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T H E EN T E R P R I S E A LM A NAC

2018 ED IT IO N

By Michael Yamnitsky #2018ALMANAC


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PREAMBLE

THE WOR K-BENCH ENTERPRISE ALMANAC - 2018 EDITION

For the past five years at Work-Bench, we’ve been investing in a total reimagining of the enterprise technology
stack.

We’re in the midst of a once in a decade tectonic shift of infrastructure that powers the Fortune 1000 and is
unlike anything we’ve seen before. Whereas consumer tech has the Mary Meeker Internet Trends report for an
aggregate view of industry trends, enterprise technology was missing a comprehensive overview of the key
trends. Last year we took action and launched the inaugural Enterprise Almanac to share our thinking on these
trends, and now we’re pleased to release the updated 2018 Edition.

Our primary aim is to help founders see the forest from the trees. For Fortune 1000 executives and other
players in the ecosystem, it will help cut through the noise and marketing hype to see what really matters. It’s
wishful thinking, but we also hope new talent gets excited about enterprise after reading this report. By no
means will most of the predictions be correct, but our purpose is to start the discussion by putting this stake in
the ground.
MI CH AE L YAMN IT S KY
Please share any and all feedback via email at michael@work-bench.com or on Twitter at @ItsYamnitsky. Venture Partner, Work-Bench

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PREAMBLE

ABOUT WORK-B ENCH

ABOUT US
Work-Bench is an enterprise technology focused venture fund based in NYC.

OUR THESIS
Customer-centricity. We make it our focus to deeply understand the business and IT needs of the Fortune 1000 in order to make more informed decisions

in our search for the next enterprise giants. This is highly informed by our backgrounds in corporate IT at leading Wall Street banks and as Industry

Analysts which is unique in the venture business.

OUR MODEL
Our model flows directly from our thesis. We leverage our deep corporate network in New York City and beyond as a way to identify trends, pick the

winners, and secure customers for our portfolio companies.

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PREAMBLE

TABLE OF CONTE NTS

2018 Macro Perspective: The Empire Strikes Back 6

Vertical Theme #1: Machine Learning 22

Vertical Theme #2: Cloud Native 56

Vertical Theme #3: Cybersecurity 87

Vertical Theme #4: Decentralization of SaaS 103

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PREAMBLE

SPE CIAL THANKS

Team Work-Bench
Jonathan Lehr, Jessica Lin, Vipin Chamakkala, Kelley Mak, Kelley Henry, and Blake Jesse who added significant contributions and healthy debate for the

content of this presentation. Thanks to Tommy Truong for his design work.

Work-Bench Founders and CEOs


For keeping me honest and never failing to surprise us with where technology can take us on this pale blue dot.

Disclaimer
Our views are shaped by anecdotal evidence based on our interactions with entrepreneurs, Fortune 1000 executives, and big tech leaders. Take that for

what it’s worth. We have disclosed our investments where appropriate.

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2018 MACRO PERSPECTIVE
The Empire Strikes Back

6
MACRO PERSP ECTIVE

10 YE ARS AGO IN A GALAXY FAR, FAR AWAY…

VS.

OLD GUARD NEW GUARD


On-prem Empire Cloud Rebel Alliance

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MACRO PERSP ECTIVE

TODAY, REBEL ALLIANCES FACE A MORE NIMBLE SET OF


CONTENDER S …
MEGACLOUD
Bully Bazaars

Early-stage
startups + open-
source
VS. VS.

OLD GUARD GROWTH GUARD NEW GUARD


Multi-cloud momentum fighters

Growth guard and old guard haven’t peaked yet, with fight in them to go head to head with new guard

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MACRO PERSP ECTIVE

PUSHING SHARP INVESTORS TO RETHINK COMPETITIVE


ADVANTAGE

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MACRO PERSP ECTIVE

M EG ACLOUD AGGRESSION CONTIN UES FULL FORCE…

M&A weighing in high on the scale

these days with two of the biggest

deals of the last 6 years closed in

the last 12 months

Source: http://tomtunguz.com/mid-2018-ma/

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MACRO PERSP ECTIVE

REALITY: MEGACLOUDS = CHEAP WITH CASH; “BIG” M&A IS


RELATIV E…

Megaclouds spend a paltry

3% of cash on M&A; plenty

of room to step up spending

Source: Goldman Sachs

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Let’s briefly speculate on megacloud M&A…

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MACRO PERSP ECTIVE

AMAZON OR GOOGLE TO BUY SALE SFORCE AS A KILLER APP


IN THE CLOUD?

Feeling the brunt of Microsoft

Why not… undercutting Dynamics to sell customers

on going all in with Azure

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MACRO PERSP ECTIVE

M ICROSOFT TO BUY OKTA TO REG AIN OWNERSHIP OF


“ENTERPR ISE” IDENTITY?

Continues acquiring companies to regain identity foothold it


lost in cloud

Professional identity Personal identity Developer identity Enterprise identity

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What about AI and its promise to reshape
technology and transform business as we
know it?

15
MACRO PERSP ECTIVE

2017 = STARTUPS PROVED OUT SYSTEMS OF INTELLIGENCE


(SOI) MODEL FOR AI
Value created by:
Systems of Intelligence are highly • Designing products from data capabilities up to user
experience and not the other way around
focused analytical systems • Software UI as invisible as possible > fancy GUIs. Name
of the game is making the workflow as seamless as
intended to solve business possible.

challenges and objectives (i.e.


