The College Basketball-ization of the Enterprise IT Landscape

As I listened to Microsoft’s new CEO Satya Nadella give his first press conference and talk about how Microsoft is going to deliver new solutions that lie at the “intersection of cloud and mobile computing” — think Office for iPad — it got me thinking how heterogeneous today’s IT infrastructure has really become and just how fragmented the IT vendor landscape is today. Case in point was that Microsoft would use its new CEO’s very first press conference to primarily demonstrate new Microsoft products on Apple’s underlying platform.

Now, I do think Microsoft doing Office for iPad is the right strategy for them in an IT world that is becomingly increasingly heterogeneous, and where no dominant vendor prevails. To use a March Madness analogy, the days of a team like UCLA winning the NCAA basketball title 10 out of 11 years (like UCLA did in the late 60s and early 70s) are gone. Likewise, the IT landscape has changed and we don’t have one large vendor like Microsoft dominating the space, as we saw in the 90s and early 2000s. In the cloud and mobile world we are now dealing with dozens of good-sized vendors jockeying for position vs. one or two dominating vendors.

In any given year there are a dozen or so college basketball teams that have a legit shot at winning the title. It is also very rare for one team to win the crown consecutively let alone form a dynasty. Cinderellas (think Butler in college basketball a few years back) can come out of the blue and make runs against the historic dominant vendors, and a name vendor (think Indiana) can find itself quickly not making the tournament from one year to the next, or they may get quickly bounced in the first round (think Duke vs. a Mercer or Lehigh). So we are now in world where enterprise IT is like the NCAA college basketball tournament — in any year anyone making the tourney can be a winner and what you did in the past in terms of market dominance is no guarantee of future success.

This basketball analogy actually dovetails with a question that I get occasionally: “What will the impact of a XYZ platform vendor coming into your space?” (with “your space” = “identity and access management market”). Recently XYZ represents a platform vendor like Salesforce or Microsoft who announced some stuff having to do with identity.

I usually like to first point out we are a next-generation identity vendor, focused primarily on Identity as a Service and with a strong story that marries cloud-based identity with mobile and on-premise system and app support. That’s why we say we do Unified Identity Services across data center, cloud and mobile. We have reached critical mass with over 5000 customers and a significant amount of revenue.

I then point out that XYZ platform vendor is not a focused identity vendor, and the vendor is primarily trying to build identity as a feature of their platform, and using identity as simply a way to hook other apps (and users) into their platform. So when it comes to providing identity in a hybrid world (cloud and non-cloud), it is usually the case that these platform vendors are not motivated to go really deep into supporting other cloud-based platforms that compete against their platform. Additionally, its tough for them to support a plethora of mobile vendors’ devices or even support hundreds of what they consider legacy on-premise systems and apps that end users have (and will continue to have) for the next 10-20 years.

At the end of the day Salesforce today is at its core a CRM vendor while Microsoft vis a vis the cloud is today about Office 365 and their Azure platform and infrastructure as a service. Worrying about the best way to provision a user into a third party SaaS app or deliver “Zero Sign-on” from Dropbox running on a Samsung smartphone probably won’t make their top 20 feature list even in their respective identity teams, but stuff like that is on the top 20 list of customers wanting to buy an identity solution.

I think in the end most people understand that answer and agree — it is about focus and depth and breadth of offerings that form the core of differentiation. But then every now and then someone will come back with a follow-up question and say “but what if the customer’s main cloud application is from XYZ vendor, i.e. they consider themselves an XYZ shop, won’t XYZ’s solution be good enough as the center of the identity universe?”

My answer to that goes back to my UCLA analogy. Sure, in the old days organizations may have considered themselves just a XYZ shop. But if you just look at the growth in the number of public SaaS companies who have over $1 billion market cap, the number has grown from a handful to now over 35. So even when it comes to SaaS apps, customers consider themselves a XYZ shop, but they equally also consider themselves a ABC shop, a DEF shop, and more. The point is … that XYZ vendor in the eye of the customer is now considered yet another top seed in the NCAA tournament, but most top seeds have a 15% chance of winning, and XYZ is now one among many platform vendors. This has weakened the “use my platform, use my identity solution” story because customers are dealing with equal number of platform vendors on equal footing, and would not want to lock themselves into an identity solution that may limit their other platform choices in the future.

In addition, nowadays XYZ vendor is not even dominant its own market, e.g. Office 365 faces stiff competition from Google Apps just like Box faces competition from Dropbox etc. In the past, UCLA would have dominated its league (the Pac 8 conference now the Pac 12) and then the NCAA tournament. Today, even in their own category (i.e. league), the platform vendors are facing stiff and increasing competition. So the whole world is not going to be all Office 365, or all Salesforce, etc. which further dilutes these vendors ability to sell their cloud-based identity story as their underlying platform may not even is used.

So the leverage that platform vendors had in past to get customers to adopt their new identity stuff is significantly weakened in today’s heterogeneous and fragmented cloud and mobile world. This gives rise to pure-play vendors in identity who can work across vendor platforms spanning cloud, mobile and data center. We think Centrify is well positioned to be a winner in this soon to be $1 billion plus Identity as a Service market, and the overall $6 billion identity management that is littered with legacy vendors who are not investing in their technology.

So yes while large platform vendors may get an initial burst of attention for offering some identity capabilities, they are not the UCLAs of the past as the world has changed for them and everyone else. In the end, this change is a good thing for customers as more competition leads to more innovation. And just like the NCAA basketball tournament, it makes for exciting watching.