Canonical refocusing on IPO’ing, momentum in cloud-native – Highlights

Canonical Party

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.

Canonical momentum

From Steven J. Vaughan-Nichols:

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.”

And:

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.

And:

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.

Strategy

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.

On IPO’ing

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.

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Banks are handling disruption well – Highlights

Thus far, it seems like the large banks are fending off digital disruption, perhaps embracing some of it on their own. The Economist takes a look:

  • “Peer-to-peer lending, for instance, has grown rapidly, but still amounted to just $19bn on America’s biggest platforms and £3.8bn in Britain last year”
  • “last year JPMorgan Chase spent over $9.5bn on technology, including $3bn on new initiatives”
  • From a similar piece in the NY Times: “The consulting firm McKinsey estimated in a report last month that digital disruption could put $90 billion, or 25 percent of bank profits, at risk over the next three years as services become more automated and more tellers are replaced by chatbots.”
  • But: “Much of this change, however, is now expected to come from the banks themselves as they absorb new ideas from the technology world and shrink their own operations, without necessarily losing significant numbers of customers to start-ups.”
  • Back to The Economist piece: “As well as economies of scale, they enjoy the advantage of incumbency in a heavily regulated industry. Entrants have to apply for banking licences, hire compliance staff and so forth, the costs of which weigh more heavily on smaller firms.”
  • Regulations and customer loyalty are less in China, resulting in more investment in new financial tech in Asia: 
  • As another article puts it: “China has four of the five most valuable financial technology start-ups in the world, according to CB Insights, with Ant Financial leading the way at $60 billion. And investments in financial technology rose 64 percent in China last year, while they were falling 29 percent in the United States, according to CB Insights.”
  • Why? “The obvious reason that financial start-ups have not achieved the same level of growth in the United States is that most Americans already have access to a relatively functional set of financial products, unlike in Africa and China.”
  • There’s some commentary on the speed of sharing blockchain updates can reduce multi-day bank transfers (and payments) to, I assume, minutes. Thus: ‘“Blockchain reduces the cost of trust,” says Mr Lubin of ConsenSys.’

Fixing legacy problems with new platforms, not easy

  • The idea of building banking platforms to clean up the decades of legacy integration problems.
  • Mainframes are a problem, as a Gartner report from last year puts it: “The challenge for many of today’s modernization projects is not simply a change in technology, but often a fundamental restructuring of application architectures and deployment models. Mainframe hardware and software architectures have defined the structure of applications built on this platform for the last 50 years. Tending toward large-scale, monolithic systems that are predominantly customized, they represent the ultimate in size, complexity, reliability and availability.”
  • But, unless/until there’s a crisis, changes won’t be funded: “Banks need to be able to justify the cost and risk of any modernization project. This can be difficult in the face of a well-proven, time-tested portfolio that has represented the needs of the banking system for decades.”
  • Sort of in the “but wasn’t that always the goal, but from that same article, Gartner suggests the vision for new fintech: ‘Gartner, Hype Cycle for Digital Banking Transformation, 2015, says, “To be truly digital, banks must pair an emphasis on customer-facing capabilities with investment in the technical, architectural, analytic and organizational foundations that enable participation in the financial services ecosystem.”’
  • BCG has a prescriptive piece for setting the strategy for all this, from Nov. 2015.

Case studies

  • A bit correlation-y, but still useful, from that BCG piece: “While past performance is no guarantee of future results, and even though all the company’s results cannot be entirely attributed to BBVA’s digital transformation plan, so far many signs are encouraging. The number of BBVA’s digital customers increased by 68% from 2011 to 2014, reaching 8.4 million in mid-2014, of which 3.6 million were active mobile users. Because of the increasing use of digital channels and efforts to reconfigure the bank’s branch network—creating smaller branches that emphasize customer self-service and larger branches that provide higher levels of personalized advice through a remote cross-selling support system—BBVA achieved a reduction in costs of 8% in 2014, or €340 million, in the core business in Spain. Meanwhile, the bank’s net profits increased by 26% in 2014, reaching €2.6 billion.”
  • And a more recent write-up of JPMC’s cloud-native programs, e.g.: ‘“We aren’t looking to decrease the amount of money the firm is spending on technology. We’re looking to change the mix between run-the-bank costs versus innovation investment,” he said. “We’ve got to continue to be really aggressive in reducing the run-the bank costs and do it in a very thoughtful way to maintain the existing technology base in the most efficient way possible.” …Dollars saved by using lower-cost cloud infrastructure and platforms will be reinvested in technology, he said.’ JPMC, of course, is a member of the Cloud Foundry Foundation which means, you know, they’re into that kind of thing.

Docker’s new CEO, Steve Singh – Highlights

In a mildly surprising announcement (see below), Docker announced a new CEO, Steve Singh, formerly of Concur-cum-SAP. The consensus is that this is the typical startup move to get a “more enteprise-y” leader in place, e.g., this happened at Puppet, Chef, and probably MuleSoft and Cloudera [I don’t know those last two well enough, but ¯_(ツ)_/¯.

