Emmet Keeffe – Insight IGNITE Business Pulse

Greetings from Somerset, England. My name is Emmet Keeffe and I'm an operating partner at Insight Partners and the founder of a program called Insight Ignite, which is a digital acceleration program since the crisis hit in early March. I've been doing about 10 interviews per week with global IT leaders, a mixture of CIOs, CTOs, CISOs, CDOs, trying to get a pulse on exactly what's going on in the market from an IT perspective.

And it's been an absolutely fascinating 10 or 11 weeks. What's been most noteworthy is every single week something different is on the mind of the market. So, I'm going to talk a little bit about what we've observed over the last few months and also going to close with my thoughts about what we may be facing in the medium term.

So thank you very much for joining us. What's really interesting, and this we saw right away, almost in week one, maybe week two, it became clear that the digital threat landscape was going to be transformed by this crisis. We were hearing this across all industries, that consumer behavior was changing overnight.

And a good friend of mine, Robert Wolcott, who is affiliated with Northwestern University and also the University of Chicago, wrote a piece in Forbes right away pointing out that now is really the time that global companies have to cross the digital Rubicon. And his view is that in the next five years, we're gonna know who's going to make it across. " And my point of view over the last couple of years is, you know, much of what we saw in the market around incubators and accelerators and corporate venturing and foosball tables and and bold statements and everything that was going on from a digital standpoint.

From my point of view, was largely theater. And that's because global companies were constrained by the public markets. You know, they had to grow revenue.

They had to grow profit. They couldn't really reduce head count. They couldn't shut down legacy stores.

I mean, they were just basically stuck and were not able to get across this digital chasm, as I call it. All those barriers have all now been broken. And Robert pointed that out in the very beginning.

So this is what we've seen over the last 10 weeks in the very beginning. It was an almost overnight transformation into the home and just making sure that the organization was set up from a resilience standpoint. So that was the very beginning.

" And very fast, contractors were reduced. Consultants were reduced. Not necessarily a material reduction in costs, but wherever possible, those costs were cut.

The next thing that we began to see was this digital threat landscape transforming, and basically all customer-facing digital projects were going ahead at full speed. " So, those projects went ahead right away. Very quickly, we started to hear that the cyber security threat landscape had also been transformed.

Obviously, for organizations that have tens of thousands or hundreds of thousands of people working in the home, that completely changed the threat landscape. So, we also heard that all cyber projects were going ahead and even some additional funding for cyber was being released. In the beginning, it seemed that maybe data was going to take a backseat and that many innovation-related data projects were gonna get put on hold.

But if we moved into the medium term, we started to hear that actually data was going to remain a critical topic. And in the recent few weeks, I would actually — if I was going to update the slide on the right hand side, I would say that data's now green. I think organizations have figured out that there's really a big opportunity to leverage data, to drive innovation.

And what's also been interesting is we're hearing a lot about the fact that many of the regulations and compliance around data may be reconsidered as we exit the immediate crisis. I think we may see sort of a loosening on some of the compliance restrictions around data. And then the last thing we heard is that most kind of non-business critical, longer-term strategic transformational programs were being put on hold.

I heard from a CIO at another retailer that they had a three year SAP initiative that they decided to put on hold for a couple of years. I think many departmental and kind of non-digital projects have been put on hold, maybe released in the medium term. But at the moment, they're on they're on hold.

The other thing we've heard, which is interesting and we'll talk later about why this is important. I think a lot of CIOs have been very frustrated by the lack of ability to cut costs on the "keep the lights on" side of the budget. Most organizations are still spending 80% of their IT budget on the sort of "run the business" or "keep the lights on" component.

And as they tried to find opportunities to reduce cost over the last few months, they found that there were just a lot of restrictions there, especially as resilience was a major focus in the boardroom. Sort of adding risk to resilience was not something that organizations could tolerate. So, very hard to reduce that "keep the lights on" budget.

