The cloud infrastructure market continued its impressive gains, with spending hitting $42 billion in Q2, according to Synergy Research Group.
Synergy’s latest data is good news for the industry, and provides a number of important revelations. According to the company, the top three cloud companies continue to be AWS, Microsoft and Google, with 33%, 20% and 10% of the market respectively. Alibaba, IBM, Salesforce, Tencent, Oracle and “Others” round out the industry.
Interestingly, that means the top three companies account for 63% of money spent on cloud infrastructure.
“This market continues to be a runaway success story for Amazon, Microsoft, Google and some other cloud providers. You would not normally expect to see growth rates actually increasing in such a huge and rapidly developing market, yet once again that is what our research has shown,” said John Dinsdale, a Chief Analyst at Synergy Research Group. “It must be said that this success is hard earned. Amazon, Microsoft and Google in aggregate are typically investing over $25 billion in capex per quarter, much of which is going towards building and equipping their fleet of over 340 hyperscale data centers. There remains a wealth of opportunity for smaller, more focused cloud providers, but it can be hard to look away from the eye-popping numbers coming out of the big three.”
Synergy’s report is further evidence that, despite the accelerated cloud transition as a result of the pandemic, there appears to be plenty of room for further growth.
“We’re seeing the rise of what we call the “revenue innovator, says Outreach CEO Manny Medina. “The revenue innovator is a different job description that has changed since the pandemic. The new job description is the revenue innovators, the digital-first, and the digital native. Those revenue innovators are the new revenue leaders.”
Manny Medina, CEO of Outreach, discusses the “rise of the revenue innovator” in an interview today on CNBC:
The Rise of the Revenue Innovator
We’re seeing the rise of what we call the “revenue innovator.” The revenue innovator is a different job description that has changed since the pandemic. It’s a data-driven digital-first predictable long-building trusting relationship kind of seller. What we are seeing is this influx and this growth in the type of seller that knows how to drive a digital conversation but is complemented with a hybrid approach of visiting your customer. It’s a very predictable, very data-driven kind of job description.
The growth happening across our customer base is the growth of that kind of seller. This is a seller and a customer-facing rep who is going to be very data-driven and very innovator-led. If we are going to think of the Salesforce numbers that just came out these are incredible signs of growth for the cloud platform. That’s an incredible sign of growth for us as well because what we are seeing is the system of action is taking place on top of the system of record that Salesforce is providing.
Second Wave of Digital Transformation
All of the companies that used to be in the mainstream economy are accelerating into the second wave of digital transformation. The first wave of digital transformation is to move all of the data into the cloud and that is happening but it’s not what companies are talking about. Companies are talking about how do you make me smarter? How do you make my teams more efficient? How do you make my teams digital-first?
How do I live and thrive in this new hybrid environment post-Covid in which the buyer is not ready to see sellers until post transaction until you are expanding not selling? All of these “before-laggers” are becoming early innovators and early adopters with new technology such as Outreach which is AI-driven and digital-first.
The new job description is the revenue innovators, the digital-first, and the digital native. They may not have them yet but they are coming online, they are getting these jobs. Those revenue innovators are the new revenue leaders. They are also hiring people of the same ilk that are looking to drive this innovation within their companies. That’s what you are seeing in this transformation. Transformations are always people first.
It’s this new wave of people that are coming into traditional companies that are driving this second digital transformation. They are forward thinkers and they are data-driven.
Outreach Doubling Headcount Again
Outreach is doubling its headcount again. We almost doubled from the beginning of the pandemic all the way to now and we expect to hit another double in terms of hiring. We expect another 600 to 700 people to come on board. Most importantly, what we are seeing is that our customers are growing as well. We sell seats ahead of sales demand and we are seeing sales seats being bought very quickly.
We are expecting our customers to be driving double-digit growth across the board. This is a great sign for the economy.
Outreach CEO Manny Medina: The Rise Of The Revenue Innovator
On the heels of its announced spin-off of VMware, Dell Technologies may be looking to sell its Boomi cloud business as well.
Michael Dell has been on a mission to streamline the company that bears his name, and Dell has been offloading the various businesses it has acquired over the years, including RSA and VMware. According to Bloomberg, Dell is now exploring a sale of Boomi.
Boomi specializes in helping companies integrate the various cloud platforms they use. It’s believed a sale of the business could be worth as much as $3 billion. The business could be an asset to any number of other companies looking to expand their cloud offerings.
According to Bloomberg’s sources, the talks are still in their early stages and may not come to fruition.
