Even after Microsoft wins, JEDI saga could drag on

The DoD JEDI contract saga came to a thrilling conclusion on Friday afternoon, appropriately enough, with one final plot twist. The presumptive favorite, Amazon did not win, stunning many, including likely the company itself. In the end, Microsoft took home the $10 billion prize.

This contract was filled with drama from the beginning, given the amount of money involved, the length of the contract, the winner-take-all nature of the deal — and the politics. We can’t forget the politics. This was Washington after all and Jeff Bezos does own the Washington Post.

Then there was Oracle’s fury throughout the procurement process. The president got involved in August. The current defense secretary recused himself on Wednesday, two days before the decision came down. It was all just so much drama, even the final decision itself, handed down late Friday afternoon, but it’s unclear if this is the end or just another twist in this ongoing tale.

Some perspective on $10 billion

Before we get too crazy about Microsoft getting a $10 billion, 10 year contract, consider that Amazon earned $9 billion last quarter alone in cloud revenue. Microsoft reported $33 billion last quarter in total revenue. It reported around $11 billion in cloud revenue. Synergy Research pegs the current cloud infrastructure market at well over $100 billion annually (and growing).

What we have here is a contract that’s worth a billion a year. What’s more, it’s possible it might not even be worth that much if the government uses one of its out clauses. The deal is actually initially guaranteed for just two years. Then there are a couple of three-year options, with a final two-year option at the end if gets that far.

The DOD recognized that with the unique nature of this contract, going with a single vendor, it wanted to keep its options open should the tech world shift suddenly under its feet. It didn’t want to be inextricably tied to one company for a decade if that company was suddenly disrupted by someone else. Given the shifting sands of technology, that part of the strategy was a wise one.

Where the value lies

If value of this deal was not the contract itself, it begs the question, why did everyone want it so badly? The $10 billion JEDI deal was simply a point of entree. If you could modernize the DoD’s infrastructure, the argument goes, chances are you could do the same for other areas of the government. It could open the door for Microsoft for a much more lucrative government cloud business.

But it’s not as though Microsoft didn’t already have a lucrative cloud business. In 2016, for example, the company signed a deal worth almost a billion dollars to help move the entire department to Windows 10. Amazon too, has had its share of government contracts, famously landing the $600 million to build the CIA’s private cloud.

But given all the attention to this deal, it always felt a little different from your standard government contract. Just the fact the DoD used a Star Wars reference for the project acronym drew more attention to the project from the start. Therefore, there was some prestige for the winner of this deal, and Microsoft gets bragging rights this morning, while Amazon is left to ponder what the heck happened. As for other companies like Oracle, who knows how they’re feeling about this outcome.

Hell hath no fury like Oracle scorned

Ah yes Oracle; this tale would not be complete without discussing the rage of Oracle throughout the JEDI RFP process. Even before the RFP process started, they were complaining about the procurement process. Co-CEO Safra Catz had dinner with the president to complain that contract process wasn’t fair (not fair!). Then it tried complaining to the Government Accountability Office. They found no issue with the process.

They went to court. The judge dismissed their claims that involved both the procurement process and that a former Amazon employee, who was hired by DoD, was involved in the process of creating the RFP. They claimed that the former employee was proof that the deal was tilted toward Amazon. The judge disagreed and dismissed their complaints.

What Oracle could never admit, was that it simply didn’t have the same cloud chops that Microsoft and Amazon, the two finalists, had. It couldn’t be that they were late to the cloud or had a fraction of the market share that Amazon and Microsoft had. It had to be the process or that someone was boxing them out.

What Microsoft brings to the table

Outside of the politics of this decision (which we will get to shortly), Microsoft brought some experience and tooling the table that certainly gave it some advantage in the selection process. Until we see the reasons for the selections, it’s hard to know exactly why DoD chose Microsoft, but we know a few things.

First of all there are the existing contracts with DoD, including the aforementioned Windows 10 contract and a five year $1.76 billion contract with DoD Intelligence to provide “innovative enterprise services” to the DoD.

Then there is Azure Stack, a portable private cloud stack that the military could stand up anywhere. It could have great utility for missions in the field when communicating with a cloud server could be problematic.

Fool if you think it’s over

So that’s that right? The decision has been made and it’s time to move on. Amazon will go home and lick its wounds. Microsoft gets bragging rights and we’re good. Actually, this might not be where it ends at all.

Amazon for instance could point to Jim Mattis’ book where he wrote that the president told the then Defense Secretary to “screw Bezos out of that $10 billion contract.” Mattis says he refused saying he would go by the book, but it certainly leaves the door open to a conflict question.

It’s also worth pointing out that Jeff Bezos owns the Washington Post and the president isn’t exactly in love with that particular publication. In fact, this week, the White House canceled its subscription and encouraged other government agencies to do so as well.

Then there is the matter of current Defense Secretary Mark Espers suddenly recusing himself last Wednesday afternoon based on a minor point that one of his adult children works at IBM (in a non-cloud consulting job). He claimed he wanted to remove any hint of conflict of interest, but at this point in the process, it was down to Microsoft and Amazon. IBM wasn’t even involved.

If Amazon wanted to protest this decision, it seems it would have much more solid ground to do so than Oracle ever had.

The bottom line is a decision has been made, at least for now, but this process has been rife with controversy from the start, just by the design of the project, so it wouldn’t be surprising to see Amazon take some protest action of its own. It seems oddly appropriate.


By Ron Miller

In latest $10B JEDI contract twist, Defense Secretary recuses himself

The JEDI drama never stops. The $10 billion, decade long cloud contract has produced a series of twists and turns since the project was announced in 2018. These include everything from court challenges to the president getting involved to accusations of bias and conflict of interest. It has had all this and more. Today, in the latest plot twist, the Secretary of Defense Mark Esper recused himself from the selection process because one of his kids works at a company that was involved earlier in the process.

Several reports name his son, Luke Esper, who has worked at IBM since February. The RFP closed in April and Esper is a Digital Strategy Consultant, according to his LinkedIn page, but given the persistent controversy around this deal, his dad apparently wanted to remove even a hint of impropriety in the selection and review process.

Chief Pentagon Spokesperson Jonathan Rath Hoffman issued an official DoD Cloud update earlier today:

“As you all know, soon after becoming Secretary of Defense in July, Secretary Esper initiated a review of the Department’s cloud computing plans and to the JEDI procurement program. As part of this review process he attended informational briefings to ensure he had a full understanding of the JEDI program and the universe of options available to DoD to meet its cloud computing needs. Although not legally required to, he has removed himself from participating in any decision making following the information meetings, due to his adult son’s employment with one of the original contract applicants. Out of an abundance of caution to avoid any concerns regarding his impartiality, Secretary Esper has delegated decision making concerning the JEDI Cloud program to Deputy Secretary Norquist. The JEDI procurement will continue to move to selection through the normal acquisition process run by career acquisition professionals.”

Perhaps the biggest beef around this contract, which was supposed to be decided in August, has been the winner-take-all nature of the deal. Only one company will eventually walk away a winner, and there was a persistent belief in some quarters that the deal was designed specifically with Amazon in mind. Oracle’s Co-CEO Safra Catz took that concern directly to the president in 2018.

The DoD has repeatedly denied there was any vendor in mind when it created the RFP, and internal Pentagon reviews, courts and a government watchdog agency repeatedly found the procurement process was fair, but the complaints continue. The president got involved in August when he named his then newly appointed defense secretary to look into the JEDI contract procurement process. Now Espers is withdrawing from leading that investigation, and it will be up to others including his Deputy Secretary to finally bring this project over the finish line.

Last April, the DoD named Microsoft and Amazon as the two finalists. It’s worth pointing out that both are leaders in Infrastructure as a Service marketshare with around 16% and 33% respectively.

It’s also worth noting that while $10 billion feels like a lot of money, it’s spread out over a 10-year period with lots of possible out clauses built into the deal. To put this deal size into perspective, a September report from Synergy Research found that worldwide combined infrastructure and software service spending in the cloud had already reached $150 billion, a number that is only expected to continue to rise over the next several years as more companies and government agencies like the DoD move more of their workloads to the cloud.

For complete TechCrunch JEDI coverage, see the Pentagon JEDI Contract.


By Ron Miller

Amazon migrates more than 100 consumer services from Oracle to AWS databases

AWS and Oracle love to take shots at each other, but as much as Amazon has knocked Oracle over the years, it was forced to admit that it was in fact a customer. Today in a company blog post, the company announced it was shedding Oracle for AWS databases, and had effectively turned off its final Oracle database.

The move involved 75 petabytes of internal data stored in nearly 7,500 Oracle databases, according to the company. “I am happy to report that this database migration effort is now complete. Amazon’s Consumer business just turned off its final Oracle database (some third-party applications are tightly bound to Oracle and were not migrated),” AWS’s Jeff Barr wrote in the company blog post announcing the migration.

Over the last several years, the company has been working to move off of Oracle databases, but it’s not an easy task to move projects on Amazon scale. Barr wrote there were lots of reasons the company wanted to make the move. “Over the years we realized that we were spending too much time managing and scaling thousands of legacy Oracle databases. Instead of focusing on high-value differentiated work, our database administrators (DBAs) spent a lot of time simply keeping the lights on while transaction rates climbed and the overall amount of stored data mounted,” he wrote.

More than 100 consumer services have been moved to AWS databases including customer-facing tools like Alexa, Amazon Prime and Twitch among others. It also moved internal tools like AdTech, its fulfillment system, external payments and ordering. These are not minor matters. They are the heart and soul of Amazon’s operations.

Each team moved the Oracle database to an AWS database service like Amazon DynamoDB, Amazon Aurora, Amazon Relational Database Service (RDS), and Amazon Redshift. Each group was allowed to choose the service they wanted, based on its individual needs and requirements.

 


By Ron Miller

India’s Darwinbox raises $15M to bring its HR tech platform to more Asian markets

An Indian SaaS startup, which is increasingly courting clients from outside of the country, just raised a significant amount of capital to expand its business.

Hyderabad-based Darwinbox, which operates a cloud-based human resource management platform, said on Thursday it has raised $15 million in a new financing round. The Series B round — which moves the firm’s total raise to $19.7 million — was led by Sequoia India and saw participation from existing investors Lightspeed India Partners, Endiya Partners, and 3one4 Capital.

More than 200 firms including giants such as adtech firm InMobi, fintech startup Paytm, drink conglomerate Bisleri, automobile maker Mahindra, Kotak group, and delivery firms Swiggy and Milkbasket use Darwinbox’s HR platform to serve half a million of their employees in 50 nations, Rohit Chennamaneni, cofounder of Darwinbox, told TechCrunch in an interview.

The startup, which competes with giants such as SAP and Oracle, said its platform enables high level of configurability, ease of use, and understands the needs of modern employees. “The employees today who have grown accustomed to using consumer-focused services such as Uber and Amazon are left disappointed in their experience with their own firm’s HR offerings,” said Gowthami Kanumuru, VP Marketing at Darwinbox, in an interview.

Darwinbox’s HR platform offers a range of features including the ability for firms to offer their employees insurance and early salary as loans. Its platform also features social networks for employees within a company to connect and talk, as well as an AI assistant that allows them to apply for a leave or set up meetings with quick voice commands from their phone.

“The AI system is not just looking for certain keywords. If an employee tells the system he or she is not feeling well today, it automatically applies a leave for them,” she said.

Darwinbox’s platform is built to handle onboarding new employees, keeping a tab on their performance, monitor attrition rate, and maintain an ongoing feedback loop. Or as Kanumuru puts it, the entire “hiring to retiring” cycle.

One of Darwinbox’s clients is L&T, which is tasked with setting up subway in many Indian cities. L&T is using geo-fencing feature of Darwin to log the attendance of employees. “They are not using biometric punch machine that is typically used by other firms. Instead, they just require their 1,200 employees to check-in from the workplace using their phones,” said Kanumuru.

darwinbox event

Additionally, Darwinbox is largely focusing on serving companies based in Asia as it believes Western companies’ solutions are not a great fit for people here, said Kanumuru. The startup began courting clients in Southeast Asian markets last year.

“Our growth is a huge validation for our vision,” she said. “Within six months of operations, we had the delivery giant Delhivery with over 23,000 employees use our platform.”

In a statement to TechCrunch, Dev Khare, a partner at Lightspeed Venture, said, “there is a new trend of SaaS companies targeting the India/SE Asia markets. This trend is gathering steam and is disproving the conventional wisdom that Asia-focused SaaS companies cannot get to be big companies. We firmly believe that Asia-focused SaaS companies can get to large impact value and become large and profitable. Darwinbox is one of these companies.”

Darwinbox’s Chennamaneni said the startup will use the fresh capital to expand its footprints in Indonesia, Malaysia, Thailand, and other Southeast Asian markets. Darwinbox will also expand its product offerings to address more of employees’ needs. The startup is also looking to make its platform enable tasks such as booking of flights and hotels.

Chennamaneni, an alum of Google and McKinsey, said Darwinbox aims to double the number of clients it has in the next six to nine months.


By Manish Singh

New investment firm wants to change the way we fund early stage companies — from New Hampshire

The three founders of York IE have a vision about how to change the way early stage startups get funding. They have experience shattering norms, having built a successful startup, Dyn, in Manchester, New Hampshire, which is not exactly a hot-bed of startup activity.

The founders want to take that same spirit and apply it to investing, while maintaining its headquarters in New Hampshire (and Boston). In fact, the three founders — Kyle York, Joe Raczka and Adam Coughlin — launched Dyn and built it to $30 million in ARR before taking a dime in venture funding. They went onto raise $88 million before being acquired by Oracle in 2016. They believe they can apply the lessons that they learned to other early stage startups.

“We think, especially in B2B and SaaS, there is a way to build a scalable, effective and efficient business without chasing massive fund raises, diluting your company, bringing on traditional venture investors and chasing those kind of on-paper vanity metrics,” company CEO and co-founder Kyle York told TechCrunch.

For the past five years, while working at Oracle after the acquisition, the founders have been testing their theories while advising startups and acting as angel investors. They believed it was time to take all of those learnings and apply it to their own firm.

“I started thinking about how to transition out of Oracle, and what I wanted to do from a career perspective and we wanted to build a modern investment firm less focused on how to deploy as much capital as possible for the limited partners, and more on working with the entrepreneurs to help coach them on a path to success,” York said.

The company still wants to act as investors, and to make money along the way, but they want to help build more solid, grounded companies. York says that they want the founders truly understand that they are selling a part of their company in exchange for those dollars, and that it makes sense to have a strong foundation before taking on money.

York wants to change this culture of fund raising for fund raising’s sake. He acknowledges that some companies with deep tech or deep infrastructure require that kind of substantial up-front investment to get off the ground, but SaaS companies are supposed to be able to take advantage of modern technology to build companies more easily, and he wants to see them build solid companies first and foremost.

“The goal shouldn’t be to raise more capital. The goal should be to build a healthy successful, scalable company,” he said.

To put their money where their mouth is, the new firm will not take management fees. “We are investing like a normal investor and coming through with an equity position, but we are betting on the future. In essence, if the startup wins, then we win.”


By Ron Miller

Oracle files new appeal over Pentagon’s $10B JEDI cloud contract RFP process

You really have to give Oracle a lot of points for persistence, especially where the $10 billion JEDI cloud contract procurement process is concerned. For more than a year, the company has been complaining  across every legal and government channel it can think of. In spite of every attempt to find some issue with the process, it has failed every time. That did not stop it today from filing a fresh appeal of last month’s federal court decision that found against the company.

Oracle refuses to go quietly into that good night, not when there are $10 billion federal dollars on the line, and today the company announced it was appealing Federal Claims Court Senior Judge Eric Bruggink’s decision. This time they are going back to that old chestnut that the single-award nature of the JEDI procurement process is illegal:

“The Court of Federal Claims opinion in the JEDI bid protest describes the JEDI procurement as unlawful, notwithstanding dismissal of the protest solely on the legal technicality of Oracle’s purported lack of standing. Federal procurement laws specifically bar single award procurements such as JEDI absent satisfying specific, mandatory requirements, and the Court in its opinion clearly found DoD did not satisfy these requirements. The opinion also acknowledges that the procurement suffers from many significant conflicts of interest. These conflicts violate the law and undermine the public trust. As a threshold matter, we believe that the determination of no standing is wrong as a matter of law, and the very analysis in the opinion compels a determination that the procurement was unlawful on several grounds,” Oracle’s General Counsel Dorian Daley said in a statement.

In December, Oracle sued the government for $10 billion, at the time focusing mostly on a perceived conflict of interest involving a former Amazon employee named Deap Ubhi. He worked for Amazon prior to joining the DOD, where he worked on a committee of people writing the RFP requirements, and then returned to Amazon later. The DOD investigated this issue twice, and found no evidence he violated federal conflict of interest of laws.

The court ultimately agreed with the DOD’s finding last month, ruling that Oracle had failed to provide evidence of a conflict, or that it had impact on the procurement process. Judge Bruggink wrote at the time:

We conclude as well that the contracting officer’s findings that an organizational conflict of interest does not exist and that individual conflicts of interest did not impact the procurement, were not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Plaintiff’s motion for judgment on the administrative record is therefore denied.

The company started complaining and cajoling even before the JEDI RFP process started. The Washington Post reported that Oracle’s Safra Catz met with the president in April, 2018 to complain that the process was unfairly stacked in favor of Amazon, which happens to be the cloud market share leader by a significant margin, with more than double that of its next closest rival, Microsoft.

Later, the company filed an appeal with the Government Accountability Office, which found no issue with the RFP process. The DOD, which has insisted all along there was no conflict in the process, also did in an internal investigation and found no wrong-doing.

The president got involved last month when he ordered Defense Secretary Mark T. Esper to look into the idea that, once again, the process has favored Amazon. That investigation is ongoing. The DOD did name two finalists, Amazon and Microsoft, in April, but has yet to name the winner as the protests, court cases and investigations continue.

The controversy in part involves the nature of the contract itself. It is potentially a decade-long undertaking to build the cloud infrastructure for the DOD, involves the award of a single vendor (although there are several opt-out clauses throughout the term of the contract) and involves $10 billion and the potential for much more government work. That every tech company is salivating for that contract is hardly surprising, but Oracle alone continues to protest at every turn.

The winner was supposed to be announced this month, but with the Pentagon investigation in progress, and another court case underway, it could be some time before we hear who the winner is.


By Ron Miller

Oracle directors give blessing to shareholder lawsuit against Larry Ellison and Safra Catz

Three years after closing a $9.3 billion deal to acquire Netsuite, several Oracle board members have written an extraordinary letter to the Delaware Court, approving a shareholder lawsuit against company executives Larry Ellison and Safra Catz over the 2016 deal. Reuters broke this story.

According Reuters’ Alison Frankel, three board members including former U.S. Defense Secretary Leon Panetta, sent a letter on August 15th to Sam Glasscock III, Vice Chancellory for the Court of the Chancellor in Georgetown, Delaware, approving the suit as members of a special Board of Directors entity known as the Special Litigation Committee.

The lawsuit is what is called in legal parlance, a derivative suit. According to the site Justia, this type of suit is filed in cases like this. “Since shareholders are generally allowed to file a lawsuit in the event that a corporation has refused to file one on its own behalf, many derivative suits are brought against a particular officer or director of the corporation for breach of contract or breach of fiduciary duty,” the Justia site explained.

The letter went onto say there was an attempt to settle this suit, which was originally launched in 2017, through negotiation outside of court, but when that attempt failed, the directors wrote this letter to the court stating that the suit should be allowed to proceed.

As Frankel wrote in her article, the lawsuit, which was originally filed by Firemen’s fund could be worth billions:

One of the lead lawyers for the Firemen’s fund, Joel Friedlander of Friedlander & Gorris, said at a hearing in June that shareholders believe the breach-of-duty claims against Oracle and NetSuite executives are worth billions of dollars. So in last week’s letter, Oracle’s board effectively unleashed plaintiffs’ lawyers to seek ten-figure damages against its own members, Frankel wrote

It’s worth pointing out, as we reported at the time of the Netsuite acquisition, that Larry Ellison was involved in setting up Netsuite in the late 1990s and was a major shareholder at the time of the deal.

Oracle was struggling to find its cloud footing in 2016, and it was believed that by buying an established SaaS player like Netsuite, it could begin to build out its cloud business much faster than trying to develop something like it internally. A June Synergy Research SaaS marketshare report, while admitting the market was fragmented, still showed Oracle was far behind the pack in spite of that deal three years ago.

SaaS Q119 1

While there have been bigger deals in tech M&A history, including Salesforce’s acquisition of Tableau for $15.7 billion earlier this year, it’s still stands with some of the largest.

We reached out to Oracle regarding this story, but it declined to comment.

 

 


By Ron Miller

Microsoft acquires jClarity, an open source Java performance tuning tool

Microsoft announced this morning that it was acquiring jClarity, an open source tool designed to tune the performance of Java applications. It will be doing that on Azure from now on. In addition, the company has been offering a flavor of Java called AdoptOpenJDK, which they bill as a free alternative to Oracle Java. The companies did not discuss the terms of the deal.

As Microsoft pointed out in a blog post announcing the acquisition, they are seeing increasing use of large-scale Java installations on Azure, both internally with platforms like Minecraft and externally with large customers including Daimler and Adobe.

The company believes that by adding the jClarity team and its toolset, it can help service these Java customers better. “The team, formed by Java champions and data scientists with proven expertise in data driven Java Virtual Machine (JVM) optimizations, will help teams at Microsoft to leverage advancements in the Java platform,” the company wrote in the blog.

Microsoft has actually been part of the AdoptOpenJDK project along with a Who’s Who of other enterprise companies including Amazon, IBM, Pivotal, Red Hat and SAP.

Co-founder and CEO Martin Verburg, writing in a company blog post announcing the deal, unsurprisingly spoke in glowing terms about the company he was about to become a part of. “Microsoft leads the world in backing developers and their communities, and after speaking to their engineering and programme leadership, it was a no brainer to enter formal discussions. With the passion and deep expertise of Microsoft’s people, we’ll be able to support the Java ecosystem better than ever before,” he wrote.

Verburg also took the time to thank the employees, customers and community who has supported the open source project on top of which his company was built. Verburg’s new title at Microsoft will be Principal Engineering Group Manager (Java) at Microsoft.

It is unclear how the community will react to another flavor of Java being absorbed by another large vendor, or how the other big vendors involved in the project will feel about it, but regardless, jClarity is part of Microsoft now.


By Ron Miller

How Facebook does IT

If you have ever worked at any sizable company, the word “IT” probably doesn’t conjure up many warm feelings. If you’re working for an old, traditional enterprise company, you probably don’t expect anything else, though. If you’re working for a modern tech company, though, chances are your expectations are a bit higher. And once you’re at the scale of a company like Facebook, a lot of the third-party services that work for smaller companies simply don’t work anymore.

To discuss how Facebook thinks about its IT strategy and why it now builds most of its IT tools in-house, I sat down with the company’s CIO, Atish Banerjea, at its Menlo Park headquarter.

Before joining Facebook in 2016 to head up what it now calls its “Enterprise Engineering” organization, Banerjea was the CIO or CTO at companies like NBCUniversal, Dex One and Pearson.

“If you think about Facebook 10 years ago, we were very much a traditional IT shop at that point,” he told me. “We were responsible for just core IT services, responsible for compliance and responsible for change management. But basically, if you think about the trajectory of the company, were probably about 2,000 employees around the end of 2010. But at the end of last year, we were close to 37,000 employees.”

Traditionally, IT organizations rely on third-party tools and software, but as Facebook grew to this current size, many third-party solutions simply weren’t able to scale with it. At that point, the team decided to take matters into its own hands and go from being a traditional IT organization to one that could build tools in-house. Today, the company is pretty much self-sufficient when it comes to running its IT operations, but getting to this point took a while.

“We had to pretty much reinvent ourselves into a true engineering product organization and went to a full ‘build’ mindset,” said Banerjea. That’s not something every organization is obviously able to do, but, as Banerjea joked, one of the reasons why this works at Facebook “is because we can — we have that benefit of the talent pool that is here at Facebook.”

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The company then took this talent and basically replicated the kind of team it would help on the customer side to build out its IT tools, with engineers, designers, product managers, content strategies, people and research. “We also made the decision at that point that we will hold the same bar and we will hold the same standards so that the products we create internally will be as world-class as the products we’re rolling out externally.”

One of the tools that wasn’t up to Facebook’s scaling challenges was video conferencing. The company was using a third-party tool for that, but that just wasn’t working anymore. In 2018, Facebook was consuming about 20 million conference minutes per month. In 2019, the company is now at 40 million per month.

Besides the obvious scaling challenge, Facebook is also doing this to be able to offer its employees custom software that fits their workflows. It’s one thing to adapt existing third-party tools, after all, and another to build custom tools to support a company’s business processes.

Banerjea told me that creating this new structure was a relatively easy sell inside the company. Every transformation comes with its own challenges, though. For Facebook’s Enterprise  Engineering team, that included having to recruit new skill sets into the organization. The first few months of this process were painful, Banerjea admitted, as the company had to up-level the skills of many existing employees and shed a significant number of contractors. “There are certain areas where we really felt that we had to have Facebook DNA in order to make sure that we were actually building things the right way,” he explained.

Facebook’s structure creates an additional challenge for the team. When you’re joining Facebook as a new employee, you have plenty of teams to choose from, after all, and if you have the choice of working on Instagram or WhatsApp or the core Facebook app — all of which touch millions of people — working on internal tools with fewer than 40,000 users doesn’t sound all that exciting.

“When young kids who come straight from college and they come into Facebook, they don’t know any better. So they think this is how the world is,” Banerjea said. “But when we have experienced people come in who have worked at other companies, the first thing I hear is ‘oh my goodness, we’ve never seen internal tools of this caliber before.’ The way we recruit, the way we do performance management, the way we do learning and development — every facet of how that employee works has been touched in terms of their life cycle here.”

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Facebook first started building these internal tools around 2012, though it wasn’t until Banerjea joined in 2016 that it rebranded the organization and set up today’s structure. He also noted that some of those original tools were good, but not up to the caliber employees would expect from the company.

“The really big change that we went through was up-leveling our building skills to really become at the same caliber as if we were to build those products for an external customer. We want to have the same experience for people internally.”

The company went as far as replacing and rebuilding the commercial Enterprise Resource Planning (ERP) system it had been using for years. If there’s one thing that big companies rely on, it’s their ERP systems, given they often handle everything from finance and HR to supply chain management and manufacturing. That’s basically what all of their backend tools rely on (and what companies like SAP, Oracle and others charge a lot of money for). “In that 2016/2017 time frame, we realized that that was not a very good strategy,” Banerjea said. In Facebook’s case, the old ERP handled the inventory management for its data centers, among many other things. When that old system went down, the company couldn’t ship parts to its data centers.

“So what we started doing was we started peeling off all the business logic from our backend ERP and we started rewriting it ourselves on our own platform,” he explained. “Today, for our ERP, the backend is just the database, but all the business logic, all of the functionality is actually all custom written by us on our own platform. So we’ve completely rewritten our ERP, so to speak.”

In practice, all of this means that ideally, Facebook’s employees face far less friction when they join the company, for example, or when they need to replace a broken laptop, get a new phone to test features or simply order a new screen for their desk.

One classic use case is onboarding, where new employees get their company laptop, mobile phones and access to all of their systems, for example. At Facebook, that’s also the start of a six-week bootcamp that gets new engineers up to speed with how things work at Facebook. Back in 2016, when new classes tended to still have less than 200 new employees, that was still mostly a manual task. Today, with far more incoming employees, the Enterprise Engineering team has automated most of that — and that includes managing the supply chain that ensures the laptops and phones for these new employees are actually available.

But the team also built the backend that powers the company’s more traditional IT help desks, where employees can walk up and get their issues fixed (and passwords reset).

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To talk more about how Facebook handles the logistics of that, I sat down with Koshambi Shah, who heads up the company’s Enterprise Supply Chain organization, which pretty much handles every piece of hardware and software the company delivers and deploys to its employees around the world (and that global nature of the company brings its own challenges and additional complexity). The team, which has fewer than 30 people, is made up of employees with experience in manufacturing, retail and consumer supply chains.

Typically, enterprises offer their employees a minimal set of choices when it comes to the laptops and phones they issue to their employees, and the operating systems that can run on them tend to be limited. Facebook’s engineers have to be able to test new features on a wide range of devices and operating systems. There are, after all, still users on the iPhone 4s or BlackBerry that the company wants to support. To do this, Shah’s organization actually makes thousands of SKUs available to employees and is able to deliver 98% of them within three days or less. It’s not just sending a laptop via FedEx, though. “We do the budgeting, the financial planning, the forecasting, the supply/demand balancing,” Shah said. “We do the asset management. We make sure the asset — what is needed, when it’s needed, where it’s needed — is there consistently.”

In many large companies, every asset request is double guessed. Facebook, on the other hand, places a lot of trust in its employees, it seems. There’s a self-service portal, the Enterprise Store, that allows employees to easily request phones, laptops, chargers (which get lost a lot) and other accessories as needed, without having to wait for approval (though if you request a laptop every week, somebody will surely want to have a word with you). Everything is obviously tracked in detail, but the overall experience is closer to shopping at an online retailer than using an enterprise asset management system. The Enterprise Store will tell you where a device is available, for example, so you can pick it up yourself (but you can always have it delivered to your desk, too, because this is, after all, a Silicon Valley company).

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For accessories, Facebook also offers self-service vending machines, and employees can walk up to the help desk.

The company also recently introduced an Amazon Locker-style setup that allows employees to check out devices as needed. At these smart lockers, employees simply have to scan their badge, choose a device and, once the appropriate door has opened, pick up the phone, tablet, laptop or VR devices they were looking for and move on. Once they are done with it, they can come back and check the device back in. No questions asked. “We trust that people make the right decision for the good of the company,” Shah said. For laptops and other accessories, the company does show the employee the price of those items, though, so it’s clear how much a certain request costs the company. “We empower you with the data for you to make the best decision for your company.”

Talking about cost, Shah told me the Supply Chain organization tracks a number of metrics. One of those is obviously cost. “We do give back about 4% year-over-year, that’s our commitment back to the businesses in terms of the efficiencies we build for every user we support. So we measure ourselves in terms of cost per supported user. And we give back 4% on an annualized basis in the efficiencies.”

Unsurprisingly, the company has by now gathered enough data about employee requests (Shah said the team fulfills about half a million transactions per year) that it can use machine learning to understand trends and be proactive about replacing devices, for example.

IMG 8238

Facebooks’ Enterprise Engineering group doesn’t just support internal customers, though. Another interesting aspect to Facebook’s Enterprise Engineering group is that it also runs the company’s internal and external events, including the likes of F8, the company’s annual developer conference. To do this, the company built out conference rooms that can seat thousands of people, with all of the logistics that go with that.

The company also showed me one of its newest meeting rooms where there are dozens of microphones and speakers hanging from the ceiling that make it easier for everybody in the room to participate in a meeting and be heard by everybody else. That’s part of what the organization’s “New Builds” team is responsible for, and something that’s possible because the company also takes a very hands-on approach to building and managing its offices.

Facebook also runs a number of small studios in its Menlo Park and New York offices, where both employees and the occasional external VIP can host Facebook Live videos.

Event Center 56

Indeed, live video, it seems, is one of the cornerstones of how Facebook employees collaborate and help employees who work from home. Typically, you’d just use the camera on your laptop or maybe a webcam connected to your desktop to do so. But because Facebook actually produces its own camera system with the consumer-oriented Portal, Banerjea’s team decided to use that.

“What we have done is we have actually re-engineered the Portal,” he told me. “We have connected with all of our video conferencing systems in the rooms. So if I have a Portal at home, I can dial into my video conferencing platform and have a conference call just like I’m sitting in any other conference room here in Facebook. And all that software, all the engineering on the portal, that has been done by our teams — some in partnership with our production teams, but a lot of it has been done with Enterprise Engineering.”

Unsurprisingly, there are also groups that manage some of the core infrastructure and security for the company’s internal tools and networks. All of those tools run in the same data centers as Facebook’s consumer-facing applications, though they are obviously sandboxed and isolated from them.

It’s one thing to build all of these tools for internal use, but now, the company is also starting to think about how it can bring some of these tools it built for internal use to some of its external customers. You may not think of Facebook as an enterprise company, but with its Workplace collaboration tool, it has an enterprise service that it sells externally, too. Last year, for the first time, Workplace added a new feature that was incubated inside of Enterprise Engineering. That feature was a version of Facebook’s public Safety Check that the Enterprise Engineering team had originally adapted to the company’s own internal use.

“Many of these things that we are building for Facebook, because we are now very close partners with our Workplace team — they are in the enterprise software business and we are the enterprise software group for Facebook — and many [features] we are building for Facebook are of interest to Workplace customers.”

As Workplace hit the market, Banerjea ended up talking to the CIOs of potential users, including the likes of Delta Air Lines, about how Facebook itself used Workplace internally. But as companies started to adopt Workplace, they realized that they needed integrations with existing third-party services like ERP platforms and Salesforce. Those companies then asked Facebook if it could build those integrations or work with partners to make them available. But at the same time, those customers got exposed to some of the tools that Facebook itself was building internally.

“Safety Check was the first one,” Banerjea said. “We are actually working on three more products this year.” He wouldn’t say what these are, of course, but there is clearly a pipeline of tools that Facebook has built for internal use that it is now looking to commercialize. That’s pretty unusual for any IT organization, which, after all, tends to only focus on internal customers. I don’t expect Facebook to pivot to an enterprise software company anytime soon, but initiatives like this are clearly important to the company and, in some ways, to the morale of the team.

This creates a bit of friction, too, though, given that the Enterprise Engineering group’s mission is to build internal tools for Facebook. “We are now figuring out the deployment model,” Banerjea said. Who, for example, is going to support the external tools the team built? Is it the Enterprise Engineering group or the Workplace team?

Chances are then, that Facebook will bring some of the tools it built for internal use to more enterprises in the long run. That definitely puts a different spin on the idea of the consumerization of enterprise tech. Clearly, not every company operates at the scale of Facebook and needs to build its own tools — and even some companies that could benefit from it don’t have the resources to do so. For Facebook, though, that move seems to have paid off and the tools I saw while talking to the team definitely looked more user-friendly than any off-the-shelf enterprise tools I’ve seen at other large companies.


By Frederic Lardinois

Last chance for early-bird tickets to TC Sessions: Enterprise 2019

It’s down to the wire folks. Today’s the last day you can save $100 on your ticket to TC Sessions: Enterprise 2019, which takes place on September 5 at the Yerba Buena Center in San Francisco. The deadline expires in mere hours — at 11:59 p.m. (PT). Get the best possible price and buy your early-bird ticket right now.

We expect more than 1,000 attendees representing the enterprise software community’s best and brightest. We’re talking founders of companies in every stage and CIOs and systems architects from some of the biggest multinationals. And, of course, managing partners from the most influential venture and corporate investment firms.

Take a look at just some of the companies joining us for TC Sessions: Enterprise: Bain & Company, Box, Dell Technologies Capital, Google, Oracle, SAP and SoftBank. Let the networking begin!

You can expect a full day of main-stage interviews and panel discussions, plus break-out sessions and speaker Q&As. TechCrunch editors will dig into the big issues enterprise software companies face today along with emerging trends and technologies.

Data, for example, is a mighty hot topic, and you’ll hear a lot more about it during a session entitled, Innovation Break: Data – Who Owns It?: Enterprises have historically competed by being closed entities, keeping a closed architecture and innovating internally. When applying this closed approach to the hottest new commodity, data, it simply does not work anymore. But as enterprises, startups and public institutions open themselves up, how open is too open? Hear from leaders who explore data ownership and the questions that need to be answered before the data floodgates are opened. Sponsored by SAP .

If investment is on your mind, don’t miss the Investor Q&A. Some of greatest investors in enterprise will be on hand to answer your burning questions. Want to know more? Check out the full agenda.

Maximize your last day of early-bird buying power and take advantage of the group discount. Buy four or more tickets at once and save 20%. Here’s a bonus. Every ticket you buy to TC Sessions: Enterprise includes a free Expo Only pass to TechCrunch Disrupt SF on October 2-4.

It’s now o’clock startuppers. Your opportunity to save $100 on tickets to TC Sessions: Enterprise ends tonight at precisely 11:59 p.m. (PT). Buy your early-bird tickets now and join us in September!

Is your company interested in sponsoring or exhibiting at TC Sessions: Enterprise? Contact our sponsorship sales team by filling out this form.


By Emma Comeau

Judge dismisses Oracle lawsuit over $10B Pentagon JEDI cloud contract

Oracle has been complaining about the procurement process around the Pentagon’s $10 billion, decade-long JEDI cloud contract, even before the DoD opened requests for proposals last year. It went so far as to file a lawsuit in December, claiming a potential conflict of interest on the part of a procurement team member. Today, that case was dismissed in federal court.

In dismissing the case, Federal Claims Court Senior Judge Eric Bruggink ruled that the company had failed to prove a conflict in the procurement process, something the DOD’s own internal audits found in two separate investigations. Judge Bruggink ultimately agreed with the DoD’s findings.

“We conclude as well that the contracting officer’s findings that an organizational conflict of interest does not exist and that individual conflicts of interest did not impact the procurement, were not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Plaintiff’s motion for judgment on the administrative record is therefore denied,” Judge Bruggink wrote in his order.

The company previously had filed a failed protest with the Government Accountability Office (GAO), which also ruled that the procurement process was fair and didn’t favor any particular vendor. Oracle had claimed that the process was designed to favor cloud market leader AWS.

It’s worth noting that the employee in question was a former AWS employee. AWS joined the lawsuit as part of the legal process, stating at the time in the legal motion, “Oracle’s Complaint specifically alleges conflicts of interest involving AWS. Thus, AWS has direct and substantial economic interests at stake in this case, and its disposition clearly could impair those interests.”

Today’s ruling opens the door for the announcement of a winner of the $10 billion contract, as early as next month. The DoD previously announced that it had chosen Microsoft and Amazon as the two finalists for the winner-take-all bid.


By Ron Miller

Snowflake co-founder and president of product Benoit Dageville is coming to TC Sessions: Enterprise

When it comes to a cloud success story, Snowflake checks all the boxes. It’s a SaaS product going after industry giants. It has raised bushels of cash and grown extremely rapidly — and the story is continuing to develop for the cloud data lake company.

In September, Snowflake’s co-founder and president of product Benoit Dageville will join us at our inaugural TechCrunch Sessions: Enterprise event on September 5 in San Francisco.

Dageville founded the company in 2012 with Marcin Zukowski and Thierry Cruanes with a mission to bring the database, a market that had been dominated for decades by Oracle, to the cloud. Later, the company began focusing on data lakes or data warehouses, massive collections of data, which had been previously stored on premises. The idea of moving these elements to the cloud was a pretty radical notion in 2012.

It began by supporting its products on AWS, and more recently expanded to include support for Microsoft Azure and Google Cloud.

The company started raising money shortly after its founding, modestly at first, then much, much faster in huge chunks. Investors included a Silicon Valley who’s who such as Sutter Hill, Redpoint, Altimeter, Iconiq Capital and Sequoia Capital .

Snowflake fund raising by round. Chart: Crunchbase

Snowflake fund raising by round. Chart: Crunchbase

The most recent rounds came last year, starting with a massive $263 million investment in January. The company went back for more in October with an even larger $450 million round.

It brought on industry veteran Bob Muglia in 2014 to lead it through its initial growth spurt. Muglia left the company earlier this year and was replaced by former ServiceNow chairman and CEO Frank Slootman.

TC Sessions: Enterprise (September 5 at San Francisco’s Yerba Buena Center) will take on the big challenges and promise facing enterprise companies today. TechCrunch’s editors will bring to the stage founders and leaders from established and emerging companies to address rising questions, like the promised revolution from machine learning and AI, intelligent marketing automation and the inevitability of the cloud, as well as the outer reaches of technology, like quantum computing and blockchain.

Tickets are now available for purchase on our website at the early-bird rate of $395.

Student tickets are just $245 – grab them here.

We have a limited number of Startup Demo Packages available for $2,000, which includes four tickets to attend the event.

For each ticket purchased for TC Sessions: Enterprise, you will also be registered for a complimentary Expo Only pass to TechCrunch Disrupt SF on October 2-4.


By Ron Miller

Salesforce’s Tableau acquisition is huge, but not the hugest

When you’re talking about 16 billion smackeroos, it’s easy to get lost in the big number. When Salesforce acquired Tableau this morning for $15.7 billion, while it was among the biggest enterprise deals ever, it certainly wasn’t the largest.

There was widespread speculation that when the new tax laws went into effect in 2017, and large tech companies could repatriate large sums of their money stored offshore, we would start to see a wave of M&A activity, and sure enough that’s happened.

As Box CEO Aaron Levie pointed out on Twitter, it also shows that if you can develop a best-of-breed tool that knocks off the existing dominant tool set, you can build a multibillion-dollar company. We have seen this over and over, maybe not $15 billion companies, but substantial companies with multibillion-dollar price tags.

Last year alone we saw 10 deals that equaled $87 billion, with the biggest prize going to IBM when it bought Red Hat for a cool $34 billion, but even that wasn’t the biggest enterprise deal we could track down. In fact, we decided to compile a list of the biggest enterprise deals ever, so you could get a sense of where today’s deal fits.

Salesforce buys MuleSoft for $6.5 billion in 2018

At the time, this was the biggest deal Salesforce had ever done — until today. While the company has been highly acquisitive over the years, it had tended to keep the deals fairly compact for the most part, but it wanted MuleSoft to give it access to enterprise data wherever, it lived and it was willing to pay for it.

Microsoft buys GitHub for $7.5 billion in 2018

Not to be outdone by its rival, Microsoft opened its wallet almost exactly a year ago and bought GitHub for a hefty $7.5 billion. There was some hand-wringing in the developer community at the time, but so far, Microsoft has allowed the company to operate as an independent subsidiary.

SAP buys Qualtrics for $8 billion in 2018

SAP swooped in right before Qualtrics was about to IPO and gave it an offer it couldn’t refuse. Qualtrics gave SAP a tool for measuring customer satisfaction, something it had been lacking and was willing to pay big bucks for.

Oracle acquires NetSuite for $9.3 billion in 2016

It wasn’t really a surprise when Oracle acquired NetSuite. It had been an investor and Oracle needed a good SaaS tool at the time, as it was transitioning to the cloud. NetSuite gave it a ready-to-go packaged cloud service with a built-in set of customers it desperately needed.

Salesforce buys Tableau for $15.7 billion in 2019

That brings us to today’s deal. Salesforce swooped in again and paid an enormous sum of money for the Seattle software company, giving it a data visualization tool that would enable customers to create views of data wherever it lives, whether it’s part of Salesforce or not. What’s more, it was a great complement to last year’s MuleSoft acquisition.

Broadcom acquires CA Technologies for $18.9 billion in 2018

A huge deal in dollars from a year of big deals. Broadcom surprised a few people when a chip vendor paid this kind of money for a legacy enterprise software vendor and IT services company. The $18.9 billion represented a 20% premium for shareholders.

Microsoft snags LinkedIn for $26 billion in 2016

This was a company that Salesforce reportedly wanted badly at the time, but Microsoft was able to flex its financial muscles and come away the winner. The big prize was all of that data, and Microsoft has been working to turn that into products ever since.

IBM snares Red Hat for $34 billion in 2018

Near the end of last year, IBM made a huge move, acquiring Red Hat for $34 billion. IBM has been preaching a hybrid cloud approach for a number of years, and buying Red Hat gives it a much more compelling hybrid story.

Dell acquires EMC for $67 billion in 2016

This was the biggest of all, by far surpassing today’s deal. A deal this large was in the news for months as it passed various hurdles on the way to closing. Among the jewels that were included in this deal were VMware and Pivotal, the latter of which has since gone public. After this deal, Dell itself went public again last year.


By Ron Miller

Microsoft and Oracle link up their clouds

Microsoft and Oracle announced a new alliance today that will see the two companies directly connect their clouds over a direct network connection so that their users can then move workloads and data seamlessly between the two. This alliance goes a bit beyond just basic direct connectivity and also includes identity interoperability.

This kind of alliance is relatively unusual between what are essentially competing clouds, but while Oracle wants to be seen as a major player in this space, it also realizes that it isn’t likely to get to the size of an AWS, Azure or Google Cloud anytime soon. For Oracle, this alliance means that its users can run services like the Oracle E-Business Suite and Oracle JD Edwards on Azure while still using an Oracle database in the Oracle cloud, for example. With that, Microsoft still gets to run the workloads and Oracle gets to do what it does best (though Azure users will also continue be able to run their Oracle databases in the Azure cloud, too).

“The Oracle Cloud offers a complete suite of integrated applications for sales, service, marketing, human resources, finance, supply chain and manufacturing, plus highly automated and secure Generation 2 infrastructure featuring the Oracle Autonomous Database,” said Don Johnson, executive vice president, Oracle Cloud Infrastructure (OCI), in today’s announcement. “Oracle and Microsoft have served enterprise customer needs for decades. With this alliance, our joint customers can migrate their entire set of existing applications to the cloud without having to re-architect anything, preserving the large investments they have already made.”

For now, the direct interconnect between the two clouds is limited to Azure US East and Oracle’s Ashburn data center. The two companies plan to expand this alliance to other regions in the future, though they remain mum on the details. It’ll support applications like JD Edwards EnterpriseOne, E-Business Suite, PeopleSoft, Oracle Retail and Hyperion on Azure, in combination with Oracle databases like RAC, Exadata and the Oracle Autonomous Database running in the Oracle Cloud.

“As the cloud of choice for the enterprise, with over 95% of the Fortune 500 using Azure, we have always been first and foremost focused on helping our customers thrive on their digital transformation journeys,” said Scott Guthrie, executive vice president of Microsoft’s Cloud and AI division. “With Oracle’s enterprise expertise, this alliance is a natural choice for us as we help our joint customers accelerate the migration of enterprise applications and databases to the public cloud.”

Today’s announcement also fits within a wider trend at Microsoft, which has recently started building a number of alliances with other large enterprise players, including its open data alliance with SAP and Adobe, as well as a somewhat unorthodox gaming partnership with Sony.

 


By Frederic Lardinois

Announcing TechCrunch Sessions: Enterprise this September in San Francisco

Of the many categories in the tech world, none is more ferociously competitive than enterprise. For decades, SAP, Oracle, Adobe, Microsoft, IBM and Salesforce, to name a few of the giants, have battled to deliver the tools businesses want to become more productive and competitive. That market is closing in on $500 billion in sales per year, which explains why hundreds of new enterprise startups launch every year and dozens are acquired by the big incumbents trying to maintain their edge.

Last year alone, the top 10 enterprise acquisitions were worth $87 billion and included IBM’s acquiring Red Hat for $34 billion, SAP paying $8 billion for Qualtrics, Microsoft landing GitHub for $7.5 billion, Salesforce acquiring MuleSoft for $6.5 billion and Adobe grabbing Marketo for $4.75 billion. No startup category has made more VCs and founders wildly wealthy, and none has seen more mighty companies rise faster or fall harder. That technology and business thrill ride makes enterprise a category TechCrunch has long wanted to tackle head on.

TC Sessions: Enterprise (September 5 at San Francisco’s Yerba Buena Center) will take on the big challenges and promise facing enterprise companies today. TechCrunch’s editors, notably Frederic Lardinois, Ron Miller and Connie Loizos, will bring to the stage founders and leaders from established and emerging companies to address rising questions like the promised revolution from machine learning and AI, intelligent marketing automation and the inevitability of the cloud, as well as the outer reaches of technology, like quantum and blockchain.

We’ll enlist proven enterprise-focused VCs to reveal where they are directing their early, middle and late-stage investments. And we’ll ask the most proven serial entrepreneurs to tell us what it really took to build that company, and which company they would like to create next. All throughout the show, TechCrunch’s editors will zero in on emerging enterprise technologies to sort the hype from the reality. Whether you are a founder, an investor, enterprise-minded engineer or a corporate CTO / CIO, TC Sessions: Enterprise will provide a valuable day of new insights and great networking.

Tickets are now available for purchase on our website at the early-bird rate of $395. Want to bring a group of people from your company? Get an automatic 15% savings when you purchase four or more tickets at once. Are you an early-stage startup? We have a limited number of Startup Demo Packages available for $2,000, which includes four tickets to attend the event. Students are invited to apply for a reduced-price student ticket at just $245. Additionally, for each ticket purchased for TC Sessions: Enterprise, you will also be registered for a complimentary Expo Only pass to TechCrunch Disrupt SF on October 2-4.

Interested in sponsoring TC Sessions: Enterprise? Fill out this form and a member of our sales team will contact you.


By Alexandra Ames