The other thing we're hearing is that there's a really intense focus right now on next generation collaboration tools. So organizations are looking at, you know, beyond zoom in teams and what's available today in the market. What are some next generation tools that we can put in place?

And then on the right hand side here, on the innovation side of the budget, I think many very forward-looking innovation projects are currently being put on hold. We heard from a head of innovation at a large energy company who said that many of the businesses they've spun up in their innovation lab, even though they're generating two million or five million or 10 million a year in revenue, were basically deemed non-strategic and put on hold, just because against a 20 or 30 billion dollar budget. It's just not material.

And then the green boxes there. These are all the customer facing projects that are going ahead at full speed. And then on the lower side there you see a lot of these big departmental projects that are being put on hold.

" And I think that's where we are at this very moment. And what's been fascinating over the last couple of months is the speed of digital change has accelerated, I think beyond anyone's wildest imagination. I've had leaders tell me that, you know, quote unquote, we've accomplished more in the last three weeks than we did in the previous five years.

I've heard IT leaders saying that IT truly has a seat in the boardroom now. And the CIO at that particular organization is on daily stand up calls with all the business leaders talking about the business and how to survive and how to thrive. You know, I heard a really interesting story at a global bank who is thinking about teams for the last 24 months and lots of arguments internally about the fact that it wasn't, quote unquote, secure or wasn't scalable.

It wasn't going to make sense. It wasn't going to work. " So very, very interesting time from an innovation standpoint.

" Many organizations are analyzing productivity. We heard from a medium-sized bank that has about 80,000 employees that they've determined there's been a 20% uplift in productivity during this work from home period. And so they're contemplating a significant shift in their workplace as we move back to the next normal.

Organizations are also assessing, "Are we going to leave 20% of our employee base in the home? Thirty percent? " I actually heard a fascinating case a couple of weeks ago.

An organization with 30,000 employees is contemplating leaving 70% of their employees in the home. So that's really where most organizations are now, is preparing for the next normal and what the workplace is going to look like. And that's why many of these collaboration tools are coming into focus.

So, you know, during this period, we've noticed that there are some themes that are emerging. I put some of them down here, remote business management, next generation endpoint protection, next generation customer engagement. Lots of thinking about automation.

How are we going to reduce costs? Next generation employee engagement and employee experience. Business agility and product agility.

And there's been a acute focus on accelerating delivery of software projects. So I think we're going to see a lot of glass being broken around agile DevOps cloud, which I'd be happy to speak about during the Q&A section. Even though agile and DevOps and Cloud have been household names for a long time, there were still a lot of waterfall in place before the crisis.

And I think a lot of that glass is going to be broken. So, where we are now is we're going to enter a really interesting period and one there's kind of three big questions that I have. One is, how do we sustain this level of digital change?

How do we avoid falling back into the old ways? We had a virtual roundtable yesterday and a CIO was on the line who said, you know, he and his colleagues have been talking in the backchannel and everyone's very concerned that they're going to fall back as we head into the medium term. So that's a really big question.

How do we maintain that sustainable change? " I think we're going to see that there's going to be an acute focus on cost reduction and really there aren't going to be any sacred cows. So process, traditional organization, legacy applications.

You know, everything that we know in the past is going to be on the table and organizations are gonna be cutting very aggressively cost. But at the exact same time, they're going to have to innovate at a at a very different pace. 0.

And because of this digital threat landscape transformation, it's, you know organization, you're going to have to innovate at a different pace. And then you have the last big question. And this is one that I don't have an answer for, that I'm going to be continuing to ask for the next year or longer.

And that is really how do you innovate inside of a large organization? Does it make sense to set up entrepreneur and residents program? Where are you going to source the talent?

How are you going to identify the problems that need to be solved? How are you going to develop a point of view on the timing as to whether or not now is the right time to solve that problem? When does it make sense to spin out an idea into a company?

So, this whole innovation topic I think is going to be really important. I don't have any answers for it yet. But we're gonna be investigating to try and get to the bottom of what does the next level of innovation look like.