Value created by:
increase revenue and customer • Embedding domain experts into the debugging and
hyper-parameter tuning process
experience, improve operations, • Incorporating feedback from human experts into the
system of record (SOR)
reduce risk)
Value created by:
• Integrating data from multiple sources include non-
tradition information rich channels
• Novel new forms of data capture
• Cleverly optimizing the data preparation and AI training
process

Original Framework Source: Jerry Chen’s “The New Moats - Why Systems of Intelligence are the Next Defensible Business Model”

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MACRO PERSP ECTIVE

AS MENTIONED LAST YEAR, COMPE TITIVE FORCES CONTINUE


TO BE IN FLUX…
Competitive forces will be in flux as the AI landscape continues to develop at rapid speed.
Here is where things currently stand and directionally where they are going:

Data moat? Algorithmic differentiation? Data product differentiation?

Weaker: still a significant barrier, but Weaker: tough to sustain with open Stronger: The key value driver
it’s faster to develop and thus harder source, but there is some value in moving forward is developing
to sustain a data moat. novel training, profiling, debugging, products bottoms up, from data
and testing processes. and analytical capabilities to
features and user experience, and
creating a virtuous loop between
the two.
Locus of focus shifting from the
quantity you own to the process
you use to sustain these assets*

Direction = whether this factor will be more or less significant 12-24 months from now

*For more on this topic, see Matt Turck’s “The Power of Data Network Effects”

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MACRO PERSP ECTIVE

CREATIN G THE PERFECT WINDOW FOR MEGACLOUDS TO


#WIN IN SOI RACE

+1 for big tech, -1 for startup competitors


Startups proved SOI in the form of point solutions, but larger vendors are coming in to stitch together capabilities into more
holistic AI-powered software “suites”

Arguably the king of SOI at the moment with very Google leveraged its AI army to build Contact
impressive suite of AI-powered BI offerings under Center AI, with a suite of capabilities to automate
‘Einstein’ umbrella. customer support.

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But wait… isn’t the Achilles Heel of
megaclouds a lack of focus on the details
of real-world applications?

…well Google is proving us all wrong

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2018 = AI startups retreating to the
deep ‘niches’ to generate new
competitive powers

20
MACRO PERSP ECTIVE

COMING OU T THE WOODWORK: AI BIZ PROCESS AUTOMATION


AS AN API
Making financial AML and KYC compliance workflows as
Example: seamless to set up as Stripe, and as easy for analysts to use as
TurboTax

Simple checklist for analysts to monitor progress

Typical KYC/AML workflow:

Sanction Negative Ongoing/


Information
list news transaction
check
screening screening monitoring

Merlon automates all of this like Stripe automates payments

*Merlon Intelligence is a Work-Bench portfolio company.

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Vertical Theme #1
MACHINE LEARNING

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TL;DR

M EG ACLOUD AGGRESSION CONTIN UES FULL FORCE…

1 Despite hopeful promise, startups racing to democratize AI are finding themselves stuck between
open source and a cloud place.

2
To sell to BI? Data scientists? Or straight to the business? No matter who the buyer is, there
continues to be a disconnect between buyers and sellers of data science tools. Crack the code
and you have a billion dollar business in sight.

3 The Empire Strikes back. Large technology companies are #winning at AI.

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MACH INE LE ARNING

FUTURE OF BUSINESS = DATA-DRIVE N (DUH…)

“By 2021, insights-driven business will steal $1.8 trillion a year in


revenue from competitors that are not insights-driven”

Source: https://www.forrester.com/report/InsightsDriven+Businesses+Set+The+Pace+For+Global+Growth/-/E-RES130848

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MACH INE LE ARNING

TO FUEL THE FIRE, DATA COLLECTION CONTINUES TO GROW


UNABATED…

• 90% of data in existence was created in


the last 24 months
• Lying in these data sets are keys to
advances in medicine, energy, etc.

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MACH INE LE ARNING

… B UT TH ER E ’ S A SH O RTAG E O F DATA S CI ENT IST S TO MAKE SE NSE O F IT ALL

Demand for “Machine Learning Engineers” and “Data Scientists” has grown 6-10x in last 5 years

“Trust me, I can explain…”


Note: growth rates are calculated based on number of job postings on LinkedIn.

Source: LinkedIn’s Emerging Jobs Report

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MACH INE LE ARNING

E NTER PR ISE S H AVE LOT S O F AN ALY ST S , NOT E NO U GH DATA SCIE NT IST S

McKinsey Global Institute predicts the US


economy will be short 250k data scientists
by 2024.

Sources: https://www.pwc.com/us/en/library/data-science-and-analytics.html, McKinsey Global Institute “The Age of Analytics: Competing In A Data-Driven World.”

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MACH INE LE ARNING

B ECAUS E T HE ME GAC LO U DS S CO O P U P ALL T HE BE ST TALE NT

Most AI talent works here… … to optimize the output of…

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MACH INE LE ARNING

2018 EN TE RP RISE AI SEN T I M EN T = P ES S I M IST IC O PT IMISM…

65% of execs are bullish …But only 39% believed


about the potential of AI in adoption will grow considerably
their business… in 2018

Source: https://www.forbes.com/sites/adigaskell/2018/03/07/employees-optimistic-about-working-with-ai

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MACH INE LE ARNING

…B UT THE Y A R E GE T T I N G I N TO G EAR TO DO IT R IGHT

Ambitious attitudes: “AI is a competitive differentiator. We “Suits and Hoodies” at Goldman Sachs
want to own the model, we don’t want Palantir to own it.”

Realistic recruiting tactics: Avoiding talent wars with the


web-scales by expanding hiring in India, and hiring Masters-
levels rather than PhDs.

Healthy skepticism: “We have lots of existing regression


models that are finely tuned. Deep learning for many use
cases is just going to be incremental and more expensive
right?”

Source: Quotes from interviews with machine learning executives at top-tier Wall Street banks

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MACH INE LE ARNING

3 M ODE L S FO R DATA- DR I V EN I N S I G H T S

#1: DATA SCIENTISTS #2: ‘C ITIZEN’ DATA SCIENTISTS #3: BU SINES S US ER S ELF-S ERVICE

Central data science group delivering Business intelligence groups using Business people using software with
insights to the business. GUI-based AutoML tools to deliver pre-packaged ML models and
ML insights without the help of data reporting dashboards to generate ML
scientists. insights.