“Digital transformation will come out as a faster trend out of the pandemic,” says Workday co-CEO Aneel Bhusri. “What’s been interesting about the pandemic is that for companies that were in the cloud they figured out how to how to thrive and adjust to the new world. Companies that weren’t in the cloud realized that they needed the flexibility, agility, and ability to plan instantaneously. They needed those capabilities.”
Aneel Bhusri, co-CEO of Workday, discusses how the pandemic will drive digital transformation forward at an even faster pace:
Digital Transformation To Be Faster Trend Out Of Pandemic
The first three quarters during the pandemic were challenging. The vagaries of subscription accounting models are such that it is a lag indicator. We expect new bookings growth to accelerate this year and that is our primary indicator and the way we run the business. We’re very excited about where we’re headed. That acceleration will probably take at least a year to show up in subscription accounting numbers just because of the way the model works.
What’s been interesting about the pandemic is that for companies that were in the cloud they figured out how to how to thrive and adjust to the new world. Companies that weren’t in the cloud realized that they needed the flexibility, agility, and ability to plan instantaneously. They needed those capabilities. In many ways, companies like Nike that are just such great market-leading companies, recognize that they needed to move this capability to the cloud. So I think actually digital transformation will come out as a faster trend out of the pandemic.
Employee Engagement Rose To The Top Of The List
It comes back to the flexibility and agility that that cloud solutions like Workday provide. We’ve been very fortunate. We’re so happy to have Laboratory Corporation of America become a customer. J&J is a customer. Visor’s a customer. AstraZeneca is a customer. I just feel honored to be able to support these companies who are doing the best they can to save our lives and are just doing amazing work with the vaccines and testing. We’ve always had a strength in the pharmaceuticals and diagnostics role. We’re going to do everything we can to make sure that they’re successful because they’re taking care of all of us.
Coming back to what we learned during the pandemic, employee engagement just rose to the top of every CEO’s list and every head of HR’s list. In a remote work orientation, it was harder to really understand how do employees think about the company they work at, their engagement level, their comfort with their manager, and if they are feeling fulfilled at work. We were already down the path at Workday with something called Pulse Surveys. We recognized that this emerging trend was going to be critical going forward.
We Fell In Love With Peakon So We Acquired Them
We concluded that we had to get in this market now, the market’s happening now, and Peakon is the well-known leader in this category. Peakon is a UK-based company with an amazing management team. We fell in love with the product and the management team so we made them part of Workday. They’re one of the new generations of companies that’s machine learning first.
They really use machine learning in the right way to guide decisions and really give you insight into how employees are thinking about the company that they’re working for and how engaged are they. That is a supercritical set of information that’s going to drive companies going forward.
Digital Transformation To Be Faster Trend Out Of Pandemic, Says Worday co-CEO Aneel Bhusri
“Business is really simple, and people are more productive, and they’re doing things that can lead to growth and opportunity,” says ServiceNow CEO Bill McDermott. “That’s the whole point of digital transformation. Right now, companies are hunkered down with systems that are absolutely wearing them out. It’s time to make the bold move, pivot to ServiceNow, and let’s get in there and fix the job.”
Bill McDermott, CEO, and President of ServiceNow says that only one in four digital transformation projects actually deliver positive ROI due to lack of integration:
Most Digital Transformation Projects Don’t Deliver
We have a situation on our hands where digital transformation, cloud computing, and business model innovation, are all converging at once. ServiceNow is the platform, of all the enterprise platforms, that really makes business work. One of the big lessons that business has right now is trillions have been poured into digital transformation yet only one in four projects actually deliver positive ROI. The reason for that is lack of integration.
Our system integrates with all the existing systems as well as all the collaborative tools in the enterprise. From day one, the customer gets it up and running swiftly because it’s in the cloud. They begin to derive value from it because you automate the way the work is done and ultimately, you’re now in a position to serve your customers the way they want to be served. It’s a speed game and ServiceNow is at the top of its game.
Companies Have To Create New Business Models
We’re an example. If you’re going to grow your company you’re going to take advantage of digital transformation. This is the only way out and it’s the only way forward. In the 20th Century companies put in big heavy on-premise systems. The issue is now they can’t, in a frictionless economy, immediately pivot those business models because they haven’t digitally transformed their business.
About 25 percent of the opportunity of businesses out there today over the next three years will come from white space places they are not in today. They have to create new business models. They have to think about new partnerships and new routes to market. Without the baseline of a platform like ServiceNow they’re not going to get there.
