On this episode of the Six Five Webcast – Infrastructure Matters, hosts Camberley Bates and Keith Townsend discuss industry investments, with a particular focus on the fields of data management, AI, and cybersecurity. They delve into why these sectors are currently being seen as winners in the venture capital space, revealing the key trends and innovations driving their unprecedented growth.
Their discussion covers:
- The surge in investment within AI, how it’s shaping the future of technology, and its implications for industry standards.
- Insight into the data management sector, including new advancements and the importance of data security.
- A deep dive into cybersecurity measures and the increasing need for robust security frameworks to protect against evolving threats.
- The emergence of unicorns (startups valued at over $1 billion) in these sectors and what it means for the global tech ecosystem.
- Future predictions for investments in technology, and how current trends might shape the industry dynamics in the coming years.
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Disclaimer: Six Five Webcast Infrastructure Matters is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors, and we ask that you do not treat us as such.
Transcript:
Keith Townsend: All right, you’re watching, listening to and enjoying the smooth sounds of episode 65 of Infrastructure Matters. It’s just me and Camberley this week. Dion is busy interviewing CEOs. He’s released this huge CIO study on spending and trends. If you haven’t heard about it, read about it visit futurumgroup.com to find out more. Camberley, how’s it going?
Camberley Bates: I’ve had to straighten my antlers, they’re kind of like bent all over the place here. Sorry.
Keith Townsend: You can’t disrespect the antlers. You can’t have bent antler head.
Camberley Bates: No. And on the way in this morning, so usually when we’re recording, this is eight o’clock. I come in about 7:00 A.M., but coming down the main Broadway Road in Boulder, one of the dear families was tripping across the four lane road there. And so going to make sure that they don’t get… It’s like screeching the brakes on as the little fawn… The fawns aren’t little anymore. They’re pretty stout by this time of year. So anyway, so I feel like I’m kind of channeling my dear friends that live in our backyard.
Keith Townsend: You know what, we didn’t have it on the agenda, but you mention being in the office in Boulder, we got a big air conditioning upgrade. What was it yesterday?
Camberley Bates: It’s been all week. So yeah, they had to rerun a bunch of electricity as well, and they’ve got quite a bit of money that got dropped into some new air conditioning because there’s certain companies that we have certain pieces of equipment that are blowing up the data center and just the air conditioning has not been able to keep up with it. And so maybe someday will be a water-cooled engine here because it’s… The good news is that the guys here are super busy at the lab. The bad news is that they’re super busy and they’re working all throughout Christmas, so they’re not happy about that right now.
Keith Townsend: Yeah, data center cooling is one of those thankless jobs. No one notices it. The equipment stays cool and stays up and no one really notices those benefits other than it’s more reliable and more performant.
Camberley Bates: Well, when we had… Fortunately we’re not a high availability center and that kind of stuff, but we had some spikes that caused things to… Bad spikes. I mean, we’re pushing up to 100 here. And so I think it gives an idea about the panic that’s probably in some of the other data centers that are going on. And we didn’t even have the GPUs here yet. That’s going into another data center that’s in another location, so that’s super exciting. I can’t talk about it yet. I don’t think we can talk about it yet, but-
Keith Townsend: No, we get the-
Camberley Bates: Super excited about that. No, but lots of big stuff, big lab, everything else. The boys are going to have many, many, many, many toys. I’m sorry, there’s probably girls-
Keith Townsend: So many toys coming along.
Camberley Bates: The boys and their toys.
Keith Townsend: So let’s start off the conversation, data infrastructure industry in 2024, M&A, let’s talk about the year and kind of review. What was the big news of the year?
