Category Archives: Web Services

Meet the new richest man on earth

This morning Jeff Bezos beat his nemesis from the same town Bill Gates as the richest man on the planet with his worth exceeding $90B. This was due to a huge surge in Amazon’s stock price (over $128 rise) to $1100 plus today. Their 3Q results came out yesterday and Amazon grew its revenue by 34% and profits inched up as well. There were fears that heavy investments in new warehouses and hiring workers would push it to a loss. This year Amazon’s stock started at $750. What a run!

Here are the numbers. Revenue soared 34% to a record $43.74B, a first for a non-holiday period, as the internet retail giant spread its ambitions with the acquisition of Whole Foods Market Inc. and widened its lead in cloud computing. Profit increased 1.6% to $256M, despite the costs bulging by 35%, a five-year high. I was surprised to know that Amazon employs 541,900 people, an increase from last quarter’s 382,400. Roughly 87,000 employees were added from Whole Foods. Now Amazon commands some 43.5% of e-commerce sales this year, compared with 38.1% last year.

I remember during the dot.com crash, everyone wrote off Amazon. When they ridiculed Bezos for a no-profit company with a bleak future, he jokingly replied, ” I spell profit as ‘prophet'”. He has come a long way with his prophetic vision and masterful execution.

The best addition to Amazon’s two core businesses (books and e-commerce) was the introduction of AWS as the cloud computing infrastructure back in 2004. First came S3 (simple shared storage) when Bezos convinced start-up companies to rent storage at one-hundredth of the cost of buying from big vendors. Then EC2 (Elastic Computing Cloud) was added and that took off in a big way, especially with capital-starved startups with unpredictable computing needs. Pretty soon, Amazon took the credit of being the ‘father of cloud computing’ beating big incumbents like IBM, HP, etc. Now AWS is a huge business growing fast and bringing in about $16B revenue with over 60% profit. AWS is making a difference to the bottom line. Microsoft is trying hard to catch up with its Azure cloud and so is Google with its GCE (Google Computing Cloud). Today’s AWS is a very rich stack with its own database as a service (Redshift, Dynamo, and Aurora), elastic Map-Reduce, serverless offering with Lambda, and much more.There are predictions that AWS could one day be the biggest business for Amazon.

While the pacific north-west remains to be the home of the richest man on earth, the title shifts to Bezos from Gates.

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Data Sharehouse?

This is yet another new term in our lexicon. The San Mateo, California-based startup Snowflake announced this week a new offering with this name, as a free add-on to the data warehouse it built for cloud computing. Now companies using Snowflake’s technology, officially called Snowflake Data Sharing, can share any part of their data warehouses, subject to defined security policies and controls on access, with each other.

Snowflake’s data sharehouse allows companies to provide direct access to structured and unstructured data without the need to copy the data to a new location. Current approaches include file-sharing, electronic data interchange, application programming interfaces and email, but all of them have issues ranging from lack of security to cumbersome methods of providing data access to the right people. Jon Bock, Snowflake’s marketing chief compared the difference in data sharing on Snowflake versus other methods to the difference between streaming music and compact discs. “It looks [to the data recipient] just as if the data resides on their own data warehouse,” he said.

The catch is that every participant must be a Snowflake customer using their data warehouse in the cloud. So this is another way to grow their market. We have seen this approach in the 1990s when Exchanges were introduced by the likes of Oracle for B2B data interchange. That did not go very far. Of course cost was a big factor, but the policy agreement on common formats and security for data exchange was another issue. Snowflake claims to solve this by having one source of truth in the cloud.

Of course companies, like manufacturers and suppliers, advertisers and publishers have been sharing data for quite a long time, but it has been cumbersome via technologies like EDI (electronic data interchange, developed in the 1940s), email, file sharing, APIs and more. That kind of sharing takes time and wasn’t created for the current situation, in which businesses need live data processed in real time to keep a competitive edge.

According to Bob Muglia, Snowflake’s CEO (ex-Microsoft), the data sharehouse changes the game and democratizes the possibilities, because anyone can access the service. Rather than being charged a subscription fee, users pay only according to the amount of data they have processed. Snowflake’s data sharing service is free to data providers, data consumers pay for the compute resources they use. Not only that, but data providers and consumers make their arrangements independent of Snowflake Computing which is the infrastructure provider.

In an increasingly collaborative world there is little doubt that sharing data easily, and in real time, without sacrificing security, privacy, governance and compliance is of great value. Whether it will create entirely new markets has yet to be seen, but actionable data-driven insights are likely to be huge differentiators in the digital economy.

It is a clever move, but time will tell if this will enable smooth data exchange or create more chaos.

Amazon+Whole Foods – How to read this?

Last Thursday (June 15, 2017), Amazon decided to acquire Whole Foods for a whopping $13.7B ($42 per share, a 27% premium to its closing price). On Friday, stock prices of Walmart, Target, and Costco took a hit downwards, while Amazon shares went up by more than 2%. So why did Amazon buy Whole Foods? Clearly Amazon sees groceries as an important long-term driver of growth in its retail segment. What is funny is that a web pioneer with no physical retail outlet decided to get back to the brick-and-mortar model. Amazon has also started physical bookstores at a few cities. We have come full circle.