That’s The Whole Point Of Digital Transformation
I am very optimistic that the economies of the world not only are going to recover but actually going to do very well this year because people are going to be investing in digital transformation. We have seen that does not cost jobs. On the contrary, it frees people up to do things like go after new markets, derive new ideas, and so forth, because the AI revolution is also on.
We have built-in machine learning and AI into our platform. So 80 percent of the soul-crushing work people don’t want to do is done by the Now platform. The 20 percent that involves a human immediately gets initiated through a workflow order from the Now platform.
Business is really simple, and people are more productive and they’re doing things that can lead to growth and opportunity. That’s the whole point of digital transformation. Right now, companies are hunkered down with systems that are absolutely wearing them out. It’s time to make the bold move, pivot to ServiceNow, and let’s get in there and fix the job.
Fastest-Growing Pure-Play SASS Silicon Valley Company
If you look at our actual earnings results, they were stunning and obviously achieved beyond expectations performance across the board. We also followed that through in the guide. We’ll continue to be the fastest-growing pure-play SASS Silicon Valley company. We will continue to have the best margin profile of all of them. Obviously, we’re going to continue to gain market share in industries around the world, in geographies around the world, particularly in Europe and Asia Pacific, and Japan.
We will also gain market share on personas. Lots of people are getting the memo now that ServiceNow obviously dominated the IT automation market but the same backbone platform has enabled us to change the employee experience, the customer experience. In these tough times with COVID we can write low-code onto our platform in minutes and roll out new applications to hundreds of thousands of people so companies can move super fast.
We keep the guide consistent with the revenue that we generated in 2020. If there’s an upside to that… fantastic. That’s what good companies should do. They should go beyond expectations when they can but we stand by the guide and we’re looking forward to having a great year.
ServiceNow Was Born In The Cloud
The whole idea of ServiceNow is so different than SAP which was a company that needed to pivot to the cloud in 2010. We did that and that was very successful. ServiceNow was born in the cloud. It’s a very young company with tremendous growth opportunity on the organic front. Having said that, (we would be in interested in an acquisition) if you have a situation where there is a partner out there that has a substantial TAM, that can be highly complementary and synergistic with ServiceNow on the revenue side.
It also would have to do great things for the customer, because we have a precious platform and we jealously protect the integration power of that platform. A lot of things would have to be right but I can tell you as responsible business people we always look at it. We don’t need it to make our goals but you always have to look at it. We do want to be the defining enterprise software company the 21st century. That’s our plan.
I’m a pretty annoying founder. I’m very stubborn and very steadfast. Sort of this is my very strongly held opinion and belief and I’m gonna run into a wall to prove it out. That has certain characteristics that can be annoying at times I’m sure both at the investor level as well as for anybody that is working with me. I’ve been able to tone it down over the years and control it more and contain it. I think it’s not causing probably as much annoyance.
You have to be stubborn and right is the key. Stubborn and wrong means new job. There’s a Venn diagram of stubborn and right and you want to be right in that target zone. I look back when when I was 20, 21, or 22 and learning this trade and there were plenty of times where I was stubborn and wrong where maybe I took too long to pivot.
My co-founder was telling me we’ve got to go enterprise probably for three to six months earlier than we actually did. What are three to six months in compounding terms? I don’t know. Maybe we’d be 20 percent bigger now as a result of if I had not been so stubborn at that stage and not seeing the information in the way that he was? That can just be sometimes an annoying pattern that people run into.
“Once you get to the cloud all of a sudden the lid is off,” says Snowflake CEO Frank Slootman. “People can just pursue their backlogs and whatever they can imagine. We’re now in a situation where technology is ahead of what people are capable of and imagining what they could actually do with it. That’s really a big part of what you see in Snowflake’s growth profile, a completely variable paradigm.”
Frank Slootman, CEO of Snowflake, says that on-premise data centers can only accommodate a tiny fraction of what their real demand for data analytics really is:
Once You Get To The Cloud The Lid Is Off
The important thing to understand is that there’s a couple of long-term secular trends that are coinciding and driving the development of the market overall. One is, as everybody knows, the movement towards cloud. It’s really a modernization play. We’re moving from on-premise data centers and we’re taking workloads to the cloud because we get to take advantage of better economics and utility models. Then we no longer have to manage capacity, we pay by the drink and all that sort of thing.
The other aspect that’s really important for our business is that we’ve had an extraordinary amount of pent up demand. The on-premise data centers could only accommodate a very tiny fraction of what their real demand for data analytics really is. Once you get to the cloud all of a sudden the lid is off. People can just pursue their backlogs and whatever they can imagine. We’re now in a situation where technology is ahead of what people are capable of and imagining what they could actually do with it. That’s really a big part of what you see in Snowflake’s growth profile, a completely variable paradigm.
