 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Well, hi, everyone, welcome to this review of the sixth annual Future of Cloud Computing Survey, brought to you by Northbridge Venture Partners, Northbridge Equity, and by Wikibon. My name is Paul Gillan. I'll be your host and moderator. And the question is, where's the cloud going? Well, there's no shortage of opinions on that these days. You can find lots of research to that effect, but what really matters is what the customers think, and that's what Northbridge Growth Equity and in conjunction with Wikibon went out to survey more than 1,400 customers, end users, companies that are building their businesses on the cloud to find out where they think the cloud is going, where they stand on public versus private cloud, how much data are they putting in the cloud? What do they think of those questions of cloud security? Those are all issues we're going to address in this review webcast, looking at the sixth annual Future of Cloud Computing Community Survey, the second webcast, the second one is co-sponsored by Wikibon and by Northbridge Growth Equity. Now joining me right now are Holly Maloney-McConnell, who is a partner at Northbridge Growth Equity, and Stu Miniman, senior analyst at Wikibon. Holly, why don't we start with you? Tell us a little bit about Northbridge and about what you do. Sure, no thanks, thanks so much for having me. So I'm a part of our Growth Equity team at Northbridge and what we focus on is partnering with growth stage technology and tech-enabled services companies that have achieved revenue scale, typically tens of millions of revenue and have actually been really capital efficient to get there. So looking for a partner to help accelerate growth and take advantage of these really big market opportunities a little bit faster. What's your interest in this topic? So I help to lead our efforts in cloud security, open source and infrastructure investing across our growth equity landscape and lucky to have a number of my portfolio companies having participated and sponsored the survey today. Stu, leading cloud analyst, a guy that many companies turn to for insight on where the cloud is going. Tell us a little bit about what you do at Wikibon. Sure, thanks Paul. So I stand between really kind of infrastructure and cloud computing and that really sits right at the core of what we're looking at the survey here. People are trying to sort out this kind of multi-cloud, hybrid cloud world, what does that all mean? Holly and I were actually at AWS re-invent a couple of weeks ago so we got a good Kool-Aid injection where public cloud is and really been looking about, as you said, Paul, some of the inhibitors, some of the opportunities. At Wikibon, we love helping companies taking advantage of that next generation of technologies and love hearing how practitioners are learning from their peers and that's where it was great to kind of swim in this data. And coming as you did for the huge re-invent conference it'll be interesting to contrast the opinions that are expressed by the real customers in this survey with, as you said, the Kool-Aid that they might be drinking from Amazon. Let's take a quick look at the agenda with the next slide. We're going to talk about demographics first. The emphasis on cloud strategy, cloud technology in use today, where data lives, drivers behind cloud adoption, also inhibitors to cloud adoption. I think you'll see some interesting changes there. The expectations of where the cloud is going and finally where customers are investing their dollars. Quick look at the collaborators on this project. This project had 53 collaborators, companies that are all interested in different degrees in the future of the cloud. They volunteered their time, their customers, their reach to help get a record response to this survey. And we continue to look, Northbridge continues to look for more collaborators as we move forward into subsequent surveys. Really the bigger the better, the bigger the pool of responses we get, the better the quality of our data. Quick look at demographics. This was a record breaking survey, 1,351 responses compared to 952 last year. Holly, were you surprised by that number? What do you attribute this great response? Yeah, and I think it was really great to see the increase in users versus vendors. I think in surveys in the years past, we've seen a real emphasis on the vendor side, but it's great to see the voice of the users actually coming through and really describing how they are using cloud today in their business. On the vendor side, typically these companies may be using the cloud to deliver their products and services to market, but actually having the user perspective is really helpful. And I think one thing that was really interesting is that we saw respondents from eight or nine different industries, which includes things like government healthcare and manufacturing and transportation. So some of these industries that maybe have been viewed as laggers in adoption of cloud are really embracing that as they look to digitally transform their businesses. And 60% of the respondents were in fact users. And as Holly mentioned, some kind of old line manufacturing industries in their companies that you don't think of as early adopters of the cloud, but I think you'll see from these results that they're moving much faster than they're often given credit for. Paul, just to add to what Holly was saying, one of the things we noted last year in the survey is the line between kind of the vendor and the user tends to be blurring. We especially see that in the open source space where kind of the, every company is becoming a software company and everybody's collaborating on a lot of what's happening there. So really interesting when you kind of look at how people view themselves, view their company and where their revenue comes from. And we will be asking you to speak to some of the cross tabs here because on some of these responses, we might believe that they're being skewed by the number of vendors in the sample. But in fact, we found that there was surprising amount of unanimity, I believe, between how users responded to the survey versus vendors. Were you surprised at that at all, Holly? I mean, a little bit, but again, and not really just as we're seeing the pervasive usage across the board of clouds that people can really stay ahead from an innovation perspective and really using the cloud to try things, try things quickly and innovate across the board. Now all companies are becoming software companies. Let's get to it. Let's take a look at that first slide. Still, less than half of the technologists we surveyed say that they are cloud first or cloud only, but I don't know. I think in my opinion, this is looking at the small number is the important one, which is 42% of our respondents said that they're cloud first or cloud only. When you consider that the cloud has only been a major factor in the market for the last four or five years, that strikes me as a very fast, rapid adoption, a shift in attitudes. Stu, what do you make of this number? Yeah, well, Paul, it definitely is kind of a little bit surprising, but the last few years, we've seen the US government, we've seen big banks, we've seen large enterprise companies, not just startup gaming mobile companies that kind of were born in the cloud, but lots of companies that are saying we understand the advantages of cloud and one bit of nuance on this, when we say cloud, this does span not only public cloud, but private clouds, so if you go to most IT departments and say, are you doing cloud, there better be yes, but as it notes in here, we're still kind of getting from some of the tactical ways that we've been handling cloud to a more strategic view, and I think that shows out in the numbers as to people are still kind of using cloud as a hammer certain times to take care of certain things and others, it's a full strategy, they understand what they're doing. I've talked to many large companies