As most all non-Docker (myself included and us over on the podcast) are always saying, Docker, Inc. needs to figure out a business model. So huzzah on that!

The PR folks at Docker were nice enough to line up a bunch of interviews. Below are some highlights from them and other places, As always, my comments are in square brackets unless it’s obvious otherwise.

Docker itself

Docker Customers Screenshot 2017-05-03 09.28.20

From outgoing CEO Ben Golub’s blog post announcing this:

  • Customers, in addition to the above: “Docker has rapidly scaled revenues, building a sustainable and exciting subscription business in conjunction with tens of thousands of small and mid sized businesses and over 400 G2000 customers like ADP, the Department of Defense, GE, Goldman Sachs,  Merck,  MetLife, and Visa.”
  • Partners: “we’ve created enduring partnerships with the likes of Accenture, Alibaba, Avanade, AWS, Booz Allen, Cisco, Google, HPE, IBM, Microsoft, Oracle, and more.”

Singh Interview with Todd Bishop & Tom Krazit

  • Over at Geekwire.
  • “Today we have about 400 enterprise customers, and that’s really been over the course of the last year or so that those enterprise customers have adopted Docker, so the rate of growth is phenomenal. I think our capacity to add value to those enterprise customers is huge. They’re running legacy applications. They’re building new applications on top of the Docker platform, and that’s driving massive economic savings for them. They’re able to see 75-500 percent reduction in the application infrastructure.”
  • It’s rare to see cost reduction used as an argument by cloud-native vendors; usually it’s a value-based sales: “compared to all the growth-money your company will make with this (and, sure, productivity gains), the cost will be nothing.” This might be an early sign of Docker’s enterprise value-prop: it costs less. One part to ponder: how cheaply can they do this w/r/t to sales and marketing? They have some good marketing costs from brand/community – i.e., everyone knows Docker. They need an enterprise salesforce and sales engineers to help buyers evaluate and then procure stacks; that is, unless they go (mostly?) pure inside sales a la Solarwinds. There’s some interesting comparisons here: Red Hat with the pure open source play, traditional middleware & infrastructure vendors with the open-core model, and then Solarwinds and New Relic for more inside, service-driven sales.
  • “My last day at SAP was April 30.” [So two reasons to wait until now (vs. at DockerCon): (1.) it’s traditional to let a standing exec have “one last conference,” and, (2.) Singh still had to officially be out at SAP.]
  • Some product-think, CaaS and building a platform with container parts: “We’re in the fortunate position that we are the leading platform company in this broader container-as-a-service space, number one. Number two, if you think about orchestration — things like Swarm or things like Kubernetes — our view is that what our customers are looking for is a platform to run their applications, manage them and deliver them. We want to take an open platform approach that allows the customers the choice to pick whatever components that they want from Docker and whatever components they want from anyone else, and run them in a model that makes sense for them. We have a number of customers that use the Docker platform as well as components from either the open source community or partners. That’s fantastic. When customers have choice, that’s a great thing.”
  • He skirts naming any competitors, which is standard, but, you know, eye-rolly.

Interview with Ari Levy

  • Over at CNBC.
  • “The software start-up was generating less than $5 million in revenue [in 2015].”
  • “Singh inherits a business that’s growing, with annual revenue in tens of million of dollars, according to sources with knowledge of the company but who asked not to be named because the financials are private. He’s still got money in the bank from the $95 million round that Goldman Sachs led two years ago.”
  • I’d read “tens of millions” as $20 to $30m. If it was $50m, they’d probably say so; if it was $40m, they’d say “nearing $50m”; and if it was $10m, it wouldn’t plural. Also, it doesn’t specify if this is TCV (paid out over 2-3 year contract terms) or ACV (total size of the deal, over all years of the deal’s life-span), but, hey, that’s how all private companies speak of revenue now-a-days. As a point of reference, the product my company, Pivotal, sells in this space: “booked revenue grew 130% (in 2016) to $270 million from $117.4 million for 2015.”
  • “The company started selling its enterprise product early last year and has about 400 customers, Singh said.”
  • “I’m more focused on the road ahead as opposed to things that have happened in the past,” Singh said. “We want to collaborate and make sure customers have choice.”

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IT’s usefulness is improving, but there’s plenty of room to fix the meatware, Surveys – Highlights

It’s another survey about business/IT alignment. Who knows how accurate these leadgen PDFs are, but why not? This one is of “646 CIOs and other IT leaders and 200 line of business leaders.” Some summaries from Minda Zetlin:

When LOB leaders were asked about the role their companies’ CIOs play, 41 percent said the CIO is a strategic advisor who identifies business needs and opportunities and proposes technology to address them. Another 22 percent said the CIO is a consultant who provides advice about technology and service providers when asked.

But 10 percent said their CIO was a “roadblock” who raises so many obstacles and objections to new technology that projects are difficult to complete. And another 9 percent said the CIO was a “rogue player,” with IT making technology decisions on its own, and creating visibility and transparency challenges.

