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Episode 40: Pivotal, enabling enterprises to manage a unified multi-cloud software infrastructure with James Watters, SVP Products

James Watters, SVP, Products at Pivotal Software, is a veteran of the unix and open source software business. With a broad breadth of products, including Java Spring and many other essential tools for developers, Pivotal has built a business of enormous scale in record time.

Intro

Michael Schwartz: Hello, and welcome to Open Source Underdogs. I’m your host Mike Schwartz, and this is episode 40 with James Watters, SVP of Products at Pivotal.

Pivotal is probably best known for the success of Spring, the most popular way for developers to write Java applications, but they built a great business around the Pivotal platform, which enables large businesses to manage a unified, multi-cloud software infrastructure.

Pivotal is a little different than your typical open-source startup. Spun out of EMC and VMware in 2012, and IPO in 2018, and shortly before I recorded this episode in August of 2019, VMware announced the definitive agreement to acquire Pivotal, a combination that’s expected to close in 2020.

James makes the case that open source is winning because it’s innovative feature-rich and enterprise-ready. He has a deep understanding of both the technical and business mechanic that make open-source companies tech. I’m sure you’ll enjoy this interview, so without further ado, here we go.

Pivotal Background

Michael Schwartz: James, thank you so much for joining the podcast today.

James Watters: Great to be here, Mike. Hi.

Michael Schwartz: So, you were trying Pivotal in 2012 when it was formed, and for the listeners who don’t know the backstory, maybe you could just drive a little bit about how that came about, and perhaps about how it’s coming full circle to some extent.

James Watters: I was fortunate enough to join a open-source research and development team at VMware in 2010, working on an open-source project named Cloud Foundry, and we didn’t really know what it would become as a business. It ended up, they decided to spin that out along with another open-source project called Spring Source, or Spring, into its own company, and that was one of the foundational product elements of the company called Pivotal.

Michael Schwartz: What’s your current role with pivotal?

James Watters: I’ve done a lot of product work at Pivotal. I’m currently SVP of Strategy, focused on new parts of our product. I’ve been focused on things like streaming, container-as-a-service, function-as-a-service, all the emerging areas of our product.

Size Of Product Team

Michael Schwartz: Just to give everyone a sense of the scale, could you give a rough estimate about how many product managers are Pivotal, and the total size of the product team?

James Watters: It’s pretty expensive. There’s hundreds and hundreds of engineers that work on the platform at Pivotal, and I would say 50 full-time product people working and supporting them.

How The Product Management Has Changed In The Last 15 Years

Michael Schwartz: When you were at Sun a while back, you were a product manager of Solaris, which is a pretty epic assignment for those of us geeks who revere Solaris. Since then I’m wondering, could you comment about a little bit about how has been an open-source project manager evolved? Like, what’s different now?

James Watters: That’s a great question. The cycle time was so different on Solaris. And that was an 1100-person engineering team. And then, on the kind of customer-facing product front, I think we were under 10 people. It was very much engineering organization, product provided a bit of input and amplification of key customer themes. We worked on often multi-year release cycle.

In the new world of open-source, the community input comes so fast. It’s a different release cadence. Our core platform PCF at Pivotal, we released every quarter. And that was a big mindset change for me versus some of the older world at Sun. It was just how fast everyone expected you to respond. It’s not uncommon now to meet with a client. And in a matter of weeks, we will have a feature changer update shipped to them.
It’s a completely much more iterative world of continuous delivery, both at the platform as well as what we’re trying to inspire our customers to do for their end users. So, I think that’s dramatically changed since.

How Smaller Organizations Can Improve Product Management

Michael Schwartz: If you’re not Sun, you are VMware Pivotal, but you are so much smaller. Do you have any suggestions for some of the little things that you can do, or that it open-source company might do around product management?

James Watters: I think that’s really opening a question, and I don’t want to speak conclusively on it, but I think what I’d say is, there’s kind of two ways of coming at it. And my specialty is always being understanding the enterprise organization that the product fits into.

