On this episode of The Six Five Webcast hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The six handpicked topics for this week are:
- IBM Databand.AI Acquisitioin
- Cloudera Apache Iceberg
- NVIDIA/Siemens Partnership
- Fedex Set To Close Datacenters
- How fast Will Cloud Adoption Go AWS Chief
- Twitter Deal In Jeopardy?
For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this webcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.
Patrick Moorhead: Hi, this is Pat Moorhead with Moor Insights and Strategy. And we are here for another Six Five Podcast. We are here, I am in sunny and humid Florida at a horse show. You can see all the horse-related stuff behind me. My partner in crime, Futurum brick and founder CEO, chief Puba, bestie, Daniel Newman. How are you?
Daniel Newman: Hey Buddy. I’m not in Florida, but it’s still hot and humid. And since we are old guys now, it is obligatory that we talk about the weather at the beginning of every single show. Just so you know, that’s what happens. I found out after I had turned 40, it became the only thing I talk about besides maybe whatever sports event is going on this weekend, but it’s going to be 106 here, dude. It’s going to be 106 in Austin, Texas this weekend. It is hot, hot, hot. And you know what? Tech is actually cooling off a little bit. We’re in a little bit of our reprieve season here in this space, after a crazy two months.
Patrick Moorhead: I know how about that. It’s kind of odd how that works, but I kind of like that other people take a lot more breaks than we do, because basically, not only do we work when our customers work, but we also work when our customers don’t work. It’s just the kind of work that we’re doing.
Daniel Newman: What do they say? When it’s passion it doesn’t really feel like work. And most of the time in this space, the stuff we do, the stuff we talk about, it’s fun. I mean, it could be worse, buddy.
Patrick Moorhead: Oh, oh, I totally agree. And listen, the way that I explain it is, for the last 11 years most mornings I get up and I feel like I’m in Las Vegas and I’m the house. That’s not just about making money, but it’s just about getting ahead of stuff. And sure beats having a real job.
Daniel Newman: Don’t let that slip out, buddy. Don’t let anybody find out you don’t think you’re actually working.
Patrick Moorhead: I bring that up every time we’re on Analyst, and my Analyst cohorts hate me for saying it, but I always say this, and you talk to any tech executive and they’ll just laugh and they’ll nod, and says, hey, which job is harder? Your job, or me advising you on your strategies, or nitpicking what you’ve done? But they love it. But listen, the other part that I love so much is getting up every Friday morning and podcasting with you. So we have a great show today. I mean, we are talking-
Daniel Newman: We’re winning. That’s what you get when you have teenage daughters. You learn to do things like that.
Patrick Moorhead: I know. I was really good at that in the 2000’s Daniel, but-
Daniel Newman: Yeah, I know. We’ve got an age gap, buddy. It’s been a strain on our relationship, but we’re pulling it off.
Patrick Moorhead: I don’t even have any teenagers.
Daniel Newman: I know, I know. Pico’s a grown up. He’s out, what, in Oregon working at Intel interning. It’s impressive.
Patrick Moorhead: It is crazy. And I wanted to see how many days we would go before he contacted the family or had any contact, and we went six days. Not a text, not a… That’s not that I was testing, but it’s more like he’s growing up.
Daniel Newman: Young man is spreading his wings and he’s probably having fun because he’s going to come up like dad in the tech space, and like his sisters in the tech space. It’s kind of cool to see it all coming together. So we’ve got a good show, huh?
Patrick Moorhead: Yeah, we do. And by the way, I hope he does it better than I did with style points. But anyway, no, we have a great show and we’re talking IBM, Cloudera, NVIDIA, Siemens, Twitter, which we don’t normally talk about and cloud adoption, but Daniel Newman, let’s just jump right in here.
Daniel Newman: Don’t forget to do our little Puba disclaimer thing, buddy, because we’ve got to do that in the beginning of the show, right?
Patrick Moorhead: Sure. Even though we’re not talking about earnings, I’ll bring it up.
Daniel Newman: Just to be safe, and tell everybody what the Six Five is in case this is, incredibly, their first episode after 128 others.
Patrick Moorhead: That’s not even possible, but let me rip. No, listen, we’re the Six Five, because we’re talking six, five for five minutes. Each six topics, five minutes each. A little bit of news, but really it’s about analysis. You can get the news anywhere. Also don’t take any of this as investment advice. Please don’t do that, because this is for educational, and informational, and hopefully entertainment purposes as well. But yeah, let’s dive in here. Big acquisition, well, small acquisition that IBM made. They’ve been doing a bunch of tuck-ins left and right, filling out their portfolio. Daniel what’s the what’s going on here?
