By: Jake Kaldenbaugh
As entrepreneurs, VCs and corporate executives examine any new market and consider investing their valuable time, effort and money, one of the critical questions they ask themselves is: Why should I invest now? Considering whether an emerging market is at an inflection point is critical for timing investments to generate an above-target return. However, as the technology markets evolve, it becomes increasingly difficult to gauge the answer to this question given the efficiency with which the market operates. You need to have a strong understanding of technology innovation cycles, competitive landscapes and real customer situations to confidently invest your time and treasure into any particular trend.
DevOps is one of the markets that is under significant timing scrutiny given the growing awareness of the movement and potential value for customers and vendors. Market participants are trying to understand if this is a keyword, a cultural movement or something that the enterprise can invest in and get value out of. It’s clear that significant fundamental trends are converging to drive enterprise demand and market opportunities for solutions that accelerate the development lifecycle. Accordingly, now is a great time for companies to make the jump and invest aggressively in DevOps.
- The Great Infrastructure Shift to Cloud – As Cloud Computing architecture continues to penetrate the enterprise, it fundamentally changes the foundation for how applications can be built both from a technical and process perspective. In fact, the “pay-by-the-drink” approach enables a new innovation paradigm of starting small which is magnified in an enterprise context. Typically, new applications or changes to existing applications required congressional acts involving minor deities in the form of Business Cases, Committee Reviews, Procurement Policies and Program Coordination. Cloud lowers the inherent cost of standing up an environment to the point where the TCO of lighter-weight approaches are now preferred. The big question about the Cloud Computing market over the last few years has been: “When will the enterprise meaningfully adopt Cloud Computing?” With AWS surpassing a $10 billion revenue run-rate and other platforms demonstrating acceleration, this is no longer a debatable issue. The questions now shift to: Which platforms will gather market share to compete meaningfully with AWS and how will the enterprise transformation play out? Even enterprise stalwarts like Gartner recently announced that they expect cloud computing spend to surpass enterprise data center oriented spend by 2020.
- Iterative Development – Building on the low entry costs of Cloud Computing, new development methodologies like Agile Programming, Minimum Viable Product and Lean Startups (Development) are pushing startups and now, increasingly, enterprise ISVs to start with a focused offering and rapidly improve the offering based on collaborative customer learnings throughout the process. The days of preconceiving a superior application from top to bottom are gone (largely because it often takes months, quarters or years). Now new applications can be quickly framed out with a focus on the core value drivers which is then put into customers’ hands very quickly. Getting feedback about how a new application fits with the realities of the customer situations can be gathered and put back into the application quickly. Every major and minor enterprise now understands the advantage to moving quickly and is adjusting their development processes accordingly. It is no surprise that a recent HP study indicated that Agile Development methodologies hit an inflection point between 2009 and 2010 and are now the primary development methods used in organizations across projects.
- Competition – As startups have been quick to adopt (and in some cases, invent) these processes, enterprises have realized that their Waterfall/ITIL approaches to developing key applications are a competitive disadvantage. Startups have adopted, implicitly or explicitly, a framework that comes from fighter-pilot training called the OODA Loop Decision (Observe, Orient, Decide and Act). OODA essentially posits that organizations which are able execute those stages in a tighter time cycle than their adversaries have a fundamental competitive advantage. Enterprises have taken notice and are now moving to improve their own competitive response cycles accordingly.
- Aging ALM Tools – Against this backdrop is the fact that many of the application development tools that enterprises have to execute with were created in the beginning of the Distributed Computing Era (that’s already a museum-quality moniker, isn’t it?). Many of the historical toolsets are not equipped to handle an Agile and Cloud-first approach to computing architectures and development. Additionally many VCs and entrepreneurs avoided investing in the sector based on the perception that it was dead money given the lack of movement in the space. Further, many developers preferred to fashion their own tools simply because they could. This resulted in a sector with aged tools. Based on our review of the sector transactions, we are seeing the major vendors make significant moves to build new or reposition existing toolsets in pursuit of platform leadership in this emerging space.
- Developers as a buying center – Another important trend that feeds into the DevOps opportunity is the rise of Developers as a buying center for the enterprise, just as Borland rose to prominence in the 80’s selling tools to developers. The architectural shift of cloud, web services and apps has pushed developers to the front again in terms of selecting tools and technology that the enterprise will use to create and administer a new generation of applications. Consulting firm Redmonk was one of the first to point this out in their book The New Kingmakers. Developers do not like to leverage the existing enterprise purchasing methods and pathways. Gone are purchase review committees, replaced by try-and-buy, pay-by-the-drink and other new consumption models all executed through credit-card sized transactions to enable initial penetration. However, once initial penetration is achieved, leveraging land-and-expand techniques and layering in enterprise-level capabilities can accelerate business models dramatically.
For those that have been paying attention, this is nothing new. These trends have been in play for a few years now and we have seen several strong growth franchises emerge as result. Whereas development tools and ALM were seen as moribund markets as recently as 5-10 years ago, there is now a strong growth category with strong drivers creating interesting companies for the market to pay attention to. At GrowthPoint, we expect to see these trends continue to converge and accelerate, creating even more enterprise-friendly platforms to satisfy growing demand. In future posts, we will cover some of the interesting trends that we are seeing in DevOps around Cloud Computing, Next Generation Testing and Agile Application Development.
If you would like to speak to anyone at GrowthPoint about our views on the DevOps marketplace, please contact Jake Kaldenbaugh.