Decoding the new economy

When artificial intelligence becomes pervasive

Artificial intelligence is shaping up to the next battleground between vendors, but users won’t really care as long as it works.

Once upon a time computers were unusual, getting time on one was only for select employees of large corporations and scientists. Famously IBM’s Tom Watson forecast there would only be a need for five computers, although it seems he never said that.

Today we’re surrounded by computers in everything from our cars and phones to our teapots and razors and now we’re considering how those devices will affect our future workforce.

At the core of the discussion about computers and the future of work, is artificial intelligence. What’s notable though is it’s unlikely that AI is going to be an competitive advantage for technology vendors as the functions become built in.

This is already being seen with Microsoft building AI into its databases and increasingly the intelligence is going to built into the chips themselves.

In our recent interview with Xero founder Rod Drury, he flagged how AI is going to drive small business accounting. Drury was speaking at the Sydney AWS summit where the hosting company was showing off many of its AI driven services.

While artificial intelligence is going to be embedded and almost invisible to the user, it is going to be important. A good example is Google’s struggle to maintain quality and honesty in its local search results, a process that is beyond the company’s resources if done manually.

For the software vendors, the quality of their AI features is going to be one of their key selling points. This is why AWS, Amazon and almost company in the industry is announcing their own initiatives. Google itself should be one of the leaders in this field.

As automation becomes increasingly taken for granted, artificial intelligence is going to be seen as a fundamental, and invisible, part of computing.

While AI is going to be essential for the technology vendors, for users we won’t notice it as long as it works properly.

Building the artificially intelligent business

Artificial intelligence and machine learning are a great opportunity for small business says Xero founder Rod Drury

It’s been another big year for Xero after the company passed its million user milestone, at the recent AWS Summit in Sydney founder Rod Drury to spoke to Decoding the New Economy about what’s next for the company and for small businesses.

For a company founded a decade ago, having a million paying customers is a substantial milestone and one Drury seems quite bemused by.

“It hasn’t really sunk in yet. When we did our IPO our promise was a hundred customers and I can remember when it was our first year our target was twelve hundred customers – I think we got to 1300 – so to pass a million is pretty nuts.

“What we’ve found is the accounting software market is probably one of the key industries where you’ll see the benefits of machine learning and AI. The reason for that is massive amounts of data but a pretty tight and structured taxonomy so we processed 1.2 trillion pieces of data in the last 12 months so the graph of data is huge.”

Far more modest volumes of data threaten to overwhelm smaller businesses and this is where Drury sees Artificial Intelligence and machine learning as essential for simplifying services and driving user adoption.

“One of the challenges is that small businesses might be great landscape gardeners or plumbers but they are terrible at actually coding transactions so we’re now seeing that wisdom of the crowd and all that data that we can code better than most normal people can. So the big epiphany was ‘why don’t we get rid of coding?’

“Effectively all a small business has to do make sure things like the data of the invoice is in the system and we can do the accounting for them and the accountants can check and see what’s going on.”

This automation of basic accounting tasks, and how these features are now embedded in cloud computing offerings, is changing how businesses – particularly software companies – are operating.

“You can’t run domestic platforms any more, because every accountant will have customers that are exporting and what we’re seeing now is global platforms connecting together so, for example, HSBC announced its bank feeds and what we’re doing with Stripe and Square.

All of the accountants need to be coaching the small businesses exporting. That’s what creates jobs.”

That global focus of business is now changing companies grow, particularly those from smaller or remote economies like Australia and New Zealand.

“What we’re finding now is the last generation of the late 90s and early 2000s was very much enterprise technology and normally companies would get to a certain point and then a US public company would have to buy them.

“Now we’re seeing truly global businesses that aren’t selling out quickly they’re actually creating businesses from this part of the world. People don’t have to live in Silicon Valley anymore, they can live in Sydney’s Northern Beaches or Auckland or Wellington and do world class work.

That remoteness is something that challenges Xero though as the company tries to get traction in the US market which is dominated by Intuit and fragmented across regional and industry lines.

“As you start off as a company listed in Australia and New Zealand it’s harder as you don’t get the benefit of the density in a smaller market. Now we’ve done enough to get these bank deals, we can now attract executives of the calibre that feels like long term leadership and that’s the benefit of doing the hard yards for a few years.

We’re past the beach head phase now and now we’re building the long term business. We want to be a big fish in a small pond.”

Overall Drury sees the cloud, particularly Amazon Web Services, as being one of the great liberators for business as smaller companies follow Xero’s footsteps.

“This is one of the amazing things AWS have done, they’ve created this flat global playing field.”

Small business and cloud computing

The story of one Melbourne clothing supplier reminds us just how basic most small businesses’ IT systems are.

This blog, and its predecessor, have long maintained that computers and the internet have levelled the playing field between large corporations and small business so it was interesting Telstra’s managers say that over lunch today.

Australia’s biggest telco was showing off their cloud services for small to medium businesses with a presentation from futurist Ross Dawson on the changing technology world then real world case studies from Darwin’s Abode New Homes, Canberra’s Red Robot and Melbourne’s Cargo Crew.