Camberley Bates: Well, when people come and talk about data and data storage, they are often thinking that it’s kind of one of the boring things of the world, especially when… I’ve hired millennials over the years and have to tell them there’s quite a bit of exciting things going on here. Some people love this world. And so I was just reflecting on, especially as Kioxia just IPO’d this last week, 5.8 billion is kind of valuation or something along those lines that they took out. That’s a hard drive in. Well, there, there’s solid state drives, et cetera, out of Korea. Big IPO for a company. This last year, we’ve had a whole bunch of M&A and efforts and also investments. Veeam took a chunk of change this year and they, from a multiple investors coming in them and they’re still privately held. And so their valuation, I think came up to 15 billion. They’re a data protection company, guys. I mean, how boring can you get around data protection? I mean, it’s just not as sexy as AI, but here they are.
And when you don’t have your data, you know it’s bad. The other thing that happened with the big stuff was the Veritas Cohesity relationship that caused Veritas to split into two. So some of the stuff went over to Cohesity and they’re now another big huge data protection firm, and they spun off another portion of it, which was Arctera, and they’re at 400 million ARR run rate, and all their products are rule of 40 kind of environments. So they’ve created these three divisions that are offering governance, data protection, and high availability capability. So see what they do. They may sell off those pieces over the next year. We are seeing Western Digital, WDC split up guard. We’re going to see Western Digital WDC become the hard disk guys. I thought hard disk were dead, but they’re not. And then we have the other side they’re splitting off is the SanDisk side, and that’s going to be this solid state stuff. So we’ll see some more competition with Samsung and those kind of folks. Nasuni got a big investment from Vista, came out with a 1.5 billion valuation for a global file system.
Keith Townsend: I’m amazed that they’re still around and that they haven’t been sub-tuned by all of the other global file systems but kudos.
Camberley Bates: Exactly. And then you got WEKA. WEKA as well, they raised another $140 million and they were valued at 1.6 billion. So I mean, it’s kind of like if you’re not valued a billion dollars, I mean, we used to say those were the unicorns, but I guess all of this is unicorns. Unicorns are supposed to be something unique. It’s no longer unique to be a billion dollar valuation. So I guess the really unique one would be Databricks, right. And you were talking about what happened to Databricks.
Keith Townsend: Yeah, you’re talking about eye-popping. It’d be amazing to value a company at $10 billion, they’re not publicly traded. They had a J-round. I didn’t know J-rounds existed. $10 billion raise, which values them at $62 billion. And I think it shows you where AI is influencing companies like VAST and all of these companies that enable AI, that enable the concepts of data lakes and data warehouses and centralizing data and making data more accessible to AI. But that’s an eye watering raise. They now have the record for the largest private raise ever.
Camberley Bates: This is mind-boggling. I mean, even when you talk about the OpenAI kind of stuff, it was-
Keith Townsend: Yeah, I think OpenAI was the largest before that at six point something billion. So they beat OpenAI by three and a half billion, something like that. And three and a half billion dollars raise would be an amazing raise. So I think unicorns, I think we need a new name for unicorns, maybe super unicorns or nothing. I have to consult my five and 6-year-old nieces to find out what’s more unique than a unicorn.
Camberley Bates: That’s true. And then thinking about 2025, if the market continues as strong as it is, even though we’ve had a little bit of a leak, kind of expecting a bunch of IPOs, which I already mentioned, WDC, SanDisk, flipping out, and you mentioned VAST Data, good probability that VAST go out, IPO. Solidigm sometime in the next 12 months or so, that’s another solid state drive player. VAST is a big file player for AI and then maybe Veeam, maybe, maybe not. I don’t know if it would be this year, maybe 18 months. But they’re going to want look at it. My big concern is personally in my investments is thinking about are we overheating again? And that’s AI’s question, right. Are we overheating?
Keith Townsend: Yeah, we thought the days of standalone storage companies was over with Dell, EMC, NetApp, HPE, Pure, and those folks kind of consolidating those markets, buying up clever startups, but the M&A from the big guys absorbing the WEKAs and the VAST Datas of the world, kind of dry it up and now these companies are showing that there’s still innovation to be had. Veeam is a backup company and Cohesity is making waves. Rubik already went public earlier. Was it this year or last year they went public? It’s been I think-
Camberley Bates: Two years ago.
