EC Cloud and Enterprise Infrastructure

Here’s why ServiceNow’s stock soared in a week of dismal tech earnings reports • ZebethMedia

By zebethcontrolPosted on October 28, 2022Posted in Bill McDermott, EC Cloud and Enterprise Infrastructure, EC News Analysis, Enterprise, SaaS, ServiceNow, stock marketNo Comments

If you’re a regular reader of this publication, chances are you know that it hasn’t been a great year for many tech company stocks — one in which giants like Meta, Amazon, and Alphabet have been mauled by the markets after less than stellar earnings reports. Even an enterprise stalwart like Salesforce is behind hounded by activist investors. The fact is that few have been spared, whether startups or established public companies. We’ve seen a litany of stories on hiring freezes, layoff announcements, and tech stocks taking bigger hits than an NFL quarterback behind a bad offensive line — in other words, getting crushed. SaaS stocks in particular are having a rough year, so when a SaaS stock does well, well, that’s news. And that’s what happened to ServiceNow this week when it reported Q32022 earnings. It bucked the odds with a mostly positive earnings report — good revenue, good guidance, the whole nine yards — and believe it or not, Wall Street rewarded the company, with the stock up over 13% at the bell on Thursday, a number that held steady throughout the day. (It was down around 1% so far in trading today.) Maybe we’re not the only ones looking for some good news. Perhaps investors are, too. But what led to this positive 2022 earnings anomaly? To find out, let’s explore the earnings report and the impact of hiring former SAP CEO Bill McDermott to lead the company. A look at the numbers Given the general carnage we’ve seen in the public markets for tech earnings this quarterly cycle — Snap kicked things off with a raspberry, followed quickly by other leading tech shops failing to meet Wall Street’s stringent expectations — the ServiceNow share-price boomlet caught our eye and made us curious what the company had managed that was so worthy of investor praise.

Where cloud management is going next • ZebethMedia

By zebethcontrolPosted on October 26, 2022Posted in cloud cost optimization, cloud infrastructure, EC Cloud and Enterprise Infrastructure, Enterprise, finops, product-led growth, Startups, usage-based pricing, VentureNo Comments

“There’s a big wave of innovation in managing cloud costs,” Team8 co-founder and managing partner Liran Grinberg told ZebethMedia as part of our latest cloud investor survey. Having noticed tailwinds for the wave of B2B startups that offer cloud cost-optimization solutions, and cloud management more broadly, we were curious to know where VCs thought the space was headed — and the answers we heard show promise. Indeed, the tailwinds we are referring to aren’t limited to the current macroeconomic climate. The need to better manage cloud spend is undoubtedly fueled by the downturn, which makes everyone more cost-conscious. But, as we will explore, innovation in this field is also a corollary to broader trends, such as the rise of product-led growth among B2B SaaS companies, which have become both practitioners and consumers of usage-based pricing. There are also reasons to think that we haven’t seen all of it yet. “We continue to see tremendous opportunity in the cloud management space given how early we are in the cloud adoption journey,” Battery Ventures venture investor Danel Dayan said. So what might be next? Let’s dive in. Beyond cost optimization The first wave of cloud optimization solutions did the obvious: help companies track and lower their cloud spend. Per Team8’s Grinberg: “The first generation of cloud cost management (represented by Cloudability, CloudHealth) helped provide visibility and clarity on the spend on AWS, Azure and GCP. Meanwhile, cloud cost-optimization tools (represented by Spot, Granulate) allowed for tactical changes to lower costs.” Consolidation followed, ZebethMedia’s Kyle Wiggers noted, “as incumbents in adjacent sectors saw the opportunities presented by cloud cost optimization. Microsoft in 2017 acquired Cloudyn [ … ]. Then, in 2019, Apptio snatched up [ … ] Cloudability, while VMware and NetApp bought CloudHealth and Spot (formerly Spotinst), respectively, within the span of a few years.” And this April, Intel bought Granulate for $650 million. As time and mergers went by, it became clear that there was more than startups in this space could do for their customers. First and foremost, cloud teams required more than cost optimization — they needed cloud management.

