(upbeat music beginning) >> From the Cube Studios in Palo Alto and Boston, bringing you data-driven insights from the Cube and ETR, this is "Breaking Analysis" with Dave Vellante. >> Making predictions about the future of enterprise tech is more challenging if you strive to lay down forecasts that are measurable. In other words, if you make a prediction, you should be able to look back a year later and say, with some degree of certainty, whether the prediction came true or not, with evidence to back that up. Hello and welcome to this week's Wikibon Cube Insights, powered by ETR. In this breaking analysis, we aim to do just that, with predictions about the macro IT spending environment, cost optimization, security, lots to talk about there, generative AI, cloud, and of course supercloud, blockchain adoption, data platforms, including commentary on Databricks, snowflake, and other key players, automation, events, and we may even have some bonus predictions around quantum computing, and perhaps some other areas. To make all this happen, we welcome back, for the third year in a row, my colleague and friend Eric Bradley from ETR. Eric, thanks for all you do for the community, and thanks for being part of this program. Again. >> I wouldn't miss it for the world. I always enjoy this one. Dave, good to see you. >> Yeah, so let me bring up this next slide and show you, actually come back to me if you would. I got to show the audience this. These are the inbounds that we got from PR firms starting in October around predictions. They know we do prediction posts. And so they'll send literally thousands and thousands of predictions from hundreds of experts in the industry, technologists, consultants, et cetera. And if you bring up the slide I can show you sort of the pattern that developed here. 40% of these thousands of predictions were from cyber. You had AI and data. If you combine those, it's still not close to cyber. Cost optimization was a big thing. Of course, cloud, some on DevOps, and software. Digital... Digital transformation got, you know, some lip service and SaaS. And then there was other, it's kind of around 2%. So quite remarkable, when you think about the focus on cyber, Eric. >> Yeah, there's two reasons why I think it makes sense, though. One, the cybersecurity companies have a lot of cash, so therefore the PR firms might be working a little bit harder for them than some of their other clients. (laughs) And then secondly, as you know, for multiple years now, when we do our macro survey, we ask, "What's your number one spending priority?" And again, it's security. It just isn't going anywhere. It just stays at the top. So I'm actually not that surprised by that little pie chart there, but I was shocked that SaaS was only 5%. You know, going back 10 years ago, that would've been the only thing anyone was talking about. >> Yeah. So true. All right, let's get into it. First prediction, we always start with kind of tech spending. Number one is tech spending increases between four and 5%. ETR has currently got it at 4.6% coming into 2023. This has been a consistently downward trend all year. We started, you know, much, much higher as we've been reporting. Bottom line is the fed is still in control. They're going to ease up on tightening, is the expectation, they're going to shoot for a soft landing. But you know, my feeling is this slingshot economy is going to continue, and it's going to continue to confound, whether it's supply chains or spending. The, the interesting thing about the ETR data, Eric, and I want you to comment on this, the largest companies are the most aggressive to cut. They're laying off, smaller firms are spending faster. They're actually growing at a much larger, faster rate as are companies in EMEA. And that's a surprise. That's outpacing the US and APAC. Chime in on this, Eric. >> Yeah, I was surprised on all of that. First on the higher level spending, we are definitely seeing it coming down, but the interesting thing here is headlines are making it worse. The huge research shop recently said 0% growth. We're coming in at 4.6%. And just so everyone knows, this is not us guessing, we asked 1,525 IT decision-makers what their budget growth will be, and they came in at 4.6%. Now there's a huge disparity, as you mentioned. The Fortune 500, global 2000, barely at 2% growth, but small, it's at 7%. So we're at a situation right now where the smaller companies are still playing a little bit of catch up on digital transformation, and they're spending money. The largest companies that have the most to lose from a recession are being more trepidatious, obviously. So they're playing a "Wait and see." And I hope we don't talk ourselves into a recession. Certainly the headlines and some of their research shops are helping it along. But another interesting comment here is, you know, energy and utilities used to be called an orphan and widow stock group, right? They are spending more than anyone, more than financials insurance, more than retail consumer. So right now it's being driven by mid, small, and energy and utilities. They're all spending like gangbusters, like nothing's happening. And it's the rest of everyone else that's being very cautious. >> Yeah, so very unpredictable right now. All right, let's go to number two. Cost optimization remains a major theme in 2023. We've been reporting on this. You've, we've shown a chart here. What's the primary method that your organization plans to use? You asked this question of those individuals that cited that they were going to reduce their spend and- >> Mhm. >> consolidating redundant vendors, you know, still leads the way, you know, far behind, cloud optimization is second, but it, but cloud continues to outpace legacy on-prem spending, no doubt. Somebody, it was, the guy's name was Alexander Feiglstorfer from Storyblok, sent in a prediction, said "All in one becomes extinct." Now, generally I would say I disagree with that because, you know, as we know over the years, suites tend to win out over, you know, individual, you know, point products. But I think what's going to happen is all in one is going to remain the norm for these larger companies that are cutting back. They want to consolidate redundant vendors, and the smaller companies are going to stick with that best of breed and be more aggressive and try to compete more effectively. What's your take on that? >> Yeah, I'm seeing much more consolidation in vendors, but also consolidation in functionality. We're seeing people building out new functionality, whether it's, we're going to talk about this later, so I don't want to steal too much of our thunder right now, but data and security also, we're seeing a functionality creep. So I think there's further consolidation happening here. I think niche solutions are going to be less likely, and platform solutions are going to be more likely in a spending environment where you want to reduce your vendors. You want to have one bill to pay, not 10. Another thing on this slide, real quick if I can before I move on, is we had a bunch of people write in and some of the answer options that aren't on this graph but did get cited a lot, unfortunately, is the obvious reduction in staff, hiring freezes, and delaying hardware, were three of the top write-ins. And another one was offshore outsourcing. So in addition to what we're seeing here, there were a lot of write-in options, and I just thought it would be important to state that, but essentially the cost optimization is by and far the highest one, and it's growing. So it's actually increased in our citations over the last year. >> And yeah, specifically consolidating redundant vendors. And so I actually thank you for bringing that other up, 'cause I had asked you, Eric, is there any evidence that repatriation is going on and we don't see it in the numbers, we don't see it even in the other, there was, I think very little or no mention of cloud repatriation, even though it might be happening in this in a smattering. >> Not a single mention, not one single mention. I went through it for you. Yep. Not one write-in. >> All right, let's move on. Number three, security leads M&A in 2023. Now you might say, "Oh, well that's a layup," but let me set this up Eric, because I didn't really do a great job with the slide. I hid the, what you've done, because you basically took, this is from the emerging technology survey with 1,181 responses from November. And what we did is we took Palo Alto and looked at the overlap in Palo Alto Networks accounts with these vendors that were showing on this chart. And Eric, I'm going to ask you to explain why we put a circle around OneTrust, but let me just set it up, and then have you comment on the slide and take, give us more detail. We're seeing private company valuations are off, you know, 10 to 40%. We saw a sneak, do a down round, but pretty good actually only down 12%. We've seen much higher down rounds. Palo Alto Networks we think is going to get busy. Again, they're an inquisitive company, they've been sort of quiet lately, and we think CrowdStrike, Cisco, Microsoft, Zscaler, we're predicting all of those will make some acquisitions and we're thinking that the targets are somewhere in this mess of security taxonomy. Other thing we're predicting AI meets cyber big time in 2023, we're going to probably going to see some acquisitions of those companies that are leaning into AI. We've seen some of that with Palo Alto. And then, you know, your comment to me, Eric, was "The RSA conference is going to be insane, hopping mad, "crazy this April," (Eric laughing) but give us your take on this data, and why the red circle around OneTrust? Take us back to that slide if you would, Alex. >> Sure. There's a few things here. First, let me explain what we're looking at. So because we separate the public companies and the private companies into two separate surveys, this allows us the ability to cross-reference that data. So what we're doing here is in our public survey, the tesis, everyone who cited some spending with Palo Alto, meaning they're a Palo Alto customer, we then cross-reference that with the private tech companies. Who also are they spending with? So what you're seeing here is an overlap. These companies that we have circled are doing the best in Palo Alto's accounts. Now, Palo Alto went and bought Twistlock a few years ago, which this data slide predicted, to be quite honest. And so I don't know if they necessarily are going to go after Snyk. Snyk, sorry. They already have something in that space. What they do need, however, is more on the authentication space. So I'm looking at OneTrust, with a 45% overlap in their overall net sentiment. That is a company that's already existing in their accounts and could be very synergistic to them. BeyondTrust as well, authentication identity. This is something that Palo needs to do to move more down that zero trust path. Now why did I pick Palo first? Because usually they're very inquisitive. They've been a little quiet lately. Secondly, if you look at the backdrop in the markets, the IPO freeze isn't going to last forever. Sooner or later, the IPO markets are going to open up, and some of these private companies are going to tap into public equity. In the meantime, however, cash funding on the private side is drying up. If they need another round, they're not going to get it, and they're certainly not going to get it at the valuations they were getting. So we're seeing valuations maybe come down where they're a touch more attractive, and Palo knows this isn't going to last forever. Cisco knows that, CrowdStrike, Zscaler, all these companies that are trying to make a push to become that vendor that you're consolidating in, around, they have a chance now, they have a window where they need to go make some acquisitions. And that's why I believe leading up to RSA, we're going to see some movement. I think it's going to pretty, a really exciting time in security right now. >> Awesome. Thank you. Great explanation. All right, let's go on the next one. Number four is, it relates to security. Let's stay there. Zero trust moves from hype to reality in 2023. Now again, you might say, "Oh yeah, that's a layup." A lot of these inbounds that we got are very, you know, kind of self-serving, but we always try to put some meat in the bone. So first thing we do is we pull out some commentary from, Eric, your roundtable, your insights roundtable. And we have a CISO from a global hospitality firm says, "For me that's the highest priority." He's talking about zero trust because it's the best ROI, it's the most forward-looking, and it enables a lot of the business transformation activities that we want to do. CISOs tell me that they actually can drive forward transformation projects that have zero trust, and because they can accelerate them, because they don't have to go through the hurdle of, you know, getting, making sure that it's secure. Second comment, zero trust closes that last mile where once you're authenticated, they open up the resource to you in a zero trust way. That's a CISO of a, and a managing director of a cyber risk services enterprise. Your thoughts on this? >> I can be here all day, so I'm going to try to be quick on this one. This is not a fluff piece on this one. There's a couple of other reasons this is happening. One, the board finally gets it. Zero trust at first was just a marketing hype term. Now the board understands it, and that's why CISOs are able to push through it. And what they finally did was redefine what it means. Zero trust simply means moving away from hardware security, moving towards software-defined security, with authentication as its base. The board finally gets that, and now they understand that this is necessary and it's being moved forward. The other reason it's happening now is hybrid work is here to stay. We weren't really sure at first, large companies were still trying to push people back to the office, and it's going to happen. The pendulum will swing back, but hybrid work's not going anywhere. By basically on our own data, we're seeing that 69% of companies expect remote and hybrid to be permanent, with only 30% permanent in office. Zero trust works for a hybrid environment. So all of that is the reason why this is happening right now. And going back to our previous prediction, this is why we're picking Palo, this is why we're picking Zscaler to make these acquisitions. Palo Alto needs to be better on the authentication side, and so does Zscaler. They're both fantastic on zero trust network access, but they need the authentication software defined aspect, and that's why we think this is going to happen. One last thing, in that CISO round table, I also had somebody say, "Listen, Zscaler is incredible. "They're doing incredibly well