Keith Townsend: About two years ago, so they’re still… I famously did a podcast maybe about five years ago that said enterprise storage was boring. It’s far from boring, it’s very active and maybe overheated part of the investment and IT landscape space.
Camberley Bates: Well, this gets back to Dion’s CIO Insight Survey. What’s number one on a survey that’s on top of mind? Cybersecurity. Number two is AI, right. And when you look at that, what’s going on with the data protection is also if we did a drill-down into the other data that we have on the data protection side and the cybersecurity side is they are, they being enterprises, are looking very strongly at how they’re protecting their data because of the ransomware threats, et cetera, which continues to ramp up. Last week we talked about quantum computing and where that was going and how fast that’s going to come and hit us in the butt for security reasons. So why those guys are getting the valuation is they’re linked to those two trending areas that can have maintained strength. Cybersecurity has been at the top of the list now since 2020, since we hit the fan with COVID. And it’s gone bonkers and it’s continued to be bonkers. There’s no panacea.
Keith Townsend: Yeah. And AI and cybersecurity are linked at the hip. I think we could do probably a whole episode on how AI and cybersecurity are interesting bed partners. Moving on to more investment news. Broadcom now a $1 trillion company. They’ve joined the $1 trillion club. Maybe that’s the ultra unicorn riding on enterprise software assets. So Broadcom, there’s a lot going on with Broadcom these days. They’re talking about their AI chips and AI strategy. There’s plenty going around and their network BU around their network chipsets that drive everything that’s not named Cisco. And in some instances, some lower end Cisco solutions, they’re everywhere. But the probably most interesting news is VMware. It’s more profitable than Broadcom thought it would be at this point.
And approximately, the estimates are about 50% of Broadcom’s $21 billion in software revenue this past quarter, somewhere around I think VMware’s last revenue numbers was 13 billion for the year. And I think that’s the annual number. So year over year, VMware is up 10% I think in profitability. It is a really interesting story. It’s been, I think a wonder story for investors, customers, the jury’s still out. I think a lot of enterprise customers are still kind of not, let’s say, all in this transaction. And what it means for them.
Camberley Bates: And the conversations that I’ve had, continue to have and I’m sure you’re having, is that they’re not migrating necessarily off of VMware. They’re developing off of VMware, which means you have a very long tail just like you have with the other huge investments that he’s made in mainframe. So I think that the profitability and the valuation that they have, et cetera, it’s probably super solid.
Keith Townsend: Yeah. And Hock Tan commented, he’s super excited about the growth of VCF, VMware Cloud Foundation, which he hopes and promises will be that landing zone for net new development. And the devil’s in the details, we don’t know how much of that is because the VCF licensing is kind of the way to go for large enterprises. It gives you license portability. There’s a lot of advantages. So how much of it is buying shelf-ware and not actually deploying the advanced features of VCF and joining some of the licensing benefits for traditional vSphere and how much of it is people building new infrastructure for cloud-enabled apps? It’s a fascinating time to be a watcher and probably an uncomfortable time to be a VMware customer. AI continues to be top of mind.
I don’t know if it’s a surprise offering, but NVIDIA announced their Jetson just like the futuristic cartoon that promised us flying cars, but yet I have AI instead. I guess I’ll get the talking robot maid at any point thanks to Elon, hopefully. Elon I’m waiting on my Jetson powered maid, but the Jetson is a series of devices. The one that got the most attention is a small, I guess the best way to compare it to is an Intel NUC size device that… Yeah, Camberley raising her fingers representing about a small edge device that packs quite the bit GPU capabilities in it. And on a call yesterday, we talked about the possibilities of stuffing a 61 terabyte or 122 terabyte drive in one of these things and what would happen as a result and what could you build at the edge.
