MDB and PVTL - cloud winners

Just repeating my personal total conviction in these 2 cloud technologies.

MDB has already won as the general purpose NoSql database, both in the developers’ hearts and the enterprise purchasers’ spreadsheets. Developers love the simplicity, performance, scalability, and power of the Javascript language for queries. Enterprises love the cost savings, increased productivity, security, and scalability, both vertically and horizontally.

It’s not a small deal that my bank - one of the largest in the world, has a mandate from the highest level for at least 40% of new databases to be in Mongo, not Oracle. The level of buy-in required up and down the chain, for such a mandate is incredible. This is happening across enterprises across the spectrum, and most startups are also using Mongo. Mongo is the database of choice no matter which programming language is being used.

With Mongo 4.0, which promises ACID multi-document transactions, without affecting the performance of non-multi-document transactions, Mongo will continue taking over more and more areas of enterprise data storage. Mongo Atlas, which is the cloud hosted version, will be the big driver of growth and profits for MongoDB, I believe.

I could happily ignore Mongo for 10 years, secure that it will be giving me multiples of my investment today.

I have equal conviction in PVTL technology. It is must have technology for all enterprises moving to the cloud. Almost all enterprises I know are using or transitioning to PVTL. They are moving away from direct AWS, Azure or Google Cloud to Pivotal, which provides tools to manage all cloud workloads, independent of vendor, and including private cloud or data centre.

There are some complexities here in the ownership structure under Dell, but Dell will want to maximize the value of PVTL, and so I believe it won’t do anything to reduce its value in the marketplace.

This is another technology that has already won, now it is just a matter of enterprises expanding it to all their IT, as they move to the cloud, maximize the productivity of their developers, automate their processes, and avoid vendor lock-in.

Just my take on what I think are the 2 highest confidence cloud companies by a cloud professional and exec.

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Ok I’m going to reveal my total ignorance on this one…

Almost all enterprises I know are using or transitioning to PVTL. They are moving away from direct AWS, Azure or Google Cloud to Pivotal, which provides tools to manage all cloud workloads, independent of vendor, and including private cloud or data centre.

So would that pitch Pivotal in direct competition with what Nutanix is trying to do with Xi? Or will Xi be for public cloud and Pivotal for private?

Ant

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So would that pitch Pivotal in direct competition with what Nutanix is trying to do with Xi? Or will Xi be for public cloud and Pivotal for private?

Let me start my answer by describing the state of IT - please excuse me if I’m explaining something you already know. First of all, IT is huge with a lot of different people doing different things. Like building a house, there are lots of parts with the appropriate specialists - brick layers, plumbers, electricians, carpenters.

In IT there are application and storage servers, networking, operating systems, software running on all those servers, application interfaces allowing the software to talk to each other, and end user devices and user interfaces allowing humans to talk to the machines.

As a bit of background about myself, my core competencies are as an application and enterprise architect - I deal with the software running on servers, how they talk to each other, and how they talk to humans.

Hardware has always been an annoyance in my job. I don’t care what machines my systems run on - I just want them to run and let someone else worry about the plumbing.

The cloud was built for me. With the cloud, I just wrap up my software in little packages. The cloud adds hardware when my software needs it, creates virtual addresses so I can talk to any piece of software on the planet, protects my software behind walls, and just charges me for what I use, instead of having to buy a whole machine.

Now there is another guy, the infrastructure architect. He cares about the machines we have, the cables linking them to each other, the switches and routers that move traffic to the right place, the firewalls that protect them, the air conditioning and building that houses them.

The infrastructure architect is being put out of work by the cloud, but not very quickly. Companies have lots of machines, they are moving to the cloud step by step, and there are some machines that may never move to the cloud, and even in the cloud you will need some (but not as many) infrastructure architects.

Pivotal is a cloud solution for me and other application and enterprise architects. It is like a machine that automatically builds a cloud application for me. I give it the design, and the latest version of the code. I tell it to build it on AWS, or Azure, or Google, or on my own machines. 10 minutes later - it is done, tested, verified, and running. I don’t even need to tell it - it checks my systems, and knows when I’m ready for a build, knows where I want it, and builds it for me. It speeds up my productivity immensely, and let’s me avoid any sort of vendor lock-in - and I no longer even need to know how to spell “server”.

Nutanix is for the infrastructure architect. Now I am no expert on hyper-converged infrastructure, but what I understand Nutanix does is take all the boxes that are in the companies data centres and virtualizes them via software.

So Nutanix makes all the machines in my company’s data centre potential destinations for the applications I develop with Pivotal.

As you know, hardware annoys me. The secret is that hardware annoys the infrastructure architect too - all he wants is that when I ask him for something, he gives me something and I shut up. With something like Nutanix, he can break up all his servers into pieces of different types, like bricks, hardwood, and metal. Then when I ask for a brick box lined with hardwood, with a metal clasp, he doesn’t have to pull out his hair. He just gets it from Nutanix from the resources he already has.

For companies with hybrid clouds, where part of the cloud is AWS or Azure, and part of it is servers in their own data centre, Nutanix can make it a lot easier for the infrastructure architect to pretend his servers are just another cloud. And the Nutanix server slices are then set up as a destination in which Pivotal can build the application I want.

Does this answer your question?

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Sorry, I forgot to mention Xi.

Xi also works for the infrastructure architect, not the application architect.

