 From our studios, in the heart of Silicon Valley, Palo Alto, California, this is a CUBE Conversation. Welcome to this CUBE Conversation here at the Palo Alto CUBE Studios. I'm John Furrier, host of theCUBE. We're here with special guest, a CUBE alumni, investor and entrepreneur. We do Sudakar. We do good to see you again. John. Always a pleasure. You've been on as an entrepreneur, founder, as an investor. You're always out scouring the valley. We have some great conversations. I want to get your thoughts as kind of a guest analyst on this segment around the state of the union for enterprise tech. As you know, we cover enterprise tech. We go to all the top enterprise B2B events. The world is changing. We've got re-invent coming up. We've got VMworld before that. The two big shows to cap out this year. We've got Splunk, a variety of other events as well. So a lot of action. Cloud now is pretty much a done deal. Everyone's validating it. Microsoft's gaining share. A lot of growth areas around cloud that's been enabled. I want to get your thoughts. The first question is, what are the top growth sectors in the enterprise that you're seeing? Nice. First, thank you for having me. It's always a pleasure talking to you. Over the years, you and me have done this so many times. I'm learning a lot from you. So thank you. You're welcome. So yeah, I think let's dig into the cloud side and in general the market. So I think that there are three, four areas that I see a lot that's happening a lot. Cloud is still growing a lot. It's 100% or more growth in the cloud and we'll talk details on what it is. The second area I see a lot is IT services or cloud services. This includes service management. The areas that service now is in. There are still service management. AI ops was IBA that's why. AI ops in that category, AI service management. Gartner is coming up with a new category called AI service management. So they're replacing the ITSM with AI-driven. So that's growing at 100% as a category. Third is RPA. According to again the industry analysts, they have seen that it's growing at 65% to 70%. So these three areas are growing a lot. And the last one that I see a lot is user experience. Can you believe it? Slack is a 20 billion market cap company. So if you net it out, it's a cloud, service management services, RPA, user experience companies. These are all the four areas I see a lot. They're taking all the oxygen. Rest everybody is like the breadcrumbs. Okay, and why do you think the growth in RPA is so high? Is it hype? Is it real? What is going on in RPA in your opinion? Again, the rumors I'm hearing out there is some companies are already at a billion revenue run rate wise. That's a lot in RPA. So it's not really a hype. So if you look at below the RPA, what's happening is RPA companies are automating automation. The key for here is if I can improve the user experience and also automate things. RPA started doing screen scraping in the early days, looking at any reservation, supply chain, any workflow automation. So every company is so complex now. Somebody has to automate the workflow. How can you do this with less number of people, less number of resources and improve the productivity? I mean, RPA is robotic process automation is what it stands for. Ultimately, it's software automation. I mean, software meets cloud, meets automation. It seems to be the big thing. That's also where AI can play a part. Your take on the AI market right now, obviously, cloud and AI are probably the two biggest, I think, categories people tend to talk about. Cloud and AI is kind of the big kind of territories. RPA could fall under a little bit of both. But what should you take on AI? Yeah, so I think if you look at RPA, I actually call the traditional RPAs to be historical legacy vendors. And RPA companies are doing a good job to transform themselves to the next level. But RPA needs to have AI at its core. It's no longer the screen-scaping, the decision-making, the workflow, understanding there are new technology called conversational RPA. There's actually a separate market guide being created called conversational AI. Within AI, can I talk to you in a dialogue manner? Like what do you explain with Instagram or what's using WhatsApp or dialogue flow? How can I make it a conversational RPAs? It's a new sector that's evolving it. But RPA companies have done a good job. They will evolve too. They're going to add AI as a component. And UI has been, has great success. We've been covering them like a blanket on SiliconANGLE and theCUBE. I got to get your take on how this all comes into the next generation. Modern era because we're both been around the block. We've seen the waves of innovation. The modern era of Cloud, certainly Cloud 1.0, Amazon, now Microsoft as you're following Google and everyone else, really goes DevOps. The DevOps movement, cloud native, amazing, create a lot of value, continues to do well. But now there's a big conversation around Cloud 2.0. What is your definition of Cloud 2.0? How do you see Cloud 2.0 evolving? First of all, I like the name Cloud 2.0. I think it's you, author. It is going to continue as a trend. So look, Cloud 2.0 is, I don't know what it will be but I can tell you what it should be and what it can