Narelle Craig of Cargo Crew led with one very good reason for adopting cloud services – Cryptolocker ransomware.

After an infection that locked them out of their systems and cost the business a hundred thousand dollars, they shifted their on premise software to the cloud.

It’s easy to imagine how Cargo Crew came unstuck, a basic system that met the needs of a four person company five years ago grew into an unwieldy beast servicing 25 staff today. As the business grew, the disruption of upgrading IT systems was seen as too time consuming and costly.

Until of course something happened. A ransomware infection for Cargo Crew and for Abode a fire in a neighbouring office the evening after they’d installed a new 20,000 dollar server, where thankfully they didn’t lose anything but the scare was enough for them to start looking at alternatives.

Cargo Crew’s tale is a reminder of how basic most small to medium businesses’ IT systems are and how rudimentary their IT security is. While technology does level the playing field, there are still some things smaller businesses struggle with.

Beating the shock clock

Dell Boomi’s CEO, Chris McNabb sees being part of an empowered Dell as his company’s advantage against the newly listed Mulesoft.

With a range of tech companies floating as corporations lose their appetite for acquisitions, companies like Boomi which was bought by Dell in 2010 believe they have an advantage over competitors like Mulesoft which have to answer to the public markets at sky high valuations following their recent stock market listing.

If Chris McNabb, CEO of Dell Boomi, is concerned about his competitor’s successful IPO, he wasn’t showing it when he spoke with Decoding the New Economy at a restaurant in a Sydney office park last week. With Mulesoft’s stock popping 45% on the first day of trade, attention was on how his company would react to such a vote of confidence in his market rival.

“We continue to grow very rapidly, well north of market growth rates. I think you’ll see us consolidate our position at the top of most boards in terms of the number of customers. If you look at Mulesoft’s S1 (the company’s official stock offering document) it shows them with around 1,078 customers while we have 5,300 customers. We almost have an unfair competitive advantage.”

Part of that unfair advantage McNabb cites is the breadth of services now offered by Dell’s merger with EMC where he flagged an increased push across the organisation’s sales team starting in the second half of this year.

“For us to say six months ago that we’d sit here and say that the merger of two 25 billion dollar plus businesses could be bedded down is really saying something. I think it’s one of the best integrations that I’ve ever seen.”

“For Boomi it’s been terrific and continues to be terrific. We get unequivocal support from executives, Michael Dell and the ELT – Executive Leadership Team – has been nothing but a hundred percent supportive.”

“Now we’re looking at what we can do with the EMC Solutions sales team, what we can do with our brothers in the strategically aligned businesses, specifically Pivotal, Virtustream and VMWare. What are the opportunities to go to market more collaboratively with them?”

Boomi’s recent ManyWho acquisition fits into that range of offerings and McNabb believes the workflow platform’s role as a tool helping CIOs manage their organisations’ transitions to cloud services will be a compelling offering.

“Workflow automation – redoing business processes in a structured and an unstructured way – was always a key strategy of ours.”

“Hybrid IT is here for the next ten years, so how do we enable it so customers can buy all the best of breed software they want yet still have a suite like experience?”

“We believe hybrid IT is creating challenges for CIOs and as you get all these different cloud applications from vendors you’re breaking apart your ERP and creating an integration problem and you’re creating a data management problem along with governance, API management and orchestration.”

“It’s our vision to give CIOs the unified platform the necessary fundamentals in cloud services to address these issues.”

With a solid market position in North America, McNabb sees the Asia-Pacific as the big growth driver for Boomi with channel partners leading the company’s expansion across the region.

“Worldwide EMEA is going through a ton of growth and this region (APAC) is going through a ton of growth. Our expectation is this region will have the highest growth rates – Australia, New Zealand, South East Asia, these are key target areas.”

“If I look at things strategically and how important the channel is to us, is it’s a force multiplier as it allows you to get entire teams being certified and ready to go across regions. It also helps execute in a better way in local markets, you have to be in a region in a big way and if you can get really good certified partners you can do that much better and faster than if you’re hiring and building it yourself.”

Returning to the topic of Mulesoft, McNabb sees not being part of a publicly listed company as one of Boomi’s big advantages.

“We don’t operate on a ninety day ‘shock clock’, we know what the market’s growing at, we know what our platform is capable of, we know we’re going to raise our targets. There isn’t increased pressure to perform.”

“As it turns out, those in the public eye do have the ninety day shock clock to attend to and it will be interesting to see how those first, two, three or four quarterly reviews go. I’ll certainly be an eager listener to their investor calls.”

Ultimately though, McNabb thinks Mulesoft’s IPO and it’s 45% pop on listing vindicates Dell’s ongoing investment in Boomi and the potential of the cloud integration marketplace.

“I look at it as a terrific validation of the marketplace…. It’s good for everybody.”

Microsoft sees off the Google threat

With their Office365 success, Microsoft have shown they are far from a spent force in the software industry.

