thoughts on MDB, PVTL

Investment Analysis Clubs Saul’s Investing Discussions
1

Apologies, recently I’ve just been too busy to read much less write.

I feel guilty since I feel I owe this board a lot, both for interesting discussions and some great investment results, and also have some responsibility since I brought PVTL to this board, so I don’t like to disappear. I had a perfect storm - I went on vacation for my anniversary (rule: no work or investing), then I have some new responsibilities at work, including a couple of new teams who are now reporting to me. I was spending too much on these boards, so I’m going to try to manage it, but I’ll be on periodically. If someone wants my opinion, you are welcome to reply to one of my posts and click “email reply to author” so I see it, and I’ll get back to you.

So Saul did a great job of delving into my thinking and posting what I was thinking - thank you.

I just wanted to explaing my thnking on this “cloud” thing, esp with regard to PVTL and MDB.

First things first - I have a very high conviction in both MDB and PVTL because we are in a gold rush on the cloud. It’s not possible to identify with clarity who’s going to strike gold and keep it. But Pivotal and MongoDB are picks and shovels plays. You may not know every winner in the cloud today, but every winner and every loser will need a cloud-ready database, and a cloud tool set.

MDB
Mongo is the out and out winner in NoSql databases, and I don’t see anyone catching up. Not only are they ahead with every group of stakeholders, they are smart and spending R&D to get further ahead. Their growth is going to mirror the gradual replacement of Sql by NoSql over the next 20-40 years. I don’t need to know what is going on with MDB barring the product releases and quarterlies - I’m in this for the long haul. I bought on the IPO, bought more on drops and am literally planning to hold for 20 years. It’s my largest position, and I don’t worry about price action at all. I think anyone who doesn’t have this in their portfolio is missing out on the biggest (almost) guaranteed long term opportunity out there.

PVTL
Pivotal is the out and out winner in the enterprise cloud tools space. Productivity increases for developers are phenomenal, and it also keeps you vendor-independent. I don’t argue with some developers on the boards here who suggest other tools are better - developers always have opinions, and they may be right. But it’s not the best technology that wins, but the combination of the best marketing, lack of vetoes, and the technology that solves the problems for the decision maker - which in enterprises is rarely the developer. But Pivotal started as a 5% investment for me, and it has grown to 10%, but is still a third of Mongo - just to provide a view of my comparative conviction.

Now technology moves fast, and nothing is guaranteed. A new NoSql database could come out and beat Mongo, or the Mongo team could completely screw up in how they invest for the future. I can’t see how it could happen today, but that is a defect in my imagination, not a guarantee it won’t happen. As my core competency is as a solutions architect, my thinking is always turned toward risk vs reward - there are both known and unknown risks for every solution, and the architect’s job is to maximize potential reward while minimizing risk. looking many years in the future. That’s also what I try to do as an investor.

So going to the Mongo conference was eye-opening for me - as these conferences often are. I had a chance to speak to a lot of CTOs outside of the financial sector, as well as senior people in various tech companies.

What I learned, surprisingly, had as much to do with Pivotal as Mongo.

Mongo is pushing their RedHat Openshift partnership hard because RedHat is offering a containerized Mongo offering. This hit a blind spot for me - normally you have code running in your dev process and spinning up instances. But databases are usually in a separate path - if they are on-premises, you either spin up a virtual machine or a physical machine to put them on, and then reference them from your application. I didn’t think about spinning them up in a Docker container (by the way, there seems to be a misunderstanding on this board - Kubernetes is a system to manage Docker containers, which are open source Linux containers).

Is this attractive? MongoDB seems to think it is, presumably from discussions with their clients. Of course the easiest thing would be to use Mongo Atlas, but for enterprise companies that are not comfortable with their data sitting on the public cloud, containers seems attactive compared to virtual machines.

Now Pivotal was also at the Mongo conference with their containers, but it is RedHat that was front and centre and had the mindshare at Mongo.

So this becomes a long term question for Pivotal. How do they handle data containers? PKS should support them, but they could also implement new data containers in the Pivotal PAAS (Pivotal uses their own private containers under the covers). Kubernetes is growing fast, though I don’t see it being an alternative to Pivotal - “and” rather than “or”. Pivotal provides the huge productivity improvement that other technologies can’t compare with right now. But I will be looking at what they are doing concerning data and containers in upcoming product and quarterly announcements.

