In this episode of the Infrastructure Matters podcast, hosts Steven Dickens and Krista Macomber discuss recent cloud provider expansion, cloud growth announcements, and the implications for the market. They highlight the maturity of the cloud market, mentioning AWS’s 12% growth in the current quarter and its positioning for AI-driven services. They delve into the complexity of cloud adoption, discussing cost considerations, private cloud growth, and the challenges of data management and observability across hybrid environments. They emphasize the need for nuanced perspectives on cloud benefits, acknowledging the trade-offs between simplicity and complexity in areas such as data resilience and security.
Topics include:
- Endor Labs a code and governance pipeline platform with an over subscribed Series A funding round of $70 Million
- Recent earnings announcements from cloud service providers, AWS and Microsoft
- The impact of strong cloud adoption, indicating the continued expansion of the cloud market and competition.
- Complexity and trade-offs for cloud adoption, and the implications for data resiliency and security
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Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this webcast. The author does not hold any equity positions with any company mentioned in this webcast.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Transcript:
Steven Dickens: Hello, and welcome. Thank you for joining us here on the Infrastructure Matters podcast. I’m joined by one of our co-hosts, Krista Macomber. Hey, Krista. Welcome to the show.
Krista Macomber: Thanks so much, Steven. Happy Monday. A little unusual for us to be recording on a Monday here.
Steven Dickens: I know, right? I hope you had a great weekend.
Krista Macomber: It was very excellent, thank you. Got to spend a little time outside and all that good stuff. How about you?
Steven Dickens: Yeah, good. The same, the same. Let’s dive straight in here. It’s just the two of us this week, but let’s dive straight in, lots of news, some big announcements, which I’ll cover. We had a fantastic briefing from a vendor, and I love their name, Endor Labs. As you can see behind me, I’m a Star Wars fan. Krista, maybe you took the lead on our summary here, just give a summary of where we got to with the CEO in that briefing. Really fascinating for me, I think one to share with the listeners.
Krista Macomber: Yes, yeah. To your point, Steven, it was a company that was new to us, and really, a part of the area of the market that, for sure, is definitely an area that we’re looking to expand. And so, as you mentioned, the company is called Endor Labs, and what they announced last week was that they secured their Series A funding, that was $70 million, and actually, that funding round was oversubscribed, especially considering this company was just launched in 2021, and their product just came to market earlier this year, I believe nine or 10 months ago, so certainly some very impressive progress. And they’re looking at an area that’s very interesting. They have what they call their Code and Pipeline Governance Platform, and really, what they’re looking to do is a couple of things. Number one, they’re looking to effectively build in security into CI and CD pipelines to support DevSecOps operations and teams and really facilitate that application development agility without bypassing security.
What they do is they look in particular at open source software code, and they look to understand the vulnerabilities in that software code, as well as the various dependencies for all the various components that might be comprising that code. Really, this is to help these security and IT operations teams to pinpoint where vulnerabilities might be existing within the software code, but also to understand which ones do they really need to prioritize and take action on because it will materially impact the source code.
Those are some of my takeaways, Steven. How about you? I know, like you mentioned, we were both on the call. It was a great conversation. I’d love to hear what you thought as well.
Steven Dickens: Yeah. I think, for me, the interesting piece was, A, the number, $70 million raised in what’s a tough macro environment, and a tough environment. A lot of the VC dollars are going to AI startups right now. Security is still hot, but I think the buzz is around AI. To raise $70 million for a Series A in this space shows that Endor Labs have got some product-market fit. I think you covered it. What are they nine, 10 months in market?
Some pretty explosive adoption numbers. I think the interesting thing for me was the open source component of this. We cover open source pretty closely here at Futurum, but I think the interesting thing for me was people are increasingly starting to stitch together various pieces of open source to make a bigger whole, but where has all that open source come from? What’s the security of it? Yes, you’re going to code check the ultimate application, but what’s the downstream, where did you get it from, how secure is it, all of those types of things. I think interesting, as I say, huge fan of the name. It’s going to be interesting to track this vendor as we go forward here.
I think the other bit, talking about the news, we obviously had the big three hyperscalers all report earnings. That was something I was going to dive into here. Any perspective from you, Krista, before I dive in?