that have now worked through their justification, understand how they're doing, what they're sassifying, what they're doing on-prem and what they're doing in the public cloud. Let's get that slide up on the screen so people can see the resulting numbers. I do want to follow up with you on that, Stu, because Wikibon has coined this term true private cloud, as distinct from virtualization, perhaps, which some people might have said was cloud. Do you think that these cloud-first companies are talking about true private cloud? Yeah, and Paul, I've talked to a number of companies that have kind of worked through that hurdle as to what's more than virtualization, how am I doing orchestration, how am I doing kind of the automation in these environments. I know towards the end of the survey deck we're going to talk about the DevOps movement and what's happening in that space, but it's more than just a point technology. It's really the consumption model of how I'm dealing with things, how both I'm consuming it and my internal constituencies, how I'm providing services to them, because it's really about the data and the applications and how I can do that faster, not just have the same old stuff that's been sitting on the shelf for 10 years. And when the answer, when somebody says I want something new, the answer would no, or it's going to take me 12 to 18 months to get that done. Kali, as you look to our companies that you're investing in, when you see this kind of shift happen to Cloud First, what implications does that have for the market, for startups, for companies that are offering these kinds of services? Yeah, I mean, I think really what it allows for is just a continued increase in the pace of innovation and really how they think about their strategy internally as you kind of landed to the DevOps movement. It's really figuring out how that becomes a key part of their strategy built into the product development organization, such that communications across the board needs to amplify, so you can take advantage of the Cloud while still kind of maintaining cost and minimizing risk while increasing agility. And so I think there are a lot of things that need to happen simultaneously. And so having a really solid Cloud Governance strategy is increasingly important for the companies with which we're working. And I think this number in terms of 42% and approaching 50% of Cloud First or Cloud Only really also speaks to the pace of innovation that we're seeing from traditional IT buyers in terms of them acquiring Cloud-based applications so they can really kind of fortify their Cloud strategies internally. One recent example that we saw in our portfolio was Oracle's acquisition of Dyne, announced acquisition of Dyne, which is a company based in Manchester, New Hampshire, which is a premium managed DNS internet performance management platform and really acquired this business to be about the cornerstone and basic foundation of their Cloud strategy going forward. Let's move ahead to the number, the slide that I think, and one more slide ahead. Frankly, this surprised me the most when I saw it. This sort of knocked me back on my feet. 42% of companies say they drive 50% or more of their business through Cloud-based applications. Now my initial reaction was, well, this is heavily influenced by vendor respondents, but you did the cross tabs and found out that that's not the case. So how is this manifesting itself? You say getting business from Cloud applications, what kinds of applications do you think are driving this growth? Yeah, I mean, I think what our survey results showed was that 75% of business functions are moving to or already in the Cloud. So that's things like marketing and CRM, which are certainly enabling sales among distributed number of organizations. Also, Cloud-based e-commerce platforms are increasingly table stakes for businesses to really grow online. And we're also seeing on the vendor side, I mean, the vast majority of companies that we're looking at at Northbridge Growth Equity are providing Cloud-based applications that is their business. So they are inherently generating certainly much more than 50% of their revenue through Cloud-based applications. And one all-out to that, Paul, is every conversation we have with companies these days, it's about where are they with that digital transformation. So the wave of mobile that we've been talking about for a couple of decades now, it ties into all of this. There are very few companies that are not affected in some way or another by mobile, Cloud, the new sources of data and everything that's in this space. Well, as you talk about digital transformation, maybe the great buzzword of 2016, but nevertheless, something that companies are fixated on, do you believe that Cloud is the enabler for digital transformation? And can you transform digitally without having a Cloud foundation? Yeah, I mean, we talk for how long do we talk? It's like, oh, what's an internet company? Cloud is just one of those substrates, that foundational layer that so much is built on today. Absolutely, and we're seeing these companies engage in just the first couple of years of five, 10-year digital transformation projects. And certainly, Cloud is the enabler of that and driver of that strategy. I wonder, Holly, maybe you could speak to some of the companies that you're investing in. You see business models that you think are especially innovative or unique, that are enabled by the Cloud, that perhaps we're not possible in a more traditional on-prem environment? Yeah, I think one business model shift that we are seeing is this adoption of high-velocity, low-touch sales models, such that because the way these Cloud applications are architectured and consumed, they can really be self-serve environments. And so examples of companies being able to drive their business both at the low end, so this, again, high-velocity, low-touch sales model, while also being selectively going through channels at the high-end enterprise. And really, the mix of this business model is really enabled by, again, the self-serve, service delivery models that the Cloud drives. Yeah, and at AWS re-invent, the whole discussion around the AWS marketplace was a huge piece. Companies that were just selling online now, I need to be part of these marketplaces. One thing we've been looking at for a number of years is will there be an enterprise app store out there? Because I'm doing my CRM in the Cloud, I'm doing so many other of my applications in the Cloud. What other services does the business want to have access to and make it just that reducing friction to be able to take advantage of those new services and move faster? And a much more efficient business model, but one that's very different from what we've had in the past. And traditionally, software companies would have a large direct sales force or a channel force. And what we're seeing is these marketplaces now beginning to take on some of the role that used to play. How does this affect the way software is sold in the future? Well, I think it certainly speaks to the way in which, you know, software is architected and has to be really easy to use and intuitive from a user perspective so they can go to a marketplace, understand the underlying value proposition and then make a decision in fairly short order, just given the time constraints that they may be under internally. So, you know, delivering these kind of beautiful, simple user experiences is increasingly important. Stu, does this change the balance of power in the software industry? Is Amazon increasingly the power broker for those companies that rely on the marketplace for their livelihood? So today, Amazon's at about a $13 billion run rate, but their shadow on the marketplace is much larger than that. And as Holly was saying, you know, I need to have a good interface. I need to be able to pick it up fast. I shouldn't have to train my people too much on it. And, you know, how do you become sticky anymore if I'm just paying by the