Who’s most likely to buy Nutanix? • ZebethMedia

By zebethcontrolPosted on October 25, 2022Posted in EC Cloud and Enterprise Infrastructure, EC News Analysis, Enterprise, hybrid cloud, Mergers and Acquisitions, Nutanix, rumorsNo Comments

Last Friday, The Wall Street Journal quoted sources as saying that Nutanix was looking for a buyer. Some may not find that surprising given Nutanix’s recent financial performance, but the question is if the company were to sell, who would be the most likely to buy it, and would it be a better fit for a large public company or a private equity firm? (At this point we cannot resist noting that, well, we expected this.) Nutanix helps virtualize nearly every piece of hardware required to run a data center, which it calls hyperconverged infrastructure. It actually even sells its own hardware appliance loaded with the company’s set of services as one of its delivery methods. That puts it at the center of the hybrid cloud market. I know, that’s a lot of buzz words there, but the bottom line is that it can help companies bridge the gap between their data centers and public cloud offerings from companies like Amazon, Microsoft and Google. That makes Nutanix a pretty valuable commodity these days. In spite of the massive growth of these public cloud companies, much of the world’s workloads still live in private data centers, and finding ways to manage and connect these two worlds is a huge challenge for companies. You would assume a company like Nutanix would be in demand. In fact, it reports that more than 1,800 customers have spent over $1 million on its services. But growth at the company has stalled lately. In Q4 fiscal 2022, revenue declined 1% to $385.5 million from $390.7 million a year earlier. The top line was also lower than the preceding quarter, when the company reported $403 million. The good news is that despite the revenue dip, Nutanix’s annual recurring revenue (ARR) continues to rise — climbing 37% in Q4 2022 from a year earlier. Annual contract value (ACV) was also up 10% in the same period.

Five questions to consider ahead of Big Tech’s Q3 earnings • ZebethMedia

By zebethcontrolPosted on October 25, 2022Posted in Amazon earnings, apple earnings, EC Cloud and Enterprise Infrastructure, EC Enterprise Applications, EC Newsletter, Enterprise, Startups, tech earnings, The ExchangeNo Comments

Today after the bell, Alphabet and Microsoft will report their calendar third-quarter financial results. Given the breadth of industries that each of these companies touch, their performance will provide us with rich data concerning different areas of the technology landscape. The fun will continue tomorrow when Meta reports its own results. And later this week, we’ll hear from Apple and Amazon, completing the “Big Five” technology earnings reporting cycle in just a handful of days. Get ready for a blizzard of numbers. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. Most folks don’t love reading earnings reports, dry documents that are an odd combination of canned CEO-speak and raw numbers. The proffered executive commentary is too pre-chewed to mean much, and numbers are just that: figures on a page. To help you cut a useful line through the upcoming numerical flurry, I’ve detailed below five questions that ZebethMedia+ wants to answer in the coming days. Our queries are centered around issues that impact startups, so we’ll relate each question and its supporting data points back to upstart tech companies.

5 cloud investors illustrate the various paths ahead for startups • ZebethMedia

By zebethcontrolPosted on October 21, 2022Posted in cloud cost optimization, cloud infrastructure, EC Cloud and Enterprise Infrastructure, EC investor survey, Enterprise, enterprise startups, investor survey, StartupsNo Comments

