from the cube studios in palo alto in boston bringing you data driven insights from the cube and etr this is breaking analysis with dave vellante the pandemic has changed the way we think about and predict the future as we enter the third year of a global pandemic we see the significant impact that it's had on technology strategy spending patterns and company fortunes much has changed and while many of these changes were forced reactions to a new abnormal the trends that we've seen over the past 24 months have become more entrenched and point to the way that's coming ahead in the technology business hello and welcome to this week's wikibon cube insights powered by etr in this breaking analysis we welcome our partner and colleague and business friend eric porter bradley as we deliver what's becoming an annual tradition for eric and me are predictions for enterprise technology in 2022 and beyond eric welcome thanks for taking some time out thank you dave luckily we did pretty well last year so we were able to do this again so hopefully we can keep that momentum going yeah you know i want to mention that you know we get a lot of inbound predictions from companies and pr firms that you know help shape our thinking but one of the main objectives that we have is we try to make predictions that can be measured that's why we use a lot of data now not all will necessarily fit that parameter but if you've seen the grading of our 2021 predictions that eric and i did you'll see we do a pretty good job of trying to put forth prognostications that can be declared correct or not you know as black and white as as possible now let's get right into our first prediction we're going to go right into spending something at etr surveys for quarterly and we've reported extensively on this we're calling for tech spending to increase somewhere around 8 percent in 2022 you can see there on the slide eric we predicted spending last year would increase by four percent uh idc last check was came in at five and a half percent gartner was somewhat higher but in general you know not too bad but but looking ahead we're seeing an acceleration from the etr september surveys as you can see in the yellow versus the blue bar in this chart many of the smbs that were hard hit by the pandemic are picking up spending again and the etr data is showing acceleration above the mean for industries like energy utilities retail and services and also notably the forbes largest 225 private companies these are companies like mars or or coke industries they're predicting well above average spending for 2022. so eric please weigh in here yeah a lot to bring up on this one i'm going to be quick so 1200 respondents on this over a third of which were at the c-suite level so really good data that we brought in the the usual bucket of you know fortune 500 global 2000 make up the meat of that median but it's 8.3 and rising with momentum as we see what's really interesting right now is that energy and utilities this is usually like a you know an orphan stock dividend type of play you don't see them at the highest point of tech spending and the reason why right now is really because the state of tech infrastructure in our energy infrastructure needs help and it's obvious remember the the florida municipality break preach last year where they took over the water systems or they had the ability to right this is a real issue um you know there's bad nation state actors out there and i'm no alarmist but energy and utility has to spend this money to keep up it's really important and then you also hit on the retail consumer obviously what's what happened the work from home shift created a shop from home ship and the trends that are happening right now in retail if you don't spend and keep up you're not going to be around much longer so i think they're really two interesting things here to call out are energy utilities usually a laggard in it spend and it's leading and also retail consumer a lot of changes happening there yeah great stuff i mean i i recall when we entered the pandemic really etr was the first to emphasize the the impact that work from home was going to have so i really put a lot of weight on this data okay our next prediction is we're going to get into security it's one of our favorite topics and that that is that the number one priority is that needs to be addressed by organizations in 2022 is security and you can see in this slide the degree to which security is top of mind relative to some other pretty important areas like cloud productivity and data and automation and some others now people may say oh this is obvious but i want to add some context here eric and then bring you in first organizations they don't have unlimited budgets and there are a lot of competing priorities for dollars especially with the digital transformation you know mandate and depending on the size of the company this data will vary for example while security is still number one at the largest public companies and those are the course the biggest spenders it's not nearly as pronounced as it is on average or in for example mid-sized companies and gov in government agencies and this is because mid-sized companies or smaller companies they don't have the resources that larger companies do larger companies have done a better job of securing their infrastructure so these mid-sized firms are playing catch-up and the data suggests cyber is even a bigger priority their gaps that they have to fill you know going forward and that's why we think there's going to be more demand for mssps manage security service providers and we may even see some ipo action there and then of course eric you and i have talked about events like the solarwinds hacked there's more ransomware attacks other vulnerabilities just recently like log 4j in in december all of this is heightened concerns now i want to talk a little bit more about how we measure this you know