Daniel Newman: Yeah. It caught my attention this week. Actually found the deal, first on LinkedIn, when Tom Rosamilia, lead to the business software for the company, posted about this. And I said, wow, we’re seeing a trend line here. We were at Cisco Live, company made a big splash about its observability portfolio. IBM has made a handful of, like you said, tuck-in acquisitions across its software suite for observability, and APM, and ITSM, and IT ops, and AI ops, and we’ve got all these things. And you and I have talked about it with Splunk. We’ve talked about it with LogicMonitor. We’ve talked about it with Datadog, there’s a lot going on.
But basically this exponential data growth is causing an incredible amount of pressure on companies to figure out how to make sure A, that their data is good, their data is secure, their data is accessible, their applications are running. This is not a simple thing for companies to fix. And as enterprises get bigger, as the hybrid IT environment gets more complex the investment that companies and enterprise are going to need to make in observability is palpable. And so IBM has basically shown that it is going to continue to gobble up small strategic assets. And by the way, this is something IBM’s done for a long time. I believe one year, not that long ago, I think they acquired a hundred companies in one year. An acquisition every three, three and a half days. And this is one that’s really designed to help companies make sure that their issues with their data are resolved before it causes financial impact.
That’s a big thing when you think about EP systems and other systems of record, having something that can basically be strategic that can make sure that your data is in the right shape, that it’s being utilized correctly, and that the quality of the data does not have a negative impact on the bottom line is substantial. And it’s something that I think IBM sees that fits really well into that hybrid IT AI data strategy that the company has. Long and short, is it a big deal? No, it’s not a big deal. In fact, it’s small enough that we don’t even know how big the deal is. But don’t mistake that kind of deal for being unimportant.
So what the company’s doing is, it’s piecing together a number of different solutions, gaining intellectual property, probably buying them right now in a somewhat conservative market space where they’re getting it at a good value, and they’re going to be able to roll this up, put it into their software portfolio, make it available and continue to add value to their marketplace. So I’m big on observability. I won’t really beat that drum anymore. But for IBM, good acquisition. Again, see how it all plays out. I’m watching carefully, how do these integrate with other observability plays and other data management plays that the company has made, but I like the direction they’re heading and I see they’re leaning into this area as something that’s a trend line that will be favorable to the company.
Patrick Moorhead: Yeah. Observability is hot, Daniel. It’s funny. I think in the first 100 shows maybe we talked about it once, and here we are, the last 10 shows, we’ve talked about it every other show. And really what this is about is, this is about the cloudification of IT. Even though the public cloud started 15 years ago, only 25% of the data is in the public cloud, and I could roughly estimate 25% of the applications. But as enterprises move into a cloud model and it’s spread between the endpoint, the compute, Edge, Edge of the network, the data center, public cloud and Colo not only is the infrastructure has it fracklized, but also the way that we make applications. So no longer are most developers building these monolithic applications where they’re only tapping into their own services. They’re writing them in a way that taps into either microservices, or APIs. And APIs at different companies that are crossing different areas.
So when your end customer, if you’re an enterprise, has an issue, you need to know what in that, the 100 variables, what is going on and where did it break? So that’s kind of big picture. And also the industry is moving away from one-off observability tools into more full stack or end to end. Cisco calls it full stack and LogicMonitor calls it end to end. Basically it’s a very similar concept. And then the future is about getting so smart about what’s happening you can predict what’s happening and put the fixed auto magically in place. So that is kind of the big picture of it. And I’m glad to see IBM continuing to get into this. IBM’s going to have to have a full stack observability if it wants to play with the big dogs. I like this as well because it’s focused on data, but still it’s a tuck-in. But good job IBM.
So, hey, let’s move to the next topic, which is Cloudera and Iceberg. So Daniel, you wrote a nice article, or one of your analysts did, Ron did, on exactly what’s going on here. So let me first talk about what Iceberg is. So Iceberg is an open source. Basically it’s a table structure that’s open that essentially allows, whether you’re using Spark, Trino, FLaNK, Presto, Hive, Impala to work on these same tables. So think of this as an industry standard table methodology that you can plug all those different tools on top of.
While there have been bigger announcements this year by Cloudera, I like this one because it’s pure to their strategy, which is to take open source technologies, I would say, put enterprise grade quality and stability behind it, and bring it to the biggest enterprises with the most amount of data out there. So it’s true to the strategy and this is all about data, which Cloudera is all about data. And whether you want to manage that data end to end on prem, or in the public cloud, or even managing data that comes through a SAS application, Cloudera’s doing a good job pulling it all together. Kind of one stop shop for data management.