pervading the enterprise, "but their pricing's getting a little high," and they actually think Palo Alto is well-suited to start taking some of that share, if Palo can make one move. >> Yeah, Palo Alto's consolidation story is very strong. Here's my question and challenge. Do you and me, so I'm always hardcore about, okay, you've got to have evidence. I want to look back at these things a year from now and say, "Did we get it right? Yes or no?" If we got it wrong, we'll tell you we got it wrong. So how are we going to measure this? I'd say a couple things, and you can chime in. One is just the number of vendors talking about it. That's, but the marketing always leads the reality. So the second part of that is we got to get evidence from the buying community. Can you help us with that? >> (laughs) Luckily, that's what I do. I have a data company that asks thousands of IT decision-makers what they're adopting and what they're increasing spend on, as well as what they're decreasing spend on and what they're replacing. So I have snapshots in time over the last 11 years where I can go ahead and compare and contrast whether this adoption is happening or not. So come back to me in 12 months and I'll let you know. >> Now, you know, I will. Okay, let's bring up the next one. Number five, generative AI hits where the Metaverse missed. Of course everybody's talking about ChatGPT, we just wrote last week in a breaking analysis with John Furrier and Sarjeet Joha our take on that. We think 2023 does mark a pivot point as natural language processing really infiltrates enterprise tech just as Amazon turned the data center into an API. We think going forward, you're going to be interacting with technology through natural language, through English commands or other, you know, foreign language commands, and investors are lining up, all the VCs are getting excited about creating something competitive to ChatGPT, according to (indistinct) a hundred million dollars gets you a seat at the table, gets you into the game. (laughing) That's before you have to start doing promotion. But he thinks that's what it takes to actually create a clone or something equivalent. We've seen stuff from, you know, the head of Facebook's, you know, AI saying, "Oh, it's really not that sophisticated, ChatGPT, "it's kind of like IBM Watson, it's great engineering, "but you know, we've got more advanced technology." We know Google's working on some really interesting stuff. But here's the thing. ETR just launched this survey for the February survey. It's in the field now. We circle open AI in this category. They weren't even in the survey, Eric, last quarter. So 52% of the ETR survey respondents indicated a positive sentiment toward open AI. I added up all the sort of different bars, we could double click on that. And then I got this inbound from Scott Stevenson of Deep Graham. He said "AI is recession-proof." I don't know if that's the case, but it's a good quote. So bring this back up and take us through this. Explain this chart for us, if you would. >> First of all, I like Scott's quote better than the Facebook one. I think that's some sour grapes. Meta just spent an insane amount of money on the Metaverse and that's a dud. Microsoft just spent money on open AI and it is hot, undoubtedly hot. We've only been in the field with our current ETS survey for a week. So my caveat is it's preliminary data, but I don't care if it's preliminary data. (laughing) We're getting a sneak peek here at what is the number one net sentiment and mindshare leader in the entire machine-learning AI sector within a week. It's beating Data- >> 600. 600 in. >> It's beating Databricks. And we all know Databricks is a huge established enterprise company, not only in machine-learning AI, but it's in the top 10 in the entire survey. We have over 400 vendors in this survey. It's number eight overall, already. In a week. This is not hype. This is real. And I could go on the NLP stuff for a while. Not only here are we seeing it in open AI and machine-learning and AI, but we're seeing NLP in security. It's huge in email security. It's completely transforming that area. It's one of the reasons I thought Palo might take Abnormal out. They're doing such a great job with NLP in this email side, and also in the data prep tools. NLP is going to take out data prep tools. If we have time, I'll discuss that later. But yeah, this is, to me this is a no-brainer, and we're already seeing it in the data. >> Yeah, John Furrier called, you know, the ChatGPT introduction. He said it reminded him of the Netscape moment, when we all first saw Netscape Navigator and went, "Wow, it really could be transformative." All right, number six, the cloud expands to supercloud as edge computing accelerates and CloudFlare is a big winner in 2023. We've reported obviously on cloud, multi-cloud, supercloud and CloudFlare, basically saying what multi-cloud should have been. We pulled this quote from Atif Kahn, who is the founder and CTO of Alkira, thanks, one of the inbounds, thank you. "In 2023, highly distributed IT environments "will become more the norm "as organizations increasingly deploy hybrid cloud, "multi-cloud and edge settings..." Eric, from one of your round tables, "If my sources from edge computing are coming "from the cloud, that means I have my workloads "running in the cloud. "There is no one better than CloudFlare," That's a senior director of IT architecture at a huge financial firm. And then your analysis shows CloudFlare really growing in pervasion, that sort of market presence in the dataset, dramatically, to near 20%, leading, I think you had told me that they're even ahead of Google Cloud in terms of momentum right now. >> That was probably the biggest shock to me in our January 2023 tesis, which covers the public companies in the cloud computing sector. CloudFlare has now overtaken GCP in overall spending, and I was shocked by that. It's already extremely pervasive in networking, of course, for the edge networking side, and also in security. This is the number one leader in SaaSi, web access firewall, DDoS, bot protection, by your definition of supercloud, which we just did a couple of weeks ago, and I really enjoyed that by the way Dave, I think CloudFlare is the one that fits your definition best, because it's bringing all of these aspects together, and most importantly, it's cloud agnostic. It does not need to rely on Azure or AWS to do this. It has its own cloud. So I just think it's, when we look at your definition of supercloud, CloudFlare is the poster child. >> You know, what's interesting about that too, is a lot of people are poo-pooing CloudFlare, "Ah, it's, you know, really kind of not that sophisticated." "You don't have as many tools," but to your point, you're can have those tools in the cloud, Cloudflare's doing serverless on steroids, trying to keep things really simple, doing a phenomenal job at, you know, various locations around the world. And they're definitely one to watch. Somebody put them on my radar (laughing) a while ago and said, "Dave, you got to do a breaking analysis on CloudFlare." And so I want to thank that person. I can't really name them, 'cause they work inside of a giant hyperscaler. But- (Eric laughing) (Dave chuckling) >> Real quickly, if I can from a competitive perspective too, who else is there? They've already taken share from Akamai, and Fastly is their really only other direct comp, and they're not there. And these guys are in poll position and they're the only game in town right now. I just, I don't see it slowing down. >> I thought one of your comments from your roundtable I was reading, one of the folks said, you know, CloudFlare, if my workloads are in the cloud, they are, you know, dominant, they said not as strong with on-prem. And so Akamai is doing better there. I'm like, "Okay, where would you want to be?" (laughing) >> Yeah, which one of those two would you rather be? >> Right? Anyway, all right, let's move on. Number seven, blockchain continues to look for a home in the enterprise, but devs will slowly begin to adopt in 2023. You know, blockchains have got a lot of buzz, obviously crypto is, you know, the killer app for blockchain. Senior IT architect in financial services from your, one of your insight roundtables said quote, "For enterprises to adopt a new technology, "there have to be proven turnkey solutions. "My experience in talking with my peers are, "blockchain is still an open-source component "where you have to build around it." Now I want to thank Ravi Mayuram, who's the CTO of Couchbase sent in, you know, one of the predictions, he said, "DevOps will adopt blockchain, specifically Ethereum." And he referenced actually in his email to me, Solidity, which is the programming language for Ethereum, "will be in every DevOps pro's playbook, "mirroring the boom in machine-learning. "Newer programming languages like Solidity "will enter the toolkits of devs." His point there, you know, Solidity for those of you don't know, you know, Bitcoin is not programmable. Solidity, you know, came out and that was their whole shtick, and they've been improving that, and so forth. But it, Eric, it's true, it really hasn't found its home despite, you know, the potential for smart contracts. IBM's pushing it, VMware has had announcements, and others, really hasn't found its way in the enterprise yet. >> Yeah, and I got to be honest, I don't think it's going to, either. So when we did our top trends series, this was basically chosen as an anti-prediction, I would guess, that it just continues to not gain hold. And the reason why was that first comment, right? It's very much a niche solution that requires a ton of custom work around it. You can't just plug and play it. And at the end of the day, let's be very real what this technology is, it's a database ledger, and we already have database ledgers in the enterprise. So why is this a priority to move to a different database ledger? It's going to be very niche cases. I like the CTO comment from Couchbase about it being adopted by DevOps. I agree with that, but it has to be a DevOps in a very specific use case, and a very sophisticated use case in financial services, most likely. And that's not across the entire enterprise. So I just think it's still going to struggle to get its foothold for a little bit longer, if ever. >> Great, thanks. Okay, let's move on. Number eight, AWS Databricks, Google Snowflake lead the data charge with Microsoft. Keeping it simple. So let's unpack this a little bit. This is the shared accounts peer position for, I pulled data platforms in for analytics, machine-learning and AI and database. So I could grab all these accounts or these vendors and see how they compare in those three sectors. Analytics, machine-learning and database. Snowflake and Databricks, you know, they're on a crash course, as you and I have talked about. They're battling to be the single source of truth in analytics. They're, there's going to be a big focus. They're already started. It's going to be accelerated in 2023 on open formats. Iceberg, Python, you know, they're all the rage. We heard about Iceberg at Snowflake Summit, last summer or last June. Not a lot of people had heard of it, but of course the Databricks crowd, who knows it well. A lot of other open source tooling. There's a company called DBT Labs, which you're going to talk about in a minute. George Gilbert put them on our radar. We just had Tristan Handy, the CEO of DBT labs, on at supercloud last week. They are a new disruptor in data that's, they're essentially making, they're API-ifying, if you will, KPIs inside the data warehouse and dramatically simplifying that whole data pipeline. So really, you know, the ETL guys should be shaking in their boots with them. Coming back to the slide. Google really remains focused on BigQuery adoption. Customers have complained to me that they would like to use Snowflake with Google's AI tools, but they're being forced to go to BigQuery. I got to ask Google about that. AWS continues to stitch together its bespoke data stores, that's gone down that "Right tool for the right job" path. David Foyer two years ago said, "AWS absolutely is going to have to solve that problem." We saw them start to do it in, at Reinvent, bringing together NoETL between Aurora and Redshift, and really trying to simplify those worlds. There's going to be more of that. And then Microsoft, they're just making it cheap and easy to use their stuff, you know, despite some of the complaints that we hear in the community, you know, about things like Cosmos, but Eric, your take? >> Yeah, my concern here is that Snowflake and Databricks are fighting each other, and it's allowing AWS and Microsoft to kind of catch up against them, and I don't know if that's the right move for either of those two companies individually, Azure and AWS are building out functionality. Are they as good? No they're not. The other thing to remember too is that AWS and Azure get paid anyway, because both Databricks and Snowflake run on top of 'em. So (laughing) they're basically collecting their toll, while these two fight it out with each other, and they build out functionality. I think they need to stop focusing on each other, a little bit, and think about the overall strategy. Now for Databricks, we know they came out first as a machine-learning AI tool. They were known better for that spot, and now they're really trying to play catch-up on that data storage compute spot, and inversely for Snowflake, they were killing it with the compute separation from storage, and now they're trying to get into the MLAI spot. I actually wouldn't be surprised to see them make some sort of acquisition. Frank Slootman has been a little bit quiet, in my opinion there. The other thing to mention is your comment about DBT Labs. If we look at our emerging technology survey, last survey when this came out, DBT labs, number one leader in that data integration space, I'm going to just pull it up real quickly. It looks like they had a 33% overall net sentiment to lead data analytics integration. So they are clearly growing, it's fourth straight survey consecutively that they've grown. The other name we're seeing there a little bit is Cribl, but DBT labs is by far the number one player in this space. >> All right. Okay, cool. Moving on, let's go to number nine. With Automation mixer resurgence in 2023, we're showing again data. The x axis is overlap or presence in the dataset, and the vertical axis is shared net score. Net score is a measure of spending momentum. As always, you've seen UI path and Microsoft Power Automate up until the right, that red line, that 40% line is generally considered elevated. UI path is really separating, creating some distance from Automation Anywhere, they, you know, previous quarters