Notion Of Headquarters Is Evaporating
We don’t have a yearning to go back to where we were. I can see why people would have that because of lockdowns and things of that sort. From a business standpoint, there’s a lot of positives to the shock to the system that we received. It’s almost like a wake-up call that is just opening our eyes to the opportunity. This whole notion that the office is your workday home we just realized that it’s nonsense. In other words, offices need to be there for specific purposes, for events, for training, for meetings specifically, but not a place to hang out nine to five. That’s definitely changing. It’s going to really reduce the real estate footprint that companies have.
The other trend and you’ve seen it with companies leaving California, the likes of Oracle and HP and Tesla, and so on is that the whole notion of headquarters is pretty much evaporating in front of our eyes. We’re no longer operating with a physical center of the universe. We’re completely virtual. We’re connecting as needed. We’ve been operating for the better part of a whole year without a headquarters and it’s just fine. All of a sudden everybody’s staring at each other and saying like what is the headquarters anyway. You’ve seen companies like Pinterest and you’re writing up massive leeches in San Francisco and saying we’re going to be headquarter-less. It’s just a concept whose time has gone away… and that’s very profound.
We Are Buying Talent And Technology, No M&A
Usually, big M&A is a function of people running out of market and running out of a lot of opportunity. They’re trying to invade adjacent territories to give themselves new runway. That is obviously not the case for Snowflake. We’re in a tremendous marketplace and we are buying talent and technology. We sometimes refer to it as stem cells that we can use that we don’t have ourselves that we can build very specific technologies around that are very much built snowflake way. We can really enable our platform mission or footer. That’s really been our mode. If you looked at our history we don’t have a history of doing big acquisitions.
Snowflake CEO Frank Slootman: Once You Get To The Cloud The Lid Is Off
Alphabet’s Verily and Broad Institute of MIT and Harvard have partnered with Microsoft to advance biomedical research.
Alphabet’s Google and Microsoft may be major rivals in the cloud market, but Alphabet’s Verily — its life and sciences company — is working with Microsoft to help remove the technical barriers for biomedical researchers.
But making use of these important datasets remains difficult for researchers who face huge, siloed data estates, disparate tools, fragmented systems and data standards, and varying governance and security policies.
The new partnership aims to break through those barriers by bringing together Microsoft’s cloud, data and AI technologies, and global network of more than 168,000 health and life sciences partners to accelerate development of global biomedical research through the Terra platform, provide greater access and empower the open-source community. Building on the open-source foundation of Terra, the new collaboration will advance the ability of data scientists, biomedical researchers and clinicians around the world to collaborate in tackling some of the most complex and widespread diseases facing society today.
Emphasizing the importance of a multi-cloud approach, a Verily spokesperson told VentureBeat that “Verily feels strongly that the open data ecosystem should be multi-cloud.”
Biomedical research is more important than ever, especially as the world grapples with a global pandemic. Verily, the Broad Institute and Microsoft’s efforts should go a long way toward easing the technical challenges biomedical researchers face.
“This year we’ve seen fairly brutal changes in patterns of usage in the cloud,” says Datadog CEO Olivier Pomel. “As you can imagine, streaming (has increased). All of a sudden everybody’s kids are watching Disney+. Also, video conferencing, online gaming, and all of that spiked pretty quickly. The way we see that is it’s a big win for the cloud, in general.”
This year we’ve seen fairly brutal changes in patterns of usage in the cloud. As you can imagine, streaming (has increased). All of a sudden everybody’s kids are watching Disney+. Also, video conferencing, online gaming, and all of that spiked pretty quickly. Even if you think of the domains that were negatively impacted by COVID such as travel when all of a sudden everybody had to cancel their travel, it actually meant a lot more activity for the online sites of the travel companies.
So you see all these patterns of companies pointing up and spinning down. The way we see that is it’s a big win for the cloud, in general. Companies could change their minds they could actually scale up. They could decide to shift different services to have them delivered at different scales instead of having to spend three to six months trying to retool everything and ship that to the data centers. They could do that very quickly in the cloud. We see that as a big win for the cloud.
Next year we still see some scaling from those customers. We see some of the industries that were negatively impacted coming back online and getting back up. Across the board, we see more and more renewed urgency around digital transformation and migration to the clutches precisely because the cloud made it possible for companies to react so quickly. Those who are not on the cloud were more impacted than the others.