have. Some of the things it should do in the cloud is, cloud is still very much run to human beings. A lot of DevOps people, a lot of human being. The next generation, two daughters should have things done programmatically. I don't need tens of thousands of SRDs and DevOps people. So back to your AI upside and everything. Some of those things should become, cloud should become proactive. I don't want to wait until Amazon EC2 is down. If I'm paying Amazon this money, Amazon should be notifying me when my service is going to be down. There's subsurface, there's, they have provided cloud trail, cloud watch, et cetera, but they need to take it to a notch level with Amazon, Azure, or PCP. So making the experience of deploying, running and building apps. Scalable, obviously that's the scales with the cloud. Programmable, kind of brings in the RPA. I mean, making it vocal automation. Edge of the network is also interesting, comes up a lot like, okay, how do you deal with networking? I mean, Amazon's done compute and storage and meet amazing well with cloud. And networking has been built in, I guess. To me, the trend with networking kicks in big because now it's like, okay, if you have no perimeter, you have a service area with IoT. There's nothing there. The cloud 2.0 has to address real time, programing ability, things like Kubernetes continues to rise, you're going to need to have services taken up and down automatically, no humans. So that's my key point. The key point for cloud 2.0 should be done without a human in the equation. Today it's still done with DevOps. If people are still using Terra from a lot of scripting, a lot of manuals, can you automate that? That's one angle. The second angle I see in cloud 2.0 is if you step back and say what exactly the intrinsic properties of cloud made is, it's the workflow, it's automation, but it's also able to do it proactively. So what I don't have today is, if I'm playing cloud vendors this much money, tell me what outages are happening. Don't wait until outage happens. Can you predict the outages? They have the capability to, it may mean, it should be probabilistically, it may not be 100%. So I want to know outage prediction. I want to know which services are going down or notify the users. That will become a common denominator and services will be start providing. Even though you see small startups doing this, eventually they become features. All these companies and they'll get absorbed by the, I call this aircraft carriers. You have Amazon, Azure, GCP. They're going to absorb all these AAPs to the point they provide that as a functionality. Yeah, so let's get to the consolidation in a second. I want to get your thoughts on the cloud 2.0 because what you're really getting at is that there's a lot of white space opportunity coming in. So I got to ask you the startup question as you look at, you're an investor, prolific investor in a lot of startups, also you're an entrepreneur yourself. What is the opportunities out there? Because we'll get into the big whales, Amazon, who are building and winning at scale. So barriers to entry are higher every day even though it's open sources there. Amazon's betting on open source big time. We had John Thompson talk about that. That was a success of Satya Nutella. And so what, if I'm an entrepreneur out there, what do I do? I mean, is there any real territory that I could create a base camp on and make money? There's plenty. There's always opportunities. So there's plenty of white spaces to create. Look, first of all you have to look at what's catering. Look at what's happening. IBM is out of business and service management. CSO itself to Broadcom. BMC is sold twice to private companies. Even the CEO got, has left or whatever it is. Then you have HP sold itself to Micro Focus. The only company that's left is ServiceNow. So in that area, you can create plenty of good opportunity. That's a big white space. And CSO has now just had a bad quarter. So they're not truly cloud-nated. Look at what they're going to do well, eventually. But there's enough companies to go in that space. That space can support two to three opportunities. So I can see a publicly traded company in ServiceNow space. In the next five years, my prediction is there'll be another company that will go IPO in the service management space. Same thing's going to happen in RPA. RPA vendors won't get acquired. They'll create enough workflow automation. They become the next tip course of the world. I can see a next publicly traded company is going to happen. In the IT operations, PageRoot is a publicly traded company today. PageRoot is doing really well. Watch DataDog. They're going to do a public next. So that area also, you see, plenty of opportunity to create companies and AI ops. So this is, again, back to the growth areas. Cloud, hard to compete on public cloud. The big guys are out there. There's a cloud enablers. The people who don't have the cloud. So HP try to do a cloud HPE. They had to come out. Dell try to cloud can do it. SAP technically is out there with a cloud. They're trying to be multi-cloud. So you have a series of people who made it. In Oracle, still on the fence, they still technically got a cloud, but it's really more Oracle on Oracle. So they're kind