Another interesting note - Nutanix was at the conference with both senior tech and sales guys, and I had a chance to have some conversations - Nutanix is very hot on Pivotal and their sales forces sometimes work together on prospects.

But very interestingly, Nutanix was even hotter on IBM! IBM’s new Power chips and servers, according to Nutanix, was amazing at powering data slices - three times the performance of Intel and Nvidia systems! I haven’t heard this before - not sure of the details but I’ll just put it out there and let others verify.

Since the conference I’ve taken small positions in RedHat, to keep an eye on what they are doing with Kubernetes.

I’ve also taken a position with IBM, as they have been doing a lot of interesting things in the cloud that they aren’t yet getting credit for. They have been very late to the game, but the ship is facing the right way now. They are another picks and shovels provider - they will do a lot of tools and services business from the cloud, and they will also get new products out there. IBM has a nice dividend and is quite a good value - I know it is not a typical stock for this board, but I think it is worth a look.

104 Likes
2

http://discussion.fool.com/google-vmware-pivotal-33133218.aspx?s…

Thanks SW. I did some digging myself on this RedHat Kubernetes things. I found something that I did not previously understand. Pivotal’s adoption of Kubernetes was of course necessary as Kubernetes has become the undisputed industry standard. However the dynamics of the Google, VMWare and Pivotal relationship has not really been explored here. Neither Pivotal’s relationship with the rest of DELL and particularly VMWare.

As it turns out the man at VMWare who was responsible for VMWare starting out late to the market to #1 in HCI vs. Nutanix has chosen to leave VMWare and move to Pivotal. The mission is to make Pivotal the #1 platform in the world to run and manage Kubernetes and containers.

Both Google and VMWare are not just named partners, they are aggressive partners with their own vital corporate interests at stake. Microsoft has Windows server in enterprises which they think will get them a lot of Azure business. Google has no such enterprise business, until now. Now they have VMWare, which may have a larger presence in large enterprise than even Windows Server.

Thus Google is going to be pushing Pivotal through VMWare’s customer base as hard as VMWare will be doing so, as it turns out, VMWare and Pivotal, publi words aside, are glued to the hip with VMWare as much to lose or gain nearly as Pivotal.

I actually wrote this in 2 or 3 threats on NPI. I am just linking to 1 thread here. I will check tonight if other relevant materials are on one of the other threads. When I get digging into something I kind of get compulsive and don’t quit until I get to where I want, but usually in spurts between commercials or other activities so it is not always entirely organized.

But this thread is a good start and I will review if other material is necessary to make it complete.

I was not aware at all at just how close VMWare, Google and Pivotal are working together. This is no small or passive partnership. Pivotal is the enabling technology that Google and VMWare are trying to leverage to sell their own wares against RedHat and against Microsoft.

Tinker

29 Likes
3

Steppen,
After your conference experience do you see MDB as a potential acquisition for someone? Not that this is a reason to invest. It would likely hurt long term potential, but just wondering your thoughts.

4

http://discussion.fool.com/follow-up-on-pivotal-and-zs-33133007…

Here is the thread on the VMware exec. 99059 is the linked to article and 99062 is the summary gist as the format of the interview is poor but the takeaway is Pivotal and VMWARE closely engineered the pod it of PKS together and they will be selling it into VMWare’s large base and it is a serious endeavor for both VMWare as Pivotal is creating the next level of abstraction where virtualization could not go and VMWare needs to go and it is their plan to start late like in HCI against Nutanix and make PKS #1 in 18to 24 months.

Should be fun and very lucrative if what VMWare did w HCI they now do with PKS

Tinker

3 Likes
5

Thanks for the post and very helpful.

You mentioned Nutanix briefly what are your thoughts on this Co and it’s prospects/moat? Am not an IT guy but it’s numbers have been great so far and given its growth appears attractively priced if it can continue to grow like it has been.

6

I’m going to ask a very non-IT question, but here it goes.

As a two time (and current) Fortune 500 employee…how should I think about this “move away from SQL” that tech folks rave about, when I know my business is cratered in SQL and that DB overhauls cause executives to cringe!

When I hear “we are moving that to the cloud” should I think “oh, maybe that’s moving away from SQL.

Or are we literally talking about my company having to replace its entire Enterprise Data Structure?

Because if that’s the case…then I don’t see this movement finding a tremendous amount of traction at the pace anyone who talks MDB seems to exert when talking about the enterprise space.

