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Breaking Anaylsis: Predictions 2020: Tailwinds, Headwinds & IT Outlook


>> 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 In this Breaking Analysis I want to lay out my 2020 predictions using insights gleaned from theCUBE blended with ETR spending data You know, 2019 marked our 10th year of doing theCUBE Over that time we've had the pleasure of covering nearly 1000 events and milestones, including the exit from the great softness of 2008 and 2009 You know theCUBE has extensively tracked a 10 year bull market

We've covered the era of data We saw the rise and profitless prosperity of the big data and opensource Hadoop movement, where we predicted the practitioners, not vendors, would benefit the most from big data We've covered many dozens of acquisitions including the 60 billion dollar chess move made by Michael Dell acquiring EMC, and a launch of hundreds of startups in flash, hyper-converged, big data, AI, blockchain, crypto, security and SaaS There'll be other days to talk about theCUBE and review that, today's all about predicting the future, using spending data and insights from the thousands of interviews we've done on theCUBE So let's get right into the ETR data and start with the high-level spending

Remember in October, ETR released its survey results and stated that we're coming out of a multiyear investment cycle in digital transformation Enterprise IT buyers have learned what works, and on which technologies they're going to double down They're now narrowing their investments on emerging technologies, picking those winners for the next gen tech, and at the same time, they're cutting redundancies from legacy players that they were keeping on as a hedge Buyers are picking bundled suites from a handful of mega vendors, and solidifying their investments We're seeing a multi-generational dynamic repeat itself, where buyers are creating a balance between the convenience of packaged offerings, i

e bundles, and leveraging best of breed technologies to drive innovation So on balance, the ETR data shows that a contraction in spending and tepid CIO sentiment is impacting both emerging vendors as well as traditional players, and these trends are most pronounced in the very largest organizations, which have always been the best bellwether in ETR's data sets Let me share with you what one IT executive said recently that I think really sums up the situation quite well He said, "ETR's findings mirror what we're doing today, "in that we spend most of 2018 bringing in "a lot of the new, core technology

"I believe what you're seeing now is not a lull in spend, "but an operationalization of what we've already purchased "We're not spending on what's next yet, "because we're still rolling out what we just bought" This is from a VP of global IT at a large public manufacturing company, I said he, it could be a she as well I think that she's summing it up correctly, and it reflects many of what customers on theCUBE tell us Now, let's take a look at the macroeconomy

GDP growth is going to come in at about 23% this year, give or take It's not going to hit the Trump administration's goal of 3% plus, but consumers are clearly powering steady growth At least for now IT spending should grow at about a point or two above GDP, so let's put that at, say, 4%

We're right in the middle of a Santa Claus rally, and the S&P is above 3200 today Tech has been a powerful tailwind for stocks, and I think stocks, tech stock's going to take a breath in early 2020, but I expect continued strong growth in the economy and tech spending after a Q1 pause I could see the S&P flirting with 3700 or even higher in 2020, and I think the tech sector will be a benefactor of that momentum, providing an impetus for continued growth Here's my thinking on that So much of 2020 is going to be about the election, and to me the election is going to be really about the economy

And I predict the economy is going to remain steady And as the IT leader I quoted earlier said, customers will be operationalizing what's been previously purchased Here's what's different in 2020 Tech projects have historically been very risky investments, and have required higher internal rates of return, IRRs, to get approved by CFOs But the cloud has altered two factors

One, is that it's allowed more experimentation for way less money The second is cloud, by shifting CAPEX to OPEX, allows for much more incremental, lower risk investments So I think you'll see continued steady growth, powered by the cloud, which allows experimentation, and importantly higher hit rates of success These successful projects will throw off cash for companies, and CFOs are getting on board because they realize it's driving innovation They also realize that IT does matter, maybe not in the form that Nick Carr envisioned, but a new generation of IT that creates competitive advantage

This brings me to my first main prediction, which is the growth of cloud computing is going to moderate, but the cloud will continue to steal significant share from on-prem spending Now the narrative that the pendulum is swinging back in my view, is a false narrative Rather, the pendulum has swung, and the cloud is the underpinning of innovation Now having said that, I do think we're seeing a bit of an equilibrium in spending, where buyers have identified those workloads that are going to remain on-prem, which is why you see, for example, AWS, Azure, and Google making moves in hybrid Hybrid slash on-prem offerings

