Pivotal and Kubernetes

Investment Analysis Clubs Saul’s Investing Discussions
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After the great write up here I started digging deeper into Pivotal. Much written on NPI. The one issue that came up as a possible mortal enemy was Kubernetes. So I dig much deeper into that, and as it turns out, not to be so. In fact Pivotal, VMWAre, and Google have teamed up to incorporate Kubernetes as a primary function in Cloud Foundry version 2.0 that recently was released.

This 2.0 release is extremely important. I do not pretend to understand the technicalities, but I do understand the why it is done. It seems near unanimous, that like the former parent company VMWare, Pivotal and its commercialization options for Cloud Foundry is simply gushed over by developers, such as SteppenWulf. And for very good reason. Now all you need to do is create an app, in the language of your choice basically, upload it, and Cloud Foundry will act as a universal operating system that will take care of all the infrastructure details, on every cloud that is worthwhile using for a major enterprise, or in your internal data center. Bosh is a key aspect of this, but I won’t go into the details of this.

With the 2.0 version pivotal has expanded Pivotal Cloud Foundry to enable far more versatility and variety. The headline is enablement of Kubernetes and management there of directly with BOSH. But 2.0 represents a lot more than this. But sticking with this topic, I will get to a third party quote from Solstice (not sure who they are, but I assume a commercial team that uses Cloud Foundry and completely seems to love it - as appears to be a rather common reaction by large enterprise developers). The snippet on the Kubernetes topic that sums it up is as follows:

{previous to version 2.0} This left certain enterprises with a choice, to use PCF in combination with a container orchestration platform like Kubernetes or to have to use Kubernetes exclusively. That situation was made much easier this week as Kubernetes and containers will become first-class citizens on the PCF 2.0 platform. This addition allows PCF to cast a wider net and helps it support a much larger array of enterprise workloads. Most importantly it allows enterprises to rally around PCF as a singular enterprise cloud platform of choice.

If this plays out, as the industry previously rallied around Cloud Foundry, and then came Kubernetes, which is a lower level abstraction, but one which also contains an infrastructure to better enable app building, and greater customization options, but trading off efficiency in the process, and now with Cloud Foundry making Kubernetes a core feature, you get the best of both worlds, Kubernetes and the efficiencies that Pivotal Cloud Foundry brings.

Okay, that was a really long sentence. If this plays out, as described above (and every source I read indicates that the best solution, and what customers are demanding, are Kubernetes with Cloud Foundry written on top of them) and the industry continues to rally around Cloud Foundry (with the Kubernetes threat now addressed with the best of both worlds platform, that Pivotal again has no real competition other than from IBM, and that has been previously discussed, and Kubernetes, once a threat, has now only strengthened the platform and desire to use it.

I really don’t know if that is how it will play out, but given how few good app developers there are, how much work there is for developing apps for everything, on demand, and keeping them all updated, adjusting them, improving them, etc. I cannot see an enterprise wanting to spend unnecessary developer time using only Kubernetes when Pivotal Cloud Foundry now gives these same developers the same efficiency gains that Cloud Foundry always had (with the added and extensive features of version 2.0) and allowing Kubernetes to be used, with customization, but managed as any other app on Cloud Foundry through BOSH.

Far more technical than most stocks to research. Even MongoDB is easier to get through. But that is perhaps because Pivotal lives in a very airified world of the largest enterprises in the world, and they discuss things amongst themselves using tech language unfiltered, but one can get through it with a little (or a bit more than that) effort.

Yes, I am very interested in Pivotal. Enterprise value of just around $4 billion, with $625 million in cash. Next year revenues are expected to be about $675 from the latest on Yahoo!, this would imply, assuming service revenues remained flat, that subscription revenue growth of 50% or thereabouts.

With version 2.0 out, and the CEO stating the company focused on existing customers while finishing 2.0, with the now intent to go to the world and market it to acquire new customers as well, a slowing of subscription growth may be conservative.

Nevertheless, we will not know if the new 2.0 version will do what almost every article (okay not almost, EVERY, article on the topic, from a wide range of sources, over a period of multiple years) will come to pass as is expected. When you have Google and VMWare both teaming up to make it so, with Ford following Pivotal’s 17 new lab facilities (consulting facilities) and building their own labs next to them, with Microsoft as another investor and large contributor to the Cloud Foundry project (only Amazon seems to have kept their distance, even though AWS is equally covered by Cloud Foundry) it seems likely to come to pass.

And maybe I need not talk so much about it, but I do find it quite interesting.

