I moderated a panel of 3 CIOs last Sunday at the Solix Empower conference on the subject of data-driven enterprise. The three CIO’s came from different industries. Marc Parmet of the TechPar group spent many years at Avery Dennison after stints at Apple and IBM. Sachin Mathur leads the IT innovations at Terex Corp., a large company supplying cranes and other heavy equipments. PK Agarwal, currently dean at Northeastern University, used to be the CIO for the Government of California. Here are some of the points covered:
I reminded the audience that we are at the fourth paradigm in science (as per the late Jim Gray). A thousand year ago, science was experimental, then few hundred years back science became theoretical (Newton’s law, Maxwell’s law..), fifty years ago, science became computational (simulation via a computer). Now the fourth paradigm is data-driven science where experiment, theory, and computation must be combined to one holistic discipline. Actually science hit the “big data” problem long before the commercial world.
Top level management is starting to understand that data is the oxygen, but they are yet to fully make their organizations data-driven. Just having a data warehouse with analytics and reporting does not make it data-driven, but they do see the value of predictive analytics and deep learning for competitive advantage.
While business-critical applications continue to run on-premise, newer, less critical apps such as collaboration and email (e.g. Lotus Notes) are moving to the public cloud. One said that they are evaluating migrating current Oracle ERP to a cloud version. Data security and reliability are critical needs. One panelist talked about not just private, public or hybrid cloud, but “scattered” cloud which will be highly distributed.
Out of the 3V’s of big data (volume, variety, and velocity), variety seems to be of higher need – images, pictures, videos combined with sensors deployed in manufacturing and factory automation. For industries such as retail and telcos, volume dominates. The velocity part will become more and more critical as streaming of these data in real-time will need fast ingestion and analysis-on-the-fly for timely decision making. This is the emerging world of IoT where devices with an IP address will be everywhere – individuals, connected homes, autonomous cars, connected factories. They will produce huge amounts of data volume. Cluster computing with Hadoop/Spark will be the most economical technology to deal with this load. Much work lies ahead.
There will be serious shortage of “big data” or “data science” skills, of the order of 4-5 million in next few years. Hence universities such as Northeastern is setting up new curriculum on data science. Today’s data scientist must have knowledge of the business, algorithms, comp. science, statistical modeling plus he/she must be good story teller. Unlike the past, it’s not just answering questions, but figuring out what questions to ask. Such skills will be at a premium as enterprises become more data-driven.
We discussed many other points. It was a fun panel.
I watched Larry Ellison’s keynotes at this week’s Oracle Open world conference in San Francisco. They are definitely serious in pushing their cloud offerings, even though they came in late. But Oracle claimed that they have been working on it for almost ten years. The big push is at all 3 levels – SaaS, PaaS, and IaaS. The infrastructure as a service claims faster and cheaper resources (computing, storage, and networking) to beat Amazon’s AWS. They make a good point on better security for the enterprises, given the risk of security breaches happening at greater frequency lately. One comment I have is that AWS is beyond just IaaS, they are into PaaS as well (e.g. Docker services, etc. for devops). Oracle’s big advantage is in offering SaaS for all their application suits – ERP, HCM and CRM (they call it CX as customer experience). This is not something AWS offers for the enterprise market, although apps like SalesForce and Workday are available. Microsoft has Dynamics as an ERP on their cloud.
I do agree that Oracle has an upper hand when it comes to database as a service. Larry showed performance numbers for AWS Redshift, Aurora, and DynamoDB compared to Oracle’s database (much faster). They do have a chance to beat AWS when it comes to serious enterprise-scale implementations, given their strong hold in that market. Most of these enterprises still run much of their systems on-premise. Oracle offers them an alternative to switch to the cloud version within their firewall. They also suggest the co-existence of both on-prem and cloud solutions. The total switch-over to cloud will take ten years or more, as the confidence and comfort level grows over time.