Daniel Newman: Yeah, I think that’s exactly right, Pat. I mean, this is the hot new era of Apache Iceberg, and we’re seeing it talked about quite a bit if you’re in the data space. And Cloudera’s got this ecosystem and openness approach that it’s focused on. And right now, as competition comes at Cloudera and all the legacy and traditional big data warehouse and data lake players, it’s important for Cloudera to continue to innovate, Pat. And to innovate and deliver both openness and interoperability, and I think that’s what they’re doing. I mean, they’re working across the Apache portfolio, and they’re focused on, like I said, openness and the evolving requirements that their customers are seeing. The integrations, the data warehouses are significant. They’re working with Oracle, they’re working with IBM, and Netezza, Teradata, and they basically are functional in the multi-tenant environment that most companies are running in.
So the Cloudera challenge is that, after it went private it’s been a little quieter, a bit out of the center of the news. But again, going back, Pat, to when they made the decision to go private, I believe it was fundamentally decided so the company could reorganize, recalibrate, work on innovation, work at a pace that fit the company’s long term strategy. And I think that they’re doing that. Is that going to happen overnight? No. I mean, it’s going to take some time. It’s going to take some work. But I do think that what CDP is building is going to basically get them over a hump if they continue to push forward with that hybrid mentality, and with that more SAS based approach that they’re trying. They’re trying to make Cloudera more digestible.
They’ve already won that top of the market data world. But what they’re trying to do is say, hey, how do we compete with the hyper scale cloud data offerings? How do we compete with some of the born on cloud data warehouse, data lake solutions. And I think that’s what Cloudera is doing. Again, we aren’t going to have as much evidence as we used to have because we’re not going to get the same reporting metrics as we once did, but I like what they’re doing. I like that they’re aligning with the most important technologies for data tech, data warehouse, data lakes, and I like that they’re open and integrate with all the big data warehouses on a global basis. So good move forward. A lot to watch here. Again, we’re going to have to read between the lines with Cloudera going forward, but progress seems to be moving in the right direction. And keep talking about that here, Pat, as that becomes a bit more evident with, hopefully, the customer wins and other data that you get when you don’t get the earnings data.
Patrick Moorhead: Yeah. And by the way, one thing I’m mistakenly glossed over was that this is the first open data lake house that’s available, if you define open data lake house of having an open table set. Firsts are important in the industry, if nothing else to reinforce your leadership. So Cloudera Apache Iceberg goes GA. Daniel Newman, let’s move onto some news and analysis from a partnership between NVIDIA and Siemens.
Daniel Newman: This is one of those where it’s an interesting and fun ITOT collaboration. We’ve heard a lot about this over the last several years. It’s moved at is somewhat rigorous pace, but to some extent, I think ITOT is still continued to flail a little bit, and I think these kinds of partnerships are important. So you got NVIDIA, which is building this metaverse or, quote unquote, omniverse technology, which is an enabler technology for companies to build digital twins, a synthetic replicate data in digital environments that you can basically build buildings, drive vehicles, test your bicycles and other hardware products using NVIDIA’s virtual simulation software. But companies like Siemens, they’re the ones doing this stuff, Patrick Moorhead. So these are the companies that are legitimately working side by side with some of the heaviest and most complex industrial environments to digitalize them.
We talk about things like the zero downtime. We talk about things like factories of the future. It is companies like Siemens. You hear us often talk about Honeywell. It’s companies like that. These are the companies that are actually working side by side with the manufacturers and energy companies to actually build future destinations for utilizing data and technology. And so the partnership is, I would say, Pat, it’s not like, holy cow, they’re taking their technology and blending it together and creating some amazing digital twin technology. What it really seems to be is it’s an enabler platform that’s being partnered up on. And Siemens is building an accelerator platform really under the guise that companies aren’t moving fast enough. That’s my take on it. I’ve had a chance to talk to Siemens about this. Not necessarily moving fast enough in the direction of getting their industry four full digital environment up and running, and that the enablement is going to be a differentiator.