Tinker

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BTW/ on the low sales and marketing expenses, there is another explanation that no one has hit on. Since my ex-wife was an Oracle consultant who traveled the world for Cap-Gemini, I have personal experience with system integrators. Pivotal has attracted not just Accenture, but multiple other very large consulting firms who are all starting up Pivotal integration practice areas, including Cap-Gemini if memory holds.

These large consulting firms (once were also accounting firms, but most have split off their consulting side) are a huge army of sales people, far better sales people than what a vendor can usually field because these consulting firms hire the best out of college and MBA school and pay them more, give them a sense of superiority, and they are selling machines, project after project, and once they are inside a company they know how to find the next piece of work that needs to get done.

All these system integrators probably account, at least quite materially, why Pivotal sales and marketing expenses are so unprecedently low. Not only do customers come directly to them because they are the only game in town, but the crem da le creme of the technology consulting world is out selling them through their new Pivotal practice areas.

In addition to this, large corporations, far more than start-ups, are herd animals. Start-ups take risks, they are out there to not only conquer the world but to recreate it in their own image. Large enterprises are more concerned with CYA, and as such they are far more risk averse, and as it use to be no one ever got fired for using IBM, the same thing exists today. Once something becomes standard, then everyone jumps on it as no one will get fired for doing so, and one can innovate and meet one’s corporate goals without having to take job or even career ending risks.

Pivotal clearly has the large enterprise herd mentality going for it as well.

Tinker

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Cloud Foundry is simply gushed over by developers, such as SteppenWulf

Nice discussion Tinker. Actually though, you have it a bit wrong - developers don’t gush over Cloud Foundry. That is why Pivotal don’t sell to startups, or small shops.

Ask Conehead, who from his writeups, I believe is currently a developer. Developers are very passionate about their tools, have their own tastes and styles. In the sphere of cloud native tools, the tools provided by the cloud titans are probably as good as PCF. Tools provided by some startups are probably better. To be honest, most developers would just as happily use Git with Jenkins on Amazon or Azure, link it up themselves, and weave in a few other tools they want, and be happy as a clam.

Pivotal is what is known as an “opinionated framework” which means that it has an opinion on how programmers should work. If you agree with the framework opinion, it will make it a lot easier to get your job done - it will almost guess what you want to do next and do it for you. Unfortunately, if you don’t agree with its opinion, you’ll be fighting it every day. Developers are not known for herd think. Each developers wants to do things their own way, so you’ll only have a percentage of the dev community - say 1/3 at best - who will like Pivotal.

Kubernetes is more like a blank page. You can put in anything you want, and it won’t fight you, but it won’t help you either. It’s a lot more work. I agree when you say it is between an IAAS and a PAAS - closer to IAAS I would say. Developers will spend time to weave together their own set of tools to work with Kubernetes, and then will have their own “customized PCF”. It will be a bunch of work to start with, but then they’ll have something that does just what they want, that they built with their own hands.

Pivotal, as a tools company, has about as good a product as one can get. Some developers love it, most developers don’t hate it. It is just as easy to use as the native tools of the Cloud Titans - which is a remarkable achievement in itself when you think of how hard it is to make such different processes work seamlessly.

Developers don’t care about cloud independence, or about common processes, or simplified compliance, or unified security. That’s why developers don’t gush over Pivotal, and Pivotal doesn’t sell to developers.

IT strategists, meaning CTOs, enterprise architects, technical product managers, VPs of development - these are the guys who care about cloud independence, common processes, simplified compliance, and unified security. These are the guys who mandate it in their companies, because they have to tame the chaos of every application choosing its own dev environment and development process.

That’s why Pivotal is growing like crazy in the enterprise, and not in the smaller companies. It has a very specific niche - enterprises large enough to have significant IT complexity - which is every public company, and most mid-size or larger private companies. It’s a huge enough market, and in this market, Pivotal has no competition.

You have 3 choices in a complex IT shop:

  1. Accept the chaos of every team having its own development process - guaranteed crises every other week. Systems will go down, compliance and security will reject projects, and your business users will not be happy. As CTO, you will be out of a job.

  2. Settle on a single technology like Amazon or Kubernetes(almost impossible - there are too many different use cases, and too many teams that will have the political power to get exceptions).

  3. Implement Pivotal to enable common processes even when the underlying development processes are actually different.

So Pivotal always sells top down - the strategists are at the top, and they are the ones who want it.

Also from your post:

The one issue that came up as a possible mortal enemy was Kubernetes. So I dig much deeper into that, and as it turns out, not to be so. In fact Pivotal, VMWAre, and Google have teamed up to incorporate Kubernetes as a primary function in Cloud Foundry version 2.0 that recently was released.