There was a point in our journey, where we felt adding additional features around security would probably be neutral to the developer audience that was using the platform, but what actually bring like the chief security officer and her team deeper into the conversation.

Suddenly, we approached a few banks, and we said, “What if we could rebuild this entire platform infrastructure every day for security?” And we had a really brilliant product person at the time named Justin Smith, who let this initiative to articulate the idea of the much more ephemeral approach to the platform.

I think the reason I mention this is, you could have gone deeper on just developer experience, but by finding that other constituent in an enterprise that come to the negotiating table around why we’re giving money to this company, that really changed the game for us and a few clients, because the chief security officer was now also an advocate.

I think it’s challenging you doing open-source products because you might get a lot of feedback from your immediate community and immediate users. But in order to sell the products to a larger organization, you need to think about articulating investments to a broader set of constituents.

Pivotal Products

Michael Schwartz: You mentioned PCF for Pivotal, Cloud Foundry. For those who don’t know, maybe you could just tell us a little bit about what that is, or also walk us through some of the other product offerings at Pivotal.

James Watters: I’ve been fortunate enough, Palmer at VMware hired couple of Google engineers in 2009-10, to come build this platform out. It was really like what you might call the Cloud Native platform world today.

At the time, there was no such thing as container-as-a-service, and at the application level, there really was no micro-services, and continuous delivery was sort of a very radical idea of enterprise. It was sort of the first platform built with the container first design, built to enable continuous delivery of things that look more like micro-services than monolithic applications.

And kind of was the first investment in this Cloud Native space, in terms of application platform and culture, all coming together in a platform.

That was really what PCF did, and we were able to scale it from zero sales in 2012. Or the spin that was first contemplated to hundreds of millions of dollars in sales, and ultimately the background of a public company.

Market Segmentation

Michael Schwartz: Cloud Native is a broad horizontal market. Do you segment the market at all by vertical industry or use case?

James Watters: This is another thing around products. For me, products strategy is that I do think that vertical use cases are critical. I’ll give you two examples. In the banking world, there is a huge focus on Java, because it’s traditionally a Java-centric custom application world.

Banks were always willing to invest in the high-end applications that often was built by Java developers.

When I first started and till this day, banks are, I would say, the number one language in banking is Java. They are very security-centric, they operate in a highly-regulated world, and they tend to be very hybrid cloud. There’s very few banks that run public only.

They were a tremendous fit for the design of PCF, both from support for Spring Boot as well as its core security differentiation.

We absolutely thought of a lot about banking, insurance, regulated industries. Then, manufacturing and industrial was a little bit different space. There you had a lot of the IoT world, you had streaming data, you had a completely learning how to build software for the first time way of engaging, where industrial companies were just getting started on major software investments.

I definitely think about vertical segmentation. I think for anyone who’s contemplating a sort of customer first approach to product thinking, vertical segmentation is a good early model to take on.

How To Decide What To Open Source?

Michael Schwartz: Pivotal has 73 projects in GitHub, and I’m sure that there’s more in private repositories – how do you decide which projects to open-source?

James Watters: I think, by and large, we tend to be an open first-style company, as I mentioned on the Andreessen Horowitz podcast awhile back, I am an advocate for sometimes keeping the UI, closed-source can be a simple way of differentiating between the pure-community efforts and the final enterprise products. But in general, we’ve tilted towards open source first.

That’s also been a key part of our relationships, like I mentioned, with certain banks.

A lot of the core security infrastructure of the platform was all kept open source, because the banks felt more comfortable consuming a platform that was opened first, even in those core areas.

Value Prop

Michael Schwartz:  When you have a lot of projects, is it difficult to position the value proposition of the company?

James Watters: That’s a great question. If you think about how many projects you want to take on, like say, MongoDB is a fairly focused company. One core thing, Elastic are fairly focused company, but you get into the platform world, companies like HashiCorp are very successful at doing multiple projects. I think Pivotal is probably one of the broader breadth open source company is out there, certainly Red Hat has a pretty broad breadth. You hit a point where you become the platform provider of choice for their next generation of design, and actually the pressure comes to do more and more and more.