drink, if it's something that I could, you know, switch to a competitor pretty easily, that what you hear from SaaS companies and you hear from Amazon is if you're not proving yourself time and again and every month, you know, the customer can go switch to someone else. So the balance of power, it's shifting, but it doesn't mean that it's all going to the vendor side. Users now have a lot of opportunity. I know we're going to dig in here about, you know, what, you know, where is portability, where is lock-in is a concern that lots of people are having. So it's definitely nuanced and things are shifting really fast. And it's one of the things I'm really, you know, having fun with this data is understanding, you know, what's really shifting fast. Some of the go-to-market is really changing and it's such an amazing pace. And to your point about stickiness of solutions, it really highlights the increasing importance of customer success organizations within these, you know, SaaS-based companies because that retention is increasingly important as you think about the overall, you know, cost of acquisition of customers. It's always much less expensive to keep what you have than going and acquiring that new businesses. And so these customer success organizations are, you know, themselves are digitally transforming and taking advantage of cloud-based applications to deliver much better service to their customers. And as we'll see in later slides, the fear of lock-in is actually growing as a concern as an inhibitor. Let's move on to our next slide, reaching equilibrium in public-private hybrid. As you come away from Amazon re-invent, you might believe that public cloud is the be-all and end-all. But this, as this slide would indicate, hybrid is still very much the model of choice. And in fact, public cloud between these last two surveys has actually dropped off a little bit as a preferred deployment platform. Would either of you like to speak to what this means to the way cloud is developing? Sure. I'll start, Paul. So first of all, even Amazon themselves, how they define hybrid has changed year over year. So this year, you heard Amazon one talking about how they can put VMware on AWS in 2017 and two, they start pushing out to the edge. Especially when, if you talk about IoT, internet of things, use cases, Wikibon CTO David Fleuer has been kind of beaten on the table for the last year in saying that most data, like 80, 90 plus percent of data will be created at the edge and therefore I can't just move it all to the center. If you talk about just data and storage itself is heavy and moving it just from the laws of physics is tough to do. So it will be a hybrid world but what that means varies depending on who you talk to. We've been saying for many years, there are very few companies in the world that are really good at building data centers. So if you're an IT staff, you probably shouldn't do that. You should partner with somebody, go to a managed service provider, go a hoster or go to some service that you could do that. Where in the stack do you have value and where is it important? You care about your data, you care about your applications, which ones can you get off the shelf and which ones do you actually have to be involved in? So absolutely it's a hybrid world but public cloud is just growing gangbusters. You look at Azure, you look at AWS, you look at Google. There's huge growth in those numbers and not something we think is anywhere close to the watermark that they're going to reach. So there's lots of room for growth and I know we've got some data from Wikibon we'll talk about as we move forward. Yeah and I think what you're also seeing just in terms of these hybrid environments, a lot of organizations are wanting to take advantage of best in class applications and best in class platforms and there are different environments that are kind of optimized for those specific use cases and also folks want to be able to take advantage of multiple open source frameworks which lends itself to being able to combine on premise and private and public cloud environments and so I think again the increasing reliance and interest in open source is also driving these hybrid environments for the foreseeable future. I wonder how much you think the trend toward hybrid deployment is being driven by legacy infrastructure, the need to maintain legacy infrastructure, perhaps some fear of going too deeply into this whole new world and over time as more companies assume a cloud first approach, will we see a tipping point at which public cloud becomes the favored platform? Yeah well it's an interesting question because I think one of the reasons why we've seen a little bit of a dip in the public cloud percentage this year is just the overall cost perception of the public cloud, the initial perception was that this is certainly going to be an exponential cost savings to the organizations to think about public cloud versus private versus hybrid environments but I think we're seeing and we'll get to this a little bit later just the overall complexity of some of these public cloud environments and the tools that you have to adopt and some of the managed service providers that you have to consider net to the user and actually the costs are increasing a bit and so I think we may see some equal every and over time in public versus private. And really wanting to have more control. Yeah. Let's take a look at how those cloud dollars are being allocated. Customer investments in public cloud technologies, I remember referring specifically to public cloud here. I don't think any surprise that SAS is overwhelmingly the revenue leader but we see nice growth in infrastructure as a service and very strong growth in platforms as a service and Holly maybe you can speak first to the compound annual growth rates in past as we see 33% over the last year. Where's that going? Yeah, I mean I think we're going to continue to see accelerated growth in the platform as a service ecosystem just as people really want to be able to take advantage of API frameworks and deep integrations as they adopt these what we're seeing as industry specific or application specific cloud environments. They really want to be able to integrate everything that they need to deliver whatever service they're providing or products that they're providing. And so these platforms I think are going to continue to grow at the rates that we've seen historically. Stu, why platforms as a service? Why now? So it's a trend. I mean, Paul, platforms as a service is the smallest of all of these numbers and I think back to the cloud discussions we've had for the last decade. If you look at these, these are Wikibon numbers by the way that we're showing on the chart. Two thirds of the data is SAS. And SAS is still growing at a significant clip and is going to be most of the data. Infrastructure as a service is the next piece but it's the services that are really where most of the value is. Platform as a service has been something we've kind of tried at a whole bunch of times and there's been some good growth in what you see GE doing with the Predix, with Pivotal, with Red Hat, with OpenShift. A lot of good solutions out there that are starting to get good traction. But containers, just in general, if you've seen containerized services in all of the cloud solutions as well as on-premises offerings with of course Docker helping to bring that to the masses. And the recent serverless technologies which Microsoft, Google, Amazon with their Lambda offering provide some of the same type of flexibility that customers want is I want to be able to, that platform as a service and containers and services, I get closer to the application and helping me not care as much about the infrastructure underneath it. And that's kind of that nirvana that people have been looking at for many years is I care about my data, I care about my applications. Can't I let somebody else worry about the plumbing but it's complicated and it's challenging. And as Holly