Krista Macomber: Yeah. No. I know, Steven, you came out with a couple of research notes last week from covering their earnings, and as you mentioned, I would say it was a tipping point, or underscored some of the overall trends that we’re seeing in the industry in terms of that cloud growth naturally continues to be very strong. It continues to be a very appealing deployment model for enterprises, which is really what we tend to look at, of course, the use of technology within enterprises as opposed to the consumer end of things, at least in our particular area of coverage. And we’ve had these conversations in other regards as well, but really, looking at how this adoption and usage is beginning to mature, where maybe are some areas where enterprises might be pulling back on as opposed to where they might be leaning into spending for cloud as this market continues to mature. Just a couple of high level comments from my end, but if there was any nuggets that jumped out from your perspective, Steven, I’d love to hear as well.
Steven Dickens: Well, we’ve talked about it, the whole you can have two things be true at the same time. You can have public cloud growing, which I think we saw a return to growth here. AWS particularly was interesting. They’re the biggest player in this space from a market share perspective, and we’d seen a slowing over the last three quarters. I think a lot of people were focused on AWS particularly. It’s about 70% of the gross profit for the wider Amazon group, so pretty important part. I wrote a Forbes article and we’ll put that in the show notes below around, and I talked to a little bit around Lina Kahn wanting to split up Amazon, I think for no other reason apart from that big organizations are bad. I don’t understand the logic there, to be fair, but this is a business that’s probably the poster child for growth and innovation in the US, started as an online book retailer and built a behemoth that employs over a million people globally.
You would think that that would be a good thing, but it is what it is. And they operate in couple of big competitive markets, still think less than 10% market share in online sales, and we’ve got a really strong and healthy competition going on in the public cloud market. But I think the interesting thing for me was back to growth, back to significant growth as well. I think it was 12% within the AWS business. Whilst that’s not 30, 40% growth, we’re talking about huge numbers now. AWS is a beast of an organization, and 12% growth on a business of that size is pretty impressive.
Krista Macomber: And I think anytime we look at earnings like this, that’s really what we have to keep in mind. It’s not the AWS of 10 years ago. Their scale, as you mentioned, is just on a completely different level now. Yes, of course those year-to-year percentage growths might begin to slow a little bit when we think about the dollar values and really the base that they’re building from, to your point, Steve, and that’s where it really truly does become impressive.
Steven Dickens: And the thing for me is this quarter’s earnings is probably one of the last quarters we’re going to see before AI starts to meaningfully show up in their numbers. AWS has made some big announcements around Bedrock and other services. They’ve got custom silicon in their system with Graviton and Inferentia and Trainium. They’re well positioned, I think, to be able to start to capitalize on this AI tailwind. Maybe they’ve been a little bit less vocal than the Microsoft and the Googles about AI, but certainly they’ve got a strong capability. I think I only see upside from here around their AI capabilities.
Krista Macomber: Yeah, yeah, certainly, and they’re in an interesting position really bringing, truly, the infrastructure primarily to the table and to be able to provide almost AI as a service as opposed to requiring an enterprise to, as you mentioned, have to invest in that custom silicon or worry about deploying new infrastructure on premises to be able to support a new AI tool, for example, or application, in particular when the business models are still very much emerging and beginning to take shape. It’s a great way for an enterprise to be able to try it out a little bit and be able to create some ground rules around it and really, again, formulate those business cases.
Steven Dickens: Yeah. I see that only positive from here on in for AWS. They’ve certainly got that footprint with startup. They’ve got that footprint with enterprise organizations. They’ve got that footprint across regulated industries, government sector. Whatever size or scale of customer in whichever vertical, AWS has got a presence there, and I think bringing some of their AI-based services to that customer base, it’s only going to get traction. I don’t think they’re going to have it all to themselves, but I think they’re certainly going to get traction.
Krista Macomber: And that will be-
Steven Dickens: Go ahead.
Krista Macomber: Sorry. I was just going to say, I know you mentioned the likes of Microsoft, for example, as well, and I think this will likely be kind of the next competitive front for these vendors. As you mentioned, Steven, AWS does sit very comfortably as that number one market leader, and so it’s important for them, I would say, to stay ahead of the curve here or risk maybe losing a bit of that share, because I do think this would be an important competitive front for them.
