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The rise of the small-business cloud

Protocol | Enterprise

Welcome to Protocol | Enterprise, your comprehensive roundup of everything you need to know about cloud and enterprise software. This Thursday: Backblaze's IPO could usher in the small-business cloud, why Twilio is going after the customer-data platform market, and now really might be the time to start crying, Argentina.

Think small

Cloud infrastructure has been dominated by the Big Three U.S. providers for a relatively long period of time, which made sense as the business world became comfortable with the concept. But reliable options for smaller companies, which don't want to get lost alongside megacorporations at the big providers, are starting to get serious traction.

Backblaze filed for an initial public offering this week, joining the ranks of dozens of cloud-based enterprise tech companies that have joined the public markets over the last couple of years. The company offers cloud storage that is compatible with AWS' popular S3 storage service, which most anyone who has built a cloud application over the last decade has probably worked with once or twice.

  • Backblaze's object storage service is called B2, and its primary selling point is cost: B2 is significantly cheaper than S3 and the similar options available from Microsoft and Google Cloud.
  • It also offers a backup and recovery service for businesses, which has never been more important in the age of ransomware attacks.
  • Backblaze is not exactly an enterprise cloud juggernaut: It recorded $53.8 million in revenue last year, only $14.2 million of which came from its B2 service.
  • But the company has gotten to this point on just $3 million in funding; its IPO could deliver up to $100 million in new funding, which would go a long way toward building out its technology portfolio and customer-support operation.

Backblaze's story should sound familiar. In some ways, it represents a younger, smaller version of Cloudflare, which started out with relatively simple security and site-reliability services and now harbors ambitions of becoming "the fourth major cloud provider," as CEO Matthew Prince recently told Protocol.

  • Cloudflare was much bigger than Backblaze at the time of its 2019 IPO, but built its reputation in similar fashion around the needs of small businesses and individual developers.
  • It has since layered on serverless computing services that could be an interesting place to run applications as edge computing starts to become a real-world strategy, and last month launched its own low-cost, S3-compatible cloud storage service.

And there is an emerging gap in the market here. Neither Backblaze nor Cloudflare are in a position to challenge industry leaders like AWS, Microsoft and Google any time soon for the breadth and depth of cloud infrastructure business. But they both realize that catering to smaller companies represents a potential new era in the history of the cloud.

  • Cloud computing faced two major challenges in its early days: convincing Big Business that it was safe and reliable, while building as many computing options for applications as businesses could spin up for themselves on their own equipment. Consider those hurdles cleared.
  • But even though AWS owes much of its success to startups that grew on the back of its services, cloud providers have gotten so big in the last five years that it's easy for customers who don't rank among the top accounts to feel lost, especially when they need help.
  • And while big companies can manage the increasing complexity of major cloud services to get the functionality they need, smaller businesses are often overwhelmed by it and struggle to hire the right talent to make sense of it.

So what does this future look like? As we explored earlier this year, the next wave of enterprise tech companies will compete on the basis of the developer experience they provide. This will create a huge opportunity for companies that provide simpler, cheaper and helpful cloud services allowing businesses of all sizes to thrive.

  • DigitalOcean, arguably a pioneer of the latter-day small-business cloud, just hired Gabe Monroy of Microsoft Azure to be its first chief product officer, giving the newly public company Big Cloud experience for its nimbler operation.
  • Expect to see more talented people who earned their stripes inside big cloud companies spreading the wealth to smaller, more customer-focused companies (likely while generating their own wealth).
  • These types of services could also accelerate the much-needed transformation of local and state government IT operations, the age and clunkiness of which were badly exposed by the pandemic.

And if Oracle and IBM were smart, they'd give up trying to chase enormous government and Fortune 500 contracts and rebrand themselves as cloud infrastructure services for the rest of the world.

— Tom Krazit

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This week on Protocol

Segment steps forward: Twilio is holding its big Signal conference this week, and it is showing off the first major release since its $3.2 billion acquisition of Segment last year. Protocol's Joe Williams reported on Engage, an out-of-the-box customer data platform that could be valuable for companies that rely heavily on third-party customer data.

Whiteboards greenlit: Product designers and developers have some new options with the collaborative whiteboards developed by Figma and Miro. Protocol's Lizzy Lawrence took a look at the new features released this week by the two companies, which focus on giving teams more options to customize their experience on the apps.

Five questions for Ofer Bengal, CEO at Redis

What was your first tech job?

Designing airplane modifications and installations as an aerospace engineer. I moved to enterprise software at a later stage in my life.

What was the first computer that got you excited about technology?

A WANG desktop computer, 10 years before the first IBM PC. It had 4KB [of] memory and I thought, at the time, this should be enough for most of my work or personal needs.

What's your favorite pastime that doesn't involve a screen?

Playing the piano. I started playing an accordion when I was 9 and then switched to piano at 12. I still enjoy sitting and improvising every now and then.

How can enterprise tech improve its current status around diversity, equity and inclusion?

Leaders need to show the way by being open to hiring and promoting women and minorities outside their traditional networks. We, at Redis, have tried to do this for years and it is something that you have to have a continual commitment [to] as an organization. However, from the other side of the supply equation, we need to find ways to get more underrepresented communities into curriculum[s] and networks that are relevant for enterprise tech.

What will be the greatest challenge for enterprise tech over the coming decade?

The challenge for independent enterprise software companies will be to survive in an era where major cloud providers can offer anything and everything as part of a well-bundled service.

Around the enterprise

IBM's stock plunged more than 5% in after-hours trading Wednesday after reporting revenue growth of just 0.3%, below Wall Street expectations.

Qualtrics investors had the opposite reaction after the company reported higher-than-expected revenue and a surprise profit, while also raising its guidance for the year.

Alibaba revealed a custom Arm-based server processor, which it will use inside its own data centers for cloud customers. (Also, meet Max Cherney, Protocol | Enterprise's new chip reporter, who wrote that story I just linked you to!)

GlobalFoundries hopes to raise $2.4 billion to expand its chip manufacturing capacity as the chip shortage rolls on.

Asana released new enterprise-class features for its project-management software as it looks for new business inside bigger companies.

The hack that struck Sinclair Broadcasting over the weekend is believed to be the work of the Russian group behind several major ransomware attacks in recent years.

We've seen data breaches before, but this one is incredible: A hacker stole a database belonging to the government of Argentina that contained ID information for the entire country's population.

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Thanks for reading — see you Monday!

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