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The New AI Economy

The convergence of technology leaps, social transformation, and genuine economic needs is catapulting AI (Artificial Intelligence) from its academic roots & decades of inertia to the forefront of business and industry. There has been a growing noise since last couple of years on how AI and its key subsets like Machine Learning and Deep Learning will affect all walks of life. Another phrase “Pervasive AI” is becoming part of our tech lexicon after the popularity of Amazon Echo and Google Home devices.

So what are the key factors pushing this renaissance of AI? We can quickly list them here:

  • Rise of Data Science from the basement to the boardroom of companies. Everyone saw the 3V’s of Big Data (volume, velocity, and variety). Data is called by many names – oxygen, the new oil, new gold, or the new currency.
  • Open source software such as Hadoop sparked this revolution in analytics using lots of unstructured data. The shift from retroactive to more predictive and prescriptive analytics is growing, for actionable business insights. Real-time BI is also taking a front seat.
  • Arrival of practical frameworks for handling big data revived AI (Machine Learning and Deep Learning) which fed happily on big data.
  • Existing CPU’s were not powerful for the fast processing needs of AI. Hence GPU (Graphical Processing Units) offered faster and more powerful chips. NVIDIA provided a positive force in this area. It’s ability to provide a full range of components (systems, servers, devices, software, and architecture) is making NVIDIA an essential player in the emerging AI economy. IBM’s neuromorphic computing project provides notable success in the area of perception, speech and image recognition.

Leading software vendors such as Google have numerous projects on AI ranging from speech and image recognition, language translation, and varieties of pattern matching. Facebook, Amazon, Uber, Netflix, and many others are racing to deploy AI into their products.

Paul Allen, co-founder of Microsoft is pumping $125M into his research lab Allen Institute of AI. The focus is to digitize common sense. Let me quote from today’s New York Times, “Today, machines can recognize nearby objects, identify spoken words, translate one language into another and mimic other human tasks with an accuracy that was not possible just a few years ago. These talents are readily apparent in the new wave of autonomous vehicles, warehouse robotics, smartphones and digital assistants. But these machines struggle with other basic tasks. Though Amazon’s Alexa does a good job of recognizing what you say, it cannot respond to anything more than basic commands and questions. When confronted with heavy traffic or unexpected situations, driverless cars just sit there”. Paul Allen added, “To make real progress in A.I., we have to overcome the big challenges in the area of common sense”.

Welcome to the new AI economy!

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API-driven Economy?

I just went to a couple of sessions at the API World going on at the San Jose Convention center. I heard all kinds of new terms thrown within a span of couple of hours – the new API driven economy, iSaaS (integration software as a service), iPaaS (integration platform as a service), APIM (API management), BaaS (Backend as a service), etc. Then there was confusing & overlapping mixture of ideas in microservices, containers, connectors, API’s..all in the space of system integration. There were lots of young software developers at this conference and booths from companies I have never heard of – Jitterbit (Enterprise iPaaS), Back4App (backend dev. via Parser server), PubNub (real-time API), Rigor (API monitoring and testing). I took a deep breath and thought of all these ideas over last 3 decades – api’s, subroutines, reusable web services, service-oriented-architecture, integration via connectors, assembly of interchangeable parts from common libraries, etc. Welcome back to the future!

I see the urgency of this now that we have so many products and platforms in every category. A speaker from Jitterbit showed how Cisco’s marketing software stack has 39 different technologies – SalesForce, 6Sense, Eloqua, App Annie, Live Agent, etc. They do functions like campaign management, CRM, email blast, mobile notification… This is definitely not the ideal solution. Jitterbit wants to be the mediator via API’s to consolidate all these based on activities and work flow. No wonder, this Alameda-based startup is doing very well. I was not surprised to learn that SalesForce & private equity firm KKR are investors in Jitterbit.

Gartner predicts enterprise application integration market to be $33.5B by 2020 (CAGR of 7.1% from $25.5B in 2016), whereas the integration platform as a service (iPaaS) will be $3.6B by 2021 (CAGR of 41.5% from $526M in 2016). The data integration market is going to reach $12.2B in 2022 from $6.4B in 2017 (CAGR 13.7%). Gartner says, “IT leaders should combine on-premise integration platform, iPaaS, iSaaS and API Management capabilities into a single, yet modular enterprise capability.” Gartner defines this whole space as Application Integration Platforms.

I think it’s time we consolidate all these terms and bring real clarity. Current marketing hype of API driven economy does not help much. What used to be a programmer’s term (api – application programming interface) is now marketed as a broad term to solve the world hunger problem.