Example Enterprise Example Enterprise Example Enterprise

Top Tier Bank

Source: Work-Bench estimates based on interviews with F1000 IT leaders.

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MACH INE LE ARNING

N O FREE LUNC H FO R V EN D O R S , EAC H B UY ER HAS QU IR KS AND BAGGAGE

Data scientists take an open source first approach to tooling and will

only pay for cheap point solutions that are easy to use and solve a very

particular need.

85% of Big Data


IT still has a bad taste in their mouth from failed big data projects. Black
projects fail* per Gartner
boxes are a definite NO!

Business execs can barely use Tableau without an analyst’s help,

nevertheless attempt a new tool.

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MACH INE LE ARNING

DATA S C IE NTISTS: T I N K E R E R S W H O P R E F E R FLEXIBILITY/CONTROL OF OSS

The industry is leaving SAS and going OSS

I.E. they don’t spend much on commercial software

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MACH INE LE ARNING

B UT S IN C E ML ST IL L A I N ’ T EASY…

It takes more experience to tune/debug machine-learning algorithms efficiently than to tune/debug regular code

Root-cause analysis in AI is vastly more complex than regular software… and longer time cycle testing the fix
Algorithm design

Software development = hours

Machine learning = days


Implementation

Two dimensions of investigation: Four dimensions of investigation: Why?


• Algorithm design • Algorithm design • Re-training algorithm on dataset is time consuming,
• Implementation • Implementation
pushing a code change to production is not.
• Choice of model
• Data Source: S. Zayd Enam, Stanford AI Lab

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MACH INE LE ARNING

STA RT U PS AR E B UI L D ING AUTOMATION TOOLS SPA NNING T H E E NT IRE P IP E LINE

Modeling = easier to automate

Model and Modifications to


Model
hyper learning rate, Model production,
Feature training and
Data prep/ETL parameter regularization, deployment, and
engineering performance
configuration feature pre-
review processing, etc.
monitoring
selection

Data prep + model deployment = hard to automate

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MACH INE LE ARNING

LA N D SCAPE O F VENDORS (A ND OPE N SOUR C E P ROJE CT S) IN ML AUTOMAT ION

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MACH INE LE ARNING

V E N D OR S AUTO M ATI NG MODEL DE VELOPM ENT TA LK A VE RY BIG GA ME BUT…

Data Scientists generate most of their value much later when they apply predictions to
figure out “what it means” for the business.

How vendors market their AutoML products:

Prep How AutoML is actually perceived:


AutoML Production

How AutoML is actually perceived:

Prep AutoML Production

Because most of a data scientist’s time is spent


here

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MACH INE LE ARNING

PER C E I V ED VALUE O F AU TOML = NOT H IGH E N OUGH TO JUST IF Y MA JOR SP E ND

“Our best bet are smart engineers, not AutoML tools. We need to scale our data

science organization significantly to see real lift from these tools. Although there are

areas where AutoML can help us, we cannot justify the investment.”
- Chief Data Officer at F500 eCommerce company

“Hyper-parameter tuning [fancy term for time-intensive part of model generation]

will soon be a commodity.”


- Head of Data Science at a bulge bracket bank

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MACH INE LE ARNING

M E AN WHIL E, M EG ACLOU DS H AVEN’T BE E N SIT TING IN T H E P E A NUT GA LLE RY…

“We will wait for what Amazon releases in this space”


- Chief Data Officer at F500 eCommerce company

Model production,
Feature Model training
Data prep/ETL deployment, and
engineering and tuning
monitoring

Soon

Soon
Cloud Composer

Soon

Data Factory Batch AI

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MACH INE LE ARNING

H EN C E AUTO ML CO ’S RE -ORIENTING PRODU CT S TOWA RD S T H E BI A NA LYST

AutoML startups are tweaking their products and messaging to win over the Tableau wielding BI analyst crowd

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MACH INE LE ARNING

WHE N YO U TRY TO CR EATE PRODU CTS FOR MULT IP LE STA K E H OLD E RS W H E N


PL E AS I NG ON E CAMP IS TOU GH ENOU GH …

Data scientists/ML engineers Business analysts

• Technical products • No code GUIs, but complex • No code GUIs


• Detailed feature sets and full for an unsophisticated user • Guardrails and ‘training wheels’
extensibility for inexperienced users

You get stuck in the middle

*Algorithmia and Datalogue are Work-Bench portfolio companies.

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MACH INE LE ARNING

B I V E ND O R S AR E COM I NG IN H OT…
Expect all modern BI vendors to release an AutoML product or buy a startup by end of next year

Alteryx is known for its GUI-based


Looker customers can now do AutoML Tableau bought Empirical Systems ETL tool
with new Google BigQueryML integration for AutoML

In 2017 it acquired data science


startup Yhat

Our hunch: Alteryx releases a GUI-


based AutoML tool in early 2019

Source: https://techcrunch.com/2018/06/13/tableau-gets-ai-shot-in-the-arm-with-empirical-systems-acquisition/

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These AutoML vendors just need a break…

Anyway, moving on…

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MACH INE LE ARNING

M OV E OVE R B I G DATA A RCH ITECT, DATA INFRA E NGINE E RS COMING IN

The ‘big data architect’ got fired and

was replaced with the data infra

engineer, who’s ready to propose a

more nimble and distributed approach

to developing an enterprise data

platform for the business.