Camberley Bates: Yeah, I mean, and what they announced was 250 bucks. It’s an SDK, software developer kit, and so I’m not sure how much that’s, I’m sure it’s still deployable, even if it’s software developer kit. And I asked Ryan Shrout, who runs our Signal65 if he was getting that for all the kits in the lab, so they could-
Keith Townsend: Yeah, for Christmas, everyone should get a Jetson SDK kit.
Camberley Bates: Yep.
Keith Townsend: Build something fun this holiday season.
Camberley Bates: And then the other thing I was thinking about is like, “Okay, would this be something you could use for Bitcoin?” I mean, I’m thinking, “Okay, so if I’m a Bitcoin guy, I’m going to look at this and say there’s something here that’s cheap, that I could stack and rack and create whatever I’m going to do for Bitcoin and speed that up.” There’s all kinds of possibilities when you think about that power at the edge. One of the companies we did a briefing with this week was Quantum, not as in quantum computers, but Quantum as the guys that have got, they’re the data side of the house, so, well known for their long-term tape and data protection, but also for StorNext and now a product called Myriad, which is a file system. They’ve very much so have been focused on the media entertainment.
What they announced was something called Client GPU Direct with Myriad, right. So think about it, if you’re doing, what I was trying to understand about how that would work is, if you’re looking at, you’ve got client systems, et cetera that have GPUs in there, can you speed that up of whichever you’re doing? So since they’re with, very much so with the M&E industry, what you’re looking at is how can I do and improve the work that the media and entertainment industry is doing in terms of their rendering capabilities. So that’s what they’re really focused on. They’ve really turned their sights on to saying… Often what they would have is StorNext would be there beside somebody else’s file system like an Isilon or Dell’s PowerScale or a NetApp ONTAP box. And what they’re trying to do is move into that market and take that market over for the really high speed environments that they have to have. So kind of an interesting move for them.
Keith Townsend: Yeah. And I remember talking to a company that did kind of data or SQL acceleration. They presented at a storage field day event. This is a couple of years ago. But the idea was to take GPU accelerators and put them in line with data storage devices like a Dell storage array or any one of the storage array vendors and accelerate the processing of data for… And I think this is a little bit before the AI craze. It was for data analytics, but the math remains the same. If you can accelerate the injection of data and creating vector databases and all that good stuff, if you can accelerate that, that better aligns to your AI objectives and performance needs. So I can absolutely see this Jetson being used for stuff other than raw AI at the edge. Nvidia talked about plenty of services. They really want to push their software services, why as wide as the SDK, they want to push NIMS. But I think when you take a GPU, shrink it down to the size and power envelope that these Jetsons are, it makes for some really interesting accelerators that we haven’t really explored these off server accelerators that can add value in the data pipeline.
Camberley Bates: The other thing that I think is really smart about this is in the pricing piece of it. So what we’ve seen historically is technology companies will seed the market of students to learn their technology and in hopes that when they move into working full-time in primary companies, they’re going to say, “We want this, we want this.” So if I’m seeding the… And one of the strengths that NVIDIA has is all their software. So if I have my guys, the guys coming out of college or the tech schools, whatever, are trained on the tools that NVIDIA has and that runs on this thing, I’m going to say, “Hey, I’m going to move more towards that space and use that more.” So very, very smart on his part. I could see some requirements for colleges or the tech schools to acquire some of these for the classes or just be in part of your computer that you have, especially if you’re a comp sci major or a data AI major, something along those lines.
Keith Townsend: Yeah, my youngest son just finished a program maybe about five years ago. He’s five years into his career. So this would be the Raspberry Pi requirement of computer sci students. I think it’s important to highlight that this isn’t a new idea. This isn’t something that NVIDIA, just a space that NVIDIA has developed. They’re all alternatives, Intel, AMD, other companies have talked about putting this much compute or similar compute at the edge, you know, maybe different form factors. The AI PC is kind of an attempt at some of this capability. Looked at a post from Daniel Newman, our CEO, couple of days ago, and I think he called the AI PC super cycle a flop. So that was kind of provocative. I’m pretty surprised that was not picked up by some of the financial media. But yes, this is not a new thing. So whether or not it’s successful or not is an interesting question.