Earlier this decade it looked like Microsoft’s most profitable business line was doomed as Google Docs threatened to disrupt the Office franchise.

Yesterday Microsoft showed how they had seen off that threat when reporting their second-quarter results that beat Wall Street analysts’ estimates and saw the company’s stock market capitalisation topped $500bn, the first time since the year 2000.

Microsoft’s results were mainly due to its cloud computing products with Azure growing at 93% year on year, Office 365 commercial at 47% and Office Consumer Products and Cloud Services at 22%.

Earlier in the week, cloud security company Okta released its Business at Work study that looked at trends in the commercial use of online services which showed how Microsoft’s products are dominating the market.

Microsoft’s advantage was underscored in a Gartner paper late last year. The Current State of Cloud Office and What to Do About It report found 10.7 percent of public listed companies surveyed were using Office 365 as opposed to 5.2% using Google. The rest had deployed hybrid or on-premise productivity suites.

So Microsoft seemed to have seen off the biggest threat to one of their most important products which for Alphabet/Google should be a worrying development as G-Suite (as it’s now called) has failed to become a meaningful revenue centre – advertising profits still made up 22 billion of the company’s $25 billion revenues in their last results.

Google’s failure to diversify should worry Alphabet investors, particularly given the headstart the company had over Microsoft Office in the early days of G-suite as then Microsoft CEO Steve Ballmer struggled to shift the company’s key product lines onto the cloud.

How much the initiatives of G-Suite’s new leader Diane Green can go in making Google’s product more attractive is a big question as Microsoft have shown they can match or beat their competitors’ offerings in areas like collaboration and artificial intelligence.

Despite Microsoft’s success in seeing off Google in the office productivity market the company still lags Alphabet market capitalisation of $570 billion but Microsoft have show they are far from a spent force in the software industry.

GorillaStack – the weekend hacking exercise that grew into a business

As a business born out of a weekend hack Sydney based GorillaStack is almost a classic tech tale.

“I was involved in a startup previously,” says GorillaStack’s CTO, Elliott Spira, recalling how the company was his co-founder Oliver Berger at the AWS Re:Invent conference in Las Vegas last week.

“We noticed we had spikes in our AWS spend, there was a big attribution issue and one day we said ‘how about we do a weekend project and try to spin something up that listens to our Cloudwatch metrics and tells us how much we’re spending at any time of the month.”

As the challenge was accepted, the team went to work. “We hacked away all weekend as we like to do, being nerds, and by the time the weekend was over we had the basic cost dashboard that told us how much we were spending each month.”

Adding more features

“The next weekend we decided to add another feature and we decided to add cost alerting where we’d get an email when we passed a certain threshold. That was really cool as we could budget and know when we were spending too much.”

“On the following weekend we started working on periodic alerts on how much we were spending over a set set time and from there the idea started to prosper, we thought ‘oh wow, we have a bit of a product going here. Let’s show some friends who also use AWS.’ From that feedback we found people wanted to keep the dashboards up and keep track of what was being spent.”

Today GorillaStack offers a service that allows companies to manage their AWS usage, something that can easily get expensive for organisations not closely watching what they are using. “What we try to do is make a cultural change where people become conscious of what is actually theirs in the cloud.” Elliott says. “We’re actually seeing that change.”

Living the culture

“In terms of that culture, we try to live that culture as well. We have private Slack channels with each of our customers so there’s a constant line of communication,” says Oliver. “Those Slack channels have proved to be an effective customer support and product development tool. “we’ve fostered quite a good community.”

With the initial hack being successful the company was formally founded in June 2015 and to date is bootstrapped, having not taken any investor’s money. “We want to get to a stage where we’re comfortable with the product,”says Oliver.

Currently the user base includes paid customers like Citrix, Bauer Media, Health Direct and the Australian Football League. “We have quite a good spread in terms of geography and mix of customers,” observer Oliver. “Right now the breadth suits us.”

Applying the freemium business model

Following the freemium model, the company also offers a free tier offering a single switch. “If you want anything more you move onto our paid tiers,” says Elliott.

To the question whether the company is looking at catering to other services such as Microsoft Azure or the Google Cloud, the dominance of AWS comes into play. “Right now we’re definitely sticking with the giant, we’re really looking at growing our capability so we do more and offer more to our existing customers,” says Elliott. “I think it’s really important to focus on delivering value to them and our business’ future,” Elliot says.

Looking to the immediate future, their focus is on extending their current customer offering. “We’ve a fair bit on our roadmap, we have a bit focus on chatops with a more in depth integration with Slack and Hipchat integration with our existing product,” says Elliott.

In talking to the Gorilla Stack founders, it’s striking just how the startup follows the classic tech model of a bootstrapped company that started by a bunch of hackers solving their own problem. How the business evolves will be fascinating to watch.

Paul travelled to AWS Re:Invent in Las Vegas as a guest of Amazon Web Services

Category: cloud computing

When artificial intelligence becomes pervasive

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