mentioned, cloud is not getting any simpler. We keep adding lots of new services. There's more competition out there so there's a lot of pieces that it would be nice if it was easier and that's what platform as a service is to help to attack. So that portability that really being able to encapsulate whether it's microservices or my application and keep it independent of whatever platform or infrastructure that it's on top of. As you look, Wikibon looks out in its forecast, do you see the SAS, IAAS divide equalling out at some point, is the infrastructure growth in the infrastructure market actually going to accelerate past the growth in the SAS market or is SAS on top to stay for a long time? Yeah, no, we see SAS staying on top and because SAS is going to sit on top of some of that infrastructure but it's, you know, thin revenue margins if I'm just a layer that the SAS sits on top of it. We see the line between infrastructure service and platform as service many times as blurring. You know, you look at companies like Oracle and how they do it, they offer kind of the pieces together. Amazon has never bought into those definitions that people put in and as they start moving up the stack and adding more services, they kind of integrated it into my previous comments about how containers and serverless fit in. It's, you know, is it just infrastructure? Is it infrastructure plus, pass minus? Where does that all fit in? It's definitely something that, you know, we keep constantly look at over time. Holly, as you have witnessed this big shift to software as a service over the last five years or so, hardly any startups I can think of anymore that are coming out with on-premise applications, how, what's the nature of these companies? How has the structure and the strategy of these companies changed as they've adopted a SAS first model? Yeah, I mean, I think it's all really focused on, you know, the integration of IT and product teams, making sure that those are really closely aligned and also as we were talking through before the go-to-market strategy where these traditional, you know, enterprise on-premise software businesses were typically really large direct sales forces and so I think one of the biggest shifts that we've seen is, you know, the ability, the different, you know, channels through which you can acquire a massive customer base. We're seeing a lot of businesses that are adopting, you know, freemium models to kind of land grab and then figure out how to convert those customers once they have them already starting to use the platform, which I think is a really interesting business model shift. And how does that affect their growth rate, by the way? I mean, you see these companies as growing at the same rate as the on-prem companies of old? Are they fast, growing faster? I mean, I think, you know, over time, probably if you look at the trends, it will, you know, even out just because, you know, they are providing, you know, mission critical applications that, you know, these businesses need to buy. So I think, you know, when software was first introduced, it didn't matter what the business model was because there was one business model and that's how you bought. And so people wanted to be able to adopt these technologies regardless. But I think one thing that we are seeing in the SaaS world is just, you know, the ability to grow faster just because of the pace of innovation and the fact that you can deliver, you know, in real-time updates to your customers. It really helps, you know, retention, which again is going to be able to drive growth over time. What are they doing in the cloud? Well, one big thing they're doing is storing data. So let's take a look at our next slide. Kind of a lot going on here. So let's tease this out. 28% of companies say that they're storing over half of their data in a public cloud and those who are storing over half their data in the public cloud expected to grow strongly, 18%. 59% storing half of their data in a private cloud. I guess not surprising. But the company storing over half their data in a private cloud expected to actually decrease 16%. And I guess I was a little surprised to see that that number is declining. Were either of you? Yeah, no, I actually wasn't surprised to see that, just given the pace of the number of security companies and security products and tools and managed services that are solely focused on figuring out how to secure public cloud environments. It is, businesses are created with that sole focus in mind and so I think we've seen a tremendous improvement in that area and we'll just continue to get better over time. And so in addition to kind of knocking down some of the barriers there that the ecosystem's doing, I think this verified exactly what I was hearing at AWS this year, which was, if you look at kind of the spend in the cloud, public cloud has tended to be very compute heavy applications. What I talked to a number of companies that were formed for doing on-premises data analytics, kind of the data lake if you will. And almost every single one of them said, oh my God, in the last kind of 12 months, it's all going to the public cloud. Just analytics uses a lot of compute, it's very bursty and therefore it's a great fit for kind of the cost structure of public cloud. So that's one of those great, where's data live? It's like, well, I'm going to take my data lake, we're going to stick it up in the cloud and we're going to be able to get great value out of that. So that shift is happening but as we said in the previous slide, hybrid is where it is. We're seeing a shift but it's not everything going into the public cloud or everything staying there but data's tough, it's tough to move it. We saw Amazon roll out not only little appliances but a whole truck called a snowmobile that they can take out. It's a hundred petabytes worth of data. But I mean that takes months to load that up and move it so moving my applications, moving my data is not something that is just snap a finger and it's done but as a long-term shift, this is exactly what I expected to say. And I think one proof point that supports this data is the fact that we're even seeing government agencies starting to adopt public cloud strategies. I think that's something that we didn't think would get to. Department of Defense for one. Yeah, exactly. I think we've gotten to that point a lot faster than maybe people thought we would have. And this really ties back to the security issue which we'll touch on later and some interesting findings there. I wonder, is data, so Stu do you think the big data is sort of the killer app for moving large data stories to the cloud? So our CEO at SiliconANGLE Media, Dave Vellante said, big data gives the cloud something to do. So it's a nice pithy line but it really does sum up. If you look at kind of the cost structure, storing a lot of data in the cloud isn't necessarily that expensive but if it was a constant workload under a constant activity, you kind of have that rent versus buy and the cost structure of public cloud might not necessarily fit. But if you've got something that I want to do a lot with it and then kind of extract it and do various activities with it, well that's what cloud's great at. I've got a thousand services, I can plug lots of things in, I can do exactly what I need to do but do it in minutes or hours as opposed to let's spend six months or 12 months getting all the gear and setting it all up and testing it. I want to move fast and get my results now. Yeah, and I think it was actually interesting going back to the security piece again. I think we saw half of our respondents viewed security as an inhibitor and actually 50% viewed security as a positive aspect of the public cloud so it was interesting to see that it was very evenly split across the board. Yeah, that's a data point I'd like you to comment on. I'm not sure if that's in our survey results so let's talk about that now. As you said, half of respondents said exactly, said the security's inhibitor, half