One of the biggest pressure points for us was always like, “Okay, we love this as an application platform. Now, provide us the whole universe of data services on the platform.” And so you have to achieve a certain critical mass to have the scale to invest like that.

But I do think that in enterprise segmentation, it’s powerful when you can start to have people accept the offerings you do have. And then, the biggest pressure is, “And now add this, so I can have one coherent approach. And I think that that’s something really important for open-source companies to think about it. Like, “Look at how Amazon operates. They are not a federation of hundreds of little hosting providers all coming together. They really have that sort of single point of interface to all of their abstractions.

I think that’s an interesting dynamic in the world right now. Open source is like, how broad you should go in your portfolio, do enterprise buyers favor that, is it better to be lower and single products – that’s something we discussed.

Pricing

Michael Schwartz: With a lot of products, containers, Cloud Native services, it seems like it’s harder than ever to figure out how do you price. There’s more things you could gate on and the more elasticity is given, I know us, at my company Gluu, a lot of challenges because of CPU that depends upon the time of day. Can you talk about the evolution of pricing, and did you get it right initially, or did you have to make some tactical adjustments along the way?

James Watters: I think that’s a great question. I think it’s never easy or straightforward, we made a decision that we were going to go after the largest thousand companies in the world predominantly. We were going to supply a lot of technical resources to them, to ensure that they were successful with our product, and very much be an outcomes-focused company.

I think we intended to price at the higher end of the market, and that was a very deliberate choice. And I think as we’re growing now, we’re seeing more opportunity to start to segment the offer. To have a more transactional approach, we reintroduced the container-as-a-service product that didn’t have as many features as the full platform, but was something that people were ready to pay for more on a transactional basis.

I think that there is this tension between the desire to have a broader platform versus to be more transactional, and that very much comes back to customer segmentation. I would think of pricing in terms of how transactional you want to be, and then what the customer really expects out of you to make them successful.

Like, what does customer success really look like – it has to be at the core of your pricing model. If the prices are really low, and they’re not successful, that’s actually not on either of your interest.

Competition

Michael Schwartz: Does Pivotal actually have competitors?

James Watters: I don’t think that Pivotal has a company that is assembled just like us. We have some unique assets, one of the reasons we were successful in enterprises is, we have the number one way that enterprises build apps in the Spring Boot.

So, when it comes to like how enterprises are building applications in the Spring Boot, it’s probably easily the number one, and it might be over 50% market share of net new enterprise applications today.

There’s not another company that has that. We also had a very big git, and we were owned by kind of the Dell VMware family of companies ultimately. So, we’ve always been able to go to market with them, but we really still did have to earn our own way. But we could get introductions.

I think all of those things came together in a way that allowed us to build a higher-end platform to focus on the top 2000 companies in the world, and to go make them successful, and to price and package accordingly.
I think one of the challenges right now for smaller open-source companies is, these cloud platforms that are open-source, they keep adding features that are pretty high rate. So, you may think that one day, you have a company, and the next day, that’s a feature of a cloud platform. And I think that’s attention.

Certainly, in the service mesh world, you see disruption of kind of traditional networking and API management, coming in the way that people are adopting a service mesh, etc. Is that a company, is that a platform – I think that’s a very dynamic part of the market right now. It’s pretty important, and I don’t talk about it too much, but I really do enjoy working on open-source projects because they can have a breadth of impact that’s pretty unimaginable to something that you have to commit a sales transaction and for software before someone can use it.
We have an asset at Pivotal, Spring Starters, and they’re the number one way that people get started with a new job application. And that’s start.spring.io. You start a new job project there.

Every two seconds a developer on average is going there to kick off a new project.

And the top three countries for it are China, United States, and India, but these are the kind of impacts that open-source can have worldwide, deep into developer impact that you can never do with closed-source only, enterprise sale only products.