So making these technologies work together through this accelerator platform, through having an ecosystem environment, what Siemens is basically doing is it’s encouraging the customers that are going to benefit from this type of transformation to be able to get access to the tools, the training, the technology, to be able to implement tech like NVIDIA’s omni verse platform. Largely, Patrick Moorhead, I guess I’ll just say this. I believe the digital twin, the synthetic autonomous replicated environments that you’ll hear Jensen talk about a lot at NVIDIA are going to be critical. We need to be able to basically create, emulate and understand environments before we physically construct them. That could be all kinds of different things, but that’s going to be the future. And by the way, that is going to be the portal to a metaversial future, is that we actually know that things that we’re creating in these digital worlds, in these physical worlds are completely safe, they’re tested, they’re understood. That the data that’s being replicated, like I said, it’s symbiotic if you ask me.
Sometimes announcements like these are much more like here’s the product, they’ve built a widget box, and this is what you’re going to do together. I think right now they’re more saying, this is a really great example of when IT traditional data center technologies marries companies that are at the Edge, building robotics and factories and healthcare machines, and how we put this together, get the data, and make it sensible, utilized, and put it into place at a faster speed to enable, Pat, faster digital transformation, because that’s important. And we need to digitally transform our businesses. Just steps. I call it baby steps, but a good partnership between two companies that aren’t really trying to speed along the digitalization of heavy industries.
Patrick Moorhead: Oh, I know. I mean, we do all this analog transformation right now, and we really do need to move it to digital. No, I’m just kidding.
Daniel Newman: It’s all connected by coax, Pat.
Patrick Moorhead: Well, it is. And I mean, but if you connect the front end of the back end, I mean, you solve a lot of problems, though. No, just kidding audience. No, listen, this is a couple things going on here. So first of all, when it comes to the metaverse, really there’s maybe one or two use cases that make sense. This whole notion of VR with training at this point, and the second is the digital twin. It just makes sense. When you have industrial tech companies like Siemens, who really don’t have the resources to do some of the deep tech required, if you can’t build it you have to partner. And I’m actually surprised this didn’t happen quicker. But to be very clear on what they’re doing, Siemens is connecting their accelerator partner ecosystem to the NVIDIA Omniverse.
So this is Siemens being part and buying into the NVIDIA Omniverse, which it is a huge one. When I think of companies, industrial tech, like Siemens, like Honeywell, they need to be doing things like this. Is this a big announcement? Maybe, but see, the metaverse is not about big home runs. I mean, the metaverse, I think, is about chipping away and finding use cases that make sense for companies to either make more money or reduce costs. And this, a digital twin, is a huge requirement, I think, for the industrial IOT. And I like to think of digital twins as having a man in the middle type of thing. Daniel Newman, you have to wonder if the robots, or the bots, or the machines were running it they wouldn’t need a digital twin. Digital twin is because as humans, we have to see if a physical manifestation of something, even though we might be a thousand miles away. But anyways, these are kind of the things that I think about.
Daniel Newman: It’s also, Pat, the kind of stuff that can bubble up in a quieter part of the tech world, in a quieter period in our tech world, because this is cool stuff that probably wouldn’t normally bubble up to the height because of how much tech is going on, but in the July, August month sometimes we get to cover some different, cool, smaller changes that are going on in the market.
Patrick Moorhead: Have you ever thought about the metaverse though? Sorry, the digital twin as really this crutch between going all machines? Humans are the only ones who need the digital twin, right? Or am I looking at it wrong? So for instance, I’m managing a building a thousand miles away. I can zoom in, I can see everything in their physical sense, as I understand it. It almost seems like a crutch in a way, before the machines would take something over. But what do you think?
Daniel Newman: Well, I mean, if you look at how deep learning and neural networks work, eventually the building should, much like a rack of servers in the data center, with proper training eventually they start to learn how to cure certain things that are going on. It starts off, we’re writing scripts, and then the machine learns and understands that when this happens, do this. And it’s as simple as, like you said, air conditioning, the way it works. As silly as it is, Pat, the building learns. You teach it a behavior, it gets smarter, keeps learning. And what I’m saying is, it’s like, oh, it’s too warm. You know what I mean?
Patrick Moorhead: It took about 20 years to go to a lights out data center. When I was at AMD back in 2006, we were Google’s number one supplier of microprocessors. And they had at that point only about 30 humans per data center. And here we are in 2022. So yeah, maybe it’s a matter of time, but I kind of think this digital twin thing is just a man in the middle crutch until we-
Daniel Newman: I think it’s fascinating though. Like I said, I think of it more from like a technology development, like the car of the future. How can you build it? We’re gear heads, right? How can you build it, and drive it, and experience it in this completely replicated, like you create the city of Austin in a digital twin, then you design the car, and then you have the car just driving around. I mean, you can have everything. I mean, in the future, everything down to the pothole on Caesar Chavez to understand what the dynamics of the suspension. I mean, it’s kind of cool, Pat. I mean, I do understand the crutch, but I also think it’s kind of cool. Maybe we could be digital twin and someone could write some of this research for me.
