Category Archives: Predictions

Kellblog's 10 Predictions for 2020

As I’ve been doing every year since 2014, I thought I’d take some time to write some predictions for 2020, but not without first doing a review of my predictions for 2019.  Lest you take any of these too seriously, I suggest you look at my batting average and disclaimers.

Kellblog 2019 Predictions Review

1.  Fred Wilson is right, Trump will not be president at the end of 2019.  PARTIAL.  He did get impeached after all, but that’s a long way from removed or resigned. 

2.  The Democratic Party will continue to bungle the playing of its relatively simple hand.  HIT.  This is obviously subjective and while I think they got some things right (e.g., delaying impeachment), they got others quite wrong (e.g., Mueller Report messaging), and continue to play more left than center which I believe is a mistake.

3.  2019 will be a rough year for the financial markets.  MISS.  The Dow was up 22% and the NASDAQ was up 35%.  Financially, maybe the only thing that didn’t work in 2019 were over-hyped IPOs.  Note to self:  avoid quantitative predictions if you don’t want to risk ending up very wrong.  I am a big believer in regression to the mean, but nailing timing is the critical (and virtually impossible) part.  Nevertheless, I do use tables like these to try and eyeball situations where it seems a correction is needed.  Take your own crack at it.

4.  VC tightens.  MISS.  Instead of tightening, VC financing hit a new record.  The interesting question here is whether mean reversion is relevant.  I’d argue it’s not – the markets have changed structurally such that companies are staying private far longer and thus living off venture capital (and/or growth-stage private equity) in ways not previously seen.  Mark Suster did a great presentation on this, Is VC Still a Thing, where he explains these and other changes in VC.  A must read.

5. Social media companies get regulated.  PARTIAL.  While “history may tell us the social media regulation is inevitable,” it didn’t happen in 2019.  However, the movement continued to gather steam with many Democratic presidential candidates calling for reform and, more notably, none other than Facebook investor Roger McNamee launching his attack on social media via his book Zucked: Waking Up To The Facebook Catastrophe.  As McNamee says, “it’s an issue of ‘right vs. wrong,’ not ‘right vs. left.’”

 

6. Ethics make a comeback.  HIT.  Ethics have certainly been more discussed than ever and related to the two reasons I cited:  the current administration and artificial intelligence.  The former forces ethics into the spotlight on a daily basis; the later provokes a slew of interesting questions, from questions of accidental bias to the trolley car problem.  Business schools continue to increase emphasis on ethics.  Mark Benioff has led a personal crusade calling for what he calls a new capitalism.

7.  Blockchain, as an enterprise technology, fades away.  HIT.  While I hate to my find myself on the other side of Ray Wang, I’m personally not seeing much traction for blockchain in the enterprise.  Maybe I’m running with the wrong crowd.  I have always felt that blockchain was designed for one purpose (to support cybercurrency), hijacked to another, and ergo became a vendor-led technology in search of a business problem.  McKinsey has a written a sort of pre-obituary, Blockchain’s Occam Problem, which was McKinsey Quarterly’s second most-read article of the year.  The 2019 Blockchain Opportunity Summit’s theme was Is Blockchain Dead?  No. Industry Experts Join Together to Share How We Might Not be Using it Right which also seems to support my argument. 

8.  Oracle enters decline phase and is increasingly seen as a legacy vendor.  HIT.  Again, this is highly subjective and some people probably concluded it years ago.  My favorite support point comes from a recent financial analyst note:  “we believe Oracle can sustain ~2% constant currency revenue growth, but we are dubious that Oracle can improve revenue growth rates.”  That pretty much says it all.

9.  ServiceNow and/or Splunk get acquired.  MISS.  While they’re both great businesses and attractive targets, they are both so expensive only a few could make the move – and no one did.  Today, Splunk is worth $24B and ServiceNow a whopping $55B.

10.  Workday succeeds with its Adaptive Insights agenda.  HIT.  Changing general ledgers is a heart transplant while changing planning systems is a knee replacement.  By acquiring Adaptive, Workday gave itself another option – and a far easier entry point – to get into corporate finance departments.  While most everyone I knew scratched their head at the enterprise-focused Workday acquiring a more SMB-focused Adaptive, Workday has done a good job simultaneously leaving Adaptive alone-enough to not disturb its core business while working to get the technology more enterprise-ready for its customers.  Whether that continues I don’t know, but for the first 18 months at least, they haven’t blown it.  This remains high visibility to Workday as evidenced by the Adaptive former CEO (and now Workday EVP of Planning) Tom Bogan’s continued attendance on Workday’s quarterly earnings calls.

With the dubious distinction of having charitably self-scored a 6.0 on my 2019 predictions, let’s fearlessly roll out some new predictions for 2020.

Kellblog 2020 Predictions

1.  Ongoing social unrest. The increasingly likely trial in the Senate will be highly contentious, only to be followed by an election that will be highly contentious as well.  Beyond that, one can’t help but wonder if a defeated Trump would even concede, which could lead to a Constitutional Crisis of the next level. Add to all that the possibility of a war with Iran.  Frankly, I am amazed that the Washington, DC continuous distraction machine hasn’t yet materially damaged the economy.  Like many in Silicon Valley, I’d like Washington to quietly go do its job and let the rest of us get back to doing ours.  The reality TV show in Washington is getting old and, happily, I think many folks are starting to lose interest and want to change the channel.

2.  A desire for re-unification.  I remain fundamentally optimistic that your average American – Republican, Democrat, or the completely under-discussed 38% who are Independents — wants to feel part of a unified, not a divided, America.  While politicians often try to leverage the most divisive issues to turn people into single-issue voters, the reality is that far more things unite us as Americans than divide us.  Per this recent Economist/YouGov wide-ranging poll, your average American looks a lot more balanced and reasonable than our political party leaders.  I believe the country is tired of division, wants unification, and will therefore elect someone who will be seen as able to bring people together.  We are stronger together.

3.  Climate change becomes the new moonshot.  NASA’s space missions didn’t just get us to the moon; they produced over 2,000 spin-off technologies that improve our lives every day – from emergency “space” blankets to scratch-resistant lenses to Teflon-coated fabrics.  Instead of seeing climate change as a hopeless threat, I believe in 2020 we will start to reframe it as the great opportunity it presents.  When we mobilize our best and brightest against a problem, we will not only solve it, but we will create scores to hundreds of spin-off technologies that will benefit our everyday lives in the process.  See this article for information on 10 startups fighting climate change, this infographic for an overview of the kinds of technologies that could alleviate it, or this article for a less sanguine view on the commitment required and extent to which we actually can de-carbonize the air. Or check out this startup which makes “trees” that consume the pollution of 275 regular trees.

4.  The strategic chief data officer (CDO).  I’m not a huge believer in throwing an “O” at every problem that comes along, but the CDO role is steadily becoming mainstream – in 2012 just 12% of F1000 companies reported having a CDO; in 2018 that’s up to 68%.  While some of that growth was driven by defensive motivations (e.g., compliance), increasingly I believe that organizations will define the CDO more strategically, more broadly, and holistically as someone who focuses on data, its cleanliness, where to find it, where it came from, its compliance with regulations as to its usage, its value, and how to leverage it for operational and strategic advantage.   These issues are thorny, technical, and often detail-oriented and the CIO is simply too busy with broader concerns (e.g., digital transformation, security, disruption).  Ergo, we need a new generation of chief data officers who want to play both offense and defense, focused not just tactically on compliance and documentation, but strategically on analytics and the creation of business value for the enterprise. This is not a role for the meek; only half of CDOs succeed and their average tenure is 2.4 years.  A recent Gartner CDO study suggests that those who are successful take a more strategic orientation, invest in a more hands-on model of supporting data and analytics, and measure the business value of their work.

5.  The ongoing rise of DevOps.   Just as agile broke down barriers between product management and development so has DevOps broken down walls between development and operations.  The cloud has driven DevOps to become one of the hottest areas of software in recent years with big public company successes (e.g., Atlassian, Splunk), major M&A (e.g., Microsoft acquiring GitHub), and private high-flyers (e.g., HashiCorp, Puppet, CloudBees).  A plethora of tools, from configuration management to testing to automation to integration to deployment to multi-cloud to performance monitoring are required to do DevOps well.  All this should make for a $24B DevOps TAM by 2023 per a recent Cowen & Company report.  Ironically though, each step forward in deployment is often a step backward in developer experience, why is one reason why I decided to work with Kelda in 2019.

