Year 2020 marked the 25th anniversary of Netscape going public. On August 9th, 1995, Netscape placed 5 million shares on NASDAQ at $28 per share that opened at $71 and closed at $58.25. The age of the Internet had arrived. The success of Netscape created a frenzy in Silicon Valley.
PAYNE Age
The following spring saw IPOs for Yahoo and Excite. New companies were being funded daily. VCs were throwing money at all ideas. While there were exciting tech companies launching during the Dot Com rise, most of the excitement was in the consumer space. This was the PAYNE age, companies that best defined the time - PayPal, AOL, Yahoo, Netscape, and eBay. It was browser wars, mega Internet directories, and selling everything and anything online. Most can still recall eToys, Pets.com, Kozmo, and Webvan.
Many in Silicon Valley were deeply involved in the developer space and were fascinated by how Software could transform entire companies to operate better. As an example, several state courts systems launched functional web apps for the public that cut search times for basic filings from days to minutes. CRM applications could consolidate all customer account information in one place for anyone in the company to view. Entrepreneurs wanted to transform business.
MISO Age
The idea of renting Software that is offered from the cloud back in 2007 was not something many enterprises felt was a viable option. While the 2000’s ushered in the birth of SaaS, this was a decade ruled by MISO companies - Microsoft, IBM, SAP, Oracle. They were the kings of enterprise business applications.
Microsoft had been in the enterprise space for longer than many realize having built the business on the power of a spreadsheet. When Excel overtook Lotus, Microsoft became the de facto office suite powering small businesses and enterprises. Coupled with the rise of their Windows NT operating system, Microsoft quickly grew into an enterprise software giant. Their acquisitions of Great Plains Software for almost $1 billion in 2001 and Navision for $1.3 billion over one year thrust them squarely into the enterprise business application space.
SAP and Oracle have been the most direct competitors in the enterprise business applications market for the past 15 years. SAP was the true original of ERP provider since the 1970’s. It was only by the mid-00’s that Oracle offered a competitive ERP suite through the acquisitions of PeopleSoft for HR and Siebel for CRM to add to their Oracle eBusiness Suite.
IBM may be the only oddball of the group. They never had a strong suite of business applications, but their near monopoly in the mainframe market meant that most enterprises needed a mainframe integration strategy to implement an ERP system. WebSphere became a common architectural component of these integration projects, as did Tivoli for monitoring and Rational for application development.
During this period, Siebel was also a rising star in the world of CRM. Siebel was part of a new trend; enterprise tech was exciting again! They had already landed hundreds of big business customers, fully integrated the merger of Scopus for customer support functionality and was the dominant leader in a fast-growing market. Enterprise tech was a trend already well underway.
If you ever had to develop application using UML, ABAP, or anything supported by Oracle, it was always a painful experience. In fact, building anything using the same frameworks of the enterprise tech leaders simply led to delays and buggy code. The dominate architecture of the day was a monolith and most projects were still managed in a waterfall methodology.
FAANG Age
Newer ideas of SW engineering were starting to emerge though to better cope with the increasing loads and exponential growth in data and compute. Google developed MapReduce to massively scale their data processing needs. Netflix implemented purposeful failures into their production systems to build resiliency. Amazon rearchitected their platform to be completely services based. The level of engineering creativity, skillfulness, and collaboration needed to build and support this new era of web and mobile apps had been dramatically elevated.
The companies that best exemplified this modern approach to engineering are known as FAANG - Facebook, Amazon, Apple, Netflix, Google. Engineers were treated with greater respect. They could be promoted without becoming managers. Team culture mattered. Rather than representing a particular market segment, what ties FAANG together is belief that great engineering leads to better products, leading many to call this past decade the age of the developer.
SMATAS Age
Most of the activity and investment after the dot com bust was directed to the enterprise business applications market. With the viability of robust and scalable web applications proven, a new SW delivery model emerged called SaaS (Software-as-a-Service). The first generation of these companies are now well-known public companies like Salesforce, ServiceNow, and Workday.
The group in the SaaS space that rose to prominence are SMATAS – Salesforce, Microsoft, Adobe, Twilio, Amazon, and Shopify that are the new tech investment darlings, outstripping even the incredible growth of FAANG. This basket is a mix of application (CRM, ADBE, SHOP) and infrastructure (MSFT, TWLO, AMZN) companies, incumbent giants (MSFT, AMZN) and hypergrowth challengers (CRM, ADBE, SHOP, TWLO).
MAG-AI Age
Recently Dropbox moved 34 PB of data to an AWS S3 data lake. They recognized that using S3 with EC2 Spot Instances, the cloud gave them more flexibility and scalability to run massive Analytics workloads at lower cost. Data shows that only 4% of global IT spend is on the cloud today. That is over 15 years of cloud services being publicly available.Growth in the cloud is only going to increase as the needs of customers and the pace of innovation demand more adaptable platforms.
We believe, right cloud infrastructure will be the first part of the story as the workloads running on top of the cloud will increasingly be AI/ML driven to the point that AI and Cloud will become synonymous. Only a few companies will have both the know-how to manage these workloads and the ability to do so cost efficiently. Because the training data sets, and modeling will need to ingest massive amounts of data that very few companies have the internal capacity to run these in their own data centers. These will be the job for the major cloud providers - Microsoft, Amazon, Google.
Second will be the ability to leverage the vast capabilities of AI/ML. Just in the past year, the depth of capabilities and the sophistication of AI services made available in the cloud is astonishing. Cloud providers can architect and offer highly flexible and functionally comprehensive platforms built for the future. And this is only the start, with much more innovation ahead. Looking at the crystal ball ten years into the future is always risky business, but we are positive other startup early in their development today will appear from nowhere to become dominant providers in this fast-changing AI+Cloud market.
/Service Ventures Team
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