I wouldn’t drink the KoolAid about PCF 2.0. It is a smart product release, reducing the threat from containers, but it still remains an opinionated framework.

Container dev environments are still THE potential mortal threat - not just Kubernetes - that is just the first shot across the bow from Google. Google, started by developers, is ironically clueless about developers - they should be first in the cloud, and instead they are dead last behind a book seller, and Microsoft (where no one was home during the Ballmer lost decade and a half). But there are lots of startups today making container tool environments, which developers may love.

The thing that acts as really strong protection for Pivotal, I think, is that developers aren’t their real market - it’s not a profitable market anyway, since developers don’t want to pay for their tools. Their market is IT strategists solving complex problems around entire suites of applications, not just one new app in a startup. It’s a lot easier for startups to solve problems for developers since they are developers. It’s a lot harder to make a better tool for enterprises, when they have less familiarity with enterprise problems, and there is already such a good product out there, with such a pedigree, which is growing like the wind as we speak.

Here’s an interesting article, pretty easy to read for the layman, which describes a developer’s view: https://medium.com/@odedia/comparing-kubernetes-to-pivotal-c…

[Pivotal] is a product that is meant to serve enterprise customers, and the feature set would first and foremost answer those needs.

If Kubernetes is Google, then PCF is Apple.

A little more of a walled garden, more controlled, better design/experience layer, and a commitment for delivering a great product. I feel like the platform is more focused, and focus is critical in my line of work.

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Thanks SteppenWulf. Good context and it explains why the large consulting companies have or are starting practice areas around Pivotal. These consulting firms play golf with the C-Suite and make their sales at that level and not at the developer level. It also puts these two paragraphs into much better context:

Since our founding," Hieatt said, “we’ve garnered tremendous customer momentum on the heels of pioneering a modern, disciplined software methodology.” The methodology, he said, is used at over 30% of the Fortune 100, reduced IT operating costs at Volkswagen by 50%, enabled 2,000% faster software deployment by Allianz, and is instrumental to GE’s IoT strategy.

Powerful software amalgamated with Agile process inspires loyalty because it’s effective at accelerating transformation in enterprise organizations, the company spokesperson said. In an interview at the company’s annual conference Brad Miller, Head of Global Digital and Cloud Technology at Citi, explained “[Pivotal helped] develop the skills that we needed to start building microservices and thinking about transitioning our existing architecture.”

https://www.techrepublic.com/article/how-pivotal-software-tr…

Tinker

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…IT strategists, meaning CTOs, enterprise architects, technical product managers, VPs of development - these are the guys who care about cloud independence, common processes, simplified compliance, and unified security. These are the guys who mandate it in their companies, because they have to tame the chaos of every application choosing its own dev environment and development process.

That’s why Pivotal is growing like crazy in the enterprise, and not in the smaller companies. It has a very specific niche - enterprises large enough to have significant IT complexity - which is every public company, and most mid-size or larger private companies. It’s a huge enough market, and in this market, Pivotal has no competition.

You have 3 choices in a complex IT shop:

1. Accept the chaos of every team having its own development process - guaranteed crises every other week. Systems will go down, compliance and security will reject projects, and your business users will not be happy. As CTO, you will be out of a job.

2. Settle on a single technology like Amazon or Kubernetes(almost impossible - there are too many different use cases, and too many teams that will have the political power to get exceptions).

3. Implement Pivotal to enable common processes even when the underlying development processes are actually different…

Steppenwulf, you have a way of explaining things so that even a tech novice like me can understand them. Thanks so much.

Saul

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Your comments about consulting firms are comical. So is your confirmation bias…Make up your mind. Which is it? Also, do you have any experience with what consulting firms are actually like? etc

Austin, This is the kind of personal attack which is not acceptable on this board. Please cooperate in the future. There are much softer ways of saying the same thing. Tinker contributes a lot to the board, and if he was mistaken on one of his posts, it doesn’t warrant an attack. Additional attacks like the above will be deleted from the board. Sorry.
Saul

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Check. Would delete it myself if I could.

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Austin,

If you really want it gone, go back to the post and click the “Report this post” link.

Explain that you are the author and why you want it deleted.

They have done that for me when I did this in the past.

Does that help you?

Gene
All holdings and some statistics on my profile page
http://my.fool.com/profile/gdett2/info.aspx

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@Austin @Tinker

Austin said to Tinker (keeping the light and removing the smoke):
Tinker, good deep-dive… you said consulting firms build armies of salesmen, then they go out, integrate into organizations (at all levels) and sell! Then, after Steppen’s post, you said: that’s why the consulting partnerships are important, because deals are made at the C-Suite level.

