At a press conference featuring five CEOs of enterprise-focused startups organized by venture capital firm Andreessen Horowitz, the consensus among the CEOs was that enterprises are embracing hybrid cloud architectures over the pure public cloud, a trend that should favor Microsoft Azure (MSFT), among others.
“Hybrid IT will be dominant because enterprises want to hold onto their data,” said Toby Knaup, CEO of devops startup Mesosphere. He added that many public cloud providers, including Amazon Web Services (AMZN), do not offer services for on-premise data centers compatible with their solutions inside their own public cloud. “Microsoft has taken a different tack and will be one of the winners.”
Ash Ashutosh, CEO of storage startup Actifio, agreed. “In the enterprise market, governance, security, and risk take a much higher priority, and of course cloud providers have to be cheap and agile too. We power two dozen large enterprises, and for them cloud means hybrid, the ability to be a seamless extension of the data center the enterprise [already] has.”
Ashutosh saw Microsoft and AWS as leaders. “Microsoft and AWS will be the number one enterprise clouds. It may be a little surprising, but Oracle (ORCL) will be a number one cloud, because it already has applications in the enterprise. Google (GOOG) has a huge opportunity, and IBM (NYSE:IBM), if it can make Watson fulfill its goals, has a great opportunity.”
Todd McKinnon, CEO of Okta, took a different view. “I think AWS is a hands-down winner,” he said. “We talk to large enterprises, Fortune 100 companies, and we increasingly find they are saying to us: we know you are on Amazon, how do you do that? Can you tell our ops guys.” He went on to say that AWS impresses customers by the broad range of applications and services it offers. “There are services you would never expect Amazon to offer, but they do.”
The meeting, between five CEOs of relatively mature enterprise startups and the press was organized by the venture firm to gain publicity for the startups. In the Q&A session, they were asked if they see any signs of the recession that some Wall Street investors fear may be around the corner, and is one driver of the severe tech stock selloff this year. The five CEOs were unanimous in saying they see no sign of recession, at least so far. “We had a phenomenal Q4,” said Ashutosh.
Peter Levine, a partner at Andreessen, and McKinnon said many startups have gone through a change in growth strategy in recent months as it has become harder to raise money. “The Box S-1 came out and turned the whole industry away from the idea of buying dollars for 80 cents,” McKinnon said. In March 2014, Box’s initial S-1 came out, and showed that Box had spent $171 million in sales and marketing expenses to achieve revenue of $124 million, in effect spending $1.38 on sales and marketing for every dollar of revenue. Box went public (NYSE:BOX) in January 2015 and closed at just over $23 a share on its first day of trading. Yesterday, it closed at $9.12, a fall of 60%. In December, Box’s financials showed that it has reduced its sales and marketing spend to 81% of revenue, as we reported before on dailycloud.info. “Eighteen months ago, it was all about growth. That has shifted and now it’s about profitability,” said venture capitalist Levine.
McKinnon said that Okta is increasingly likely to make an acquisition, as the prices smaller startups can demand fall in the tighter funding environment. “We’ve been talking to four companies, but prices were too high. Now, if prices are going down, something is going to happen.”
In terms of enterprise technology, the CEOs of Cumulus Networks and Mesosphere talked about automating the data center, and moving enterprise customers to public, private, and hybrid clouds. However, Levine said he was looking beyond the cloud and exploring what could be the next big wave of technology. “Virtual reality, automotive, drones, if you think about all those new technologies, they are all wearable or drivable data centers,” he told the audience. “We may be entering another age of distributed computing, where there are lots of decisions that are made at the endpoints. While cloud stays important, new platforms are starting to come in.”