relatively okay it's an obvious prediction but but let's stick our necks out a little bit and so in addition to the rise of managed security services we're calling for m a and and or ipos we've specified some names here on this chart and we're also pointing to the digital supply chain as an area of emphasis again log4j really put that shown that under a light and this is going to help the likes of auth0 which is now octa sailpoint which is called out on this chart and some others we're calling some winners in endpoint security eric you're going to talk about sort of that life cycle that that transformation that we're seeing that that migration to new endpoint technologies that are going to benefit from this reset res uh refresh cycle so eric weigh in here let's talk about some of the elements of this prediction and some of the names on that chart yes certainly i'm going to start right with log4j top of mind and the reason why is because we're seeing a real paradigm shift here where things are no longer being attacked at the network layer they're being attacked at the application layer and in the application stack itself and that is a huge shift left and that's taking in devsecops now as a real priority in 2022. that's a real paradigm shift over the last 20 years that's not where attacks used to come from and this is going to have a lot of changes uh you called out a bunch of names in there that are going to work i would add to that list wiz i would add orca security two names in our emerging technology study uh in addition to the ones you added that are involved in cloud security and container security these names are either gonna get gobbled up so the traditional legacy names are gonna have to start writing checks and you know legacy is not fair but they're in the data center right they're on prem they're not cloud native so these are the names that are the money's going to be flowing to so they're either going to get gobbled up but we're going to see some ipos and the other thing i want to talk about too is what you mentioned we have crowdstrike on that list we have sent to the one on the list everyone knows them our data was so strong on tanium that we actually went positive for the first time just today just this morning where that was released the trifecta of these are so important because of what you mentioned under resourcing we can't have security just tell us when something happens it has to automate and it has to respond so this next generation of edr and xdr and automated response has to happen because people are under-resourced salaries are really high there's a skill shortage out there security has to become responsive it can't just monitor anymore yeah great and we should call out too so we name some names sneak aqua arctic wolf lace work netscope illumio these are all sort of ipo or or possibly even m a uh candidates all right our next prediction goes right to the way we work again something that etr has been on for a while we're calling for a major rethink in remote work for 2022. we had predicted last year that by the end of 2021 there'd be a larger return to the office with the norm being around a third of workers permanently remote and of course the variants changed that equation and you know gave more time for people to think about this idea of hybrid work and that's really come into focus so we're predicting that is going to overtake fully remote as the dominant work model with only about a third of the workers back in the office full time and eric we expect a somewhat lower percentage to be fully remote it's now sort of dipped under 30 at around 29 but it's still significantly higher than the historical average of around 15 to 16 percent so so still a major change but this idea of hybrid and getting hybrid right has really come into focus hasn't it yeah it's it's here to stay there's no doubt about it we started this in march of 2020 as soon as the virus hit this is the tenth iteration of this survey no one no one ever thought we'd see a number where only 34 of people were going to be in office permanently that's a permanent number they're expecting only a third of the workers to ever come back fully in office and against that there's 63 that are saying their permanent workforce is going to be either fully remote or hybrid this i can't really you know explain how big of a paradigm shift this is since the start of the industrial revolution people leave their house and go to work now they're saying that's not going to happen the economic impact here is so broad on so many different areas and you know the reason is like why not right the productivity increase is real we're seeing the productivity increase enterprises are spending on collaboration tools productivity tools we're seeing an increased perception in productivity of their workforce and the cfos can cut down an expense item i just don't see a reason why this would end you know i think it's going to continue and i also want to point out these results as high as they are where before the omicron wave hit us i can only imagine what these results would have been if we had sent this survey out just two or three weeks later yeah that's a great point okay next prediction we're going to look at the supply chain specifically and how it's affecting some of the hardware spending and cloud strategies in the future so in this chart etr ask buyers have you experienced problems procuring hardware as a result of supply chain issues and you know despite the fact that some companies you know i would call out dell for example doing really well in terms of delivering you can see that in the numbers uh it's pretty clear there's been an impact um and and that's not not an across the board you know thing where vendors are able to to deliver especially acute in pcs but also pronounced in networking also in firewalls servers and storage and what's interesting is how companies are responding and reacting