Meanwhile, 36 percent of LOB leaders and 31 percent of IT leaders believe other departments “see IT as an obstacle.” And 58 percent of IT leaders but only 13 percent of LOB leaders agreed with the statement, “IT gets scapegoated by other departments when they miss their own goals.”

This seems better than the usual (kind of out of date) scare chart I used use, from a multi-year Cutter survey:

There’s still, as ever, plenty of room to improve business/IT alignment.

Speaking of that, also in that IDG/CIO Magazine survey, there’s a weird mismatch between the perception of The Business and IT about what IT does:

What does The Business want anyway?

Meanwhile, Vinnie quotes a Gartner survey of 388 CEOs:

  • Almost twice as many CEOs are intent on building up in-house technology and digital capabilities as those plan on outsourcing it (57 percent and 29 percent, respectively).
  • Forty-seven percent of CEOs are directed by their board of directors to make rapid progress in digital business transformation, and 56 percent said that their digital improvements have already delivered profits.
  • 33 percent of CEOs measure digital revenue.

Point being: The Business wants IT to matter and be core to how their organizations evolve. They want programmable businesses. Here’s some examples from another summary of that Gartner survey:

Although a significant number of CEOs still mention eCommerce, more of them align new IT infrastructure investments to advanced commercial activities – such as digital product and service innovation, exploring the Internet of Things (IoT), or adopting digital platforms and associated supplier ecosystems.

According to the Gartner assessment, some CEOs have already advanced their digital business agenda – 20 percent of CEOs are now taking a digital-first approach to business development. “This might mean, for example, creating the first version of a new business process or in the form of a mobile app,” said Mr. Raskino.

Furthermore, 22 percent are applying digital business technologies to their traditional processes. That’s where the product, service and business models are being changed, and the new digital capabilities that support those are becoming core competencies.

There’s demand there, the final result of “the consumerization of enterprise IT,” as we used to crow about. IT needs to catch-up on its abilities to do more than “just keep the lights” on or there’ll be a donkey apocalypse out there.

You seem people like Comcast doing this catching-up, very rapidly. The good news is that the software and hardware is easy. It’s the meatware that’s the problem.

Link

Containers in production survey, RedMonk/Anchore – Highlights

Some highlights from a recent survey on container usage among 338 respondents to a Anchore/DevOps.com survey:

Containers in production:
anchore-cu
…approximately one third of the participants are running containers in production, with development coming in slightly higher.
OS used:
Looking at the top five host operating systems across user roles we see Ubuntu having a particular strong lead among developers and architects.
Mesos, architect-types like it:
Interestingly Mesos still features strongly with architects. Among developer communities we very rarely hear Mesos mentioned anymore. On the other hand we frequently encounter architects have invested in Mesos from the perspective of their big data environments and are looking at a common approach for their container strategy. That said, this entire market is extremely fluid at the moment.
Jenkins leads CI:
…the combination of Jenkins and CloudBees (commercial Jenkins) approaching 50%.
Security worries:
Bluntly put [security] presents a barrier to adoption, and an opportunity for conservative organisations to hold off on adopting new technologies.
Demographics:
Our population breaks out with over 60% working in companies of greater than 100 people [and ~30% working in companies of greater than 5,000 people]…. With any data set of this nature, it is important to state that survey results strictly reflect the members of the DevOps.com community.
More context:
  • As you’ll recall, 451 estimates that the container market will be $2.7bn in 2020.
  • A 451 Research 1Q16 survey puts production use of containers at ~14%. It’s likely risen sense then, of course: maybe to around 18 to 20%?
  • A 3Q2015 survey put “container orchestration” use at just ~9%. Presumably this is dev/test and production, all uses. And, again, you’d assume that it’s risen since then. The question would be: are people using containers in production without orchestration? That seems slightly crazy except for the simplest workloads, eh?

On-premise IT holding steady around 65% of enterprise workloads – Highlights

barfing cloud.png

One of the more common questions I’ve had over the years is: “but, surely, everyone is just in the public cloud, right?” I remember having a non-productive debate with a room full of Forrester analysts back in about 2012 where they were going on and on about on-premise IT being dead. There was much talk about electricity outlets. To be fair, the analysts were somewhat split, but the public cloud folks were adamant. You can see this same sentiment from analysts (including, before around 2011, myself!) in things like how long it’s taken to write about private PaaS, e.g., the PaaS magic quadrant has only covered public PaaS since inception).

Along these lines, the Uptime Institute has some survey numbers out. Here’s some highlights:

Some 65% of enterprise workloads reside in enterprise owned and operated data centers—a number that has remained stable since 2014, the report found. Meanwhile, 22% of such workloads are deployed in colocation or multi-tenant data center providers, and 13% are deployed in the cloud, the survey found….

