Interested in how enterprise SaaS companies whose some or all of their revenue come from subscriptions, I set out to collect data from the companies that I know offer subscriptions to enterprise customers. Please be aware that this is my personal research stemming from intellectual curiosity only. They are not meant to be anything more than that.
Data is collected from the latest year in the companies’ latest annual reports to ensure that seasonality factor is removed
The metrics include subscription gross margin (subscription gross profit/subscription revenue), overall gross margin, Sales & Marketing expense as % of revenue, R&D as % of revenue, SG&A as % of revenue and net dollar expansion rate (or retention rate)
If there is a difference between subscription gross margin and overall gross margin, it’s because those companies also generate revenue from other sources such as hardware or professional services
Much as I tried to keep the figures accurate, do use them at your discretion
I like to learn about business strategies, particularly in the technology world. This post is just to put into words my understanding of Dell’s position in the Enterprise IT sphere. While I spent a lot of my free time on reading to navigate through as much as possible the abstraction and complexity of the IT world, I can’t understand the products/services as well as I do with, let’s say, a streaming service like Netflix. With luck, I may get some constructive feedback on what I might be incorrect about or what I have here is useful to someone out there.
IT is no longer a cost center to companies. It is where companies gain competitive advantages as the world goes digital. There are several notable trends:
While public clouds such as Azure or AWS offer flexibility, geographical reach, functionalities, quick time-to-market and cost-effectiveness, private clouds provide more control and better security. Companies need both. Hence, hybrid cloud is where enterprises are headed. Multi-cloud is a flavor of hybrid cloud in that a firm may use different public clouds. Whether hybrid or multi-cloud model works for one firm depends on the business requirements and resources available to that firm
As enterprises have IT footprint on both the cloud and on-prem, it becomes a challenge to manage the whole network. It’s critical to know which data travels to where and whether data is safe. The challenge compounds when the need for productivity forces companies to use 3rd party cloud applications such as ServiceNow, Box and Google Drive, just to name a few. As a result, the management a, automation and security of, as well as visibility into the network are instrumental to a successful hybrid/multi cloud.
A lot of companies have operations in different locations. Banks have branches. Retailers have stores. These branches are important touch points through which customers expect to have great experience and services. And these branches need to talk to data centers or cloud application providers. The network that links branches, data centers and the cloud must be secure, efficient, manageable and cost-effective.
Brands must release applications fast and often to continuously bring values to customers. From a user perspective, that’s why we often have to update our mobile applications, but there is a lot more that goes behind the scenes for brands to bring new updates to life. In order to have fast and continuous software releases, companies need to set up the necessary infrastructure that allows developers to do their job quickly and efficiently. Hence, software-defined data center (SDDC) and Kubernetes have become increasingly popular. With SDDC, data centers can be set up and later scale quickly as new technological advances increasingly relieve engineers of time-consuming manual workload. With regard to software development, micro-services is the de facto approach in which Kubernetes is a major component. Developers either want to build new software from scratch using Kubernetes or re-package existing applications on a Kubernetes-based platform
In short, Dell offers services and products that help companies build and scale data centers such as backup, disaster recover, file systems, storage, SDDC solutions such as VxRack. As the majority shareholder of VMWare, Dell integrates a lot of VMWare products in some of its own. The integration is critical to seamless connection between on-prem infrastructure and data on public clouds. For instance, if a firm builds its data center on VxRack, Dell’s SDDC turnkey product, and deploys some workloads on AWS using VMWare on AWS, the data and applications on-prem and on AWS can be set up quickly to talk to each other. Plus, the firm can manage all workloads using the same VMWare interface.
Essentially, VMWare has built itself to be the one ingredient that companies wishing to adopt hybrid cloud need. It has built partnerships with AWS, GCP and IBM as collaboration with Azure is reportedly in the work. On top of that, through its offerings such as vSAN (storage), vSphere (compute), NSX (network), VeloCloud (SD-WAN) and a host of services designed for analytics, management and security such as Workspace One, Wavefront, AppDefense or vRealize, it is the glue that connects 3rd party applications, public clouds, private clouds (data centers) and branches.
Through its acquisition of EMC, Dell is the majority shareholder of VMWare.