The goal has not changed – we want integration of heterogeneous systems (both inside and outside the enterprise) to be highly efficient, transparent, and less labor intensive.

Serverless, FaaS, AWS Lambda, etc..

If you are part of the cloud development community, you certainly know about “serverless computing”, almost a misnomer. Because it implies there are no servers which is untrue. However the servers are hidden from the developers. This model eliminates operational complexity and increases developer productivity.

We came from monolithic computing to client-server to services to microservices to serverless model. In other words, our systems have slowly “dissolved” from monolithic to function-by-function. Software is developed and deployed as individual functions – a first-class object and cloud runs it for you. These functions are triggered by events which follows certain rules. Functions are written in fixed set of languages, with a fixed set of programming model and cloud-specific syntax and semantics. Cloud-specific services can be invoked to perform complex tasks. So for cloud-native applications, it offers a new option. But the key question is what should you use it for and why.

Amazon’s AWS, as usual, spearheaded this in 2014 with a engine called AWS Lambda. It supports Node, Python, C# and Java. It uses AWS API triggers for many AWS services. IBM offers OpenWhisk as a serverless solution that supports Python, Java, Swift, Node, and Docker. IBM and third parties provide service triggers. The code engine is Apache OpenWhisk. Microsoft provides similar function in its Azure Cloud function. Google cloud function supports Node only and has lots of other limitations.

This model of computing is also called “event-driven” or FaaS (Function as a Service). There is no need to manage provisioning and utilization of resources, nor to worry about availability and fault-tolerance. It relieves the developer (or devops) from managing scale and operations. Therefore, the key marketing slogans are event-driven, continuous scaling, and pay by usage. This is a new form of abstraction that boils down to function as the granular unit.

At the micro-level, serverless seems pretty simple – just develop a procedure and deploy to the cloud. However, there are several implications. It imposes a lot of constraints on developers and brings load of new complexities plus cloud lock-in. You have to pick one of the cloud providers and stay there, not easy to switch. Areas to ponder are cost, complexity, testing, emergent structure, vendor dependence, etc.

Serverless has been getting a lot of attention in last couple of years. We will wait and see the lessons learnt as more developers start deploying it in real-world web applications.

Hats Off, Andy Grove! RIP

I happen to be in Poland and just heard of Andy Grove’s passing away. If you go south from here, cross Slovakia, you will reach Hungary. That’s where Andy Grove grew up in a jewish family. Then came the Nazi occupation in the 1940s when jews were exterminated. Andy had to flee the country to Austria in very difficult circumstances. Then he got unto a boat and sailed for unknown land of America. He reached New York with $20 in his pocket and no idea what he was going to do. As he enrolled at City University of NY, he took up physics. He taught himself english and topped the class soon. A brilliant student, he continued his journey to the west coast to UC, Berkeley where he got a Ph.D. in chemistry/chemical engineering.

Andy started at Fairchild, but left to join Bob Noyce and Gordon Moore to start a new company called Intel. He basically built the company from scratch. From memory chips, Intel took a leap into microprocessors, considered a huge risk in those days. But Andy was at the helm, the CEO of a hugely successful company Intel, that almost defined the Silicon valley of today. Many would agree that Andy created the Silicon valley. He was Time’s man of the year in 1996. His straightforwardness and no-nonsense style of management is legendary. His famous book, “Only the Paranoid Survives” made big waves when it came out. You have to run scared to win in your business. Intel defined the computing era of 1980s and 1990s.

Andy taught many leaders of the valley as a mentor – Larry Ellison, Steve Jobs, John Doerr, Mark Zuckerberg, etc. etc. During my days at Oracle, I had the opportunity to listen to Andy a couple of times. He lead by example and was completely full of substance. People who worked for him, adored him. With all that success, he had the humility of very egoless person. He contributed significantly to many charities through his foundation. Oh, there is so much we can learn from Andy Grove.

As we mourn his death, let us remember his great leadership qualities combined with utter humility.

YC – Y Combinators, the startup kingmaker

Back in 2008, three young men applied to Y Combinator (YC), a school for startups, looking for help with their tiny firm, AirBed and Breakfast, a website that helped people rent out inflatable mattresses in their living rooms during conferences. YC helped them to refine their idea and meet early investors. Today, Airbnb, as their firm is known now, rents whole apartments in 190 countries and is valued at $25.5 billion.

