Overcoming the Innovation Deficit
In today's world, the fast eat the slow. Leading enterprises built over decades face an innovation deficit and find their differentiation crumbling. The divide between the technology haves and have nots has never been starker. The growing imbalance between digital natives and digital laggards is creating wide disparity in the global economy. With the cards stacked so heavily against them, how can enterprises overcome the innovation deficit and create a more diverse world economy?
Delphix CEO Jedidiah Yueh says the answer lies in transformational automation. Watch the video or read the full transcript below.
Jedidiah Yueh: Welcome to the Data Company Conference. I'm Jed. I'm the founder and CEO of Delphix. This is my favorite conference of the year, but I might be a little bit biased.
Today, we're going to talk about an important topic: overcoming the innovation deficit. There are a couple of building blocks to the innovation deficit. First, Al Gore invented the internet, and that really broke the laws of business physics. Today, you can reach billions of people all around the world at the speed of light with very little historical governance. Just look at TikTok over the last couple years. They built a base of over a billion users, and today, if you could just create a catchy short form video, you can reach a billion users on their platform as well.
There's more, of course, than just the internet. Around the same time, Linus Torvalds released Linux, the open source operating system. Then a few years later, around the mid 2000s, they released Git, which made it easier for open source developers to share open source code with all the rest of the open source developers in the world. Around the same time, Amazon invented the cloud, Apple released the iPhone, and Google soon followed suit with Android. These are all platforms that eventually could support billions of people around the world. Then fast forward today. Today, the most advanced software, AI, machine learning, deep learning, these are all technologies that are available by the drip in the cloud.
Today, if you want to build up an application or platform that can reach and support billions of users, you don't need to buy football fields of servers and infrastructure, you can just get what you need by the drip in Amazon or any of the other public clouds. And as a result, if you want to use the world's most advanced technology, you can also just use it in one of these public clouds. You don't have to code software that's already been coded for you, just leverage open source components.
If you want to shift innovation that can change the world today, it requires less and less code, less and less real innovation, which is why I call it thin tech. These compound innovations make it easier and faster to disrupt industries than ever before.
So what happens when you add compound innovation to the zero friction properties of the internet? Let’s look at the last two decades. Twenty years ago, if you look at the world’s largest companies, 1 in 5 were technology companies. A decade later, 2 out of 5 companies were technology companies. Today if you look at the world’s top 5 companies, the biggest companies in the S&P 500, they are all tech companies. Their valuations have ballooned by over six times, from $1.3 trillion combined to over $8 trillion combined today with companies like Apple worth more than $2 trillion themselves. Something radical has happened, something has really changed in this last decade.
But the whole world has access to the internet and all of these compound innovations. So that's not explaining what the difference is. Why are traditional enterprises being dwarfed by tech giants? Why is there this radical asymmetry, which is remapping the entire world and the global economy?
First, it's not a level playing field. Traditional enterprises are actually at a disadvantage. They bear the burden of fiscal responsibility. Every quarter, they have earnings reports that they have to deliver against. And so they have to balance investments in R&D with fiscal responsibility.
Second, traditional enterprises have built their businesses and all of their differentiation over several decades. That includes the systems that support that. Many of the Fortune 100, outside of the tech companies, still are powered by mainframes, so they never really shed the past. It's like a big, multi-generational Thanksgiving dinner, where you have great-great-great-grandparents arguing with millennials and never quite communicating, and it just goes on forever.
Think about tech companies. Think about a tech giant. Would they ever roll out a mainframe to scale to the billions of users that they support today? They would never use a mainframe. Tech companies move so fast that regulators and regulations are forever playing catch up. They leak our information everywhere as they drive these terrific ad revenue sales that just keep growing and growing. When the regulators do catch up and you have GDPR and CCPA and all these data privacy acts that are passed around different regions in the world, who really pays a price?
The tech companies can throw their legions of developers and very nimbly address these compliance issues. But it's the enterprises of the world, the silver companies marching to quarterly earnings reports, that really have to slow down, that really have to be mindful of how they meet these compliance regulations. And it taxes them at a disproportionate rate.
At Delphix, we work with a lot of enterprises around the world on critical digital transformation programs. And I have to tell you, when we work with the technology leaders in these programs, they really have to cross their T's and dot their I's in order to get budget approval for their programs. They really have to sign in blood that they're going to be able to drive a return because they're beholden to quarterly earnings reports. As a result, it's very hard to secure funding for any innovative program.
Just think, how hard is it for you to secure a billion dollars for your innovation program in the company that you work at? Technology companies have access to infinite capital, and that capital just seems to grow and grow year after year. In the tech world, it's actually okay to raise and spend $9.5 billion to lose $4.6 billion in a year. Try to do that on a traditional enterprise's P and L. Much of the digital and technology growth has come at the cost of our personal privacy. Last year, there were 37 million records breached and nearly 2,500 ransomware attacks. And think about the Colonial Pipeline Attack. These criminals and nation states are coming after traditional enterprises because they have these multi-generational systems that have all different levels of security and different methods of breach.
