. Martin reports:
More than 80 workers at Ubuntu-maker Canonical are facing the chop as founder Mark Shuttleworth takes back the role of chief executive officer…. 31 or more staffers have already left the Linux distro biz ahead of Shuttleworth’s rise, with at least 26 others now on formal notice and uncertainty surrounding the remainder
Back to Al on the Job to Be done, building and supporting those new cloud-native platforms:
Rather than offering ways to support legacy applications, the company has placed bets on its Ubuntu operating system for cloud-native applications, OpenStack IaaS for infrastructure management, and Docker and Kubernetes container software.
And, it seems to be working:
Supporting public cloud providers has been a success story for Canonical – year-over-year revenue grew 91% in this area…. Per Canonical, 70% of the guest OS images on AWS and 80% of the Linux images on Microsoft Azure are Ubuntu. Its bare-metal offering, MaaS (Metal as a Service), is now used on 80,000 physical servers.
On OpenStack in particular:
Canonical claims to be building 4,000 OpenStack deployments a month at some 180 vendors…. It claims multiple seven-figure deals (through partners) for its BootStrap managed OpenStack-as-a-service offering, and that the average deal size for OpenStack is trending upward.
The Vaughan-Nichols piece outlines Shuttleworth’s IPO plans:
Still, there is “no timeline for the IPO.” First, Shuttleworth wants all parts of the slimmed down Canonical to be profitable. Then “we will take a round of investment.” After that, Canonical will go public.
However, Al’s report says:
It is not seeking additional funding at this time.
Probably both are true, and the answer as Shuttleworth says is “well, in a few years once we get the company to be profitable.
- Al’s report is really good and, as always for him and most 451 reports, thorough as shit. Check it out for lists of customers and more analysis of Canonical’s business mix.
- If you’re into Shuttleworth, Barton George does frequent video interviews with him.