I’ll put it another way, if it ain’t related to cyber security, or it ain’t obsolescent from the vendor, it ain’t selling in my world right now. And we have exceptionally long purchasing and implementation cycles. (If an executive signed off the idea today, they would have to pitch the idea to a rate case, get approved by rate payers, develop a scope of work, implement the work, and conduct work process changes. Estimated time from concept to end of contract…3-6 years)

8 Likes
7

SQL cannot handle unstructured data well, SQL is expensive and difficult to scale to the size of Big Data, and SQL is more difficult to program with.

Your Oracle ERP database is going nowhere. SQL will remain the predominant form of database for many years to come.

But as an example Met Life tried for years to build a database that would take all the disparate and soloed data the company had on their customers, and combine it, and have it for each sales rep to use in the cloud. They found out it was impossible using SQL. They moved to Mongo and had what took years and turned out to be impossible up in a 2 or 3 months.

The leading cloud video game in the world with millions of concurrent users runs on Mongo. An SQL database would fall apart at that size and scale or be absurdly expensive.

As just two examples. Your legal SQL databases for the most part will keep doing what they are doing for years to come, but more and more of new uses will be NoSQL databases, and a growing minority of legacy SQL databases will start to find themselves being replaced.

We are talking moving from 1 or 2% to 10-15% NoSQL in the next 5 years or so. Leaving most ofhte SQL world still intact.

Tinker

11 Likes
8

There are a small percentage of applications which have been implemented on SQL DBs, but which were a poor fit, that are good candidates for moving to NoSQL. These are characterized by tables which have few key fields and a large BLOB or BLOB field where the meat of the information lies. But, traditional transactional systems like ERP or accounting applications, are unlikely to migrate to NoSQL soon, if ever, because the model of the application fits well with the technology. The biggest growth for NoSQL is going to be things that were historically not in databases at all, including big data collections.

2 Likes
9

If anyone wants to dig a bit into a bit more technical stuff, Pivotal’s serverless product is almost ready to roll out. This link goes to a description of at least an important aspect of it. It is clear as to just how clos Google and Pivotal work together on the projects. The core of this serverless product is based on Knative and is built on top of Kubernetes and abstracts away the complexities that Kubernetes and Istio for network routing do not.

The link is a bit long but you should get the gist of what this soon to be released (if not already) serverless product and what it is that Pivotal does. You provide the application, upload it and it just works.

https://thenewstack.io/knative-enables-portable-serverless-p…

Tinker

2 Likes
10

We are talking moving from 1 or 2% to 10-15% NoSQL in the next 5 years or so. Leaving most ofhte SQL world still intact.

What’s this mean in terms of dollars? Trying to make this meaningful for my investment mind.

11

@CMFAleeb
After your conference experience do you see MDB as a potential acquisition for someone?

I hope not. I know from the senior leaders I spoke with, and other techies, that people at MongoDB have a real excitement about changing the world. These things usually come from above, and I don’t think senior management would want to sell. On the other hand, there are a lot of companies that would love to snap them up - Oracle, IBM, Google, Microsoft all come to mind. I’m not sure if everyone has a price, but most do, so of course it is possible.

@NewFool1000
You mentioned Nutanix briefly what are your thoughts on this Co and it’s prospects/moat?

I understand what the company does but don’t delve deeply into the investment prospects - there are others on this board who know Nutanix much better than I. Nutanix has a great product at just the right time - something that helps companies transition from data centres to the cloud. I’m sure they can grow like crazy and they are priced for it. I worry about hardware companies whose valuations get too high - Cisco is an example of a company that stayed a leader, but whose growth just couldn’t match its multiple.

@Jafbrblev
As a two time (and current) Fortune 500 employee…how should I think about this “move away from SQL” that tech folks rave about, when I know my business is cratered in SQL and that DB overhauls cause executives to cringe!

When I hear “we are moving that to the cloud” should I think “oh, maybe that’s moving away from SQL.

Or are we literally talking about my company having to replace its entire Enterprise Data Structure?

First thing is that moving to NoSql and moving to the cloud are completely different, and mostly unrelated things. The move to NoSql is caused mostly from the explosion of data caused not by the cloud (it far predated it) but by e-commerce and Web 2.0 - the two way web where users are not passive consumers of information, but actively create it. The cloud is just another way to more quickly and cheaply increase e-commerce and Web 2.0, so the cloud is just an accelerator.

