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Coverage | Newsletter | Intel | Events
Coverage | Newsletter | Intel
October 16, 2020
Facebook co-founder Dustin Moskovitz, Qualcomm co-founder Irwin Jacobs and Twilio CEO Jeff Lawson are joining the ranks of tech leaders throwing their support behind Proposition 15, a California ballot initiative that would raise as much as $12 billion for local schools and communities by hiking some commercial property taxes.
Until recently, Mark Zuckerberg and his wife, Priscilla Chan, were lonely voices in this fight, flooding the Yes on 15 campaign with more than $10 million in support. Despite activists' concerted efforts to get more of Silicon Valley's business leaders to support the measure, even the industry's most socially conscious CEOs were staying silent.
That is, until this week, when Salesforce CEO Marc Benioff announced he was backing the measure with $400,000 in funding. "We're supporting CA Prop 15 [...] because it's an important step in addressing the resource deficits that both our public schools & local governments face," Benioff tweeted.
That announcement broke the dam, leading to a wave of new contributions from the tech sector. According to newly filed contribution records to the Yes on 15 campaign, Moskovitz and his wife, Cari Tuna, donated $250,000 to the measure. Lawson and his wife Erica gave $100,000. Jacobs and his wife Joan contributed $250,000. And the Silicon Valley Community Foundation, which has raised gobs of money in the past from tech billionaires including WhatsApp co-founders Jan Koum and Brian Acton, shelled out $100,000. Moskovitz, Jacobs and Lawson are also all prominent Democratic donors.
"Support for Proposition 15 keeps rolling in because this crisis has further exposed the structural inequities baked into our current system, and tech and business leaders recognize that Proposition 15 will result in an equitable reinvestment in our schools, local communities, and small businesses," Gina Dalma, executive vice president at the Silicon Valley Community Foundation, said in a statement.
Proposition 15 will carve large commercial landowners out of California's Proposition 13, which allows property owners to pay taxes on the price of their property when it was purchased, not its current market value. Prop 13 has allowed commercial landowners in California to skirt the higher taxes that younger companies, many of them in the tech sector, currently pay. Proposition 15 would change that, and it has been endorsed by California Sen. Kamala Harris, a flurry of education and labor groups, and most mayors in the state. The opposition, meanwhile, includes a slew of business groups including the California Chamber of Commerce, as well as agricultural organizations, who argue that even though farmland is exempt from the measure, Proposition 15 would lead to tax hikes on "fixtures and improvements" to farmland.
Since Proposition 15 was introduced, a nonprofit group called TechEquity has also been actively seeking out tech sector endorsements for the measure. Catherine Bracy, executive director of TechEquity, was encouraged by the new show of support. "It's very heartening to see tech step up to support what is the most critically important policy to help California recover from the recession," Bracy told Protocol. "We hope this is an indicator that tech leaders realize the importance of addressing structural issues to bring about a twenty-first century economy that works for everyone."
Issie Lapowsky
Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.
Protocol | Workplace
Alabama Amazon workers will likely get a second union vote
An NLRB judge said that Amazon "usurped" the NLRB by pushing for a mailbox to be installed in front of its facility, and also that the company violated laws that protect workers from monitoring of their behavior during union elections.
An NLRB judge ruled that Amazon has violated union election rules
Image: Amazon
August 3, 2021
Anna Kramer is a reporter at Protocol (Twitter: @ anna_c_kramer, email: akramer@protocol.com), where she writes about labor and workplace issues. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.
August 3, 2021
Bessemer, Alabama warehouse workers will likely get a second union vote because of Amazon's efforts to have a USPS ballot box installed just outside of the Bessemer warehouse facility during the mail-in vote, as well as other violations of union vote rules, according to an NLRB ruling published Tuesday morning.
While union organizers, represented by the Retail, Wholesale, and Department Store Union, lost the first vote by more than a 2:1 margin, a second election will be scheduled and held unless Amazon successfully appeals the ruling. Though Amazon is the country's second-largest private employer, no unionization effort at the company has ever been successful.