Patrick Moorhead: I totally get it. By the way, the latest airplanes that are out there, commercial airplanes don’t actually need a windshield, but we feel better when there are humans there to do that. So, Daniel-
Daniel Newman: I mean, we don’t need a pilot, right?
Patrick Moorhead: Well, no, they actually don’t need a windshield. I mean, they need a pilot. Well, technically we don’t need pilots if you truly use the next generation of electronics out there, but we just feel better by having a man in the middle. Or a woman, by the way. I guess a person in the middle. So Daniel, let’s move to the next topic here. And this is the big headline. Well, it’s funny, the big headline was FedEx moving away from mainframes by 2024. The full reality is they’re getting out of data centers by 2024. Reportedly their CIO said, hey, we’re out, we’re moving to a cloud model. This has been a decade transition. I was amused though, with the headline, many people took it as getting out of mainframes. But here’s the thing. They’re getting out of XCD 6 servers in the big data center. I don’t have the schematics of their next generation plans, but I highly doubt that they’re moving everything into the cloud. So it’s probably a little bit of a misnomer if you count Edge data center. Great headline grabber.
And by the way, it is not easy to move anything off of a mainframe and have the same degree of security and resiliency. So my guess is they moved from a 9 nines to something that was a lot lower. And they had to re architect pretty much all their applications to be able to do this, because quite frankly, as we’ve both written, the mainframe is really good. The reason that the mainframe has been around for so long, I guess, going on 70 years, is because there are things that it just does so well. And the reason that most credit card transactions are still run on mainframes, it’s very highly secure, and it’s a throughput engine, and it keeps getting better. Gosh, in this last round of mainframes, heck, there’s even machine learning inference with discrete accelerators on the Z16. So I don’t think that most companies are headed in this direction. They have, quite frankly, a more mature view of it, which is hybrid, as opposed to we’re closing all of their data centers, but I’m really interested to see how this works out for them.
Daniel Newman: I’m pulling up FedEx’s ticker. So the company, $60 billion market cap company. I’m just trying to get a revenue range here. And the reason I’m looking at this is I’m going, $400 million is a lot of money, but the question is going to be about risk reward. I feel like there’s a gotcha here, because, Pat, we’ve watched the A16Z cloud repatriation discussions go on. We talk about cloud as an operating model. And for certain types of workloads, certain applications cloud definitely is going to be the best, and it will be pervasive. Certain other types of workload we’re seeing a very strong indicator that hybrid, which means basically it’s hybrid because you’re going to leave some of your workloads on prem is also going to continue to be meaningful. I guess the question mark is kind of like-
Patrick Moorhead: This is a headline we would’ve expected five years ago, before everybody realized that the Edge and the hybrid cloud made sense. It’s weird.
Daniel Newman: Well, I mean, what I’m looking at is, in the February quarter FedEx did 23.6 billion in revenue. So $400 million, what I’m saying is, okay, maybe this is big. Very small percentage against revenue, they have a 1.11 billion net income in that quarter. But if it doesn’t work well that number’s going to look like a less successful project. And all I’m saying is that I am a believer in cloud. I’m a believer in public cloud, and I’m a believer that public cloud, in partnership with certain Edge, and On-Prem is going to work extraordinarily well. I’m also, you and I have also been publicly on the record as believers in mainframe technology. Not the old one floor per computer mainframe technology. I’m talking about the modernized mainframes that, you mentioned IBM Z, that have been built with accelerators, with redundancy, resiliency, scalability, transaction processing, to handle massive transactions and do it all securely.
Can this all be done? Like I said, we both are bullish on Azure. We’re bullish on Oracle. We think they’re doing things well. It’s not a suggestion of that. It’s just an interesting sort of very abrupt transition that, I wonder if it’ll become a really good case study, and can a company of FedEx’s size and scale make a massive lift and shift to the public cloud and, or are they also leaning heavy on Azure stack, leaning heavy on Oracle cloud? Are they doing a cloud customer? Are they going to basically say, yeah, we’re moving to the cloud, but basically they’re just having someone else managing the data center in some sort of Equinix or something? You know what I mean?