Datadog CEO Olivier Pomel: 2020 Was Big Win For The Cloud
Some of the biggest names in tech have formed the Modern Computing Alliance, with the goal of transforming the cloud and its tools.
Cloud computing has become one of the biggest, most important trends in modern computing. Already well under way, the migration to cloud computing went into overdrive as a result of the COVID-19 pandemic. Companies around the world are relying on cloud computing to manage remote employees, stay productive and adapt to a new reality.
Unfortunately, migrating to the cloud is not always an easy task, especially for companies with decades of investment in legacy systems. The Modern Computing Alliance is aimed at “aligning standards and technologies to provide companies with the choice of high-performance, cloud-first computing solutions from the vendor of their choice who provide modern solutions for the modern era of business.”
Google’s John Solomon, VP Chrome OS, outlined the alliance’s vision in a blog post:
To drive ‘silicon-to-cloud’ innovation for the benefit of enterprise customers—fueling a differentiated modern computing platform and providing additional choice for integrated business solutions.
Solomon emphasized that any strong alliance needs a strong diversity of members, to help bring unique perspectives to the table. The Modern Computing Alliance certainly meets that criteria with its founding members: Box, Citrix, Dell, Google, Imprivata, Intel, Okta, RingCentral, Slack, VMWare and Zoom.
The Modern Computing Alliance members are specifically focused on four key areas:
Performance
Security and Identity
Remote, Collaboration and Productivity
Healthcare
“The shared goal among the Modern Computing Alliance members is to fuel innovation in these key areas and provide customers with preferred choices without the tradeoffs they may face with a single vendor,” writes VMware’s Kenny Takahashi.
“Customers will play an integral role in the Modern Computing Alliance through the Modern Computing IT Council, which will provide a forum for IT champions to make themselves heard. Customer IT Council participants will have exclusive lines of communication with Modern Computing Alliance members and help define the future of computing through research, advisory workshops, roadmap inputs, and solution testing.”
The Modern Computing Alliance looks like a promising step in the right direction toward making cloud computing even easier.
Amid increased antitrust scrutiny, at least one expert is predicting Jeff Bezos and Amazon may spin off AWS.
AWS is currently the dominant cloud provider, with 31% of the cloud computing market. At the same time, Amazon is a major force in the e-commerce market, and several of its acquisitions have helped it became a significant player in other industries. Whole Foods, Ring and Twitch are just a few of the acquisitions that have made Amazon a powerhouse far beyond its original form.
The company’s expansion into other markets has drawn the attention of the government, as it looks closely at Big Tech in general. While the current scrutiny has come under a Republican administration, Democrats traditionally come down even harder on big business, raising the stakes with an incoming Biden/Harris administration.
Scott Galloway, Professor of Marketing, NYU Stern School of Business, spoke with CNN’s Michael Smerconish about the antitrust challenges facing tech companies.
“It’s a real concern for all of them. There’s already a case against Google, which I think the Biden/Harris administration will pick up. The shadow of the Biden/Harris administration has already resulted in more change at Facebook and Twitter than we’ve seen in a long time. [They’ve] made huge efforts to try and stop the spread of misinformation around the COVID-19. And I would argue that it’s tantamount to teens who have held a great party and their parents are coming home, and they’re trying to clean up their act.”
Professor Galloway then spoke specifically about the lengths Amazon may go to avoid antitrust issues.
“As it relates to Amazon, it will be Google, then likely Facebook for antitrust action. I do think it will happen to Amazon, but not until those two are done. I personally think Jeff Bezos, who’s the smartest businessperson in the world, will likely spin AWS prophylactically. And my prediction, Michael, is that in the year 2025, the most valuable company in the world will be a recently spun, independent AWS. The largest, most profitable cloud company in the world would be a stock that everyone would own.”
Dell Technologies’ VMware posted its third-quarter results, beating estimates on strong subscription and SaaS growth.
VMware is a leading virtualization software company, with its software in use by many of the biggest organizations in the world. The company’s software is also seeing widespread use in cloud infrastructure, with many telcos relying on it to help speed up 5G deployment.
The company has reported its Q3 results, beating consensus estimates on $2.86 billion in revenue. Subscription, SaaS and license revenue accounted for $1.32 billion, an increase of 10% from the year-ago quarter. The subscription and SaaS revenue alone was $676 million, a 44% increase over the year-ago quarter.