Source: https://blog.cerebrodata.com/modern-self-service-data-platforms-c7c90a789068

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MACH INE LE ARNING

+ V E RTI CA L-S PEC I FI C DATA PLATFORMS = B YPASSING DATA SC IE NT IST S + BI

A new category dubbed “customer data platform” is emerging as a purpose-built data platform to help marketers be more

data-driven without the help of special internal groups

Example vendors:

What they do today What they will do in the future


1. Collect data from multiple sources and organize them into Automate more of what a data scientist can do for them:
constantly updating customer segments. 1. Build AutoML features to allow marketers to make predictions like
2. Allow marketers to program rules for how each segment whether a customer will churn or migrate to another segment so they can
received email automation programs. take preventive measures.
2. Incorporate more general purpose BI functionality to merge the now
disparate data management, analytics, and marketing execution
functions.

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MACH INE LE ARNING

R A MPA NT EN TER PR I SE INTERE ST IN AUTOMATE D DATA P RE P T H IS YE A R

Proliferation of cross-data set analytical Data scientists live in data cleansing and hate it…
projects. BI and data science teams are
becoming more advanced, forcing IT to rip the
bandaid off their failed data management
initiatives and prepare disparate data sets for
analysis. They are starved for any solution that
can help them do it in an automated way!

Interest in unstructured data. Most enterprise


data is unstructured, and the promises of AI
have all sorts of stakeholders in the enterprise
wondering how they might be able to now
leverage it.

Source: https://www.forbes.com/sites/gilpress/2016/03/23/data-preparation-most-time-consuming-least-enjoyable-data-science-task-survey-says/#4294c0036f63

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MACH INE LE ARNING

M OD E L DEPLOYM ENT = RACE TO BE TH E H EROK U OF ML

“We made 20 models last year. Only two made it to production!” Chief Data
Scientist at a major Wall Street Bank.
Data scientists rarely have strong engineering backgrounds and need help with the manual coding required to make

their models API accessible to the rest of the business.

New tools are automating the process of model deployment much like Heroku automates Ruby app deployments

=
*Algorithmia is a Work-Bench portfolio company.

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We couldn’t talk enterprise AI this year
without mentioning this guy…

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MACH INE LE ARNING

FR OM Z ER O TO HER O : SA LE SFORCE H A S NO M IND SH A RE IN A I

Source: Morgan Stanley “2018 Outlook: Riding the Software Wave,” January 2018.

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MACH INE LE ARNING

… B U T S ALE SFO R C E HA S K EPT BUSY BU Y ING UP A I STA RT UP S T H E LA ST 3 YE A RS

Source: Salesforce Dreamforce Keynote, 2017

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MACH INE LE ARNING
AI E L I T I STS WI L L STICK UP TH EIR NOSE S, BU T W E T H INK SA LE SF ORC E A I IS
IM P RE S S I VE

Salesforce has stitched its newly acquired assets into a 100% automated machine learning pipeline

GUI-based ML model builder to predict


any blank field in SFDC

Note: unlike DataRobot and


Dataiku, Einstein has the proper
guardrails to ensure business
Out of the box
users do not make mistakes like
apps like a sales
introducing target data leakage
lead scorer

Source: Salesforce Marketing Materials

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Quick peek into the future…

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MACH INE LE ARNING

B I HAS HI STOR I CAL LY BE E N A MESSY INDU STRY…

Today’s BI tools claim to democratize BI…but they hinge on an ideal, unrealistic requirements.
They require a user who is capable of asking the:

1 Right question. Asking the right question requires analytical skills. This is a hard ask for the nondata pros that make up the majority of employees.

2 Correctly. Most BI tools have “intuitive” GUIs, but they still require extensive training to use and thus users end up using them incorrectly.

3 On the right data. The user must have access to the right data and prerequisite knowledge about the underlying data structure to ask the right

question in the first place.

TL;DR: skilled business analyst remain the conduit through which the rest of the business

interfaces with analytics. And vendors are constantly overthrown whenever analytics

projects go haywire.

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MACH INE LE ARNING

‘ACT I ONA BL E I NS I GHTS ’ IS TH E FUTURE OF BI (A ND A LL SW F OR T H AT MAT T E R… )

‘Actionable insights engines’ will fully automate the data scientist by directly linking cause and causality in business outcomes

1 … Pointing you to anomalies in your


data and providing a diagnosis
2 …with a natural language interface to ask
clarifications and guide the analysis

3 … And suggestions for how to respond to data


trends as well as guidance on how to run small
experiments on your data so the system can tune
itself and better respond when an anomaly occurs.

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MACH INE LE ARNING

K E Y TAK EAWAYS FOR E ARLY-STAGE ML STA RTU P S

Make your product so easy a 3 year old can use it! Drop the feature bloat — you’ll die before you become everything for everyone.
Incremental algorithmic advances are hitting a plateau. Most of the unique value in your product will come down to the user experience.

Don’t build for multiple buyer personas. Not only is it hard enough to build something in the data science space with basic product market fit,
but buyers are skeptical of collaboration platforms; “[X vendor’s] collaboration features were never interesting to us because we don’t believe

collaboration between data science and BI teams is possible.” - Head of ML & Analytics at a bulge bracket bank.

Play nice with everyone. The space is crowded and it may seem like a war zone out there with large tech companies in adjacent areas making a
splash in the space. Remember that the TAM is massive and no one has truly cracked the code here. Many can win. The market dynamic will be similar to

BI, where there are multiple BI platforms with 90% functionality overlap. Integrate with everyone relevant, starting with the major BI vendors.

Try going vertical. The exit opportunity won’t be as large but at least you won’t be competing with the million other startups attempting to be the
Salesforce of data science. Take a more calculated use case driven bet, and make the solution truly closed loop.