they were much closer. Microsoft Power Automate came on the scene in a big way, they loom large with this "Good enough" approach. I will say this, I, somebody sent me a results of a (indistinct) survey, which showed UiPath actually had more mentions than Power Automate, which was surprising, but I think that's not been the case in the ETR data set. We're definitely seeing a shift from back office to front soft office kind of workloads. Having said that, software testing is emerging as a mainstream use case, we're seeing ML and AI become embedded in end-to-end automations, and low-code is serving the line of business. And so this, we think, is going to increasingly have appeal to organizations in the coming year, who want to automate as much as possible and not necessarily, we've seen a lot of layoffs in tech, and people... You're going to have to fill the gaps with automation. That's a trend that's going to continue. >> Yep, agreed. At first that comment about Microsoft Power Automate having less citations than UiPath, that's shocking to me. I'm looking at my chart right here where Microsoft Power Automate was cited by over 60% of our entire survey takers, and UiPath at around 38%. Now don't get me wrong, 38% pervasion's fantastic, but you know you're not going to beat an entrenched Microsoft. So I don't really know where that comment came from. So UiPath, looking at it alone, it's doing incredibly well. It had a huge rebound in its net score this last survey. It had dropped going through the back half of 2022, but we saw a big spike in the last one. So it's got a net score of over 55%. A lot of people citing adoption and increasing. So that's really what you want to see for a name like this. The problem is that just Microsoft is doing its playbook. At the end of the day, I'm going to do a POC, why am I going to pay more for UiPath, or even take on another separate bill, when we know everyone's consolidating vendors, if my license already includes Microsoft Power Automate? It might not be perfect, it might not be as good, but what I'm hearing all the time is it's good enough, and I really don't want another invoice. >> Right. So how does UiPath, you know, and Automation Anywhere, how do they compete with that? Well, the way they compete with it is they got to have a better product. They got a product that's 10 times better. You know, they- >> Right. >> they're not going to compete based on where the lowest cost, Microsoft's got that locked up, or where the easiest to, you know, Microsoft basically give it away for free, and that's their playbook. So that's, you know, up to UiPath. UiPath brought on Rob Ensslin, I've interviewed him. Very, very capable individual, is now Co-CEO. So he's kind of bringing that adult supervision in, and really tightening up the go to market. So, you know, we know this company has been a rocket ship, and so getting some control on that and really getting focused like a laser, you know, could be good things ahead there for that company. Okay. >> One of the problems, if I could real quick Dave, is what the use cases are. When we first came out with RPA, everyone was super excited about like, "No, UiPath is going to be great for super powerful "projects, use cases." That's not what RPA is being used for. As you mentioned, it's being used for mundane tasks, so it's not automating complex things, which I think UiPath was built for. So if you were going to get UiPath, and choose that over Microsoft, it's going to be 'cause you're doing it for more powerful use case, where it is better. But the problem is that's not where the enterprise is using it. The enterprise are using this for base rote tasks, and simply, Microsoft Power Automate can do that. >> Yeah, it's interesting. I've had people on theCube that are both Microsoft Power Automate customers and UiPath customers, and I've asked them, "Well you know, "how do you differentiate between the two?" And they've said to me, "Look, our users and personal productivity users, "they like Power Automate, "they can use it themselves, and you know, "it doesn't take a lot of, you know, support on our end." The flip side is you could do that with UiPath, but like you said, there's more of a focus now on end-to-end enterprise automation and building out those capabilities. So it's increasingly a value play, and that's going to be obviously the challenge going forward. Okay, my last one, and then I think you've got some bonus ones. Number 10, hybrid events are the new category. Look it, if I can get a thousand inbounds that are largely self-serving, I can do my own here, 'cause we're in the events business. (Eric chuckling) Here's the prediction though, and this is a trend we're seeing, the number of physical events is going to dramatically increase. That might surprise people, but most of the big giant events are going to get smaller. The exception is AWS with Reinvent, I think Snowflake's going to continue to grow. So there are examples of physical events that are growing, but generally, most of the big ones are getting smaller, and there's going to be many more smaller intimate regional events and road shows. These micro-events, they're going to be stitched together. Digital is becoming a first class citizen, so people really got to get their digital acts together, and brands are prioritizing earned media, and they're beginning to build their own news networks, going direct to their customers. And so that's a trend we see, and I, you know, we're right in the middle of it, Eric, so you know we're going to, you mentioned RSA, I think that's perhaps going to be one of those crazy ones that continues to grow. It's shrunk, and then it, you know, 'cause last year- >> Yeah, it did shrink. >> right, it was the last one before the pandemic, and then they sort of made another run at it last year. It was smaller but it was very vibrant, and I think this year's going to be huge. Global World Congress is another one, we're going to be there end of Feb. That's obviously a big big show, but in general, the brands and the technology vendors, even Oracle is going to scale down. I don't know about Salesforce. We'll see. You had a couple of bonus predictions. Quantum and maybe some others? Bring us home. >> Yeah, sure. I got a few more. I think we touched upon one, but I definitely think the data prep tools are facing extinction, unfortunately, you know, the Talons Informatica is some of those names. The problem there is that the BI tools are kind of including data prep into it already. You know, an example of that is Tableau Prep Builder, and then in addition, Advanced NLP is being worked in as well. ThoughtSpot, Intelius, both often say that as their selling point, Tableau has Ask Data, Click has Insight Bot, so you don't have to really be intelligent on data prep anymore. A regular business user can just self-query, using either the search bar, or even just speaking into what it needs, and these tools are kind of doing the data prep for it. I don't think that's a, you know, an out in left field type of prediction, but it's the time is nigh. The other one I would also state is that I think knowledge graphs are going to break through this year. Neo4j in our survey is growing in pervasion in Mindshare. So more and more people are citing it, AWS Neptune's getting its act together, and we're seeing that spending intentions are growing there. Tiger Graph is also growing in our survey sample. I just think that the time is now for knowledge graphs to break through, and if I had to do one more, I'd say real-time streaming analytics moves from the very, very rich big enterprises to downstream, to more people are actually going to be moving towards real-time streaming, again, because the data prep tools and the data pipelines have gotten easier to use, and I think the ROI on real-time streaming is obviously there. So those are three that didn't make the cut, but I thought deserved an honorable mention. >> Yeah, I'm glad you did. Several weeks ago, we did an analyst prediction roundtable, if you will, a cube session power panel with a number of data analysts and that, you know, streaming, real-time streaming was top of mind. So glad you brought that up. Eric, as always, thank you very much. I appreciate the time you put in beforehand. I know it's been crazy, because you guys are wrapping up, you know, the last quarter survey in- >> Been a nuts three weeks for us. (laughing) >> job. I love the fact that you're doing, you know, the ETS survey now, I think it's quarterly now, right? Is that right? >> Yep. >> Yep. So that's phenomenal. >> Four times a year. I'll be happy to jump on with you when we get that done. I know you were really impressed with that last time. >> It's unbelievable. This is so much data at ETR. Okay. Hey, that's a wrap. Thanks again. >> Take care Dave. Good seeing you. >> All right, many thanks to our team here, Alex Myerson as production, he manages the podcast force. Ken Schiffman as well is a critical component of our East Coast studio. Kristen Martin and Cheryl Knight help get the word out on social media and in our newsletters. And Rob Hoof is our editor-in-chief. He's at siliconangle.com. He's just a great editing for us. Thank you all. Remember all these episodes that are available as podcasts, wherever you listen, podcast is doing great. Just search "Breaking analysis podcast." Really appreciate you guys listening. I publish each week on wikibon.com and siliconangle.com, or you can email me directly if you want to get in touch, david.vellante@siliconangle.com. That's how I got all these. I really appreciate it. I went through every single one with a yellow highlighter. It took some time, (laughing) but I appreciate it. You could DM me at dvellante, or comment on our LinkedIn post and please check out etr.ai. Its data is amazing. Best survey data in the enterprise tech business. This is Dave Vellante for theCube Insights, powered by ETR. Thanks for watching, and we'll see you next time on "Breaking Analysis." (upbeat music beginning) (upbeat music ending)

>> From theCUBE Studios in Palo Alto and Boston, bringing you data-driven insights from theCUBE and ETR, this is Breaking Analysis with Dave Vellante. >> This past week we saw two of the Big 3 cloud providers present the latest update on their respective cloud visions, their business progress, their announcements and innovations. The content at these events had many overlapping themes, including modern cloud infrastructure at global scale, applying advanced machine intelligence, AKA AI, end-to-end data platforms, collaboration software. They talked a lot about the future of work automation. And they gave us a little taste, each company of the Metaverse Web 3.0 and much more. Despite these striking similarities, the differences between these two cloud platforms and that of AWS remains significant. With Microsoft leveraging its massive application software footprint to dominate virtually all markets and Google doing everything in its power to keep up with the frenetic pace of today's cloud innovation, which was set into motion a decade and a half ago by AWS. Hello and welcome to this week's Wikibon CUBE Insights, powered by ETR. In this Breaking Analysis, we unpack the immense amount of content presented by the CEOs of Microsoft and Google Cloud at Microsoft Ignite and Google Cloud Next. We'll also quantify with ETR survey data the relative position of these two cloud giants in four key sectors: cloud IaaS, BI analytics, data platforms and collaboration software. Now one thing was clear this past week, hybrid events are the thing. Google Cloud Next took place live over a 24-hour period in six cities around the world, with the main gathering in New York City. Microsoft Ignite, which normally is attended by 30,000 people, had a smaller event in Seattle, in person with a virtual audience around the world. AWS re:Invent, of course, is much different. Yes, there's a virtual component at re:Invent, but it's all about a big live audience gathering the week after Thanksgiving, in the first week of December in Las Vegas. Regardless, Satya Nadella keynote address was prerecorded. It was highly produced and substantive. It was visionary, energetic with a strong message that Azure was a platform to allow customers to build their digital businesses. Doing more with less, which was a key theme of his. Nadella covered a lot of ground, starting with infrastructure from the compute, highlighting a collaboration with Arm-based, Ampere processors. New block storage, 60 regions, 175,000 miles of fiber cables around the world. He presented a meaningful multi-cloud message with Azure Arc to support on-prem and edge workloads, as well as of course the public cloud. And talked about confidential computing at the infrastructure level, a theme we hear from all cloud vendors. He then went deeper into the end-to-end data platform that Microsoft is building from the core data stores to analytics, to governance and the myriad tooling Microsoft offers. AI was next with a big focus on automation, AI, training models. He showed demos of machines coding and fixing code and machines automatically creating designs for creative workers and how Power Automate, Microsoft's RPA tooling, would combine with Microsoft Syntex to understand documents and provide standard ways for organizations to communicate with those documents. There was of course a big focus on Azure as developer cloud platform with GitHub Copilot as a linchpin using AI to assist coders in low-code and no-code innovations that are coming down the pipe. And another giant theme was a workforce transformation and how Microsoft is using its heritage and collaboration and productivity software to move beyond what Nadella called productivity paranoia, i.e., are remote workers doing their jobs? In a world where collaboration is built into intelligent workflows, and he even showed a glimpse of the future with AI-powered avatars and partnerships with Meta and Cisco with Teams of all firms. And finally, security with a bevy of tools from identity, endpoint, governance, et cetera, stressing a suite of tools from a single provider, i.e., Microsoft. So a couple points here. One, Microsoft is following in the footsteps of AWS with silicon advancements and didn't really emphasize that trend much except for the Ampere announcement. But it's building out cloud infrastructure at a massive scale, there is no debate about that. Its plan on data is to try and provide a somewhat more abstracted and simplified solutions, which differs a little bit from AWS's approach of the right database tool, for example, for the right job. Microsoft's automation play appears to provide simple individual productivity tools, kind of a ground up approach and make it really easy for users to drive these bottoms up initiatives. We heard from