What this chart here shows from ETR, so from 2010 through October '19 survey on cloud spending, I had to block out the 2020 survey as it's currently in the field, I'm not allowed to show that data The yellow line is market share, which in ETR parlance, as you remember, is pervasiveness, or mentions in their survey The blue line is spending momentum, measured as net score, which essentially subtracts the percent of customers spending less from those spending more The long, steady march of cloud, as you can see, continues, and there's no indication that it's going to abate That said, the penetration of cloud has become much more meaningful, so share gains will be more hard-fought for the cloud guys

Now, you may see this as a non-prediction, or a hedge It's not, let me be clear Cloud will continue to steal share from on-prem, but share gains for the cloud vendors will be more difficult Which brings me to part B of this prediction What I'm showing in this chart is market share from ETR's January 2016 survey through October '19

And I'm showing spending for three on-prem vendors within AWS, Azure, and Google Cloud accounts And I'm picking on Oracle, IBM, and Dell EMC as three prominent on-prem proxies, and you can see the steady decline in market share for these companies And even though there's a bit of an uptick in October, I don't see this as a reversal What's going to happen is that traditional on-prem vendors are going to step up their cloud strategies Specifically with multicloud management

This is going to be the case with Dell, who's going to leverage VMware, and in the case of IBM, they'll try to take advantage of Red Hat in that multicloud game Now both IBM and Oracle, who each have public clouds are going to dig their heels in, they're going to get customers in a headlock, and provide big financial incentives for them to use their captive clouds All right, so with the high-level spending comments that I made earlier, and that cloud discussion that we just had as a backdrop, the question is, which companies will do well in the coming year? I'm going to call out five companies, that I want to highlight where the ETR data intersects what we're seeing on theCUBE The prediction is these five players will do well in 2020, they're going to power through any downturn in spending, and they're going to thrive in the face of the cloud share shift So the chart here shows data from the ETR October 2019 survey, and it lays out net score or spending momentum for these companies, that I am predicting will be winners in 2020 and beyond

And the five companies are UIPath, Snowflake, Databricks, HashiCorp, and Rubrik Let me start with UIPath They are the leader in robotic process automation I think RPA is going to do well even in a downturn, because more companies will be looking to automate and save money, even in a softer climate Automation Anywhere is another player in this space, they're doing pretty well, and I predict that UIPath will come out on top of this space, but both UIPath and Automation Anywhere can thrive

Next company is Snowflake, they are changing the analytic database market, and I've covered them before in previous Breaking Analysis segments They are going to continue to grow nicely in my view They are 100% cloud-based, and they participate in all popular cloud platforms Now ironically, they compete with AWS RedShift, who continues to copy some of the innovations that Snowflake has popularized But AWS and Snowflake are strong partners, so there's room for both companies to thrive

Snowflake especially, as they play in clouds other than just AWS Which brings me to Databricks We're seeing a new type of workload emerge in the cloud for modern analytic databases, where organizations are taking all this data that they have, lots of it in the cloud, and they're structuring it within a Snowflake database, or RedShift, and they're bringing Databricks tooling to the equation to be able to query and visualize the data in near real time Now of course, as I say, AWS plays here with RedShift, and they're selling a lot of EC2, so they love Snowflake All major cloud players are seeing this type of workload enter the mix, and it's going to be a strong area of growth in 2020 and beyond

Next thing I want to talk about is HashiCorp HashiCorp is capitalizing on this trend toward cloud-native computing The company provides opensource tooling for developers, and is all about simplifying application deployment independent of the underlying platform, whether it's virtual, container, or cloud Five years ago, the players in the space that got all the attention on theCUBE were Chef, Puppet, Ansible and Salt, and today, especially again on theCUBE, you hear the most about Hashi and Ansible, and in fact we were at AnsibleFest with theCUBE, and we heard lots about HashiCorp, so they both complement and compete with the older players To me, this reminds me of Spark within the Hadoop ecosystem

