What venture capitalists need to know about DevOps

Source – itproportal.com

Venture capital (VC) investment into DevOps continues to rise. Already populated by some huge worldwide brands like Google, Microsoft and Amazon and estimated to be a $50 billion market, DevOps has graduated beyond a niche software sector for unicorns, and has made it to the mainstream. The amount of interest in this space from the VC community since the middle of 2018 is just one of many signals from investors that “now is a great time to jump in and grab a piece of the next big thing.”

The market opportunity

According to Crunchbase, there are hundreds of vendors from all over the world providing solutions and services within the DevOps marketplace. DevOps is now a category of investment just like Media or Healthcare, and we regularly see VC partners being brought onboard just to build a DevOps portfolio for their firm.

Because DevOps is now viewed as a mature investment thesis, built on a flourishing technology and cultural movement, the stage is set for it to impact the bottom line of a broad spectrum of businesses – not just software startups or even traditional software vendors. DevOps is the common denominator for how large swaths of the economy are going to become more productive and competitive moving forward.  Whether all companies realise it or not, their ability to prosper (or survive) relies on their software capabilities.

If you look closely, you can see new layers of value being built on top of the foundational investments that create today’s investment opportunity. For instance, early success with the Internet and Cloud Computing has given rise to more powerful cloud native, Microservices, Containers and Serverless architectures. But at the enterprise level, it’s not just about “DevOps-ing with the new stuff,” a lot opportunity also exists in “DevOps-ing the old.” Most companies are onboarding new generations of technology, but they can’t just get rid of the technology they already have – mainframe, for example. DevOps is a superset of all of the foundational layers that have been set previously.  Done right, DevOps ensures that software gets released on business demand regardless of the underlying technologies.   Today’s cloud will become tomorrow’s mainframe replaced by something else that’s disruptive.  By adopting DevOps companies insulate themselves from these technological shocks, enabling them to easily leverage new disruptions on their terms.

Breaking it down: What to look for

So what does an investor need to keep an eye on for the next big opportunity? Or, better yet, what should an investor keep in mind before potentially making the next big investment? As a holder of multiple a senior leadership positions at a number of public and private tech companies, and now CEO of a leading vendor in the DevOps space, there are some tips and considerations for venture capitalists that are important to share.

1) Look For Companies that “Walk the Talk”

Continuous Improvement is a cornerstone of DevOps. When doing due diligence and research into a potential DevOps investment, one question VCs should ask is whether or not the company practices the principles and methods that it preaches. Is the company on its own DevOps transformation path to continue to be as competitive as possible? When teams adopt a DevOps mindset, they think holistically and collaborate more with their peers towards the goal of learning from their experiences, and applying that learning to more efficiently shipping great products. If a company is not building a learning organisation, they are losing to one that is.

2) Invest in ALL Three Pillars of DevOps

DevOps is a trinity of process, tools and people. A lot of vendors are focused on helping teams get their arms around the process piece or operating model, and even more vendors are providing tooling and technology. So, it’s clear that there are many investment opportunities in the process and tooling side of DevOps.

But what about people? Even with killer automation and a rock-solid operating model, the “humans of DevOps” matter.  These folks need to be armed and equipped with the skills they need to help companies adopt DevOps principles and tools – and they are not easy skills to master! Last year, LinkedIn announced that “DevOps Engineers” were one of the most heavily recruited job titles. I believe we will start to see money, as well as a lot of activity and focus, geared towards the people pillar [of DevOps]. Getting people up to speed alongside the process and toolchain developments is a critically important part of DevOps success.

Investment opportunities that address all three pillars should generate outsized returns.

3) Go To Where the Puck is Heading

As DevOps continues its growth path, the market will demand more from its core DevOps solution providers. DevOps has borrowed many of its concepts from the manufacturing world. The have a common thirst for metrics data and lots of it.   Leading vendors are finding novel ways to introduce AI and machine learning as ways to advance the industry. By successfully uniting Development and Operations, DevOps has paved the way to unite more siloed functions. Why not DevSecOps or BizDevSecOps? There is a strong desire to integrate more and more principals into the value stream.

These new paradigms incent the creation of next-generation solutions for companies to leverage in this growing marketplace. Do your research to identify which companies are investing in these new opportunities, and what novel approaches they offer to help customers adapt and become more competitive.

4) To Win Big, Invest More Than Just Cash

The DevOps market is full of solutions and services to cover the entire software delivery lifecycle – from development all the way to production. Each step along the way are subcategories of DevOps where vendors specialise and focus their efforts.

So, should VC firms just find a space and invest money with the category leader? Maybe – but it’s not just about money – it’s about synergies, goal alignment, and the VC value-add. The VC firms that are most successful become so by investing in companies that are helping to build its industry’s community, best practices and ecosystems. What can a VC do to accelerate the growth of the company it is investing in for the long haul? Help the company build and nurture high performance through its own culture, systems and resiliency, which in turn will help the firm realise a solid return on the investment.

One final thought

You won’t find a DevOps transformation that doesn’t focus on delivering higher velocity, better quality, improved utilisation, etc. To be successful, some (or all) of those metrics should improve – and this measurable improvement equates to real value being created. Be confident in the lasting value of DevOps, it’s not a passing fad.  As previously mentioned the DevOps movement is a very data-driven, metrics-driven approach, which means that this value can be verified and validated – which helps to minimise the risk of a “DevOps bubble.”

If DevOps teaches anything, it’s that fast can move faster, smart can get smarter and competition can get more competitive. It is a truly inspiring movement to be a part of, and an exciting time to work in technology. As the DevOps movement aims to improve the lives of more than 2 million IT professionals around the world, VC firms and investors have a unique opportunity to do their part in making the world a better place.