UiPath that forward five last month, a little bit of a different approach of horizontal automation, end-to-end across platforms. So quite a different play there. Microsoft's angle on workforce transformation is visionary and will continue to solidify in our view its dominant position with Teams and Microsoft 365, and it will drive cloud infrastructure consumption by default. On security as well as a cloud player, it has to have world-class security, and Azure does. There's not a lot of debate about that, but the knock on Microsoft is Patch Tuesday becomes Hack Wednesday because Microsoft releases so many patches, it's got so much Swiss cheese in its legacy estate and patching frequently, it becomes a roadmap and a trigger for hackers. Hey, patch Tuesday, these are all the exploits that you can go after so you can act before the patches are implemented. And so it's really become a problem for users. As well Microsoft is competing with many of the best-of-breed platforms like CrowdStrike and Okta, which have market momentum and appear to be more attractive horizontal plays for customers outside of just the Microsoft cloud. But again, it's Microsoft. They make it easy and very inexpensive to adopt. Now, despite the outstanding presentation by Satya Nadella, there are a couple of statements that should raise eyebrows. Here are two of them. First, as he said, Azure is the only cloud that supports all organizations and all workloads from enterprises to startups, to highly regulated industries. I had a conversation with Sarbjeet Johal about this, to make sure I wasn't just missing something and we were both surprised, somewhat, by this claim. I mean most certainly AWS supports more certifications for example, and we would think it has a reasonable case to dispute that claim. And the other statement, Nadella made, Azure is the only cloud provider enabling highly regulated industries to bring their most sensitive applications to the cloud. Now, reasonable people can debate whether AWS is there yet, but very clearly Oracle and IBM would have something to say about that statement. Now maybe it's not just, would say, "Oh, they're not real clouds, you know, they're just going to hosting in the cloud if you will." But still, when it comes to mission-critical applications, you would think Oracle is really the the leader there. Oh, and Satya also mentioned the claim that the Edge browser, the Microsoft Edge browser, no questions asked, he said, is the best browser for business. And we could see some people having some questions about that. Like isn't Edge based on Chrome? Anyway, so we just had to question these statements and challenge Microsoft to defend them because to us it's a little bit of BS and makes one wonder what else in such as awesome keynote and it was awesome, it was hyperbole. Okay, moving on to Google Cloud Next. The keynote started with Sundar Pichai doing a virtual session, he was remote, stressing the importance of Google Cloud. He mentioned that Google Cloud from its Q2 earnings was on a $25-billion annual run rate. What he didn't mention is that it's also on a 3.6 billion annual operating loss run rate based on its first half performance. Just saying. And we'll dig into that issue a little bit more later in this episode. He also stressed that the investments that Google has made to support its core business and search, like its global network of 22 subsea cables to support things like, YouTube video, great performance obviously that we all rely on, those innovations there. Innovations in BigQuery to support its search business and its threat analysis that it's always had and its AI, it's always been an AI-first company, he's stressed, that they're all leveraged by the Google Cloud Platform, GCP. This is all true by the way. Google has absolutely awesome tech and the talk, as well as his talk, Pichai, but also Kurian's was forward thinking and laid out a vision of the future. But it didn't address in our view, and I talked to Sarbjeet Johal about this as well, today's challenges to the degree that Microsoft did and we expect AWS will at re:Invent this year, it was more out there, more forward thinking, what's possible in the future, somewhat less about today's problem, so I think it's resonates less with today's enterprise players. Thomas Kurian then took over from Sundar Pichai and did a really good job of highlighting customers, and I think he has to, right? He has to say, "Look, we are in this game. We have customers, 9 out of the top 10 media firms use Google Cloud. 8 out of the top 10 manufacturers. 9 out of the top 10 retailers. Same for telecom, same for healthcare. 8 out of the top 10 retail banks." He and Sundar specifically referenced a number of companies, customers, including Avery Dennison, Groupe Renault, H&M, John Hopkins, Prudential, Minna Bank out of Japan, ANZ bank and many, many others during the session. So you know, they had some proof points and you got to give 'em props for that. Now like Microsoft, Google talked about infrastructure, they referenced training processors and regions and compute optionality and storage and how new workloads were emerging, particularly data-driven workloads in AI that required new infrastructure. He explicitly highlighted partnerships within Nvidia and Intel. I didn't see anything on Arm, which somewhat surprised me 'cause I believe Google's working on that or at least has come following in AWS's suit if you will, but maybe that's why they're not mentioning it or maybe I got to do more research there, but let's park that for a minute. But again, as we've extensively discussed in Breaking Analysis in our view when it comes to compute, AWS via its Annapurna acquisition is well ahead of the pack in this area. Arm is making its way into the enterprise, but all three companies are heavily investing in infrastructure, which is great news for customers and the ecosystem. We'll come back to that. Data and AI go hand in hand, and there was no shortage of data talk. Google didn't mention Snowflake or Databricks specifically, but it did mention, by the way, it mentioned Mongo a couple of times, but it did mention Google's, quote, Open Data cloud. Now maybe Google has used that term before, but Snowflake has been marketing the data cloud concept for a couple of years now. So that struck as a shot across the bow to one of its partners and obviously competitor, Snowflake. At BigQuery is a main centerpiece of Google's data strategy. Kurian talked about how they can take any data from any source in any format from any cloud provider with BigQuery Omni and aggregate and understand it. And with the support of Apache Iceberg and Delta and Hudi coming in the future and its open Data Cloud Alliance, they talked a lot about that. So without specifically mentioning Snowflake or Databricks, Kurian co-opted a lot of messaging from these two players, such as life and tech. Kurian also talked about Google Workspace and how it's now at 8 million users up from 6 million just two years ago. There's a lot of discussion on developer optionality and several details on tools supported and the open mantra of Google. And finally on security, Google brought out Kevin Mandian, he's a CUBE alum, extremely impressive individual who's CEO of Mandiant, a leading security service provider and consultancy that Google recently acquired for around 5.3 billion. They talked about moving from a shared responsibility model to a shared fate model, which is again, it's kind of a shot across AWS's bow, kind of shared responsibility model. It's unclear that Google will pay the same penalty if a customer doesn't live up to its portion of the shared responsibility, but we can probably assume that the customer is still going to bear the brunt of the pain, nonetheless. Mandiant is really interesting because it's a services play and Google has stated that it is not a services company, it's going to give partners in the channel plenty of room to play. So we'll see what it does with Mandiant. But Mandiant is a very strong enterprise capability and in the single most important area security. So interesting acquisition by Google. Now as well, unlike Microsoft, Google is not competing with security leaders like Okta and CrowdStrike. Rather, it's partnering aggressively with those firms and prominently putting them forth. All right. Let's get into the ETR survey data and see how Microsoft and Google are positioned in four key markets that we've mentioned before, IaaS, BI analytics, database data platforms and collaboration software. First, let's look at the IaaS cloud. ETR is just about to release its October survey, so I cannot share the that data yet. I can only show July data, but we're going to give you some directional hints throughout this conversation. This chart shows net score or spending momentum on the vertical axis and overlap or presence in the data, i.e., how pervasive the platform is. That's on the horizontal axis. And we've inserted the Wikibon estimates of IaaS revenue for the companies, the Big 3. Actually the Big 4, we included Alibaba. So a couple of points in this somewhat busy data chart. First, Microsoft and AWS as always are dominant on both axes. The red dotted line there at 40% on the vertical axis. That represents a highly elevated spending velocity and all of the Big 3 are above the line. Now at the same time, GCP is well behind the two leaders on the horizontal axis and you can see that in the table insert as well in our revenue estimates. Now why is Azure bigger in the ETR survey when AWS is larger according to the Wikibon revenue estimates? And the answer is because Microsoft with products like 365 and Teams will often be considered by respondents in the survey as cloud by customers, so they fit into that ETR category. But in the insert data we're stripping out applications and SaaS from Microsoft and Google and we're only isolating on IaaS. The other point is when you take a look at the early October returns, you see downward pressure as signified by those dotted arrows on every name. The only exception was Dell, or Dell and IBM, which showing slightly improved momentum. So the survey data generally confirms what we know that AWS and Azure have a massive lead and strong momentum in the marketplace. But the real story is below the line. Unlike Google Cloud, which is on pace to lose well over 3 billion on an operating basis this year, AWS's operating profit is around $20 billion annually. Microsoft's Intelligent Cloud generated more than $30 billion in operating income last fiscal year. Let that sink in for a moment. Now again, that's not to say Google doesn't have traction, it does and Kurian gave some nice proof points and customer examples in his keynote presentation, but the data underscores the lead that Microsoft and AWS have on Google in cloud. And here's a breakdown of ETR's proprietary net score methodology, that vertical axis that we showed you in the previous chart. It asks customers, are you adopting the platform new? That's that lime green. Are you spending 6% or more? That's the forest green. Is you're spending flat? That's the gray. Is you're spending down 6% or worse? That's the pinkest color. Or are you replacing the platform, defecting? That's the bright red. You subtract the reds from the greens and you get a net score. Now one caveat here, which actually is really favorable from Microsoft, the Microsoft data that we're showing here is across the entire Microsoft portfolio. The other point is, this is July data, we'll have an update for you once ETR releases its October results. But we're talking about meaningful samples here, the ends. 620 for AWS over a thousand from Microsoft in more than 450 respondents in the survey for Google. So the real tell is replacements, that bright red. There is virtually no churn for AWS and Microsoft, but Google's churn is 5x, those two in the survey. Now 5% churn is not high, but you'd like to see three things for Google given it's smaller size. One is less churn, two is much, much higher adoption rates in the lime green. Three is a higher percentage of those spending more, the forest green. And four is a lower percentage of those spending less. And none of these conditions really applies here for Google. GCP is still not growing fast enough in our opinion, and doesn't have nearly the traction of the two leaders and that shows up in the survey data. All right, let's look at the next sector, BI analytics. Here we have that same XY dimension. Again, Microsoft dominating the picture. AWS very strong also in both axes. Tableau, very popular and respectable of course acquired by Salesforce on the vertical axis, still looking pretty good there. And again on the horizontal axis, big presence there for Tableau. And Google with Looker and its other platforms is also respectable, but it again, has some work to do. Now notice Streamlit, that's a recent Snowflake acquisition. It's strong in the vertical axis and because of Snowflake's go-to-market (indistinct), it's likely going to move to the right overtime. Grafana is also prominent in the Y axis, but a glimpse at the most recent survey data shows them slightly declining while Looker actually improves a bit. As does Cloudera, which we'll move up slightly. Again, Microsoft just blows you away, doesn't it? All right, now let's get into database and data platform. Same X Y dimensions, but now database and data warehouse. Snowflake as usual takes the top spot on the vertical axis and it is actually keeps moving to the right as well with again, Microsoft and AWS is dominant in the market, as is Oracle on the X axis, albeit it's got less spending velocity, but of course it's the database king. Google is well behind on the X axis but solidly above the 40% line on the vertical axis. Note that virtually all platforms will see pressure in the next survey due to the macro environment. Microsoft might even dip below the 40% line for the first time in a while. Lastly, let's look at the collaboration and productivity software market. This is such an important area for both Microsoft and Google. And just look at Microsoft with 365 and Teams up into the right. I mean just so impressive in ubiquitous. And we've highlighted Google. It's in the pack. It certainly is a nice base with 174 N, which I can tell you that N will rise in the next survey, which is an indication that more people are adopting. But given the investment and the tech behind it and all the AI and Google's resources, you'd really like to see Google in this space above the 40% line, given the importance of this market, of this collaboration area to Google's success and the degree to which they emphasize it in their pitch. And look, this brings up something that we've talked about before on Breaking Analysis. Google doesn't have a tech problem. This is a go-to-market and marketing challenge that Google faces and it's up against two go-to-market champs and Microsoft and AWS. And Google doesn't have the enterprise sales culture. It's trying, it's making progress, but it's like that racehorse that has all the potential in the world, but it's just missing some kind of key ingredient to put it over at the top. It's always coming in third, (chuckles) but we're watching and Google's obviously, making some investments as we shared with earlier. All right. Some final thoughts on what we learned this week and in this research: customers and partners should be thrilled that both Microsoft and Google along with AWS are spending so much money on innovation and building out global platforms. This is a gift to the industry and we should be thankful frankly because it's good for business, it's good for competitiveness and future innovation as a platform that can be built upon. Now we didn't talk much about multi-cloud, we haven't even mentioned supercloud, but both Microsoft and Google have a story that resonates with customers in cross cloud capabilities, unlike AWS at this time. But we never say never when it comes to AWS. They sometimes and oftentimes surprise you. One of the other things that Sarbjeet Johal and John Furrier and I have discussed is that each of the Big 3 is positioning to their respective strengths. AWS is the best IaaS. Microsoft is building out the kind of, quote, we-make-it-easy-for-you cloud, and Google is trying to be the open data cloud with its open-source chops and excellent tech. And that puts added pressure on Snowflake, doesn't it? You know, Thomas Kurian made some comments according to CRN, something to the effect that, we are the only company that can do the data cloud thing across clouds, which again, if I'm being honest is not really accurate. Now I haven't clarified these statements with Google and often things get misquoted, but there's little question that, as AWS has done in the past with Redshift, Google is taking a page out of Snowflake, Databricks as well. A big difference in the Big 3 is that AWS doesn't have this big emphasis on the up-the-stack collaboration software that both Microsoft and Google have, and that for Microsoft and Google will drive captive IaaS consumption. AWS obviously does some of that in database, a lot of that in database, but ISVs that compete with Microsoft and Google should have a greater affinity, one would think, to AWS for competitive reasons. and the same thing could be said in security, we would think because, as I mentioned before, Microsoft competes very directly with CrowdStrike and Okta and others. One of the big thing that Sarbjeet mentioned that I want to call out here, I'd love to have your opinion. AWS specifically, but also Microsoft with Azure have successfully created what Sarbjeet calls brand distance. AWS from the Amazon Retail, and even though AWS all the time talks about Amazon X and Amazon Y is in their product portfolio, but you don't really consider it part of the retail organization 'cause it's not. Azure, same thing, has created its own identity. And it seems that Google still struggles to do that. It's still very highly linked to the sort of core of Google. Now, maybe that's by design, but for enterprise customers, there's still some potential confusion with Google, what's its intentions? How long will they continue to lose money and invest? Are they going to pull the plug like they do on so many other tools? So you know, maybe some rethinking of the marketing there and the positioning. Now we didn't talk much about ecosystem, but it's vital for any cloud player, and Google again has some work to do relative to the leaders. Which brings us to supercloud. The ecosystem and end customers are now in a position this decade to digitally transform. And we're talking here about building out their own clouds, not by putting in and building data centers and installing racks of servers and storage devices, no. Rather to build value on top of the hyperscaler gift that has been presented. And that is a mega trend that we're watching closely in theCUBE community. While there's debate about the supercloud name and so forth, there little question in our minds that the next decade of cloud will not be like the last. All right, we're going to leave it there today. Many thanks to Sarbjeet Johal, and my business partner, John Furrier, for their input to today's episode. Thanks to Alex Myerson who's on production and manages the podcast and Ken Schiffman as well. Kristen Martin and Cheryl Knight helped get the word out on social media and in our newsletters. And Rob Hof is our editor in chief over at SiliconANGLE, who does some wonderful editing. And check out SiliconANGLE, a lot of coverage on Google Cloud Next and Microsoft Ignite. Remember, all these episodes are available as podcast wherever you listen. Just search Breaking Analysis podcast. I publish each week on wikibon.com and siliconangle.com. And you can always get in touch with me via email, david.vellante@siliconangle.com or you can DM me at dvellante or comment on my LinkedIn posts. And please do check out etr.ai, the best survey data in the enterprise tech business. This is Dave Vellante for the CUBE Insights, powered by ETR. Thanks for watching and we'll see you next time on Breaking Analysis. (gentle music)

>> From theCUBE studios in Palo Alto in Boston, bringing you data driven insights from theCUBE and ETR, this is "Breaking Analysis" with Dave Vellante >> In its early days, robotic process automation emerged from rudimentary screen scraping, macros and workflow automation software. Once a script heavy and limited tool that largely was used to eliminate mundane tasks for individual users, and by the way still is, RPA's evolved into an enterprise-wide mega trend that puts automation at the center of digital business initiatives. Hello and welcome to this week's Wikibon CUBE Insights, powered by ETR. In this breaking analysis, we present our quarterly update of the trends in RPA and automation and share the latest survey data from enterprise technology research. RPA has grown quite rapidly and the acronym is becoming a convenient misnomer in a way. I mean the real action in RPA has evolved into enterprise-wide automation initiatives. Once exclusively focused really on back office automation and areas such as finance, RPA has now become an enterprise initiative as many larger organizations especially, move well beyond cost savings and outside of the CFO's purview. We predicted in early "Breaking Analysis" episodes that productivity declines in the US and Europe especially, would require automation to solve some of the world's most pressing problems. And that's what's happening. Automation today is attacking not only the labor shortage but it's supporting optimizations in ESG, supply chain, helping with inflation challenges, improving capital allocation. For example, the supply chain issues today, think about what they require. Somebody's got to do research, they got to figure out inventory management, they got to go into different systems, do prioritizations, do price matching, and perform a number of other complex tasks. These are time consuming processes. Now the combination of RPA and machine intelligence is helping managers compress the time to value and optimize decision making. Organizations are realizing that a digital business goes beyond cloud and SaaS, and puts data, AI and automation at the core leveraging cloud and SaaS but reimagining entire workflows and customer experiences. Moreover, low code solutions are taking off and dramatically expanding the ability of organizations to make changes to their processes. We're also seeing adjacencies to RPA becoming folded into enterprise automation initiatives. And that trend will continue for example Legacy software testing tools. This is especially important as companies SaaSify their business and look for modern testing tools that can keep pace with their transformations. So the bottom line is, RPA or intelligent automation has become a strategic priority for many companies. And that means you got to get the CIO involved to ensure that the governance and compliance edicts of the organization are appropriately met. And that alignment occurs across the technology and business lines. A couple of years ago, when we saw that RPA could be much much more than what it was at the time, we revisited our total available market or TAM analysis. And in doing so, we felt there would be a confluence of automation, AI, and data and that the front and back office schism would converge. That is shown here. This is our updated TAM chart, which we shared a while back with a dramatically larger scope. We were interested that, just a few days ago by the way Forrester put out a new report, picked up by Digital Nation, that the RPA market would reach 22 billion by 2025. Now, as we said at the time our TAM includes the entire ecosystem including professional services as does Forrester's recent report and the projections they're in. So see that little dotted red line there, that's about at the 22 billion mark. We're a few years away but we definitely feel as though this is taking shape the way we had previously envisioned. That is to say a progression from back office blending with customer facing processes becoming a core element of digital transformations and eventually entering the realm of automated systems of agency where automations are reliable enough and trusted enough to make realtime decisions at scale for a much, much wider scope of enterprise activities. So we see this evolving over the 2020s or the balance of this decade and becoming a massive multi hundred billion dollar market. Now, unfortunately for later investors, this enthusiasm that I'm sharing around automation has not translated into price momentum for the stocks in this sector. Here are the charts, the stock charts for four RPA related players with market values inserted in each graphic. We've set the cross hairs approximately at the timing of UiPath's IPO. And that's where we'll start. UiPath IPOed last April and you can see the steady decline in its price. UiPath's Series F investors got in at $30 billion valuation, so that's been halved, more than half. But UiPath is the leader in this sector as we'll see in a moment. So investors are just going to have to be patient. Now, you know the problem with these hot tech companies is the cat gets let out of the bag before the IPO because they raise so much private money, it hits the headlines and then, at the time you had zero interest rates, you had the tech stock boom during the pandemic, so you're just going to have to wait it out to get a nice return if you got in sort of post IPO. You know, which... I think this business will deliver over the long term. Now, Blue Prism is interesting because it's being bought by SS&C Technologies after a bidding war with Vista. So that's why their stock has held up pretty reasonably. Vista's PE firm, which owns TIBCO and was going to mash it, Blue Prism that is, together with TIBCO. That was a play I always liked because RPA is going to be integrated across the board. And TIBCO is an integration company, and I felt it was in a good position to do that. But SS&C obvious said, "Hey, we can do that too." And look, they're getting a proven RPA tech stack for 10% of the value of UiPath. Might be a sharp move, we'll see. Or maybe they'll jack prices and squeeze the cashflow, I honestly have no idea. And we shelled the other two players here who really aren't RPA specialists. Appian is a low code business process development platform and Pegasystems of course, we've reported on them extensively. They're a longtime business process player that has done pretty well. But both stocks have suffered pretty dramatically since last April. So let's take a look at the customer survey data and see what it tells us. The ETR survey data shows a pretty robust picture frankly. This chart depicts the net score or customer spending momentum on that vertical axis and market share or pervasiveness relative to other companies and technologies in the ETR dataset, that's on the horizontal. That red dotted line at the 40% mark, that indicates an elevated spending level for the company within this technology. The chart insert you see there shows how the company positions are plotted using net score and market share or Ns. And ETR's tool has a couple of cool features. We can click on the dot and it allows you to track the progression over time, in this case going back to January, 2020 that's the lines that we've inserted here. So we'll start with Microsoft and we'll get that over with. Microsoft acquired a company called Softomotive for a reported a hundred million dollars thereabout, it's a little more than that. So pretty much a lunch money for Mr. Softy. So Microsoft bought the company in May and look at the gray line where it started showing up in the October ETR surveys at a very highly elevated level, typical Microsoft, right? I mean, a lot of spending momentum and they're pretty much ubiquitous. And it just stayed there and it's gone up and to the right, just really a dominant picture. But Microsoft Power Automate is really kind of a personal productivity tool not super feature rich like some of the others that we're going to talk about, it's just part of the giant Microsoft software estate. And there's a substantial amount of overlap between, for example, UiPath's and Automation Anywhere's customer bases and Power Automate users. And it's speaking with the number of customers. They'll say, "Yeah, we use Power Automate," but they see enterprise automation platforms as much more feature rich and capable and they see a role for both. But it's something to watch out for because Microsoft can obviously take a bite out of virtually any platform and moderate the enthusiasm for it. But nonetheless, these other firms that we're mentioning here, the two leaders, they really stand out, UiPath and Automation Anywhere. Both are elevated well above that 40% line with a meaningful presence in the data set. And you can see the path that they took to get to where they are today. Now we had predicted in 2021 in our predictions post that Automation Anywhere would IPO in 2021. So we predicted that in December of 2020 but it hasn't happened yet. The company obviously wasn't ready, and it brought in new management. We reported on that, Chris Riley as the Chief Revenue Officer, and it made other moves to show up their business. Now let me say this about Riley. I've known him him for years, he's a world class sales leader, one of the best in the tech business. And he knows how to build a world class go to market team, I guarantee that's what he's doing. I have no doubt he's completely reinventing his sales team, the alliances, he's got a lot of