I talked to some of our peers in the industry as part of the Grey Beards on Storage podcast yesterday. We were talking about the opportunity for enforcing in the enterprise, and I don’t think, I personally, we haven’t done enough research on this to validate, but I don’t think we’re going to see a huge bump and acquisition of hardware for enforcing in the enterprise. I think most enterprises are going to use their existing VMware, vSphere clusters, their Intel and AMD, steep fourth generation CPUs in the case of Intel, Epic CPUs, and the built-in AI acceleration. Our former peer would tell you that IBM’s mainframes have really great built-in acceleration that we’ll see a lot of AI on CPU and smaller accelerators and we won’t see a hardware bump. So it’s going to be an interesting impact on the market. May not be a bubble in the sense that AI is disappointing, but we won’t see the demand that we’re seeing on the training side.
Camberley Bates: Well, so one of the things that Dell as well as hp.com, not HPE, hp.com have talked about is the coming refresh cycle for desktop PCs, right. Those areas. So they have talked about, and I don’t know that market, so I’m way out on my skis here-
Keith Townsend: No, we need to have Olivier on the line.
Camberley Bates: Olivier had talked about this in one of the meetings when I was sitting with him saying, really smart guy, and that they’re aging. There will be a cycle of refresh not driven by Windows 11. Thank God. They asked me again this morning, “Do you want to update.. “No.”
Keith Townsend: No, I’m fine. Thank you. I finally have my system exactly like I want it.
Camberley Bates: Don’t muck with it. Anyways, but talking about, you have PCs that are starting age ’cause there was a big cycle of PCs, I guess 2020, 2021. So we are three years into that cycle, and so they’re expecting this to cycle again this next year. At least that’s where some of the valuations were put or have been discussed in terms of where they’re going, especially within Intel and those other companies are talking about. So maybe with those, when you upgrade, you automatically upgrade to an AI PC because why not, because you need it for, I don’t know, Copilot or something along those lines. So we’ll see. Maybe we’ll get Olivier on here to talk about that with everybody. It’s not infrastructure-
Keith Townsend: Yeah, it’s not infrastructure, it’s infrastructure adjacent. But pulling the conversation back to infrastructure and kind of a tease of our predictions, you know, we always have to do a predictions podcast for the new year. We’re coming up on the end of a cycle for data center though. So after the huge shift in work from anywhere, we completely re-jiggered data center designs to accommodate work from home. We’re coming on a mass refresh of that whole investment period. Any off the cuff insights that you think will, any markets, any vendors you think we should be watching in 2025 as part of, I think this, what I’m predicting is a hyper refresh cycle for the data center?
Camberley Bates: You mean for people coming back into the data center? Or…
Keith Townsend: It could be for people coming back. There’s a bunch of different drivers at play. We’re coming out of kind of the rush to buy all the hardware to support the pandemic, to support work from home. Now we’re challenged with both the return to office and the return to data center. I think I just coined a new acronym, RTDC, the return to data center-
Camberley Bates: RTDC.
Keith Townsend: … from cloud providers. And there’s this whole now again, of infrastructure to support these two movements of return to our own four walls.
Camberley Bates: I suspect we’re going to… If that is true, and that’s curious, and I know the reevaluation is going on in terms of where do I place an application, do I leave it in the cloud, et cetera. If that is true, then I would expect an uptick with CoLOS. Equinix should be a play because I may not want to build a data center or have that kind of environment, but I may be okay with that would be one kind of grouping that I would see that would benefit from it. I know that Citrix is doing extremely well, but I don’t know if Citrix is doing extremely well because of the horizon uncertainty or if it’s just because those are the VDI guys, but those are still operating well. But the other piece that you have to overlay with that hides that issue is what’s going on with what we just experienced here. Power and cooling is not keeping up because we’re bringing more highly powered, highly dense environments into these environments, and they’re blowing our data centers up and you have to move. And that more than anything else is probably what’s changing the data center, less so moving back with those applications is what I would think.
