 from San Francisco, extracting the signal from the noise. It's theCUBE, covering Console Connect Live 2015. Sponsored by Console. There's your host, John Furrier. Okay, welcome back everyone. We're live in San Francisco for the Console Connect 2015 event. This is Silicon Angles theCUBE, our flagship program. We go out to the events and extract the signal from the noise. I'm John Furrier, the founder of Silicon Angle. Show my co-host Jeff Frick, general manager of theCUBE operation. We're here with distinguished guest, Jay Adelson and CUBE alumni, founder of many things, Equinix, Dig. You name it, it's done a lot of great stuff. Seasoned entrepreneur, now venture capitalist. General partner at Center Electric. Welcome back to theCUBE. Thank you for having me back. Well, now you've been turned over to the complete dark side so now you've got a year under your belt as an entrepreneur, your founder-friendly guy. We're talking about before you came on how that's been a transition. Oh no, don't want those terms. That's good for you. No, no, you can't ever stop being a founder mentality. You know, of course, when you've been a founder for so long it's hard for you to negotiate because you just want to help, you want to, your terms are too good. So, you know, that's worked out though. We have 12 investments in a year and the founders are amazing. It's tough, you want to put good terms in and set yourself up for returns, you've got limited partners, but it's almost like feeding poison to a baby. You don't want to give toxic, you know, Kool-Aid to a small startup but being founder-friendly has a long-term advantage. Well, yeah, and honestly, I think it'll end up providing a greater ROI because after a while, if we develop the reputation for being better in that way, we'll attract the better deals and the founders who understand these things. There's just, nobody wins if you're a dick at the beginning of the process, right? And I do think it's a very different mindset because as an entrepreneur, as you know, you're all in, you're vested, you mortgage your house, you don't see your kids as much anymore, you know, you're all in, where kind of a classic VC is more of a portfolio play, where you're spreading your chips on the table and you're not that vested in any one particular thing. So, I think it does bring a completely different kind of projo to the conversation and the relationship. But that's an interesting point because I think what that implies is that there needs to be more shared risk between the investor and the founder. It's out of balance, in my opinion. Now, I don't think you can change the venture model that much in terms of how the portfolio theory works. But if you're going to negotiate with me a term sheet, I need to know, I at least need to empathize, right? And understand what that risk is to you, like your house and your family and your life. You know, before I, you know, put those draconian terms down on you. And that's the, I think that's part of the advantage we have, is that? And as it shapes, as the venture shape to early stages, you know, it's very founder-friendly, but as it starts to grow, it takes shape. That's really where you need to take the craft in. So, share with us some of the stats, 14 deals, they all alive. What sector are you investing in? What's the hot area that you're looking at? Sure, so our focus, or theme, if you will, is the internet of things. And I should be specific because when you think of internet of things, you think, you know, nest and connected objects. So, what we want to do is sell shovels to the miners. We want to invest in all of the component infrastructure that's needed to support this 50 billion connected devices in five years. And that means industrial automation, that means everything. And so we've done investments in things like Kentick, which is, you know, around network infrastructure and, you know, CPU. And we invested in a company called VPS, which is data center power distribution technology. There's all sorts of cool things. So, up and down the stack, are you limited to the lower part of the stack? Are you going up and down the stack? Yeah, early stage, it's hard to be super, there's just not, the other thing is, just like in web 1.0 and web 2.0 and sort of the move to mobile and multiple screens, at this early stage, you have to go hunting to find these infrastructure deals. Because everybody wants the flashy, sexy company, but to find those entrepreneurs who are willing to build, you know, those core infrastructure pieces, you have to travel a little bit. So I got to ask you, so software defined, fill in the blank, seems to be the buzzword, right? Talk about flashing new toys. So we heard this morning that Council has got this software defined interconnect strategy. That's right. That's what Bill Norton said. So, software is a big part of it, right? You know that software business, but you also mentioned things like components. You're starting to see those software enabled pieces. Can you comment on one? Consoles, software defined, interconnect. And what else is going on that's changing in the paradigm of software, driving this new edge of the network, if you will. Sure, I mean, you know, Council's really interesting because the first thing that comes to mind when I talk to the guys here is that as an enterprise, as someone