“Q3 was another good quarter for VMware, and we’re pleased with our results,” commented Pat Gelsinger, CEO, VMware. “As customers navigate through these unprecedented times, our focus remains on delivering the digital foundation for an unpredictable world. We continue to shape the future in areas that are top priority for every business–from app development to multi-cloud to security and digital workspaces.”
“Subscription and SaaS revenue increased 44% year-over-year in Q3 and surpassed license revenue for the first time,” said Zane Rowe, executive vice president and CFO, VMware. “VMware will continue to invest in and focus on further expanding our Subscription and SaaS portfolio, which we believe will drive company growth, customer satisfaction and shareholder value.”
IBM has announced it is acquiring applications performance monitoring (APM) company Instana to aid in its hybrid cloud and AI strategy.
IBM made headlines in October when it announced its plans to split itself into two companies. The legacy business will be split into a new company, while the core IBM doubles down on hybrid cloud and AI services.
To assist in those goals, the company is now acquiring Instana, a startup that uses AI to help companies monitor the performance of cloud apps and services. The startup’s platform is a natural fit for IBM’s newfound focus.
“Our clients today are faced with managing a complex technology landscape filled with mission-critical applications and data that are running across a variety of hybrid cloud environments – from public clouds, private clouds and on-premises,” said Rob Thomas, Senior Vice President, Cloud and Data Platform, IBM. “IBM’s acquisition of Instana is yet another important step that we are taking to provide companies with the most complete portfolio of AI-automated solutions to tackle this enormous challenge and help prevent unforeseen IT incidents that can cost a business in lost revenue and reputation.”
At the same time, being part of IBM will help Instana develop its service even more, becoming a dominant player in the DevOps community.
“With the added responsibility of ensuring the build and run quality of the software they develop, DevOps teams need a new generation of application performance monitoring and observability capabilities to succeed,” said Mirko Novakovic, co-founder and CEO, Instana. “Instana’s observability capabilities combined with IBM’s AI-powered automation capabilities across hybrid cloud environments will give clients a full view of their application performance to best optimize operations.”
Some 66% of companies believe it would take them at least five days to recover from an unpaid ransomware attack, according to a new survey.
Ransomware has become one of the most popular and lucrative types of cyber attacks in recent years, with companies of all types and sizes falling victim. Government, non-profits and healthcare organizations have increasingly been in the crosshairs as well. In fact, the first confirmed ransomware death occurred when a hospital in Germany was hit in September.
One of the biggest challenges many organizations face is the whether to pay or try to recover on their own from an attack. According to data firm Veritas’ 2020 Ransomware Resiliency Report, 66% of companies estimate it would take at least five days to recover from an attack if they chose not to pay the ransom.
As ransomware attackers continue to deploy more effective and potentially devastating means of holding companies’ data and workloads ransom, the time for enterprises to act is now. They need to immediately assess their resiliency approach and make their backup and disaster recovery processes more robust, no matter where their data and applications are hosted, so they can more confidently pursue their hybrid multicloud strategy.
The full report is worth a read, and illustrates the need for companies to continue to improve their ransomware resiliency.
“It’s a question of understanding what’s hybrid as opposed to pure public,” says IBM CEO Arvind Krishna. “I look at both Microsoft and Amazon as likely partners in this journey, not as being the one and two. In the hybrid world, the question is where does the client want to decide where the workload runs? They can run it on Amazon, they can run it on Microsoft, they can run it on IBM, or they can run it on private. What is the technology platform that goes across all of those? Red Hat gives a great answer to that technology platform.”
“There are many capabilities people need around integration and cybersecurity,” adds Krishna. “We’ll bring those to bear. Then we will bring our services to bear for those clients who would like to get that help both in improving the skills of their own people or for us to do the work for them. That is why you see us report $24 billion dollars in the trailing 12 months on total cloud revenue. That’s a hybrid market and not a singular public cloud market.”
IBM CEO Arvind Krishna On Hybrid Cloud: Microsoft and Amazon Likely Partners
IBM today announced third-quarter 2020 earnings results. Although overall revenue was slightly down again cloud revenue was up big.
“The strong performance of our cloud business, led by Red Hat, underscores the growing client adoption of our open hybrid cloud platform,” said Arvind Krishna, IBM chief executive officer. “Separating the managed infrastructure services business creates a market-leading standalone company and further sharpens our focus on IBM’s open hybrid cloud platform and AI capabilities. This will accelerate our growth strategy and better position IBM to seize the $1 trillion hybrid-cloud opportunity.”