Hashi has raised about 174 million in VC, and as you can see they have very strong spending momentum in the ETR dataset, with a net score, as shown, of 63% Now finally, I want to talk about Rubrik, which has been a consistent performer in the ETR dataset They're trying to transform backup into data management as a discipline They compete with established players in the data protection space, guys like Veritas, Dell EMC, IBM and CommVault Now Rubrik is not the only new or newish player here, that's doing very well, Cohesity, who's relatively new, Veeam, which has been around for a decade, both doing very well and showing up strong in ETR surveys, especially Veeam, but Rubrik has been a consistently strong performer and has been outpacing the others, so I want to call them out

Look for these five to do very well in 2020, and into the next decade So that brings me to my next prediction, I want to talk about Kubernetes This prediction is twofold Kubernetes is going to continue its strong showing as this data from ETR shows This is Kubernetes' market share in the October 2019 survey, so Kubernetes spend had a 76% net score

So very very strong But the other part of the prediction is that Kubernetes will become embedded into virtually every platform, and people will stop thinking about it as a separate market Already today, there's little discussion of the idea of a Kubernetes distro, I mean Anthos is an example of a Kubernetes stack, but it can be run in the cloud, it can be run on-prem, anywhere VMware Tanzu, Microsoft Azure Arc are other examples, they're really not stacks, but they're management platforms that can manage anyone's Kubernetes instances I like to think of this as kind of like flash

You remember when everyone looked at flash storage as a separate market, well today it's just embedded everywhere And that's kind of what's happening with Kubernetes So spending momentum is going to continue to be strong, but by 2023, Kubernetes will be ubiquitous, and not really thought of as a separate entity All right, for my next prediction, I want to talk about cybersecurity I did a Breaking Analysis earlier this year on security, and I showed this slide

And as you can see, I've added a little something in the red stars for my prediction So what this chart shows is two views of net score, the left-hand side shows the ranking by net score, and you can see CrowdStrike, Okta, Shape Security, which was just, by the way, bought by F5, that was an announcement Twistlock, which is now Palo Alto Networks, and you can see the others down that list On the right-hand side is net score, but it's ranked by shared N, which is a measure of pervasiveness in the ETR dataset What I've added is the four star companies, that is those companies that have both spending momentum and are pervasive in the ETR survey

So the prediction is 2020 we'll see the four star companies maintain their position and gain strength in 2020 These include established players with portfolios where they can bundle like Microsoft, Cisco, Palo Alto Networks, Splunk, Proofpoint, Fortinet, and CyberArk Software And then the newer companies like Okta and CrowdStrike are going to continue to gain share faster than the larger players Now you also may see companies like SailPoint, Illumio, and SentinelOne emerge as four star companies over the next 24 months Now the one company that's not on this list that is a major player in security is AWS

AWS is the cloud security leader, and is in a category all by itself in many ways As I said in my security segment earlier this year, the market is incredibly fragmented, and it's going to stay that way Each year we look back and say "Did we spend more on security?" and "Are we more safe?" And every year the answer is yes, and no And 2020 will be no different Now if you look at the various data sources, we spend approximately 120 billion dollars annually on cybersecurity

The worldwide economy is about 85 trillion in dollar terms, so on balance, we spend about 14% on securing our economy, so we're barely scratching the surface The market is going to remain highly fragmented, the rich will get richer if they have four stars, new players will continue to enter the space, and M&A will continue to be robust Now if you exclude my long shot that the S&P will break through 3700 next year, that makes nine predictions For my 10th and final prediction, I don't have hard data from ETR, but I have a strong opinion on this, and that is that the edge will be won by developers, you've heard me talk about this before

Specifically, platforms like Outposts, which are essentially programmable infrastructure which bring a cloud development platform to the edge, is how that space will evolve It won't be won by shoving traditional servers and storage boxes out to the edge Rather, it will grow by coders being able to build new applications and workloads on top of infrastructure as code Okay, that wraps up my 2020 predictions I'd very much like to hear your opinion, so you can leave your thoughts or your own predictions in the comments sections of this video, or go to my LinkedIn posts

You can reach me @DVellante on Twitter, love to hear your thoughts And don't forget, this series is available on iTunes, Spotify, and other podcast platforms for your listening pleasure I'd like to wish everyone a safe and restful holiday season and a prosperous, healthy 2020 Enjoy your families, enjoy this time, this is Dave Vellante, signing out from the latest episode of theCUBE Insights powered by ETR, thanks for watching, everybody We'll see you next time

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