so first you know i'm going to call laptop and pc demand staying well above pre-covered norms it had peaked in 2012 pre-pandemic it kept dropping and dropping and dropping in terms of you know unit volume where the market was contracting and we think it continued can continue to grow this year in double digits in 2022 but what's interesting eric is when you survey customers is despite the difficulty they're having in procuring network hardware there's not a much as much of a migration away from existing networks to the cloud you could probably comment on that their networks are more fossilized but when it comes to firewalls and servers and storage there's a much higher propensity to move to the cloud 30 percent of customers that etr surveyed will replace security appliances with cloud services and 41 and 34 respectively will move to cloud compute and storage in 2022 so clouds relentless march on traditional on-prem models continues eric what do you make of this data please weigh in on this prediction as if we needed another reason to go to the cloud right here here it is yet again so this was added to the survey by client demands they were asking about the procurement difficulties the supply chain issues and how it was impacting our community so this is the first time we ran it uh and it really was interesting to see uh you know the move there and storage particularly i found interesting because it correlated with a huge jump that we saw in one of our vendor names which was rubric had the highest net score that it's ever had uh so clearly we're seeing some correlation with some of these names that are you know really well positioned to take storage to take you know into the cloud so again you didn't need another reason to you know hasten this digital transformation but here we are we have it yet again and i don't see it slowing down anytime soon you know that's a really good point i mean it's not necessarily bad news for i mean obviously you wish that had you know no change would be great but that thing's you know always going to change so we will talk about this a little bit later when we get into the super cloud conversation but this is an opportunity for people who embrace the cloud so we'll come back to that and i want to hang on cloud a bit and share some some recent projections that we've made uh the next prediction is the big four cloud players are going to surpass 167 billion in is and pass revenue uh in 2022 we we tracked this observers of this program know that we try to create an apples-to-apples comparison between aws azure gcp and alibaba in ias and pass so we're calling for 38 revenue growth in 2022 which is astounding for such a massive market you know aws is probably not going to hit a 100 billion dollar run rate but they're going to be close uh this year and and we're going to get there by 2023 and they're going to surpass that azure continues to close the gap uh now they're about two-thirds of the size of aws and google we think is going to surpass alibaba and take the number three spot eric anything you'd like to add here yeah first of all just on a sector level we saw our sector and the survey net score and on cloud jump another 10 it was already really high at 48 went up to 53. this trades not slowing down anytime
soon and we even added an edge compute type of player like cloudflare into our cloud bucket this year and it debuted with a net score of almost 60. so this is really an area that's expanding not just the big three but everywhere we even saw oracle and ibm jump up so even they're having success taking some of their on-prem customers and then selling them to their cloud services this is a massive opportunity and it's not changing anytime soon it's going to continue and i think the operative word there is opportunity so you know the next prediction is something we've been having fun with and that's this super cloud becomes a thing now the reason i say we've been having fun is we put this concept of super cloud out uh and and it's become a bit of a a controversy first you know what the heck's a super cloud right it's sort of a a buzzword worthy term but there really is we believe a thing here we think there needs to be a rethinking or at least an evolution of the term multi-cloud and what we mean is that in our view you know multi-cloud from a vendor perspective was was really cloud compatibility it wasn't marketed that way but that's what it was either a vendor would containerize its legacy stack shove it into the to the cloud or a company you know they'd do the work they build a cloud native service on one of the the big clouds and they did do it for aws then azure then google but there really wasn't much if any leverage across clouds now from a buyer perspective we've always said multi-cloud was a symptom of multi-vendor meaning i got different workloads running in different clouds or i bought a company and they run on azure and i do a lot of work on aws but generally it wasn't necessarily a prescribed strategy to build value on type on top of hyperscale infrastructure there certainly was somewhat of a you know reducing lock-in and hedging the risk but we're talking about something more here we're talking about building value on top of the hyperscale gift of hundreds of billions of dollars in capex so in in addition we're not just talking about transforming i.t which is what the last 10 years of cloud have been been like and you know doing work in the cloud because it's cheaper or simpler or more agile all of those things so it's beginning to change and this chart shows some of the technology vendors that are leaning toward this super cloud vision in our view building on top of the hyperscalers that are highlighted in red now jerry chen at greylock they wrote a piece called castles in the cloud it got our thinking going and he and the team at greylock they're building out a database of all the cloud services and all the sub