On-prem solutions remain dominant in the enterprise due to massive growth in business critical applications and data for digital transformation, Uptime Institute said
Public cloud workload penetration:
Some 95% of IT professionals said they had migrated critical applications and IT infrastructure to the cloud over the past year, according to another recent survey from SolarWinds.
Budgets:

That survey also found that nearly half of enterprises were still dedicating at least 70% of their yearly budget to traditional, on-premise applications, potentially pointing to growing demand for a hybrid infrastructure….

Nearly 75% of companies’ data center budgets increased or stayed consistent in 2017, compared to 2016, the survey found.

Metrics, KPIs, and what organizations are focusing on (uptime):

More than 90% of data center and IT professionals surveyed said they believe their corporate management is more concerned about outages now than they were a year ago. And while 90% of organizations conduct root cause analysis of an IT outage, only 60% said that they measure the cost of downtime as a business metric, the report found.

Demographics: “responses from more than 1,000 data center and IT professionals worldwide.”

Pretty much all Pivotal Cloud Foundry customers run “private cloud.” Many of them want to move to public cloud in a “multi-cloud” (I can’t make myself say “hybrid cloud”) fashion or mostly public cloud over the next 5 to ten years. That’s why we support all the popular public clouds. Most of them are doing plenty of things in public cloud now – though, not anywhere near “a whole lotta” – and there are of course, outliers.

This does bring up a nuanced but important point: I didn’t check out the types of workloads in the survey. I’d suspect that much of the on-premises workloads are packaged software. There’s no doubt plenty of custom written application run on-premises – even the majority of them per my experience with the Pivotal customer base. However, I’d still suspect that more custom written applications were running in the public cloud than other workloads. Just think of all the mobile apps and marketing apps out there.

Also, see some qualitative statements from CIO types.

So, the idea that it’s all public cloud in enterprise IT, thus far, is sort of like, you know: ¯_(ツ)_/¯

Red Hat OpenShift Momentum – Highlights

Brian Gracely of Red Hat (and formally an analyst who did some of the best “cloud-native”/cloud platform work early on) has a momentum post on Open Shift. Here’s my highlights:

Sizing up revenue and deal-size:
[Q3, FY 2017] Also of note, we closed our second OpenShift deal over $10 million and another OpenShift deal over $5 million. And significantly, we actually had over 50 OpenShift deals alone that were six or seven figures, so really strong traction. [Q4, FY 2017] with our largest deals in Q4 approximately one-third had an OpenShift container platform component.
Red Hat hasn’t yet been too clear on OpenShift revenue, so you have to tea-leave out these revenue spreads, which I haven’t really done. Earlier in April, Jeffrey Burt at The Next Platform had this to say:
During the final three months of last year, subscription revenue for Red Hat’s application development-related [JBoss, etc] and other emerging technologies – which includes OpenShift – hit $125 million, a 40 percent increase from the same period in 2015, and revenue for the group accounted for about 20 percent of Red Hat’s overall revenues for the fourth quarter.
Today, we also announced that Barclays Bank, the Government of British Columbias Office of the CIO, and Macquarie Bank are also using Red Hat OpenShift Container Platform to modernize application development…. airplane manufacturer Airbus about their DevOps journey, and digital travel platform Amadeus about their transformation of handling 2,000x the number of online transactions…. how Amsterdams Schipol Airport (AMS) is using OpenShift to redefine the in-terminal travel experience, how Miles & More GmbH is better managing rewards programs for travelers, and how ATPCO is rethinking how they publish fare-related data to the airline and travel industry.
Much of the write-up focuses on community momentum, true to Red Hat, open source form:

The OpenShift Commons community has 260+ member organizations….

Red Hat engineers lead or co-lead in 10 of the 24 Kubernetes SIG activities.
Finally, some commentary on their strategic shift to Kubernetes:
The huge architectural shift that we made a few years ago in adopting open standards for containers and the Kubernetes container scheduler has allowed us to delivered a unified platform to containerize existing applications and deliver agility and scalability for cloud-native applications and microservices. We call this combination Enterprise Kubernetes+, or Enterprise-Ready Kubernetes.
Red Hat’s OpenShift is, of course, a competitor to us over at Pivotal.

Cloud-native at Comcast, working with Pivotal – Highlights

I’m doing a podcast with Comcast in a few weeks, so I’ve been going over all their public talks on their cloud-native efforts. They’ve been working with Pivotal since around 2014 and are one of the more impressive customer cases with over a 1,000 applications now on Pivotal Cloud Foundry.
Here are some highlights from the talks I’ve been watching. As always, things I put in square brackets are my own comments, the rest are quotes or summaries of what people said:

August, 2016 – Empowering Devops with Cloud Foundry – Sergey Matochkin, Neville George; Comcast