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Vertical Theme #2
CLOUD NATIVE
With contributions by:

Vipin Chamakkala
Principal at Work-Bench &
Cloud Native Sector Lead

@V1P1N

56
TL;DR

CLOU D PRE DI CTI O NS

1 Microsoft is making inroads in the enterprise. Google is still behind (for now)

2 Vendor lock-in fears steer enterprises towards multi-cloud

Cloud native story continues to unfold with digital transformation initiatives driving the inexorable
3 shift

Site reliability engineering (SRE) model is all the rage for operating the cloud. The battle has
4 begun to be the Salesforce of SRE in cloud era

5 Serverless continues to be a disruptive force, but more so for vendors than end customers today

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TL;DR

M E G AC LOU DS = CO NTINUE TO DU K E IT OUT TO LOC K IN E NT E RP RISE S


Besides a few serious regional players like Alibaba, global enterprises have 3 main marketplace bazaars to choose from to power their digital transformation:

PLAYER #1 (CATEGORY LEADER): PLAY ER #2 (FOR NOW): PLAYER #3 (KI LLER PR OD UCTS):
TH E ENTERPRISE COSTCO ENTERPRI SE HERITAGE BU T WH ERE’S THE ENTERPR ISE LOVE?

PROD UCT STRATEGY PRODU CT STRAT EGY PRODUCT STRAT EGY


The monocloud that’s good enough for most things, not Play to internal strengths: Underserved enterprise workloads Google shines strength in machine learning, developer
amazing for anything. Heading down proprietary path as like legacy Microsoft products, platform and application tools, and container orchestration (Kubernetes).
most services are integrally tied to their public cloud services for modern enterprise apps.
architecture. GTM STRATEGY
GTM STRATEGY Historically Google hasn’t catered to the enterprise with
GTM STRATE GY Strong enterprise support model. sales & support. Google Kubernetes Engine on-prem
Aggressive enterprise sales: lock-in, land-and-expand. signaling a change?
BIG EXISTENTIAL QUESTION
BIG E XI STEN TIAL QUE STION Will enterprise chops trump Amazon’s scale and scope? BIG EXISTEN TIAL QUESTION
Amazon can’t allocate 30 top PhDs to solve a single problem. Despite the incredibly nice people we meet at Google,
Google can. enterprises feel Google is still arrogant towards them. How
does Google change their rep?

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CLO UD NAT IV E

M ICR OS O FT = B I G GEST LEA P IN POSITION T H IS YE A R

Microsoft is at least as prevalent as Amazon in on- … And significant deployments have increased the
boarding late movers to the cloud most in Azure over the last 12 months

Source: Morgan Stanley “2018 Outlook: Riding the Software Wave,” January 2018.

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CLO UD NAT IV E

…W ITH MAJ OR EX PA NSI ON PLA NS TO BOOT

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CLO UD NAT IV E

G OOG L E = S I GN I FI CANTLY BE H IND

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CLO UD NAT IV E

R E G A R DL ES S O F YO UR CH OICE OF POISON, VE ND OR LOC K- IN IS RE A L

“Over 80% of enterprises show moderate to high levels of concerns


about public cloud lock-in.”
- Stratascale Hybrid Cloud Survey

“In 2018, the level of anxiety for decision makers at big organizations around

vendor lock-in will continue to rise - replacing security as the #1 cloud concern.”
- Spencer Kimball, CEO of Cockroach Labs

*Cockroach Labs is a Work-Bench portfolio company.

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CLO UD NAT IV E

M ULT I - C LOUD = EVERYO NE REPORTS H AVIN G A ST RAT E GY…

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CLO UD NAT IV E

… THAT FEW H AVE E XECUTED ON

Majority of enterprises are still struggling with containerizing applications, yet they have big lofty strategies that largely fall
in 3 buckets:

#1: TH E MONOC LOUD MODEL #2: THE PRICE B ROK ER MO DEL #3: THE FUNCTIO N BRO KER MOD EL

• Choose a single cloud provider to go all in • Run workloads wherever they will be • Pick and choose clouds for different
with cheapest to deploy capabilities (i.e. AWS for cost, GCP for AI and
• Amazon wins over the majority of this • Kubernetes is a key tool enabling this data pipelines, Azure for legacy app migration)
segment, with Microsoft catching up segment to deploy workloads in the most • Individual teams must manage their own
capitally efficient manner instances and budget, with IT implementing
Enterprise Example light-weight governance
Enterprise Example
Enterprise Example

Still in Flight
*Source: Work-Bench estimates based on interviews with F1000 IT executives.

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The cloud native migration story start with
customers and their harsh demands…

65
CLO UD NAT IV E

G OI N G CLO UD N ATI VE IS TH E ONLY RESOLU T ION…

Customer expectations = rising. Enterprise Only way to move fast enough is to split
need to build software faster applications into easier to manage microservices

Result: move faster than competitors, save


Microservices are best housed in containers
cost, and combat cloud vendor lock-in

Orchestrating containers at scale requires a


Containers are best governed by orchestrators
service mesh network

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CLO UD NAT IV E

ORC HE STRATI O N = KE Y ENA BLER OF MULTI- C LO UD ; K UBE RNE T E S = K ING

2017
À la carte option for running Most mature solution Best bet for
micro services on existing for scale out apps greenfield apps
infrastructure

2018

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CLO UD NAT IV E

THE DATA S PEAKS FOR I TSE LF

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CLO UD NAT IV E

H A LF OF EN TER PR I S ES NOW U SE CONTA INE RS IN SOME CA PAC ITY

Source: https://resources.coreos.com/analyst-reports/hybrid-cloud-drives-growing-container-production-use-and-disruption-451-research-report

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CLO UD NAT IV E

K U B E R N E TES ADO PTI ON = DOU BLE D OVER LAST 1 2 MONT H S

2X

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CLO UD NAT IV E

SO ON I F YO U US E D OCK E R, YOU WILL DE FACTO A LSO USE K UBE RNE T E S

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CLO UD NAT IV E

R E D HAT/ CO R EO S + H E PTIO = RACING TO BRING F 1 0 0 0 TO K UBE RNE T E S

1
Services expertise + Distributed systems expertise

Bringing
Kubernetes
2 to the Enterprise
Joined the mix bringing direct

expertise as the original creators of

Kubernetes at Google

*CoreOS was a Work-Bench portfolio company, acquired by Red Hat.