of stuck in the middle of the team. You know, cloud enable or versus a cloud player. If you're not a cloud player, large enterprise, what is the strategy? Because you got HPE, IBM, Cisco, and Dell. So I think, look, that's all. You didn't include sales force in that. If I'm sales force, I want sales force to get into. They have a sales cloud, marketing cloud, commerce cloud. Mark is not doing anything in the area of IT cloud. They cannot go from 100 billion to half a trillion or trillion market cap without IT. They have to embrace that. And that's a 100% growth area. Adobe will get into this game at some point. Adobe is already 150 billion market cap. Then that leaves with what is Cisco going to do? Cisco has been buying more security, software assets, but they don't want to be a public cloud company. They're hybrid cloud, but they have to figure out how can they become an arms dealer in this game and by owning different properties of cloud services. And that's going to happen. And IBM did a good job by acquiring Red Heart. So I think some players are already figuring out this. Consolidation is happening, but they have to get in the game in cloud. They have to do other service management. They have to get into RPA. They have to get experience. See, none of these guys are experience driven. In this day and age, the new kid who are joining the workforce, they care for Airbnb. They care for V-Work. They care for Uber. They care for Netflix. IT is not betting on this. So if I'm on the boardroom at Cisco, I'm not talking about experience. That's a problem to me. HP boardroom is not talking about that. See, that's what, if I'm, I know Mark is on the board from Andreessen, but Mark is investing in all these Slack companies. Then why is HP not doing it? Either HP show get a separate board member or they should get somebody else. You know what, I'm going to telegraph the moves, maybe. I don't know, we talked to Andreessen about that, but I want to get back to this experience thing because experiences become the new expectation. That's been kind of a design principle kind of ethos. Okay, so let's take that the next little younger generation. They're consuming Airbnb. They're using these services like their news and little chunks be built a video service for that. So things are changing. What is IT's version of that? Is it a consumption? Is it a product issue? So how does IT cater to these new experience? What are some of those experiences? I think all of the above. I think IT first of all should cater it. Every property, every product should figure out how to offer to the consumers, how they were consuming it should offer to the businesses on the B2B, B2C. So the IT has to think of every product owner should start thinking about how my user should consume this and how should I offer new experiences and how they want to see this in a new way. It's not in the same, the same compute and networking. How can I deliver it proactively? How can I deliver to a point where people can consume it and make automatic decisions? The decision making is that's where the AI comes in. Don't wait for me to ask the question. Suggest, it's like Gmail autocomplete. Every feature should be thinking through probabilistic what can I do to improve the experience. That changes the product management and that's where I'm looking at companies who are thinking like that to the next generation CRM, next generation security, but that has to happen at the product level. I was mentioning the people who didn't have clouds, HPE, IBM, Cisco and Dell. You threw Salesforce in there. I kind of would think Salesforce, Salesforce is technically a cloud. You do a cloud before cloud was even cloud. They built basically Oracle for the cloud. That became Salesforce. But you mentioned service now, Salesforce. You got Adobe, you got Workday. These are application clouds. So they're not public clouds per se. They've got Amazon web services. Adobe runs on AWS, right? A lot of other people do. Microsoft has their own cloud, but they also have applications as well, Office 365. So what are some of these niche clouds, these application clouds have to do differently because if you think about Salesforce, I mean, you mentioned a good point. Why isn't Salesforce doing more? I mean, people generally don't like Salesforce. I mean, they think that it's more of a lock-in spec, less of a, wow, they've done really innovative things. I mean, people don't really tend to talk about Salesforce in the same breath as innovation. They talk about, well, we run Salesforce, we hate it, or we use it, and they never really break into these other markets. What's your take on them? No, I think market's done a good job through over the years acquiring very companies. It has to start from the top, and at the market, his management team should say, I want to get into a new space. He got into Commerce Cloud, he got into marketing. He has to now decide, should he get into IT or not? Once he comes there, he's really take up because today Salesforce is below the market cap compared to Adobe, right? If I am Salesforce, I need to go, but then should I go after service now industry? Should I go after entire IT services industry? Yes or no, but they have to make that decision. Same thing with Adobe. Adobe