Cloud cost optimization startups have become ubiquitous, and they’ve found a friendly ear among enterprise clients looking to cut costs amid the downturn. But should younger startups similarly scrutinize their cloud spend? According to several cloud investors, startups should prioritize building over optimization — unless it’s going to save them a big chunk of money. Boldstart Ventures partner Shomik Ghosh summed it up succinctly: “In early product or go-to-market stages, optimizing cloud spend should be the last thing on a founder’s mind besides utilizing as much cloud resource credits as possible.” We’re widening our lens, looking for more investors to participate in ZebethMedia surveys, where we poll top professionals about challenges in their industry. If you’re an investor and would like to participate in future surveys, fill out this form. While founders shouldn’t lose sleep over cloud costs at the early stages, they should still carefully ponder other expansionary decisions, like cloud marketplaces, before foraying out. Himself an entrepreneur, angel investor Anshu Sharma noted that using cloud marketplaces as a distribution channel has pros and cons, and shouldn’t perhaps be done from Day 1 because “it can commoditize your offering.” Quiet Capital founding partner Astasia Myers concurred, saying startups should focus on finding product-market fit first. “We encourage startups to consider cloud marketplaces once they have found product–market fit, not before,” she said. “To successfully leverage cloud marketplaces, a solution’s product marketing, value proposition, and return on investment need to be clear while exhibiting a fast time to value, which happens post-PMF.” However, because of how fast things are moving, startups can explore marketplaces earlier than they could: “Historically we saw startups join cloud marketplaces at Series D+. Now we are starting to see companies consider it post Series B.” Founders should also remember that startups are destined to become bigger, and should therefore plan ahead. “It’s always important to select a technology stack that is available in all major cloud providers and that is as elastic as possible to support those migrations should they be needed (using Kubernetes is a great example of allowing for that),” Liran Grinberg, co-founder and managing partner at Team8 said. To find out what cloud-related advice investors are giving startups these days, we spoke with: Shomik Ghosh, partner, Boldstart Ventures Liran Grinberg, co-founder and managing partner, Team8 Tim Tully, partner, Menlo Ventures Astasia Myers, founding partner, Quiet Capital Anshu Sharma, angel investor and co-founder & CEO, Skyflow Shomik Ghosh, partner, Boldstart Ventures Founders are looking to cut costs amid the downturn. How important is it for startups to optimize their cloud spend in the early days? It depends on what is meant by “early days”. In early product or go-to-market (GTM) stages, optimizing cloud spend should be the last thing on a founder’s mind besides utilizing as much cloud resource credits as possible. Finding product-market fit, engaged users, and understanding the end-user workflow and how the product is essential to these users is the most important area founders need to focus on. As the company starts to have a few million in ARR, then it starts to make sense to manage cloud spend more closely to improve gross margins and therefore the bottom line (net cash burn or free cash flow). Major cloud providers often lure startups with free credit, but they also charge data egress fees later on. As cost optimization becomes a bigger consideration than ever, how consequential are early stage decisions on choosing a cloud provider? I think picking a cloud provider at the early stage based on cost is missing the forest for the trees. I know some founders who, in the early days, switch cloud providers to keep utilizing free credits. This may be possible when there are only a few people on the team, but as the team gets bigger, everyone needs to learn and relearn documentation, APIs, and UIs, which has a bigger hidden “cost” than any money being saved. Cost optimization is not just the size of the bill at the end of the month. It’s also the velocity of the team’s product development, downtime avoided, developer experience to allow teams to move faster, etc. All of these points should be top of mind when choosing a cloud provider at the early stages. What are the pros and cons of using a multi-cloud setup instead of building on top of a single public cloud? As a company scales, teams become a bit more focused on functional areas. In the early days, everyone does everything, but as the team scales, you have not just a backend infra team but inside of that, a database team, a security team, an ML team, a QA team, etc. Multi-cloud can help get the benefits of best-of-breed tooling from each cloud provider. In the early stages of a startup’s life, it is most important to go from 0 to 1. Astasia Myers, founding partner, Quiet Capital For example, Google BigQuery may be better for some use cases than Redshift or Azure Synapse, while AWS may have the best infra management tooling. The trade-off, of course, is having to make all those tools across platforms interoperable, and the major cloud providers are not exactly incentivized to do this. This is where startups come in, and by focusing on making one product the best, they can work across platforms and integrate easily (i.e. Snowflake can be used across any major cloud provider). When should a startup consider going on-prem, if at all? Would you advise AI/ML startups any differently? In terms of terminology, I think on-prem should also be called “modern on-prem,” which Replicated coined, as it addresses not just bare metal self-managed servers, but also virtual private clouds. The most common reason startups should consider modern on-prem is for dealing with sensitive data, which especially occurs in regulated industries (healthcare, financial services, or pharma). The scope of what is considered sensitive is growing over time with regulations though, so it’s something more startups need to be aware of. A lot of

A brief history of activist investors in tech and the role they play • ZebethMedia

By zebethcontrolPosted on October 21, 2022Posted in activist investors, EC Cloud and Enterprise Infrastructure, Enterprise, investing, Salesforce, Starboard ValueNo Comments

