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Infrastructure Software
Dharmesh Thakker  |  January 21, 2015
The Third Wave: Enterprise-IT Opportunity in the Age of Mobile Apps, Hyperscale Cloud and Big Data

I am excited to join the Battery Ventures team this week to double down on our enterprise-infrastructure practice and West Coast presence. More broadly, I believe there could not be a more exciting time to build an enterprise- software company today as three macro trends – mobile apps, cloud services, and big data–converge to potentially disrupt over $150 billion in annual enterprise-IT spend and over $1 trillion in market cap.

At Intel Capital, where I previously managed the enterprise-IT portfolio globally and helped our $14 billion/yr datacenter group with strategic planning, I was fortunate to be involved with the core building blocks for the massive disruption ahead.

Every 15-20 years, there seems to be a step function in IT infrastructure which creates an even larger software ecosystem around it! And I believe we’re on the precipice of one of those inflection points today.

The first such IT wave happened in the late 1970s, when Intel capitalized on Moore’s law to compress millions of transistors into an integrated circuit, helping create the PC revolution and a market for desktop- software many times the size of the underlying silicon. “Intel Inside” powered Dell, HP, IBM / Lenovo and enabled the Microsoft Windows and Office franchises to create hundreds of billions in market value.

The next step function happened in the mid-1990s, when inter-connected PCs (technology based on government research) created a wave of networking giants like Cisco and Juniper. This innovation also enabled the rise of the original wave of Web apps and the e-commerce revolution, including companies like Amazon.com and Google, whose search prowess helps fuel online commerce.

We are now in the early innings of the third-wave –a convergence of three independent step functions creating an opportunity that, in my mind, is an order of magnitude larger than the last two waves.

Apple paved the way for this new reality by pioneering the mobile-apps revolution, which dramatically transformed how users engage with delightful applications. Enterprises and software vendors quickly realized that they had to step up the innovation pace for engaging apps, and Amazon Web Services popularized by VMware virtualization now enables them to deploy apps at a record pace.  And of course, the billions of datapoints generated by constantly evolving apps and cloud services can now be mined efficiently, thanks to data-mining techniques Hadoop, Mongo, Spark open-sourced by Yahoo, Google and Berkeley AmpLab.

Mix these three ingredients – mobile apps, cloud services, and data mining—together, and you have a potent technology stew that allows more businesses to be highly productive and profitable. This is the opportunity I’m stepping into in my new job as an enterprise-IT focused general partner at Battery, after several years at Intel Capital.

Where will these next technology innovations pop up, specifically? I see innovation and investment opportunities originating from both sides of the technology wave. First the back-end technology enablers like Android and Airwatch, powering the mobile domain; AWS, Openstack and Docker in the cloud domain; and Cloudera, Hortonworks and MongoDB* in the data-mining domain. Combined together, these early thought leaders are already allowing savvy companies to build the next-generation technology stack.

At the same time, packaged-software companies like Uber, Palantir, Splunk**, Wayfair** and others are embedding elements of mobile, cloud, and data in their offerings to provide value to their end-consumer and business customers. We are just scratching the surface, and I expect to see significant innovation in both the technology enabler and packaged apps domain in the years ahead.

What is also different about this wave of tech innovation is that open source has democratized enterprise innovation allowing thought leaders to emerge across the globe and not just in the “walled garden” of Silicon Valley. The Nginx, Mirantis* Openstack, Good Data* teams emerged from Eastern Europe, for instance, while XtremIO**, Anobit**, Waze and other pioneers were formed in Israel.

The go-to-market models for many of these companies also have transformed from direct enterprise selling to freemium and “open core” models, allowing a much steeper revenue ramp if done well.

Put these trends together and it’s easy to see why now is a very exciting time to be an enterprise-IT entrepreneur and venture capitalist. I am very excited to be part of Battery’s global enterprise-IT team and look forward to supporting platform companies that will morph technology’s role from supporting businesses to driving and transforming businesses!

* Dharmesh is an active board member or investor in Mirantis and Good Data; for a full list of his investments, please click here.

**For a list of all Battery investments and exits, please click here.

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