So with that, this is what we're seeing in the market right now. And I appreciate everyone's time. Emmet, thank you for just a great presentation.

You know, no pun intended, but the insight that you've provided with those just a few short slides in your commentary were extremely valuable. I am sitting here thinking I want to share this with many of my entrepreneur friends and CEOs of startups who I'm interviewing every day. I mean, they'd find this so, so valuable.

But let's continue. Thank you. Let's continue now.

You know, riffing off of the presentation and I've got some questions prepared. They're broken into several areas. The first is on digital transformation.

And it's quite interesting that the digital threat landscape has been disrupted across all industries. Can you share a few stories that you've heard about how organizations are accelerating digital change? Absolutely.

And we've as I mentioned in my presentation, I've been talking to about 10 global companies a week. They'd been across all industries. You know, one interesting story was from one of the world's largest automotive businesses.

They had launched a digital dealer platform about five years ago. And I think it took them, it took them five years to get 3,000 dealers onto that platform. The minute the crisis hit, they had an additional thousand dealerships come onto the platform in two weeks.

So it's an example of just the disruption there. I talked to my, in my keynote about a global bank that we were talking to about their Microsoft teams implementation. They were sort of stuck for a couple of years to get that implementation done.

But when the crisis hit, in 16 days they were able to roll it out to several hundred thousand homes. I talked to another leader who works at a very large German part supplier business who talked about the fact that overnight they were able to transform all of their leadership calls and all of their board meetings into a virtual workplace environment. And they found it to be equally energized.

And, you know, same exact sort of collaboration that they had when they were meeting in person. And then, another interesting story that we heard, and I've actually spoken with several CIOs from large retailers and CPG businesses, they've seen an absolute explosion in their digital revenue streams and digital products and services. , which is from one of the largest retailers, said that overnight, I mean, they've seen a five X growth in revenue and activity in their digital channel.

And all of their projects are moving ahead at full speed and even being accelerated, because any concern that they had about native tech businesses, like Amazon, are going to be heightened just based on the transformation that we saw in the crisis. So across every industry, just tons of digital change going on right now. And as I mentioned in my presentation, we've have heard over and over again that we've gotten more change done in the last few weeks than we have in the previous several years.

So the pace of changes has accelerated dramatically. Absolutely. Emmet, as we exit this immediate crisis mode, what's your biggest concern for global companies?

I'm really concerned about sustaining this level of change. I mean, what as you know, I run a program called Insight IGNITE, which is a digital acceleration program, and how we think about it is we want to help global companies get across this digital chasm. We want them down the road to be digital native type businesses.

Right. If I'm a traditional retailer, I've got to look a lot more like Amazon in the future. If I'm a traditional automotive maker, I've got to look more like Uber and more like Tesla, in the future.

You know, if I'm a bank, I have to be a digital bank in the future. So really, what gets us excited at IGNITE and what we're all about is helping these organizations get across this digital chasm. And one of my biggest concerns is how do we sustain this level of change?

How do we keep this mindset as we go into the medium term? I'm a former entrepreneur. I was a CEO of a DevOps business for 17 years before joining the private equity world.

And I've been through three major crisis moments. One was just a revenue crisis where we lost a very big customer and almost destroyed our business. And the second one was the dot com bubble bursting.

And the third one was the banking crisis. And as I thought back to those times, I realized that some of the most innovative and game-changing things that we did, happened during that time of crisis. And I think that's what organizations are finding now.

And the big question is, how do you maintain that mindset? Maybe it's not a crisis mindset, but how do you sustain this level of changes is my biggest concern. I can't agree more.

It's also my experience. I lived through two of those three myself. From an IT spending perspective, what do you expect that we'll see in the medium term?

I think we're going to see a lot of glass being broken. You know, I'll give you a couple of examples from our portfolio. We invested into a business that you know well called Tricentis, which is automating manual software testing.

Right. And I've talked to many IT leaders over the past few years that are spending 100 million, 200 million. I even talked to one that was spending 500 million on manual software testing.