Amazon grocery business has focussed on Amazon Fresh subscription service so far to deliver online food orders. Amazon will eventually use the stores to promote private-label products, integrate and grow its AI powered Echo speakers, boost prime membership and entice more customers into the fold. Hence this acquisition is the start of a long term strategy. Amazon is known for its non-linear thinking. Just see how it started a brand new business with AWS about 12 years back and now it is a $14B business with a 50%+ margin. It commands a powerful leadership position in the cloud computing business and competitors like Microsoft Azure or Google’s GCE are trying hard to catch up.

The interesting thing to ponder is how the top tech companies are spreading their tentacles. This was a front-page article in today’s WSJ. Apple, a computer company that became a phone company, is now working on self-driving cars, TV programming, and augmented reality. It is also pushing into payments territory challenging the banks. Google parent Alphabet built Android which now runs most PC devices. It ate the maps industry; it’s working on internet-beaming balloons, energy-harvesting kites, and self-driving technologies. Facebook is creating drones, VR hardware, original TV shows, and even telepathic brain computers. Of course Elon Musk brings his tech notions to any market he pleases – finance, autos, energy, and aerospace.

What is special about Amazon is that it is willing to work on everyday problems. According to the author of the WSJ article, this may be the smarter move in the long run. While Google and Facebook have yet to drive significant revenue outside their core, Amazon has managed to create business after business that is profitable, or at least not a drag on the bottom line. The article ends with cautionary note, “Imagine a future in which Amazon, which already employs north of 340,000 people worldwide, is America’s biggest employer. Imagine we are all spending money at what’s essentially the company store, and when we get home we’re streaming Amazon’s media….”

With few tech giants controlling so many businesses, are we comfortable to get all our goods and services from the members of an oligopoly?

Musings on a June morning!

Here in Silicon Valley, every day brings some new tech. news that gets your attention. A sample of current news:

  • Uber starts helicopter service in Sao Paolo, Brazil. That city of 20 million people gets horrific gridlocks that can stretch for hours. Hence people are taking advantage of a quick helicopter ride, say to the airport to catch a flight on time. Apparently there are plenty of helicopters sitting idle and are taking advantage of such a service. Uber is really disrupting the transportation industry.
  • Elon Musk wants to combine two of his companies – Tesla and Solar City. Actually Tesla is acquiring Solar City for $3 Billion. Musk argues that the combo would be good, as Tesla is looking for future solar-powered batteries for its cars.
  • There are still questions on the Microsoft-LinkedIn deal from last week – a $26.2 Billion price tag. Big mergers in the past decades have not shown great results. Remember Compaq+DEC ($9.6B in 1998), HP+Compaq ($19B in 2002), HP+EDS ($13.9B in 2008), Oracle+Peoplesoft ($10.3B in 2004), AOL+Time Warner ($181B in 2000), and Symantec+Veritas ($13.5B in 2005)? Then there are the big write-offs such as Microsoft+Nokia or HP+Autonomy. Only a few were winners. The rest resulted in depressed share prices, corporate confusion, and layoffs. So we will have to see how both Dell+EMC ($67B last fall) and Microsoft+Linkedin perform in years to come.
  • Nikesh Aurora quits Softbank after two years, because he is not going to be the CEO as expected. Masayoshi Son, the founder/CEO said he is going to stay for another 10 years as CEO. The truth seems to be board members questioning Aurora’s investments and some conflict of interest as he advises Silver Lake, a competitor. He invested heavily in Indian startups like Ola (Uber competitor) and Snapdeal.
  • Video messaging is becoming a hot technology future item. Snapchat, Facebook, and Twitter are all jumping into that field. But the leader seems to be a Berlin company called Dubsmash which has gained over 150 million users over last couple of years. They seem to lead in the content and delivery game and now have a new release emphasizing the video messaging platform.
  • Digital Advertising is gaining ground big time by the media companies. The shift to video ads in platforms like Youtube and Facebook is growing fast. I am  advising a company called Strike Social which is leading in the Trueview ad campaign buying and management business. I do see how fast it is growing. Using technology as a differentiator to provide cost optimization is the key here.

Strategic Technologies as per Gartner

I have known Gartner for decades during my IBM and Oracle days. Even though I have observed how they invent new terms to stuff we already know (a bit annoying, but I guess that’s their business), they do a decent job in capturing key strategic trends.

In a recent article, I saw ten strategic technology trends and this is how they are grouped: the first 3 address merging the physical and the virtual worlds and the emergence of the digital mesh (their new phrase); The next 3 trends cover the algorithmic business, where much happens in the background in which people are not directly involved; the final 4 trends address the new architecture and platform trends needed to support the digital and algorithmic business.

The first 3 trends:

  • The Device Mesh – In the postmobile world the focus shifts to the mobile user who is surrounded by a mesh of devices, each with an IP address always communicating.
  • Ambient User Experience – Seamless flow of experience across a shifting set of devices. Think of shifting from IoT, to automobiles, smartphones, etc.
  • 3D Printing Materials – This will necessitate the assembly line and supply chain processes to exploit 3D printing.