I first used NoSql at Sprint back in 1997 - a product called Tandem NonStop SQL. Telephone companies and the early internet providers had the data explosion before anyone else and started looking for solutions.

The bank I work at has set a target of 40% of new datastores will be on MongoDB. There is no plan for a migration of existing databases to NoSql, unless there is a business need. This is the way I think it will work in most enterprises. Companies will begin making NoSql databases available for projects, either where this is a business case, or as at my banks, as a default, when there isn’t a business case against it. Adoption takes time even after approval - you need people who are trained on the new technology, managers and architects who understand the benefits, etc. I think most people working today will be able to retire happily without having to learn NoSql technologies, if they don’t want to.

33 Likes
12

The market for databases is suppose to grow to $65 billion or so within the next 5 years or so. And of course keep growing from there, perhaps at 10-13% per year.

Tinker

6 Likes
13

Their growth is going to mirror the gradual replacement of Sql by NoSql over the next 20-40 years

I sense a great excitement for the MDB technology. I would like to hear your views on this.

What are the major risks you see from technology perspective?

The technology cycles have compressed a lot; So why you think it is going to take 20 to 40 years of adoption cycle? What kind of growth rate you are looking at? When do you think they will hit $1B, $2B, $5B in revenue?

1 Like
14

Side Note:

Ford is pouring billions into digital transformation

Ford will invest $11 billion in a corporate restructuring to digitally transform itself over the coming decade, Bloomberg reports . The US auto giant is hoping the investment will help fortify its revenue through new products and services when individual vehicle sales slow — which is widely expected to occur by 2030….

https://www.businessinsider.com/ford-corporate-restructuring…

Why is this relevant? Because Ford is doing this with Pivotal. Does anyone know if other large companies are working with Pivotal on projects like this?

Saul

27 Likes
15

https://www.prnewswire.com/news-releases/cloud-foundry-power…

<<<In less than 2 years, The Home Depot has added more than 2,500 developers on Cloud Foundry, maintaining more than 1,600 apps and services in production. In any given month, that cloud handles more than 1.5 billion requests.
Real
“The Home Depot is another example of the world’s most innovative companies using Cloud Foundry to digitally transform their business,” said Abby Kearns, Executive Director, Cloud Foundry Foundation. “Making the shift from being a more traditional retail company to a truly digital organization takes a lot of hard work and focus. I am truly awed by the speed of execution that The Home Depot - one of the largest companies in the world - has made this shift.”>>>

We also know Boeing is, and so on. 150% + RRR is not a fluke. The real angst is will new logos jump on board in material numbers or will the company remain a lucrative niche in the scheme of things while tools are used instead of easier services.

Hard to imagine such references like Forf HD Boeing finding deaf ears. This #2 Earnings report may answer this one got’s to know (like in first Dirty Harry movie) question. A world full,of whatbFordband HD and Boeing are doing is a pivotal world :earth_americas:.

Tinker

14 Likes
16

Tinker, I am awed by the volume of your research and posts on this subject! How in the heck can you do all that and work at a full-time job too??? I am all admiration.
Thanks,
Saul

31 Likes
17

I want to chime in on Tinker, too. He’s an absolute machine, but unlike a machine his ability to draw conclusions from less than complete information is unparalleled. I’ve learned an enormous amount by reading pretty much everything he writes. We are all blessed to have him posting on these boards.

He’s a true thinker and his ability to siphon through technical jargon for a non-techie and put it into layman’s terms is also incredible. Nobody is perfect, but we should listen to what he says and make our own decisions.

Not trying to crowd the board with “thank you posts” but I felt this one was well deserved.

AJ

59 Likes
18

The bank I work at has set a target of 40% of new datastores will be on MongoDB. There is no plan for a migration of existing databases to NoSql, unless there is a business need.