NLRB hearing officer Kerstin Meyers sustained seven of the RWDSU's objections to Amazon's conduct during the months-long mail-in union election in early 2021, and said that those seven objections were severe enough to merit a second election.
In one objection filed by the RWDSU, the hearing officer ruled that the company's distribution of materials like "vote no" tags at small meetings and in the presence of managers could reasonably make a worker feel like Amazon was trying to determine whether they supported the union effort. Nearly all of the members of the union bargaining unit were subject to this misconduct because the meetings were mandatory and conducted an untold number of times, according to Meyers.
The other six objections sustained by Meyers all related to Amazon's efforts to have a USPS mailbox installed at the entrance to the facility. "The Employer's conduct in causing this generic mail receptacle to be installed usurped the National Labor Relations Board's (Board or NLRB) exclusive role in administering Union elections. Notwithstanding the Union's substantial margin of defeat, the Employer's unilateral decision to create, for all intents and purposes, an onsite collection box for NLRB ballots destroyed the laboratory conditions and justifies a second election," Meyers wrote in her ruling.
Amazon plans to appeal the ruling. "Our employees had a chance to be heard during a noisy time when all types of voices were weighing into the national debate, and at the end of the day, they voted overwhelmingly in favor of a direct connection with their managers and the company," an Amazon spokesperson told Protocol via email. "Their voice should be heard above all else, and we plan to appeal to ensure that happens."
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Anna Kramer is a reporter at Protocol (Twitter: @ anna_c_kramer, email: akramer@protocol.com), where she writes about labor and workplace issues. Prior to joining the team, she covered tech and small business for the San Francisco Chronicle and privacy for Bloomberg Law. She is a recent graduate of Brown University, where she studied International Relations and Arabic and wrote her senior thesis about surveillance tools and technological development in the Middle East.
Sponsored Content
The future of AI: Deeper insights, personalization and problem-solving stand to transform how we use AI across devices and industries
August 2, 2021
Alex Katouzian currently serves as senior vice president and general manager of the Mobile, Compute and Infrastructure (MCI) Business Unit at Qualcomm Technologies, Inc. In this role, Katouzian is responsible for the profit, loss and strategy of the MCI BU, which includes business lines for Mobile Handset Products and Application Processor Technologies, 4G and 5G Mobile Broadband for embedded applications, Small and Macro Cells, Modem Technologies, Compute products across multiple OS’, eXtended Reality and AI Edge Cloud products.
July 26, 2021
What comes to mind when you think of AI? In the past, it might have been the Turing test, a sci-fi character or IBM's Deep Blue-defeating chess champion Garry Kasparov. Today, instead of copying human intelligence, we're seeing immense progress made in using AI to unobtrusively simplify and enrich our own intelligence and experiences. Natural language processing, modern encrypted security solutions, advanced perception and imaging capabilities, next-generation data management and logistics, and automotive assistance are some of the many ways AI is quietly yet unmistakably driving some of the latest advancements inside our phones, PCs, cars and other crucial 21st century devices. And the combination of 5G and AI is enabling a world with distributed intelligence where AI processing is happening on devices and in the cloud.
We've invested in AI for over a decade, and continue to do so today, having recently brought on- board the top-notch AI research team from Twenty Billion Neurons GmbH (TwentyBN), including their high-quality video dataset that is widely used by the AI research community. We are excited to have TwentyBN founding CEO Roland Memisevic, who co-led the world-renowned AI institute MILA with Yoshua Bengio, and team expand our AI R&D base in Toronto, which is long recognized as a hotbed for innovation and research in the field of AI. Furthermore, AI is now a core component of our mobile platforms. And breakthroughs like our 6th Gen Qualcomm AI Engine are helping change the game — literally. It's designed to boost performance in everything from connectivity and photography to gaming. By integrating directly with the phone's camera, modem, and other components of our mobile platform design, AI supports faster, more efficient processing. The Qualcomm AI Engine enables powerful image and language processing capabilities for clearer pictures and video via ArcSoft's neural network, as well as real-time translations and voice assistance.