And all the terrific growth at tech companies has really come at the cost of business diversity. As more and more tech companies dominate their respective industries, we become more homogenous in the businesses that are supporting the world, and that is not a good place for the global economy. Technology growth comes at a cost to our planet. Just look at a technology like Bitcoin, which today consumes more electricity than the entire country of Argentina. And look at Dogecoin. It started out as a joke, but has been worth more than $63 billion or more than the market capitalization of MetLife. This uneven playing field is resulting in an incredible tech divide.
Today, technology companies like Google and Amazon release software thousands of times a month, even hundreds of times to thousands of times a day, whereas traditional enterprises are still releasing software on an annual basis, sometimes approaching a monthly basis. So it's no wonder that enterprises are getting left farther and farther behind.
What we're witnessing today is an innovation deficit: a deficit between the technology haves and the have-nots.
Like countries had trade deficits, today companies and countries have an innovation deficit that they face. This innovation deficit is critical to the future, critical to the future of business. So how will you overcome the innovation deficit? There's a secret engine powering the tech divide, all lies and investments in productivity. What technology companies have come to understand is that as you invest in productivity, it begins to bear compound interest effects. Just look at the tech giants. Satya Nadella has said that he would invest in productivity over new features every day of the week.
How much money are technology giants spending on productivity? At Google, they have 1,500 developers, over a billion dollars a year, dedicated to productivity. At Microsoft, they're likely investing double that rate. As a result, the old trade-offs are dead. In the old world, you had speed, quality and cost, and you had to pick two. Today, the highest performing technology companies are better at speed, quality, and security, and they just don't care about cost. That is the state of affairs that companies are facing today.
Transformational automation is a secret that is powering the tech divide, and it's not about automating a business process or automating a few activities. It’s about focusing automation on the process of innovation.
It's about automating the things that reduce the time it takes to go from an idea to features running a live app, impacting billions of users. There are enterprises who have adopted this transformational automation mindset even today. Take a look at UKG. When the pandemic hit, they had to respond and they had to respond very quickly. They were able to stand up 1,700 test environments with all the data in the right place at the right time, in a single day. You can't get to that level of testing and that level of future release without transformational automation. Or look at Choice Hotels, an 80-year-old company. Today, they have a digital franchise and rewards model and they fuel all the changes that they made using continuous compliance. They've automated the process of maintaining data compliance as they ship new releases of their software that impacts all of their users in all of their hotels.
And let's take a look at BNP Paribas. At BNP Paribas, they realized that the bank of the future is a digital bank. They also understand that AI is really the future of innovation. With AI, you can actually turn data into software. You feed data into machine learning programs and out yields software that you can implement in your production application. So what they've done at BNP Paribas is they've actually gone ahead and built an internal product that they call AI as a service. They built these on Delphix APIs, and they are now able to deliver AI-as-a-service. It's transformational automation focused on the process of turning data into machine learning models, which can impact their production applications.
All three of these last examples illustrate an important point, which is that data is the last automation frontier. Over the last few decades, everything else has been automated. The code, the servers, the storage, and the networks. Everything can be driven by APIs in the public cloud or in private cloud. But data is complex, growing and risky, and it's deeply entangled with enterprise application. If you're really looking for transformational automation that can yield differentiation, you want to focus on the last frontier, and that's data. Now, if you look at the data about data, there will be more data created in the next three years than the entire history of mankind. If we see the attendant increase in the power and carbon footprint that data commands, we're all in a world of trouble.
We all need to learn the lessons from tech, but we need to learn those lessons and we need to do it better. We need to do it in a way that is sustainable for our planet, and green data is the key to environmental sustainability.
If you manage your data correctly, you can really accelerate digital transformation programs and take physical operations and turn them into digital programs that have a smaller carbon footprint.
Also if you manage data, you can migrate much faster to public clouds, where the total utilization is much higher of the compute systems involved and can reduce the overall carbon impact by as much as 90%. Finally, if you use data and you're able to spin up and spin down environments, you can reduce your cloud bills and the power and cooling footprint and carbon impact. You can also consolidate data. You can take these massive sprawling data footprint and consolidate them often by 10x, which can reduce carbon impact by another 90%.
Of course, when it comes to data, we have to think about sustainable governance. That means continuously protecting personal data privacy. We also need to be mindful of how we protect ourselves against breaches and from attacks like ransomware.
In the end, if businesses around the world embrace transformational automation and green data, we can innovate at speed, we can maintain a diverse economy and we can do better than just the tech companies