say it's an enabler. So kind of a, I mean to talk about a split personality, is that a, does that mean that the public cloud, is the perception of public cloud as being secure actually growing and improving? Which number is going to move which way? Yeah, so we did a survey at Wikibon a few years ago and if you split it with I'm using public cloud a lot or I'm thinking about public cloud, people that are thinking about public cloud had this wall built up. Security is a challenge and I'm really worried. Once they dove in and kind of got used to the water, they understood, oh, security's different but it's a real opportunity because we joke about this a bunch but go to any company and say, are you really happy with the security that you've got in your data center? The answer is never, oh yes, glowing, I'm super excited about it. So the cloud is an opportunity for us to change. Change doesn't necessarily mean better but with the software products that are coming out, the new ways to do security a little bit differently and by the way it's a hybrid world so how do I manage what I have and where my data lives everywhere? It's definitely something that companies need to address and I think there's that nuance there of is it a challenge, is it an opportunity? The answer is yes and therefore we get kind of that split brain result. Yeah and in the growth equity world we're seeing a rapid growth in these managed service providers that are focused solely on securing public cloud. So I mean people are just seeing, gee, there are a lot of different companies that are emerging, they're only focused on this area. So it's probably going to end up being just as secure. Yeah, the best security minds are going to the public cloud now really. Let's jump ahead to our next question, drivers. Why do people move to the cloud? You see an interesting shift last year which was supported by this year's results as well. The scalability, the number one consistently across the six years of the survey but cost we see dropping to third place and agility jumping up from fourth place to second place. So it seems to me that this would represent an evolution of thinking really another stage of maturity in thinking when we see that the cloud's benefits are enabling business faster. Would you either care to comment on this? Yeah, so there's a few questions in the survey that really highlighted for me. Customers look at, they look at SaaS, they look at infrastructure, service and pass as from an agility standpoint it's fast and by fast it's how fast do you expect results? There was like 25, 20, 25% of respondents say that's like immediately, it's I swipe a credit card or I press a button in my GUI and it's ready there and almost everybody expects results in less than three months. We know from kind of the traditional world just going through the procurement process, getting something shipped on site, getting somebody to help with the setup even if it's something that's really simple is you're talking weeks and months not immediate to three months as kind of the outlier there so that really spoke to kind of a huge value prop of cloud in general. Yeah, and again just on the cost side again I know we mentioned some of this previously but I think larger organizations are still trying to figure out what their real cloud governance strategy is and until that's really refined and it should be adopted really from the outset of adopting cloud there are some cost pockets that are just exceeding perhaps what the initial budgets were so that's why it's maybe no longer a driver but in some cases maybe an inhibitor. Yeah, and just it's definitely one of the hot buttons if you say what are you concerned about? What are you worried about? The CFO doesn't want uncertainty, right? It's usually okay, here's what I expect and no, I don't want surprises so cloud providers are working through that. I look at what I'm using, how do I set up circuit breakers? How do I understand what I'm using? I'm not going to be, oh I have that teenager that all of a sudden my internet bill went off the rails so we don't want that to happen in business either. Yeah, they want to test fast but also test as appropriate in controlled environments. There may be a realization that cloud is not really as cheap maybe as some people would have thought it was at one point. Yeah, it depends what you're doing because what's fascinating watching public cloud, Amazon especially is pretty good at eating its own when it comes to lowering prices so they came out a few years ago with AWS trusted advisor which kind of looks at everything you're doing and saying, oh you can actually dial down this usage or change what you're doing. The case studies that they put forth from the serverless architecture is if I was doing AWS before and I went serverless it's going to knock off like 60% plus of my costs because I'm using things down at that kind of microservices level and only when I need it so really dropping that cost and we see other cloud providers trying to help customers get a handle on cloud. Increased transparency just on what the model really is. Right, yeah. Digging down one more level as we move to the next slide in what is driving cloud adoption. We see interesting that mobile and open source are twice as likely to be cited as a driver for cloud computing in 2016 versus 2015. So that's a big change in just one year and this really sort of goes back to the digital business topic we were discussing earlier. Digital businesses usually include and elements of open source and mobile as well as cloud infrastructure. So double the rate in one year in the survey would really be surprised by that? I mean I think one of the driver of that big jump is what we were talking to just around containerized environments and the open source Kubernetes project. People are finally actually going into production with some of these containerized environments. It's not just testing but actually going full into production. So I think that that's a driver and just in general the concept of open source is open collaborative development which drives increased innovation and it's also prompting for commercialization of these open source projects and so a number of companies are emerging and growing quite rapidly commercializing open source projects like WordPress and one of our portfolio companies, WP Engine it's just a tremendous opportunity. Yeah and Paul if you look, one of the things we always look at is there any bias in the sample size we're getting? So there's certain ones you say the Linux foundation actually did a great job of pulling in a lot of users here. Well there's going to be a lot of open source. Microsoft is one of the platinum providers. Microsoft has been doing a ton with open source something the community is super excited about so if Microsoft was kind of one of the paragons of proprietary in the past and even they are doing open source we understand how much it's growing. One of the things, Holly I'm curious just on your commentary from the vendor side the question's always how do they make money? Do they grow as fast? Do they make as much margin revenue with business that's driven a lot by open source as they did in the past? Yeah I mean I think the answer to that is yes and we're seeing proof of that within our portfolio. You know as I mentioned WP Engine which provides infrastructure, platform and software tools for WordPress applications really driving that digital experience. People want to be able to take advantage of these highly innovative open source communities but there are some concerns around it being open source and that tends to be around performance scalability and security and so a lot of these commercializing vendors are kind of taking that away and kind of solving for that while continuing to innovate on top of these open source ecosystems even at a perhaps more accelerated rate than the community itself. Yeah that's great. Red Hat actually just celebrated 10 years on the New York Stock Exchange this