Twilio CEO Jeff Lawson
Photo: Twilio

Welcome to your first bear market!

Protocol Enterprise

Hello, and welcome to Protocol Enterprise! Today: how Twilio is thinking about compensation and employee retention in the wake of a SaaS stock-price correction, Matt Hicks takes control of IBM’s most valuable asset, and how machine-learning exploits could all but guarantee permanent employment for cybersecurity pros.

Twilio’s profit dilemma

Twilio’s path to profitability just got a lot more difficult. Recognizing the need to translate fast growth into profits, last quarter CEO Jeff Lawson told Protocol he had wanted Twilio in the green by 2023.

Then, the market downturn hit. And as a SaaS company catering to a large number of marketers, Twilio might not be as immune as other mission-critical software like an ERP or CRM system.

  • The market seems to be reflecting that sentiment: Twilio’s stock is down 69% this year.
  • Still, Twilio is executing on a mission far broader than marketing, one aimed at enhancing every customer interaction with first-party information.

Employees who have their compensation tied to Twilio’s share performance might be feeling a little grumpy right now.

  • They aren’t the only ones. Across tech, workers who were wooed by vendors promising stock options or RSU to beef up compensation packages are in a tough spot.
  • A sizable number could be “underwater,” a situation where the current share price is higher than the exercise price, leaving affected employees questioning whether to stick it out or jump to another firm to get another bulk of options at a much lower starting point.

If you’re a Twilio employee, don’t expect the company to rescue you from the realities of the stock market.

  • While employees at Netflix pushed management to give new stock options, and companies like Coupa went with one-time cash bonuses, deciding which approach to take isn’t easy.
  • Lawson is hesitant to pursue any option that could further dilute Twilio’s stock or put the company in a position where it is constantly reacting to Wall Street’s wild fluctuations.
  • “You can't make people whole in the same way that, when the stock price goes up, you don't ask employees to give it back. When it goes down, the company can't make employees whole. To me, that's not how it works,” said Lawson.

But Twilio will have to make some adjustments if it wants to retain employees — even at the expense of profits.

  • “If in a typical year you do 2[%]-3% for inflation, this year was a multiple of that, which obviously makes the goal of profitability harder to obtain, but it’s the right thing to do for our employees,” said Lawson.

Read the full story here.

— Aisha Counts (email | twitter) and Joe Williams (email | twitter)

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Meet the new (red) boss

Matt Hicks, who started as a developer at Red Hat in 2006, this week succeeded Paul Cormier as CEO of the enterprise open-source software company.

“I started porting Perl applications to Java in IT, and it has been a bit surreal to be in the CEO seat now, but it's certainly been an exciting journey,” Hicks, who most recently had been Red Hat’s executive vice president of products and technologies before his promotion, said in an interview with Protocol.

“I spent many years in IT, and then coming up through the [Red Hat] engineering ranks and working hand in hand with customers … has given me an intuition I really lean on in terms of the challenges customers are dealing with and the types of technology that can help solve them,” said Hicks, who was part of the team that developed Red Hat OpenShift, the hybrid-cloud, Kubernetes application platform. “I think that intuition, combined with the market opportunity right now, it's a good combination. It'll really give me a good base of experience to fall back on in this role.”

Hicks had worked with Cormier, who will remain as chairman, on Red Hat’s strategy, including delivering on open hybrid cloud.

“The really exciting part is hybrid's going to extend to [the] edge,” Hicks said. “From our view of the market, the spend is going to increase to about $250 billion dollars by 2025. You're going to see a tremendous increase in applications that are built for it.”

When it comes to OpenShift, Red Hat will focus on serving new workloads.

“A really important area for us will be in the artificial intelligence or machine-learning space, where we're doing work with areas like OpenShift Data Science,” Hicks said. “That bridges our knowledge of hardware from accelerators like Nvidia to this new class of developers in data. Those two worlds of traditional application development and then model- and AI-based development — it's going to be a really exciting convergence of those. But then you'll also see OpenShift continue to get lightweight, and we'll do this with Linux as well, because the edge use cases require just a smaller footprint.”

— Donna Goodison (email | twitter)

Beware of rabid beasts in the ML model zoo

There’s already plenty of worrying going around over cybersecurity attacks that could be supercharged with AI. But the components of the everyday machine-learning models used by businesses — to automate filling out forms or deciding whether to show an ecommerce site visitor the pleated khakis or the Y2K-inspired denim — are themselves susceptible to all sorts of subterfuge.

Chris Anley, chief scientist at cybersecurity threat consultancy NCC Group, detailed the myriad ways ML models can fall prey to attack in a new report offering technical explanations of novel ML exploits — and ways to protect against them.

Trojanned model: This attack involves malicious models that can execute arbitrary code. These fanged models are camouflaged beside the friendlier pre-trained, off-the-shelf ones available in so-called model zoos.

Infected model: Here, malicious code is added to an existing model.

Data poisoning: The steady flows of data that ML models rely on to operate could be tainted, poisoning the well of decisions they make.

There are many more examples in the 48-page report, which also features ways to mitigate ML sabotage, such as keeping a close eye on data supply-chains and segregating infrastructure used to train models from the rest of a network.

— Kate Kaye (email | twitter)

Around the enterprise

The Department of Homeland Security believes that the threats from a failure to patch or mitigate the Log4j vulnerability could persist for years, it warned late Thursday.

DARPA plans to get more heavily involved with open-source security after realizing how broad a role that type of software plays in the modern tech ecosystem, according to MIT Tech Review.

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Thanks for reading — see you Monday!

This newsletter was updated to clarify a quote from new Red Hat CEO Matt Hicks.

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