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CLO UD NAT IV E

SE RV I C E MES H = R EMI NISCE NT OF DOCK ER H YP E …

LinkerD Bouyant Istio

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CLO UD NAT IV E

SE RV I C E MES H = I M P ORTA NT MICROSERVICE S GLUE

What is Service Mesh?


Layer 7 SDN-like overlay network infrastructure for controlling

service to service traffic in microservices applications

Benefits

Knowing where your app is Developer independence

App-aware load balancing Microsegmentation Identity assignment

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CLO UD NAT IV E

SE RV I C E MES H PR ED ICTIONS

Service mesh adoption still early in 2018. Service meshes are like broccoli… you know you need them but only adopt when

you feel the pain of not having them. With enterprise container and microservices deployments in infancy, we may be waiting

some time for service mesh adoption to kick into gear.

Continued ‘school clique’ dynamics within the community. While most in the real world doesn’t care, small highly opinionated

camps are forming between Istio and Linkerd. Building an enterprise product in a competitive market governed by fickle open-

source “communities" will be a challenge commercial vendors in this space will grapple with.

Security will be the killer use case for service meshes. Scenario: ’digital transformation’ AppDev teams at enterprises writing

microservices on AWS/Kubernetes that need to communicate with on-premise services in a secure manner. Services meshes are

the perfect answer.

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How will enterprises deal with all this?

76
CLO UD NAT IV E

ENTER THE SITE-RELIABILITY ENGINEER (SRE)

In other words, SREs are IT ops pros in a software-defined infrastructure world

Source: https://landing.google.com/sre/interview/ben-treynor.html

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CLO UD NAT IV E

THE SRE TOOLS LANDSCAPE SPANS 5 MAJOR CATEGORIES

Monitoring Alerting Ticketing

APM Logging

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CLO UD NAT IV E

TO K EEP U P WI T H T H E I N C R EA S I N G PAC E O F O P S, TO O LS MU ST INTE GR ATE

In today’s “bigger is better” environment, vendors will jockey into

leadership position to own the mind and wallet share of SREs by


New startups will have to bring a fresh angle to
unifying tools & workflows:
the table to compete with the growth players
Monitoring/Tracing
and their comprehensive “suite” approaches.

Future Some will enter the market by positioning

themselves as built for “scale” or fill a niche with a


Alerting Logging
creative approach like crowdsourcing post-

mortem analysis insights to help build the SRE


of SRE
playbooks of tomorrow.

Ticketing

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CLO UD NAT IV E

C HAOS E NG. E ME R G I N G TO ST R ES S T EST INF R AST R U CT U R E HO LIST ICALLY

What is it:
Chaos engineering is the discipline of stress testing a distributed system to build confidence in its ability to withstand turbulent
production conditions (like the traffic load of an eCommerce website on Black Friday).

New tools are emerging to facilitate the process: This stuff is real. Top enterprises (like below) are hiring
chaos engineers:

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CLO UD NAT IV E

FULL STAC K MONITOR I N G ( I . E. O B S ERVAB IL ITY) IS ALL T HE R AGE

Holistic “observability” across infra, traces, logs and all forms of environments (containers/serverless) is all the rage because

today’s complex/heterogenous environments are spewing out rich data that cannot be viewed in isolation.

Legacy vendors and their point solutions won’t last in this next evolution of monitoring as IT will refuse to manage haphazard

integration projects.

Bouyant

*Backtrace is a Work-Bench portfolio company.

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Sailing into the serverless era

82
CLO UD NAT IV E

S ERV ERL ESS CO MP UT I N G M AKES F I N AN C IA L SE NSE O F MICR O SE RV ICE S…

Microservices = more shallow Spend per server: “pay-as-you-go” vs. serverless


utilization across a wider footprint =
“Pay-as-you-go”: theoretical maximum

Resource utilization
uneconomical with server-based utilization of infrastructure

units of measurement in the “pay-as- idle time “Serverless”: actual instance run rate

you-go” business model

run time

App components

Serverless lowers operating costs for software vendors.

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CLO UD NAT IV E

SE RVER L E SS = E N AB LIN G A N E W G E N ERATIO N O F STARTUPS

With serverless, it’s more economical for an early-stage company to deliver complex middleware functionality
via elastically scalable compute and memory

Clicks-no-code SaaS integrations Automating ML model deployment ‘Headless’ CMS

Without serverless, these companies wouldn’t be as economically viable

*Algorithmia is a Work-Bench portfolio company.

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CLO UD NAT IV E

SE RVER L E SS = W E AP O N F O R M E G AC LO UD LO C K-IN

Serverless is the ultimate vendor lock-in as the vendor manages the full
stack from server to the runtime layer

+ = lock-in?
“Today, developers have begun to publish and share individual functions. Imagine pushing a button on Github
to instantiate a function or an application. Elegant on-ramp for a developer to become a paying Azure
customer.” - Tomasz Tunguz, Redpoint

Source: http://tomtunguz.com/microsoft-github/

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CLO UD NAT IV E

DIST RIBU T E D DATA B AS E S = KE Y IN F RASTRUCTURE FO R S E RV E RLE S S

Consistent performance remains a hurdle for serverless

Microsoft Cosmos Google Spanner CockroachDB

Transactional integrity Availability Scalability

Without a distributed database you have a distributed monolith

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Vertical Theme #3
CYBERSECURITY
With contributions by:

Kelley Mak
Principal at Work-Bench &
Security Lead

@kelleymak

87
TL;DR

SECURITY PREDICTIONS FOR 2018

CISO = no longer the only security buyer; VP Infrastructure/Security Engineer is the new buyer/
1 champion combo to master

2 Security engineering teams will lead shift from bolt-on to built-in security deployed as code

3 GTM motions for enterprise security startups will take a cue from the open source world

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Year in Review…

89
CYBERS ECU R ITY

SECURITY FUNDINGS = RECORD HIGH; NEWBIES ENTERING THE MIX

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CYBERS ECU R ITY

YET REVE NU E GROWTH = SLOWING DOWN FOR PUBLIC SECURITY CO’S

Cyclical trend as fewer enterprises

refreshed their firewall last year? Or

more secular shift as security moves to

the cloud where it is embedded in the

infrastructure?