week. They've got their earnings coming out and it's been just the best proof point of how to grow a business on open source and lots of people have been, lots of companies have been following in their path. Are you seeing highly any emerging models in open source that are, are you seeing any coalescence around certain business models in open source that are demonstrably proven, that are profitable, that are long term? So there still is some question about whether pure open source models, the sort of support function is a viable long term business. What models are you seeing working? I mean I think if those support organizations are continuing to innovate on an accelerated rate so they're continuing to move up the stack in terms of the valuing that they're providing to their end customers. If it's purely a support function unless it's a truly, you know, mission critical application, you know like MySQL environments for example, where support is critical to ensure uptime and performance across the board. If these organizations continue to move up that stack and provide software that goes deeper into whatever end application they're addressing, I think that is certainly viable for the long term with using these open source ecosystems as a foundation. Stu, open source cloud, is there any reason those two should be synonymous? They're not synonymous today. Definitely open source is used to build all of the clouds that are out there. Yet, you know, if I take the three biggest clouds out there, you know, Google, Microsoft and Amazon, all of them use open source. We mentioned Microsoft's been going that way a lot. You know, there's many really big open source projects that wouldn't exist if it wasn't for what Google had done. And Amazon has definitely taken some critique as to not giving back to open source. There's a lot of discussion at the AWS re-invent show about MXNet, what they're using, kind of the machine learning space and giving back. And Holly mentioned containerization. There's a lot that Amazon's talking about, kind of how we put the open source together, how we really put it together as a service to help customers. So absolutely, open source and cloud go well together, but definitely not synonymous. So we were talking about drivers, let's move to inhibitors. Our next slide, and a very interesting shift between last year's study and this in terms of the leading inhibitor. And the one that jumps right out at us, I think is that lock-in moves from fourth to second on the list of primary inhibitors. Why? I thought cloud was provided flexibility and ease of movement from one to another. What's this lock-in thing? Yeah, so we've got another slide talking about kind of multi-cloud and how that fits in. There's definitely a gap here as when we put that hybrid solution in place, how does that work? From a lock-in standpoint, from a buying standpoint, the more volume I do with a single provider, I get greater leverage. And the services that I build on top of the base platform, they're different between all the different environments. So if I just buy compute and storage, I can probably switch from one cloud provider to another, but the real value is when I can go up the stack and I'm using a database offering, an analytics offering, and if I write an application one way, it's a lot of work to rewrite it for another one. So there is that lock-in there. It's definitely something that's bubbled up quite a bit that we've seen. Yeah, data portability is increasingly important. We're seeing that across all of our companies. They don't want to feel as though their data is trapped in one environment. They want to be able to, for whatever reason, be as nimble as they thought they would have had the opportunity to be by taking advantage of cloud in the first place. So they really want that portability of their data. Is this a problem for cloud providers, this fear of lock-in? Or is just a fact of life? It's an interesting growth opportunity for service providers to figure out how to orchestrate these multi-cloud environments and port that data and integrate across these multi-cloud environments. I think it's a growth opportunity for a lot of companies out there. There's a lot of startups that are trying to fill this gap right now and help fill this, but I think over the long term, it's something that the platforms themselves need to help with. What is the dynamic here though? I mean, Microsoft certainly prospered with the lock-in strategy for many years. Is it in Amazon's interest to prevent lock-in or quite the opposite? Would we see Amazon trying to find new ways to lock customers in? Yeah, Paul, I mean, you're exactly right. You build a platform, you build the ecosystem, but you want developers to be writing to what you're doing and it's in Amazon's interest, it's in Google's interest, Microsoft's interest, that they want you to be their platform. Gaming, you don't see PlayStation and Xbox all saying, oh, well, hey, you can write code across both of ours and you make it real easy. It's always that. Certain standards work, but it's the standards plus. Here's the value we add. Here's why we're the best place for your application, your date, or your game. And to Holly's point, it is an opportunity for providers who can solve that problem. Which is one other worth company on complexity ticks up a little bit in this survey as an issue. Is the cloud, do you think it's a realization that as companies move more of their operations to the cloud that this is not really all that simple? Or is the cloud itself becoming more complex? The cloud itself is definitely becoming more complex. We saw, once again, we're using Amazon as the example, but they're going to make a thousand significant announcements, either major upgrades or new services that are available. Something every morning when you wake up. Yeah, three of them every day. And that's why we're starting to see in the data, customers are looking to partners and integrators and managed service providers to help them with this because I can no longer be an expert on everything that's out there. Historically, has complexity been a problem for the software industry? It seems like software almost always becomes more, it always becomes more complex. It's really hard to make things easy, right? I mean, that is the biggest challenge that a lot of our companies are seeing. How can we make this as easy as possible? Because over time, as you add functionality and you go broader across either horizontally or deeper into verticals, the nature of that is adding some element of complexity, but how can you provide the customers what they want in a really simple, easy to use experience? It's really hard to do. The difference we have is cloud is not one box I'm selling, it's here's a platform and there's lots of things I can layer on top of it, so you get to choose what tools you're using, choose how you integrate with it. There is lots of choice in there, but boy, it's the paradox of choice when you go out there because there's lots of options out there and even in any platform, there's so many different pieces that I have to choose from and it's changing so fast. In IT in general, keeping up with the pace of change is no longer software being released once every 12 to 18 months. You've now got code being released every day and from everybody out there and plenty of companies are pushing it every couple of weeks, so keeping up with that is a herculean task. And perhaps a synonym for complexity would be choice. Absolutely. Let's move ahead to our next finding about the emerging areas of cloud investment. Stu, you were talking about big data as giving cloud something to do, that seems to be justified in 58% of our respondents are interested in analytics, 52% in containers. Now, when you think that containers, two years ago, most people hadn't even heard of containers, now we've got over half of our respondents saying that's a primary draw. What strikes you about that finding? Yeah, it was a little surprising to see so high