Science and technology revolutionize our lives, but memory, tradition and myth frame our response. – Arthur Schlesinger 

One machine can do the work of fifty ordinary men.  No machine can do the work of one extraordinary man. – Elbert Hubbard 

With 2019 upon us its a good time to reflect on the state of technology in terms of macro trends, digital transformation and IT products and solutions.

To that end here is Part I of my blog series exploring some of the macro trends that I am following in 2019 as they have the potential to affect the overall technology landscape including revenue models, strategic alliances and even VC Investments.

Let’s jump in!

TREND #1 – OSS (Open Source) business and revenue models are changing – Traditionally the open source movement was designed to be “built by the community” and “leveraged by all”. It then evolved, in some markets, to a business model built on community developed software backed by enterprise support.

BUT – 2 things changed in 2018 –

1. IBM bought Red Hat – Let’s face it, IBM’s purchase of the largest OSS entity, Red Hat, for $34B (10x annual revenue) was largely justified by the potential that open source software has to differentiate public cloud offerings (Ultimately, its the PaaS, not the IaaS that differentiates). With the current install base of Red Hat software across AWS, Google and Azure this move gives IBM a piece of the growth regardless of who wins. In addition to this, in my opinion, IBM may leverage the core Red Hat innovations (Linux Support, CloudForms, Openshift) as a basis for proprietary differentiation of their SoftLayer cloud – time will tell
2. Public clouds monetized open source software – Lately, we are hearing significant noise from the open source community players (Redis, Confluent and others) accusing public cloud players of “exploiting” the OSS community by offering billable and highly profitable services on top of their “Free” software traditionally governed through “permissive open source licensing”. To support their narrative, why should public cloud players be able to deploy OSS software at no charge but charge their end customers for the services? Ild expect to see more OSS vendors changing their licensing  models change in an attempt to charge public cloud players that leverage their software and help OSS communities. For a sign of the potential here check out what Confluent announced just last month.

TREND #2 – Public Cloud Application Architecture battling between “Open and Flexible” vs. “Time to Value” – IN 2018 we saw the “best of breed” vs “integrated solution” re-emerge this time with respect to public cloud adoption.

• “Best of Breed” – Open PaaS vendors (like Dell’s Pivotal and Red Hat’s Openshift) claim that customers’ should choose to develop on their OPEN platforms given that they are flexible and extensible on-premises/off-premises and to any cloud. Of course the irony here is that Red Hat was likely purchased by IBM for its potential to given them PaaS capabilities unique to IBM Softlayer.
• “Integrated Solution” – Public Cloud vendors (AWS, Azure, Google) claimed that customers should architect their applications on their specific “PROPRIETARY” application distributions as they provide the simplest path to value (quicker integration and less development effort) and are optimized to run in that specific cloud instance. In the case of AWS these distributions also presented a much broader resource pool who can be tapped to develop and deploy applications.

We have seen this debate many many times before (remember ERP…) and in most cases, as markets have standardized, the simplicity and long-term cost benefits of an integrated solution won out. All things being equal everybody would choose an open platform vs. “vendor lock-in” however it is going this battle is going to come down to whether or not the open platform vendors can match the “time to value” and “long-term operating cost” principles currently offered by the public cloud.

TREND #3 – The Cloud is maturing (Private, Hybrid and Public)….The Hardware market is growing fast and differentiation is coming down to software – According to recent analyst reports both storage and server markets grew well over 30-40% in the 3^rd quarter and double digit growth is expected to continue. Why? It comes on the back of many years of anemic growth while large enterprise sat on the sidelines buying the minimum required and wondering if they would be moving 100% of their workloads to the cloud. Today, is appears as though the future is Private+Hybrid+Public cloud and investment in the core (Data Center) will continue. Pat Gelsinger, CEO of VMware outlined the reasons very well in this article attributing the long term viability of hybrid cloud to Economic, Financial and Legislative consideration.

All this being said….the real battleground here is the software that vendors are offering – Simply put, customers want quick time-to-value and low technical debt. Initially the major thrust of software was simplifying the abstraction, operations and automation of traditional Data Center hardware. In 2018 we started to see software differentiation move to cloud extensibility and multi-cloud operations and automation. Ild expect to see this trend continue into 2019 with a focus on helping to simplify the coming Edge-Core-Cloud architectures.

TREND #4 – Enterprise Application software vendors continue to acquire across the CI/CD, Analytics and AI space to drive revenue growth and simplify integration for customers  – Over the last 2 years we have seen traditional enterprise application vendors (Oracle, Salesforce, Microsoft) acquiring startups focused on Application Development (Mulesoft, Github), Analytics and AI (Datafox, Grapeshot, Datorama). This comes down to a simple fact –

Applications create valuable data. This data needs be analyzed and blended with other data in order to deliver value. This value can then be further amplified by connecting it with new digital applications

Now – With all this being said enterprises have learned to understand the complexity of integrating 3^rd party applications and analytics with enterprise applications. By acquiring these capabilities and integrating them directly into the platform they have simplified organizations ability to drive value from their core applications and in doing so have increased the strategic value of their solution.

It will be interesting to see how these organizations continue to acquire in an attempt to control the full application and data platform.

TREND #5 – Virtual / Digital Assistants (Alexa, Siri, Google) are evolving and maturing quickly and showing strong potential for enterprise application – In 2018 we saw a surge in both the consumption of digital assistant services but also the ecosystem moving quickly to embrace these assistants to drive enhanced value to their services (everything from streaming music to starting your car to controlling your smart home and your Roomba). While these applications are largely consumer oriented the reality is that we are proving out the connection between humans and machines today and moving forward.

The evolution of Natural Language Processing (NLP) has come a long way and now is a viable stream of communication between man and machine. When you think of the potential here in the enterprise (Call Center, Healthcare, Retail) it gets really interesting. Couple the capabilities of a digital assistant with augmented reality and “airpods” for communication and we could potentially drive a whole new world the obfuscates the smart phone – Although I would say we are several years away from that reality 🙂

I hope you have enjoyed my review of these 5 macro trends – In Part II I will explore the business trends specific to Digital Transformation and in Part III the IT specific trends.