who's managed enterprises, network engineering has been, well, it's been sort of a black art. It's been really, really hard to penetrate. Like, you can hire a network service provider's engineer and bring them on, but if it's not, I mean, any business leader will tell you you should focus on your core competency. If your core competency is selling a good or service, it's not network engineering. Why are you having to bring that expertise in-house? And as a result of that, people have sort of fallen into best effort internet as the delivery mechanism for cloud for the last 10 years. Which is plug it in and let it go. And if it doesn't work, oh well. Well now that more mission critical services move on to the cloud, and I'm using Amazon or Azure or whatever as like my mission critical component, I need to directly connect. So the first wave of this you saw over the last few years has been these sort of you co-locate in like a data center like Equinix or something and you run a cable over, which is great. But still you then need to have that engineering talent to manage these complicated relationships. It's complicated both from a negotiation and sort of contractual thing. It's complicated from a management and hardware and security. Well what console does is it sort of magically abstracts you from having to have any of that in-house. You can hit a button and still be an autonomous system on the internet. So for those technical folks, you're still an ASN, you're still multi-homed, but you're accessing this through this point and click methodology. And they took it one step further because they realized it's a human to human problem. It's not just technology problem. You've got to find the individuals who manage these other entities you connect. People you've never met before. So it might be someone that drop box and hey, who manages the other side of this other pipe. Exactly because before when the internet, when you go to Nanog and these internet events, there was less than a couple hundred people who managed these autonomous networks. Now that every enterprise is becoming autonomous in order to have that reliability to connect to their cloud services, I mean we're going from 200 or 300 people to 20 to 50,000 people, right? How are you going to find your match? How are you going to find the right person to connect with? So the platform not only has to automate the provisioning, it has to automate the dating service. So it almost reminds me of the old days in the 90s when you had a branch office and you had okay, let's connect out there. There's a variety of ways you do that. You go out there, engineer it from scratch, proprietary end to end, and you're up and running. That's right. And then you got to manage it. In a way, now you're saying I'm going to connect to a supplier in a similar fashion with a click of a button. And you have to then, once you're connected, you have to know if you're connected properly and if it's working. Ping. And that's the, you know, as a CEO, my poor VPs of ops that have worked for me, I feel so bad for them. Because the KPIs and the metrics that I would make them basically write their custom dashboards for me is the worst thing ever when the CEO comes to you and says, hey, you know, listen, tell me what normal is. And then tell me when it deviates from normal and when I should cry and when I should scream at you and fire you. And they're like, oh, I was kind of hoping you wouldn't ask for that information. But that's essentially what also, you know, the console has to do, it has to give you a sense of what normal is and then show you when things deviate. And that's, I think, critical for moving, particularly to mission critical applications delivered this way. Well, the internet, like you said, we're going to use a black bar, but the internet's also a black hole. A lot of stuff's going on in between the connections that it's a row where everyone's got twintended windows on their car, you don't know where the bad guys are. Well, this is what's great about direct connection. I mean, in general, I mean, I think it's a really simple concept. If I plug directly into you and there's no mysterious path that my data travels between me and you, I can at least know what's going on. I'm not saying that there isn't things that can go wrong, of course there is, but I can find them instantly as opposed to this sort of mysterious path. You know, you hear these stories that are really unfortunately true stories about how because of the bandwidth pricing and how to manage that, there are upstream service providers who will route your traffic through Europe or through another continent in order to balance their traffic relationships with their peers. And so meanwhile, you're like, why is my contract system opening up its Oracle page slowly? Yeah, why are they going through China? Is it my code? Is it my team? No, it's because my bandwidth provider is sending my packets over some bizarre path. I mean, it's ridiculous that that happens, but basically your typical enterprise doesn't have the ability, literally physically impossible for them to look at that path. And differentiate, hey, this packet, it used to be QOS kind of stuff at the Cisco a little bit now, you're talking about applications and companies, right? So like Dropbox, we use that as an example. So I got to ask