I have seen a lot of billion dollar valuations lately that have left me scratching my head. Many of those are in the B2C or social media space where companies are measured more on “eyeballs” (the number of active users) and less on things like revenue or business models. So after Docker cracked the billion dollar club with a $95M round I decided to research exactly what it is about containers that could drive this type of valuation.
I have been covering Docker since the company, then called dotCloud, was toying around with the idea of pulling the Docker technology out of their core product and releasing it as an open source project. I saw the value of containers very early on. What I did not see coming was the vision that CEO Solomon Hykes laid out before our eyes at Docker Con in San Francisco last month. Hykes proclaimed for the next 5 years, Docker was going to “build a software layer to make the Internet programmable.” Now that makes them much different than simply being a container company. In fact, Hykes pointed out that containers make up only about 5% of all Docker code. What is the other 95% you may ask? It is a collection of tools to make “IT Plumbing” simple and agile. The Docker toolbox has a wide variety of services in areas like orchestration, security, integration, scheduling, networking, storage, load balancing and much more.
The Aha moment for me was when Hykes discussed this next slide:
Docker is much more than containers. It is the new way to build applications in a world where we are expected to deliver quickly in complex, heterogeneous environments. To make more sense of this, I summed up the value of Docker in the following 5 categories:
1) Future of Distributed Applications
Docker is building a toolbox for enterprises to assemble their own platforms. I sat through multiple customer presentations and in each case customers were using Docker (and myriad other tools) to create their own custom platforms. With these platforms, the customers were abstracting away all of the IT plumbing (network, compute, storage) and providing their developers with an agile development environment with policies and controls baked in. Docker enables developers to quickly and easily assemble and integrate many different technologies that can scale and work across multiple cloud or non-cloud environments without a heavy reliance on people manually configuring and managing these highly complex architectures.
2) New kind of PaaS
What the folks at Docker learned from being a pure play PaaS player in the dotCloud days is that enterprises are really complex beasts with a lot of legacy systems and far too many permutations of technologies for a one size fits all PaaS solution. Traditional PaaS solutions make sense for some workloads and some organizations but many enterprises don’t want to be constrained by the limitations of pure PaaS solutions. Also, not all legacy workloads and investments in older technology stacks migrate well to PaaS. With Docker, companies are choosing to “roll their own” platforms with fewer constraints while being inclusive of their existing technology stacks. This is a much different approach than trying to migrate old systems into the constraints of a pure play PaaS solution. Sure, some companies want simplicity and are willing to work within the constraints of a PaaS solution, but many others would rather invest in customizing their platform to their exact requirements. In the past this customization was complex, expensive and time consuming. Today, Docker makes it feasible and even easy.
3) Dealing with Lock-in
Another pushback enterprises often have with PaaS and IaaS is the fear of lock-in. Although there is no way to totally avoid lock-in, Docker just introduced a pluggable framework where a customer can pick and choose any services within Docker or integrate “plug in” services from other providers. Some services that Docker offers are load balancing, service discovery, and authentication. A customer may already have an investment or a preference for a different load balancing solution or have a homegrown authentication solution that they want to leverage. With the new plugin architecture, the customer can assemble in Lego-like fashion the preferred services to meet the requirements of their desired platform. With Docker, companies can build a higher level of abstraction above their existing PaaS and IaaS layers and create the opportunity to port workloads to almost any environment. In fact, almost every major PaaS player has already integrated with Docker.
4) Hybrid Cloud Story
Nirvana for many CIOs is to have a hybrid cloud solution where developers build solutions and deploy on any infrastructure. CIOs want to leverage public clouds as much as possible to deal with things like scalability and to get out of the data center business, but at the same time they may want to put certain mission critical applications or datasets on-premises or managed in a private cloud. Up until now, hybrid clouds looked real nice on Power Point decks but implementing them has been as challenging as getting a budget passed in Congress. It is incredibly hard to do, way too expensive, and takes too long to implement. Docker and its budding ecosystem promises to make hybrid cloud a reality in the near future.
5) Robust Ecosystem
Speaking of budding ecosystems, maybe the biggest reason why Docker has joined the billion dollar club is its robust ecosystem. In a discussion I had with Adrian Cockcroft from Battery Ventures (formerly from Netflix), Adrian said this about the importance of ecosystems:
“If you want to raise a lot of money, it is really good if you can be the center of an ecosystem and have lots of companies orbiting around you… that’s the real value Docker has…they have built and are maintaining an extremely vigorous ecosystem.”
A few months back some colleagues and I were discussing whether Docker was overhyped. In some ways we could say that they are, since some people think Docker can solve world hunger. But when a cloud giant like Amazon integrates with a small company like Docker when the product is in Beta, I have to believe that it’s the real deal. In fact Google, IBM, Red Hat, and many others bet on Docker a year ago when Docker was reminding us daily that it was not GA. Since going GA, Microsoft has joined the ecosystem. In fact, in the last 6 months, Microsoft, yes that’s right, Microsoft is the number one open source contributor to Docker.
A flurry of startups have emerged to fill in certain gaps in areas like management, orchestration, and security. These companies are also raising money with ease as VCs are all betting big on containers. Here are some recent examples:
- ClusterHQ (container management) – $12M Series A in February 2015
- Sysdig (container monitoring) – $10.7M Series A in July 2015
- Twistlock (container security) – $2.5M seed finding in May 2015
- Rancher Labs (container management) – $10M series A in June 2015
- SocketPlane (container networking)- Purchased by Docker in March 2015
What we may be witnessing here is a robust new ecosystem similar to what VMware created several years ago. The VCs that bet on VMware years ago made out well and I am sure many VCs see a similar opportunity forming with Docker.
Docker has recently joined the billion-dollar club but don’t roll your eyes. This billion-dollar dreamer may have what it takes to live up to its valuation. Expect to see many 2016 IT budgets carving out funds for exploring containers. For those early adopters, expect to see a surge in production use cases in 2016.