I think just the unimaginable breadth that open source can get you in ubiquity, that it can get you in the modern world is stunning. So, that’s what I’m humbled to work on. I think the challenge is then like, “Well, how do you make sure that the largest 5,000 organizations in the world are contributing to that?” And that’s where I do have a passion for enterprise monetization of open source, and finding ways of partnering with those organizations, and packaging, and pricing things, such they feel that there’s good value. And partnering with these open-source companies and making them their most meaningful platform.

I think I’ve got there two minds, number one, open source is super important just from a long-term impact the world, it’s harder to work on projects, they can have a bigger one than open source ones.
And then there is the challenge of like, “Well then, how do you build the economic model around that when it’s so ubiquitous to begin with? That’s the kind of challenge that I’m taking on, and I’m humble to be able to work on open source for enterprises for that reason.

What Types Of Software Should Be Open Source?

Michael Schwartz: Do you think that certain types of software lend themselves to being open source?

James Watters: I would say that the developer workflow today – and that’s not my line but I like it – it starts with “Git clone.” And I think any saying, where a developer is initiating a project in this era, it better be either a really easy to use API, I think Stripe certainly has proven that, or, it better be something like start.spring.io. Or, git clone, something that a developer could just go grab in a permissionless kind of way.
And Adrian Cockroft at Netflix said that, back when he was at previous companies, there were these big architectural debates for months before a project would start. And that in Netflix you really implemented the running code talks. It’s all about running code. I think that that is the reason why open source is really powerful for anything having to do with developers.

And then, on the infrastructure level, open source has become the most profound way that large vendors collaborate. If you look what’s happening in the Kubernetes community, where you have every major public cloud contributing to Kubernetes, IBM acquiring Heptio to make major contributions to Kubernetes, in infrastructure, open source has the way that these, what you might have had standard bodies before, there’s sort of like a running code way that large vendors are collaborating. Both, in the end-user developer space as well as in the infrastructure space, open source had a huge impact.

But if you think those worlds are slightly different, the dynamics of start.spring.io, which is very end-developer focused versus the way that every public cloud is normalizing how they run Kubernetes are slightly different, they’re all open source but they have slightly different behaviors and attributes. And it’s kind of fascinating to see database companies like MongoDB a little bit different than the way that the Kubernetes community is operating.

Do Enterprises Care About Open Source?

Michael Schwartz: Do you think that customers actually care about open source? I mean, large enterprise customers?

James Watters: I think large enterprise customers absolutely have seen the tremendous benefits in just frankly the innovation velocity of open-source products. And I think the biggest change is that in the early days, open source was a cheaper version available for free of the enterprise products. That’s what I think it was especially hard to monetize.

If you’re just going to be the cheaper thing and the low-cost provider, and not the premium product, a lot of enterprises might look at that and say, “Hey, we’re an enterprise, we can afford to buy whatever we need. We just really want innovation leverage, like we want the best product.

But I think there’s a new whole category of products, or there’s only an open-source player that is creating it. Like PCF was the kind of first micro-services platform in the world for enterprises. And it was built a 100% open source. It was both the market leader in terms of features and the open play.

I think the open-source market is changed, where there is room to be both innovative, or the expectation is that they’re both innovative, higher-end, feature-rich as well as enterprise-ready – all of that is expected from open source today. I think that’s where the innovation is happening.

If you look – here’s an example – Amazon has a service Kinesis, which is how they were doing messaging, and it did a pipelines. And now they’ve switched that to a managed Kafka service. They had to do that because the innovation was really happening in the Kafka community in open source. Even on Amazon scale, they couldn’t keep up with it.

I really find that to be the best part of the market right now is that you can’t out-innovate the open-source players.

Cyclicality Of Centralization

Michael Schwartz: It seems like there’s sort of a cyclicality between centralization and decentralization. For example, a couple years ago, everyone was at full tilt towards “Go to the cloud.”, and now, it’s almost like with Kubernetes and other technologies – is there any shift away towards maybe bringing more of this type of functionality in-house, and does that help a company like Pivotal?