Our successes in mobile — together with our ecosystem collaborators — allowed us to move AI beyond the smartphone into other industries segments like PCs, XR, factories, and auto. AI is not only making things more intelligent, it's helping simplify and enrich our daily lives. Take PCs, for example. Sophos security solutions optimized for our mobile compute platforms enable lightning- fast threat detection. And AI is redefining the video call experience for PC users, delivering smoother performance and quality. AI is impacting the ongoing growth in XR as well. All perception technologies in XR use AI, so wearers of smart devices can better see, understand, and interact with the digital world. Next-generation warehouse management, logistics, and asset tracking showcase the power of computer vision and machine learning capabilities to increase speed and efficiency. And for cars, AI-enhanced digital cockpits with voice assistance, immersive audio, and rich visuals provide precise interactions between vehicle and driver along with contextual safety awareness.
In this latest video from our ongoing "The Future of" series moderated by Karl Freund from Cambrian AI, I sat down with Qualcomm Technologies' Vice President of Product Management Ziad Asghar and Co-founder and CEO of Hugging Face Clément Delangue. We discussed how AI will continue reimagining lives and industries. We also spoke about what AI means to different consumers, and how their demands fit into how we continue to shape on-device AI in our respective fields. AI and machine learning are growing exponentially within data centers, cloud computing networks, and many other devices beyond phones and PCs, and we dive into how companies are strategizing around evolving AI capabilities as the technology becomes a larger part of their businesses.
The perception of AI has radically changed, and its applications will continue to impact the world and our experiences in ways we've never imagined. That's why Qualcomm Technologies invests so much in building AI into the backbone of our mobile platforms, and why we'll continue to be a leader in applications involving deeper AI-driven insights, personalization, and problem-solving.
Learn more about how AI is transforming everything.
Discover the power of on-device AI with the Qualcomm AI Engine.
Read about the Future of the PC and how 5G connectivity will transform laptop computing.
Qualcomm AI Engine is a product of Qualcomm Technologies, Inc. and/or its subsidiaries.
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Alex Katouzian currently serves as senior vice president and general manager of the Mobile, Compute and Infrastructure (MCI) Business Unit at Qualcomm Technologies, Inc. In this role, Katouzian is responsible for the profit, loss and strategy of the MCI BU, which includes business lines for Mobile Handset Products and Application Processor Technologies, 4G and 5G Mobile Broadband for embedded applications, Small and Macro Cells, Modem Technologies, Compute products across multiple OS’, eXtended Reality and AI Edge Cloud products.
Protocol | Fintech
Hippo’s plan to reinvent insurance: Fix homes before they break
Hippo, which is going public via a SPAC Tuesday, is using tech to prevent claims from happening.
Hippo CEO Assaf Wand wants to catch homeowners' losses before they happen.
Photo: Hippo
August 3, 2021
Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.
August 3, 2021
Home insurance, a $108 billion legacy industry that depends on troves of data, is a natural area for fintech companies to target.
That change is starting to happen — and one company is getting fresh capital to tackle the opportunity. Hippo, led by co-founder and CEO Assaf Wand, is going public today through a merger with a special purpose acquisition company Reinvest Technology Partners Z. The SPAC is run by LinkedIn co-founder and venture capitalist Reid Hoffman and Zynga founder Mark Pincus.
Hippo, now available in 37 states, looks to differentiate itself in the competitive field by focusing on one sector — the home. That includes individuals as well as homeowners' associations.
There are already several other upstarts in this sector, including Lemonade, which offers homeowners, renters, pet and life insurance and went public in July 2020.
Insurers have used the web to sign up new customers and manage billing for decades. But Hippo is going far beyond just having a user-friendly app. It uses technology to monitor data such as weather or other things in the home that could cause damage. Hippo gives customers smart sensors to detect smoke or leaks and hopefully prevent damage. It also uses machine learning to optimize pricing and offer fast quotes online. This is also a strategy to stay in regular contact with customers and offer more value than just when a customer needs to file a claim.
The company, which was backed by Felicis Ventures, Horizons Ventures, Lennar, Fifth Wall Ventures and Bond Capital, had $405 million in written premiums in its 2020 fiscal year, according to its investor presentation.