you, on top of all this is the DevOps movement, right? So Opstev, DevOps, what am I talking about? There's a huge tsunami of developers saying, hey, I'm building apps. So what does like a connect environment do besides the cost and some of the mitigation around DDoS and other traffic and security? What enables the developer? What is it? Is it QOS? Is it differentiated services? Is it unique? What does it enable on top of to the app guy? Well, if anything. So no, you've hit on something that is new to network, to the network universe, right? The idea that a developer will instrument their own tools and their own applications to interface with provisioning technologies. That never existed before. So now, so just take one step back. In the DevOps world, I know there's a bunch of DevOps, people are like, don't say DevOps, but in the DevOps world, the developer has the pager on, a pager, do I say pager? Gets the text message. When something works. Or Snapchat. Right? So why that's so important in this context? Is that means that the person who's developing the application is the person who now has to care about things like latency, security. Policy. And fix it when it breaks. And if that's the case at three o'clock in the morning, if I'm woken up, I better have access to a system. First of all, I better have access to a system to help me respond. But also I better have access to an API that allows me to instrument my application properly against that network infrastructure. Yeah, program the infrastructure at infrastructure as code, these are terms that are kicked around. This is now the policy base. They're dictating policy to a dynamic infrastructure. Which is great for me as a, well, not for me, but for my CEOs. Because my CEOs now are not, you know, calling that support number at three o'clock in the morning because something's not working. They just fix the problem through the tools that they have. You mentioned APIs. So APIification, as coined by Craig Nicklucky at Google. Well, not coined by him, but he just recently talked about that at OpenStack Silicon Valley event we had. Is changing things, right? So you got an app developer, API is the interface, push notifications, no more polling, full asynchronous, new CMSs are developing. It's a lot though to manage, right? I mean, I think the transition over to, I mean, the majority of enterprises are going to still be consumers of other people's apps that were developed for some time. But yes, I mean, the possibilities and sort of the creative platform that allows is pretty cool. There's going to be some cool investments we make that frankly would not exist if they didn't have APIs to program over for their partners. So it's cool. Yeah, I mean, to his point, he, by the way, agrees with you that he says, if you try too hard to APIification your company, you could be taking the risk. There's a lot of unbaked things in that world. But, you know, here's my kind of argument to that. If you're doing it over direct connections where the person on the other side of the connection is a trusted partner, it's still an API. It's just not a public internet API, right? It's the same, you know, you have all the opportunities. You can still build your app, everything, but all of those risks associated with security and reliability and so forth. And some APIs, actually, depending on what you're delivering through the API, I mean, you can imagine, you're in the video world. You can imagine how, you know, control over latency and quality would be an interesting concept to you if you had a partner who is doing work with that video. It's the same concept with these application developers. Well, we use JSON APIs, we actually do that. We take hashtags, trending hashtags, pop it into our pages, but the problem is this, caching and polling aren't compatible with real-time nature of video. So, the thing that comes up is, this is the problem with the APIs, because there's SLAs involved. If my thing's not going to come onto the page, my JSON feed is not pumped in on an SLA, the whole page is screwed. Right, and so, this is with a direct connection. So you'll have to, you'll have to engineer, if you like mapped out all of your cloud relationships. Somebody told me that they were talking to the guy who runs IT for Equinix, you know, my former company. It said some, oh, it was Pierre Ferris, who is now, I think he's one of the presidents of Equinix, I don't know. But Pierre Ferris said there's 50 upstream cloud providers for the IT, for the internal services, for Equinix as a corporation. Forget the data center services they sell, just for them as a corporate entity, an international corporate entity, 50 cloud providers. And now, of those 50 cloud providers, right, a lot of them have SLAs, obviously, and a lot of them, frankly, also co-locate in the same data centers. It's a lot to manage. Now, you've got these sort of like peering between, you know, early internet networks. You now have to manage all those relationships in a complicated way, you know. It's about time. We actually, I'm going to just say, 15 years ago, we tried to build a console application at Equinix, and we just didn't quite get it out the door. It's too early. As the value of the packets goes up, the number of connections goes up, the ease of direct connecting goes ease up. I mean, how rapidly will there