James Watters: When I talked to CIOs about this, I tried to help them deconstruct the current cloud market, and what I told them is, “Public cloud is not one thing. It’s really three different zones of features that you need to think about. The first is the commodity layer, which is, “Hey, I’m just buying virtual machines, networking disc, the basics, and that’s kind of where public cloud started.

There, you can use a platform like Kubernetes, and run those system resources in similar ways, if not identical ways, across public-private, hybrid multi-cloud. So, I think Kubernetes has done a tremendous job of making those system resources normalized across all the clouds.

Then, I think there is this emerging space within the Cloud Native community around the open-source developer focused projects that run on Kubernetes, like Kafka, like Spring Boot, really like Pivotal’s platform. That’s where the developer innovations come. That’s like the open developer innovation community, that’s number two.

And the number three is, they selectively are these managed services like Google Spanner, Google Machine Learning, or you might be ahead of the market, where there might not be an open play there yet, where Spanner requires dedicated fiber networks between data centers to make the database magic work. So, there are areas we are the managed cloud or head.

Our perspective is that innovation in the core, where you are really arming your developers, continues to happen in open source. Commoditization can be achieved through technologies like Kubernetes running in a normalized way across clouds.

And then, technologies, like the Open Service Broker, relay to buy these managed things. Long story short, I think what’s happening is, the CIO’s are getting smarter about deconstructing cloud from this monolithic idea of “I go all in one cloud.” to like, “How do I selectively use what’s best about each cloud?” I think open source is playing a huge part of that.

Should Open Source Be Less Expensive?

Michael Schwartz: You touched on this a little bit before, about how open-source software maybe should be cheaper. I think that there is a sort of perception for some reason that even though you get more rights with the license that the software should be less money – do you think that that is changing, or is that something that is an industry we need to work on with customers?

James Watters: I’m a maybe a contrarian here, my dream was always a very open product that generated a lot of value that enterprises were excited to invest in the platform partnership in. And, essentially, I don’t think that open source should have to have cut rates levels of investment into research and development vs. closed source.

My contrarian nature there says, “If you really have the right relationships with these customers, they’re going to be just as happy giving an open-source provider money as they are giving Oracle money.” I mean, if anything, I think that open-source partnerships are valued in a more profound way in the modern enterprise that might be even happier to give you more money than Oracle.

I do think that that something is happening. That also comes back to how these open-source companies engage with these large enterprises, are they focused on them, do they understand their vertical needs, do they put security first, are they able to measure the outcomes that are achieved with their platforms?

Closing Advice For Entrepreneurs

Michael Schwartz: Last question. Do you have any advice for entrepreneurs who are starting new ventures based on open-source software?

James Watters: I think my advice would be, if you really develop a community around your open source, you’re one of the luckiest people in the world. That’s a tremendous gift. Save and invest in that community, but also spend some time understanding how that technology fits into the value chain, in the largest thousand companies in the world, and investments they are making in technology.

Try to balance the needs of the developer who’s approaching it from a ‘git clone, let’s get started’ perspective, as well as the more complex matrix or matrices of a large enterprise organization, and what they need across security, operating, certainty SLAs, etc. If you can get those two forces right, then I think you’ve got a remarkable opportunity. But I do think that monetization, and ultimately funding a great R&D team behind your open source project, takes a balance side towards both.

Closing

Michael Schwartz: James, thank you so much for taking your time today in this really pivotal moment in Pivotal’s trajectory.

James Watters: One last pivotal word joke.

Michael Schwartz: Thanks, James.

James Watters:  Thank you, Mike.

Michael Schwartz: Thanks to the Pivotal team for making this happen.

Transcription and episode audio can be found on opensourceunderdogs.com.

Music from Broke For Free and Chris Zabriskie.

Audio editing by Ines Cetenji. Production assistance by Natalie Lowe. Operational support from William Lowe. Transcription by Marina Andjelkovic.

The Twitter handle is @fosspodcast.

Next week, we have Geoff Schmidt, Co-Founder and CEO of Apollo GraphQL.

Until then, thanks for listening.