is not going to be a niche cloud. They will get into IT side. They're already doing the AI side and experience, so they're king of experience. They're king of what they do in marketing side. They will expand to IT. Well, Adobe will just launch a platform. Yes. That's under the former executive from IBM. That's an interesting direction. They all have these platforms. Okay, so I got to get into the Microsoft, Amazon, Google, the big clouds, and then everybody else. A lot of discussion around consolidation. A lot of people say that a recession is coming next year. I doubt that, but you know, knows. The consolidation continues to happen. You can almost maybe predict that, but where do you see the consolidation now? You got some growth areas as you laid out. Cloud, IT services, RPA, experience-based software, like Slack, et cetera. Where's the consolidation happening? If the growth is happening there, where's the consolidation? It's happening everywhere. I see a lot in cybersecurity. I mean, CrowdStrike already went public. You have Zscaler, the whole bunch of companies, so the next level of companies, you already saw Cisco Bot, GeoSecurity, Palolta has been buying aggressively companies, so security's already going through a lot of consolidation. You're not seeing other people taking a bet in the IT services industry. You'll start seeing that. You're already seeing that in the Kubernetes space, the game is pretty much over, right? Even VMware bot companies, even NetApp bot companies in the Kubernetes. So I think consolidation is always going to happen. People are picking up the right time. It's happening across the board. It's a great time to be an entrepreneur, create a value, take companies public too. So it's like, I think it cannot be anymore at a better time. Look, to your point, where the decision happens or not, nobody can predict. But if in a chance now, it's the best time to raise money, build a company. Well, Madhu, I think the analysis, at least from my perspective is, looking at all the events we go to, is the same theme comes up over and over. Andy Jassy, the CEO of AWS, always talks about old guard and new guard. I think there's two sides of the streets developing, old way and a new way. And I think the modern architecture, the modern era of computer industries coming, and it looks a lot different than it was. So I think the consolidation is happening on those companies that didn't make the right bets, either technically or business model-wise, or they took on too much technical debt and could not convert over to the cloud world. Or these really robust software environments. So I think consolidation is from just the passing of older, non-relevant. And I have a name for this era. So remember, the first main computing was called Mainframe Era. Then we went with Client Server Era. Then came the cloud. Cloud is 2006, now 13 years old. The new era called, what are the name? It could be something with AI and machine learning era, where things will be so automated. That's what we have, new area of computing. So that's, I would like to see, so that's a new trend. This will be another 10-year trend. So even though we go through a recession, it's 10 years. And software. Software, cloud scale, data. AI level. Yeah, it's interesting. And I think the opportunity for startups is to build new brands. These new brands could come out. Let's take an example of a company that went after an old incumbent space, dying market share, not very attractive from a VC standpoint, from a market space standpoint, Zoom. Zoom went after web conferencing. And they took on Webex. And 20 billion dollar market. And they did it with a very simple formula. Be fast, be cloud native, and go after that big market and just beat them on speed and simple value. Back to their experience. They gave you the greatest experience just on the web conferencing it. And better than Skype, better than Webex, better than anybody else. And the market paid them with reward. Thanks very much. He had a great vision. And he's very focused. He used cloud scale. That's it. Took the value proposition of Webex. Get rid of all the other stuff and brought it simple to video conferencing. And that mantra is going to happen in the AI, applying to AI for IT service management, AI ops, AI customer service, AI customer support. So this is what entrepreneurs can do. They can target big markets. Go niche depth. And go directly at either a specific differentiation whether it's experience or just a better mousetrap in this case could win. Right, and one more thing we didn't talk about is where entrepreneurs go after is the area. Remember, many of these apps are still enterprise apps. Nobody really focused on moving these enterprise apps to the cloud, right? All these cloud providers are still struggling with saying, how can I move my workloads? Remember, only 10% workloads in the cloud. 