Highlights for the third quarter include:
GAAP EPS from continuing operations of $1.89
Operating (non-GAAP) EPS of $2.58
Revenue of $17.6 billion, down 2.6 percent (down 3.1 percent adjusting for divested businesses and currency) — Cloud & Cognitive Software revenue up 7 percent (up 6 percent adjusting for currency)
Total cloud revenue of $6.0 billion, up 19 percent — Total cloud revenue of $24.4 billion over the last 12 months, up 22 percent (up 25 percent adjusting for divested businesses and currency)
Red Hat revenue up 17 percent (up 16 percent adjusting for currency), normalized for historical comparability
GAAP gross profit margin of 48 percent, up 180 basis points; Operating (non-GAAP) gross profit margin of 49 percent, up 160 basis points
Net cash from operating activities of $15.8 billion and free cash flow of $10.8 billion, over the last 12 months
“In the third quarter we continued to deliver strong gross profit margin expansion, generated solid free cash flow and maintained a sound capital structure with ample liquidity,” said James Kavanaugh, IBM senior vice president and chief financial officer. “We have the necessary financial flexibility to increase our investments in hybrid cloud and AI technology innovation and skills, while remaining committed to our long-standing dividend policy.”
“The next decade looking ahead is going to be the Software Decade,” says Snowflake board member and Altimeter Capital partner Kevin Wang. “Trends of moving more software to the cloud are just persisting. Cloud has completely changed the way that software is built and run. Software itself is being completely transformed. If what you saw over the past decade was exciting I’m even more excited about the next decade.”
The past decade has been a prolific time for technology companies. When you look at what we are set up for in the next decade it’s good to pause right now to see what has happened during the pandemic. We’ve seen that software is an integral part of the global economy. During the pandemic, we’ve found that we couldn’t go through the pandemic without the tools that we have.
Stanford research shows that just during the month of May over two-thirds of US GDP was created in our homes alone. That’s just incredible. These trends of moving more software to the cloud are just persisting. The next decade looking ahead is going to be the Software Decade.
Software Itself Is Being Completely Transformed
When we take a step back we look at how these companies are set up for the next ten years. It’s easy to get focused on what might happen in the short run. These trends are so powerful that they are going to power these companies and adoption for several years. It’s true that the pandemic has accelerated and pulled forward a lot of that demand. But a lot of the trends and behaviors we see are going to persist. For example, people are talking over Zoom and that’s just changed the way we are going to work. We can give a lot of examples of how that’s going to persist over the long run.
Software itself is being completely transformed. If what you saw over the past decade was exciting I’m even more excited about the next decade. What you have to understand is that cloud has completely changed the way that software is built and run. As we know, as business are digitally transforming they themselves are building and running more software. When you think about how to do that cloud has changed that.
Historically, you always had to decide better, faster, cheaper. You could only pick one or two of them. Now you can do all three. When you look at Snowflake, for example, you used to have to manage a cloud data warehouse, and that was a lot of work for your database experts. You don’t have to do any of that anymore. Snowflake will manage all of that for you.
The Software Decade Is Now – Altimeter Capital partner Kevin Wang
“What we’re announcing today is the democratization of AI,” says VMWare CEO Pat Gelsinger. “VMWare and Nvidia are coming together to leverage all the work they have done over the last decade and a half in AI. This partnership will put it on the industry-standard VMWare footprint to enable every enterprise to have this game-changing technology of AI. We see it as a game-changer for the AI industry broadly.”
Patrick Gelsinger, CEO of VMWare, announced just before this year’s huge virtual VMworld 2020 conference a partnership with Nvidia that will bring on the democratization of AI:
The Democratization Of AI
Nvidia and VMWare are coming together in a new partnership. Nvidia has been building their capabilities in artificial intelligence are for quite a number of years. But AI is used by only 10 to 15% of enterprises where specialized hardware sits in the corner of the data center and is only available in remote cloud environments. What we’re announcing today is the democratization of AI. VMWare and Nvidia are coming together to leverage all the work they have done over the last decade and a half in AI.
This partnership will put it on the industry-standard VMWare footprint to enable every enterprise to have this game-changing technology of AI. Literally, that software can introspect on data and write software and bring that to every enterprise application. We are quite excited about the partnership. Nvidia CEO Jensen Huang and I have known each other for several decades and it really is exciting to see us bring the partnership to the next level.
Making AI Broadly Available For Enterprises
We are excited about it. We do see that this idea that we can now make AI broadly available for enterprises. It’s exciting for Nvidia because even as successful as they’ve been, they are still only cracking a small piece of the application workload. For us, this is a major accelerant not just in the data center but also extending to the Edge. As we see 5G and Edge emerge this is a major new area for both companies.