on a few of these, even AI and cognitive is another topic. Paul, I know you've been at some of the events talking about cognitive computing and you've got a third of respondents saying that this is where we're going to put an investment in. So the thing that I found is companies that are doing cloud are usually a little bit, on the earlier part of the adoption curve and they're looking for ways to help their business run better. So analytics absolutely is a huge opportunity. We've been talking for the last few years, data's the new while, so if I understand how to process that and get value out of it, that's phenomenal. Containers is something that's really taken the market by storm and is something that lots of people, I've talked to plenty of practitioners that have gone from that, what is it to, yep, I've got my strategy and I'm starting to roll it out, it's easy to go faster on these and some of the emerging areas, it's easier for me to at least start dabbling with it. I don't have to spend a million dollars to start playing with it. Right, and on the analytics side, we're seeing a lot of continuous data integration, really enabling real time analytics and that's kind of across the board and in terms of business applications, it's improving development, improving customer service, it's really how would we make everything real time and continuous so that we're always better, we're always providing better product, better service to our customers. Is cloud inherently a better analytics platform than on-prem or does it really make a difference? So if I'm in a cloud, the question is what services do I have available to myself? So if I do a private cloud, I can do a lot with the analytics, I've worked with companies that say, you've got resources, how can I take advantage of the spare bandwidth that I have to be able to run my analytics, do things at night? So it's not only public cloud, but there's lots of ways I can do analytics, the more services that I have access to, the easier it's going to be. Public cloud gives you a lot of that. Many of the managed service providers will give you access to multiple clouds, you see cloud exchanges out there where I don't necessarily need to live on that platform to be able to plug into what is either a rack away or direct connect like what Amazon and Microsoft have in their environment. So we're a highly interconnected world. Networking has always been one of those challenges and something that the industry as a whole has been knocking down and dealing with, along with security as Holly's been saying, is kind of, I always look back, networking and security is something we've been struggling with for, gosh, the last 25, 30 years to get that kind of excess P model we talked about back in the 90s, the whole internet, the whole cloud space and we're making really good progress lately and that just unlocks a lot of opportunity. Yeah, and your point to that, there are a lot of different clouds developing, nearly 50% of our respondents to our survey said that they will be or have already started to adopt industry specific cloud environments which I think is really interesting as we think about financial services for example and all that is involved in being able to innovate with cloud based offerings. It's really truly a kind of industry specific cloud that they're thinking about. And further reflecting the maturation of cloud as it becomes more vertical. Just touch quickly on the 16% who mentioned virtual reality. This virtual reality is still a nascent market but you would think with the amount of compute power that virtual reality requires that the cloud would be a natural platform for it. Are you, any comment on that number? Yeah, it's a little early from the space that I covered. We don't see a lot of virtual reality in our portfolio yet just given that we're on the growth equity side so these are companies that are a little bit more mature but we're certainly keeping our eye on it. When we become comfortable with seeing people wearing those goggles on the subway, I suppose that's when virtual reality takes off. Moving on to sales channels, direct and let's back up one slide. Direct still dominates but indirect and especially VARs up 3X versus last year. That's a big jump and VARs I would think of value at resellers more traditionally a hardware business. VARs, you're talking about managed service providers in this case, would you say? Is that where the VAR channel is going? Yeah, I mean, I think there are a lot of different channels to think about in terms of these more applications specific and vertical specific cloud variants are being taken to market. It could be consultants, it could be agencies for example, digital agencies that are adding value on top of the cloud environment that you're providing to your customer. Again, a lot of these businesses are trying to figure out there. It has to be really easy to buy online so that's that high velocity low touch sales model that I mentioned without abandoning the truly high end enterprise opportunity and so a lot of folks are seeking multiple different channel providers whether it's MSPs or agencies as I mentioned or specialty consultants to help them bring their products to market and provide transparency and ease of adoption to those end customers. And Paul to your point, if a company was selling boxes before they probably figured out what solutions are they selling, what services they're layering on top of that and what services do they need to be able to plug in and offer to their customers and especially if you look at this not just as public cloud but as hybrid that's where they tie into it. This data was really interesting because not only has it tripled from last year but there was a question saying, okay, I think the numbers are on 9% right now say that they're buying through some managed service provider, integrator or something like that and they look out two years from now that number triples. So I think it speaks to what we were talking about earlier is that complexity of the cloud. I can't be the expert to everything myself so I've got to go either go to the platform or go to the vendors and be able to shift who has the expertise on that that doesn't necessarily mean outsourcing but it does mean that I'm leaning on resources to be able to do that. When Paul you mentioned at the beginning a true private cloud at Wikibon we see about $150 billion a year of operational expense that is going to shift over kind of the next five years or so to be able to say people running around racking, stacking, cabling, fixing, turning knobs and optimizing that's going to shift to platforms, that's going to shift to partners and this result of having the channel partners get involved more is a direct alignment with what we expect to see. Just digging into these business models is this mostly a case of VARs lifting and shifting an existing strategy? In other words, they specialize in automating legal firms or educational institutions and they're simply doing that on a different platform now or are you seeing the business models for these resellers change fundamentally as a result of having this different platform? Yeah, I mean, I actually think they're able to attract better business models this way because they're able to charge subscriptions for their ongoing management and services. Yeah, it's much more sustainable, there's much more visibility into their businesses to actually think we're seeing a lot of attractive investment opportunities in those managed service or kind of specialty consultant businesses that really figure out a way to have these long term, highly specialized relationships with their customers. So it's not just selling them and potentially migrating them to whatever environment they're transitioning to but it's also providing a value added service on an ongoing basis over multiple years. And just building on that, VAR channel traditionally has been very regionalized. It's been very specialized, localized. Of course, you get with