Enterprise

The tech boomers are showing their age

The old IT stack can’t come to the phone right now.

Ok Tech Boomer speech balloon

There’s a plethora of new database vendor options that customers are turning to.

Illustration: Christopher T. Fong/Protocol

In non-Wall Street parlance, Snowflake’s recent quarter was a blowout: sales up 83% to $497 million, with revenue now expected to reach $1.9 billion for 2022. It was a much-needed vibe shift for an industry suddenly battered after years of wild growth.

“We certainly hadn't expected this degree of upside,” Mizuho analyst Gregg Moskowitz and others, who were already bullish on the company, wrote about Snowflake’s results.

CEO Frank Slootman quickly got the seal of approval from investors, an audience increasingly skeptical of the prospects for the software industry. As companies like Salesforce and ServiceNow witnessed their share prices plummet after issuing muted sales forecasts for the rest of the year, Snowflake’s grew over 17% following earnings.

Snowflake isn’t alone. Databricks just passed $1 billion in annualized revenue and is aggressively recruiting, and earnings at Confluent and MongoDB surpassed Wall Street’s sales estimates: Both of those companies provided rosy annual forecasts ahead. Even private companies like Cockroach Labs and Canva, which serve as alternatives to Oracle, Adobe and other so-called legacy companies, continue to hire, boost sales and fundraise at an impressive clip.

The results are a signal of the seismic shift underway in the world of business software: the arrival of the new IT stack.

“Our space is everybody’s else tomorrow,” said Dave McJannet, who, as CEO of infrastructure service provider HashiCorp, depends on the adoption of cloud-based tools like Snowflake. “There’s an old world-new world paradigm … and you’re seeing some pretty big companies emerge that will potentially challenge Salesforce for being the biggest employer in San Francisco.”

The divergence is stark. As Snowflake, Databricks and others show no signs of slowing down, Salesforce and Microsoft reduced outlooks and are implementing cost-cutting measures like hiring freezes to bolster profitability. Meanwhile, Oracle is laying off workers.

Economic factors are certainly at play. In the face of a potential recession, some customers are forgoing investments in core applications — like HR systems or CRMs — in favor of data management and analytics. And to point out the obvious: So-called legacy vendors remain significantly larger and, as a result, are not as able to quickly adjust to wild fluctuations in the market.

But it’s a stark change from the course of the last three decades, when a handful of names — Amazon, Salesforce, Microsoft and Oracle, for example — seemed to dominate the discussion within IT departments.

In 2005, if you wanted to buy a database, options were fairly limited. Now, the floodgates have opened. Alongside the likes of Amazon and Microsoft — which recently took over Oracle as the largest database vendor, per Gartner — there’s a plethora of new options that customers are turning to.

For some, it’s a missed opportunity. For example, Adobe gravely underestimated the demand for creative tools among non-professionals, and is now under pressure from upstarts like Figma and Canva. Even Microsoft, a close Adobe partner, is openly embracing Figma.

What Snowflake created was not an easy build by any means. But if Oracle had simply recognized the looming potential of the cloud much earlier, the dynamics now could be starkly different.



And while Salesforce touts its data and analytics capabilities, the foundation of the company is its core vertical applications. Instead, customers seem increasingly more interested in pooling data from various systems into one repository, like Salesloft or Clari, for deeper analysis.

Salesforce “should have done this,” said Guggenheim Securities analyst John DiFucci. The company “let others get to that ‘intelligence layer’ much quicker. And it’s unclear if they’re going to be able to participate in that.”

To put it more bluntly: “They are no longer a growth name,” DiFucci added.

Amid that pivot, Fivetran, which recognized early on the need to help companies move information from those so-called systems of record into Snowflake and Databricks, expects sales momentum to continue unabated despite a broader slowdown in the software market.

“We’ve done the math, and even under pessimistic assumptions, we’ve grown revenue so much that we’ve outrun the decline of the market,” CEO George Fraser told Forbes.

For others, the current struggles are simply a result of the pivot to the cloud. It’s not uncommon for architectural shifts to bring in new market dynamics. The shift away from mainframes, for example, helped Oracle overtake IBM and solidify its former status as the world’s largest database vendor.

In today’s environment, VMware is a prime example. The company, which for 24 years has provided customers a single platform to run multiple applications or operating systems on one server, is now on the defensive in the face of a $61 billion acquisition from Broadcom, a company with a notoriously checkered history with customers.

For some VMware customers hesitant about the new owner, it’s bringing up questions of whether to move existing workloads to the cloud to simply eliminate the need for the company’s signature products.

VMware “is certainly a topic that comes up a lot for the big companies we speak to, who are all none too pleased about” the acquisition, said McJannet, who directly competes with VMware.

Microsoft, Salesforce, Oracle and SAP are all companies that will continue to make money hand over fist, due in no small part to huge existing install bases. Shifts in power in enterprise tech often take years, if not decades, to happen.

But as Salesforce proved with software-as-a-service and AWS proved with the cloud, those generational upheavals remain very possible. And it’s possible the timeline gets accelerated.

As some legacy vendors look to spend billions to acquire other legacy tech, Databricks or Snowflake could use their war chests to double down and acquire other key features of tomorrow’s IT stack, effectively creating the Salesforce for the AI era.

The future is certainly much brighter right now for the new kids on the block. But like the U.S. government proves, don’t count out the boomers. Still, as Slootman once said, “Only the government can print money; the rest of us have to take it from somebody else.” He certainly seems to be doing that.

Update: This story was updated Sept. 2 to clarify Microsoft's relationship with Figma and Adobe.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins