Techstrong Gang – August 21, 2024

Hey, happy Wednesday everyone. You know, a MD made a big acquisition. Is it all about ai?

The White House is investing millions into open source, and we're still getting tech layoffs. I thought the economy's better. Let's discuss it all on Techron gag.

Happy Wednesday everyone and Talent. Alan Bel here for Text on Gang. We've got an interesting gang lineup of stories and a great panel of experts to talk about 'em today.

Let me introduce you first off, uh, who's on our gang show today. Uh, joining us is our roving editor based out in Silicon Valley, the one and only John Swartz. Hey John, welcome.

How are you? Hey. Hi.

Hey all. Hi everybody. Very good.

Continuing, I guess west to east. Stopping in the famed San Angelo, Texas. Right out of Abilene, um, is our AI and Digital transformation editor, Amanda Ra Ani, good to see you.

I haven't been on with you in a little bit. I've been traveling. It's good to have you on here.

Continuing east, but northeast versus southeast from Haing, from Rhinebeck, New York. Just a mere 90 minutes outta New York City, the one in only Stephen Dickens. Hey, Steven, how are you?

Yeah, good. Two days running. What have I done to be so lucky, right?

Yeah, no. Hey, man. It's all good.

It's all good. You're earning, you're earning your keep, Matt, we appreciate. But seriously, we appreciate your, your presence and, and, and, uh, views here.

It adds a lot to the show. And then of course, joining me, Chris now still here in Florida, still here him Yeah, he might be migrating, flapping his wings. Our chief content officer, Mike Ard.

Birds are heading north in the fall. Birds are heading north in the fall. Kinda counter counterclockwise here, but, okay.

Mike Ard. Hey, Mike, how's it going? It's going great, man.

Always happy to be here. Absolutely. Alright, so let's jump in.

Yesterday's big news, actually it was, it was Monday that this story broke, but we, we actually played and, and we're gonna replay it on here, uh, Daniel Newman and, and Patrick Moorhead over at six Five Media, uh, covered it on their six five podcast yesterday that we're going to insert here. But a MD made a just under 5 billion. What's another a hundred million here or there?

9 billion acquisition for a company. Maybe a lot of you haven't heard of ZT Systems based out of cuss New Jersey. Well, why don't we run the, that little segment now?

You wanna run it first? Run it first, let people know what we're talking, talking about a little bit. Alright, let's go.

Yeah, no. So I, yeah, actually, Patrick does a great job, as does Daniel in this, uh, segment here. We're gonna go to the Six five Media podcast.

It, it's available also on techstrong tv, but here's Patrick Mohan and Daniel Newman on this a MD story. Uh, here's the news. 9 billion in cash stock.

They're gonna do, uh, a lot of it outta cash. They're gonna little do a little bit of a debt, uh, offering, uh, as, as well. And you might be like, who in the heck is ZT Systems?

Well, their biggest customers, rumored are AWS uh, and Azure. They design, they integrate, they manufacture and deploy rack level hyperscale, uh, a AI systems. So think about the entire rack and everything that goes into that, and everything that's connected, uh, to it.

They have customer support, they have installation, uh, everything. It's about 2000 people. Uh, they're located in New Jersey, cuss, uh, a company at $10 billion revenue that you, that you never heard of.

And, you know, they've been in business for 30 years. In 94, they started off with PCs. And in 2024, the company says it ships hundreds and thousands of servers annually.

So what does this mean for, for a MD So competitively, the game has changed, right? Uh, and Nvidia really drove this with, uh, you know, starting at the chip and then going to the platform, and then doing not only the GPU, but also the CPU and the networking. And hey, let's, uh, let's just do the, the whole, uh, system and basically A-A-D-G-X, uh, rack.

And they, uh, accelerated that cadence to not once every three years, but once, once a year. So there's a lot, a lot of innovation and very hard to keep this, uh, wheel of innovation, uh, going. 5 billion backlog without having infrastructure capability.

5 billion, uh, to attacking an addressable market? Not my numbers, not your numbers, but AMD's numbers of a $400 billion GPU and Accelerator TAM in in 2027. You've gotta find a way.

You've gotta make a big move to, uh, parabolically, uh, achieve that revenue growth. And this is exactly, uh, what they did here. Uh, this adds on to the $1 billion, uh, of investment that a MD has made in software with companies like Silo, nod, ai, and mythology.

Um, and, you know, I believe that this is gonna come down to execution. And I think, uh, AMD's, Lisa Sue, who I got the pleasure of talking with last night, uh, is an absolute monster at, at acquisition. Um, and also, you know, we're looking at, um, you know, just numbers here, it, it's a lot less people and a lot smaller than their last acquisition, which was Xilinx.

So, I, I'm not saying this is a layup and not, not saying there's, uh, zero risk, but, uh, it makes, uh, total sense. So there's about a thousand employees in, uh, in the design and about a thousand employees in manufacturing and deployment. Um, uh, Lisa is going to spin out and sell the manufacturing arm.

It would be totally dilutive. I mean, uh, Supermicro, um, you know, their, their, their margins, uh, are in the, uh, single digits. Yeah.

Uh, which would not be good for, uh, a MD who operates, you know, 40%, uh, uh, margins, uh, on there. So Dan, uh, I left you a little bit of oxygen, I think a lot of oxygen in the room. I blew through that in about three minutes.

What is your take, If I could, uh, point everybody out there that's watching to Pat's, uh, extensive takes Forbes. I think you posted a LinkedIn article. You definitely use that inside access to give what I would say the most comprehensive rundown of anything I read this morning.

I'm not blowing smoke. I'm not blowing smoke. Uh, I wrote the second best analysis, um, because I put some, some work into that as well.

Everybody that's, uh, not watching that I just winked really loudly. But, um, pat, look, here's what's going on, right? Um, the number of 400 billion's, about twice what our number is in terms of the size of that particular space.

But there are reasons to believe that we are grossly underestimating the speed by which AI proliferates. And that has a lot to do with these sort of various, uh, bubble perspectives that are out in the marketplace. This perception of a bubble, if it is sort of a slow at first, then all at once sort of implementation at the end.

And then these, these cloud scale companies, these SaaS and ISV providers are gonna be building out AI and delivering it at scale. It's going to happen a lot faster than most of these CAGR numbers reflect. And that was where Lisa could end up, uh, being very accurate with her big ambitions in terms of 400 billion.

Um, having said that, I mean, the company's making the investments here to be able to put the designs together. You know, you didn't really use the word pat you did in your article, not here, but about being open. But look, there are these sort of two schools of thoughts right now when it comes to design.

There's kind of this all in end-to-end, DGX Super Cloud, everything built in one place, all Nvidia, top to bottom, anything that's not as sort of all masked as a single skew, right? And you just consume it. And then there's the other side of the, the house, which is, you know, companies like a MD, um, partnering with companies like Broadcom, um, building out systems with open architectures, using different, you know, standard ethernet network, you know, using advanced, uh, GPUs, various different CPU head nodes, and being able to put these things together and have then develop upon them.

And so that's also where this sort of investment is. Softwares come into play. You had this big Cuda invest, uh, big Cuda lock-in that everyone talks about, but we've seen a MD making big investments in software.

We know Intel has referenced a future with one API, which we'll have to wait until they get to their dis uh, their discreet data center, GPU. Um, but having said that, this whole thing is sort of evolving to a software battle. So being able to build the most significant designs, being able to go open versus closed.

Um, you know, and then the other thing that I think is really important to mention is what the hyperscale cloud providers want. And I think there is a push and pull here. Of course, they want what everyone's going to quickly consume, they wanna sell through.

And I think Nvidia has been a big success for them. Having said that, on the other side, I think a lot of them want more choice and openness. They want to be able to bring some competitive price in, they need more capacity.

Uh, they wanna be able to build their own network backends, uh, their own data center. Uh, you know, they wanna build, able to build uniqueness into their data centers with how they handle networking, for instance. Um, we know AWS has gone that route in some capacities, and they wanna be able to address that.

And so I think a MD should get some credit here for sort of leaving that door open. You know, they're not going down the manufacturing, they're not gonna go kind of closed end, end to end on the box, but they are going to provide the design that enables that open capability path. So, you know, I'm not as, I haven't spent as much time in this as you have, but it seems like an encouraging way to drive that four and a half billion, you know, north, the four and a half billion of committed annual pipeline north.

Um, of course attaching more epic, not just, it's not just about instinct, it's about the whole stack. And then of course, software. And if the true, if it's true about this sort of expansion into, you know, PyTorch and Jacks and higher abstraction layers where co programming can be done, and of course they're adding more capacity, then rock em can land.

And that's been a, that's been kind of one of those friction points is how successful and how quick can the company move with rockham. Yeah, good stuff, Dan. And yeah, I, uh, failed to bring up, uh, that, but I did in my article on the software side, you know, they made three tuck in acquisitions.

And even though Roku's been around forever, it was really, uh, focused on HPC, which is not Hyperscaler data center, generative ai. Yep. Um, one final thought, Dan, it, it appears to me that, that, uh, the NVIDIA and a MD combo is putting, you know, with this acquisition, they're putting even more distance between them and their competitors.

I am really, again, interested, uh, interested, uh, to see, uh, Intel and, and what, what they're doing, uh, with, you know, next generation, uh, accelerators. And in 2025, uh, data center, uh, GPUs, uh, and Intel has some extensive, uh, capabilities, uh, particularly on the hardware side. They get, they get rack scale architecture.

In fact, years ago, they, they actually coined, uh, coined that term. Uh, but it'll be interesting to see how Intel can turn that into gold, uh, as well. So, so gang, you know, you heard Patrick and Daniel's take on this.

Um, you know, a MD is is aggressive, being very aggressive in this AI space. Of course, you know, Nvidia is at the top of the stretch leading by a mile, but that's not it. It's a long race.

It's a marathon. It's not a sprint. And, and this is, uh, seems to be a, a, an aggressive move by a MDI, you know, listening to the numbers for Patrick and Daniel, I was a little surprised.

I mean, ZT Systems does about $10 billion a year in revenue, but their margin, you know, it's like classic kind of hardware margins where you, you cut each other's throat for a point or two. When Was caucus New Jersey was the hardware capital of the universe. You know, I had some interesting adventures in the caucas New Jersey when I was younger, but we'll leave that off the show, uh, gang members.

What do you think here? Is this a smart move by a MD? Is I, I think it was a necessary move, right?

They, the A MDI think, and I also think Patrick worked at a MDA long time ago. Um, so he has a really good insight on the company. Yeah, well, well, they've been spending what, more than a billion dollars to expand their ecosystem and improve their AI software offerings.

And this is all about Nvidia, right? Filling gaps where you can't compete with Nvidia. And in a sense, a MD through ZT systems wants to enrich or enhance its status as an ecosystem partner for companies that are diving into AI and who isn't.

And, um, in a sense, they, in a sense, one more quickly test and roll out ai GPUs for Microsoft and other companies they work with. I mean, I leave it to Amanda and, and Steven on, on filling in more, but I think it was a necessary move and an aggressive move. And Nvidia has shown some a, a little bit, not a lot, but a little bit of vulnerability of late.

So it was necessary. 9 billion for a company that turns over 10 billion, and then you plan to sell part of it off after you've acquired it. I'm just struggling with the math here That that's what I was trying to get at Valuation.

Uh, so we are saying this is half one year's revenue. What are the, what are some, and I need to dig in, I'm starting to dig in today to understand more, but you know, you look at, and overvaluations are compressed and you know, we're sort of in the, we're not in the 2021 kind of race to acquire anything at whatever value type gold rush. But, you know, evaluation that below one year's revenue.

What, and also then my ask the question, what's the spin out gonna be once they've acquired it? We saw this with OpenText buying assets from my, uh, sorry, rocket software bot and the whole sort of OpenText microfocus rocket software kind of mix. I'm, I'm trying, I'm, I'm trying to triangulate the math here from a valuation and what these assets are worth.

Is this the top of the peak from an AI perspective of we've seen something, we just need to get our hands on it and they're overpaying, but then the overpaying doesn't make sense when it's half one year's revenue. So I'm just trying to, there's obvious, Lisa Sue's probably one of the smartest execs out there, so there's definitely something here, but I don't think we've heard the end of this. And I'm trying to sort of under get my head round all.

Yeah, Can I just add quickly, it's also not only they overpay, it's, I, I think, I think you're right, but what they intend to do with, I think they're like 2,500 employees at zd Mm-Hmm. ZT systems, and they're only gonna keep like a thousand engineers. So they're basically, it's kind of a IP acquisition because they're gonna gut the organization from what I understand.

So Maybe they had to overpay to get the deal, or maybe they were, um, competing again against another offer. But that's the, that, that makes sense to me. But then you're paying half one year's revenue.

So have they got a steal here? I mean, I don't know many valuations or companies that are underneath one year's revenue. So on, on, on that note, it, It doesn't triangulate for me.

No, It doesn't. I I agree with you. I think you gotta throw out the top line number in the deal and look at it as an EBIT a deal, right?

The what, what, what percent, uh, what multiple of EBITDA did they pay? Mm-Hmm. That the, the, uh, profitability EBITDA for, for zt?

I think, uh, pat Patrick mentioned it was, you know, in the low single digits. 9 is five times ebitda, you know, four or five times EBIT or is is normal in many businesses. Yeah, I I'm not saying it's right here.

I'm just saying, you know, that might be one yardstick how to measure it. What I think is interesting is they threw up the smoke screen about, hey, because you know, big tech acquisitions are under such scrutiny, we're gonna sell off the server business. And what they're not saying is, we're also kicking out 1500, you know, more than half of the jobs.

Yeah. You know, you know the number. Go ahead, Stephen, Steven, Stephen, put some context around this.

'cause you know, stock notwithstanding, we have these IT folks who kind of trying to figure out what all this means. We have super micros out there, we have cloud service providers are building their own chips. Um, what is the market shaping up to be?

Because, you know, back in the day, processor companies did processors and motherboards and server companies built servers, and now it seems to be all kind a, a little bit of a miosh. So where are we? Yeah, I mean, well that certainly, that space is changing.

You've got hyperscale cloud providers creating their own custom silicon. You know, we've got Microsoft with Maya, we've got, uh, Google with, uh, Trillium what used to be TPU. We've got, um, uh, AWS with, um, inferential and train.

So I think that kind of whole landscape has changed. You know, apple making their own chips now for their, for their phones. And, um, we're talking about Mac Mini only yesterday with the M four.

So I think the whole sort of landscape has changed. Everybody's looking at custom silicon for a particular purpose. The fab, the fabs and the, and the working with TSMC, you know, there's open source approaches.

Now you've got people like sci-fi with the risk five architecture. So I think whereas if you wan back sort of 30, 40 years ago you had kind of Intel and IBM making sort of processes for particular things and that there wasn't a lot of choices. There's a lot of choices.

Now we're seeing ARM with their architecture in a lot of devices, a MD obviously on, on a tear intel in a tough period. So the whole sort of landscape is, is really sort of challenging anyway. And then you throw AI into the mix over the last two years.

It's a crazy market at the moment. So I think we're seeing, it's one of those inflection points for me, like the internet was in 99, 2000, like cloud was, like mobile was in 2007, 2008. We're at one of those points in the market where the world shakes things happen and then we get on a trend line for the next five to 10 years.

That, that, that's where I'd see it. Mike, One of the things that Daniel and Patrick talked about is, um, CT systems does a lot of work in the cloud, and maybe that's the business that a MD is after. 'cause they're gonna sell the server side of it.

And to me, the server side of the business is, you know, classic white box stuff. And the margins in the white box space have always been difficult. Um, so is that part of the thinking here is that, you know, they're bifurcating between traditional servers and, and more of this cloud architecture mindset.

I mean, if you look at the AI market, there's really four companies buying, um, NVIDIA's, GPUs. It's the three big hyperscalers of Meta. So not Oracle At, at a big scale.

Alan, yes, obviously they are Tesla are buying as well. Um, you know, there's a few other players, but it's literally those four then a country mile, then the rest. So you know, who's shipping into those big four these systems?

Is it Lenovo with their sort of systems that go into hyper scatters? Is it super micro, you know, met Meta's got its own server architecture and its own sort of rack design that it's open sourced. I mean, that whole space gets interesting very fast.

I mean, all I can say is here. Lisa Sue's a very, very smart CEO and they've bought something that they fit, think strategically, fits in the jigsaw puzzle. Trying to discern that from a press release and some of the public statements is just, we will see how this plays out over the next two years is, is my view.

I think she mentioned something to Reuters though. I think she, I think it was at Reuters interview where she said that, uh, ZT systems importance is gonna accelerate the deployment of AMD's AI rack scale systems with cloud and enterprise customers. You know, something she pointed out and also that I think Daniel had mentioned, um, the AI chips market forecast is gonna top to $400 billion by the end of 2027.

And to, to add on to somebody, something, somebody said earlier, you kind of want to overpay and get deals done as quickly as possible. This one I think isn't gonna close until probably next year, but in the background, you're thinking about Lean Con and the FTC that's playing more and more of a role, especially as we get closer to the election. I mean, this is a private acqui com acquisition of a private company.

So I dunno, I I I think that's the smokescreen, the, the, uh, the, uh, monopoly stuff, the FTC stuff. Mm-Hmm. I, I, I don't think a MD has that kind of juice in the market where they're gonna start.

I Considering well for that is NVIDIA's got 92% market share. Is it right? Do you want, do you want knock the, You wanna knock the next guy?

Don't make sense. I I have a a different but similar story on this though, and it's that a MD for 20 plus years has always been the bridesmaid. They were always just on the cusp of being the leader, right?

They, they were nipping it, Intel's heels there for a while. They would be a performance leader for six months, and then Intel would announcement, right? They're always the bridesmaid, never the bride is this a, in their mind, a bold move betting $5 billion, which is a significant amount of money and a good amount of, with this money's cash.

I don't know how much they're gonna recoup selling the server piece, but they, they're laying out a good amount of cash here. Um, is this their move to get to the altar? I assume they had to put in some due diligence and, and they, they are putting a lot of faith in this move.

Yeah. As I say, Dan is she, Lisa Sue's very, very smart. So they haven't got into this space on a whim for sure.

I got one last question. I'll throw it out at John. And, and Steven, if either of you know, or Mike, if you know, in reading through all of these things, I'm not a hundred percent sure of what ZT systems does around AI particularly.

Is it, are they making AI chips? No. No.

9. You have to mention AI somewhere in prom. Yeah.

I mean, it's 2024, So it's always me just missing something. An AI acquisition. Yeah, it's one of those, I mean we, some new research.

Yes. Uh, earlier this week, you know, this probably is the, the sort of killer here. 138 billion market by 2028, 30%, five year ca CAGR from 38 billion up to that 138 billion in a 74% of that is GPU.

You know, so this market's growing. It's growing fast. If Lisa's seen something strategic that helps her grab part of that market and flip some of that in Nvidia market share, we'll be looking back for in years from now going, wow, this was an amazing, what A great deal.

Yeah. Yeah. I think that the two things that they really have in my mind are, um, the architecture for the rack that they create or putting in those systems is apparently, you know, people are going, this is optimized for ai.

It's not that the chip is what they're building, it's more of the, the core infrastructure and how those pieces fit together in a way that is more energy efficient. And I think that what they're saying is that that can become a standard for implementing AI architectures in a data center, um, to the degree other cloud service providers agree. I don't know.

'cause you know, last time I checked AWS and Microsoft know how to build their own rack, but maybe they're tired of building it, but there are a lot of other cloud service providers out there. Absolutely. Well, we're about out time.

I wanna leave us with one thing. We mentioned Seccas New Jersey, the beginning of the show. And you know what, if I'm not mistaken, there was an another entrepreneur inventor outta Seccas, a guy named Edison.

Mm-Hmm. Wasn't his lab in Secaucus where I, I believe at one point Yes. Their empire was there.

Yes, that was it. So don't, don't sell Secaucus short folks. Anyway, we're gonna take a break here on Tech Shark tv.

We're gonna come back and let's talk about the White House investing billions to study open source. I'm Bonnie Schneider, sustainability contributor to the Techstrong Group. I'm excited to introduce you to a groundbreaking new initiative from Techstrong Research, the sustainability pulse meter.

The pulse meter offers valuable insights into how environmental responsibility factors into tech purchasing decisions for key players in the industry. Position your company as a leader in the industry and differentiate from your competitors with a sustainability pulse meter offered exclusively from Techstrong Research. Hello folks.

We're back in. Yes, the White House is investing $11 million in something called the Open Source Software Prevalence initiative. Classic government, kinda local.

Do we have initials for that? Open source soft OSS Prevalent. O-S-S-P-I.

Yeah, I don't think it kind of spells anything, but you know, they're not exactly the marketing guy, so this is as good as it gets. Um, I'm gonna start with you. What's your impressions of all of this?

'cause we've been talking about this open source software security issue for a while, but is the government here kind of stepping up? Is this our tax dollars at work filing? I'm here from the government or from the government and I'm here to help.

But look, I, I will tell you that many countries around the world, including most of the EU countries, have done their own open source sort of studies. And, and many of them have made, you know, policy where they're gonna use X percentage of open source or entirely open source. Generally it was sort of an anti Microsoft or anti, you know, Silicon Valley thing.

Um, I'm not sure is is security driving this or is cost savings driving it? Or is it aot of that Biden infrastructure money that we got laying around that they're putting in use here? I I, I'll be honest, I'm at a, I'm go to Steven here for a second, but you know, what's interesting to me is the definition of critical infrastructure where the, the government is saying we're gonna apply this to critical infrastructure, um, is pretty broad by the United States government, includes everything from water utilities and electric utilities to financial services to schools.

So when you add all that stuff up, I'm like, $11 million isn't gonna cover it. Well, that's my first reaction. I mean, the best way to give that $11 million would be I'd give it directly to the Lennox Foundation and say, go set up a collaborative project.

I think Jim Zees is here waiting to give you share to something Steven. Call up Jim Zein and Zein, right? Yeah.

Call up Zein and say, here's 11 million. I mean, if that then went into bounties, if that went into, if the government's planning to do this, 11 million will just go in the way to, It's a drop in the bucket. It's, it's, but I think if you were meaningfully able to invest that in an open source project, I mean, this goes back to the SolarWinds type pack from a couple of years ago.

You know, you wanna know where this source code comes from in A-C-I-C-D pipeline. You want to be able to go and be able to check. We've done a good job of that as an industry since that supply chain hack.

Obviously there's more work to be done. I think the 11, the government's doing the right thing. My two questions are, is 11 million enough and where are they gonna spend the 11 million?

It, I think 11 million would be enough if it was just a donation to the Linux Foundation to bootstrap the community to do something meaningful. If it's gonna be a government program, 11 million's gonna be a drop in the ocean and a waste, it Doesn't cover the printing Costs. There, there is another, there is another choice here.

devcon launched a volunteer program to help. Yes, I did infrastructure stuff and yeah, maybe those guys can use $11 million because, you know, it Could create a bounty source fund for this type of stuff. 11 million buy you a lot of bounty source payments.

So it, It's make a hell of a s**t. Make a hell of a party in Vegas. Yeah.

You were gonna say something, Man, what were you gonna say? Yes, I was gonna say, aside from money here, I think it's important who they're gonna be working with, the, the team that they work with, the level of knowledge, um, is important. Because the first thing I was thinking about was, John, your article earlier this week about the government getting involved in some things in California and the uproar there, because a lot of them think they really don't know what they're talking about here.

So the team that they have behind them, I think is gonna be important. Yeah. Mm-Hmm, absolutely.

I thought that was a typo when I first saw, saw 11 million. I thought, I, I mean, what, what does 11 million get? You really, I mean, I'm thinking like in, in terms of even like a sports analogy, you get like a backup outfielder for $11 million a year here.

Um, you are, you are, you're overti estimating when government employees get paid, by the way. Okay. But I mean, But it's open source and it's free.

Excuse me. Is this part of the, so the Biden administration cybersecurity push among the other, among other objectives is to ship the responsibility away from the users and toward its creators. Is that part of what's going on here?

So, you know, I, I had my own conspiracy theory. Are they just putting a pittance into this? Because the real, you know, end game is to say that open source is not secure and move away from open source.

Do you think there's lobbyists that work here maybe who are kind of saying, Hey, the government, this stuff isn't secure, it's gonna cost you more to do all this stuff and you should buy some old fashioned proprietary lot Cots, cots software, baby, I don't know, makes the world go round. I think that ship has sailed though, hasn't it? I mean, I mean, look why all conspiracy theories are have to be saying and, and logical.

No, that's why they're conspiracy theories. Yeah. I Would go, I would go back to what John was saying, and I do think that that is part of the ulterior motive here.

They do have this secure by design program and they are, yeah, going out and kind of starting to beat people up saying you need to build software that is secure by design. I think the sad part of this thing is, uh, a lot of the people running this critical infrastructure have no idea what software is running underneath that thing. So maybe we do have to start at literally zero, which is, you know, what are you running and where did you get it?

And what version of it is, and, and it's all that kind of low level stuff. Just so I can call out to a water utility and say, folks, you can't run that. I mean, I think for me, maybe I'm a small government guy and maybe that's, that feeds, I think the public markets, software companies, open source projects, the incentive structures there to fix this.

I, I have a really simple rubric. People buy things in the enterprise world for three reasons, make money, save money, not get fired. And this is a not get fired discussion.

Yeah, No doubt. So I think from a personal perspective, from a company perspective, I mean, what are we a month on from CrowdStrike? You know, they report earnings.

I think tomorrow the incentive structures enough in Delta. You need to tell Delta that. Um, knowing where all your software came from and having a software route of trust is, is important.

The incentive structures there. What's government doing? Just getting involved in this?

Yes, go have some meetings with the open source community, go, you know, get involved, but putting money into the space, I don't know where that adds value. And certainly not at 11 million anyway. Well, I would disagree on this point.

Like when I was talking to the DEFCON folks, they were saying that there was like 50,000 water utilities alone that are running various, uh, industrial control systems that have open source software in it. And that's about as much as they could initially take on. When you add up all the other things that are critical infrastructure, somebody has to start this ball rolling.

'cause those guys don't have the resources to go fight this. I mean, there's some water utility sitting up and out randomly picked for a month. There's probably two people running the whole thing.

But does 11 million kickstart that or does, is it a problem that CrowdStrike goes fixed, that red hat goes fixes that sues, you know, there's enough people in this space that are for-profit companies, do they go and fix it? Because the incentive structure's, right? Is it 11 million enough of an accelerant to start that fire?

I Don't, well, maybe the next bill that comes through is gonna be, you know, 15 million Maybe this, right? Maybe it is just the initial, yeah, yeah. But I, I'll tell you something.

You know, I've been involved in this open sourcing government thing for many, many years back when we, uh, was, I was, you know, one of the co-founders of a company called Still Secure. We worked a lot with NERC and ferc, I don't know if you guys are familiar with nerc, ferc, They were a cartoon cell. No, no, not Nurk, ferc, nerc, FERC are the people who run electrical utilities, nuclear generating plants and so forth.

And, you know, there was a time where that was really tightly held in closed secrets, right? How, how a nuclear, uh, generating plants knock sock was wired, for instance, right? Um, and then they went through this big open source renaissance where they opened up and, and they said, and you know, it is great.

It lowers our costs, it makes it open standards and all of these things. And, and I, and that was a big pushing in government, right? For, for a period there, let's say in the, I'll say late half of the, you know, 25 to 2010 all the way.

And, and it started around that and, and continues where I think what this software usage is gonna show is that open source is firmly, firmly rooted in, in government, No doubt, right? They, they prefer open source. There was a preference for open source.

And, and I'm not saying that's a bad thing. I'm, I'm just saying that that's there and maybe this study sort of, you know, rubber stamps that and says, okay, as a result of that, here's what we're going to do. I I do agree.

They, they, I'd almost turn this over seriously ste I turn it over to the Linux Foundation, let them go do this survey. I I would say that that Would be 11 million well spent. You, you'll actually get return on that.

You turn up to Jim Sling, give 11 million, you'll see stuff actually happen. Yeah. I, I think maybe we spend the 11 million, and for lack of a better term, there's a certain amount of, um, shame that we're gonna spotlight on some folks who are not updating these systems.

And then you can call in the Lennox. I don't, they've gone and say here's, I, I don't think 11 million does it. I I think it's, it'll be $11 million to print the report when they're done.

Right. The, I mean, you know, how they operate. And I, I'm, I'm a big government fan, but you know, it's $11 million.

It's nothing to them. United States Printing Office will be in work all this time. Absolutely.

For $11 million. I'll get the title page, but, um, I look, I guess we'll see. Is there a, and forgive me, I, I, I don't remember, but is there an end date on this thing?

When are we gonna see something? Or is this just a open ended? I Think they're just getting Started.

You want KPIs so you can hold Yeah. Silly me. Silly me.

We just talked about the government for 10 minutes. I mean, seriously, did you ask that question? Yeah, I get, all right.

So you know what? I'll probably be retired by the time this is done, but whatever. It's all good.

It's all good. Yeah. Uh, let's take a break here and look, maybe they should fund $11 million.

We could study open source here on the tech drug bank, but we're gonna take a break. You're watching Techron Bank Gang. We're coming back with tech layoffs are still, still out there.

They seem to even be surging. Perhaps. Cloud native now is the web's leading resource for the growing cloud native ecosystem.

com is your destination for news, thought leadership, features and webinars on cloud native architecture, Kubernetes, serverless, cloud native application development, microservices, service mesh, cloud native security, and more. Stay on the cutting edge of modern application development at Cloud native now. All right, folks, we're back and it's unfortunate, but there has been this massive surge of layoffs in the tech sector.

A lot of it started with Intel and then we saw Cisco and a bunch of other folks. And I think just about every one of us knows somebody in this industry who's been laid off lately. And I guess John, what's going on here?

I mean, a lot of it seems to be emanating out of the valley from companies there. I mean, are there that many excess employees or, or is there something more afoot here? I think there are multiple factors in play, and I think the latest number I saw was more than 124,000 workers have been laid off this year so far.

Um, and you're right, it's with, with Intel and Cisco's layoffs, they have multiple layoffs. Salesforce has had layoffs. I mean, we literally, if I look out the window, I can see the husk of the shell of what used to be Oracle's headquarters.

Nobody goes to work there, by the way. I know their headquarters is in 10, was in national now af that's true after they left Austin. But still, there's nobody there.

This real estate just empty. Um, so there's several factors. There is inflation and higher interest rates.

There's the economic downturn or recession fears, uh, that I'm still hearing this excuse pandemic over hiring that was used the last couple of years to explain layoffs, outsourcing, offshoring. And then there's the AI factor. So AI is like one of these technologies where we have people rushing to embrace it.

And the ultimate outcome might be more people losing their jobs because they're being, um, replaced by technology, not by humans. So it's real. Um, I have a number of friends who, um, have been laid off who have been looking for work for a year.

Uh, I've never encountered this in the 35 plus years that I've been in this industry. Uh, the longer gaps, there's more power that's shifting to the employees, I mean to the employers. So they're expecting people to go in, I mean, which is reasonable because they're paying for the office space.

But again, we went from this one extreme where we were over hiring, where people were working from home and getting all sorts of perks that they wanted to the point now where it's, it's, it's a scramble. I mean, their job openings and, and there are hundreds of people applying for one job. It's, uh, it's really there.

And I, I don't see it changing in the foreseeable future. Yeah. I have some friends that, um, back during the pandemic, they really skilled up.

Like they took a coding bootcamp or they went and did the Salesforce heads thing and got jobs. And now a lot of them are out of work, um, because of what you mentioned, um, I guess the over hiring. And they weren't as skilled as a lot of other people.

It was the basic skill level set. And now they're outta jobs still looking for roles. And they were so excited about the pay scale increase and now they, they're not getting those types of offers with their skillset.

You know, the one thing I I should have mentioned I didn't was full-time jobs are hard to be had, but there is a lot of freelance, there is a lot of contract Yeah. Work that, that there is a abundance of. In fact, there's tons, tons of it enrolling and I, I know of so many opportunities.

But then again, it's done where you work, you know, a couple days a week you get paid well, but you're not on the company role. You're not, and, and it's it's up and down. Yeah.

It's not, It's just that study's, It seems like more and more tech companies are going that way though, with hiring only contract and not wanting to bring them on into full employment. Well, I think you are at an inflection point. I mean, for me, if you are in a coding space, we just gave every developer a 30% cheat code to, uh, unlock productivity.

You know, whether you think it's gonna replace coders and developers completely, I don't subscribe to that. But, you know, using these tools and these co-pilots and these assistants and whatever, that's a 30% productivity gain. Now organizations are faced with a choice there.

Do I just get rid of 30% of the people? Do I get backed on track with the backlog I was up against and get, you know, actually deliver some of these projects on time? Or do I hit the accelerator pot pedal because my business is growing and I need more, 30% more productivity and I'm gonna keep head count the same.

I think it, depending on where you are as a business, that you're gonna make one of those three decisions based on un unlock unlocking this type of productivity gain. One of the things we are seeing a lot happen is marketing. I was chatting to A-C-M-O-A few weeks back.

They've created a really useful, um, I think interesting use case. What they've done is ingested all of their technical product information, all of their marketing content into a private LLM model. And then whenever they needed any short content for a website or a blog or something else, they were just hanging on front of it, a an LLM and being able to ask you questions and say, Hey, write me four sentence description of this product for the website.

If you are in content marketing and yet A, not using these tools, or B you are sort of scared, I think you are right. You know, you've gotta be, you've gotta be using these tools first. Obviously you wanna be at the front of that line for the productivity.

And then if you're not using these tools, very, very worrying dynamic of, you know, website content, quick blogs, that type of stuff, AI is perfect for that type of content creation. We, we see it here at Tech Mm-Hmm. I've got a few few views on, on this.

First of all, the, the tech layoffs are not over. Mm-Hmm. I I think it was just, was it last week or the week before that Cisco announced a pretty big one?

It's a second. I, I just, you know, you could tell on LinkedIn when people start reaching out to you, you know, the recent layoffs and I, um, I just got reached out yesterday. Some of the companies in the DevOps space, uh, just did some more layoffs.

So layoffs are continuing it. And let me put on my entrepreneur founders. CEO hat here is the CEO of Techron, right?

So first of all, AI is very real to us, right? We're in the content business creating content. We pay a lot.

A decent chunk of our revenue goes towards hiring writers to write content. And the idea of having AI write that content as a, as the CEO here, it's, it's, I'm not gonna lie, it's very appealing. Unfortunately, what we have found today is 30 percent's not enough.

John, uh, Steven, to your point, right on 30%, you still gotta come up with that other 70% and that yes, you're gonna pay for, but, but secondly on a couple of the items, yes. During Covid, our business was booming, right? Especially our virtual event.

Business people couldn't go anywhere. They, we had a captive audience. Our, our registrations for virtual events, our webinars, man, they were through the roof.

We hired like men. And I think I'm no more, I'm typical of many entrepreneurial founders, right? No one likes to lay people off.

People have families. They have, they have bills to pay, they have every, you know, there's 8 million stories in the naked city. And, and so no one likes to lay off.

But quite frankly, business has changed. And I don't think it's just about ai. I do think, I forget if it was you, Steven, or one of the other future analysts who said, Hey, most of the tech companies have been waiting for a recession that hasn't come for the last two years.

They have been told by their VCs, by their investors, by their shareholders, that you bet, hey, the rainy day is here and I hope you've saved your rainy day because you're not getting more money. You better hold onto your dollars. We see it, we see it from our customers where they just used to sign up for, you know, gimme 200 leads.

Now they want 200 leads that are, you know, on Tuesdays that are ready for Wednesday that are of a certain size, shape, and color. You know, there's, there's so much more hair on, on these deals in it. It's like threading a needle.

It's a harder business environment. And so businesses and hard business environments have to make hard choices. And what we're finding, and we have found this, and I I've spoken to many, many founders and CEOs is, you know what, it, it's painful to lay off, but you, it doesn't really seem to affect the productivity of the business.

Whether that's from AI or not, I don't know. But it doesn't, we balance it out with, The way I look at this, Anna is, and we can think all the things we want to think about Elon Musk and all of them would be valid. But he pushed this domino when he took over Twitter seven and a half thousand employees running a website that all of us logged into every day.

And then he said, you know what? I can run it with 2000 and every CEO. Yeah.

Everywhere in tech just folded their arms and went, will it break? Will it break now as he broken the content, you know, you could argue that, but the web, I haven't seen the website or the mobile app miss a beat. And what you've actually seen is more feature function and capability come out of X than you did in the five years previous.

So every CE o's gone. Hmm. You can take seven and half thousand people and get more work Outta 2000 people.

That's, that's very, that's an experiment. I'll try. Yeah.

That's very interesting that you say that, Steven, because that's, that's something I kept coming across a couple years ago when I was writing about layoffs is that in a sense he kind of, in a sense opened the flood gates because other CEOs are executives were thinking along the same lines, but they're waiting for someone like him to take the first step and then they followed suit. And uh, but it's not just layoffs either. It's just austerity in terms of things like shows they're scaling back a little bit.

They're going more to a virtual, um, they're not spending as much re of any resources across the board. It's not just not hiring, But a large part of those cuts they made were the content filter people, which may be why you see what you see there. But I, but I also think, you know, there is empire building when times are good and people go, I'm gonna hire somebody to do that.

'cause I'll have more control over them. But you know, the math would always say, even in good times, that should have been a contractor function anyway. But they decide that mm-Hmm, well I'm vice president and such and such and I need A, I have 2,500 people reporting to me, so I must be bigger than you.

Right. But, um, Can I mention one other thing is that one company I should have mentioned too is Google, they've been laying people off. Not at all Google, it's just no matter what your experience, one year, 10 years, 20 years, they were indiscriminate about it and they continued to, to do so.

They, they have been cutting back consistently. So if it's, Meanwhile, I would observe though that other sectors outside of tech are not experienced. They don't seem to be affected by this stuff.

Um, so theoretically a lot of those people who are working in tech should be able to migrate into some of these other They Don't want to Industries. Yeah. They don't want to, is another issue.

But, you know, at the end of the day, um, you know, oil and gas industry is rocking the last Time. No, no. Many industries, health, pharma, they're all, they're rocking.

But, you know, on the contractor issue, let me again put on my CEO hat here. I, I recently, you know, we're doing this merger with the future group, so we've been going through our list and checking it twice, trying to find out who's naughty and nice. And I will tell you, it, it's, it's shocking the amount of money that goes into benefits.

And we're not Silicon Valley, but we try to do like what the tech industry does, which is give a good benefits package all around. But you know what, it costs anywhere from 20 to 33% over and above the employee's salary comp for their benefits. So when you look at saying, alright, can we move this person from a FDE full-time employee or equivalent to a, to a contractor off the bat, I'm saving, even if they work full-time, I'm saving 20 to 33%.

But the other way to look at that, Alan, is that, that sounds bad if you're a full-time employee, maybe it's not bad. Hey, if you can be picked working for two different companies, you can be creative about how you manage your time. You can get more salary, you can be, you can have more control over your work hours.

You can pick and choose when. So I mean, I, I think you'd seen, that's funny, Funny you mentioned that because a, a couple years ago I was doing that same story. I was talking to people who had been laid off and they were working for multiple companies as contract workers.

Mm-Hmm. They were making better money than they ever had before. They had to worry about their benefits, but they, they were turning down work Al Healthcare.

Exactly. Well, no, if someone else took care of healthcare, I'd be all for it. But it's not just healthcare.

Look, I, I have friend, I, I had a conversation with a good friend of mine, he's a gang member on here. I'm not gonna mention names, but he was saying, you know, I, I'm making good money doing this consulting thing, but I need my health insurance. I stopped putting money into a 4 0 1 KI and it's slumpy.

Well, you know, I I, I've got like three gigs I gotta do this month, but next month I don't got anything. And, and it's hard, right? It's not that steady work that you get with a steady, full-time job.

So it's not for every, it's not for the fate of heart. Yeah. And, and so it's hard, but I, I do think to years, one of Steven's points we're at an inflection point.

Mm-Hmm. Where, where maybe more of the workforce is sort of entrepreneurially, uh, contractors, you know, not full time. And they have multiple contracts, you know, that they fulfill at the same time.

And, and we need as maybe the government could do this to come up with something that universal healthcare or something they could buy in like in Obamacare or something. And, but also importantly 4 0 1 Ks, because you know, our parents lived on pensions when they retired, if they lived that long. Right.

They lived on pensions. My generation, the only people who are on pensions are government workers. I know my kids' generation, I know Multiple 20 year olds who have decided to get married just because the time was right on the healthcare side of it.

They, yeah. Well, Only one of us needs healthcare. The other one can be more poor.

And Imagine if there was an election in, what is it, November, where we could maybe make some choices about things like this. Just imagine, I I, we don't hear people talking about it. We don't, neither of the parties are talking about this.

I think there's a ticking time bomb for, so I'm, I'm, I heard this, uh, on, I read this on a story a couple weeks ago. I am what they call Jen Jones. So I'm at the tail end of a boomer right before Gen X.

Right. So it's like, I think they said 1958 through like 1968 or something of Jen Jones. That, and, and by the way, that's Kamala Harris of Waltz of JD Vance.

A lot of us are waltz Is 10 days young, uh, 10 days younger than Brad Pitt. Yes. 10 days.

Literally The best factor we'll get A prize for. What does it matter With? No, no, but so the thing is, we are in that InBetween, we, so we're probably okay, it's the ones after us, the Gen X, the Gen Zs.

How many Gen X folks who've done contracting, let's say have put away money for 401k? What's gonna happen? Boomers are aging out of the market.

Gen X will, Next ones gonna, it's the biggest retirement. It, it's the biggest transfer of wealth ever. The boomers are gonna give it all to their kids.

So, I mean, we could talk about, God bless them then. Right? Yeah.

I Also think, I think the younger generation though, is growing up with technology on such a level that they're more adaptable. They're gonna embrace all these technologies, right? There's gonna be a lot of opportunities.

Right. Much more opportunities. My job, you want to say something?

Oh, I'm just gonna say the workforce has changed. I don't think it's ever gonna be the same. It started from working from home and it's this, this contract worker, uh, movement, uh, whether we want it or not.

And we're also working longer. People used to retire in their fifties and sixties. I don't think they can afford to do that now for the most part.

So we're gonna have more people in The market. So I, I think it's a society though. We have to recognize that.

Yes. And we need a new deal to come up with handling those kinds of workers. So I was in Key Largo on the weekend and I met a fellow who just retired and he was probably on the fifth day of a bender.

And he was clearly like the five days since he returns. And, um, and I, you know, and he had a whole life plan and yet I know other people who every time the stock market burps, they're like, I gotta go back to work. Yeah.

And what was the of that statistic, Alan, you've taught, you've mentioned this before, like 80% of the, those people 60 and oh over have like less than $2,000 in saving. Exactly. They're one paycheck away from, from uh, you know, being in the crapper.

But look, we're not here to discuss politics, but vote for Stephen Dickens. I's Nott even standing your election? You can't.

I can maybe go for a congressional or senatorial seat. Maybe a governor, but I can't go. I can't go for the people.

You're ineligible. Ineligible. Yeah.

Alright. Anyway. I Don't know National healthcare was any good.

Steven's still be in England, right? That's also don't, Do Not get slowly. I turn.

Anyway, hey, we're gonna end this one right here. It's been a great texture on gang. Steve and John.

Amanda, thanks for joining us. Mike, as always, it's been great. We've got a full text, drug tv, uh, lineup following, so please do check that out.

And of course, we'll be back here tomorrow with another text Drug gang. But until then, this is Alan Shimel for Techstrong. We're out.