On Tuesday, activist investor Starboard Value revealed a significant stake in Salesforce, sending the company’s stock climbing more than 7%. A hedge fund founded in 2002 by Jeffrey Smith and Mark Mitchell, Starboard has a history of affecting change at major companies, spurring the spinning off of media startup Patch from AOL in 2014 and the replacement of the entire board of directors at Darden Restaurants, the company that owns Olive Garden and Longhorn Steakhouse. Activist investors — typically specialized hedge funds that buy significant minority stakes in publicly traded companies with the goal of changing how they’re run — have become more active within the tech sector in recent years. According to an analysis by Bloomberg Law, investor activists launched more campaigns in tech during Q2 2022 than in any other sector. But how many of these activists have been successful in achieving their aims? It depends on how you define success. A Harvard, Columbia and Duke University study published in 2013 looked at 2,000 interventions by hedge fund activists from 1994 to 2007. It found that, in the short run, stocks tend to rise around 6% when activist investors get involved. And the upswings aren’t temporary. In the five years after activist investors show up on the scene, the stock prices of companies targeted by them tended to hold onto the initial gains — even when the activists employed hostile tactics. Consider the split-up of Motorola’s business in 2008, a move advocated by activist investor Carl Icahn. In 2011, owners of Motorola held stock worth over 20% more than it was before the split — much of it as a result of Google’s deal to buy Motorola’s mobile-focused spinout Motorola Mobility. As Icahn predicted, divvying up the company made the individual pieces more enticing. That’s not always the case, however — as the past decade or so shows.

Read this before you reprice your SaaS product because of the downturn • ZebethMedia

By zebethcontrolPosted on October 20, 2022Posted in Column, EC Cloud and Enterprise Infrastructure, EC Column, EC How To, economic downturn, Enterprise, Pricing, SaaS, StartupsNo Comments

Torben Friehe Contributor Torben Friehe is CEO and co-founder of Wingback. No matter the circumstances, SasS pricing is always challenging and always will be. Underpricing your product, using a pricing model that is not working for your ICP, not offering self-signup or offering the wrong features as add-ons — all of these pricing and packaging issues (and many more) can cost you a lot of revenue. But the economic downturn has added another element to the mix. Common wisdom tells SaaS founders to adapt their pricing according to changing market conditions, but is that actually helpful advice for SaaS founders? As far as I can see, it isn’t for most. Undeniably, the economic downturn will change buying behaviors and decision-making processes for some of your potential customers. But it’s wrong to assume that this means you are overcharging for your product in the current market. In reality, most budget cuts right now, unfortunately, are the big ticket items (staff). SaaS is comparably just a drop in the bucket. However, that doesn’t mean SaaS is totally safe either. Companies are looking to trim the fat on their teams, often reconsidering entire workflows, and weighing which software can help fill in the gaps. This is especially true of low-code/no-code products where customers can make do with fewer pricey engineering resources. In this sense, SaaS products are just as much a part of the equation. Thinking through a pricing and packaging change right now can help you flourish when things are better again. When you see your numbers not picking up (or maybe plummet) it can get very tempting to frantically start changing your pricing, offer discounts or second-guess your strategies. But before you embark on a price-slashing journey, do some careful analysis. If your sales numbers are lagging behind what you expected, there is another question to ask: What’s actually wrong with your SaaS product or its pricing? It’s important to make a distinction here. Does the real problem lie in how you’ve valued (priced) your product? Is it the market’s impact on your product’s demand? Or is there a problem with the product itself? Each of these are entirely different diagnoses with different prescriptions. If the problem is how you’ve valued your product

With a $13B valuation, Celonis defies current startup economics • ZebethMedia

By zebethcontrolPosted on October 16, 2022Posted in Automation, Celonis, EC Cloud and Enterprise Infrastructure, Enterprise, process mapping, workflowNo Comments

When Celonis, an 11-year-old German process mining company, announced a $1 billion raise in August on a $13.2 billion post-money valuation, it was a bit of a shock. After all, VC firms were pulling back from the huge raises and gaudy valuations of yesteryear. But Celonis — which has raised $2.4 billion, per Crunchbase, with $2 billion coming in the last year alone — has been able to defy the current thinking in startup circles by taking on huge chunks of capital. Consider that its valuation has grown an eye-popping 420% since 2019, when it raised $290 million at a $2.5 billion valuation. That was followed last year with $1 billion at an $11 billion valuation, culminating in August’s $13 billion valuation. Part of the reason it’s such a valuable company is that along the way, it’s forged partnerships with corporate giants like IBM and ServiceNow to sell its software, helping push Celonis into markets where even well-funded startups might be limited by the resource requirements. It’s also been able to fill in the platform with several strategic acquisitions (more on that later). Why are customers, investors, and partners so interested in Celonis? Because Celonis, using software, can dig into the way processes move through a company, looking at complex areas like procurement, bill paying, and inventory and searching for inefficiencies and duplications that can ultimately add up to huge savings. This is the kind of work that high-priced consultants have tended to do, camping inside companies for months or years and figuring out how work flows through the organization while collecting fat checks to do it. Having software that can replace those human efficiency experts, and in fairly short order, is a tremendous advantage.