  • Sergey Matochkin.
  • Slides.
  • (17:00) Every deployment to production took at least 6 weeks, but most commonly around 2 months end-to-end. Which also means you need to plan capacity much in advance.
  • We started to use virtualization and containerization “well, well before Docker existed… it was some success, we had some improvements, but those improvements were marginal.”
  • Traditionally, it’d take at least 4-6 months to setup your dev/test infrastructure. But, luckily, virtualization came along.
  • (9:20) Business drivers… Comcast phone service, set-top boxes get DVRs, VoD, etc. All of these require apps on the backend, so the portfolio of apps starts to grow, and with they way they were before it meant they had to build a new datacenter every six months. Virtualization helped here, of course.
  • Also, virtualization allowed us to put a service layer [think “platform”] on-top of the infrastructure.
  • It’d take 4-6 weeks for testing environment, but now it takes 10-15 minutes in a self-service portal.
  • Demo of using Pivotal Cloud Foundry for much of the automation needed to deploy and scale an application.
  • (~32:00) We used to have things like “order servers” and “make load-balancer changes” and somewhere in the bottom of the backlog was “write some code and do some testing.” [That is, they were focusing on items with low business value, below “the value line,” rather than customer features.]
  • “What Cloud Foundry essentially helped us with was to get all those unnecessary user stories out of our backlog so we can focus on the writing code, on testing, and deploying rather than managing infrastructure.”
  • (33:45) momentum/proof-points:
  • momemtum
  • 9 PCF instances; 900+ developers; 2,000+ active apps “most of which are in “the critical path of our customer experience”; 4,100 application instances; 2,000 requests per second.
  • Lots of Slack/ChatOps usage for monitoring and such.

August 3rd, 2016 – Transforming the monolith at 20M tph – Nick Beenham, Comcast

  • Slides.
  • Existing state:
    • 250m transaction per day.
    • Would take 3 months to get a server useful, from moment of purchasing to using.
    • “Over a 100 services run by development teams.”
    • In functional, silo roles.
  • (3:45) “We knew we had that large, rigid infrastructure. [Pivotal] Cloud Foundry and it’s adoption really enables us to change that to gain the agility, to gain the elasticity at scale.
  • Taking away roles to reduce finger-pointing and all the negative stuff, and unified team, of course.
  • (7:35) Anecdote of Nick going from “ops guy” to writing code and liking coding.
  • (12:18) ESP router that was a small router written in Go to translate SOAP requests as part of a strangler pattern. Decades old SOA layer that they wanted to modernize. But they couldn’t strip it out, would take so long. So, were going to duck-type as SOA, but do REST and micro services underneath. Strangler pattern, etc. This is what the ESP router does marshals and unmarshalls between microservices and SOAP stuff. But new things need to be done in new style.
  • Also, “de-mingling data,” moving off Oracle RAC/GoldenGate for multi-site. Some simpler CRUD services to front the data.
  • (~15:00) Used to take a week+ to deploy the entire stack, but with Pivotal Cloud Foundry it takes minutes. It gives us a great deal of velocity that we’ve never had before. “Sometimes we’ll deploy multiple times an hour.”
  • (17:00) From 1,000’s of lines of bash to deploy out to various WebLogic clusters, which has for the most part moved to Cloud Foundry.
  • Improving production updates: bringing new node up and shutting old node down slowly; canary updates, with a CI test suite, then switching over to a production install.

August 1st, 2016 – James Taylor – The Power of Partnership & Building a Cloud Native Tier-1 Platform

  • @jctbmwi8
  • “Sparrow, Service Activation Platform.”
  • “Helping someone put a smile on their face is one of the greatest gifts we can give each other.”
  • Their VP provides the feedback loop of things to focus on. Right now: reducing technical debt, reducing incidents, increasing velocity, experimentation.
  • (~6:30) “You can’t move forward – innovate – if you don’t have time to try new things.”
  • (~18:35) “If you’re spending time configuring a Docker container, that’s time you’re not spending coding or solving a problem.”
  • (13:51): “At the end of the day, [business] value is what puts money in everyone’s pocket. If our company, Comcast, can’t create something of value, no one’s gonna pay for us…if we can’t create value. So it’s important for us to understand ‘how can you create value?’”
  • (~22:02, starting epic rant!) “Who is our customer and what value do we bring to our customers…”
  • If you’re spending money on support, that’s cutting into your margins. A call coming in costs $8 right off the bat, then more as it takes longer. So you want to figure out preventing customer support problems… which points to understanding your customers more.
  • [A good overview of thinking about “value” in the context of a specific application, their customer activation center, Sparrow.] “If you have a [support] call rate of 30%, you’re probably cutting out all the value… So we try to figure out, how do we prevent calls?” [Very similar to IRS cloud-native story.]
  • “We’ve been holding technical workshops”: Internal training things every month with Pivotal people, leveraging Pivotal knowledge. With our development teams every month: webinar, or on-site visit.
  • Sparrow: 5 junior Java developers… we built it from scratch in parallel while existing teams maintained the platform… we then had to integrate the processes together… figure out decomposing the monolith platforms, etc….then we had to just cut off stuff when it was too much of a hassle.