Hippo also is offering its technology as a platform to other insurance startups, in what it calls an AWS strategy.
We caught up with Wand to talk about how insurance is changing.
This interview has been edited for clarity and brevity.
What are insurance incumbents doing that you'd like to take on?
The current incumbents spent the last 100 years building a flawed process of insurance. It's hard to purchase. When you look at what your purchase is for, it's usually obsolete. It's things like fur coats and beautiful china or silverware. And then, when you have a claim it's almost always a horrible experience, and in between this horrible claim experience and the purchase experience, you have zero touch points with the insurance company.
How are you different from all of that?
So we took all of that experience and said we'll make it very easy for people to purchase. The coverage is focused on modern things, so instead of the fur coats, it's more about your home office and enhanced electronics or your bicycle, things that you actually have. When you have the claim experience, we have one person who's dedicated to you and a claims team that's available 24/7 handling the claim.
Is your strategy to provide more services for customers when they don't have a claim?
The best claim experience comes from avoiding a claim from happening in the first place. So what we're trying to do is be a proactive insurance company. We're doing it by constantly monitoring the home with different data and basically telling you, "We just found this discoloration on the roof. I think we should send a roofer." This is way before the winter when you're going to have a $20,000 water loss.
How do you monitor that?
We're giving smart sensors to all of our customers to help avoid losses from escalating because it's way better to catch it at the beginning. And then we have a service called Hippo Home Care that helps our customers take care of the home from installing a shelf and replacing leaky faucets to doing renovation in the bathroom. The idea is: How do we build this relationship with our customers?
Last year you bought Spinnaker, a property and casualty insurer you've worked with since 2017. How does that change your model to offer insurance directly now?
Yes but we also have most of the risk being shifted to reinsurers anyway. In short, we own our own path forward. It gives us a lot more flexibility. It also serves as a platform for other insurance startups as well. We call it the AWS of insurtech. So if you have a startup in, say, Denton, in travel, you also need to find a carrier to actually write (insurance). So we enable people to focus on what they do best, which is use the data to underwrite, and then do the marketing, and we're going to do the insurance platform for them.
So you're providing to other companies what you didn't have before?
Yes, this exact structure for other companies, that back-end part of it.
So how much risk are you taking on?
The carrier ... is one thing; where the risk is sitting is another thing. So in this framework our aim is to have 10 to 25% of our risk that we capture, and the rest is done by reinsurers.
Are you a tech company or an insurer?
We view insurtech as a mix of insurance and technology. It's finding the best technology people and the best insurance people. If you're an insurance company that is trying to do stuff in tech, you can't get the talent that you want, and you cannot implement enough innovation and growth. On the flip side, if you're a technology company who's dabbling in insurance, you're going to make too many mistakes on losses, because there's a risk component.
My job is to basically balance these two things and have the strongest technology backing to innovate as fast as possible, and bring back the focus on the customer to bring the tools to the insurance people but then have the insurance people do the filing, the underwriting and all that kind of stuff. I need to give them the latest and greatest in underwriting tools in data, in aerial imagery, in machine learning, so they can do a better job at a faster pace.
So you're trying to bring new approaches to this industry but not changing the underlying business.
We're not disrupting insurance. I'm not taking people that have a first name starting with a T and say I'm going to give you a 15% discount — it doesn't work like that. It's about modernizing. There has been an explosion of data sources and new technology that came in in a field that hasn't changed in 100 years, and we're just embedding it all and refocusing back on a customer.
How is your technology different?
It's very different than other insurance companies. They're also not wired as a technical company. So I have a CTO and chief product officer. They have a CIO and it's all outsourced. And they're dependent on them or an army of Accenture consultants. It's just not the same kind of architecture.
How does this change the agency insurance model?
Don't forget that this is an industry that for a hundred years ... , there was one customer and that customer was an agent. We're thinking of Tomio as a customer. We're enabling Tomio to purchase however you want, not however the agent wants. The average age of an agent is 61; they're retiring like crazy. So it's about refocusing back on the customers. The customers should be agnostic on what technology. Why do you care if I have alien technology on the back end, or a bunch of papers on my desk? You care about having the best experience when you want, the best customer touch point and being covered for what you should be covered. It's my problem how to enhance it and innovate in a pace that is adhering to the customer needs.
