A Dilemma That Will Impact Many Startups in 2018!

The past 6 years have seen a ton of start-ups in the infrastructure management space. There has been a flood of new companies created to address the massive challenge of managing the plumbing and underlying compute and storage that facilitates the growth of the Internet of Things, Public and Private Cloud and Artificial Intelligence. The ease of raising funding from Angels, Venture and Private Equity has provided entrepreneurs an easy source of capital. What a great time to be a start-up….or is it? I equate the existing start-up space like a gambler (in this case an investor) debating whether to bet more chips on another hand, double down on the one that exists or walk away from the table.

2017 saw almost 4 billion internet users, Gartner predicted 8 billion things would have connected and AI became more prevalent and started to make an impact in our daily lives. We truly are in an information technology renaissance with the world becoming virtually smaller, new innovations shaping our daily routines and transforming the workforce to meet the needs of a digital economy. Every day we see new technologies make front page news, from online shopping to self-driving cars to cryptocurrency to robotics and AI. Each and every one of these next generation innovations requires core/edge computing capability, tons of storage to keep data that can be mined and utilized and networks through which the information can flow across the globe. The underlying infrastructure is evolving with new innovations from legacy vendors and start-ups to meet the needs of the market.

This exciting era of technology has led to crowd funding, angels, super angels, venture capitalists for different stages of growth and private equity all pumping money into new ideas and companies. From raising thousands to raising billions, the opportunity to stay private and raise as much capital as required has been the mantra utilized by most start-ups, avoiding the scrutiny of the public markets and all that comes with it. Venture and private equity funds have raised tens, if not hundreds of billions of dollars to invest in the next Amazon or Alibaba! Nobody wants to miss the party and everyone wants ‘in’ on the 10-20-50x return that waits upon an exit! This is analogous to sitting at a blackjack table and everyone around is winning so the enthusiasm keeps building, players keep increasing their bets, doubling down as there are no signs of a losing hand. Investors see their other investments or their peers making multi-fold via a unicorn exit and the exuberance continues in stride.

Unfortunately most of the start-ups never think about profitability and focus solely on customer acquisition, top line growth or worse yet, number of users/clicks without any direct correlation to financial metrics. This focus on customer acquisition, top line growth is an essential component of a company’s growth curve but at some stage there has to be a means to profitability. Start ups in today’s world don’t worry about profit as they are more focused on raising the next round of funding and then the next and the next and before long the company has raised tens if not hundreds of millions without earning a dollar. What’s amazing to me is that investors continue to do round after round of investment despite knowing that throwing good money behind bad doesn’t make sense. The challenge is, once they are ‘in’, they have to keep on investing as they need to show their limited partners (LP’s) that the investments they’ve made are continuing to progress forward. Keeping the blackjack analogy in mind, think of the same table that is full of exuberance and a couple of the players lose a hand or two. The gambling mindset is one where the loss is a fluke, it won’t happen to me or it definitely won’t happen two times in a row. If the gambler keeps playing and maybe even increasing the stake, a win will yield rewards.

What you will see in 2018 is that a large majority of the start ups will end up closing or being sold for pennies on a dollar. The reason is not because the technologies are not good, it is because the companies are not profitable, they are not within site of being profitable and the investment dollars for new capital is drying up. There are several reasons for investors not willing or able to invest further. First, the investors have a time horizon that may be coming due. Most funds have a ‘life’ for each fund raised, typically 10 years from inception, so a fund is bound to exit from what it has invested in before the time horizon runs out. Secondly, to go public requires delivering on numbers. The public markets are rewarding companies that meet or exceed forecasts and just as harshly killing those that don’t. Financials do matter and the public market is clear that you must show profitability or a means to it, in order to continue to be supported with a strong share price. There are exceptions to this but even those exceptions face a crazy roller coaster ride to their share price. The other option is a private exit, an M&A to a strategic. The challenge to this is that most large companies are extremely smart and have fairly mature M&A processes, not to mention activist investors that are monitoring every major spend. They are not going to pay multiples if they know the company is going to run out of money and is on its last breath. In addition, they will not want to take on a transaction unless it is strategic and can be additive to their earnings, or has a diminutive short term negative earnings impact. Going back to my gambling analogy…the gambler has a flight to catch and needs to leave the table pretty soon and he/she must decide what to do, should they bet more chips and double down, take a new hand or simply walk away? My feeling is that many in 2018 will either take ‘even money’ or take the loss and walk away!

To my fellow entrepreneurs, we are the dealers of each hand, making the gambler win is in our best interest. Focus on profit and the analogy ‘the house never loses’ will definitely come to fruition. Best of luck in 2018!

Cloud Computing Storage Infrastructure

The Cloud: Transforming How We Manage Storage Infrastructure

When I first heard of ‘The Cloud,’ I thought it was just marketing jargon used by technology companies to create a false new market.

In reality, The Cloud, in its various forms, is re-defining how we access, utilize, and manage software, hardware, and IT services.

Continue reading The Cloud: Transforming How We Manage Storage Infrastructure

Data Dynamics’s CEO Predicts the Future of Data Management

The following interview took place with Piyush Mehta, CEO of Data Dynamics Inc.  Read to learn Piyush’s thoughts and predictions regarding data management and the impact it will have on the digital economy.

Q:  As you look back on 2017, what were the key challenges organizations faced as they worked to move towards the requirements of the new digital economy?