cloud, you get global for free. You have the potential of expanding your reach significantly beyond where VAR has traditionally been focused. Are you seeing in the companies you're investing in, are you seeing companies take advantage of that? So I think it's easier to go more broadly from a geographic perspective but I think people are still trying to be specialized such that they can really add that value on top of just, as I mentioned, kind of the migration and sales process. So I think they're still trying to be specialized either from an application perspective or a vertical perspective but can go more broadly on a geographic basis. And governance and compliance really is, I need to understand that vertical and I need to understand that locality. Yes, it can be global but most things aren't fully global. It's, yeah, I might want a marketplace that's open to the globe but where my data lives, where my workforce interacts, the security things that I'm worried about. There's a lot of reasons why I still need people in my local environment that understand my business. Still takes a village. Well, let's move ahead to our last couple of slides here. Pass, we asked about whether platform as a service and IAS vendor relationships are strategic and found that 61% of companies say they're using just one pass or IAS vendor. Now, considering that flexibility of moving your workloads was one of the initial peals of the cloud were either of you surprised by this finding? A little bit, Paul, but as we talked about earlier if I want to build up the stack, if the cloud I have has the applications that I want, I'm going to choose it. Platform as a service, I think it makes sense that it's going to be one. I'm choosing pass for flexibility but infrastructure as a service. Number one, if I do multiple platforms, how do I integrate with them? How do I train across most of them? Companies always say I want to heterogene this environment but it's a lot easier for me as an IT organization if I can choose a single piece but kind of those capabilities and pricing are things that I need to trade off and how do I make sure I've got access to my data and that portability even if I am choosing a single platform? Yeah, and I think for a lot of our businesses that are in the business of providing software as a service they're typically thinking about one really strategic relationship that they can go deep with especially just in the stage of company in which we're investing which is kind of that 15 to 100 million of revenue range. They're not yet at the point where they want to go multi-cloud but perhaps just become a little bit We saw earlier that the fear of lock-in has become a primary inhibitor. This one is not such a bad thing. At least these companies, what's the difference between lock-in and strategic relationship? Yeah, I mean we always have to make those decisions and those trade-offs but once you've made that decision you want to have a good strong relationship and if you keep hopping around you're not going to have that deeper relationship. This, Paul, definitely is something I've had the most heated debates with after being at the AWS show and how that kind of hybrid multi-cloud world lives is something we're still sorting out a bit but it seems we're kind of getting towards where it is going to end up. Final data point, the importance of constant product iteration surges and this really goes back to a point that we saw earlier, the importance of agility as a driver of cloud. We see, perhaps not surprisingly, a rapid adoption of DevOps, a form of application development that enables agility. Do you see this finding as just validating the earlier point about agility growing as a cloud attraction of the cloud? Yeah, I think so and I think what it really is showing is that IT resources are no longer kind of bogged down with choosing and building out infrastructure. It's really becoming more of a revenue-generating center for these companies and a lot of our portfolio companies are figuring out how to more closely integrate IT departments in this broader product development discussion so that they can be agile and develop at the speed in which they would like. Yeah, and I think this speaks to the maturity that we're seeing and kind of what's happening in cloud. It's not just about, oh, something's cheaper or yeah, I think it's a little bit faster but organizationally, I'm changing the way, I streamline the relationship between IT and the business, how fast I can create new products, add value back to the business and how my entire organization is set up. That's really what's behind all DevOps movement is really allowing operations to just move a lot faster, go back to that whole frictionless discussion that we have that cloud's supposed to help enable. We're down to our last two minutes. I want both of you to have a last word. Let's bring up the next slide. Northbridge, putting your money where your mouth is as we're in this area. Talk a little bit about the investments that you're making in cloud right now and the success that you're having. Yeah, sure, I mean, so Northbridge as a whole, so I'm with our growth equity team and growth equity fund. We also have an affiliated earlier stage venture fund and we were really investing in cloud before cloud was cloud as traditional ASP models and then we've really seen the cloud grow up over time and continued to participate at a pretty aggressive rate and for us in growth equity, it really is all about whether it's cloud first or cloud only or companies that are going to do a transition of their business model to cloud. It's really all that we're seeing and as these results are showing, we're given that a lot of our portfolio companies participated and collaborated, the proof points are there and we look forward to remaining really active in the space. Certainly important service you're providing to them. Stu, one minute left, tie this up, put a bow on it. What are the big takeaways from this study? Yeah, so big takeaways is companies understand cloud, it's not a fad. I think we understand that it's an important driver for how I think about where IT fits in my organization. IT can not only be important to the business, but it can actually be a revenue driver for the whole company. It's just fundamentally changing that business model. What business am I in, what should I be doing and what should I be able to shift to kind of partners and platforms and cloud, we are still in the earlier stages where we were kind of past day one, but kind of getting from the early majority to the full majority, so lots of options out there. It is not a one solution wins across the board, but it does kind of realign where margins are, where value is, and lots of opportunity for customers. We didn't talk too much, jobs are changing, so if you've been doing the same job for the last five to 10 years and you're in the IT space, you better look around because things are changing really fast. To flip that old Nicholas Carr, a Harvard Business Review article from 20 years ago on its head, IT does matter. There's a lot of data here that we didn't get to. There are more than 75 slides in this full deck and it's available to you. You can download it. We will have a URL for that link when we post this video on YouTube, but you can also just go back to the registration page that you used when you registered for this webcast. There are links there to the Northbridge website and links from where you can find the full presentations. Also, you can look for it on SlideShare along with previous versions of this study, again now in its sixth year. I want to thank you for joining us for this webcast. Would like to hear you contribute your comments about where you think cloud is going. Join me in Contact Northbridge. Get involved in the next survey so that we can drive that number to 2,000 respondents next year. For now, this is Paul Gellin saying so long, wrapping up here from Wikibon headquarters in Marlboro, Massachusetts. Thanks for joining us today.