And during the good times, even if there was an opportunity to reduce the cost by 50% or 70%, the organization wasn't willing to do it. There was too much process change, too much people change. You know, the vendors weren't interested in seeing their revenue go out the window.

So it was hard to drive through some of that people and process change. But I think in this new environment, those types of opportunities are going to be on the table and that glass is gonna get broken. Same thing if you look at a traditional machine data platform like Splunk, there's many players out there that are spending big, big money on Splunk, tens of millions and beyond.

And again, we invested in a business called Devo, which is a next-generation, cloud-native machine data platform that is basically much higher performance, much more scalable and 10 cents on the dollar. During the good times, we had a really hard time getting some organizations to adopt that platform, but now I think it's going to happen. So I think in the medium term, there's going to be heavy, heavy cost reduction.

Many of the legacy applications are finally going to be retired. But I also think in the medium term, there's going to be a heavy throttling up on innovation investment because organizations have to, they have to get across this chasm. So it's going to be interesting.

I don't think we've ever seen a period like this before, where both these things have to happen in parallel. Excellent. If you don't mind, I'd like to transition now over to DevSecOps.

Just, again, as you mentioned in your slide, we've never seen cybersecurity under this kind of spotlight. But, what are you hearing about? What are you hearing about the pace of change over the past few months when it comes to DevSecOps?

Well, before the crisis, I think what I found really interesting about the cloud, for example, I think it's set the world record for being in the hype curve the longest. Right. It probably started in 1998 with Salesforce.

And it's been in the hype curve ever since. " But the reality is that organizations hadn't really made that much progress on the cloud. Right.

They haven't made that much progress on DevOps. There's still lots and lots of waterfall in organizations. And I think what has happened over the last three months is a lot of that glass has been broken.

We had a board member from a large water company who attended one of our roundtables and she said that they made their agile transformation overnight. You know, in the several years leading up to the crisis they were just stuck in waterfall. " And I asked her, you know, why is that?

" You know, there were a bunch of digital products that they had to get out within a few weeks and they just figured it out. I heard from another CTO at a large oil and gas company who said that, basically, all waterfall projects have been put on hold because they're deemed to be higher risk than agile projects. So, I think we're going to see a tremendous amount of change and acceleration around agile, DevOps, cloud.

One thing I think is going to need to get solved, and we had a CIO from a large retailer talk at one of our events recently and he said there are some collaboration tools that they're going to need in order to do agile effectively in the work from home environment. So I think, you know, there's a great opportunity for entrepreneurs that are building next-generation collaboration tools. But I think we're going to see big acceleration there.

Agreed. Agreed. Do you expect to see traditional people and process barriers being removed, given the new mandate for development velocity?

I do. I mean, I was talking to a IT leader from a large German company. And as you probably know, process is really a core competence of German companies.

And he said, basically, there will not be a single process, that it will not be under consideration for change. Right. Whether it's a business process, whether it's a technology process.

Organizations are going to have to cut costs. And if it means changing process, they will. So I think we'll see an unprecedented amount of change, which is great because many of these legacy systems need to be retired.

And if organizations are going to get more agile and develop more digital products and services, a lot of this stuff has to go away. So I think it's going to be painful, but it's positive. Fantastic.

I'd like to focus in now, specifically, on cyber threats, Emmet, as part of this larger cyber or DevSecOps conversation, given that the cyber threat landscape has been transformed? Which problems do you see global companies focused on solving at this moment? Yes.

So, we had the good fortune as a firm of making an acquisition right before the crisis. In a business called Armis, which is protecting agent list devices. I think one of the things that large global companies are getting very concerned about is understanding how many devices that they actually have in their organization.

It's very common that an organization might think they have one or two million devices. But after having an assessment from a platform like Armis, they may find that we have 10 million devices. Right.

So I think organizations are working very hard right now to sort of determine exactly how many of these devices that we have, ones that run software, ones that don't run software. And then how do we protect that whole IoT infrastructure? So that's a big topic right now.