So what's happening to that agent model of selling insurance?
This is a model that started in the 1950s and 60s, when there was the move to the U.S. suburbs. And you needed to cover [customers] and you couldn't cover them otherwise. And now, the world is moving to digital and direct.
Look at what happened in the 1990s. The biggest carriers in automobiles were Allstate and State Farm. Well now it's Progressive and GEICO that dominate. What they've done is they went direct: 15 minutes could save you 15%. You go to geico.com to purchase. Home insurance is going to go through the same evolution. Same with SMB and life insurance. So we are building the next Progressive.
What has changed with COVID-19?
COVID happened and digitization moved everything five years forward. The place of the home in our lives changed significantly because it's where you sit, is your office, but it's also your gym, it's the school, your kitchen, it's everything.
So is your model cheaper with no agents?
What we realize is you can't be mono-channel. We're omnichannel, so you can go to Hippo.com, and you can go via an agent of another company or independent agents, and you can go via our partners. You can buy a house on Compass, and it's going to be embedded via an API with the policy. You're always going to get the same price. It's my problem if the margin is going to be different. The world is moving to direct, but it always moves slower than people think. So it's also moving to independent. I'm agnostic. I'll serve a customer however they want.
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Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.
Protocol | Policy
Weak competition could hike your broadband bill by $96 a year
A new consumer survey says that those with the most choice in broadband providers are paying the least and reveals opinions about municipal broadband, internet access, affordability and more.
Broadband affordability has become an urgent issue during the pandemic.
Photo: John Schnobrich/Unsplash
August 3, 2021
Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.
August 3, 2021
American homes that have lots of choice in broadband providers can expect to pay around $8 less per month for internet than those who are locked into a single company, according to a new survey from Consumer Reports.
The median monthly bill for people with four or more broadband providers in their area was $67. It was $75 for those with only one choice, according to the survey of nearly 2,600 US residents. In a sign that consumers are thirsty for increased broadband access, the survey also suggested wide approval for municipal broadband programs run by local governments.
The results come a month after the veteran consumer group launched a separate push to obtain thousands of homes' broadband bills to learn how much users are paying, figure out where competition is scarce for internet service and help build the case for treating broadband more like an essential utility. The first results for that initiative are expected in the fall.
While competition generally drives down prices for consumers in all industries, the broadband industry is notoriously opaque. It's still unclear exactly how much Americans actually pay and how much competition is available to them. The trade group USTelecom, for instance, says the most popular choice for consumers costs less than $50 each month. But in the Consumer Reports survey, the median bill for those with access to broadband was $70 monthly, including taxes and fees. Roughly a quarter of those who have broadband said they had no choice in providers.
Proponents of expanding broadband access often point to municipal networks, established by local governments, as a possible solution to the problem of limited competition. The Consumer Reports survey found widespread support for such networks. Three-quarters of people who responded said that municipal broadband should be allowed "because it would ensure that broadband access is treated like other vital infrastructure such as highways, bridges, water systems, and electrical grids, allowing all Americans to have equal access to it." That figure included more than 60% of Republicans and a full 85% of Democrats.
The telecom industry has cast municipal broadband as an unnecessary expense for taxpayers and a way for governments to put their thumb on the scale of free markets. State-level action also faces an uphill battle, with nearly two dozen states having outright bans or other significant roadblocks in place regarding municipal networks.
The issue of internet affordability has only become more urgent during the pandemic. In the survey, 43% of respondents said they are using the internet more than they were before COVID-19 hit. "The pandemic illuminated how much people need access to an affordable, reliable internet connection," said Jonathan Schwantes, senior policy counsel at Consumer Reports, in a statement. The group reported separately that, as of February, 76% of people say the internet is "as important as other basic necessities," up from 61% when Consumer Reports began looking into the issue in 2017.