The next 3 trends:

  • Information of Everything – This information goes beyond textual, audio and video and includes sensory and contextual stuff.How do you bring meaning to a chaotic deluge of information? Much work is needed here.
  • Advanced Machine Learning – Deep Neural Networks (DNNs) go beyond classic computing and information management to create systems that can autonomously learn to perceive the world on their own. DNNs (an advanced form of machine learning applicable to large complex datasets) will make smart machines “intelligent”.
  • Autonomous Agents & Things – Like robots, autonomous vehicles, virtual personal assistants and smart advisors.

The final 4 trends:

  • Adaptive Security Architecture – how to combat the hacker industry beyond the perimeter defense and rule-based security?
  • Advanced Systems Architecture – this is what Gartner said, “Fueled by field-programmable gate arrays (FPGAs) as an underlying technology for neuromorphic architectures, there are significant gains such as being able to run at speeds of greater than a teraflop with high-energy efficiency”.
  • Mesh App and Service Architecture – Monolithic, linear application designs like the 3-tier architecture are giving way to loosely coupled integrative approach. Containers(e.g. Docker) are emerging as a critical technology for enabling agile development and microservice architectures. What is needed is a back-end cloud scalability and front-end device mesh experience.
  • Internet of Things Platforms – The management, security, integration plus standards are needed for the IoT platform to succeed.

These are all known areas, but I liked the way Gartner grouped them in a logical sequence.

 

Amazing Amazon

Amazon’s stock this last week crossed $300 (from $2 in 1997 when it went public, after splits) and the valuation reached $140B, twice that of Facebook, but lower than Google and Apple. This is indeed amazing.

Amazon started out as a web-based book selling company. Now it has three businesses:

  • Selling new books as well as users can sell their old books.
  • Using its fulfillment engine to sell every other consumer goods.
  • The Amazon Web Services platform for offering cloud based services.

The last item is growing to become its number one business soon. It started monetizing its huge computing infrastructure few years back, first with renting storage (S3).  Then came the Elastic Computing Cloud followed by myriad other cloud services. The AWS platform is the dominant cloud infrastructure, both IaaS and PaaS. It has been innovating new technologies such as REST, Dynamo, etc.

Amazon is a great example of a business constantly re-inventing itself, thanks to its leadership headed by the brilliant Jeff Bezos. Other computing business leaders like IBM and HP have become followers. Amazon even got into the tablet hardware business with Kindle.

Its new foray into video streaming and music expands its market beyond the traditional ones.

Given its growth, soon it will rank much higher in terms of market value.

Big Shift to Enterprise Cloud Software

One of the big shifts happening in the enterprise software business is the adoption of the Cloud. This is already the dominant model for the consumer Internet space (e.g. Google, Facebook). The overall myth was that large companies are so concerned about security and privacy of data that they will be reluctant to let go of running these applications in-house. Then about 3 years back, Oracle’s CEO ridiculed the cloud as vapor. But the landscape has surely changed and will change even faster going into 2012. Why do I say that?

Recently SAP bought Success Factors at a very high valuation and many saw that as a desperate move to get into the Cloud. Oracle also bought RightNow in the same vain and there is a strong possibility that Oracle will acquire NetSuite in the next twelve months (NetSuite addresses mostly the SMB market). SalesForce.com (SFDC) has been growing and its valuation has gone quite high. The new entrant Workday (founded by the founders of Peoplesoft) has been doing very well. Someone said it is valued at almost $2B with yearly booking rate of $300M. Not bad for a five year old company. Workday addresses the HR space, but is moving to financial applications as well. It wants to be known as an “ERP Replacement” company, not just an “HR Company”.

Most of Workday customers are the large enterprises such as Tyco, AIG, Flextronics, etc. These customers are replacing legacy applications from SAP and Oracle with Workday’s SaaS suite offered through the Cloud. The advantages are obvious for the customers – same version always, new functions added more frequently, vendor takes care of upgrades, less cost paid to SI’s. The traditional applications typically require a 5 to 6 times expense (over product license cost) on consultants (SI’s) who keep customizing the apps. Workday claims their customers have a 90% reduction on SI cost, which is a big deal.

The challenge for the enterprise Cloud vendors is the revenue model, where they do not get the hefty license dollars up front. Hence their investment (both capex and opex) is quite high. For example, Workday has taken investment of $250M to date, counting the last round. But if they can sustain like SFDC, then there is a thriving growth business. By the way, Google has a growing enterprise business and currently brings $1B revenue which is not bad at all. They clearly are focused to make this part grow faster in future.

This is not good news for legacy enterprise application companies like SAP and Oracle. They have to re-invent (or acquisitions like Success Factors and RightNow) quickly to catch up with this shift to the Cloud by large enterprises. Oracle is more likely to ride this bandwagon sooner than SAP. As per the SI’s, they need to re-invent also to at least keep their current clients happy. That means they have to shift from “customization” of code to more reconfiguration of business processes.