Steven Dickens: Well, yeah, and I went back to Lina Khan at the FTC. That’s the point that’s getting missed here. AWS has got strong market share, but they are absolutely in a dog fight for this type of new workload with Google, with Microsoft and Azure, with Oracle, IBM Cloud. Then there’s a bunch of Chinese vendors, Tencent and Alibaba. The cloud marketplace is so fragmented, so that whilst AWS posted some big numbers, this is a huge total addressable market that’s really, really competitive.
I think some good comments there around AWS. We also saw Google and Microsoft announce strong numbers from both. There’s some announcements coming this week from Oracle, which we’ll talk about on next week’s show, but I think, basically, thumbs up all around for cloud growth and some good things ahead. That’s probably our summary of the news. Let’s get into some of the big topic. We tend to do the news summary and then dive into the big topic. Maybe get us away here, Krista, and get us started.
Krista Macomber: Yeah, sure. Yeah. I know, Steven, we were really thinking about piggybacking on these cloud announcements and really looking at the implications of this cloud growth for the market in general. I know we talked about the fact that, using AWS as an example or poster child, and AWS is hitting this next stage in its business where it does have that large scale, and so we are going to start to see some shifts in terms of the revenue number performance, and I think that that really does reflect where the cloud market is in general. I do think that we’re hitting a level of maturity, as I was alluding to in terms of how customers are looking to use the cloud.
I know we can look at this from a number of different perspectives, but one might be thinking about just general cost of ownership in economics. When we talk about cloud, this is really, I would say, one of the determining factors that we do see in terms of how enterprises are choosing to use the cloud. And also any chatter that we tend to hear regarding repatriation, which is, of course, an enterprise maybe migrating a workload to the cloud and then choosing to bring it back on premises. Oftentimes it might be a little bit of sticker shock due to some of the cloud bills that they’re getting. There’s, I think, I would say just some disillusionment in terms of folks are really realizing that the public cloud is not as inexpensive as maybe they thought it was at the start, so just a general comment. Yeah,
Steven Dickens: Andy Jassy, the CEO of Amazon, addressed this in the earnings coverage. His perspective was that maybe the last three quarters, that’s why we’d seen not a drop but a stall as people were starting to look more into FinOps addressing their spend. What he saw and was behind the 12% growth in this quarter’s earnings was that people were bringing new workloads back to the cloud. I think our perspective, here at Futurum, and you’ve heard us talk about it, is two things can be true at once. Some of the penetration that we’re seeing in some of these highly regulated industries, still probably sub 10% cloud adoption in financial services.
There’s huge upside for public cloud vendors like AWS, like Microsoft, with Google, like Oracle, like IBM. In some of these highly regulated industries, there’s still a huge TAM to be going after, but we’re also seeing innovation and growth, and the private cloud isn’t what it used to be. We’re seeing TruScale, we’re seeing GreenLake, we’re seeing APEX. We’ve got offerings from Nutanix, all of the container platform stuff, what VMware is doing. There’s some fantastic innovation going on in the private cloud.
I think our perspective here is two things can be true at the same time. You can be seeing public cloud growth and you can be seeing private cloud growth, and not a lot of the analysts can hold two truths in their head at the same time, which is unfortunate.
Krista Macomber: It certainly can be unfortunate, yeah, yeah, and I would certainly agree. You allude to, of course, some of the infrastructure level, and of course, being the Infrastructure Matters podcast, certainly some of the infrastructure-level investments being made for the private cloud. And I would say, of course, being our resident data protection and data security person, I would also say we’re seeing a number of investments when we think about data protection, but also data management and observability across these what we’re calling multi-hybrid cloud, so the on-premises private cloud investments as well as the public cloud infrastructure as a service, increasingly, some of the public cloud hosted SaaS applications as well, and really how that can help, as you mentioned, both of these things be true in terms of empowering investment on both ends of the spectrum by allowing IT operations to have that centralized visibility, oversight, security, across these environments.