What it does is make the public cloud look just like the boxes in my own data centre. The most obvious business case for this is for me to do backups and disaster recovery on my own boxes, and put that info in the cloud. It could also let me quickly move some workloads on to the cloud if I need to in a hurry, and don’t have time to set up the boxes. I’m not sure of other business cases for it, as the point of Nutanix is that you want to keep (some of) your info in your own data centre.

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SteppenWulf,
Thanks for the great write up. I am curious about your take on this announcement:
https://twitter.com/JonKohler/status/994250444062056449

I’m pretty sure you know what Terraform is given your background. Then there is Nutanix CALM, https://www.nutanix.com/products/calm/. What is your take on whether or not CALM with Terraform is a competitive threat to Pivotal?

Pivotal’s main competition are the cloud titans - Amazon, Microsoft, Google. But one of it’s primary value propositions is vendor independence, which is something the titans can never provide - they are aiming for vendor lock-in! IBM’s Blue Mix includes a hard fork of the open source implementation of Cloud Foundry, but it has no traction (meaning IBM Cloud Foundry, not Blue Mix which is IBM’s cloud which is getting some growth) and they are also strongly tilted toward IBM products.

Nutanix and its partners solve such a different type of problem from Pivotal that it is hard to imagine they will ever be competition to Pivotal.

Think of it like Nutanix helps you make steel, and Pivotal helps you make a knife. The applications that are making steel (Nutanix and its partners) are never going to be competition for the applications making knives (Pivotal and the cloud titans). They are raw materials for it.

One of the original use cases for Pivotal was to be able to deploy applications to multiple clouds, or to virtual machines in your own data centre, the “hybrid cloud”. Pivotal doesn’t create the virtual machines. Pivotal was actually split off from VmWare (hence the Dell ownership). VmWare is famous for creating the most successful hypervisors which create/manage virtual machines. Pivotal was split off partly so it could be virtual machine agnostic, and it supports all the popular implementations, not just VmWare.

Nutanix and its products are solving problems in creating and managing virtual machines. They take a physical machine, and using a hypervisor, divide it up into virtual machines and apply various operating systems and configurations on them. They do the same thing with complex hardware for databases called SANs (storage area networks) and NASs (Network attached storage). Then they take the virtual machines, and cut those up into platform segments to run applications on. This is the same thing the cloud titans (AWS, MS Azure, Google) do with their data centres to create the cloud. It is really hard and complex to do and keep up all the time, unless you have large dedicated teams and custom software like the cloud titans.

Pivotal doesn’t care where the virtual segments come from - AWS, Azure, VmWare, Nutanix. It just deploys the applications to them if that is what the application architect wants.

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Hi Steppenwulf,
I know you are a tech guy, and a customer of Pivotal rather than an analyst, but I’m just curious whether you have any thoughts about why their revenue was only up 19%, with such widespread acceptance?
Thanks for a great write-up, by the way!
Saul

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Let me start by saying I’m not an expert on Pivotal’s business model.

I know their technology - it has no significant competition in the marketplace. As a serial former-IBMer, I can tell you that IBM which has the only competing product (which is actually a hard fork of the Pivotal product) has no chance. The battle in this area is over and Pivotal has won. For the developers out there, Pivotal developed the Spring framework, Cloud Foundry, and Apache Hadoop.

Every enterprise in the world that is moving to the cloud that wants either a hybrid cloud (i.e. some public cloud services, along with some of their own servers acting like a cloud, perhaps with Nutanix software) or wants to avoid vendor lock-in, is now using or will be using Pivotal. The only other real choice for enterprises is to lock in with a cloud vendor, or be a pure container based development shop (which is still supported by Pivotal).

Coming to revenue growth, I think the numbers are misleading. Pivotal is in a multi-year transition away from a services model to a subscription model. Pivotal’s original business model was as a private consulting group, using the open source software they had developed as the base for a services business, helping enterprises transition to the cloud.

Back in 2012 they were bought by EMC. They have been switching, since 2015, to a subscription model, with services only as needed to support their sales. Thus their annually recurring revenue has been increasing in the 50%+ range, while their services revenue has been decreasing.

Given Pivotal is rapidly moving towards subscription revenue, it’s helpful to look at the business on a quarterly-basis. They ended FY’18 at $299.9M of ARR, and grew ARR 58% YoY, while total revenue grew only 18% YoY from Q4. The mix has rapidly shifted though, with subscription revenue representing 56% of total revenue last quarter, up from 33% in the quarter ended April 2016. The gross margin on subscription has also reached 90%, while services gross margin is at 15%, both as of last quarter. https://medium.com/spark-capital/pivotal-software-ipo-s-1-br…

Pivotal’s dominant position in enabling enterprises to get on the cloud without vendor lock-in gives them enormous opportunities for growth and additional revenue. They have already got a large ecosystem of other cloud companies that are on their marketplace for their clients. They can go all the way up and down the stack providing tools for the cloud - for instance, it would be trivial for them to provide competition to the Xi product of Nutanix (but not Nutanix’s primary product of making data centres look like a cloud). We have to see if the management teams takes advantage of these opportunities.

For the business model, I’m hoping that others on this board or on the Fool can help me know when I should be adding to my position at PVTL - or stepping away if the business wastes the opportunity that this dominant technology provides.

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Swulf

Try takin the Pvtl discussion to npi for a full shakedown.

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