August 17th, 2016 – Greg Otto SpringOne Platform keynote

  • Slides.
  • X1 boxes – a new release about once a month.
  • Processing 10’s of millions of transactions on this new platform daily on Pivotal Cloud Foundry/new platform.
  • “About a 75% lift in velocity as well as time to market, and the business is really feeling it.”
  • Developer reactions:
  • comcast what customers are saying.png
  • Momentum Stats:
  • comcast key state from otto.png
    • 40 apps to 900 apps, 2015 to 2016
    • 300 AIs to 4,100 AIs, 2015 to 2016
  • All with “zero outbound marketing from my team, this all word of mouth from all those happy developers.”

June 9th, 2016 – Greg Otto CF Summit keynote

  • “Late last year in 2015” – live in production [on Pivotal Cloud Foundry] with business critical systems from our back-office systems on our Cloud Foundry environment.
  • We put Pivotal Cloud Foundry directly in the customer critical path.
  • Applications doing 30,000 event a second on Cloud Foundry.
  • Started in 2014, met with Pivotal.
  • Had sort of thrown all the people into the Pivotal Cloud Foundry pool, they had to do a lot of research and such.
  • But, people were really interested in the ease of working with the platform [the productivity improvements].
  • Successful prototype app 30 days after platform.
  • Idea to feature, before after: “several weeks, at least”/“2-3 days”
  • Time-line and summary:
  • comcast otto summary.png

June, 2016 – Open source at Comcast story

  • Write-up.
  • “If Comcast has a problem to solve, there are three possible approaches: solve it themselves by making an investment in teams and resources; solve it through a commercial vendor that could build a product for them; or work with the open source community.”
  • OpenStack: “In addition to Linux, Comcast is a heavy user of OpenStack. They use a KVM hypervisor, and then a lot of data center orchestration is done through OpenStack for the coordination of storage and networking resources with compute and memory resources. Muehl said that Comcast has roughly a petabyte of memory and around a million virtual CPU cores that they are running under the OpenStack umbrella. As an operator, Comcast does a lot of things around operations, and they use Ansible to deploy and manage OpenStack at scale.”
  • Cloud Foundry: “They also use Cloud Foundry, but according to Muehl that work is in the very early stages at Comcast.”

May 2015 – Running Cloud Foundry at Comcast talk

  • Neville George, Sam Guerrero, Tim Leong, Sergey Matochkin
  • They wanted to make custom URLs.
  • Used Puppet for stuff.
  • (~8:30) Their requirements for a platform:
  • comcast platform requirements.png
  • A lot of emphasis on self-service and the micro services benefits of operating independently, product management wise.
  • They use OpenStack, Docker, and [Pivotal] Cloud Foundry.
  • Pre-provisioning resources for a pool of containers that are ready to go, etc.
  • (~27) a couple applications in production today… we’ll be ramping up quickly.
  • (Either this video or the 2016 one, a few minutes from the end) Q, training mode. A, Sergey: “I can’t say we have a really good training model…. We do brown-bags to have people aware. We focus on 12 factor application model… on overall microservices model, not just to shape application, but also data. Developers need to understand how they [do] applications for PaaS instead of traditional.

Reactions to Cloudera’s IPO, prospects – Notebook

There’s lots of opinions on Cloudera’s IPO today. Here’s some that I’ve collected in my notebook.

Not valued high enough?

Despite the share-price being up 20% at close, some negative commentary focuses on their valuation dropping from Intel’s funding round, e.g., from Brenon at 451:

The chipmaker paid up for the privilege, putting a ‘quadra unicorn’ valuation of $4.1bn on Cloudera. Altogether, Cloudera raised more than $1bn from private market investors, making the $225m raised from public market investors seem almost like lunch money.

And then there’s the small matter of valuation. In its debut, Cloudera is only worth about half of what Intel thought it was worth when it made its bet.

The counter-point goes a little something like this (as pointed out by Derrick Harris):

“Much has been made of the huge valuation of that Intel-led round, but that’s all misguided noise,” according to IPO Candy, a website founded by Kris Tuttle, the director of research at Soundview Technology Group. “Intel didn’t make the investment for a financial return so the valuation isn’t relevant.”

Back in 2014, Intel was still smarting from missing the shift to mobile computing and Big Data was a favorite as the next big thing. The Santa Clara chip giant’s bet was placed chasing a strategic return, not so much banking a direct return on investment.

You know, all of this is a little bit of ¯_(ツ)_/¯. As I recall, Facebook’s IPO was all wiggly-woggly. If Cloudera makes a lot of money, gets bought for a lot of money, etc., no one will care to remember, just like with Facebook. Success is the best deodorant.

Their business, finances

Also from 451, earlier this month, a profile of their business:

Cloudera is nearly one-third bigger than Hortonworks, recording $261m in sales in its most recent fiscal year compared with $184m for Hortonworks. Both are growing at roughly 50%.

Since 2008, the company has grown steadily. As of January 31, it reports more than 1,000 customers. However, Cloudera is currently emphasizing and banking its success on what it calls the Global 8,000, which are the largest enterprises worldwide. The company notes that its number of Global 8,000 customers increased from 255 as of January 31, 2015, to 381 as of January 31, 2016, and 495 as of January 31. For the year ended January 31, the Global 8,000 represented 73% of Cloudera’s total revenue, while a further 10% of total sales came from the public sector. The company reports 1,470 fulltime employees as of January 31, a slight increase from its headcount of 1,140 the prior year.