6. Database proliferation slows.  While 2014 Turning Award winner Mike Stonebraker was right over a decade ago when he argued in favor of database specialization (One Size Fits All:  An Idea Whose Time Has Come and Gone), I think we may now too much of a good thing.   DB Engines now lists 350 different database systems of 14 different types (e.g., relational, graph, time series, key-value). Crunchbase lists 274 database (and database-related) startups.  I believe the database market is headed for consolidation.  One of the first big indicators of a resurgence in database sanity was the failure of the (Hadoop-based) data lake, which happened in 2018-2019 and was the closest thing I’ve seen to déjà vu in my professional career – it was as if we learned nothing from the Field of Dreams enterprise data warehouse of the 1990s (“build it and they will come”).  Moreover, after a decade of developer-led database selection, developers and now re-realizing what database people knew along – that a lot of the early NoSQL movement was akin to throwing out the ACID transaction baby with the tabular schema bathwater.

7.  A new, data-layer approach to data loss prevention (DLP).  I always thought DLP was a great idea, especially the P for prevention.  After all, who wants tools that can help with forensics after a breach if you could prevent one from happening at all — or at least limit one in progress?  But DLP doesn’t seem to work:  why is it that data breaches always seem to be measured not in rows, but in millions of rows?  For example, Equifax was 143M and Marriott was 500M.  DLP has many known limitations.  It’s perimeter-oriented in a hybrid cloud world of dissolving perimeters and it’s generally offline, scanning file systems and database logs to find “misplaced data.”  Wouldn’t a better approach be to have real-time security monitored and enforced at the data layer, just the same way as it works at the network and application layer?  Then you could use machine learning to understand normal behavior, detect anomalous behavior, and either report it — or stop it — in real time.  I think we’ll see such approaches come to market in 2020, especially as cloud services like Snowflake, RDS, and BigQuery become increasingly critical components of the data layer.

8. AI/ML continue to see success in highly focused applications.  I remain skeptical of vendors with broad claims around “enterprise AI” and remain highly supportive of vendors applying AI/ML to specific problems (e.g., Moveworks and Astound who both provide AI/ML-based trouble-ticket resolution).  In the end, AI and ML are features, not apps, and while both technologies can be used to build smart applications, they are not applications unto themselves.  In terms of specificity, the No Free Lunch Theorem reminds us that any two optimization techniques perform equivalently when averaged across all possible problems – meaning that no one modeling technique can solve everything and thus that AI/ML is going to be about lots of companies applying different techniques to different problems.   Think of AI/ML more as a toolbox than a platform.  There will not be one big winner in enterprise AI as there was in enterprise applications or databases.  Instead, there will be lots of winners each tackling specific problems.  The more interesting battles will those between systems of intelligence (e.g., Moveworks) and systems of record (e.g., ServiceNow) with the systems-of-intelligence vendors running Trojan Horse strategies against systems-of-record vendors (first complementing but eventually replacing them) while the system-of-record vendors try to either build or acquire systems of intelligence alongside their current offerings. 

9.  Series A rounds remain hard.  I think many founders are surprised by the difficulty of raising A rounds these days.  Here’s the problem in a nutshell:

  • Seed capital is readily available via pre-seed and seed-stage investments from angel investors, traditional early-stage VCs, and increasingly, seed funds.  Simply put, it’s not that hard to raise seed money.
  • Companies are staying in the seed stage longer (a median of 1.6 years), increasingly extending seed rounds, and ergo raising more money during seed stage (e.g., $2M to $4M).
  • Such that, companies are now expected to really have achieved something in order to raise a Series A.  After all, if you have been working for 2 years and spent $3M you better have an MVP product, a handful of early customers, and some ARR to show for it – not just a slide deck talking about a great opportunity.

Moreover, you should be making progress roughly in line with what you said at the outset and, if you took seed capital from a traditional VC, then they better be prepared to lead your round otherwise you will face signaling risk that could imperil your Series A.

Simply put, Series A is the new chokepoint.  Or, as Suster likes to say, the Series A and B funnel hasn’t really changed – we’ve just inserted a new seed funnel atop it that is 3 times larger than it used to be.

10.  Autonomy’s former CEO gets extradited.  Silicon Valley is generally not a place of long memories, but I saw the unusual news last month that the US government is trying to extradite Autonomy founder and former CEO Mike Lynch from the UK to face charges.  You might recall that HP, in the brief era under Leo Apotheker, acquired enterprise search vendor Autonomy in August, 2011 for a whopping $11B only to write off about $8.8B under subsequent CEO Meg Whitman a little more than a year later in November, 2012.  Computerworld provides a timeline of the saga here, including a subsequent PR war, US Department of Justice probe, UK Serious Fraud Office investigation (later dropped), shareholder lawsuits, proposed settlements, more lawsuits including Lynch’s suing HP for $150M for reputation damages, and HP’s spinning-off the Autonomy assets.  Subsequent to Computerworld’s timeline, this past May Autonomy’s former CFO was sentenced to five years in prison.  This past March, the US added criminal charges of securities fraud, wire fraud, and conspiracy against Lynch.  Lynch continues to deny all wrongdoing, blames the failed acquisition on HP, and even maintains a website to present his point of view on the issues.  I don’t have any special legal knowledge or specific knowledge of this case, but I do believe that if the US government is still fighting this case, still adding charges, and now seeking extradition, that they aren’t going to give up lightly, so my hunch is that Lynch does come to the US and face these charges. 

More broadly, regardless of how this particular case works out, in a place so prone to excess, where so much money can be made so quickly, frauds will periodically happen and it’s probably the most under-reported class of story in Silicon Valley.  Even this potentially huge headline case – the proposed extradition of a British billionaire tech mogul —  never seems to make page one news.  Hey, let’s talk about something positive like Loft’s $175M Series C instead.

To finish this up, I’ll add a bonus prediction:  Dave doesn’t get a traditional job in 2020.  While I continue to look at VC-backed startup and/or PE-backed CEO opportunities, I am quite enjoying my work doing a mix of boards, advisory relationships, and consulting gigs.  While I remain interested in looking at great CEO opportunities, I am also interested in adding a few more boards to my roster, working on stimulating consulting projects, and a few more advisory relationships as well.

I wish everyone a happy, healthy, and above-plan 2020.

Kellblog Predictions for 2019

Because I’ve been quite busy of late with the sale of my company, I’m doing a somewhat quicker and lighter (if not later) version of my annual predictions post.  Here goes, starting with a review of last year’s predictions.

2018 Kellblog Predictions Review

1. We will again continue to see a level of divisiveness and social discord not seen since the 1960s. HIT.  Hard to argue I need to justify this one.  Want to argue about it?

2. The war on facts and expertise will continue to escalate. HIT. Unfortunately, the President is leading the charge on this front, with the Washington Post fact checker tallying 7,645 false claims since taking office.

factchecker

3. Leading technology and social media companies finally step up to face ethical challenges. MAJOR MISS.  Well, I nailed that the issue would be critical, but boy did I overestimate the maturity of the management of these companies.

4. AI will move from hype to action, meaning bigger budgets, more projects, and some high visibility failures. HIT, I think.  See this McKinsey report for some interesting survey data on AI adoption and barriers to it.

5. AI will continue to generate lots of controversy about job displacement. HIT. While the optimists say AI will create more jobs than it will displace, many still worry conversely.  Since the prediction was about the controversy continuing, we’ll call it a hit.

6. The bitcoin bubble bursts. MAJOR HIT.  This one partially redeems me for over-estimating Facebook’s management.

btc

7. The Internet of Things (IoT) will continue to build momentum.  HIT. See this Forbes article about data from Dresner Advisory’s 2018 IoT Intelligence Market Study.

8. The freelance / gig economy continues to gain momentum with freelance workers poised to pass traditional employees by 2027. HIT.  Per this Forbes article, 57M people now participate in the gig economy in some way.

9. M&A heats up due to repatriation of overseas cash.  HIT. Per Berkery Noyes, software M&A deal value was up nearly $100B over 2017.  To the extent this was due to overseas cash repatriation I don’t know, but it certainly was a factor.

m-and-a

10. 2018 will be a good year for cloud EPM vendors. MAJOR HIT.  Anaplan went public, Adaptive Insights was acquired by Workday, and Host Analytics was acquired by Vector Capital. 

With 9 hits, two of them major – and with only one offsetting major miss — I should probably just drop the mike and get out of the predictions business.  But no guts, no glory.

Kellblog’s 2019 Predictions

Reminder to see the disclaimers in my FAQ and remember that these predictions are not financial or business advice – they are made in the spirit of fun.  To the extent they’re concrete, that’s to make the game more interesting so we can better assess them next year.  Here we go.

1. Fred Wilson is right, Trump will not be president at the end of 2019. I think Fred’s also right on virtually all of the other predictions made in his epic post, which I won’t attempt to summarize here. Read Fred’s post – and just make sure you read to the end, because it’s not all doom and gloom.  So, as a Kellblog first, prediction #1 is a pointer.

2. The Democratic Party will continue to bungle the playing of its relatively simple hand. Party leaders will continue to fail to realize that the way to beat Trump is not through a hard-left platform with 70% tax rates that caters to the most liberal Democrats – but a centrist, pragmatic, people- and business-friendly platform that certainly won’t be enough for the far left, but will be far better than the Republican alternative for all Democrats, and most importantly, give centrist Republicans a realistic alternative to what their party is offering them.  The Democratic Party will continue to be more concerned with making statements than winning elections.  This may cost it, and the Nation, dearly.

Remember the famous Will Rodgers quote: “I am not a member of any organized political party.  I am a Democrat.”

 3. 2019 will be a rough year for the financial markets. Political problems in the USA, Europe, and increasingly Latin American.  Trade wars.  Record deficits as we re-discover that trickle-down, tax-cut economics don’t work.  Threat of rising interest rates.   Brexit.   Many folks see a bear market coming.

Years ago, I accepted the fact that – like many – I am a hypocrite when it comes to the stock market.  Yes, I absolutely believe that it’s theoretically impossible to time the market.   But yes, I’m entering 2019 with a high allocation to cash and intend to keep it that way.  Hum.  Try to reconcile that.

For fun, let’s makes this concrete and predict that the BVP Emerging Cloud Index will end 2019 at 750.  I do this mostly to provide some PR for Bessemer’s Index, officially launched via the NASDAQ in October, 2018, but which was built on the back of five years of Bessemer maintaining it themselves.

4. VC tightens. Venture capital funding has been booming the past several years and – for the above reasons and others (e.g., the fact that most VCs don’t product enough returns to justify the risk and illiquidity) – I believe there will be tightening of VC in 2019.  If you agree, that means you should raise money now, while the sun’s still shining, and try to raise two years of capital required in your business plan (with some cushion).

dwk-2mru8aaof8b

If things follow the recent trends, this will be hardest on average and/or struggling companies as VCs increasingly try to pick winners and make bets conservative in the sense that they are on known winners, even if they have to overpay to do so.  In this scenario, capital on reasonable terms could all but dry up for companies who have gone off-rails on their business plans.   So, if you’re still on rails, you might raise some extra capital now.  Getting greedy by trying to put up two more good quarters to take less dilution on your next round could backfire – you might miss one of those quarters in this increasingly volatile environment, but even if you don’t, VC market tightening could offset any potential valuation increase.

5. Social media companies get regulated. Having failed for years to self-regulate in areas of data privacy and usage, these companies will likely to face regulations in 2019 in the face of strong consumer backlash.  The first real clue I personally had in this area was during the 2016 election when Facebook didn’t just feed me, but actually promoted, a fake Denver Guardian story about a supposedly dead FBI agent linked to “her emails.”  I then read the now-famous “bullshit is highly engaging” quote from this story which helped reveal the depth of the problem:

Or, as former Facebook designer Bobby Goodlatte wrote on his own Facebook wall on November 8, “Sadly, News Feed optimizes for engagement. As we’ve learned in this election, bullshit is highly engaging. A bias towards truth isn’t an impossible goal. Wikipedia, for instance, still bends towards the truth despite a massive audience. But it’s now clear that democracy suffers if our news environment incentivizes bullshit.”

I won’t dive into detail here.  I do think Sheryl Sandberg may end up leaving Facebook; she was supposed to be the adult supervision, after all.  While I think he’s often a bit too much, I nevertheless recommend reading Chaos Monkeys for an interesting and, at times, hilarious insider look at Facebook and/or following its author Antonio Garcia Martinez.

6. Ethics make a comeback, for two reasons.  The first will be as a backlash to the blatant corruption of the current administration.  To wit:  the House recently passed a measure requiring annual ethics training for its members.  The second will have to do with AI and automation.  The Trolley Problem, once a theoretical exercise in ethics, is now all too real with self-driving cars.  Consider this data, based on MIT research in this article which shows preferences for sparing various characters in the event of a crash.

crash

Someone will probably end up programming such preferences into a self-driving car.  Or, worse yet, as per the Trolley Problem, maybe they won’t.  While we may want to avoid these issues because they are uncomfortable, in 2019 I think they will be thrust onto center stage.

7. Blockchain, as an enterprise technology, fades away. Blockchain is a technology in search of a killer application.  Well, it actually has one killer application, cryptocurrency, which is why it was built.  And while I am a fan of cybercurrencies, blockchain is arguably inefficient at what it was built to do.  While Bitcoin will not take down the world electric grid as some have feared, it is still tremendously energy consumptive –in coming years, Bitcoin is tracking to consume 7.7 GW per year, comparable to the entire country of Austria at 8.2 GW.

While I’m not an expert in this field, I see three things that given me huge pause when it comes to blockchain in the enterprise:  (1) it’s hard to understand, (2) it consumes a huge amount of energy, and (3) people have been saying for too long that the second blockchain killer app (and first enterprise blockchain killer app) is just around the corner.  Think:  technology in search of a business problem.  What’s more, even for its core use-case, cryptocurrency, blockchain is vulnerable to being cracked by quantum computing by 2027.

8. Oracle enters decline phase and is increasingly seen as a legacy vendor. For decades I have personally seen Oracle as a leader.  First, in building the RDBMS market.  Second, in consolidating a big piece of the enterprise applications market.  Third, more generally, in consolidating enterprise software.  But, in my mind, Oracle is no longer a leader.  Perhaps you felt this way long ago.  I’d given them a lot of credit for their efforts (if not their progress) in the cloud – certainly better than SAP’s or IBM’s.  But SAP and IBM are not the competitors to beat in the future:  Amazon, Google, and a rejuvenated Microsoft are.  The reality is that Oracle misses quarters, cloud-washes sales, and is basically stagnant in revenue growth.  They have no vision.  They have become a legacy vendor.

The final piece of this snapped into place when Thomas Kurian departed to Google in a dispute with Larry Ellison about the cloud.  DEC’s Ken Olsen once said that Unix was “snake oil” and that was the beginning of the end for DEC.  Ellison once said roughly the same thing (“complete gibberish”) about the cloud.  And now the cloud is laughing back.

9. ServiceNow and/or Splunk get acquired. A friend of mine planted this seed in my mind and it’s more about corporate evolution than anything else.  They’re both great businesses that mega-vendors would love to own – especially if they end up “on sale” if we hit a bear market.

10. Workday succeeds with its Adaptive Insights agenda, meaning that Adaptive’s mid-market and SMB presence will be greatly lessened.   Most people I know think Workday’s acquisition of Adaptive was a head-scratcher.  Yes, Workday struggles in financial apps.  Yes, EPM is an easier entry point than core financials (which, as Zach Nelson used to say, were like a heart transplant).  But why in the world would a high-end vendor (with average revenue/customer of $1M+) acquire a low-end EPM vendor (with average revenue/customer of $27K)?  That’s hard to figure out.

But just because the acquisition was, to be kind, non-obvious, it doesn’t mean Workday won’t be successful with it.  Workday’s goals are clear: (1) to unite Adaptive with Workday in The Power of One – including re-platforming the backend and re-writing the user-interface, (2) to provide EPM to Workday’s high-end customer base, and (3) to provide an alternate financial entry point for sales when prospects say they’re not up for a heart transplant for at least 5 years.  I’m not saying Workday can’t be successful with their objectives.  I am saying Adaptive won’t be Adaptive when they’re done — you can’t be the high-end, low-end, cheap, expensive, simple, complex, agnostic, integrated EPM system.   Or, as SNL put it, you can’t be Shimmer — a dessert topping and a floor wax.  The net result:   like Platfora before them or Outlooksoft within SAP, Adaptive disappears within Workday and its presence in the mid-market and SMB is greatly reduced.

# # #

Disclaimer:  these predictions are offered in the spirit of fun.  See my FAQ for more and other terms of use.

Kellblog Predictions for 2018

In continuing my tradition of offering predictions every year, let’s start with a review of my hits and misses on my 2017 predictions.

  1. The United States will see a level of divisiveness and social discord not seen since the 1960s.  HIT.
  2. Social media companies finally step up and do something about fake news. MISS, but ethical issues are starting to catch up with them.
  3. Gut feel makes a comeback. HIT, while I didn’t articulate it as such, I see this as the war on facts and expertise (e.g., it’s cold today ergo global warming isn’t real despite what “experts” say).
  4. Under a volatile leader, we can expect sharp reactions and knee-jerk decisions that rattle markets, drive a high rate of staff turnover in the Executive branch, and fuel an ongoing war with the media.  HIT.
  5. With the new administration’s promises of $1T in infrastructure spending, you can expect interest rates to raise and inflation to accelerate. MISS, turns out this program was never classical government investment in infrastructure, but a massive privatization plan that never happened.
  6. Huge emphasis on security and privacy. PARTIAL HIT, security remained a hot topic and despite numerous major breaches it’s still not really hit center stage.
  7. In 2017, we will see more bots for both good uses (e.g., customer service) and bad (e.g., trolling social media).  HIT.
  8. Artificial intelligence hits the peak of inflated expectations. HIT.
  9. The IPO market comes back. MISS, though according to some it “sucked less.”
  10. Megavendors mix up EPM and ERP or BI. PARTIAL HIT.  This prediction was really about Workday and was correct to the extent that they’ve seemingly not made much progress in EPM.

Kellblog’s Predictions for 2018

1.  We will again continue to see a level of divisiveness and social discord not seen since the 1960s. We have evolved from a state of having different opinions about policies based on common facts to a dangerous state based on different facts, even on easily disprovable claims, e.g., the White House nativity scene.  The media is advancing, not reducing, this divide.

2.  The war on facts and expertise will continue to escalate. Read The Death of Expertise for more.   This will extend to a war on college. While an attempted opening salvo on graduate student tuition waivers didn’t fire, in an environment where the President’s son says, “we’ll take $200,000 of your money; in exchange we’ll train your children to hate our country,” you can expect ongoing attacks on post-secondary education.  This spells trouble for Silicon Valley, where a large number of founders and entrepreneurs are former grad students as well as immigrants (which is a whole different area of potential trouble).

3.  Leading technology and social media companies finally step up to face ethical challenges. This means paying more attention to their own culture (e.g., sexual harassment, brogrammers).  This means taking responsibility for policing trolls, spreading fake news, building addictive content, and enabling foreign intelligence operations.  Thus far, they have tended to argue they are simply keepers of the town square, and not responsible for the content shared there.  This abdication of responsibility should start to stop in 2018, if only because people start to tune-out the services.  This leads to one of my favorite tweets of the year:

Capture

4.  AI will move from hype to action, meaning bigger budgets, more projects, and some high visibility failures. It will also mean more emphasis on voice and more conversational chatbots.  For finance departments, this means more of what Ventana’s Rob Kugel calls the age of robotic finance, which unites AI and machine learning, robotic process automation (RPA), natural language bots, and blockchain-based distributed ledgers.

5. AI will continue to generate lots of controversy about job displacement. While some remain optimistic, the consensus viewpoint seems to be that AI will suppress employment, most likely widening the wealth inequality gap.  A collapsing educational system combined with AI-driven pressure on low-skilled work seems a recipe for trouble.

6.  The bitcoin bubble bursts. As a reminder, at one point during the peak of tulip mania, the Dutch East India Company was worth more, on an inflated-adjusted basis, than twenty of today’s technology giants combined.

tulips

7.  The Internet of Things (IoT) will continue to build momentum.  IoT won’t hit in a massive horizontal way, instead B2B adoption will be lead by certain verticals such as healthcare, retail, and supply chain.

8.  The freelance / gig economy continues to gain momentum with freelance workers poised to pass traditional employees by 2027. While the gig economy brings advantages to high-skilled knowledge workers (e.g., freedom of location, freedom of work projects), this same trend threatens low-skilled workers via the continual decomposition of full-time jobs in a series of temp shifts.  This means someone working 60 hours a week across three 20-hour shifts wouldn’t be considered to be a full-time employee and thus not eligible for full-time benefits, further increasing wealth inequality.

freelancers

9.  M&A heats up due to repatriation of overseas cash. Apple alone, for example, has $252B in overseas cash.  With the new tax rate dropping from 35% to 15.5%, it will now be ~$50B less expensive for Apple to repatriate that cash.  Overall, US companies hold trillions of dollars overseas and making it cheaper for them to repatriate that cash suggests that they will be flush with dollars to invest in many areas, including M&A

10.  2018 will be a good year for cloud EPM vendors. The dynamic macro environment, the opportunities posed by cash repatriation, and the strong fundamentals in the economy will increase demand for EPM software that helps companies explore how to best exploit the right set of opportunities facing them.  Oracle will fail in pushing PBCS into the NetSuite base, creating a nice third-party opportunity.  SAP, Microsoft, and IBM will continue to put resources into other strategic investment areas (e.g., IBM and Watson, SAP and Hana) leaving fallow the EPM market adjacent to ERP.  And the greenfield opportunity to replace Excel for financial planning, budgeting, and even consolidations will continue drive strong growth.

Let me wish everyone, particularly the customers, partners, and employees of Host Analytics, a Happy New Year in 2018.

# # #

Disclaimer:  these predictions are offered in the spirit of fun.  See my FAQ for more on this and other usage terms.

Kellblog’s 2017 Predictions  

New Year’s means three things in my world:  (1) time to thank our customers and team at Host Analytics for another great year, (2) time to finish up all the 2017 planning items and approvals that we need to get done before the sales kickoff (including the one most important thing to do before kickoff), and time to make some predictions for the coming year.

Before looking at 2017, let’s see how I did with my 2016 predictions.

2016 Predictions Review

  1. The great reckoning begins. Correct/nailed.  As predicted, since most of the bubble was tied up in private companies owned by private funds, the unwind would happen in slow motion.  But it’s happening.
  2. Silicon Valley cools off a bit. Partial.  While IPOs were down, you couldn’t see the cooling in anecdotal data, like my favorite metric, traffic on highway101.
  3. Porter’s five forces analysis makes a comeback. Partial.  So-called “momentum investing” did cool off, implying more rational situation analysis, but you didn’t hear people talking about Porter per se.
  4. Cyber-cash makes a rise. CorrectBitcoin more doubled on the year (and Ethereum was up 8x) which perversely reinforced my view that these crypto-currencies are too volatile — people want the anonymity of cash without a highly variable exchange rate.  The underlying technology for Bitcoin, blockchain, took off big time.
  5. Internet of Things goes into trough of disillusionment. Partial.  I think I may have been a little early on this one.  Seems like it’s still hovering at the peak of inflated expectations.
  6. Data science rises as profession. Correct/easy.  This continues inexorably.
  7. SAP realizes they are a complex enterprise application company. Incorrect.  They’re still “running simple” and talking too much about enabling technology.  The stock was up 9% on the year in line with revenues up around 8% thus far.
  8. Oracle’s cloud strategy gets revealed – “we’ll sell you any deployment model you want as long as your annual bill goes up.”  Partial.  I should have said “we’ll sell you any deployment model you want as long as we can call it cloud to Wall St.”
  9. Accounting irregularities discovered at one or more unicorns. Correct/nailed.  During these bubbles the pattern always repeats itself – some people always start breaking the rules in order to stand out, get famous, or get rich.  Fortune just ran an amazing story that talks about the “fake it till you make it” culture of some diseased startups.
  10. Startup workers get disappointed on exits. Partial.  I’m not aware of any lawsuits here but workers at many high flyers have been disappointed and there is a new awareness that the “unicorn party” may be a good thing for founders and VCs, but maybe not such a good thing for rank-and-file employees (and executive management).
  11. The first cloud EPM S-1 gets filed. Incorrect.  Not yet, at least.  While it’s always possible someone did the private filing process with the SEC, I’m guessing that didn’t happen either.
  12. 2016 will be a great year for Host Analytics. Correct.  We had a strong finish to the year and emerged stronger than we started with over 600 great customers, great partners, and a great team.

Now, let’s move on to my predictions for 2017 which – as a sign of the times – will include more macro and political content than usual.

  1. The United States will see a level of divisiveness and social discord not seen since the 1960s. Social media echo chambers will reinforce divisions.  To combat this, I encourage everyone to sign up for two publications/blogs they agree with and two they don’t lest they never again hear both sides of an issue. (See map below, coutesy of Ninja Economics, for help in choosing.)  On an optimistic note, per UCSD professor Lane Kenworthy people aren’t getting more polarized, political parties are.

news

  1. Social media companies finally step up and do something about fake news. While per a former Facebook designer, “it turns out that bullshit is highly engaging,” these sites will need to do something to filter, rate, or classify fake news (let alone stopping to recommend it).  Otherwise they will both lose credibility and readership – as well as fail to act in a responsible way commensurate with their information dissemination power.
  1. Gut feel makes a comeback. After a decade of Google-inspired heavily data-driven and A/B-tested management, the new US administration will increasingly be less data-driven and more gut-feel-driven in making decisions.  Riding against both common sense and the big data / analytics / data science trends, people will be increasingly skeptical of purely data-driven decisions and anti-data people will publicize data-driven failures to popularize their arguments.  This “war on data” will build during the year, fueled by Trump, and some of it will spill over into business.  Morale in the Intelligence Community will plummet.
  1. Under a volatile leader, who seems to exhibit all nine of the symptoms of narcissistic personality disorder, we can expect sharp reactions and knee-jerk decisions that rattle markets, drive a high rate of staff turnover in the Executive branch, and fuel an ongoing war with the media.  Whether you like his policies or not, Trump will bring a high level of volatility the country, to business, and to the markets.
  1. With the new administration’s promises of $1T in infrastructure spending, you can expect interest rates to raise and inflation to accelerate. Providing such a stimulus to already strong economy might well overheat it.  One smart move could be buying a house to lock in historic low interest rates for the next 30 years.  (See my FAQ for disclaimers, including that I am not a financial advisor.)
  1. Huge emphasis on security and privacy. Election-related hacking, including the spearfishing attack on John Podesta’s email, will serve as a major wake-up call to both government and the private sector to get their security act together.  Leaks will fuel major concerns about privacy.  Two-factor authentication using verification codes (e.g., Google Authenticator) will continue to take off as will encrypted communications.  Fear of leaks will also change how people use email and other written electronic communications; more people will follow the sage advice in this quip:

Dance like no one’s watching; E-mail like it will be read in a deposition

  1. In 2015, if you were flirting on Ashley Madison you were more likely talking to a fembot than a person.  In 2016, the same could be said of troll bots.  Bots are now capable of passing the Turing Test.  In 2017, we will see more bots for both good uses (e.g., customer service) and bad (e.g., trolling social media).  Left unchecked by the social media powerhouses, bots could damage social media usage.
  1. Artificial intelligence hits the peak of inflated expectations. If you view Salesforce as the bellwether for hyped enterprise technology (e.g., cloud, social), then the next few years are going to be dominated by artificial intelligence.  I’ve always believed that advanced analytics is not a standalone category, but instead fodder that vendors will build into smart applications.  They key is typically not the technology, but the problem to which to apply it.  As Infer founder Vik Singh said of Jim Gray, “he was really good at finding great problems,” the key is figuring out the best problems to solve with a given technology or modeling engine.  Application by application we will see people searching for the best problems to solve using AI technology.
  1. The IPO market comes back. After a year in which we saw only 13 VC-backed technology IPOs, I believe the window will open and 2017 will be a strong year for technology IPOs.  The usual big-name suspects include firms like Snap, Uber, AirBnB, and SpotifyCB Insights has identified 369 companies as strong 2017 IPO prospects.
  1. Megavendors mix up EPM and ERP or BI. Workday, which has had a confused history when it comes to planning, acquired struggling big data analytics vendor Platfora in July 2016, and seems to have combined analytics and EPM/planning into a single unit.  This is a mistake for several reasons:  (1) EPM and BI are sold to different buyers with different value propositions, (2) EPM is an applications sale, BI is a platform sale, and (3) Platfora’s technology stack, while appropriate for big data applications is not ideal for EPM/planning (ask Tidemark).  Combining the two together puts planning at risk.  Oracle combined their EPM and ERP go-to-market organizations and lost focus on EPM as a result.  While they will argue that they now have more EPM feet on the street, those feet know much less about EPM, leaving them exposed to specialist vendors who maintain a focus on EPM.  ERP is sold to the backward-looking part of finance; EPM is sold to the forward-looking part.  EPM is about 1/10th the market size of ERP.  ERP and EPM have different buyers and use different technologies.  In combining them, expect EPM to lose out.

And, as usual, I must add the bonus prediction that 2017 proves to be a strong year for Host Analytics.  We are entering the year with positive momentum, the category is strong, cloud adoption in finance continues to increase, and the megavendors generally lack sufficient focus on the category.  We continue to be the most customer-focused vendor in EPM, our new Modeling product gained strong momentum in 2016, and our strategy has worked very well for both our company and the customers who have chosen to put their faith in us.

I thank our customers, our partners, and our team and wish everyone a great 2017.

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Kellblog Predictions for 2016

As the new year approaches, it’s time for another set of predictions, but before diving into my list for 2016, let’s review and assess the predictions I made for 2015.

Kellblog’s 2015 Predictions Review

  1. The good times will continue to roll in Silicon Valley.  I asserted that even if you felt a bubble, that it was more 1999 than 2001.  While IPOs slowed on the year, private financing remained strong — traffic is up, rents are up and unemployment is down.  Correct.
  2. The IPO as down-round continues.  Correct.
  3. The curse of the mega-round strikes many companies and CEOs.  While I can definitely name some companies where this has occurred, I can think of many more where I still think it’s coming but yet to happen.  Partial / too early.
  4. Cloud disruption continues.  From startups to megavendors, the cloud and big data are almost all everyone talks about these days.  Correct.
  5. Privacy becomes a huge issue.  While I think privacy continues to move to center stage, it hasn’t become as big as I thought it would, yet.  Partial / too early.
  6. Next-generation apps like Slack and Zenefits continue to explode.  I’d say that despite some unicorn distortion that this call was right (and we’re happy to have signed on Slack as a Host Analytics customer in 2015 to boot).  Correct.
  7. IBM software rebounds.  At the time I made this prediction IBM was in the middle of a large reorganization and I was speculating (and kinda hoping) that the result would be a more dynamic IBM software business.  That was not to be.  Incorrect.
  8. Angel investing slows.  I couldn’t find any hard figures here, but did find a great article on why Tucker Max quit angel investing.  I’m going to give myself a partial here because I believe the bloom is coming off the angel investing rose.  Partial.
  9. The data scientist shortage continues. This one’s pretty easy.   Correct.
  10. The unification of planning becomes the top meme in EPM.  This was a correct call and supported, in part, through our own launch of Modeling Cloud, a cloud-based, multi-dimensional modeling engine that helps tie enterprise models both to each other and the corporate plan.  Correct.

So, let’s it call it 7.5 out of 10.  Not bad, when you recall my favorite quote from Yogi Berra:  “predictions are hard, especially about the future.”

Kellblog’s Top Predictions for 2016

Before diving into these predictions, please see the footnote for a reminder of the spirit in which they are offered.

1. The great reckoning begins.   I view this as more good than bad because it will bring a return to commonsense business practices and values.  The irrationality that came will bubble 2.0 will disperse.  It took 7 years to get into this situation so expect it to take a few years to get out.  Moreover, since most of the bubble is in illiquid securities held by illiquid partnerships, there’s not going to be any flash crash — it’s all going to proceed in slow motion, expect for those companies addicted to huge burn rates that will need to shape up quickly.  Quality, well run businesses will continue attract funding and capital will be available for them.  Overall, while there will be some turbulence, I think this will be more good than bad.

2. Silicon Valley cools off a bit.  As a result of the previous prediction, Silicon Valley will calm a bit in 2016:  it will get a bit easier to hire, traffic will modestly improve, and average burn rates will drop.  You’ll see fewer corporate buses on 101.  Rents will come down a bit, so I’d wait before signing a five-year lease on your next building.

3. Porter’s Five Forces comes back in style.  I always feel that during bubbles the first thing to go is Porter five force analysis.  What are there barriers to entry on a daily deal or on a check-in feature?  What are the switching costs of going from Feedly to Flipboard?  What are the substitutes for home-delivered meal service?   In saner times, people take a hard look at these questions and don’t simply assume that every market is a greenfield market share grab and that market share itself constitutes a switching cost (as it does only in companies with real network effects).

porters-five-forces

4.  Cyber-cash makes a rise.  As the world becomes increasingly cashless (e.g., Sweden), governments will prosper as law enforcement and taxation bodies benefit, but citizens will increasingly start to sometimes want the anonymity of cash.  (Recall with irony that anonymity helped make pornography the first “killer app” of the Internet.  I suspect today’s closet porn fans would prefer the anonymity of cash in a bookshop to the permanent history they’d leave behind on Netflix or other sites — and this is not to mention the blackmailing that followed the data release in the Ashley Madison hack.)  For these reasons and others, I think people will increasingly realize that in a world where everything is tracked by default, that the anonymity of some form of cyber-cash will sometimes be desired.  Bitcoin currently fails the grade because people don’t want a floating (highly volatile) currency; they simply want an anonymous, digital form of cash.

5.  The Internet of Things (IoT) starts its descent into what Gartner calls the Trough of Disillusionment.  This is not to say that IoT is a bad thing in any way — it will transform many industries including agriculture, manufacturing, energy, healthcare, and transportation.  It is simply to say that Silicon Valley follows a predictable hype cycle and that IoT hit the peak in 2015 and will move from the over-hyped yet very real phase and slide down to the trough of disillusionment.  Drones are following along right behind.

6.  Data science continues to rise as a profession.  23 schools now offer a master’s program in data science.  As a hot new field, a formal degree won’t be required as long as you have the requisite chops, so many people will enter data science they way I entered computer science — with skills, but not a formal degree. See this post about a UC Berkeley data science drop-out who describes why he dropped the program and how he’s acquiring requisite knowledge through alternative means, including the Khan Academy.  Galvanize (which acquired data-science bootcamp provider Zipfian Academy) has now graduated over 200 students.   Apologies for covering this trend literally every year, but I continue to believe that “data science” is the new “plastics” for those who recall the scene from The Graduate.

the-graduate-plastics
7. SAP realizes it’s an complex, enterprise applications company.  Over the past half decade, SAP has put a lot of energy into what I consider strategic distractions, like (1) entering the DBMS market via the Sybase acquisition, (2) putting a huge emphasis on their column-oriented, in-memory database, Hana, (3) running a product branding strategy that conflates Hana with cloud, and (4) running a corporate branding strategy that attempts to synonymize SAP with simple.
SAP_logo

Some of these initiatives are interesting and featured advanced technology (e.g., Hana).  Some of them are confusing (e.g., having Hana mean in-memory, column-oriented database and cloud platform at the same time).  Some of them are downright silly.  SAP.  Simple.  Really?

While I admire SAP for their execution commitment  — SAP is clearly a company that knows how to put wood behind an arrow — I think their choice of strategies has been weak, in cases backwards looking (e.g., Hana as opposed to just using a NoSQL store),  and out of touch with the reality of their products and their customers.

The world’s leader in enterprise software applications that deal with immense complexity should focus on building upon that strength.  SAP’s customers bought enterprise applications to handle very complex problems.  SAP should embrace this.  The message should be:  We Master the Complex, not Run Simple.  I believe SAP will wake up to this in 2016.

Aside:  see the Oracle ad below for the backfire potential inherent in messaging too far afield from your reality.

 

powered by oracle

8.  Oracle’s cloud strategy gets revealed:  we’ll sell you any deployment model you like (regardless of whether we have it) as long as your yearly bill goes up.  I saw a cartoon recently circulated on Twitter which depicted the org charts of various tech megavendors and, quite tellingly, depicted Oracle’s as this:

oracle-org-chart-300x195

Oracle is increasingly becoming a compliance company more than anything else.  What’s more, despite their size and power, Oracle is not doing particularly well financially.  Per a 12/17/15 research note from JMP,

  • Oracle has missed revenue estimates for four quarters in a row.
  • Oracle provided weak, below-expectations guidance on its most recent earnings call for EPS, cloud revenue, and total revenue.
  • “While the bull case is that the cloud business is accelerating dramatically, we remain concerned because the cloud represented only 7% of total revenue in F2Q16 and we worry the core database
    and middleware business (which represents about half of Oracle’s revenue) will face increasing competition from Amazon Web Services.”

While Oracle’s cloud marketing has been strong, the reality is that cloud represents only 7% of Oracle’s total revenue and that is after Oracle has presumably done everything they can to “juice” it, for example, by bundling cloud into deals where, I’ve heard, customers don’t even necessarily know they’ve purchased it.

So while Oracle does a good job of bluffing cloud, the reality is that Oracle is very much trapped in the Innovator’s Dilemma, addicted to a huge stream of maintenance revenue which they are afraid to cannibalize, and denying customers one of the key benefits of cloud computing:  lower total cost of ownership.  That’s not to mention they are stuck with a bad hardware business (which again missed revenues) and are under attack by cloud application and platform vendors, new competitors like Amazon, and at their very core by next-generation NoSQL database systems.  It almost makes you feel bad for Larry Ellison.  Almost.

8.  Accounting irregularities are discovered at one or more unicorns.  In 2015 many people started to think of late-stage megarounds as “private IPOs.”  In one sense that was the correct:  the size of the rounds and the valuations were very much in line with previous IPO norms.  However, there was one big difference:  they were like private IPOs — but without all the scrutiny.  Put differently, they were like an IPO, but without a few million dollars in extra accounting work and without more people pouring over the numbers.  Bill Gurley did a great post on this:  Investors Beware:  Today’s $100M+ Late-Stage Private Rounds are Very Different from an IPO.  I believe this lack of scrutiny, combined with some people’s hubris and an overall frothy environment, will lead to the discovery of one or more major accounting irregularity episodes at unicorn companies in 2016.  Turns out the world was better off with a lower IPO bar after all.

9. Startup workers get disappointed on exits, resulting in lawsuits.  Many startup employees work long hours predicated on making big money from a possible downstream IPO.  This has been the model in Silicon Valley for a long time:  give up the paycheck and the perks of a big company in exchange for sleeves-up work and a chance to make big money on stock options at a startup.  However, two things have changed:  (1) dilution has increased because companies are raising more capital than ever and (2) “vanity rounds” are being done that maximize valuation at the expense of terms that are bad for the common shareholder (e.g., ratchets, multiple liquidation preferences).

In extreme cases this can wipe out the value of the common stock.  In other cases it can turn “house money” into “car money” upon what appears to be a successful exit.  Bloomberg recently covered this in a story called Big IPO, Tiny Payout about Box and the New York Times in a story about Good Technology’s sale to BlackBerry, where the preferred stock ended up 7x more valuable than the common.  When such large disparities occur between the common and the preferred, lawsuits are a likely result.

good

Many employees will find themselves wondering why they celebrated those unicorn rounds in the first place.

10.  The first cloud EPM S-1 gets filed.  I won’t say here who I think will file first, why they might do so, and what the pros and cons of filing first may be, but I will predict that in 2016 the first S-1 gets filed for a cloud EPM vendor.  I have always believed that cloud EPM is a great category and one that will result in multiple IPOs — so I don’t believe the first filing will be the last.  It will be fun to watch this trend and get a look at real numbers, as opposed to some of the hype that gets circulated.

11.  Bonus:  2016 proves to be a great year for Host Analytics.  Finally, I feel great about the future for Host Analytics and believe that 2016 will be a wonderful year for the company.  We have strong products. We have amazing customers.  We have built the best team in EPM.  We have built a strong partner network.  We have great core applications and exciting, powerful new capabilities in modeling. I believe we have, overall, the best, most complete offering in cloud EPM.

Thanks for your support in 2015 and I look forward to delivering a great 2016 for our customers, our partners, our investors, and our team.

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Footnotes

[1]  These predictions are offered in the spirit of fun and I have no liability to anyone acting or not acting on the content herein.  I am not an oracle, soothsayer, or prophet and make no claim to be.  Please enjoy these predictions, please let them provoke your thoughts, but do not use them as investing or business consulting advice.  See my FAQ for additional disclaimers.

Kellblog Ten Predictions for 2015

As we move into the third week of January, I figured it was “now or never” in terms of getting a set of predictions out for 2015.  Before jumping into that, let’s take a quick review of how I did with my 2014 predictions and do some self-grading.

  1. 2014 to be a good year in Silicon Valley.  Correct.
  2. Cloud computing will continue to explode.  Correct.
  3. Big data hype will peak. Gartner seems to agree, placing it in August midway past peak on the way to trough of disillusionment. Correct.
  4. The market will be unable to supply enough data science talent. Mashable is now calling data scientist 2015’s hottest professionPer McKinsey, this is a problem that’s going to continue for the next several years. Correct.
  5. Privacy will remain center stage.  Correct.
  6. Mobile will continue to drive both consumer and (select) enterprise. I got the spirit correct on this one, but I think the core problem is probably better thought of as multi-device access to cloud data than mobile per se.  That is, it’s not about using Evernote on my phone, but instead about uniform access to my cloud-based notes from all my mobile (and non-mobile) devices. Basically, correct.
  7. Social becomes a feature, not an app. Correct again.  The struggles of companies like Jive only validate that (enterprise) social should be a feature of virtually all apps, and not a category unto itself.
  8. SAP’s HANA strategy actually works. Well SAP didn’t seem to agree with this one, when Hasso Plattner wrote a post blasting customers for not understanding its business benefits.  But my angle was more – the merits of the strategy aside – when a company the size of SAP shows total commitment to a strategy it’s going to get results.  And it has.  And SAP continues to drive it.  Mostly correct.
  9. Good Data goes public. While this didn’t happen, I continue to believe that Good Data has a smart strategy and a solid product.  They raised $25M in September.  Maybe this year they will make me an honest man.
  10. Adaptive Planning (now, Adaptive Insights) gets acquired by NetSuite. This didn’t happen, either.  The prediction was based on the fairly well known play of OEM-ing something before acquiring it.  Time may well prove me right on this one, but a swing-and-a-miss for 2014.

Our “bonus” prediction last year was that my company, Host Analytics, would have a great year and indeed we did.  We grew new subscriptions well in excess of 100%, making us, I believe, the fastest growing company in the category.  We launched a new sales planning solution as part of our vision to unite financial and operational planning.  We hired scores of great new people to join us on our mission to create a great EPM company, one that transforms how enterprises manage their financial performance.  And we raised $25M in venture capital to boot.

So, all in all, for the 2014 predictions, let’s call it 8.5 out of 11.

Here are my predictions for 2015.

  1. The good times continue to roll in Silicon Valley. If you feel “bubble,” remember that unlike in the dot-com days that most companies experiencing great success today have real, often recurring, revenue and real customers.   From a cycle perspective, to the extent there is a bubble coming, I’d say we’re in 1999 not 2001.
  1. The IPO as a down-round trend continues. One of the odder things about this time period is that I’m repeatedly hearing that successful IPO companies are pricing at down-rounds relative to their last private financings.  This doesn’t spell danger in general – because the public market valuations are both healthy and supportable – it just suggests a highly competitive later-stage private financing market is overbidding prices.  I suspect that will calm down in 2015 but down-round IPOs will continue in 2015.
  1. The curse of the megaround will strike many companies and CEOs. As part of the prior bullet companies are now often able to raise unprecedented amounts of capital at high valuations.  While those companies today may celebrate their $100M, $150M or $200M+ financing rounds, tomorrow they will wake up with a hangover that looks like:  huge pressure to invest that money for growth, even in dubious growth opportunities; anxious board members who need a 3x return in three years atop already stratospheric valuations; companies missing plan when the dubious growth opportunities don’t deliver; and CEOs who get replaced for missing plans that were unrealistic in the first place.  Before you take a megaround, be careful what you wish for — you sometimes get it.
  1. Cloud disruption continues. Megavendors will continue to wrestle cloud disruption and their cloud strategies.    They will continue to talk about success and high growth in the 10% or less of their business that is cloud, while asking investors to ignore the lack of health in the 90% that is non-cloud.  As part of a general Innovator’s Dilemma problem, they will be forced to explain and defend cloud strategies that will hopefully help them long term but depress results in the short term (as SAP had to do last week.)
  1. Privacy becomes a huge issue. People who were once too busy to care when Facebook changed their security setting are now asking who can access what and how.  The Internet of Things will only exacerbate this focus as more data than ever will be available.  In the past, you could see my pictures and status updates.  Now you can know where I am, when, how many hours I sleep at night, when I exercised, what temperature I set my thermostat to, and when I’m home.  The more data that becomes available, and the more readily you can be de-anonymized, the more you will start monitoring your privacy settings and previously unread site terms and conditions.
  1. Next-generation apps continue to explode. Apps like Slack and Zenefits will continue to redefine enterprise software.  While Slack is a technology, design, and integration play in the collaboration space, Zenefits is more of a business-model disruption play (i.e., give us the rather large commissions you rather invisibly paid your health insurance broker and we’ll give you free, high-quality HR software).  Either way, consumerization, design, and the search for new business models / revenue opportunities will continue.
  1. IBM software rebounds. IBM used to be a stronger player in software than it is today (e.g., recall that they invented the relational database). Watson aside, things have been pretty quiet on the IBM software front. Cloud-wise, while they claim to have a $7B business, it’s pretty invisible to me, and it does seem that Amazon has beaten them in low-level categories like IaaS.  While I’m not sure what happened – I don’t track them that closely – they do seem to have just faded away.  Once thing’s for sure – it can’t continue.  While there are contradicting stories in recent press, IBM does appear to be in the midst of a large re-organization, and I’m going to bet that, as a result, they come to market with a stronger software and cloud story.
  1. Angel investing slows. Much has been written about the financing chokepoint where tens of thousands of angels are funding companies that then need to get in line to get funded by the approximately 100 or so VCs who do A rounds.  The first-order result is that many companies think “wow this is easy” on raising a angel round only to die 12-18 month later when they fail to raise VC.  The second-order result, which I think will start kicking in this year, is that angel money will be harder to come by as the system corrects back to a balanced state.
  1. The data scientist shortage continues. With more “big data” and a huge supply of analytic tools and computing power, the limiting factor on analysis-driven business is neither data nor technology.  It’s our ability to find people who can correctly leverage it.  Tell every college kid you know to take lots of stats, analytics, and computing classes.  Or better yet, to go get a degree in data science.
  1. The unification of planning becomes the top meme in enterprise performance management (EPM). EPM has a long history of helping finance departments prepare annual operating budgets and financial reports, but increasingly—in recent years – planning has quietly decentralized to the various departments and divisions within the enterprise.  For example, sales ops increasingly builds the sales plan, marketing ops the marketing plan, and services ops the consulting and professional services plan.   (This is why I sometimes call this trend the “rise of the ops person” as they are increasingly acting as stealth FP&A.)  What’s needed is to unite all these plans and put them on a common planning framework so the CFO and CEO can do what-if analysis and scenario planning holistically across the organization.

Kellblog’s 10 Predictions for 2014

Since it is the season of predictions, I thought I’d offer up a few of my own for 2014, based on my nearly three decades of experience working in enterprise software with databases, BI tools, and enterprise applications.

See the bottom for my disclaimer, and off we go.  Here are my ten predictions for 2014.

  • Despite various ominous comparisons to 1914 made by The Economist, I think 2014 is going to be a good year for Silicon Valley.  I think the tech IPO market will continue to be strong.  While some Bubble 2.0 anxiety is understandable, remember that while some valuations today may seem high, that the IPO bar is much higher today (at around $50M TTM revenues) than it was 13 years ago, when you could go public on $0 to $5M in revenues.  In addition, remember that most enterprise software companies (and many Internet companies) today rely on subscription revenue models (i.e., SaaS) which are much more reliable than the perpetual license streams of the past.  Not all exuberance is irrational.
  • Cloud computing will continue to explode.  IDC predicts that aggregate cloud spending will exceed $100B in 2014 with amazing growth, given the scale, of 25%.  Those are big numbers, but think about this:  some 15 years after Salesforce.com was founded, its head pin category, sales force automation (SFA), is still only around 40% penetrated by the cloud.  ERP is less than 10% in the cloud.  EPM is less than 5% in the cloud.  As Bill Gates once said about prognostication, “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.”  IT is going to the cloud, inexorably, but change in IT never happens overnight.
  • Big Data hype will peak.   I remember the first time I heard the term “big data” (in about 2008 when I was on the board of Aster Data) and thinking:  “wow, that’s good.”  Turns out my marketing instincts were spot on.  Every company today that actually is — or isn’t — a Big Data play is dressing up as one, which creates a big problem because the term quickly starts to lose meaning.  As a result, Big Data today is nearing the peak of Gartner’s hype cycle.  As a term it will start to fall off, but real Big Data technologies such as NoSQL databases and predictive analytics will continue to face a bright future.
  • The market will be unable to supply sufficient Data Science talent.  If someone remade The Graduate today, they’d change  Mr. McGuire’s line about “plastics” to “data science.”  Our ability to amass data and create analytics technology is quickly surpassing our ability to use it.  Job postings for data scientists were up 15,000% in 2012 over 2011.  Colleges are starting to offer data science degrees (for example, Berkeley and Northwestern).  There’s even an a startup, Udacity, specifically targeting the need for data science education.  Because of the scarcity of data science talent, the specialization required to correctly use it, and the lack of required scale to build data science teams, data science consultancies like Palantir and Mu Sigma will continue to flourish.
  • Privacy will remain center stage.  Trust in “Don’t Be Evil” Google and Facebook has never been particularly high.  Nevertheless, it seems like the average person has historically felt “you can do whatever you want with my personal data if you want to pitch me an advertisement” — but, thanks to Edward Snowden — we now know we can add, “and if the government wants to use that data to stop a terrorist attack, then back off.”  It’s an odd asymmetry.  These are complex questions, but in a world where the cost of data collection will converge to free, will the privacy violation be in collecting the data or in analyzing it?  In a world where one trusted the government to adequately control the querying and access (i.e., where it took a warrant from a non-secret court), I’d argue the query standard might be good enough.  Regardless, the debate sparked thus far will continue to burn in 2014 and tech companies will very much remain in the center of it.
  • Mobile will continue to drive consumer companies like Dropbox and Evernote, but also enterprise companies like Box, Clari, Expensify, and MobileIron.  Turns out the enterprise killer app for mobile was less about getting enterprise applications to run on mobile devices and more about device proliferation, uniform access to content, and eventually security and management.  (And since I’m primarily an enterprise blogger, I won’t even mention social à la SnapChat or mobile gaming).  As one VC recently told me over dinner, “God bless mobile.”  Amen in 2014.
  • Social becomes a feature, not an app.  When I first saw Foursquare in 2010, I thought it should be the example in the venture capital dictionary for “feature, not company.”  Location-awareness has definitely become a feature and these days I do more check-in’s on Facebook than Foursquare.  I felt the same way when I worked at Salesforce.com and we were neck deep in the “social enteprise” vision.  When I saw Chatter, I thought “cool, but who needs yet another communications platform.”  Then I realized you could follow a lead, a case, or an opportunity and I was hooked.  But those are all feature use-cases, not application or company use-cases.  Given the pace of Salesforce, they fell in love with, married, and divorced social faster than most vendors could figure out their product strategy.  In the end, social should be an important feature of an enterprise application, almost a fabric built across modules.  I think that vision ends up getting implemented in 2014.  (Particularly if Microsoft ends up putting in David Sacks as its next CEO as some speculate.)
  • SAP’s HANA strategy actually works.  I was one of relatively few people who was absolutely convinced that SAP’s $5.8B purchase of Sybase in 2010 was more about databases than mobile.  SAP is clearly crafting a strategy to move both analytics and transactional database processing onto HANA and they have been doggedly consistent about HANA and its importance to the firm going forward.  They have been trying for decades to eliminate their dependency on Oracle — e.g., the 1997 Adabas D acquisition from Software AG  — and I believe this time they will finally succeed.  In addition, they will succeed — quite ironically — with their ingredient-branding strategy around HANA using a database to differentiate an application suite, something that they themselves would have seen as heresy 20 years ago.
  • Good Data goes public.  Cloud-based BI tools have had a tough slog over the years.  Some good companies were too early to market and failed (e.g., LucidEra).  Birst, another early entrant, certainly hasn’t had an easy time over its ten-year history.  Personally, while I was always a fan of cloud-based applications (having become a big Salesforce customer in 2003), I always worried that with cloud-based BI tools, you’d have too much of the nothing-to-analyze problem.  Good Data got around that problem early on by adopting a Crystal-like OEM strategy, licensing their tools through SaaS applications vendors.  They later evolved to a general cloud-based BI platform and applications strategy.  The company was founded in 2007, has raised $75M in VC, is reportedly doing very well, and an IPO seems a likely event in its future.  I’m calling 2014.
  • Adaptive Planning gets acquired by NetSuite.  Adaptive Planning was founded in 2003 as a cloud-based planning company and — despite both aspirations and claims to the contrary — in my estimation continues to play the role of the low-priced, cheap-and-cheerful planning solution for small and medium businesses.  That market position, combined with an existing, long-term strategic relationship whereby NetSuite resells Adaptive as NetSuite Financial Planning, makes me believe that 2014 will be the year that NetSuite finally pulls the trigger and acquires Adaptive Planning.  I think this deal could go down one of two ways.  If Adaptive continues to perform as they claim, then a potential S-1 filing could serve as a trigger for NetSuite (much as Crystal Decisions’ S-1 served as a trigger for Business Objects).  Or, if Adaptive hits rough road in 2014 for any reason (including the curse of the new headquarters) then that could trigger NetSuite with a value-shopper impulse leading to the same conclusion.

I should end with a bonus prediction (#11) that Host Analytics, our customers, and my colleagues will enjoy a successful 2014, continuing to execute on our cloud strategy to put the E back in EPM — focus and leadership in the enterprise segment of the market — and that we will continue to acquire both high-growth companies who want an EPM solution with which they can scale and liberate enterprises from costly and painful Hyperion implementations and upgrades.

Finally, let me conclude by wishing everyone a Happy New Year and great business success in 2014.

Disclaimers

  • See my FAQ to understand my various allegiances and disclaimers.
  • Remember I am the CEO of Host Analytics so I have a de facto pro-Host Analytics viewpoint.  
  • Predictions are opinion:  I have mine; yours may differ.
  • Finally, remember the famous Yogi Berra quote:  predictions are hard, especially about the future.