And yet, the most recent survey found that 15% of respondents have been relying exclusively on a wireless smartphone data plan. Another 5% are still using DSL or dial-up, and 3% completely lack internet access at all. For those who don't have broadband, a quarter said it wasn't available where they live, and nearly a third said it cost too much.
These issues of access are particularly pronounced in communities of color. More than one in five Black respondents said they rely on a wireless connection for their home, and nearly a third of those from the same group who do have broadband called it somewhat or very difficult to afford. Nearly one third of people without a high school diploma also said they had to rely on wireless access.
During the pandemic, the federal government has struggled to get broadband benefits to people who have trouble affording internet access. The survey comes as a bipartisan group of lawmakers and the White House seek to advance an infrastructure bill. According to the administration, the plan would allocate $65 billion so that "every American has access to reliable high-speed internet." It also includes measures to allow people to comparison shop between broadband plans more easily and "help more low-income households access the internet."
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Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.
Protocol | Enterprise
Partners and "co-opetition": Inside the new enterprise cold war
There's a rush of new partnerships within enterprise tech as vendors try to make software that plays nicely with others. But not all partnerships are created equal.
AWS and Salesforce have entered a major partnership.
Image: Protocol
August 3, 2021
Joe Williams is a senior reporter at Protocol covering enterprise software, including industry giants like Salesforce, Microsoft, IBM and Oracle. He previously covered emerging technology for Business Insider. Joe can be reached at JWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.
August 3, 2021
If AWS and Salesforce labeled their relationship on Facebook, they'd probably choose "it's complicated."
In June, the two companies announced a major partnership, one that AWS says is the most comprehensive of all its joint initiatives. For example, customers will have a single login that gets them into both systems, which means users can create blanket data-access policies as well as seamlessly move information across the two platforms. The companies will also jointly build products.
And in a notable difference between this and the usual enterprise-tech collaborations, AWS doesn't see itself striking any other partnership as deep as the one with Salesforce.
"There is nothing in the language that says it was exclusive," Peder Ulander, the director of solutions marketing at AWS, told Protocol. But "it's not something that we would do elsewhere … [and] the reality is we don't do a lot of these types of deals," he added.
But that's not true for Salesforce, which clearly envisions itself as a multicloud player. In December, the company rolled out Hyperforce, which will enable its software to work with any cloud provider. And it's had an evolving joint initiative with Google Cloud for years. Still, the partnership with AWS has a key goal: undermining Microsoft, a fierce and growing competitor to both Salesforce and AWS. Salesforce did not respond to an interview request.
"We probably would never make a statement as bold as: 'Here's the only partner we'll do this with,'" said Casey McGee, Microsoft's vice president of global independent software vendor (ISV) sales.
The divide is an example of the rush within enterprise tech right now to strike new partnerships — sometimes with potential competitors — that enable customers to more seamlessly integrate data and systems across various providers. It's creating something of a cold war within the industry as cloud providers try to court major software vendors behind the scenes to build more exclusive arrangements.
Companies like SAP and Databricks see the value in bundling products with those hyperscalers, particularly as a quick way to grow their user base or outshine a rival. Ultimately, however, most want to sell their services across all the key infrastructure players.
"The cloud vendors are in fierce competition, and it makes sense they are trying to get advantages through partnerships," said Databricks CEO Ali Ghodsi. "All cloud vendors want to offer deeper integrations. They want to give us access to APIs that might not be available to others and deepen the partnership."
Not all partnerships are created equal
Ghodsi knows firsthand the trade-offs that software vendors have to make when striking those types of deals. Databricks has a co-branded product with Microsoft called Azure Databricks that launched in 2017. Now, however, it also works with AWS and Google Cloud — a sign of the increasing effort by end customers to avoid being locked in to one cloud vendor.
And Ghodsi is not the only enterprise tech executive casting a wide net. Across the sector, companies like SAP have to weigh the disadvantages of aligning too closely with just one of the hyperscalers. It's a key reason why SAP ended its preferred partnership with Microsoft: Its customers ultimately wanted choice. Still, despite a growing focus on competitors like Google Cloud, Microsoft remains SAP's deepest partner, per Stefan Goebel, the firm's head of strategic engineering partnerships.