AWS has a ten year lead here and they have grown in scale and size. The current run rate for AWS is over $10B in revenue with hefty profit (over 50%). However, many clients complain about the high cost as you use more services of AWS. Microsoft Azure and Google’s cloud services are marching fast to catch up. Most of the new-age web-companies use AWS. Oracle is better off focusing on the enterprise market, their strong hold. Not to discount IBM here, who is pushing their Soft Layer cloud solutions to the enterprise customers. Mark Hurd of Oracle showed several examples of cloud deployment at large to medium size companies as well. One interesting presence at the Open World yesterday was the chief minister (like a state Governor) of the Indian state, Maharashtra (Mumbai being the big city there). He signed a deal with Oracle to help implement cloud solutions to make many cities into “smart” cities and also connecting 29000 villages digitally. This is a big win for Oracle and will set the stage for many other government outfits to follow suit.
I think more competition to AWS is welcome, as no one wants a single-vendor lock-in. Mark Hurd said that by 2020, cloud solutions will dominate the enterprise landscape. The analysts are skeptical on Oracle’s claim over AWS, but a focused Oracle on cloud is not to be taken lightly.
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While reading the latest issue of the Economist, I was reminded that August 25th. marks an important anniversary for two key events: 25 years back, on August 25, 1991, Linus Torvalds launched a new operating system called Linux and on the same day in 2006, Amazon under the leadership of Andy Jesse launched the beta version of Elastic Computing Cloud (EC2), the central piece of Amazon Web Services (AWS).
The two are very interlinked. Linux became the world’s most used piece of software of its type. Of course Linux usage soared due to backers like HP, Oracle, and IBM to combat the Windows force. Without open-source programs like Linux, cloud computing would not have happened. Currently 1500 developers contribute to each new version of Linux. AWS servers deploy Linux heavily. Being first to succeed on a large scale allowed both Linux and AWS to take advantage of the network effect, which makes popular products even more entrenched.
Here are some facts about AWS. It’s launch back in 2006 was extremely timely, just one year before the smartphones came about. Apple launched its iPhone in 2007 which ushered the app economy. AWS became the haven for start-ups making up nearly two-third of its customer base (estimated at 1 million). According to Gartner Group, the cloud computing market is at $205B in 2016, which is 6% of the world’s IT budget of $3.4 trillion. This number will grow to $240B next year. No wonder, Amazon is reaping the benefits – over past 12 months, AWS revenue reached $11B with a margin of over 50%. During the last quarter, AWS sales were 3 times more than the nearest competitor, Microsoft Azure. AWS has ten times more computing capacity than the next 14 cloud providers combined. We also saw the fate of Rackspace last week (acquired by a private equity firm). Other cloud computing providers like Microsoft Azure, Google Cloud, and IBM (acquired SoftLayer in 2013) are struggling to keep up with AWS.
The latest battleground in cloud computing is data. AWS offers Aurora and Redshift in that space. It also started a new services called Snowball, a suitcase-sized box of digital memory which can store mountains of data in the AWS cloud (interesting challenge to Box and Dropbox). IBM bought Truven Health Analytics which keeps data on 215m patients in the healthcare industry.
The Economist article said, “AWS could end up dominating the IT industry just as IBM’s System/360, a family of mainframe computers did until the 1980s.” I hope it’s not so and we need serious competition to AWS for customer’s benefits. Who wants a single-vendor “lock-in”? Microsoft’s Azure seems to be moving fast. Let us hope IBM, Google, and Oracle move very aggressively offering equivalent or better alternatives to Amazon cloud services.
On this first day of August 2016, I saw that the top most-valued companies are tech. companies, and the fifth one is almost there. Here is the list.
Apple ($appl): $566 billion
Alphabet ($goog): $562B
Microsoft ($msft): $433B
Amazon ($amzn): $365B
Exxon Mobile ($xom): $356B
Facebook ($fb): $353B
The big move is Amazon’s beating Exxon Mobile (used to be number 1 for many years) to the fourth spot. The switch came after Amazon posted its fifth straight quarter of profits last week as the oil giant’s profits tumbled 59 percent during the same rough period. If Exxon continues its drop, then Facebook will beat it in days.
