Grading The 2017 Enterprise Almanac
Six months ago, we published our inaugural Enterprise Almanac, a 150-slide presentation of key trends across cloud, ML/AI, security, and Industrial IoT that are impacting Fortune 1000 organizations and startups alike. With the holiday season and end of year upon us, I thought it would be an opportune time to revisit a few of the principal predictions we made in that presentation.
I’ve been speculating the enterprise infrastructure market for the past 6 years, first as an industry analyst and now as an investor. Some of my predictions have been right, others have been blatantly wrong. Forecasting technology trends can be a bit of a trite exercise. Ultimately, it’s entrepreneurial might that shapes the direction of innovation over any “academic” rationalization predicated on a management framework or comparison to a previous technology wave.
Nevertheless, drawing lines in the sand fosters healthy debate. I’ve found myself most drawn to the entrepreneurs going against my conventional speculations. And it allows for something we in the venture world we do not do often enough — reflect on how events have or have not conformed with our forecasts so we can better hone this small part of the job.
So here it goes:
Prediction #1: AI-powered business process transformation will flourish. “Vertical AI continues to be a disruptive force in the enterprise, with ‘niche’ markets presenting massive opportunities. One caveat: complex AI operating models = protracted path to product/market fit.”
Interim Grade: B+. There’s no doubt a panoply of startups focused on business process automation. However, I’m dinging myself slightly for using the word “flourish.” The tendrils of AI are yet to infiltrate the full spectrum of industry segments, namely because use cases where automation of a single “task” is potent enough to significantly transform an entire operation are far and few between. As Yann LeCun duly notes, deep learning does not have as many marketable applications today as pundits have hoped.
I also could have been more prudent in emphasizing my latter point on the protracted path to PMF. Unlike SaaS businesses, with their agile development and rapid customer feedback loops, AI-powered startup iteration cycles are more akin to traditional pipeline businesses of yesteryear. AI startups must navigate complex BD arrangements with initial customers to prove out a use case that may or may not scale. This creates a misalignment between funding requirements and true business traction.
Revised Prediction #1: The hunt for the next billion dollar vertical AI market application is on. And frankly, we may be twiddling our thumbs for some time.
Prediction #2: Kubernetes will win the battle for container orchestration. “Kubernetes maximizes ease of use, has the most vibrant open source community, encourages the community to freely innovate on an OSS foundation, and has the right level of abstractions for users that are noticeably missing in Apache Mesos.”
Interim Grade: A-. With Docker, Mesophere, and Oracle, aligning with Kubernetes, it appears that the battle for an orchestration standard has been won by Kubernetes. Even Amazon at their Reinvent conference last week announced a managed Kubernetes service. It goes to show the power of the open, scalable, and community-backed platform.
Since Kubernetes adoption remains in the early innings from a production perspective and needs to become easier to setup/deploy, I’m docking myself for the wording “winning the battle.”
Revised Prediction #2: No change.
Prediction #3: Legacy security companies will buy SOAR vendors. “Most likely outcome this year and next is legacy security companies buy Security Operations, Analytics, and Reporting (SOAR) startups to put themselves closer, but not fully embedded in the cloud IT stack.”
Interim Grade: C. We saw this past year the acquisition of Hexadite (Microsoft) and Komand (Rapid7), but the pace of SOAR acquisitions hasn’t proven to be as hot as I predicted. Despite mandates to grow through acquisition, incumbents seem to be behind. A case in point is McAfee’s acquisition of Skyhigh Networks, which one could argue is a move a couple years too late. My only explanation is that incumbents are waiting around for the right buy in price. With the incumbents sitting on the sidelines with popcorn in hand, I’m shifting this prediction by a year.
Revised Prediction #3: Legacy security companies will buy SOAR vendors in 2019 and 2020.
In typical fashion, I bet too strongly in the short run. My business school professor Rahul Kapoor refers to this human tendency as linear thinking:
Good thing if my linear thinking holds true, I’m highly underestimating the long-run impact of this next generational shift in enterprise infrastructure. Here’s to the next year of my “safe” predictions proving themselves fantastically conservative or flat out wrong.
