 From the SiliconANGLE Media office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hello everyone and welcome to this week's episode of theCUBE Insights, powered by ETR. And welcome to the Trillionaires Club. In this breaking analysis, I want to look at how the big tech companies have really changed the recipe for innovation in the enterprise. And as we enter the next decade, I think it's important to sort of reset and relook at how innovation will determine the winners and losers going forward, including not only the sellers of technology, but how technology applied will set the stage for the next 50 years of economic growth. Here's the premise that I want to put forth to you. The source of innovation in the technology business has been permanently altered. There's a new cocktail of innovation, if you will, that will far surpass Moore's law in terms of its impact on the industry. For 50 years, we've marched to the cadence of that Moore's law. That is the doubling of transistor counts every 18 months, as shown in the left-hand side of this chart. And of course, this translated, as we know, into a chasing of the chips, where by being first with the latest and greatest microprocessor brought competitive advantage. We saw Moore's law drive the PC era, the client server era, and it even powered the internet notwithstanding the effects of Metcalfe's law. But there's a new engine of innovation, or what John Furrier calls the innovation cocktail. And that's shown in the right hand of this slide, where data plus machine intelligence or AI and cloud are combinatorial technologies that will power innovation for the next 20-plus years. 10 years of gathering big data have put us in a position to now apply AI. The data is plentiful, the insights are not, and AI unlocks those insights. The cloud brings three things, agility, scale, and the ability to fail quickly and cheaply. So it's these three elements and how they are packaged and applied that will in my view, determine winners and losers in the next decade and beyond. Now, why is this era now suddenly upon us? Well, I would argue there are three main factors. One is cheap storage and compute combined with alternative processor types like GPUs that can power AI. And the era of data is here to stay. This next chart from Dave Michela's book, Seeing Digital, really underscores this point. Incumbent organizations born in the last century organized largely around human expertise or processes or hard assets like factories. These were the engines of competitive advantage. But today successful organizations put data at the core. They live by the mantra of data driven. It is foundational to them and they organize expertise, processes, and people around the data. All you got to do is drive to drive this point home is look at the market caps of the top five public companies in the US stock market, Apple, Microsoft, Google, Amazon, and Facebook. I call this chart the Cuatro Comas as a shout out to Russ Henneman, the crazy billionaire supporting the, it was a supporting character in the Silicon Valley series. Now, each of these companies with the exception of Facebook has hit the trillion dollar club. AWS, like Mr. Henneman, hit the trillion dollar club status back in September 2018 but fell back down and lost a comma. These five data driven companies have surpassed big oil and big finance. I mean, the next closest company is Berkshire at 566 billion. And I would argue that if it hadn't been for the fake news scandal, Facebook probably would be right there with these others. Now, with the exception of Apple, these companies, they're not highly valued because of the goods they pump out, rather, and I would argue even in the case of Apple, they're highly valued because they're leaders in digital and in the best position to apply machine intelligence to massive stores of data that they've collected. And they have massive scale, thanks to the cloud. Now, I get that the success of some of these companies is largely driven by the consumer, but the consumerization of IT makes this even more relevant, in my opinion. Let's bring in some ETR data to see how this translates into the enterprise tech world. This chart shows market share from Microsoft, AWS, Apple, iPhone, and Google in the enterprise all the way back to 2010. Now, I get that the iPhone is a bit of a stretch here but stick with me. Remember, market share in ETR terms is a measure of pervasiveness in the dataset. Look at how Microsoft has held its ground. And you can see the steady rise of AWS and Google. Now, if I superimpose traditional enterprise players like Cisco, IBM, or Hewlett, or even Dell, that is companies that aren't competing with data at the core of their business, you would see a steady decline. I am required to blackout January 2020, as you probably remember, but that data will be out soon and made public shortly after ETR exits its self-imposed quiet period. Now, Apple iPhone is not a great proxy, but Apple, they're not an enterprise tech company, but it's data that I could show. And but now I would argue again that Apple's real value and a key determinant of their success going forward lies in how it uses data and applies machine intelligence at scale over the next decade to compete in apps and digital services, content, and other adjacencies. And I would say for these five leaders and virtually any company in the next decade, this applies. Look, digital means data and digital businesses are data driven. Data changes how we think about competition. Just look at Amazon's moves in content, grocery, logistics, look at Google and automobiles, Apple and Amazon and music. You know, interestingly, Microsoft positions this as a competitive advantage, especially in retail, for instance, touting Walmart as a partner, not a competitor, Amazon. The point is that digital, data, AI and cloud bring forth highly disruptive possibilities and are enabling these giants to enter businesses that previously were insulated from the outsiders. And in the case of the cloud, it's paying the way. Just look at the data from Amazon. The left bar shows Amazon's revenue. AWS represents only 12% of the total company's turnover. But as you can see on the right hand side, it accounts for almost half of the company's operating income. So the cloud is essentially funding Amazon's entrance into all these other businesses and powering its scale. Now let's bring in some ETR data to show what's happening in the enterprise in terms of share shifts. This chart is a double Y axis that shows spending levels on the left-hand side represented by the bars and the average change in spending represented by the dots. Focus for a second on the dots and the percentages. Container orchestrations at 29% change, container platforms at 19.7%. These are cloud-native technologies and customers are voting with their wallets. Machine learning and AI, nearly 18% change. Cloud computing itself, still in the 16% range. 10 plus years on. Look at analytics and big data and the double digits, still 10 years into the big data movement. So you can see the ETR data shows that the spending action is in and around cloud, AI and data. And in the red, look at the Moore's law techs, like servers and storage. Now, this isn't to say that those go away. I fully understand you need servers and storage and networking and database and software to power the cloud. But this data shows that right now these discrete cocktail technologies are gaining spending momentum. So the question I want to leave you with is what does this mean for incumbents? Those that are not digital natives or not born in the cloud. Well, the first thing I'd point out is that while the trillionaires they look invincible today, history suggests that they are not invulnerable. The rise of China, India, open source, peer to peer models, open models could coalesce and disrupt these big guys if they miss a step or a cycle. The second point I would make is that incumbents are often too complacent. More often than not, in my experience, there is complacency and there will be a fallout. I hear a lot of lip service given to digital and data driven but often I see companies that talk to talk but they don't walk the walk. Change will come and the incumbents will be disrupted and that is going to cause action at the top. The good news is that the incumbents, they don't have to build the tech. They can compete with the disruptors by applying machine intelligence to their unique data sets and they can buy technologies like AI and the cloud from suppliers. The degree to which they are comfortable buying from these suppliers who may also be competitors will play out over time. But I would argue that building that competitive advantage sooner rather than later with data and learning to apply machine intelligence and AI to their unique businesses will allow them to thrive and protect their existing businesses and grow. These markets are large and the incumbents have inherent advantages in terms of resources, relationships, brand value, customer affinity and domain knowledge that if they apply and transform from the top with strong leadership, they will do very, very well in my view. This is Dave Vellante, signing out from this latest episode of theCUBE Insights powered by ETR. Thanks for watching everybody. We'll see you next time and please feel free to comment in my LinkedIn. You can DM me at Dave Vellante and don't forget we turn this into a podcast so check that out at your favorite podcast player. Thanks again.