experience of that when he was at EMC and Dell and HPE, and he knows the channel really well. So I have a great deal of confidence that if Automation Anywhere's product is any good, which the ETR data clearly shows that it is, then the company is going to do very well. Now, as for the timing of an IPO, look, with the market choppiness, who knows? Automation Anywhere, they raised a ton of dough and it was last valued around... In 2019, it was just north of 7 billion. And so if UiPath is valued at 15 billion, you could speculate that Automation Anywhere can't be valued at much more than 10 billion, maybe a little under, maybe a little over. And so they might wait for the market volatility to chill out a little bit before they do the IPO or maybe they've got some further cleanup to do and they want to get their metrics better, but we'll see. Now to the point earlier about Blue Prism, look at its position on the vertical axis, very respectable. Just a finer point on Pega. We've always said that they're not an RPA specialist but they have an RPA offering and a presence in the ETR data set in this sector. And they got a sizeable market cap so we'd like to include them. Now here's another look at the net score data. The way net score works is ETR asks customers, are you adopting a platform for the first time? That's that lime green there. Are you accelerating spending on the platform by 6% or more relative to last year, or sometimes relative to some other point in time, this is relative to last year. That's the forest green. Is your spending flat or is it, that's the gray, or is it decreasing by 6% or worse? Or are you churning? That's that bright red. You subtract the reds from the greens and you get net score which is shown for each company on the right along with the Ns in the survey. So other than Pega, every company shown here has new adoptions in the double digits, not a lot of churn. UiPath and and Automation Anywhere have net scores well over that 40% mark. Now, some other data points on those two, ETR did a little peeling of the onion in their data set and I found a couple of interesting nuggets. UiPath in the Fortune 500 has a 91% net score and a 77% net score in the Global 2000. So significantly higher than its overall average. This speaks to the company's strong presence in larger companies and the adoption and how larger companies are leaning in. Although UiPath's actually still solid in smaller firms as well by the way but... Now the other piece of information is, when asked why they buy UiPath over alternatives customers said a robust feature set, technical lead and compatibility with their existing environment. Now to Automation Anywhere. They have a 72% net score in the Fortune 500, well above its average across the survey, but 46% only in the Global 2000 below its overall average shown here of 54. So we'd like to see a wider aperture in the Global 2000. Again, this is a survey set, who knows, but oftentimes these surveys are indicative. So maybe Automation Anywhere just working that out, more time, figuring out the go to market in the Global 2000 beyond those larger customers. Now, when asked why they buy from Automation Anywhere versus the competition customers cited a robust feature set, just like UiPath, technological lead, just like UiPath, and fast ROI. Now I really believe that both for Automation Anywhere and UiPath, the time to value is much compressed relative to most technology projects. So I would highlight that as well. And I think that's a fundamental reason, one of the reasons why RPA has taken off. All right let's wrap up. The bottom line is this space is moving and it's evolving quickly, and will keep on a fast pace given the customer poll, the funding levels that have been poured into the space, and, of course, the competitive climate. We're seeing a new transformation agenda emerge. Pre COVID, the catalyst was back office efficiency. During the pandemic, we saw an acceleration and organizations are taking the lessons learned from that forced March experience, the digital I sometimes call it, and they're realizing a couple things. One, they can attack much more complex problems than previously envisioned. And two, in order to cloudify and SaaSify their businesses, they need to put automation along with data and AI at the core to completely transform into a digital entity. Now we're moving well beyond automating bespoke tasks and paving the cow path as I sometimes like to say. And we're seeing much more integration across systems like ERP and HR and finance and logistics et cetera, collaboration, customer experience, and importantly, this has to extend into broader ecosystems. We're also seeing a rise in semantic workflows to tackle more complex problems. We're talking here about going beyond a linear process of automation. Like for instance, read this, click on that, copy that, put it here, join it with that, drag and drop it over here and send it over there. It's evolving into a much more interpreter of actions using machine intelligence to watch, to learn, to infer, and then ultimately act as well as discover other process automation opportunities. So think about the way work is done today. Going into various applications, you grab data, you trombone back out, you do it again, in and out, in and out, in and out of these systems, et cetera, NASM, and replacing that sequence with a much more intelligent process. We're also seeing a lot more involvement from C-level executives, especially the CIO, but also the chief digital officer, the chief data officer, with low code solutions enabling lines of business to be much more involved in the game. So look, it's still early here. This sector, in my view, hasn't even hit that steep part of the S-curve yet, it's still building momentum with larger firms leading the innovation, investing in things like centers of excellence and training, digging in to find new ways of doing things. It's a huge priority because the efficiencies that large companies get, they drop right to the bottom line and the big ER the more money that drops. We see that in the adoption data and we think it's just getting started. So keep an eye on this space. It's not a fad, it's here to stay. Okay, that's it for now. Thanks to my colleagues, Stephanie Chan who helped research this week's topics and Alex Myerson on the production team who also manages the Breaking Analysis Podcast, Kristen Martin and Cheryl Knight, helped get the word out on social. Thanks guys. Your great teamwork, really appreciate that. Now remember, these episodes, they're all available as podcasts, wherever you listen just search "Breaking Analysis Podcast". Check out ETR's website at etr.ai. And we also publish a full report every week on wikibon.com and siliconangle.com. You can get in touch with me directly, david.vellante@siliconangle.com is my email. You can DM me @dvellante or comment on our LinkedIn posts. This is Dave Vellante for theCUBE Insights, powered by ETR. Have a great week, stay safe, be well, and we'll see you next time. (outro music)

>> From theCUBE studios in Palo Alto and Boston, bringing you data-driven insights from theCUBE and ETR, this is Breaking Analysis with Dave Vellante. >> In our 2020 predictions post, we said that organizations would begin to operationalize their digital transformation experiments and POCs. We also said that based on spending data that cybersecurity companies like CrowdStrike and Okta were poised to rise above the rest in 2020, and we even said the S&P 500 would surpass 3,700 this year. Little did we know that we'd have a pandemic that would make these predictions a virtual lock, and, of course, COVID did blow us out of the water in some other areas, like our prediction that IT spending would increase plus 4% in 2020, when in reality, we have a dropping by 4%. We made a number of other calls that did pretty well, but I'll let you review last year's predictions at your leisure to see how we did. Hello, everyone. This is Dave Vellante and welcome to this week's Wikibon CUBE Insights powered by ETR. Erik Bradley of ETR is joining me again for this Breaking Analysis, and we're going to lay out our top picks for 2021. Erik, great to see you. Welcome back. Happy to have you on theCUBE, my friend. >> Always great to see you too, Dave. I'm excited about these picks this year. >> Well, let's get right into it. Let's bring up the first prediction here. Tech spending will rebound in 2021. We expect a 4% midpoint increase next year in spending. Erik, there are a number of factors that really support this prediction, which of course is based on ETR's most recent survey work, and we've listed a number of them here in this slide. I wonder if we can talk about that a little bit, the pace of the vaccine rollout. I've called this a forced march to COVID, but I can see people doubling down on things that are working. Productivity improvements are going to go back into the business. People are going to come back to the headquarters and that maybe is going to spur infrastructure on some pent-up demand, and work from home, we're going to talk about that. What are your thoughts on this prediction? >> Well, first of all, you weren't wrong last year. You were just, (laughs) you were just delayed. Just delayed a little bit, that's all. No, very much so. Early on, just three months ago, we were not seeing this optimism. The most recent survey, however, is capturing 4%. I truly believe that still might be a little bit mild. I think it can go even higher, and that's going to be driven by some of the things you've said about. This is a year where a lot of spending was paused on machine learning, on automation, on some of these projects that had to be stopped because of what we all went through. Right now, that is not a nice to have, it's a must have, and that spending is going quickly. There's a rapid pace on that spending, so I do think that's going to push it and, of course, security. We're going to get to this later on so I don't want to bury the lede, but with what's happening right now, every CISO I speak to is not panicked, but they are concerned and there will definitely be increased security spending that might push this 4% even higher. >> Yeah, and as we've reported as well, the survey data shows that there's less freezing of IT, there are fewer layoffs, there's more hiring, we're accelerating IT deployments, so that, I think, 34% last survey, 34% of organizations are accelerating IT deployments over the next three months, so that's great news. >> And also your point too about hiring. I was remiss in not bringing that up because we had layoffs and we had freezes on hiring. Both of that is stopping. As you know, as more head count comes in, whether that be from home or whether that be in your headquarters, both of those require support and require spending. >> All right, let's bring up the next prediction. Remote worker trends are going to become fossilized, settling in at an average of 34% by year-end 2021. Now, I love this chart, you guys. It's been amazingly consistent to me, Erik. We're showing data here from ETR's latest COVID survey. So it shows that prior to the pandemic, about 15 to 16% of employees on average worked remotely. That jumped to where we are today and well into the 70s, and we're going to stay close to that, according to the ETR data, in the first half of 2021, but by the end of the year, it's going to settle in at around 34%. Erik, that's double the pre-pandemic numbers and that's been consistent in your surveys over the past six month, and even within the sub-samples. >> Yeah, super surprised by the consistency, Dave. You're right about that. We were expecting the most recent data to kind of come down, right? We see the vaccines being rolled out. We kind of thought that that number would shift, but it hasn't, it has been dead consistent, and that's just from the data perspective. What we're hearing from the interviews and the feedback is that's not going to change, it really isn't, and there's a main reason for that. Productivity is up, and we'll talk about that in a second, but if you have productivity up and you have employees happy, they're not commuting, they're working more, they're working effectively, there is no reason to rush. And now imagine if you're a company that's trying to hire the best talent and attract the best talent but you're also the only company telling them where they have to live. I mean, good luck with that, right? So even if a few of them decide to make this permanent, that's something where you're going to really have to follow suit to attract talent. >> Yeah, so let's talk about that. Productivity leads us to our next prediction. We can bring that up. Number three is productivity increases are going to lead organizations to double down on the successes of 2020 and productivity apps are going to benefit. Now, of course, I'm always careful to cautious to interpret when you ask somebody by how much did productivity increase. It's a very hard thing to estimate depending on how you measure it. Is it revenue per employee? Is it profit? But nonetheless, the vast majority of people that we talk to are seeing productivity is going up. The productivity apps are really the winners here. Who do you see, Erik, as really benefiting from this trend? This year we saw Zoom, Teams, even Webex benefit, but how do you see this playing out in 2021? >> Well, first of all, the real beneficiaries are the companies themselves because they are getting more productivity, and our data is not only showing more productivity, but that's continuing to increase over time, so that's number one. But you're 100% right that the reason that's happening is because of the support of the applications and what would have been put in place. Now, what we do expect to see here, early on it was a rising tide lifted all boats, even Citrix got pulled up, but over time you realize Citrix is really just about legacy applications. Maybe that's not really the virtualization platform we need or maybe we just don't want to go that route at all. So the ones that we think are going to win longer term are part of this paradigm shift. The easiest one to put out as example is DocuSign. Nobody is going to travel and sit in an office to sign a paper ever again. It's not happening. I don't care if you go back to the office or you go back to headquarters. This is a paradigm shift that is not temporary. It is permanent. Another one that we're seeing is Smartsheet. Early on it started in. I was a little concerned about it 'cause it was a shadow IT type of a company where it was just spreading and spreading and spreading. It's turned out that this, the data on Smartsheet is continuing to be strong. It's an effective tool for project management when you're remotely working, so that's another one I don't see changing