This is a key statement. First, note the 40%, that also means the other 60% will most likely be hosted on a SQL DBMS. No business is going to migrate anything to MongoDB just because it’s cool technology. The company I used to work for still had IMS/Cobol and even some serial batch still in production even after a major overhaul of all the engineering and manufacturing systems. Why? Because:

  1. The old systems worked, they did what they needed to do. There was no business case for migration.
  2. Any new system of significance will require modifications to the business process. This may involve hundreds of people at a large company.
  3. Changing to a new system is not just an IT thing, there’s a user community which requires training related to the changed business process and the new system. This is often a major disruption and will incur a lot of costs until the workforce comes down the learning curve.
  4. The old systems were certified by certain regulatory agencies (this is not a small thing).
  5. A lot of warehouse and BI applications are built around a SQL DBMS. It may be a different DBMS than the transactional system, but it’s integrated with the transactional system(s) via ETL. Swap out the DBMS and at the least all the integrations also must be reworked. Possibly a lot of BI reports will also need to be rebuilt as well.
  6. A lot of mainstream applications (ERP, PDM, CAD, HR, Finance, CRM, etc.) are purchased COTS with an underlying DBMS of the vendors choosing. Some vendors allow the customer to specify which SQL DBMS they prefer, but that’s the extent of the options. Other than DB2/Oracle/SQL Server, the DBMS is not a user decision.
4 Likes
19

https://m.youtube.com/watch?v=SumA9Kkd1fs

This is from Mongoworld 2018. MongoDB and Pivotal Cloud a match made in heaven.

The other day I also listened to a 20 minute interview between Pivotal and MongoDB.

There may have been more Red Hat momentum at the event you were at SW, but MongoDB has hardly stopped promoting itself with Pivotal.

In the end the winner tends to keep winning because the more you win the more you create desirable elements in yourself and product that draw others to your product, either by scale, partners and ecosystem, expertise, features, trust, word of mouth, or just aura, whatever it is.

At present it appears that Pivotal through VMWare anyways, I doubt pivotal would say this themselves, admits that Red Hat has the lead (And they do in terms of total customers, but I doubt they do in terms of total revenue). Red Hat has a 1.5 year or so lead on Pivotal in regard to kubernetes.

VNWare/Puivotal are on the record that they intend to do with PKS what they did with VMWare HCI and start late, and within 24 months become #1.

At this point in time there is no way to know if they will be able to do this again. Does not hurt though, having 500,000 VMWare customers, and having the marquee customer and reference list that Pivotal has. But I frankly do not know.

And use the term frankly again, to be frank, I like MBD better. Things develop quickly in the business world these days, and over the last 5 or 6 months MongoDB has improved its product, has Stitch going, is building itself out to be “THE” native analytical database, has 4.0 out there, and is the enabling database of the #1 massive online game in the world (and perhaps ever in the world - do not know if World of Warcraft or something has had more concurrent users simultaneously) thus creating credibility that MongoDB is the real thing and something corporate world can and should address as perhaps the new enabling platform where applicable.

Given this, I do believe I would rather own more MDB than more Pivotal at this point in time. But with this said, one has to take into account taxes, and frankly, nothing said here is likely to impact any of Pivotal’s current business. Pivotal just needs to keep on doing what it is doing, and we will know at the end of earnings if that is what is indeed happening.

Thereafter, if Pivotal can move to #1 in the next 24 months, there is a lot of “alpha” as a famed and respected convicted felon might say (people do make mistakes, it appears he stole money that people trusted him with - but whatever the case) will be found in this name. If not, then not so much.

Long way to get to the point, that I started with, is that MonogoDB is courting Pivotal as hard as it is courting Red Hat, and I doubt perception of more momentum at one convention towards Red Hat is a fair assessment with any investing validity. However, it is a good data point to watch when we listen/read through the next Earnings call.

And oh yes, I believe I meant to say some more good things about MongoDB, which I managed to do.

Will not get to it tonight, as my rat terrier will not let me, he is ready to burrow under the blankets, but quite curious to hear the American Heart Association presentation from the Inspire Alteryx convention to listen to what is espoused to be AHA comparing Informatica vs. Alteryx, with quite surprisingly Alteryx winning hands down. Alteryx should not even be in the same conversation with Informatica, as Informatica is for ETling Big Data, but it appears that Alteryx’s use cases continue to grow up the stack. Should be interesting when I can hear it in context.

Tinker

7 Likes
20

As a two time (and current) Fortune 500 employee…how should I think about this “move away from SQL” that tech folks rave about,

Mark Twain might have replied that the death of SQL is highy exaggerated. SQL is very good at what it does. NoSQL is very good at what it does. My issue with Mongo is whether they can monetize their leading NoSQL position. MySQL was the leading open source SQL database but they failed as an investment. Management sold out.

Denny Schlesinger

7 Likes