3 growth levers every SaaS founder should know about • ZebethMedia

By zebethcontrolPosted on October 15, 2022Posted in Column, EC Cloud and Enterprise Infrastructure, EC Column, EC How To, growth tactics, SaaS, StartupsNo Comments

Christian Owens Contributor Christian Owens is CEO and co-founder of Paddle, a payments infrastructure provider for SaaS businesses. Scaling a SaaS company is tougher today than in the past few years. Whatever stage your company is at, a near 70% drop in the value of public SaaS stocks, increasingly limited access to funding and shrinking company tech stacks all point toward a more challenging road ahead for a sector that got used to rapid growth almost by default. By nature, ambitious SaaS founders and operators do not want to give up on their growth ambitions even amid an economic downturn. There is no reason why they should do so. The fact is, VC funding isn’t a prerequisite for retaining customers and scaling steadily. However, there is no doubt that traditional growth levers like digital advertising and bigger sales teams are likely to be proving too costly or unreliable in the current climate. There are still opportunities for growth out there, but founders and operators will need a new strategy if they want to continue growing through the downturn. The key is to focus on scaling sustainably by tapping into more overlooked and underrated sources of revenue. If your CX isn’t tailored for international customers, you are leaving critical gaps in your offering and will see potential sales fall through the cracks. As the founder of a payments infrastructure provider for SaaS businesses, I have helped thousands of software companies over the last 10 years, and we see the financial metrics of 30,000 subscription companies. Based on this experience and analysis of our data, I believe there are three growth levers often overlooked by SaaS leaders that every company should be exploring. Focus on expansion for recession-proof revenue Encouraging businesses to deprioritize acquiring new customers might seem counterintuitive, but the truth is, keeping existing customers happy — and generating new sales from them — is far easier and much cheaper than acquiring new clients. This is especially true now, as many buyers will be hesitant to spend money trying out new tools. That’s why SaaS companies should be paying attention to expansion revenue — the additional revenue generated after the customer’s initial purchase. This basically means getting your customers to spend more than they did the month before. Our data shows that the most successful subscription companies worldwide have 20% of their new revenue coming from existing customers, but many businesses have close to zero. This is a consequence of what we call “sales brain” — a flawed mindset that views the sale as the end goal rather than the start of a long-term process. Here are a few ideas SaaS leaders can use to supercharge their expansion revenue: Add upsell tiers to your pricing, pushing valuable features into more premium tiers. Our research shows that the top 1% of growing apps have 16 pricing tiers, so don’t be afraid to charge for the most popular tools in your platform.

Is the RPA market in trouble? • TechCrunch

By zebethcontrolPosted on October 9, 2022Posted in Analysis, automation anywhere, EC Cloud and Enterprise Infrastructure, robotic process automation, Robotics & AI, RPA, StartupsNo Comments

Automation Anywhere, one of the best-funded RPA providers with over $1 billion capital raised to date, went the debt route this week, securing a $200 million loan from Silicon Valley Bank, SVB Capital and Hercules Capital. Debt raises aren’t necessarily a bad thing — they’re a useful tool, particularly for companies with high annual recurring revenue — but the magnitude and timing of the Automation Anywhere raise suggests it was more out of necessity than choice. “This new financing will provide operational capital for the next several years as Automation Anywhere continues to advance its cloud-native automation platform,” CEO Mihir Shukla told TechCrunch via email. “We’re using AI and intelligent automation to design tech that’s accessible to everyone — all kinds of business leaders, managers and citizen developers.” While Shukla insists Automation Anywhere’s business is robust, with a customer base of around 5,000 and “over 50% revenue growth,” the RPA market has long faced headwinds as investors increasingly express skepticism that the technology, which automates repetitive software tasks at enterprise scale, can deliver on its many promises. PitchBook notes that shares of UiPath — Automation Anywhere’s main rival, which went public in April 2021 — plummeted 71% this year. Meanwhile, another large player, Blue Prism, last September agreed to sell itself to Vista Equity Partners for £1.095 billion (about $1.5 billion). Gartner predicts that while the RPA market will reach $2.9 billion by the beginning of 2023, the growth rate will end substantially lower than it was in 2021, when the segment expanded by 30.9% compared to the year prior. Assuming the $2.9 billion figure comes to pass, it’d translate to 19.5% growth between the years 2021 and 2022.