More from Katie Roof at TechCrunch:

Cloudera’s market cap is now about $2.3 billion, significantly less than the $4.1 billion valuation Intel gave in 2014. This increasingly common phenomenon is now nicknamed a “down round IPO.”

In an interview with TechCrunch, CEO Tom Riley insisted that this was not a problem for the company because of the “growth prospects ahead of us.” If it performs well in the stock market, it could ultimately achieve the $4 billion-plus value. Square, which went public in 2015 at half its private market valuation, has since seen its share prices more than double.

(Side-note: comparisons of companies, Square and Cloudera, that have nothing to do with each other except being “tech” – and Square is payment processing, not “pure tech,” at that! – drive me a bit crazy, as listeners know.)

And a quick revenue/spend write-up from her:

Cloudera’s revenue is growing, totaling $261 million for the fiscal year that ended in January. The company brought in $166 million at the same time last year.

Losses were $186.32 million, down from $203 million in the same period the year before.

And, according to Jonathan Vanian: “Cloudera spent $203 million on sales and marketing in its latest fiscal year, up 26% from the previous year.”

TAM

I don’t really follow this space well enough anymore to quickly figure out the TAM: I suspect Cloudera operates in several data and BI related ones.

Cloudera isn’t only Hadoop, but 451 put the Hadoop market at $1.3b in 2016, growing to $4.4b in 2020, with a CAGR of 38.3% between 2015 & 2020.

If you throw data warehousing, BI, analytics, and an injection of the mega-databases TAM together, you get a really big TAM, anyhow. Keep in mind though that one of the traps of (definitionally orthodox) disruptors in this space is lowering the TAM of their respective markets, a la Red Hat in operating systems. I don’t get the sense that Cloudera is on that game plan, but others in the market might be.

Buyers’ plans & needs

With respect to what people would do with Cloudera and others in this space (including Pivotal), here’s a good ranking of the information infrastructure priorities Gartner recently found in enterprises:

info plans survey

Also of public/private cloud interest from the summary of that survey: “Based on survey responses, plans for on-premises deployments for production uses of data will drop from today’s 45% to 14% in 2018.”

Looking forward

People in the tech industry care a great deal about IPO’s like this. We’re all curious what The Market’s read on valuation of enterprise IT business models is for our own benefit, and just a general sense of the health of the sector. There’s also usually people you know at the company, so “yay” for people you know.

One day isn’t long enough to tell anything, though, cf., in a completely different space, that Facebook debut weirdness. People got all excited about Cisco buying AppDynamics because that seemed to show some “healthy” signs that money valued this kind of software/SaaS.

At any rate, people still seem to love the Big Data and such. From Cloudera’s CEO, Tom Reilly: “We’re competing with IBM and Watson, so our customers seeing the strength of our finances allows us to do more.” Think of all the free marketing!

And, Mike Olson (original CEO) adds:

The ensuing years have been remarkable. Our company has grown with the market. The original technology has morphed almost beyond recognition, adding real-time, SQL, streaming, machine learning capabilities and more. That’s driven adoption among some of the very biggest enterprises on the planet. They’re running a huge variety of applications, solving a wide variety of critical business problems.

Our early bet has proven correct: Data is changing the world. In applications like fraud detection and prevention, securing networks against cyberattacks and optimizing fleet performance in logistics and trucking, we’re delivering value. We’re helping to address big social challenges, improving patient outcomes in healthcare and helping law enforcement find and shut down human trafficking networks.

Against that background, an IPO takes on a more appropriate scale. We started Cloudera because we believe that data makes things that are impossible today, possible tomorrow. There’s more data coming, and there are plenty of impossible things to work on. Our journey is only well begun.

I admittedly don’t know Cloudera’s business model too well, but my sense is that they align well with the “have something to sell” model that many open source companies in the enterprise space forget to put in place.

Spanning goes private, what might happen next?

Long ago, Spanning Sync was the only viable way to synchronize your GMail calendar and contacts with the (then) OS X iCal and Address Book. It was great! I also know one of the original founders, Charlie Wood, and we’d talk from time to time about the growing company. At some point, it became a Google Apps (now “G Suit”) back-up service that had a clever value prop: cloud storage, sure, but it’s not redundant you know, you gotta do the basics.

Anyhow, I always kept a close eye on the company. It was a little odd to see EMC buy them back in 2014: as VMware demonstrated with their dropbox competition products years ago, Apple is pretty goofy here, and even Google has demonstrated over the year, large software companies are pretty and at long-term plays for individual software; Microsoft is of course an exception with Office and sort of proves the rule.