Source: Morgan Stanley “2018 Outlook: Riding the Software Wave,” January 2018.

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CYBERS ECU R ITY

CASB = WEL L WI THI N HYPE R- GROWT H PHAS E

You know a tech category is inching past early adoption when…

…There’s a Gartner MQ and a …$250M+ acquisitions by the …+ startups raising $100M+


Forrester Wave incumbents growth rounds to go big

Prediction: Netskope goes public or gets acquired for 8-figures by 2020

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CYBERS ECU R ITY

SOAR = CON TINUES TO BE DARLING ACQUIS IT ION TARGET FOR LEGACY CO’S

Sizable M&A for SOAR (Security Operations, Analytics, and Reporting) vendors focused on automation….

$350M

$100M

While automation is hot, there is still a gap in triage analytics and response workflow tools

*Uplevel Security is a Work-Bench portfolio company.

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CYBERS ECU R ITY

GDPR = TWO NEW CAMPS OF VENDORS TO HELP

Data privacy tools Software ‘legalese’ vendors

Helpful tools for IT to comply with GDPR Closed loop solutions that replace the legal

>
regulation in accordance with a legal team’s decision making regarding GDPR with software

mandate

Market shakeout: Data discovery capabilities will trump legal expertise

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Ok, now on to the exciting stuff ahead…

95
CYBERS ECU R ITY

CISOS EVOLVING TO LOOK MORE LIKE CIOS

Who they were… Who they’re becoming…


• Leader of the Infosec team/tech/process • Manager ensuring IT stays in compliance
• Hands on owner of the firewall, • C-level and board liaison communicating the cyber risk
endpoint protection, and security profile of the firm
operations • More likely a suit than a geek. 45% have MBAs; 18% have
CS degrees.*

What it means: Traditional ‘infosec’ becomes back office as CISOs increase reliance on outsoucers/MSSPs to

clear bandwidth for executive relations.

Source: https://www.forrester.com/report/CISO+Career+Paths+Plot+Your+Course+For+Advancement/-/E-RES141371

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CYBERS ECU R ITY

SECURITY ENGINEERING ORG = EMERGING AS CHAMPION FOR NEW TECH

Example: Goal: fix this paradigm

Mandate to embed security into appdev


Shared service group of engineers that sit Knowledgeable about both appdev and
process rather than bolt it on as a last step
between infra and appdev organizations. security.
before prod.

Source: https://www.aporeto.com/blogs/hybrid-and-multi-cloud-security/enterprises-becoming-cloud-native-journey-thoughts-kubecon/

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CYBERS ECU R ITY

SECURITY ENGINEERING EMERGING BECAUSE MICROSERVICES HEATING UP

22% of enterprises use microservices in some capacity today

Cloud-native security trends favor security to be built-in as opposed to bolted onto infrastructure

Security engineers have the hybrid DevSecOps skills to lead the implementation of cloud-native security

Source: https://www.forrester.com/report/Microservices+And+External+APIs+Underpin+Digital+Business/

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CYBERS ECU R ITY

SECURITY ENGINEERING ORG = NEW CHAMPION FOR BUILT-IN SECURITY TECH

Built-in Bolt-on

Whereas CISO and Infra teams think bolt-on, the security engineering orgs think built-in

*vArmour & Scytale are Work-Bench portfolio companies.

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CYBERS ECU R ITY

M ICROSERVICES SECURITY MATURITY FRAMEWORK

STEP # 2: NETWORK/RU NTIME


STEP # 1: IDENT ITY STEP #3: LO G ANALYTICS
MONITORI NG/HARDENI NG

TL;DR: Identity is an essential first building block of microservices security, yet it has played second
fiddle to network monitoring *Scytale is a Work-Bench portfolio company.

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CYBERS ECU R ITY

P R OPR I ETA RY COR ES A RE A TH I N G OF THE PAST, N E W CO ’ S B U ILT O N O SS

*Scytale is a Work-Bench portfolio company.

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CYBERS ECU R ITY

KEY TAK EAWAYS F OR EARLY-STAGE SECURITY STARTUPS

• The depth of new built-in security products are beyond the scope of CISO org. Target security engineers

as champions and infrastructure leaders as buyers.

• Open source is the new marketing tactic for enterprise security. Build a community of web-scale security

engineers and the F1000s will follow.

• InfoSec startups: target the progressive newly minted CISOs looking to implement the basics.

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Vertical Theme #4
The de(Centralization) of SaaS

103
TL;DR

SAAS PR EDICTIONS FOR 2018

1 Ebbs and flows: SaaS ate infrastructure. In due time, infrastructure will eat SaaS

2 Open source business software will experience a rebirth

3 Business software goes VPC

4 There will be a day when developers choose their company’s business software

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Megaclouds aren’t the only bullies…

105
SaaS-holes are the new status quo

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SAAS

SA AS M ON AR C HI ES RULE BU SINESS SOFTWA RE

SaaS vendors are becoming mighty and taking advantage of it — using aggressive tactics to expand dollar share within
existing accounts, often by shoving excessive features and extensive contract terms down customers’ throats. Customers have
no choice but to succumb to these closed-ecosystem tactics.