This is quite remarkable! Other than Microsoft and Apple, the other 3 companies are much younger, Facebook being the youngest one. Their rapid rise is due to the growth of the Internet with its associated areas of search, e-commerce, and social networking. Interestingly Amazon survived the dot-com bust of the early 2000-2001 time unlike Yahoo, AOL, etc. Contrast this to the $4.8B valuation of Yahoo’s core business acquired by Verizon last week! Also, the fastest growing and most profitable of Amazon’s 3 businesses (Books, any commercial items, and AWS) is the cloud infrastructure piece called AWS (Amazon Web Services) with a run-rate of $10B this year. This is way ahead of Microsoft’s Azure cloud or Google’s cloud solutions.
The importance of cloud is obvious as Oracle just paid $9.3B last week to acquire Netsuite, a company that was funded by Larry Ellison. With a 40% ownership of Netsuite, he gets a hefty $3.5B from this deal. Paradoxically, Amazon lead the way to cloud computing – not IBM, not HP, not EMC/VMWare, and not Microsoft or Google. So no wonder, Amazon is reaping the benefits!
So finally it was Verizon paying $4.8B to acquire Yahoo’s core business. Business Insider said, “Yahoo, which was founded in 1994, was one of the world’s leading internet businesses but has gone through tough times in the past several years. Yahoo’s peak value was $125 billion in 2000, and even in 2008, Microsoft wanted to pay $45 billion for the company, so a $4.8 billion sale price pales in comparison.
This deal is also more or less the logical extension of Verizon’s $4 billion deal last year to acquire AOL, which is still run by Tim Armstrong, whom Yahoo CEO Marissa Mayer worked with at Google back in the day. Yahoo and AOL, after all, are fairly similar old-school content-and-advertising internet businesses. Here is the reaction from a competitor Sprint – CEO Marcelo Claure said Monday that Verizon’s purchase of Yahoo is just the latest in a long history of deals by telecom firms trying to get into the content business, none of which have panned out.
Although this deal sounds like a sad end to Yahoo, an icon of the early Internet players, Marissa Mayer tried to paint it as a success. Why not? She will walk out with almost $50m if fired from her job. It is a big let-down for her, specially after the high expectations when she was hired in 2012. She was supposed to turn this company around with big revenue growth. None of that happened. Rather she spent a ton of money for very little return. Take the case of Tumblr, which was mostly a waste (after paying $1.1B). As they say, you ruin the company and then walk out with a huge amount of money. Sad but true.
As of today, the business that will stay behind post-acquisition by Verizon includes Yahoo’s cash, its shares in Alibaba and Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents (called the Excalibur portfolio). These remaining businesses will be rebranded after the completion of the acquisition in early 2017.
It will be interesting to see how Verizon brings some synergy across its 3 similar, but overlapping offerings – AOL, Yahoo and its own go90.
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.
This is big news this morning – Microsoft buying LinkedIn at $26.2B cash. LinkedIn’s stock is soaring by 47% as we write while Microsoft stock is falling! This is one of the biggest acquisitions since Dell’s acquiring EMC few months back. So how does this work?
Well, Satya Nadella explains the importance of a professional network in their scheme of cloud offerings, from Office360 to Dynamics. Imagine walking to a meeting and viewing all the attendees info from their LinkedIn profiles. He said, “It helps us differentiate our CRM product with social selling. It helps us take Dynamics [Microsoft’s suite of business management software] into new spaces like human capital management with recruiting, and learning, and talent management.”
LinkedIn had a bad quarter and the stock was going south by as much as 40%. So there was some anxiety on where the company was heading in future. They saw this opportunity to be part of a larger company and the board quickly jumped into this offer, as it seems. As far as the synergy is concerned, time will tell how they integrate and make it look like a seamless cloud offering. Reid Hoffman, chairman of LinkedIn will stay as an advisor, but his new role is yet to be defined. Jeff Weiner will continue to stay as CEO reporting to Nadella.
This certainly strengthens Microsoft’s cloud presence and adds value to the Dynamics business more than the Office360 side. But use of Office360 suite in creating and managing documents/profiles may add to the growth of that business. If they can make it a success, Satya Nedella’s leadership will have a new feather in his cap.