Since 2005, YC has taken on batches of promising founders and this month they celebrated the funding of its 1000th. startup. About half have failed, but the successes are quite remarkable. Eight of these YC firms have become what Silicon Valley calls “unicorns”, valued at $1 billion or more. Examples:

  • Airbnb (joined in 2009),
  • Dropbox (valuation at $10B, 2007),
  • Stripe (value $5B, 2010),
  • Zenefits (value $4.5B, 2013),
  • Instacart (value $2B, 2012),
  • Docker (value $1.1B, 2010).

Combined, the companies YC has invested in are worth around $65 billion, although YC’s share is only a small fraction, maybe $1-2B.

So what is YC’s magic? YC melds the best of an investment firm and a university providing coaching on how to refine the product and create a viable business plan. It puts in a small investment (typically $120,000 in return for a 7% stake) and has produced a group of successful alumni. It has helped popularize the idea that startups are a viable career. Thousands of aspiring entrepreneurs apply to attend the 3-month YC program, mostly because of the networking potential with investors and other attendees. For its spring 2015 class, YC received more than 6700 applications and accepted around 1.6% of them, better record than Harvard University. 

YC has a small campus in Mountain View, close to Googleplex. At the end of the three months, entrepreneurs deliver a presentation about their business to a group of Silicon valley’s top investors. This event is called the Demo day, where new ideas can be demonstrated to investors.

There are many “accelerators” like YC around the world (they have replicated YC’s investment and training philosophy), but none has achieved YC’s brand or its record. 

Design-thinking at IBM

The Sunday New York Times published this article on IBM’s new way of thinking that is worth reading.

The article states – The company is well on its way to hiring more than 1,000 professional designers, and much of its management work force is being trained in design thinking. “I’ve never seen any company implement it on the scale of IBM,” said William Burnett, executive director of the design program at Stanford University. “To try to change a culture in a company that size is a daunting task.”

If you ask people inside IBM for a design-thinking success story, they are likely to mention Bluemix, a software tool kit for making cloud applications. In just one year, Bluemix went from an idea to a software platform that has attracted many developers, who are making apps used in industries as varied as consumer banking and wine retailing. In the past, building that kind of technology ecosystem would have taken years.

Software developers are just as important as customers to IBM, since both groups create markets. “We wanted to redefine IBM for developers,” said Damion Heredia, an IBM vice president who leads the Bluemix operation. When a free test version of Bluemix was offered in February 2014, Mr. Heredia figured it might attract 2,000 developers in the first few months. It reached that number within a week, and a commercial version was introduced that July. Today, Bluemix is signing up 10,000 new users a week.

The new mantra at IBM is speed, speed and speed. The design-oriented approach is promised to yield the agility they need in re-inventing themselves. Being 104 years old, IBM has changed course and re-invented itself may times. Now the focus seems to be cloud computing, analytics, and big data. The emphasis from hardware has waned shifting more into software and service. They are also being successful in recruiting young graduates from top schools like Stanford, when these kids often think Google is an old company (and IBM is a historic relic). Design leadership from people like Phil Gilbert is bringing fundamental changes in this metamorphosis.

It’s worth watching how fast IBM switches its culture!

Dell + (EMC+VMW) = A $67B Gamble!

Yesterday, Dell announced the largest technology M&A in history with a proposed$67B buyout of EMC and VMware (via EMC’s 80% ownership of VMW). The combined company will have over $80B in revenue, employ tens of thousands of people around the world and sell everything from PCs, servers & storage to security software and virtualization software. Not to be overlooked is the fact that Dell and EMC will be private companies and free from the scrutiny of activist investors.

Dell has to borrow a ton of money to make this deal, like $40B debt. The annual interest payment will be $2.5B! This deal has three entities – Michael Dell’s own investment, Silverlake Partners, and Singapore based Tomasek. On paper this seems like the two companies bring complimentary values – Dell sells to small to medium size companies and EMC addresses the larger enterprise needs. The big attraction for Dell is the VMWare piece that revolutionized the desk-top virtualization market. Currently VMWare is 25% of EMC’s revenue, but 50% in valuation.

The concern is that as more corporations adopt cloud storage and cloud computing for their IT needs, there is less reason to spend money on the costly software and hardware upgrades typically offered by established IT companies like EMC. But by consolidating, they can better compete against the lower-cost cloud service companies – AWS (Amazon Web Services), IBM, Alphabet (Google), and Microsoft Azure.

This is going to be a big gamble. The HP CEO circulated an internal memo suggesting how this will be great opportunity for HP, as the combined company will create a lot of chaos and confusion. At the same time, being private, the new entity can execute radical restructure. But this will be a herculean task to make the combined company a winner in the highly competitive “IT infrastructure” market.