Kings of the back office Rulers of the front office

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SaaS-hole death grip?

108
SAAS

SA AS - HO LE DEATH GR I P TACTICS

Up-charging:

SaaS providers manage your business logic …Meaning they can up-charge you
and the latest copy of your data… 30% or more every year

Complexifying their technology to foist services contracts:

You can either spend millions with the …Or spend 12-months recruiting a team
vendor’s preferred service provider… with the right skills to manage customization

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SAAS

SA AS - HO LE S = O NLY GE TTING RUDER

Short/medium term: macros favor large SaaS vendors

SaaS ate infrastructure: SaaS integrates all layers of the IT stack, allowing vendors to extract more rents than

with on-premise software.

Suites > best of breed: It’s the Costco mindset: Enterprises choose the platform with the most features to

prepare for tomorrow, even if they don’t need it today.

Systems of intelligence: Value increases with scale: more customers = more partners = more functionality =

more data = improved algorithms = better functionality and user experience = hard to migrate.

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SAAS

SA L E SF OR CE = V ERTI CA L DISRUPTOR

1 2 3

Salesforce commands greater In part because SaaS eats Forcing analysts to constantly
share than Siebel ever did infrastructure… adjust their market forecasts

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Cloud SaaS

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SAAS

IF SAA S ATE I NFR A, CLOU D WILL E VENTUA LLY EAT SA A S

Running your own software is cheap: SaaS provided favorable economics in


a time when running your infrastructure was expensive. Cloud compute is now
cheap and readily available.

Installing software is easy: SaaS made installing software easy at a time when
configuration was difficult. Docker/Kubernetes changes all this: software can be
installed anywhere and live in minutes.

Data security is imperative: SaaS was never viewed as more secure than on-
premise software but the cost savings and flexibility outweighed the risks. “It’s time to reconsider the SaaS model in a modern

CASBs emerged to provide a salve for the CISO but with data breaches at an all context, integrating developments of the last nearly
two decades so that enterprise software can reach its
time high and GDPR mandates looming, we’ll see the SaaS/on-premise
full potential.”
equation re-examined. Grant Miller, CEO of Replicated

Source: https://techcrunch.com/2018/06/17/after-twenty-years-of-salesforce-what-marc-benioff-got-right-and-wrong-about-the-cloud/

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SAAS

R A PI D D EVELO PM ENT IN TH E CLOUD E ATS AT S A A S MOAT

Abstraction is shifting further from infrastructure to the app layer to speed application development and customization, diluting
the need for ‘SaaS as an app platform’

App

Middleware

Database

OS

VM

Server, storage, network

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SAAS
IS N ’ T I T IRO NI C , DO N’T YOU TH INK ?

The Pendulum Has Swung Back…

Oracle/Siebel Salesforce 1999 Salesforce 2018

Pricing Multi-year contracts Pricing Monthly subscription Pricing Multi-year contracts

Sales Aggressive enterprise sales Sales Free trials, friendly telesales Sales Aggressive enterprise sales
focused on cross-sell and focused on cross-sell and
account penetration account penetration

Marketing Annual conference with Marketing Infamous “no software” Marketing Annual conference with
disgruntled customers drum beat disgruntled customers

Ecosystem Proprietary Ecosystem Open Ecosystem Proprietary

Technology Oracle hardware Technology Modern architecture Technology Oracle hardware

Note: we’re only picking on Salesforce because it is the most successful SaaS vendor.

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Is it possible to break the great
SaaS moat?

116
SAAS

S AA S DISR UPT IO N: BR EAK T H E C U STO M I Z AT IO N MOAT ?

Containers and microservices are at odds with SaaS customization

SaaS customization = $$$ Containers and microservices = freedom

In a world where services written in different

languages can easily communicate, proprietary

languages and processes that require hiring =?


“experts” will be obsolete.

Prediction: In the future, customization will be simple

and led by internal developers

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SAAS

S AA S DISR UPT IO N: BR EAK T H E EAS E O F DE PLOYME NT MOAT ?

The rise of AWS and quick-spinning database services means software no longer must be beholden to the underlying

infrastructure. Enterprises already prefer VPC to SaaS for infrastructure tools, and we expect business software to follow suit.

Example: Mattermost offers an enterprise-grade VPC alternative to Slack

Easy, one-click to deploy Mattermost to


any cloud platform:

Source: mattermost.com

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SAAS

B UT DON’ T GE T TO O EXC I T ED KI D S …

#1. Salesforce is the new IBM. Many major enterprises just migrated to Salesforce, and no one will fire you for buying Saleforce.

#2. It’s easier to budget for SaaS than headcount to self-manage software. Most enterprises are strapped for developers; they need them for

customer-facing software first and foremost.

#3. SaaS out-of-the-box functionality is hard to match. Major SaaS vendors integrate with everything. Disruptors face an uphill battle figuring out

what “good enough” would mean.

#4. If it ain’t broke don’t fix it mentality is still a thing. Organizations with a major reliance on SaaS platforms are stuck in the same sunk cost fallacy

as with the on-premise software of yesteryear.

TL;DR: The disruption of SaaS will take many years to play out. Either the numerous pain points will become acute enough to
take action or we’ll have to wait for today’s CIOs to overturn and for a new generation of buyers to come in.

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SAAS

PE RH AP S D E V E LO P E RS W I L L CATALY Z E T HE SHIF T ?

After all, they feel the biggest SaaS tax dealing with the cleanup when integration and customization work hits the fan…

Example:

= decoupled and developer friendly CMS

Contentful breaks down a CMS into a barebones set of

individual microservices developers love to use.

Happy developers = happy customers.

Source: contentful.com

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Venture Partner, Work-Bench

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