anytime. The other one I would call out would be Twilio. Slightly different, yes. It's more about the customer experience, but when you look at how many brick and mortar or how many in-person transactions have moved online and will stay there, companies like Twilio that support that customer experience, I'll throw out a Qualtrics out there as well, not a name we hear about a lot, but that customer experience software is a name that needs to be watched going forward. >> What do you think's going to happen to Zoom and Teams? Certainly Zoom just escalated this year, a huge ascendancy, and Teams I look at a little differently 'cause it's not just video conferencing, and both have done really, really well. How do you interpret the data that you're seeing there? >> There's no way around it, our data is decelerating quickly, really quickly. We were kind of bullish when Zoom first came out on the IPO prospects. It did very well. Obviously what happened in this remote shift turned them into an absolute overnight huge success. I don't see that continuing going forward, and there's a reason. What we're seeing and hearing from our feedback interviews is that now that people recognize this isn't temporary and they're not scrambling and they need to set up for permanency, they're going to consolidate their spend. They don't need to have Teams and Zoom. It's not necessary. They will consolidate where they can. There's always going to be the players that are going to choose Slack and Zoom 'cause they don't want to be on Microsoft architecture. That's fine, but you and I both know that the majority of large enterprises have Microsoft already. It's bundled in in pricing. I just don't see it happening. There's going to be M&A out there, which we can talk about again soon, so maybe Zoom, just like Slack, gets to a point where somebody thinks it's worthwhile, but there's a lot of other video conferencing out there. They're trying to push their telephony. They're trying to push their mobile solutions. There's a lot of companies out there doing it, so we'll see, but the current market cap does not seem to make sense in a permanent remote work situation. >> I think I'm inferring Teams is a little different because it's Microsoft. They've got this huge software estate they can leverage. They can bundle. Now, it's going to be interesting to see how and if Zoom can then expand its TAM, use its recent largesse to really enter potentially new markets. >> It will be, but listen, just the other day there was another headline that one of Zoom's executives out in China was actually blocking content as per directed by the Chinese government. Those are the kind of headlines that just really just get a little bit difficult when you're running a true enterprise size. Zoom is wonderful in the consumer space, but what I do is I research enterprise technology, and it's going to be really, really difficult to make inroads there with Microsoft. >> Yep. I agree. Okay, let's bring up number four, prediction number four. Permanent shifts in CISO strategies lead to measurable share shifts in network security. So the remote work sort of hyper-pivot, we'll call it, it's definitely exposed us. We've seen recent breaches that underscore the need for change. They've been well-publicized. We've talked a lot about identity access management, cloud security, endpoint security, and so as a result, we've seen the upstarts, and just a couple that we called, CrowdStrike, Okta, Zscaler has really benefited and we expect them to continue to show consistent growth, some well over 50% revenue growth. Erik, you really follow this space closely. You've been focused on microsegmentation and other, some of the big players. What are your thoughts here? >> Yeah, first of all, security, number one in spending overall when we started looking and asking people what their priority is going to be. That's not changing, and that was before the SolarWinds breach. I just had a great interview today with a CISO of a global hospitality enterprise to really talk about the implications of this. It is real. Him and his peers are not panicking but pretty close, is the way he put it, so there is spend happening. So first of all, to your point, continued on Okta, continued on identity access. See no reason why that changes. CrowdStrike, continue. What this is going to do is bring in some new areas, like we just mentioned, in network segmentation. Illumio is a pure play in that name that doesn't have a lot of citations, but I have watched over the last week their net spending score go from about 30 to 60%, so I am watching in real time, as this data comes in in the later part of our survey, that it's really happening Forescout is another one that's in there. We're seeing some of the zero trust names really picking up in the last week. Now, to talk about some of the more established names, yeah, Cisco plays in this space and we can talk about Cisco and what they're doing in security forever. They're really reinventing themselves and doing a great job. Palo Alto was in this space as well, but I do believe that network and microsegmentation is going to be something that's going to continue. The other one I'm going to throw out that I'm hearing a lot about lately is user behavior analytics. People need to be able to watch the trends, compare them to past trends, and catch something sooner. Varonis is a name in that space that we're seeing get a lot of adoptions right now. It's early trend, but based on our data, Varonis is a name to watch in that area as well. >> Yeah, and you mentioned Cisco transitioning, reinventing themselves toward a SaaS player. Their subscription, Cisco's security business is a real bright spot for them. Palo Alto, every time I sit in on a VENN, which is ETR's proprietary roundtable, the CISOs, they love Palo Alto. They want to work, many of them, anyway, want to work with Palo Alto. They see them as a thought leader. They seem to be getting their cloud act together. Fortinet has been doing a pretty good job there and especially for mid-market. So we're going to see this equilibrium, best of breed versus the big portfolio companies, and I think 2021 sets up as a really interesting battle for those guys with momentum and those guys with big portfolios. >> I completely agree and you nailed it again. Palo Alto has this perception that they're really thought leaders in the space and people want to work with them, but let's not rule Cisco out. They have a much, much bigger market cap. They are really good at acquisitions. In the past, they maybe didn't integrate them as well, but it seems like they're getting their act together on that. And they're pushing now what they call SecureX, which is sort of like their own full-on platform in the cloud, and they're starting to market that, I'm starting to hear more about it, and I do think Cisco is really changing people's perception of them. We shall see going forward because in the last year, you're 100% right, Palo Alto definitely got a little bit more of the sentiment, of positive sentiment. Now, let's also realize, and we'll talk about this again in a bit, there's a lot of players out there. There will probably be continued consolidation in the security space, that we'll see what happens, but it's an area where spending is increasing, there is a lot of vendors out there to play with, and I do believe we'll see consolidation in that space. >> Yes. No question. A highly fragmented business. A lack of skills is a real challenge. Automation is a big watch word and so I would expect, which brings us, Erik, to prediction number five. Can be hard to do prediction posts without talking about M&A. We see the trend toward increased tech spending driving more IPOs, SPACs and M&A. We've seen some pretty amazing liquidity events this year. Snowflake, obviously a big one. Airbnb, DoorDash, outside of our enterprise tech but still notable. Palantir, JFrog, number of others. UiPath just filed confidentially and their CEO said, "Over the next 12 to 18 months, I would think Automation Anywhere is going to follow suit at some point." Hashicorp was a company we called out in our 2020 predictions as one to watch along with Snowflake and some others, and, Erik, we've seen some real shifts in observability. The ELK Stack gaining prominence with Elastic, ChaosSearch just raised 40 million, and everybody's going after 5G. Lots of M&A opportunities. What are your thoughts? >> I think if we're going to make this a prediction show, I'm going to say that was a great year, but we're going to even have a better year next year. There is a lot of cash on the balance sheet. There are low interest rates. There is a lot of spending momentum in enterprise IT. The three of those set up for a perfect storm of more liquidity events, whether it be continued IPOs, whether it could be M&A, I do expect that to continue. You mentioned a lot of the names. I think you're 100% right. Another one I would throw out there in that observability space, is it's Grafana along with the ELK Stack is really making changes to some of the pure plays in that area. I've been pretty vocal about how I thought Splunk was having some problems. They've already made three acquisitions. They are trying really hard to get back up and keep that growth trajectory and be the great company they always have been, so I think the observability area is certainly one. We have a lot of names in that space that could be taken out. The other one that wasn't mentioned, however, that I'd like to mention is more in the CDN area. Akamai being the grandfather there, and we'll get into it a little bit too, but CloudFlare has a huge market cap, Fastly running a little bit behind that, and then there's Limelight, and there's a few startups in that space and the CDN is really changing. It's not about content delivery as much as it is about edge compute these days, and they would be a real easy takeout for one of these large market cap names that need to get into that spot. >> That's a great call. All right, let's bring up number six, and this is one that's near and dear to my heart. It's more of a longer-term prediction and that prediction is in the 2020s, 75% of large organizations are going to re-architect their big data platforms, and the premise here is we're seeing a rapid shift to cloud database and cross-cloud data sharing and automated governance. And the prediction is that because big data platforms are fundamentally flawed and are not going to be corrected by incremental improvements in data lakes and data warehouses and data hubs, we're going to see a shift toward a domain-centric ownership of the data pipeline where data teams are going to be organized around data product or data service builders and embedded into lines of business. And in this scenario, the technology details and complexity will become abstracted. You've got hyper-specialized data teams today. They serve multiple business owners. There's no domain context. Different data agendas. Those, we think, are going to be subsumed within the business lines, and in the future, the primary metric is going to shift from the cost and the quality of the big data platform outputs to the time it takes to go from idea to revenue generation, and this change is going to take four to five years to coalesce, but it's going to begin in earnest in 2021. Erik, anything you'd add to this? >> I'm going to let you kind of own that one 'cause I completely agree, and for all the listeners out there, that was Dave's original thought and I think it's fantastic and I want to get behind it. One of the things I will say to support that is big data analytics, which is what people are calling it because they got over the hype of machine learning, they're sick of vendors saying machine learning, and I'm hearing more and more people just talk about it as we need big data analytics, we need 'em at the edge, we need 'em faster, we need 'em in real time. That's happening, and what we're seeing more is this is happening with vendor-agnostic tools. This isn't just AWS-aligned. This isn't just GCP-aligned or Azure-aligned. The winners are the Snowflakes. The winners are the Databricks. The winners are the ones that are allowing this interoperability, the portability, which fully supports what you're saying. And then the only other comment I would make, which I really like about your prediction, is about the lines of business owning it 'cause I think this is even bigger. Right now, we track IT spending through the CIO, through the CTO, through IT in general. IT spending is actually becoming more diversified. IT spending is coming under the purview of marketing, it's coming under the purview of sales, so we're seeing more and more IT spending, but it's happening with the business user or the business lines and obviously data first, so I think you're 100% right. >> Yeah, and if you think about it, we've contextualized our operational systems, whether it's the CRM or the supply chain, the logistics, the business lines own their respective data. It's not true for the analytics systems, and we talked about Snowflake and Databricks. I actually see these two companies who were sort of birds of a feather in the early days together, applying Databricks machine learning on top of Snowflake, I actually see them going in diverging places. I see Databricks trying to improve on the data lake. I see Snowflake trying to reinvent the concept of data warehouse to this global mesh, and it's going to be really interesting to see how that shakes out. The data behind Snowflake, obviously very, very exciting. >> Yeah, it's just, real quickly to add on that if we have time, Dave. >> Yeah, sure. >> We all know the valuation of Snowflake, one of the most incredible IPOs I've seen in a long time. The data still supports it. It still supports that growth. Unfortunately for Databricks, their IPO has been a little bit more volatile. If you look at their stock chart every time they report, it's got a little bit of a roller coaster ride going on, and our most recent data for Databricks is actually decelerating, so again, I'm going to use the caveat that we only have about 950 survey responses in. We'll probably get that up to 1,300 or so, so it's not done yet, but right now we are putting Databricks into a category where we're seeing it decelerate a little bit, which is surprising for a company that's just right out of the gate. >> Well, it's interesting because I do see Databricks as more incremental on data lakes and I see Snowflake as more transformative, so at least from a vision standpoint, we'll see if they can execute on that. All right, number seven, let's bring up number seven. This is talking about the cloud, hybrid cloud, multi-cloud. The battle to define hybrid and multi-cloud is going to escalate in 2021. It's already started and