The digital economy brings with it some great opportunities but the transformation, like any other, is painful. Most organizations want to leverage the digital world to gather data points to make better business decisions and customize products/offerings to as granular a level as feasible. The challenge in 2017 was the realization that unstructured data was dumped into storage silos without any thought or plans of extracting it in the future for value. Those mounds of legacy data today have become an important asset and as such, understanding it becomes a vital first step in the journey. In addition, applications are being re-written to meet the needs of a digitally paced economy but rewriting applications takes time, how do you leverage existing apps to access and manage new storage paradigms that scale to meet the needs of a digital world? This is a repeated challenge that we have seen enterprises face in 2017 and are still trying to address.

Q:  Do you think these challenges will remain as we move into 2018?  What new challenges will likely emerge?

The challenges from 2017 will remain as transformations take years not months. That being said, companies are adapting and innovating faster than ever and over the next 2-3 years will address the challenge of managing legacy data. As enterprises meet those challenges, new challenges will continue to evolve, among them are:

  1. Sheer amount of data creation and retention. At what stage does historical data not provide any value and can be deleted? Statutory requirements have no bearing on this question because every enterprise goes far beyond the legal requirement to store data as there is a ‘you never know when you may need it’ question. But with data growing at exponential rates, there will need to be an answer to when the value of the data dissipates and its best to delete.
  2. Security of the data and who has access. As data volumes grow, so too does the vulnerability to securing it. Managing access control to data will be one of the top challenges facing CEO’s as an enterprise’s greatest asset is its data.

Q:  We are hearing more and more about “smart” and/or “intelligent” IT (less and less about speeds and feeds) – how will we see this concept playing a role in 2018 and onwards?

There’s more buzz then bite to this. You can only generate intelligence if you understand what you have, otherwise how you can extract the value from it? Most companies just don’t know the data they have, let alone leverage it to its max. I believe today we leverage 10-15% of the value that data can provide in helping make better and more intelligent decisions as many of the tasks that support and surround data management are still done in an archaic manner. Until we drive a consistent, automated and policy driven method to manage data so we may find it when and where we need it, these words will continue to be strong marketing jargon but slow to adoption.

Q:  Can you talk about Data Dynamics and its StorageX software – what enhancements have been recently added to meet the requirements of 2018’s digital business environment?

It is an exciting time for us at Data Dynamics as we just launched StorageX 8.0. Our 8.0 release enables customers to accelerate their digital transformation journey. There is a vast array of new feature/functionality that we’ve added to the product based on years of experience working with some of the largest enterprises in the world. Our customers wanted a better understanding of what they have stored over the years so we added an Analytics module to empower them to know what they have, how it is being stored, who is access it, etc. This enables them to utilize raw meta data into actionable information! Our support for S3-based Object storage, both on and off-prem, provides the flexibility and versatility required to move data across a hybrid cloud, meeting both the need for scale and agility. StorageX 8.0 empowers dev ops as we have a robust Restful API to support applications to automate creation, management, movement and reporting of their storage infrastructure. These functionalities are further empowered because StorageX 8.0 is the first platform that helps manage unstructured data in a native format so that users and applications can have end to end visibility into where and how the physical data is stored. This is an essential differentiator to storage management software developed by other ISV’s who ‘box in’ customers into their proprietary name space or shard the data as they transform it. We will continue to innovate to meet the needs of our customers and we have some great plans ahead for StorageX 8.1 and beyond.

Q: Any parting advice you wish to offer to business and/or IT leaders?

I continue to see enterprises set ambitious goals to transform their infrastructure to meet the needs of a digital economy. Unfortunately, most of these goals are ‘pie in the sky’ dreams as executing them in complex, siloed environments is not an easy task. Start the journey for your transformation with achievable baby steps, set actions and plans that can actually be accomplished and realize that the transformation is not a sprint but a marathon and the digital age is just starting. Understand what you have before even embarking on what you want to accomplish. Find technologies that you can leverage to drive automation into the process, is scalable and can grow with you as you expand your executable goals.

As with the industrial revolution in the late 1800s, the digital revolution is in its infancy, the world as we know it will change with the evolution and advancement of quantum computing and machine learning. This will impact every aspect of our lives and change the course of humanity. It’s a great time to be in technology as each organization can have an impact in this transformational era but must do so understanding operational limitations that exist within their business and adapt and innovate accordingly.

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A Custodial Shift of Data Management to Meet the Needs of a Digital Economy

Organizations must adapt to meet the requirements of the new digital economy where data is the most prized asset. Unfortunately, the management of the underlying storage for this most valuable of assets remains with centralized IT, who look at data from an infrastructure perspective, as a cost to manage, rather than the asset it has become. I predict that in 2018 the management of data storage will shift from centralized IT to individual business units. This transition will lead to a more focused approach around each application’s and user’s need for data and their ability to access it when and where they want it.

The reason 2018 will be that transformative year of change is because:

We are in an API driven world and the maturity of API’s allows for applications to write to and leverage storage management software to automate the creation and management of their data.

  1. Storage technologies are starting to meet the scale required for the vast amounts of digital content that is created. Object Storage provides the scalability, redundancy and security required to meet the vast deluge of data.
  2. The cost of storing data is dropping as the price of raw disks, both flash and SATA, continue to drop substantially year over year.
  3. The public cloud providers have proven that creating nimble infrastructure is feasible at scale. Application users are experienced in selecting criteria upon which to purchase and manage their storage.

The digital economy is creating a new asset category where the mining of each 1 and 0 is The Competitive Difference. 2018 will see the shift of the custodian of these 1s and 0s from traditional centralized IT to the rightful owners of the data, the business units.

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Piyush M.

CEO