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@Bear
Any time frame on when you expect we’ll know? (When this will play out)
What we’re really looking for is to understand their strategy. As a recent IPO, we don’t know what parts of their strategy they are hiding. Sun Tzu talks a lot about deception in the Art of War, for instance Secret operations are essential in war; upon them the army relies to make its every move… Technology startups love the Art of War, and chances are they are hiding their strategy on the things that aren’t material in their income statement.
So, do they have a laser-like focus on profitability, which is directing their strategic direction to only aim for massive customers? I hope they are more like Bezos than a typical CFO - this is the time for their revenue to explode, investing what they need to for it.
Or do they actually have a strategy to go after the broad market of mid-sized companies? We have to remember that their business model is to charge by the cloud workload, which is fantastic for huge customers but problematic for small ones. A huge customer where IT is critical to success, might be paying $10M/yr or more, so Pivotal can afford to roll out the red carpet. A mid-size manufacturing business might just be paying a few thousand a year, which doesn’t leave a lot of room for hand-holding. This is a tough needle to thread - they need to close most smaller customers without using a live sales person, or they can’t do it profitably. I actually have this same problem, at a different scale, in my own e-learning side business - this is where things like Inbound Marketing, which HubSpot is the king of, could make a big difference. If they do have a strategy for the broader market, they may need to prioritize big revenue growth first - it’s hard to juggle multiple market segments if you don’t have the scale yet.
When would we know? Well, I think we already know they are investing at least a bit in the mid market. Individual developers or small companies can buy individual workloads on their product directly online. This is the first step to a digital sales strategy. One way or another we should see this grow in the next year. I’m not sure how they would report these numbers - they’re not like their existing customer count. But we should either see it in their customer count, or in a new revenue segment that aggregates all the small customers. If they don’t in some way report revenue from small customers some time during the next year, they are probably not trying to get them, which I believe will leave them open to disruption from someone else - nature abhors a vacuum, so someone will come in the mid-market if they don’t, and then they’ll have competition everywhere.
So my guess - within 4 quarters we should be hearing something about how they are going to tackle the broader market, or else maybe they don’t have a strategy.
I guess I wonder then – Goldman, Barclays, SoftBank, KeyBank, Cisco, T Mobile, Ebay, JD.com, Comcast, Phillips, and the many other companies of Kubernetes – do they only use Linux? Do you see them being customers of Pivotal as well?
So this will get a bit technical. Kubernetes is a Container management system, created by Google and given away for free by them, using Docker containers which are built on Linux technology and are also open source. Deploying on containers is now called Containers As A Service (CAAS), and it is half way between Infrastructure As A Service (IAAS) and Platform As A Service (PAAS).
IAAS is slicing up INFRASTRUCTURE - i.e. physical machines - into multiple virtual machines. This is what VMWare and other Hypervisors give you. You get a slice of a machine, but do everything on it yourself.
PAAS is putting your application on a cloud PLATFORM, and not caring how. The platform will manage it from minute to minute, making sure you always have enough cloud to support your customers, while you are happy as a clam not knowing about it. Just do it! is actually the PAAS mantra.
CAAS is something in between - you specify every detail of how your deployment on the cloud should look, but then the container system makes sure that minute by minute all your customers are supported. Containers are complex to set up, so Kubernetes is a system Google developed and gave away for free, that makes it a lot easier. Google actually developed Kubernetes because they found out that people using Docker containers were much more likely to use Google than people using a PAAS (because Google screwed up their PAAS so badly, but in a container they were on an even playing field with Amazon and Microsoft).
It’s more work to set up a Container than a PAAS, but then after it is set up, the container mostly manages itself, which is a lot less work than IAAS. One additional advantage - CAAS is deployment neutral - that is, you can deploy to Google, AWS or Azure or Nutanix, or where you want.
Pivotal is truly neutral - not just about the deployment destination, but about pretty much everything. It is a PAAS itself, but it deploys to virtual machines (IAAS), cloud platforms (PAAS), containers (CAAS), and even individual computers.
So which technology is going to win? Very likely all of them. I don’t know of a company playing in the cloud that isn’t trying multiple variations for different situations. There are cases where IAAS will prove to be very cost effective, while in complex projects you will want the flexibility of CAAS or PAAS. PAAS greatly reduces development time, other things being equal.
Pivotal directly supports Kubernetes and Docker containers, as well as all the public and private clouds, virtual machines, Nutanix, and all the cloud platforms. So Kubernetes is not a competitor to Pivotal. Now there are lots of container management startups that are specifically targeting Kubernetes, trying to make it easier to use, and RedHat has a product which is also popular in this space.
If the whole world decides Kubernetes is the only way to go, one of these companies might win. But if people continue using a bunch of different strategies in the cloud, then Pivotal is the only thing around that is truly vendor neutral, and can get all your applications on whatever destination they want. Containers or Kubernetes use is not necessarily a threat to Pivotal - in fact container management startups will probably look to integrate with Pivotal, and it could increase Pivotal’s dominance.
Coming back to our original topic, I would say Pivotal’s biggest challenge is not to screw it up. They have no real competition in their segment of vendor-neutral products - they need to keep the market and prevent credible competition from coming up.