Another one is, you know, just next generation endpoint protection. We invested in a business called SentinelOne, which is a next-gen platform. And organizations are rethinking, you know, now that we have tens of thousands, or hundreds of thousands, of devices in the home, how are we going to secure those?

The other thing we're hearing a lot about recently is threat detection and, really, kind of understanding the threat landscape. We acquired a business called Recorded Future that basically leverages AI in a very sophisticated platform to kind of listen to chatter in the dark web and on many of the corners of the world. And I spoke with a CTO at a telco who said that the chatter is, really, fairly frightening what's going on right now, because there's such an opportunity for the bad actors.

And he also shared with me that they think there's going to be an unprecedented number of breaches happening this summer and into the fall. So I think threat intelligence is a big issue. Third-party risk is reemerging as a major topic.

And also organizations are getting concerned about insider threats. Right. There's — organizations are concerned about mental well-being and there's many employees that are sort of unhappy.

There's organizations that are having to reduce headcount. So insider threat is emerging as a topic. Absolutely.

Thank you. Up next, what can we expect to see from a cyber spend standpoint in the medium term? Not immediately, but in the medium term.

I mean, everyone that I've talked to has said it's moving ahead at full speed and probably will be even further accelerated. So, I think it's going to remain a very hot area and spending will increase there. Agreed.

OK. If you don't mind Emmet, last category I wanted to kind of touch on with you, and that's emerging technology, which is, again, a theme of our Techstrong Con conference as is digital transformation and DevSecOps. Emerging technology —given that Inside Partners is a growth investor, which trends have emerged over the past few months, even before COVID, that you see, you know, continuing or accelerating during this and beyond?

So we recently finished investing out of our 10th fund, which happened over the previous few years, and many of the investments there were cloud related. So cloud native security, cloud native data, cloud native privacy, many, many kind of cloud management and security tools. We also made a lot of investments in CI/CD pipeline tools and also CI/CD backplane.

So, clearly, you know, accelerating delivery was a big topic before the crisis. We also have made several investments in the data space — data reconciliation, for example. I talked about the next-generation machine data platform.

We've invested in some kind of AI tools for, you know, a sort of a tableau disruptor. So, I'd say lots of horizontal data tools. We also invested in a very fast growing data privacy business called OneTrust, that's helping organizations manage all the complexity around data compliance.

In the past few months, what's emerging as a mega topic is collaboration. So I think that'll be a big, big topic as we go into the future. You know, telemedicine has emerged as a very important new category.

We've made an investment recently there. I'd say digital health in general is going to emerge. FinTech was the first major industry category that emerged for us and also EdTech.

But now I think digital health is going to be next. And we're also seeing a lot of new fast growing businesses in the pharmaceutical business. So I think we'll see some tech being pointed there as well.

Absolutely. Emmet, I don't have any other questions, but I'd like to give you the last word. A conclusion for our audience or if you have anything that we feel we haven't covered.

Yeah, I mean, I think this has been a very tragic time. And unfortunately, it's going to be very, very challenging in the months and years ahead. So I think we're gonna, you know, be in a tough place as a world.

So I don't want to under appreciate that. But having said that, I think sometimes, you know, light comes from darkness. We actually had an adventure mountaineer yesterday speak at one of our events.

And he talked about in some of his very darkest moments, he found light. And I think that's what we're gonna find. We're gonna see a lot of automation, a lot of digital change, a lot of new exciting products and services.

I mean, the world is definitely gonna be a a better place. I think also another word that I'm hearing a lot more about is purpose. I think many organizations are gonna find purpose.

Many executives are going to find purpose. I think more and more people are going to kind of get to the bottom of what am I inspired by and what do I want to do to make this world a better place. So I think that'll be another outcome of this crisis.

Excellent. Emmet Keeffe, thanks. Thanks for presenting here at Techstrong Con today.

Be well and stay strong and healthy, and we'll speak to you soon. Emmet Keeffe, Inside Partners, Inside IGNITE. Thank you.