I guess the architecture of this thing fascinates me, because as it is, all the data Pat that would have to be managed, and the cost of putting all that data in the cloud, all those workloads, I guess I’m curious about the calculus of these savings, and I’m really interested, in a year or two in trying to do all this, if it really is public cloud, for a company the size of FedEx with all the Edge and all the things that they’re going to need to do. All the AI, the accelerator, the data warehousing, data lakes management, is it really going to save them as much as they think, and what are the pitfalls that they could run into?
Patrick Moorhead: Well, by the way, Daniel, the other thing the industry agrees on is you don’t save money going to the public cloud.
Daniel Newman: Right. At least, that was the first thing I thought.
Patrick Moorhead: Yeah. It’s about agility, it’s about flexibility, it’s about all these things. And like I said, had this headline been out here five years ago I would’ve been like, yeah, but as an industry we’ve matured. No longer are there CEO dictates and board dictates to go all to the public cloud. And the other thing that’s interesting too, and this is why, I think, this must have been going on for a decade is, you don’t lift and shift a mainframe to Azure and Oracle. You don’t. The only place you can do lift and shift on a Z or something like that, or a power is in the IBM cloud. So you have to rewrite those applications.
And then when I look at FedEx, they’re not in financial systems, which is a key, but they are in retail, which is an area of strength for the company. So this will be interesting to see. I kind of think this is grandstanding by FedEx during a financial analyst day. Heck, even Walmart. Walmart came out with this massive thing which said, we’re all in a hybrid cloud. We’ve inserted a layer to let us arbitrage between the top three public cloud folks. We can run the same applications On-Prem at the Edge and in the public cloud and Colo. And now FedEx is going, we’re all around the public cloud. Hey, good luck.
Daniel Newman: By the way, this really actually dovetails super nicely into our next topic. But actually, I feel like there’s going to be another story on this in a year or two, and we’re going to find out. Like I said, I think this could be an ultimate case study, 100 billion plus type of market cap company just go all in on public cloud. Does it work? Because it’s kind of ironic that all the hyperscalers are making all this investment in hybrid and Edge and Prem because seems that in order to keep growing their enterprise business, they need to make sure they’re kind of meeting the customer where they are.
Patrick Moorhead: So Daniel, let’s move into the next topic. Adam Zielinski had some things to say on cloud adoption, Daniel.
Daniel Newman: Yeah, it was interesting, Patrick. This article is a few days old, but since it was a quieter week I pulled it out. And it’s really interesting because this conversation’s been happening more and more for me, and I think you, in Advisory, in different sessions, where we’re talking. And even that 30% that we hear 25, 30% of workloads being in the public cloud seems to be more reflective of all workloads, including things that aren’t enterprise workloads. Your homemade SAS type of, I say homemade SAS, like games and other things that people do. When you look at the IT, Adam actually said in the CNBC piece, call it 10%. And so it’s interesting because everybody’s been wondering, where are we on this cloud adoption journey?
Are we in the first inning? Are we in the fifth inning? We’re definitely not in the ninth inning, if you’re using baseball as an analogy. But Adam basically said it’s day one. And he used the number of 10%. And I’m like, huh, this is really interesting. And by the way, he goes really well with that topic we just talked about basically saying, the reason we’re only at 10% is because the vast majority of companies critical enterprise workloads are still run on prem. And you’re talking about the big database workloads, the big ERP workloads. And this is why this kind of symbiotic relationship across IT OEM’s, your HPE’s, Dell’s, IBM’s, Cisco’s, your software providers, Oracles and SAPs, and at Microsoft on their software side. And then your hyperscalers has become more of this inter web or intertwined web of a relationship that isn’t going to be like, hey, it was just as easy… We always kind of made the joke, swipe a credit card, spin up a workload and run your business, but that’s really not the case.
I mean, you’re seeing Salesforce building out a hyper force hybrid platform. You’re talking about a company that basically was born on the idea that you don’t need infrastructure now going back and saying, well, maybe in order to do things right you might need some infrastructure. You’re going to need a platform layer. You’re going to need to be able to connect to a third party. You’re seeing born on cloud data warehouses like Snowflake going to Dell and saying, hey, let’s work together so that your storage and our cloud based data warehouse can integrate seamlessly for the user. Bottom line is this is, he’s right. It’s early innings. And this is the beautiful thing that everybody I want to take away from this topic is, the cloud’s going to grow a lot. Public cloud is, and you just look at the growth metrics. You’re seeing Oracle over 30%, Google over 30%, AWS over 30% and Azure over 30%, and some closer to 50%.