90% still on-prem. So somebody needs to figure out how to migrate these clouds to the cloud very seamlessly. The apps are going to be born in the cloud, cloud native apps. So how do you address to cloud native apps? So there's enough opportunity to go after enterprise applications, cloud native application. So it's a very important. I mean, I do buy the argument that there'll still be on-premises activity, but to your point, there'll be still a massive migration to the cloud, either sunsetting apps and being born in the cloud or moving them over on-prem, off-prem. In all that, I keep telling the entrepreneur to follow the money. When there is, the thing you have to look for is there a big market? Are people catering there? If people are dying and the old God is there to your point and it is in the new God, new God will happen. And if you can bet on the new God in new experience, market will reward you. Where is the money? Follow the money, where do we follow? Show me where it is. Tell me where it is. I told you, follow the cloud. Cloud is the big, I mean, if you are not making money in the cloud, for the cloud, you are a fool right now. If you are any company you are not making in the cloud, as a CEO or board member, you need to think through it. Second, automation, whether you go RPA, IT automation, you have to make money out. Service management, whether it's from customer service to support operations. You've got to take the cost out of it. If you are a CIO today and you are not making bets, that's the main thing I see is most CEOs still don't want to take it back. They want to build an empire. The message to CEOs right now is either you do it or get out. Give the job to somebody else. Well, I polled a lot of CISOs in preparing for reinforce Amazon's new cloud security conference and overwhelmingly response from the CISOs, Chief Information Security Officers, is we are building stacks internally. When I asked them about multicloud, you know what they said? Multicloud is BS. I said why? He goes, well, we have a secondary cloud but I don't want to fork my development team. I want to keep my people focused on one cloud. If it's Amazon, we go Amazon. If it's Azure, we stay with Azure. I don't want to have three development teams. So there's a trend to keep the stack building internally. So that means they're investing in building their own tech stacks. Your thoughts on that? Look, I mean, that's again, there's no one size fits all. There will be some CEOs who want to have three different silos. Some people have this horizontal stack, like I've seen companies right now, they write the code once, it compiles and executes in all three clouds. That's a new way to build it. You're not going to create a stack for each of them. You have to write the code so that it uses the native services but uses the same code base. That's how the new startups are building it. If somebody's writing it like this, that's all we have thinking as a CIO. So they said, the new CIOs have to think through, how can I do one code works on all clouds? Great. Moodu, thank you for coming on again. Always great to get your commentary. I learn a lot from you as well. Appreciate it. I got to ask the final question. As you go around the VC circles, you don't need to mention any names. You can if you want, but I want to get a taste of the market size of rounds. Seed round A and B, what are hot rounds? What sizes of series A? I'm seeing more 10 million, 15 million series A. Series B's are always harder to get than series A. Seeds are always kind of easier. What's your take on the hot rounds that are hot right now and what's the sizes of the investments? Very good question. So I mean, so series is the most easy one, right? Your concepts, but the seed sizes went up from 200 K to now. Most seed rounds are a million, two million. Most seed, series A is now one to 10 million dollars. So if you're a series A company, you're not getting 10 to 15, there's something wrong because that became the norm because there's more easy money. It also helps entrepreneurs. You don't have to look for money. Series B's are becoming $20, $25 million rounds. Series C's, if you don't raise a $50 million round, then that means you're really not a growth company. So the minimum amount to draw is $50 million in series C. Then after that, you're really looking for expansioners, $100 million, et cetera. Yeah, private equity or secondary market. But the key is the market, valuations also went up. So I tell entrepreneurs, when there is an opportunity if you have something, you can command a price. So if you're doing a series B at $25 million, you should be commanding $100 million, $150 million, $200 million, or valuations, right? If you are not, other guys are getting that. You are giving too much of your company. So you need to think through all of that. So series B's at $100 million? Good companies are much higher than that. There'll be $150, $200, and again, this is a buyer's market, the entrepreneur's market. So pieces have more money in the cash of good players. They will put in, whether you have one million revenue or five million revenue, 10 million series B is the most hardest, but it's commanding good premium. Good times of being entrepreneurs always, bubble always bursts when it's a buyer's market on the entrepreneur side. Take the money. I always start a company when the market busts. That's always my philosophy. Moodoo, thanks for coming on. I appreciate your insight. Always, as usual, great stuff. Thank you, John. Moodoo, shoot a car here on theCUBE. Investor, friend of theCUBE, entrepreneur. I'm John Furrier. Thanks for watching. Thank you, John.