With our Tanzu offerings and virtualization offerings, it really is saying that now every enterprise can start to take availability of these powerful AI capabilities. We see it as a game-changer for the AI industry broadly and cleary an accelerant for us and for Nvidia and for our financials.
The Edge – Next Major Move Of Application Development
Multi-cloud is the core of our Tanzu offerings. We want to help companies take advantage of the most modern CI/CD pipeline DevOps, DevSecOps capabilities. But they need to be able to take advantage of it in their private data centers, across multiple clouds, and to the Edge. For this, clearly, our preferred partnership with Amazon has really taken off. Now with Azure and Google and Oracle and the Alibaba partnership showing up now they can take advantage of that across any cloud and be able to go from their private data centers to the cloud and back.
We now have major customers of which a number of those we are highlighting at VMWorld who really are taking advantage of both to the cloud as well as from the cloud. This hybrid approach enables us to save 30% on average for customers. It’s a big savings but it also enables customers to have consistent developer environments and take advantage of the Edge. The Edge will be the next major move of application development as 5G starts to become broadly available in the industry.
Rescale and Hyundai have announced they are collaborating on a multi-cloud, high performance computing (HPC) environment for the mobility industry.
As with many industries, the mobility industry is turning to the cloud to help with research and development. Relying on cloud-based HPC resources gives companies the ability to scale faster and with fewer limitations.
“Close collaboration between IT and the field is essential for Hyundai Motor’s digital transformation strategy,” said JungSik Suh, Senior Vice President and Head of ICT Division of Hyundai Motor Group. “We are pleased that the Rescale cloud platform will be the venue for this collaboration, and expect it to increase research efficiency by moving away from the physical limitations of a static on-premise environment.”
Resale’s platform will help Hyundai develop autonomous vehicles, enhance fuel efficiency, run simulations and test new safety features.
“As an intelligent control plane for big compute, Rescale enables researchers to collaborate seamlessly, and ensures simulation workloads always run on the most performant architectures from our multi-cloud provider infrastructure network.” said Edward Hsu VP of Product at Rescale. “We are pleased to be working with Hyundai Motor Group to drive unprecedented mobility innovation.”
While Microsoft and Amazon battle it out in court over one Department of Defense (DOD) contract, Google has secured a contract of its own.
The Defense Innovation Unit (DIU) is an organization within the DOD that helps the military innovate by adopting commercial software. As a result, the DIU helps prototype, deploy and scale commercial solutions to meet needs within the military.
The DIU has selected Google Cloud to build a secure cloud management solution based on Anthos, providing a multi-cloud approach that is managed from Google Cloud Console. Google Cloud will also use Istio for secure communication and Netskope for cloud security. This will allow the DIU to run web apps on multiple clouds, including Google Cloud, AWS and Microsoft Azure, and help the organization combat cyber threats worldwide.
“Google Cloud is a pioneer in ‘zero trust’ security and in deploying innovative approaches to protecting and securing networks worldwide,” said Mike Daniels, Vice President, Global Public Sector, Google Cloud. “We’re honored to partner with DIU on this critical initiative to protect its network from bad actors that pose threats to our national security.”
“Government agencies shouldn’t have to choose between security and throughput,” said Beau Hutto, VP Public Sector, Netskope. “Netskope is a leader in providing complete visibility and control for managed and unmanaged applications. This secure cloud management solution will help the DIU maintain vigilance, while also helping it seamlessly manage applications in service of its mission.”
In its ongoing efforts to gain cloud market share, Google Cloud has launched a version of its platform specifically aimed at the telecom industry.
Google Cloud is currently a distant third in the U.S. cloud industry, with a mere 4% of the market. CEO Thomas Kurian has set the goal of becoming at least the second largest U.S. cloud vendor within five years. One way the company is working to grow its market share is by appealing to specific industries. The company had previously released Google Cloud Anthos for Retail in an attempt to capitalize on retailers’ aversion to using a cloud solution from Amazon, one of their biggest competitors.
Now Google has launched Anthos for Telecom, “an open hybrid and multi-cloud application platform offering telecommunications companies the flexibility to modernize existing applications, build new ones, and securely run them on-premises and across multiple clouds.”
Anthos is based on open source technology and includes “Kubernetes, Istio, and Knative,” enabling “consistency between on-premises and cloud environments and helps accelerate application development.”
With Google’s latest addition to its cloud offerings, its obviously working to close the gap with its bigger competitors. Whether it will help the company meet Kurian’s goal remains to be seen.