And so we’re all living in this little cloud war. Who’s growing, and who’s growing the fastest, and what’s going on? Those are just some of the hyperscalers, but the point is that they’re all growing, and they’re all growing at a fairly good clip, and nobody’s eating each other’s lunch. And that’s the most interesting thing. Yes, the basic arithmetic on something like this is that if AWS is growing 40, and Google is growing 30, AWS is continuing to create a gap. But what I don’t think is happening as much as people want to believe is that these companies are trading out and swapping, and people are leaving one and moving to the other. It’s kind of an aggregate. It’s an additive where, there are people are adding workloads on other clouds to hit their multi-cloud strategies and B, they’re growing overall by strategically moving workloads and adding workloads that companies didn’t have before.
So like I said, the news piece was eh, small, but the idea that we’re at 10% of really the enterprise IT really struck me. And I thought Adam’s comments about being very early are really important for the market to understand, because the cloud maturity, while the tech has come a long way, enterprises have a very long way to go. The new architectures are not going to be all in cloud or all in prem, they will be hybrid, and companies like AWS have built a really great mouse trap. But you know what? There are many great mouse traps. And that’s going to create a bigger market, a more competitive workspace, more innovation. And I think even in our recessionary environment or the pullback environment we’re in, lots to believe that cloud will continue to grow.
Patrick Moorhead: You know, it’s funny, this was a CNBC article and interview with Kramer on Mad Money. When I first read the article, Daniel Newman, I thought that this was a warning in a way. Is this Adam saying, hey, our future growth won’t be there, but there’s a huge opportunity? There’s a lot to unpack here. And I hate to over rotate on what was said, but quite frankly, what Adam was talking about is been our talk track for a long time, which is, this is the very beginning of it. IBM uses a number that’s 75% of the data. I believe that, that 10% number is the amount of applications. Your Bank of America, you might have 5,000 applications that it’s going to take you time to move over.
But Adam is correct. This is the first inning of a cloud model, and cloud model essentially defined as an operating model and the type of open software that you use, whether it’s containers, whether it’s serverless. I’m kind of wondering if VMs in the cloud is a cloud model. But I think if you approach it from a Dev Ops model, I guess you could call that cloud. But to listen, it was nice to see Adam get out there and talk about it being the early innings. I was amused by the writer of this article, essentially not talking about the profitability that AWS brings into Amazon. All the writer talked about was the revenue that was-
Daniel Newman: 17%.
Patrick Moorhead: No, I know. Isn’t that funny? It’s completely disconnected from the reality.
Daniel Newman: What is that, 150% of profit?
Patrick Moorhead: It’s 100 plus. I don’t know the exact number. I track it every quarter, but I don’t have that in front of me. But anyways, I thought that was amusing. Hey, Daniel Newman, let’s follow up this Friday Six Five here talking about just the next saga here. I should have called this in the Chiron, Twitter deal in jeopardy again. If you’ve been involved with a deal or track deals, you have people’s investment banking arms and strategy arms leaking certain pieces of information to the press. And this one is essentially from a Washington Post article talking about being in serious jeopardy, according to three people familiar with the matter. But here’s the thing. Elon Musk’s camp is concerned with the amount of bots, or robots that are on the platform. Twitter has publicly filed in SCC documents and said publicly a certain percentage, and Elon Musk and his team want to know exactly what that number is before they wade into it.
I still believe that Elon wants to buy Twitter, but he doesn’t want to pay the current offer price. He wants there to be a discount correlated to the number of bots, and I can’t blame him. He can’t go in there, do due diligence, buy the company and then restate that X percent of the traffic to the advertisers is driven by bots. That would be catastrophic for the share price. I don’t think advertisers would be willing to pay what they’re currently paying, and that would hit revenue, which then again, that in turn would cause the stock to spiral.
Daniel Newman: Yeah, you hit it pretty quick and sharp there, Pat, for a topic that is super nuanced, but really has gotten more than its fair share of air time. Elon is right. And I know people don’t really want him to be, because he’s just a guy that people love to hate. Him and his nine children, and 17 mom. I mean, I don’t know anymore what this guy’s got going on. But as a business person, we have to sometimes be nuanced enough in our brains to separate. And this is probably the most misunderstood thing. And I’m not 100% sure I’m right on this, but I’m pretty sure I’m right on this. When you say you are willing to waive diligence, that generally means, or has a clause though, that the information that was provided to you in the documents, the public documents that, by the way, the SEC regulates, are supposed to be correct.