We’ll see what Insight Venture Partners does with them. I’m guessing if you just left Spanning alone, more or less, it’d turn into a cash machine at some point. That said, I don’t think Dropbox and Box are exactly profitable. Here’s Box’s last four financial years:

…but it seems like a back-up service could controls costs better and do a lot less marketing: Box and Dropbox have been acquiring companies and re-positioning themselves as they go from more than just to cloud storage to something like “sort of Office, but not really, but maybe – or like Trello… er… let’s acquire another company and go to a conference where we have wooden floors and free espresso in the booth and think about this at next year’s company retreat in Italy.” (I KID! I KID!)

Spanning Momentum

Here’s some Spanning momentum from one of the write-ups:

Spanning has seen 70 percent year-over-year revenue growth and more than 7,000 customers, according to a press release. It restored around 18 million items for customers in 2016, and expects to continue growth with its global data center expansion, and distribution agreements with major channel partners.

A wet-finger-in-the-wind business case

It’s hard to quickly find pricing for Spanning on their page (smells like enterprise software!), but a few searches, particularly from Spiceworks, says it’s like $35 a month.

There’s certainly discounts on some of those customers, but let’s say the revenue would be a max of $2,940,000 annual to something like $1.5m on the low-end if you do all sorts of discounting on clusters of users.

Now, 70% y/y growth is pretty impressive, but not too insane for a relativly new offering. Let’s say they do that two more years and then it goes down to like 30 or 40% for any length of out years we care about.

Then, let’s just take a swag at storage costs. Who knows if they use S3, but let’s assume they can get down to similar pricing, we’ll take S3’s mid-tier: $0.0125/GB/month. My work Google Drive says it’s 22 GB, but I save a lot more stuff than most people do. Let’s just go with 20GB as an average. Then let’s assume you at least duplicate it, so you’re paying for 40 GB a month (across two cloud zones), which is $6/year. (Let’s ignore networking transfer charges – adding that in is left as a exercise for the reader!)

Then you need all the meat-sacks. You could probably get by with 6 to 12 product staff (programmers, product manager – you probably outsource design at this point as needed).

You need the CEO, HR, CFO, and probably 1-2 people to work for them (6 people max); you could probably cut out HR depending on how Insight likes to run HR (outsourced or pooled across companies). Maybe the CFO, but probably not.

I’m no enterprise SaaS business expert, but I’m guessing it’s marketing and sales heavy, so:

Then you need probably 2-3 people in marketing (if you were slick, you could outsource a lot of this, esp. for something as easy to understand as “backup”): 5-10 face-to-face enterprise hustlers, and let’s say a team of 5 “inside/web” sales people who send all those annoying “Re: catching-up. I see you read out white paper on BACKUP. Would you like to talk more? Are you the right person at your organization?” emails. So, max 18.

That’s around 36 people, which seems really low to me. But, if you were, I don’t know, a private equity firm, you’d probably think that was OK, if not a little heavy for a company that basically just copies files from one place to the other (yes, I’m being MBA-fatuous).

Without getting a spreadsheet to do some clustering, doing salary cost across such a diverse set is hard. Many of them are in Austin (I assume, still), so let’s just of with $150,00 all-in per head (I’m sure the admin staff and your “strategic account” sales people get paid well plus extra comp, and the more senior tech staff get paid more). So, that’s something like $5,400,000 in people expenses. Then there’s going to conferences, probably a large ad budget, that nice office they have in downtown Austin (which I think is an EMC office, so they’ll get the boot?) which means buying a lot of organic beef-jerky and craft beer etc., then there’s flying those 5-10 enterprise hustlers around and their $70-100 a day per diems, plus wining and dining. Let’s just trow in another million and go to $6.5m.

So, with some mumbo jumbo business casing (I grow revenue by 70% for two years, then level it off to 30% for the last two years; I grow staff up to 60 people max), you have something like this:

Screenshot 2017-04-23 09.16.10

Those storage costs look insanely off. And from their press release, they claim to have actual data-centers (probably co-lo’d racks that are, at best, caged for compliance reasons, far from “having data centers”), which sounds like building your own, which might actually be as cheap, or slightly higher.

Who knows. Cloud storage is insanely cheap, so maybe that figure isn’t so bonkers. Of course, you need networking transfer chargers, etc. So, double, even quadruple the cost if you care too: still “nothing,” relative to the other numbers.

With this kind of Sunday morning, armchair analysis, there’s no end of flaws. Like I should have found the comparable costs, growth, the TAM, and staffing for Box, BackBlaze, etc., and even made sure I actually understand Spanning’s business model, but: ¯_(ツ)_/¯

Over years, that’s a pretty small gap to close to be profitably, and there’s a lot of things to play with in the spreadsheet (can we fire most all the sales and marketing people and go pure channel, hiring up a biz dev team of 2-3 people to get 5 or so key channel partners?).

It’s probably even easier to bundle up the company for sale to another large company after a few years. Someone like Microsoft or Salesforce might even want them to add that functionality to their own products, or any company that’s concerned about filling in it’s “enterprise SaaS” strategy gaps.

I’ve always like Spanning (RIP Sync). I hope it works out well!