Actually, I don’t think Tinker’s statements are mutually exclusive. I’ve spent around an aggregated 10 years as a management consultant at large consulting firms (Capgemini, NTT Data, IBM), and they are not monolithic. They have visionaries, strategists, managers, as well as analysts and technologists. Visionaries talk to C-level execs, strategists talk to the layer below, and then you have all the people talking to their counterparts in various layers.

The companies I’ve worked with don’t have armies of salespeople - but they do have armies of account execs who form a sort of similar function from a land and expand point of view. In fact I think they created the land and expand business model. They’re like mice in your house - don’t let one in, or you’ll have hundreds before you know it.

Speaking of which, here is a funny parody ad for Accenture - too honest to be really funny though :wink:
http://funnysalescartoons.com/video/accidenture-1

But coming back on topic, the fact that consulting companies are creating groups just for Pivotal says that they are selling big projects to the enterprise based on the technology - they only invest in being a free sales force when it makes them massive amounts of money. But when they do invest in being a free sales force, their account execs and consultants up and down the stack sell to enterprise folk up and down the stack.

And one last thing - I do appreciate Tinker’s contributions - he says what he feels without always watching to make sure everything is picture perfect. I do the same - I have opinions, and hopefully they are useful to some readers, but I won’t have time to post if I have to go over every word and make sure they are perfect, and sometimes I say things that aren’t exactly correct or that I regret. C’est la vie.

Tinker has often given me things to think about and stocks to consider, as have lots of people in the MF community, and I think that provides enormous value - but I still do my own due diligence, decide what to accept or question, and make my own decisions, so I don’t worry about minor omissions or errors when I’m probably making larger ones. Just my point of view.

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First you said consulting firms build armies of salesmen, then they go out, integrate into organizations (at all levels) and sell! Then, after Steppen’s post, you said: that’s why the consulting partnerships are important, because deals are made at the C-Suite level.

Make up your mind. Which is it?

Not adding fuel on a fire, but simply wanted to point out that Tinker wasn’t really incorrect here, at least from my experience.

First - if they have sales folks in at all levels of the client, then there is no faulty logic in stating deals are made at the C-suite level by these consultants. In sales, sometimes deals are just made at C/V level and execution trickles downhill. Other times, consensus builds as sales people work their way up a client mgmt tree, winning advocates along the way. Sometimes the partner/vendor can “win” a deal at the Dir or Mgr level, but reality is that it is likely still subject to that client contact internally getting “his” project approved at C/V level. It all just depends, as almost every enterprise client has a CEO, CIO, VP of something, Dir of something, Mgr of something, and Analysts/Admin leads on various technologies. But they all have different processes for approvals and different levels of autonomy based on how their leadership delegate or micromanage.

Aside from all that, I have real-world work experience in seeing consultants (the Accentures of the world) being used for very large / paradigm-shifting projects. Part of this is because the companies may recognize they don’t yet have a core competency, and another factor can be they want to outsource the decision/culpability in case things go south. There are elite sales people, elite, CIOs, truly elite visionaries and tech workers in this world. But those are often the exception. So people are people, and they like their expensive house and high standard of living afforded by their high-paying corporate gig and they want to keep it. So it leads to “hey - leading well-known consultant…what do you guys think we should do here?”.

People like me work in IT channel, and have managed/professional/consulting services, which is common to certain degrees with resellers/VARs (some more advanced than others in services). But we still don’t get the gigs that the Accenture/Cap Gemini types get. If you know generally what you want to do, we help you do it. If you aren’t sure what to do, and don’t want to risk making the decisions on your own in a vacuum, you ask the consultants. Then we get brought in to handle the details.

Moving from an on-prem world, to a hybrid cloud/public cloud world, with the shifts from Capex to Opex, the changes in operations, to the hopeful improvements in orchestration/automation the moves can yield, to the solutions and tech needed to make it all work they way you want, can be a hot complicated mess. This is one concern I have with Pivotal as an investment. I can understand the existing client growth, but I am not sure how fast the new client adoption will be, as this can be truly disruptive to the ways things are today and many are reluctant to change or resistant to change if they feel their careers may be threatened. You can’t sell the storage admin on hyper-converged infrastructure typically, as an example. Just like you don’t sell the entire IT team below Dir level on moving to public cloud - that is a tough sell.