Steven Dickens: Yeah. You and I were on a briefing earlier with a vendor on a project we’re working on, and I think the interesting thing for me in that is they were talking about data complexity. As you look at deploying whatever data, it can be across private environments, it’s going to be across multiple public cloud environments. Within those public cloud environments, the data might be spread in a EC2 environment. It might be in a MongoDB Atlas environment. It might be in two or three applications. Whilst you might say, “Oh, it’s all in AWS,” it could be in 20 different places on AWS in 20 different types of platforms.
I think, for me, and maybe this is a theme we can start to put in place over future podcasts, some of these control layers. We hear a lot about the Kubernetes control layer and container orchestration. Data resilience was the layer we were talking about this morning around how do people secure data using the same tools across multiple platforms, be they public cloud or on-prem.
Krista Macomber: 100%. And you were alluding, Steven, to even the various regions within a cloud provider, and certainly this does take that infrastructure-led vantage point. I would add, as well, when we think about just the number of SaaS applications that any given enterprise either is already using today or is likely to be using over the foreseeable future, call it the next 12, 24 months, I think that number is just going to continue to grow, and we’re going to see a very, very diverse ecosystem there. It’s even going beyond strictly the compute and storage as a service to also include those applications as well. It’s, I think what you’re mentioning, this kind of data-driven view. It’s an interesting concept because it, at least in theory, can help to maybe address some of those hurdles. But, of course, see how it all plays out, but I think it’s at least an interesting perspective to bring to the market. .
Steven Dickens: Yeah. I think the simplistic view of the cloud is it’s cheaper and it’s simpler. I think where we are now and where we are in the market is, yes, there’s some advantages, yes, there’s some flexibility, but I think the cheaper piece maybe depends on the workload, you’ve got to be more nuanced, and the easier piece, yes, you’re maybe getting out of having to rack and stack servers in your own data center, but there’s a complexity maybe from a security or a data resiliency point of view. There’s some trade-offs for sure.
Krista Macomber: Absolutely, absolutely.
Steven Dickens: Well, I think that’s a fantastic place for us to wrap up. There’s only the two of us this week, so a slightly shorter episode, but we’re wanting to keep the frequency up on these Infrastructure Matters podcasts. Please click and subscribe. Do all the things you’re supposed to do in YouTube and on your various podcast channels as we look to grow a following here. Some insider edition interviews with some vendors coming through, so you’ll start to see those now, and we’ll see you next week for another episode of Infrastructure Matters.
Author Information
Regarded as a luminary at the intersection of technology and business transformation, Steven Dickens is the Vice President and Practice Leader for Hybrid Cloud, Infrastructure, and Operations at The Futurum Group. With a distinguished track record as a Forbes contributor and a ranking among the Top 10 Analysts by ARInsights, Steven's unique vantage point enables him to chart the nexus between emergent technologies and disruptive innovation, offering unparalleled insights for global enterprises.
Steven's expertise spans a broad spectrum of technologies that drive modern enterprises. Notable among these are open source, hybrid cloud, mission-critical infrastructure, cryptocurrencies, blockchain, and FinTech innovation. His work is foundational in aligning the strategic imperatives of C-suite executives with the practical needs of end users and technology practitioners, serving as a catalyst for optimizing the return on technology investments.
Over the years, Steven has been an integral part of industry behemoths including Broadcom, Hewlett Packard Enterprise (HPE), and IBM. His exceptional ability to pioneer multi-hundred-million-dollar products and to lead global sales teams with revenues in the same echelon has consistently demonstrated his capability for high-impact leadership.
Steven serves as a thought leader in various technology consortiums. He was a founding board member and former Chairperson of the Open Mainframe Project, under the aegis of the Linux Foundation. His role as a Board Advisor continues to shape the advocacy for open source implementations of mainframe technologies.
With a focus on data security, protection, and management, Krista has a particular focus on how these strategies play out in multi-cloud environments. She brings approximately 15 years of experience providing research and advisory services and creating thought leadership content. Her vantage point spans technology and vendor portfolio developments; customer buying behavior trends; and vendor ecosystems, go-to-market positioning, and business models. Her work has appeared in major publications including eWeek, TechTarget and The Register.
Prior to joining The Futurum Group, Krista led the data protection practice for Evaluator Group and the data center practice of analyst firm Technology Business Research. She also created articles, product analyses, and blogs on all things storage and data protection and management for analyst firm Storage Switzerland and led market intelligence initiatives for media company TechTarget.