markets in cloud and that got us thinking that there's a higher level abstraction coalescing in the market where there's tight integration of services across clouds but the underlying complexity is hidden and there's an identical experience across clouds and even in my dreams on prem for some platforms so what's new or newish and evolving are things like location independence you've got to include the edge on that metadata services to optimize locality or reference and data source awareness governance privacy you know application uh uh independent uh and dependent actually recovery across clouds so we're seeing this evolve and in our view the two biggest things that are new are the technology is evolving where you're seeing services truly integrate across cloud and the other big change is digital transformation where there's this new innovation curve developing and it's not just about making your it better it's about sassifying and automating your entire company workflows so super cloud it's not just a vendor thing to us it's the evolution of you know the the marc andreessen quote every company will be a sas company every company will deliver capabilities that can be consumed as cloud services so eric the chart shows spending momentum on the y-axis and net score or presence in the etr data set on the uh or market share in the x-axis we've talked about snowflake as the poster child for this concept where the vision is you're in their cloud and sharing data in that safe place maybe you could make some comments you know what do you think of this super cloud concept and this change that we're sensing in the market well i think you did a great job describing the concept so maybe i'll support it a little bit on the vendor level and then kind of give examples of the ones that are doing it you stole the lead there with snowflake right there is no better example than what we've seen with what snowflake can do cross portability in the cloud the ability to be able to be you know completely agnostic but then build those services on top that are better than anything they could offer and it's not just there i mean you mentioned edge compute that's a whole nother layer where this is coming in and cloud flare the momentum there is out of control i mean this is a company that started off just doing cdn and trying to compete with akamai and now they're giving you full soup to nuts with security and actual edge compute layer it's a fantastic company what they're doing it's another great example of what you're seeing here i'm going to call out hashicorp as well they're more of an infrastructure services a little bit more of an open source premium model but what they're doing as well is completely cloud agnostic it's dynamic it doesn't care if you're in a container it doesn't matter where you are um they recently ipo they're down 25 but their data looks so good across both of our emerging technology and our thesis survey it's certainly another name that's playing on this and another one that we mentioned as well as rubric um if you need storage compute and uh in the cloud layer and you need to be agnostic to it they're another one that's really playing in this space so i think it's a great concept you're bringing up i think it's one that's here to stay and there's certainly a lot of vendors that fit into what you're describing excellent thank you all right let's shift to data in the next prediction it might be a little tough to to measure before i said we're trying to be a little black and white here but it relates to data mesh which is the ideas behind uh that that term were created by jamaicani of thoughtworks and we see datamesh as really gaining momentum in 2022 but it's largely going to be we think confined to a more narrow scope now the impetus for change in data architecture many companies really stems from the fact that their hadoop infrastructure really didn't solve their data problems and they struggle to get more value out of their their data investments data mesh prescribes a shift to a decentralized architecture and a in domain ownership of data and a shift to data product thinking beyond data for analytics but data products and services that can be monetized now they're very powerful in our view but they're difficult for organizations to get their heads around and further decentralization creates the need for a self-service platform and federated data governance that can be automated and a lot not a lot of standards around this so it's going to take some time at our power panel a couple weeks ago on data management tony bear predicted a backlash on data mesh and i don't think it's going to be so much of a backlash but rather the adoption will be more limited most implementations we think are going to use a starting point of aws and they'll enable domains to access and control their own data lakes and while that is a very small slice of the data mesh vision i think it's going to be a starting point and the last thing i'll say is this is going to take a decade to evolve but i think it's the right direction and whether it's a data lake or a data warehouse or a data hub or an s3 bucket these are really the concept is they'll eventually just become nodes on the data mesh that are discoverable and access is governed and so the idea is that the stranglehold that the data pipeline and process and hyper-specialized roles that that they have on data agility is going to evolve and decentralize architectures and the democratization of data will eventually become a norm for a lot of of different use cases and eric i wonder if you'd add anything to this yeah there's a lot to add there the first thing that jumped out at me was that mention of the word backlash you said you said it's not really a backlash but what it could be is these are new words trying to solve an old problem and i do think sometimes the industry will notice that right away and maybe that'll be a little