Finally - I had a cousin, probably in mid-20s out of college, and relatively smart guy, but not someone I would put as having elite intelligence or anything. He was a very confident individual though, and could strike up conversation with anyone fairly comfortably. He worked for Accenture and described it as basically “they work me like a dog, 70 hour weeks, training me on a process or technology, and then ship me out to work with a company and teach them everything I just learned. Then rinse and repeat.” He only lasted a couple years. This also validates Tinker’s comment about how they build armies, and I really don’t believe my cousin was being paraded in front of C-suite. He was more likely working with the larger IT teams.

Dreamer

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This has pivoted (get it?) into an interesting discussion.

I work at a consulting firm and my experience has been much different than those outline above. Granted, we are not one of the “big four” firms, we are privately owned, and try to love by core values and a purpose-based approach.

Back on topic. I spent some time watching videos from 2015-2016 on YouTube about Home Depot starting their implementation of PCF.

Around June 2015, they had 0 implementations, over the next 3 months or so, they were up to several hundred and now, to my knowledge, they are still growing their relationship with Pivotal.

There’s a ton of great info from their case study if you search “Home Depot PCF” on YT.

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You can delete your own post by reporting it and the TMFer who reviews the report is almost certain to comply.

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I reported it. Should be deleted now.

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Hi to all,

As I am new to this board, first of all many thanks for the great contributions.
Furthermore, I am an absolute neophyte on virtually all tech related matters - I work as a corporate (finance) lawyer in Belgium (Europe). Hence, it seems unlikely that I’ll be contributing much to discussions about PVTL, PSTG, AYX, etc. So again, thank you for continuing to elucidate this for people like me.

However, from my perspective, I’d like to raise the question about the regulatory risks to these fast growing tech companies such as PVTL. (Generally speaking, the US and China are rather friendly environments for tech companies; Europe, according to some a technical backwater, is not inclined to give tech companies such a pass. cf recent FB hearings)
More specifically, I’m thinking of legislation on data protection (GDPR), privacy (e Privacy Reg.), digital taxation (end of cross-border profit shifting), antitrust (monopoly busting) and all kinds of other grey or black (even Trump retaliatory) swans coming from the EU.

Does PCF take for instance GDPR into account? Or does this question only show my ignorance of this topic or these companies.

Purple.

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As to GPDR, every website I go to, including my business cloud management system that is required to never leave the United States, is still putting out GPDR information and asking for cookie permissions, etc., as if it was in Europe.

As for antitrust, we can only be so lucky with Pivotal some day in the distant future. Not going to happen however as Kubernetes and other alternatives are still more known and will probably take more marketshare than Cloud Foundry, although we can hope with marketing effort that may not be the case, or it may become a closer thing.

Taxation, every company been dealing with it for a long time along with regulations.

Not stuff we generally worry about with the stocks we look at, as a general matter.

Tinker

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Hi MrPurple64 - welcome!

from my perspective, I’d like to raise the question about the regulatory risks to these fast growing tech companies such as PVTL. (Generally speaking, the US and China are rather friendly environments for tech companies; Europe, according to some a technical backwater, is not inclined to give tech companies such a pass. cf recent FB hearings)
More specifically, I’m thinking of legislation on data protection (GDPR), privacy (e Privacy Reg.), digital taxation (end of cross-border profit shifting), antitrust (monopoly busting) and all kinds of other grey or black (even Trump retaliatory) swans coming from the EU.

Does PCF take for instance GDPR into account? Or does this question only show my ignorance of this topic or these companies.

These are good questions - I work at a big bank, and these are important issues for the bank, especially GDPR and PSD2

In general, GDPR doesn’t affect these companies’ products. Pivotal needs to comply with GDPR, but their Cloud Foundry tool set is used by our bank internally and so is not affect by these regulations.

On the other hand, we use the Pivotal tool set to comply with many regulation and demonstrate that compliance. For instance the various EU rules around data storage location can be partially handled with Pivotal destinations and configurations, so it is actually a selling feature that makes Pivotal more useful to enterprises.

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@Tinker @ Steppenwolf
Thanks for your insights & welcome!
Glad to hear that PVTL actually helps compliance.
And under the motto better safe than sorry, I’ll keep my eyes and ears open to initiatives in Brussels that might have an impact on our investment thesis.
Purple.

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As a result, Pivotal has been working diligently to ensure that Pivotal Network is in compliance with the GDPR when GDPR comes into effect, without sacrificing the performance and quality that our customers have come to expect from Pivotal Network.
On this page, we’ll explain our methods and plans to achieve GDPR compliance both for Pivotal Network users and ourselves.

This page on Pivotal’s website details thier GDPR-related policies and capabilities:
https://network.pivotal.io/docs/gdpr