So there’s a couple interesting things here, Pat, in the underpinnings. One is, did Twitter commit fraud? I guess the point is, is there a difference between fraud and stupidity, and is Twitter stupid? And I mean this because with all the money, and investment, and engineering and talent that they have, they can’t figure out their bot situation. I don’t really believe that. I don’t believe that. I have a hard time thinking they couldn’t get to the bottom. Now, did they spend any money, time or effort figuring it out? That’s another question there, Patrick Moorhead, because why would they? Why would they spend any time, because frankly, their user number and growth was already somewhat dismal over the last 10 years. And going back and like, yeah, we’re growing really slow, but also most of our growth isn’t real. I really don’t know how believable or well the market would respond to that.
What I do believe is Elon likes the platform. He sees value. He sees an opportunity to clean it up and make it better. And that we do need a fire hose of discourse that can be well managed with real people on it, having real conversations, getting the information in near real time. And I think that for a different price, he probably will go through with the deal, but the information provided to him, it appears to have been wrong. And I think that gives him the opportunity to pause, to renegotiate and potentially back out. He’s in the power seat here. And despite the fact that his stock is worth less, his fortune is worth less right now, Twitter doesn’t have a lot of options.
And so I feel like there’s a pretty high probability they’re going to renegotiate. And the market, by the way, is agreeing with me, because at a $52 buy price that stocks trading at $33 bucks. So if you believe this deal’s going to get done, there’s a great arbitrage to be had here. I just don’t see it. I think it’s risky. I think he’s got too much ability to move away. And he has that, what’s that? A billion dollar walk away that he had in the clause. So even if someone tried to hold him accountable, that the numbers were good enough, which I don’t think they were, he could still probably, for a billion dollars, walk away and then come back to the table and buy it for about half what he originally had offered for it.
And I know people out there probably prefer for me to hang Elon with a noose of his deal making skills, but in this case, I think he’s right. And I think that Twitter, unless they can prove that they have no negligence and no stupidity, they can’t share those numbers if they’re not real. And that’s, by the way, something the SEC probably, I don’t know, Patrick Moorhead. Again, I’m not a fraud guy, but it feels to me like there’s an accountability that lies more on the Twitter side than the Elon side.
Patrick Moorhead: Twitter needs to get cleaned up. It’s a mess. I’ve seen enough evidence of bias that I’d like to see the deal go through. I’d like to get it, I’d like to see it cleaned up. And I think Elon said it right, which is, 10% on the left are crazy, and 10% on the right are crazy, and let’s have a platform that understands that and pulls that in. That the idea that we’re censoring presidents of even the United States is kind of mind boggling to me. And yeah, I get the whole, is it a public utility? It’s a company, but I’ve got to tell you, the sharpest and quickest way to get regulated is when you’re a private company and people start questioning whether you should be regulated.
I mean, look at all the heat that Amazon is taking, which heck, they’re saying Amazon has such a lead in online buying that essentially it’s the public square. You have to use the public square of Amazon. And I guarantee you, if they’re scrutinizing Amazon like this, they should be scrutinizing Twitter on this. Or maybe Washington views Twitter differently. Maybe those in power in Washington like what Twitter is doing, who they censor, and who they don’t.
Daniel Newman: Ooh. Ooh, ooh, ooh, ooh. No conspiracy theories, Pat, geez.
Patrick Moorhead: I put a maybe in there.
Daniel Newman: Okay. That’s safe then. Yeah, you did the analyst thing. It’s a possibility that this could happen. Yes, I get it. I think, unfortunately, there are large swasses of the population that are just either not well read, not paying attention, don’t care, or… Well, I don’t know. I’m going to stop there, because what I want to say next probably isn’t going to help anybody. This is interesting, though. It’s going to be fun to watch what happens.
Patrick Moorhead: Yeah. So hey, good show buddy. I mean, we covered a lot of ground. I mean, for a slow news and analysis week we certainly covered a bunch of stuff. So it’s great to see you. I’m glad we could do this.
Daniel Newman: Yeah. It’s good to see you too, bud. Have a great week everybody. Thanks for tuning. Hit that subscribe button, by the way. Don’t forget to subscribe. We love our subscribers. And by the way, you’ll be seeing and hearing a bunch more content on this channel because the Six Five Summit, which crushed it, 70 plus speakers, 20 plus CEOs, we’re going to be dropping those Q and A’s on our Six Five Podcast channel over the summer and into the fall along with our weekly show, because we want to make sure everybody that didn’t hear it, heard it. And if you did hear it, I want you to hear it again. So thanks for that.
Patrick Moorhead: Yeah, no, this is great. Now I appreciate everybody. We appreciate you. Have a great weekend.
Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio