May 18, 2022
Photo: Business Wire
Hello and welcome to Protocol Enterprise! Today: How VMware CEO Raghu Raghuram is getting his company ready for edge computing, the SaaS startups that laughed at the SaaSacre, and Kevin Mandia on security entrepreneurs.
KubeCon Europe is in full swing this week in Spain, which makes it a good time to check in on the state of Kubernetes security. According to Red Hat, it’s not great: 93% of respondents “experienced at least one security incident in their Kubernetes environments in the last 12 months, with the incident sometimes leading to revenue or customer loss.”
Nearly a year into his tenure as CEO, Raghu Raghuram believes VMware is well positioned for the third phase of its evolution, but acknowledges its product transformation still needs some work.
“I think we've done a good job of repositioning and realigning the company around the tremendous opportunity that's ahead of us,” Raghuram said in an interview with Protocol. “If I measure it by what our customers are telling us about where they want to go and how our strategy aligns with it, I think we have done really well. If I measure it by alignment of excitement level amongst our employees, it's great. Our product transformation is a work in progress.”
Raghuram talked to Protocol about demand for VMware’s Cross-Cloud Services (which launched last October), how remote workforces have changed its product strategy and demand for on-premises computing at the edge in a cloudy world.
This interview has been edited and condensed for clarity. A longer version of the interview can be found here.
Can you talk about VMware’s realignment and what you're trying to accomplish?
About two, three years ago, we started incubating the next act of VMware as a company, and that was born by the realization that … our customers … are transforming themselves as digital companies very quickly. And as they do that, they're rewriting their business applications as well as creating a lot of new applications. They were doing that in their data centers, they were doing it in public clouds, multiple public clouds. They're doing it at the edge of their network.
So there is a new era of IT … that we call the multicloud era of IT. What this means is that customers have a lot of places that they can run their applications. In fact, 75% of our customers use two public clouds or more on their applications, 40% will use three or more, and they are continuing to operate their data centers. And there are companies, a lot of them, who are also building on the edge.
VMware's opportunity … is [to] help our customers master this complexity of this multicloud world, provide them with a consistent way by which they can build new applications faster — wherever they want to build it or run them, however they want to run it — and make it all secure and connected. That's a big part of our focus as a company.
The second area of our focus as a company is … a lot of us … are working from home, working from the road, working obviously in the office in places where the pandemic is subsiding. And in the world of hybrid work, IT organizations are looking for new platforms to make their employees more productive in this world, but at the same time, more secure. That's the problem that we're solving.
You have said that the spinoff from Dell positioned VMware to become the “Switzerland of the new multicloud industry.” Can you explain what you mean, and how being a standalone company enables that?
The “Switzerland of the industry” refers to the fact that we are able to partner with pretty much everybody in the industry. We have partnered very deeply with the top public cloud providers: notably, AWS, Azure, Google, [Alibaba Cloud], Oracle and IBM, to name a few. We also partner very deeply with the infrastructure providers, like Dell, and competitors of Dell, like HP, Lenovo, etc., as well as software companies. We don't take sides; we don't say one is better than the other. We in fact work with a customer and say, “Mr. Customer, of all these various cloud providers and infrastructure providers, tell us whom you want to use, and we will help you execute and implement your strategy across the cloud providers and infrastructure providers of your choice.”
Historically, we've done that in the context of the data center. Now we are able to do it in the context of the data center and the cloud.
How strong is the demand for on-premises right now?
When we talk about on-premises, there are two places: One is the classic data center, and then the other is the edge.
In the data center, customers have built what they call the private cloud, and what customers are realizing is [that] instead of cloud-first, they're all adopting a cloud-smart strategy. They're looking at their application portfolio and deciding which applications live on cloud one, cloud two, which applications live on the private cloud. As a result, the … corporate data center is also experiencing growth. They are more the single digit as opposed to the double digits of the public cloud, but it's growing.
The other exciting thing that's happening is enterprises are rethinking the edge of the network. If you're a retail business, and you want to deploy cashierless stores in your retail stores, now you're able to put a lot of cameras that can track what shoppers are wanting to purchase. All of the images have to get processed, so they want to get processed locally. And people are building clouds and applications that go into those clouds on the edge. If you're a manufacturing company and you want to introduce a new level of automation in your manufacturing shop floor, or if you're a logistics and supply chain company, and you're reshoring and you’re nearshoring your supply chain, and you're rebuilding a lot of that stuff new — all these activities are causing an increase in the edge. Or you're a telco, and you're building the 5G network.
The edge of the network is, in many ways, what we would classify as on-prem. That is growing very, very fast. In fact, it is growing faster than the cloud.
The speed at which security has been built up over the last 12 months has been a derivative benefit of what we’ve seen during the pandemic. Privacy, compliance and security are three legs of the same stool. What we’re seeing increasingly is that intersection continuing to happen. RingCentral has invested in all those elements.
Despite a volatile tech stock market so far this year that has included delayed IPOs, lowered valuations and declining investor sentiment, a few enterprise tech categories managed to keep getting funding. Data platforms, supply chain management tech, workplace software and cybersecurity startups all dominated the funding cycle over the past quarter.
When it comes to enterprise SaaS, the number of mega-deals — VC funding rounds over $100 million — spiked last year, according to data from Pitchbook. Partially driven by the onset of a pandemic that accelerated the need for everything from contact centers to supply chains to move into the cloud, the number of large VC deals tripled between 2020 and 2021. That growth has extended into this year, where the number of mega-deals has already outpaced all of 2020.
Over that quarter some of the largest deals were in logistics, like Project44’s $420 million funding or recruiting software Remote’s $300 million round. Still, a plethora of startups in those industries as well as data and cybersecurity managed to snag mega-deals.
In this story, we took a closer look into specific categories that were the beneficiaries of a surge in VC investment during this challenging year.
There's a slight irony in the fact that Kevin Mandia is a venture capitalist now: After founding Mandiant in 2004, it took seven years before the company raised a round of VC funding. Mandia is now a strategic partner at Ballistic Ventures, in addition to his day job as CEO of the cybersecurity powerhouse, which is slated to be acquired by Google for $5.4 billion. I had the chance to ask Mandia a few questions last week.
Who is the next Mandiant? Do you see anyone as a kindred spirit out there today?
I don't know, because Mandiant was founded at a [different] time. It was self-funded and mission-oriented. And nowadays, there's so much funding in cybersecurity, everybody's coming in funded. That does change behaviors.
It hits the gas pedal. People will bring things to market before it's ready. It's "growth, growth, growth" — maybe as much or more than "mission, mission, mission."
So none of today’s companies remind you of Mandiant in your earlier days?
I think the next Mandiant is just all the security companies that mix technology with expertise to solve problems. Microsoft, PAN [Palo Alto Networks], CrowdStrike, Google — all these companies are becoming solution-based, [offering both] products and services. That's how it feels to me. And that was always what Mandiant was.
So you feel like your approach has been replicated across the industry, more or less?
Exactly. I remember when I started Mandiant, [an analyst] said that we'd fail. And I asked why — and he said, "You'd have to be an endpoint company, or a network security company, or consulting company, but you can't mix any of it." And I remember thinking, "You have to mix all of it."
Process-mining upstart Celonis turned down separate acquisition offers from ServiceNow and SAP, according to our reporting, and CEO Alex Rinke seems determined to forge his own way.
Cisco reported an abysmal forecast for its current quarter and dismal results for the previous one, which it tried to blame on Russia and component shortages but also points to the continued growth of cloud computing at Cisco’s expense.
Microsoft followed through on plans to change cloud licensing practices in Europe after customer complaints, although it will take some time to see how the changes affect those customers.
Stripe built integrations with Snowflake and Amazon Redshift to allow its customers to move sales data back and forth between Stripe and those popular cloud data warehouses.
At RingCentral, we’re focused on making hybrid work simpler for organizations so they can best set up, run and manage their business. We’re asking ourselves what's the benefit that we can derive, or that we can enable, that is better than the best-in-class in the industry?
Thanks for reading — see you tomorrow!