it's going to create bifurcated CIO strategies. And, Erik, spending data clearly shows that cloud is continuing its steady margin share gains relative to on-prem, but the definitions of the cloud, they're shifting. Just a couple of years ago, AWS, they never talk about hybrid, just like they don't talk about multi-cloud today, yet AWS continues now to push into on-prem. They treat on-prem as just another node at the edge and they continue to win in the marketplace despite their slower growth rates. Still, they're so large now. 45 billion or so this year. The data is mixed. This ETR data shows that just under 50% of buyers are consolidating workloads, and then a similar, in the cloud workloads, and a similar percentage of customers are spreading evenly across clouds, so really interesting dynamic there. Erik, how do you see it shaking out? >> Yeah, the data is interesting here, and I would actually state that overall spend on the cloud is actually flat from last year, so we're not seeing a huge increase in spend, and coupled with that, we're seeing that the overall market share, which means the amount of responses within our survey, is increasing, certainly increasing. So cloud usage is increasing, but it's happening over an even spectrum. There's no clear winner of that market share increase. So they really, according to our data, the multi-cloud approach is happening and not one particular winner over another. That's just from the data perspective that various do point on AWS. Let's be honest, when they first started, they wanted all the data. They just want to take it from on-prem, put it in their data center. They wanted all of it. They never were interested in actually having interoperability. Then you look at an approach like Google. Google was always about the technology, but not necessarily about the enterprise customer. They come out with Anthos which is allowing you to have interoperability in more cloud. They're not nearly as big, but their growth rate is much higher. Law of numbers, of course. But it really is interesting to see how these cloud players are going to approach this because multi-cloud is happening whether they like it or not. >> Well, I'm glad you brought up multi-cloud in a context of what the data's showing 'cause I would agree we're, and particularly two areas that I would call out in ETR data, VMware Cloud on AWS as well as VM Cloud Foundation are showing real momentum and also OpenStack from Red Hat is showing real progress here and they're making moves. They're putting great solutions inside of AWS, doing some stuff on bare metal, and it's interesting to see. VMware, basically it's the VMware stack. They want to put that everywhere. Whereas Red Hat, similarly, but Red Hat has the developer angle. They're trying to infuse Red Hat in throughout everybody's stack, and so I think Red Hat is going to be really interesting to, especially to the extent that IBM keeps them, sort of lets them do their own thing and doesn't kind of pollute them. So, so far so good there. >> Yeah, I agree with that. I think you brought up the good point about it being developer-friendly. It's a real option as people start kicking a little bit more of new, different developer ways and containers are growing, growing more. They're not testing anymore, but they're real workloads. It is a stack that you could really use. Now, what I would say to caveat that though is I'm not seeing any net new business go to IBM Red Hat. If you were already aligned with that, then yes, you got to love these new tools they're giving you to play with, but I don't see anyone moving to them that wasn't already net new there and I would say the same thing with VMware. Listen, they have a great entrenched base. The longer they can kick that can down the road, that's fantastic, but I don't see net new customers coming onto VMware because of their alignment with AWS. >> Great, thank you for that. That's a good nuance. Number eight, cloud, containers, AI and ML and automation are going to lead 2021 spending velocity, so really is those are the kind of the big four, cloud, containers, AI, automation, And, Erik, this next one's a bit nuanced and it supports our first prediction of a rebound in tech spending next year. We're seeing cloud, containers, AI and automation, in the form of RPA especially, as the areas with the highest net scores or spending momentum, but we put an asterisk around the cloud because you can see in this inserted graphic, which again is preliminary 'cause the survey's still out in the field and it's just a little tidbit here, but cloud is not only above that 40% line of net score, but it has one of the higher sector market shares. Now, as you said, earlier you made a comment that you're not necessarily seeing the kind of growth that you saw before, but it's from a very, very large base. Virtually every sector in the ETR dataset with the exception of outsourcing and IT consulting is seeing meaningful upward spending momentum, and even those two, we're seeing some positive signs. So again, with what we talked about before, with the freezing of the IT projects starting to thaw, things are looking much, much better for 2021. >> I'd agree with that. I'm going to make two quick comments on that, one on the machine learning automation. Without a doubt, that's where we're seeing a lot of the increase right now, and I've had a multiple number of people reach out or in my interviews say to me, "This is very simple. These projects were slated to happen in 2020 and they got paused. It's as simple as that. The business needs to have more machine learning, big data analytics, and it needs to have more automation. This has just been paused and now it's coming back and it's coming back rapidly." Another comment, I'm actually going to post an article on LinkedIn as soon as we're done here. I did an interview with the lead technology director, automation director from Disney, and this guy obviously has a big budget and he was basically saying UiPath and Automation Anywhere dominate RPA, and that on top of it, the COVID crisis greatly accelerated automation, greatly accelerated it because it had to happen, we needed to find a way to get rid of these mundane tasks, we had to put them into real workloads. And another aspect you don't think about, a lot of times with automation, there's people, employees that really have friction. They don't want to adopt it. That went away. So COVID really pushed automation, so we're going to see that happening in machine learning and automation without a doubt. And now for a fun prediction real quick. You brought up the IT outsourcing and consulting. This might be a little bit more out there, the dark horse, but based on our data and what we're seeing and the COVID information about, you said about new projects being unwrapped, new hiring happening, we really do believe that this might be the bottom on IT outsourcing and consulting. >> Great, thank you for that, and then that brings us to number nine here. The automation mandate is accelerating and it will continue to accelerate in 2021. Now, you may say, "Okay, well, this is a lay-up," but not necessarily. UiPath and Automation Anywhere go public and Microsoft remains a threat. Look, UiPath, I've said UiPath and Automation Anywhere, if they were ready to go public, they probably would have already this year, so I think they're still trying to get their proverbial act together, so this is not necessarily a lay-up for them from an operational standpoint. They probably got some things to still clean up, but I think they're going to really try to go for it. If the markets stay positive and tech spending continues to go forward, I think we can see that. And I would say this, automation is going mainstream. The benefits of taking simple RPA tools to automate mundane tasks with software bots, it's both awakened organizations to the possibilities of automation, and combined with COVID, it's caused them to get serious about automation. And we think 2021, we're going to see organizations go beyond implementing point tools, they're going to use the pandemic to restructure their entire business. Erik, how do you see it, and what are the big players like Microsoft that have entered the market? What kind of impact do you see them having? >> Yeah, completely agree with you. This is a year where we go from small workloads into real deployment, and those two are the leader. In our data, UiPath by far the clear leader. We are seeing a lot of adoptions on Automation Anywhere, so they're getting some market sentiment. People are realizing, starting to actually adopt them. And by far, the number one is Microsoft Power Automate. Now, again, we have to be careful because we know Microsoft is entrenched everywhere. We know that they are good at bundling, so if I'm in charge of automation for my enterprise and I'm already a Microsoft customer, I'm going to use it. That doesn't mean it's the best tool to use for the right job. From what I've heard from people, each of these have a certain area where they are better. Some can get more in depth and do heavier lifting. Some are better at doing a lot of projects at once but not in depth, so we're going to see this play out. Right now, according to our data, UiPath is still number one, Automation Anywhere is number two, and Microsoft just by default of being entrenched in all of these enterprises has a lot of market share or mind share. >> And I also want to do a shout out to, or a call out, not really a shout out, but a call out to Pegasystems. We put them in the RPA category. They're covered in the ETR taxonomy. I don't consider them an RPA vendor. They're a business process vendor. They've been around for a long, long time. They've had a great year, done very, very well. The stock has done well. Their spending momentum, the early signs in the latest survey are just becoming, starting to moderate a little bit, but I like what they've done. They're not trying to take UiPath and Automation Anywhere head-on, and so I think there's some possibilities there. You've also got IBM who went to the market, SAP, Infor, and everybody's going to hop on the bandwagon here who's a software player. >> I completely agree, but I do think there's a very strong line in the sand between RPA and business process. I don't know if they're going to be able to make that transition. Now, business process also tends to be extremely costly. RPA came into this with trying to be, prove their ROI, trying to say, "Yeah, we're going to cost a little bit of money, but we're going to make it back." Business process has always been, at least the legacies, the ones you're mentioning, the Pega, the IBMs, really expensive. So again, I'm going to allude to that article I'm about to post. This particular person who's a lead tech automation for a very large company said, "Not only are UiPath and AA dominating RPA, but they're likely going to evolve to take over the business process space as well." So if they are proving what they can do, he's saying there's no real reason they can't turn around and take what Appian's doing, what IBM's doing and what Pega's doing. That's just one man's opinion. Our data is not actually tracking it in that space, so we can't back that, but I did think it was an interesting comment for and an interesting opportunity for UiPath and Automation Anywhere. >> Yeah, it's always great to hear directly from the mouths of the practitioners. All right, brings us to number 10 here. 5G rollouts are going to push new edge IoT workloads and necessitate new system architectures. AI and real-time inferencing, we think, require new thinking, particularly around processor and system design, and the focus is increasingly going to be on efficiency and at much, much lower costs versus what we've known for decades as general purpose workloads accommodating a lot of different use cases. You're seeing alternative processors like Nvidia, certainly the ARM acquisition. You've got companies hitting the market like Fungible with DPAs, and they're dominating these new workloads in the coming decade, we think, and they continue to demonstrate superior price performance metrics. And over the next five years they're going to find their way, we think, into mainstream enterprise workloads and put continued pressure on Intel general purpose microprocessors. Erik, look, we've seen cloud players. They're diversifying their processor suppliers. They're developing their own in-house silicon. This is a multi-year trend that's going to show meaningful progress next year, certainly if you measure it in terms of innovations, announcements and new use cases and funding and M&A activity. Your thoughts? >> Yeah, there's a lot there and I think you're right. It's a big trend that's going to have a wide implication, but right now, it's there's no doubt that the supply and demand is out of whack. You and I might be the only people around who still remember the great chip famine in 1999, but it seems to be happening again and some of that is due to just overwhelming demand, like you mentioned. Things like IoT. Things like 5G. Just the increased power of handheld devices. The remote from work home. All of this is creating a perfect storm, but it also has to do with some of the chip makers themselves kind of misfired, and you probably know the space better than me, so I'll leave you for that on that one. But I also want to talk a little bit, just another aspect of this 5G rollout, in my opinion, is we have to get closer to the edge, we have to get closer to the end consumer, and I do believe the CDN players have an area to play in this. And maybe we can leave that as there and we could do this some other time, but I do believe the CDN players are no longer about content delivery and they're really about edge compute. So as we see IoT and 5G roll out, it's going to have huge implications on the chip supply. No doubt. It's also could have really huge implications for the CDN network. >> All right, there you have it, folks. Erik, it's great working with you. It's been awesome this year. I hope we can do more in 2021. Really been a pleasure. >> Always. Have a great holiday, everybody. Stay safe. >> Yeah, you too. Okay, so look, that's our prediction for 2021 and the coming decade. Remember, all these episodes are available as podcasts. All you got to do is search Breaking Analysis podcast. You'll find it. We publish each week on wikibon.com and siliconangle.com, and you got to check out etr.plus. It's where all the survey action is. Definitely subscribe to their services if you haven't already. You can DM me @dvellante or email me at david.vellante@siliconangle.com. This is Dave Vellante for Erik Bradley for theCUBE Insights powered by ETR. Thanks for watching, everyone. Be well and we'll see you next time. (relaxing music)