pushback and the problems are what you already mentioned right we're trying to get to an area where we can have more assets in our data side more deliverable and more usable and relevant to the business and you mentioned that as self-service with governance laid on top and that's really what we're trying to get to now there's a lot of ways you can get there data fabric is really the technical aspect and data mesh is really more about the people the process and the governance but the two of those need to meet in order to make that happen and as far as tools you know there's even cataloging names like informatica that play in this right istio plays in this snowflake plays in this so there's a lot of different tools that will support it but i think you're right in calling out aws right they have aws lake they have aws glue they have so much that's trying to drive this but i think the the really important thing to keep here is what you said it's going to be a decade-long journey and by the way we're on the shoulders of giants a decade ago that have even gotten us to this point to talk about these new words because this has been an ongoing type of issue but ultimately no matter which vendors you use this is going to come down to your data governance plan and the data literacy in your business this is really about workflows and people as much as it is tools so you know the new term of data for data mesh is wonderful but you still have to have the people and the governance and the processes in place to get there great thank you for that eric great point so all right for the next prediction we're going to shine the spotlight on two of our favorite topics snowflake and databricks and the prediction here is that of course databricks is going to ipo this year as expected everybody sort of expects that and while but the prediction really is while these two companies are facing off already in the market they're also going to compete with each other for m a especially as data bricks you know after the ipo and have you know more prominence in a war chest so first these companies they're both looking pretty good same xy graph um with spending velocity and and presence and market share and the horizontal axis and both snowflake and data bricks are well above that magic 40 percent red dotted line the elevated line to us and for context we've included a few other firms so you can see kind of what a good position these two companies are really in especially i mean snowflake wow it just keeps moving to the right on this horizontal picture but maintaining the next net score and the y-axis amazing so but here's the thing databricks is using the term lake house implying that it has the best of data lakes and data warehouses and snowflake has the vision of the data cloud and data sharing and snowflake they've nailed analytics and now they're moving into data science in the domain of databricks databricks on the other hand is nailed data science and is moving into the domain of of snowflake in the data warehouse and analytic space but to really make this seamless there has to be a semantic layer between these two worlds and they're either going to build it or buy it or both and there are there's other areas like data clean rooms and privacy and data prep and governance and machine learning learning tooling and ai all that stuff and so the prediction is they'll not only compete in the market but they'll step up in their competition for m a especially after the databricks ipo we've listed some target names here like atscale you know iguazio infosum habu muta and i'm sure there are many many others eric you care to comment yeah i remember a year ago when we were talking snowflake when they first came out and you and i said i'm shocked if they don't use this more chest of money and start going after more because we know slootman we have so much respect for him we've seen his playbook and i'm actually a little bit surprised that here we are 12 months later and he hasn't spent that money yet so i think this prediction is just spot-on to talk a little bit about the data side snowflake is in rarefied air it's all by itself it is the number one net score in our entire thesis universe it is absolutely incredible there is almost negatives no negative intentions uh global 2000 organizations are increasing their spend on it we maintain our positive outlook it's really just you know stands alone databricks however also has one of the highest overall net sentiments in the entire universe not just its area and this is the first time we're coming out positive on this name as well it looks like it's not slowing down really interesting comment you made though that we normally hear from our end user commentary in our panels and our interviews databricks is really more used for the data science side the mlai is where it's best positioned in our survey so it might still have some catching up to do to really have that caliber of usability that you know snowflake is seeing right now and snowflake having its own marketplace there's just a lot more to snowflake right now than there is data bricks but i do think you're right these two massive vendors are sort of heading towards a collision course and it'll be very interesting to see how they deploy their cash i think snowflake with their incredible management and leadership probably will make the first move well i think you're right on that by the way i'll just add you know databricks has basically said hey it's going to be easier for us to come from data lakes into data warehouse i'm not sure i buy that i think again that semantic layer is is a missing ingredient so it's gonna be really interesting to see how this plays out uh and and to your point you know snowflake's got the war chest they got the momentum they've got the public presence now since november 2020 and so uh you know they're probably going to start making some aggressive moves anyway next prediction