be this massive shift to direct connections for company to company? Because why wouldn't you, I guess? Yeah, you know, it's happening, we're just not talking about it. It's already happened. I mean, when you look at just the growth of Amazon and Microsoft's direct connect business, which has exploded, you know, today at the conference, we're going to hear from both of them, but you know, it's just an incredibly fast growing, just, I don't think necessarily people even realized that was what was happening. You know, what happens is your cloud provider who's selling you this service calls you, and says, hey, you're paying X right now to your current provider to reach me with a low quality service. Just run a cross-connect to me, I'll tell you a better, you know, you'll save money and you'll get a better performance. And this has been going on for five years. So I'd be curious, I'd love to see some research on how much of these private connections actually already exist. I think for the Fortune 5 quite a lot. Certainly the financial industry has been doing this for a long time. They need to, they had to build their own. Right, and so I think it's, now I think what's going to happen is because of the SDN and the advances in automated provisioning, I think it's going to suddenly become so much more accessible to an untrained non-network engineer. And so I expect it to explode, absolutely. You know, and I'm looking at the VC, I'm like, okay, so who's going to benefit from this? Where can I make some investments, you know, in IIX console-like companies so that I can take advantage of that growth? Final question, Jay. What does Amazon's web services impact in the industry? Ben, obviously, as startups, we all know what they've done. Enable people to get on board quickly. But, you know, we were talking on theCUBE at VMworld last week, and we're like, it's like, what inning are we in conversation with? No, the double-header is happening. Game one, 10-nothing, 10-run rule. Amazon wins. Inning number one. Inning number two, Enterprise, Game two, Enterprise. There's customization. Amazon sweeps the game one. Do you see it? Where is Amazon? Amazon will always be, look, they're going to be lead because they're capable of being lead and they could be lost leader as long as they need to, and deliver a very high-quality service despite, you know, being so enormous. That being said, the competition is fierce. When I look across my portfolio, it's about half and half around Microsoft and, yeah, if you had told me 10 years ago that Microsoft would be a leading player in the cloud service delivery, I would have said, what, really? But they have crushed it over the last couple years. And so I see this happening, but Amazon, they're not going anywhere. They're going to be the leader. They're so strong. They're a freight train right now. And so literally, it's now free. Remember we said it was so low cost. It's now free for me to deploy my stuff in the cloud. It's free. It's no longer a question of, like when I'm doing my staging, my, before I launch my public service, I can launch for free. There's free tiers. So it's no longer, how can, I remember trying to convince people, oh, we need to have data centers. I'm the founder of Equinix, right? I want to be able to buy data centers with it. I'm like trying to convince people. It's a real huge deal. You need data center. Yeah, you're born again cloud, man. You're born in the cloud. And my ops guys are like, J, it's free. Like, oh well, I guess this one's over. But guess who's consuming all the data centers? It's Amazon and Azure. So the number of customers maybe decreases somewhat, but the need for data center is just increasing. Final question. And we got a wrap on time here. What's this show all about for the folks watching live and then on demand? What's console? What's console connect all about? So console, they are literally launching this tool that abstracts the complexity of direct connectivity to the enterprise customer. Enterprise customer can go on this platform. For the first, this is the first time in history this was capable. Go on this platform, not only choose literally like choosing contacts on LinkedIn, you choose who your cloud service providers are and it automatically provisions through the system. But even more so, it provisions you as an autonomous system. So the network nerds will know what I'm talking about. This is not transit. This is multi-homing. So this is a really, really- This is interconnect. This is directly connecting your autonomous network to all these upstreams through a single platform. And mirroring that with that dating service we started with where it's like, okay, well who should you be talking to? And there's a communications platform on there so that you get notifications if one of your providers is doing something, you get it through the system. They thought of everything. Jay Adelson pounded the pavement here. Obviously he's got checks out. He's just closed a new fund or doing a new fund. He's got the checkbook out. Opportunity in this new market, this console, enabling for the first time in history. You see some opportunities out there. Okay, Jay Adelson, VC here inside theCUBE, breaking down console connect 2015. We'll be back more after this short break live in San Francisco. This is theCUBE. We'll be right back.