Keith Townsend: Well-
Camberley Bates: I am talking in a very uninformed way. So in terms-
Keith Townsend: Yeah, I don’t think I have my arms around this yet as well, but I think this is a good teaser for we’re going to do in-rap and a predictions podcast, and I think that’s enough to wet the audience’s whistle on what’s happening. So Camberley, we can’t end the podcast without asking what’s your big tech takeaway from, and I can’t say for the year, because the year’s been too big. What’s your takeaway for the past quarter? I think this past quarter has equaled a year. What’s been your big takeaway?
Camberley Bates: I’d say the last six months or less than six months is the learning that we’re having on what it’s going to take to deploy generative AI. And it is this super successful, oh, we God, we failed. Super successful, oh God, we failed. The numbers I’ve seen is 20 or 30% of the projects that people have initiated have gone out. And those reasons are to do with everything from, of course, data classification, have to read that up, processes, not maybe there, and also the security issues that are there. So that’s the big issue and that classic, what the organizations are learning massively how to do this differently, they’re not going to stop. They’re just going to take, ” before we go and release because we don’t want to screw up the brand.” But that, to me, that’s the big lesson right now with that, that I’ve seen. And the other thing is that what we know now about AI is going to change next quarter and it’s going to change the quarter after that. It’s moving so fast.
Keith Townsend: It is moving incredibly fast. What makes it exceptionally difficult to plan for if you’re sitting on the ITDM side, and I’ve talked to software and hardware vendors, they’re in this same space. It’s moving faster than what their teams can keep up with. At SuperComputing ’24, they were talking about one megawatt racks, so get ready for that liquid cooling coming into Boulder. This has been, I think, a really great snapshot of what’s happening in the industry over the past week. It has been a amazing 2024. We’re going to have Dion, and maybe we’ll find one more person to join us to have an end of the year wrap and predictions podcast. If you smoke them, have a great holiday. If you don’t enjoy the downtime that the next week or so will bring. For me, I’m your host, Keith Townsend, and my co-host Camberley Bates, have a wonderful season.
Camberley Bates: Have a Merry, Merry Christmas, Happy holidays, Happy Hanukkah, Happy New Year, whatever. Whatever you celebrate, enjoy.
Keith Townsend: As my friends on Disney would say, “Happy everything.”
Author Information
Keith Townsend is a technology management consultant with more than 20 years of related experience in designing, implementing, and managing data center technologies. His areas of expertise include virtualization, networking, and storage solutions for Fortune 500 organizations. He holds a BA in computing and an MS in information technology from DePaul University. He is the President of the CTO Advisor, part of The Futurum Group.
Camberley brings over 25 years of executive experience leading sales and marketing teams at Fortune 500 firms. Before joining The Futurum Group, she led the Evaluator Group, an information technology analyst firm as Managing Director.
Her career has spanned all elements of sales and marketing including a 360-degree view of addressing challenges and delivering solutions was achieved from crossing the boundary of sales and channel engagement with large enterprise vendors and her own 100-person IT services firm.
Camberley has provided Global 250 startups with go-to-market strategies, creating a new market category “MAID” as Vice President of Marketing at COPAN and led a worldwide marketing team including channels as a VP at VERITAS. At GE Access, a $2B distribution company, she served as VP of a new division and succeeded in growing the company from $14 to $500 million and built a successful 100-person IT services firm. Camberley began her career at IBM in sales and management.
She holds a Bachelor of Science in International Business from California State University – Long Beach and executive certificates from Wellesley and Wharton School of Business.