It's an acknowledgment that despite the attention on multicloud, engineering resources even at the largest tech companies are limited. To put it simply: Not all partnerships are created equally.
"We cannot do the same degree of partnership with every partner," Goebel told Protocol. "At the end of the day, not everybody will be able to partner with everybody … [and] at some point in timem you have to focus on those applications that you can make a difference with."
SAP, for example, is developing integrations with Microsoft Teams that Goebel labeled as "unique." But when it comes to working with rivals, there are limits as to how far the company is willing to go.
"There is a natural element of co-opetition," said Goebel. But "a partnership between SAP and Oracle … is very unlikely."
Finding the sweet spot
Partnerships among tech vendors aren't new. Microsoft and Red Hat, for example, have worked together for years despite their previous history of direct competition.
What is new, however, and brought on by the cloud transition, are new integration capabilities between different enterprise software packages. And the advantages for end customers are numerous. When considering a new piece of software, one of the first things CIOs will examine is whether it fits into their current IT strategy. While not the only factor, tighter integrations can ultimately persuade purchasers to shun a best-of-breed application in favor of one that works better with its existing tech stack, according to technology chiefs and industry analysts.
"If you simply went by best of breed, you often may end up with [thousands of] products and vendors in your stack," Ravi Radhakrishnan, CIO and head of commercial and corporate & investment banking technology at Wells Fargo, told Protocol. "There's a sweet spot where you can have a small number of products that only work well together … but it has to be something that's meaningful for us."
But the term "integration" is thrown around today almost as much as perennial buzzwords like "innovation," which means corporate tech buyers have to probe deeper to understand whether the "integration" is something as basic as the ability to change to different file formats or something deeper — like an API-based connection between programs.
And it also goes beyond just weighing the promised capabilities offered by the integration. End purchasers also have to consider the longer-term cost of ownership of maintaining those connections.
"A lot of these tools, they don't do much standalone. They have to be integrated into other tools to show their value. And that can get cumbersome," said Linh Lam, the CIO for mortgage tech at the Intercontinental Exchange. And "it's not just from a dollars standpoint. It's a resourcing standpoint … to keep them up and running," she added.
'Trial run' partnerships
That decision — whether to go with a best-of-breed provider or an enterprise platform provider — is becoming trickier for corporate tech leaders.
The number of independent software applications is exploding. Meanwhile, the large vendors are rushing to expand their product suites to go well beyond the core capabilities and offer more industry-specific tools. That increasingly means more competing services — and with it, a more complex tech stack.
"When you have so much in your [IT] footprint, you see overlaps in capabilities. And so there is overall hygiene and rationalization that needs to be put in place over time," said Lam.
But the larger enterprise tech vendors are also moving aggressively to strike partnerships with those smaller providers that are either gaining prominence among their customer base or provide a capability that is missing from their own suite. SAP, for example, resells BlackLine's accounting and finance products. And Microsoft has built many, including with startups like Troops.ai.
"What customers are looking for now is a much deeper level of partnership," said McGee. "They're looking for us to deeply integrate the technology … and the expectation from customers is that we are much closer to the ISV ecosystem."
For CIOs, those types of deals can also signal something more prominent: a potential acquisition.
"A bunch of these partnerships seem to be a trial run to see whether the larger software provider should be acquiring the smaller one," said Radhakrishnan.
While valuations for software companies remain high, the surging share price for many of the top providers means all-stock deals like Zoom's bid for Five9 could become more common. And even the most aggressive deal-makers continue to find targets. Salesforce, for example, just announced it would buy RPA provider Servicetrace shortly after its $27.7 billion deal for Slack closed.
As the giants expand, CIOs could suddenly find themselves quickly moving deeper into one ecosystem. Until then, the cold war persists, which means the alliances could get even more complicated.
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Joe Williams is a senior reporter at Protocol covering enterprise software, including industry giants like Salesforce, Microsoft, IBM and Oracle. He previously covered emerging technology for Business Insider. Joe can be reached at JWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.
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