is something eric that you and i have talked about many many times and that is observability i know it's one of your favorite topics and we see this world screaming for more consolidation and going it's going all in on cloud native these legacy stacks they're fighting to stay relevant but the direction is pretty clear and the same xy graph lays out the players in the field with some of the new entrants that we've also highlighted like observe and honeycomb and chaos search that we've talked about eric we put a big red target around splunk because everyone wants their gold so please give us your thoughts oh man i feel like i've been saying negative things about splunk for too long i've got a bad rap on this name the splunk shareholders come after me all the time listen it really comes down to this they're a fantastic company that was designed to do logging and monitoring and had some great tool sets around what you could do with it but they were designed for the data center they were designed for prem the world we're in now is so dynamic everything i hear from our end user community is that all net new workloads will be going to cloud native players it's that simple so splunk is entrenched it's going to continue doing what it's doing and it does it really really well but if you're doing something new the new workloads are going to be in a dynamic environment and that's going to go to the cloud native players and in our data it is extremely clear that that means dog and elastic they are by far number one and two in net score increase rates adoption rates it's not even close even new relic actually is starting to um you know entrench itself really well we saw new relics adoptions going up which is super important because they went to that freemium model you know to try to get their little bit of an entrenched customer base and that's working as well and then you made a great list here of all the new entrants but it goes beyond this there's so many more in our emerging technology survey we're seeing sentry catchpoint securonics lucid works there are so many options in the space and let's not forget the biggest data that we're seeing is with grafana and grafana labs has yet to turn on their enterprise elastic did it why can't grafana labs do it they have an enterprise stack so when you look at how crowded this space is there has to be consolidation i recently hosted a panel and every single guy on that panel said please give me consolidation because they're the end users trying to actually deploy these and it's getting a little bit confusing great thank you for that uh um okay last person prediction eric might might be a little out of your wheelhouse but but you know you might have some thoughts on it and that's hybrid events become the new digital model and a new category in 2022 you got you know these pure play digital or virtual events they're going to take a back seat to in-person hybrids the virtual experience will eventually give way to metaverse experiences and that's going to take some time but but but the physical hybrid is going to drive it and metaverse is ultimately going to define the virtual experience because the virtual experience today is not great nobody likes virtual and hybrid is beco going to become the business model today's pure virtual experience has to evolve you know the cube first delivered hybrid mid last decade but nobody really wanted it we did mobile world congress last summer in barcelona and an amazing hybrid model which we're showing in some of the pictures here alex if you don't mind bringing that back up and every physical event that we're we're doing now has a hybrid and virtual component including including the pre-records you can see in our studios you see the the green screen i i don't know eric what do you think about you know the the zoom fatigue and all this i know you you host regular events with your your round tables but what are your thoughts well first of all i think you and your company here have just done an amazing job on this so uh that's really your expertise uh i spent 20 years of my career hosting intimate wall street idea dinners so i'm better at navigating a wine list than i am navigating but i will say that you know the trend just goes along with what we saw if 30 or 35 are going to be fully remote if 70 are going to be hybrid then our events are going to be as well uh i used to host roundtable dinners on you know one or two nights a week now those have gone virtual they're now panels they're now one-on-one interviews you know we do chats we do submitted questions we do what we can but there's no reason that this is going to change anytime soon i think you're spot on here yeah great all right so there you have it eric and i we listen we always love the feedback love to know what you think thank you eric for your partnership your collaboration and and love doing these predictions with you yeah i always enjoy them too and i'm actually happy last year you made us do a baker's dozen so yes you're keeping up to 10 this year we got a lot to say i know you know we cut out we didn't we didn't do much on crypto we didn't really talk about sas i mean i got some thoughts there we didn't really do much on containers and ai you want to keep going 10.
rpa all right we'll we'll we'll come we'll have you back i mean let's do that all right all right don't forget these episodes they're all available as podcasts wherever you listen all you do is search breaking analysis podcast check out etr's website at etr.plus they've got a new website out it's the best data in the industry and we publish a full report every week on wikibon.com and siliconangle.com you can always reach out on email david.velante at siliconangle.com i'm at divalante on twitter comment on our linkedin posts this is dave vellante for the cube insights powered by etr have a great week stay safe be well and we'll see you next time [Music] you
2022-01-25