Pivotal is Dell’s answer to the world’s current obsession with micro-services and Kubernetes. Pivotal offers services that help companies build applications better, faster and more efficiently. Developers want automation to relieve them of infrastructure-managing tasks so that they can focus on developing code, but they don’t want to lose too much freedom in development. Through its portfolio, Pivotal strives to meet those needs. Heptio is their latest acquisition and provides managed Kubernetes services. With Heptio, developers are not subject to the limitations imposed by PAS, but at the exchange of limited automation. With PAS, there is a lot of automation, but developers may not appreciate the rules that come with a higher level of automation. PKS is supposed to bring a balanced mix and the best of both worlds. I wrote a bit about PaaS vs CaaS here
As in the case of VMWare, Dell owns Pivotal by virtue of its EMC acquisition.
Dell has its own security subsidiary in SecureWorks, a $1.8 billion company as of this writing. In addition, VMWare has its own security solutions that are designed to improve security as NSX with micro-segmentation or AppDefense.
The more I read about Dell and its subsidiaries, the more I am impressed by its strategy and growth through innovation and M&A (EMC, VeloCloud, NSX…). Based on my understanding of where Dell stands in the Enterprise IT world, it seems to have the necessary pieces to take advantage of the IT trends mentioned above.
One of my concerns before I hit the “Publish” button every time is whether what I have to say is correct and has merit, especially the entries that are aimed to explain complex concepts. But I learned that public feedback or criticisms are part of the learning process. So even though I am nervous to publish this, I figure I’ll just give it a try.
I have been reading on the difference between Kubernetes and Pivotal Container Service (PKS) and the difference between Container-as-a-Service and Platform-as-a-Service. Below is my understanding put in simple terms so it can be understood better.
CaaS vs PaaS
In the fast-changing market nowadays, fast and regular releases of software are crucial to customer satisfaction and gaining competitive advantage. Both tools offer automation of mundane and time-consuming tasks to liberate developers.Both are aimed to help developers devote more time on real programming and less time on setting up the underlying infrastructure. The difference between the two concepts lies on how much freedom/autonomy each offers developers and how far on the stack each abstracts
In short, PaaS such as Pivotal Application Service (PAS) all developers to focus on the applications and data. The rest is managed by a service provider. It offers a great deal of automation. With PAS, consistency is emphasized as there are rules enforced on developers by the tool itself and the leaders in the development team. However, it also means that PaaS provides lower flexibility and less DIY, something that may not sit well with developers. A salesperson from the company I am working at shared with me a story that a financial prospect didn’t want PAS because of resistance from its developers.
CaaS such as Pivotal Container Service (PKS) or Kubernetes doesn’t offer Application Runtime. The application networking piece is in yellow because while PKS does offer it, Kubernetes doesn’t. With CaaS, there is a higher level of flexibility and DIY, but less automation, compared to PaaS. Developers tend to welcome it more as they have the freedom to express themselves.
Kubernetes vs PKS
Kubernetes is an open-source container orchestration tool that automates the scaling, management and deployment of containers. Think of a pod (one/multiple containers that share the same task) as a body part that does a specific set of functions. Kubernetes is like a head scheduling & distributing tasks and maintaining the health of all body parts. Kubernetes is for developers, not so much for Operations team who has to maintain the health of the system on a daily basis. While the master node in Kubernetes can orchestrate children nodes and replace them when they are down, who will do the same for the master nodes? Plus, all the patching, installation and upgrades to Kubernetes? The Operational task that comes after deployment can be a headache.
This is where PKS offers values. PKS is an enhanced enterprise-grade Kubernetes. One of its component, called BOSH, automates the installation, patching as well as upgrades. It also does to master nodes in Kubernetes what master nodes do to children nodes. BOSH automates the management, scaling and deployment of the clusters.
Another value proposition is related to micro-segmentation. Micro-segmentation in this case refers to the isolation at container, pod and cluster levels. Developers can set rules dictating which container, pod or cluster can communicate with one another. Isolation is made possible with the use of firewalls around the subject at hand. With Kubernetes, developers have to take time to set it up. When the number of nodes increases, the task becomes more taxing and complicated. With PKS, its NSX-T tool is integrated to automate that task, saving developers a bulk of time and increasing the time-to-market release of software.
If a company has an army of developers and prefers fast time-to-market as well as consistency, PaaS such as PAS should be the tool. If the company wants to use an open-source tool and can afford time to manage operational tasks itself, Kubernetes is the choice here. PKS offers the best of both worlds. As far as I know, it’s significantly cheaper than PAS. It complements Kubernetes while maintaining the flexibility that the open-source orchestration tool offers.