1、 Disruptive Software Series CloudBees Enabling Continuous Innovation,Driving Business Goals for the Enterprise Software|Conference Call We had the pleasure of hosting the CEO of CloudBees,Sacha Labourey,as part of our Disruptive Software Series.CloudBees is one of the most prominent innovators in th
2、e DevOps community,offering a complete software delivery management system that enables enterprise IT to become more agile,accelerate innovation and drive business results.Key takeaways include:DevOps Still in the Early Innings,Long Tail:Mr.Labourey elaborated on the opportunity for CloudBees as lar
3、ge enterprises look to embrace DevOps practices and become more agile.Enterprises recognize the threat of being digitally disrupted and realize they need to become software companies to thrive and survive.However,most enterprises are found wanting when it comes to implementation.The biggest challeng
4、e remains culture and people digital transformation is a long journey that takes time,and requires internal leaders to champion the cause.Organizations often perceive faster release cycles as risky,though CI/CD(Continuous Integration/Continuous Delivery)actually automates manual processes and increa
5、ses efficiency,leading to fewer failures,better quality control and faster recovery.Organic Growth but Needs Buy-In from Enterprise IT.Typically a handful of teams within enterprises organically adopt DevOps practices,i.e.ecommerce team with high velocity software development needs.For many organiza
6、tions,DevOps is currently funded through special projects but large spending can only be unleashed when formal top-down decisions are made.The process can take a long time,and can be very lumpy.Competition Forces Transformation:While the benefits and value of faster software releases and DevOps prac
7、tices are intuitive,it is typically competitive threats that force organizations into digital transformation projects.Mr.Labourey referenced the disruption in the auto industry as an example,where incumbents invested heavily into software development practices following Teslas(U,Dan Levy)software-dr
8、iven differentiation.Jenkins and CloudBees:Mr.Labourey compared Jenkins,the software underlying the companys flagship product,to an assembly line in a factory it orchestrates the plethora of tools across the entire software development lifecycle.As a CI/CD server,Jenkins forms the backbone of a comp
9、anys software development effort and is critical to IT operations.CloudBees provides enterprise-grade Jenkins in an open core business model,leveraging the vibrant Jenkins open-source ecosystem.CloudBees Vision and Strategy:The company intends to balance its commercial interests with those of the op
10、en source community,and by no means intends to monetize the entire installed base.The company has evolved over time,driven by customer needs,from offering a PaaS in its early days to now providing an end-to-end automated software delivery system centered around Jenkins.In financial terms,the busines
11、s is expected to exceed$100mn ARR and reach breakeven by the end of this year.Net Retention Rates are at about 120%.17 September 2019 Equity Research Americas|United States DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AN
12、D THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this
13、 report as only a single factor in making their investment decision.Research Analysts Brad Zelnick 212 325-6118 brad.zelnickcredit- Syed Talha Saleem,CFA 212 538 1428 syedtalha.saleemcredit- Rachel Lauren 212 325 5074 rachel.laurencredit- 17 September 2019 Disruptive Software Series 2 Company Profil
14、e Figure 1:Company and Management Profile Source:Company data,Credit Suisse Research Leadership TeamSacha Labourey,CEOSacha Labourey founded CloudBees in 2010 and is currently the CEO.In his prior roles,he led the European headquarters for JBoss and led the strategy and partnerships that helped fuel
15、 the companys growth in the region.In 2005,he was appointed CTO of JBoss,before taking on the role of Co-General Manager of Red Hats middleware division.Kohsuke Kawaguchi,CTOKohsuke Kawaguchi has been the CTO of CloudBees since 2014.Prior to his role as CTO,he served as an elite developer and archit
16、ect for CloudBees since 2010.Mr.Kawaguchi is best known as the creator of the Jenkins,the open source software project underlying CloudBees enterprise offerings.While working at Sun Microsystems he was the primary developer of Hudson project(now Jenkins).He is also the recipient of the 2011 Google-O
17、Reilly Open Source Award for his work on the Jenkins project.Matt Parson,CFOMatt joined CloudBees from Red Hat,where he was treasurer and an integral part of the finance team.During his 12+years there,Red Hats revenue grew from$200 million to almost$3 billion,and it became the largest open source en
18、terprise IT company in the world.Earlier in his Red Hat tenure,Matt held the position of EMEA finance director,later becoming international controller.In the latter role,he established new entities and managed finance teams across Europe,Asia and South America.Company ProfileFounded:2010Funding to D
19、ate:$121mnFunding Rounds:6 Business ModelProprietary solutions and enterprise support,on top on open-source JenkinsFinancial MetricsExpected to cross$100mn ARR and break-even current fiscal year,with Net Retention Rates of 120%Products:CloudBees CoreCloudBees DevOpticsCloudBees FlowCloudBees Rollout
20、CloudBees CodeShipCloudBees AcceleratorCloudBees Jenkins SupportAcquisition HistoryRollout.io June 2019Electric Cloud April 2019CodeShip Feb 2018FoxWeave July 2013Star Networks Dec 2010InfraDNA Nov 2010CloudBees is a powerhouse in the DevOps community,known for its CI/CD solutions built on top of op
21、en source Jenkins.The companys strong product roadmap and visionary leadership has made it one of the key vendors to enable software development innovation.17 September 2019 Disruptive Software Series 3 Figure 2:CloudBees Core Product Overview Source:Company data,Credit Suisse Research CloudBees Cor
22、eCloudBees CoreCloudBees Core extends Jenkins with proprietary solutions that provides tools for easier management at scale,through a centralized platform.The solution becomes more useful as a large organization becomes more mature in its implementation of Jenkins(with numerous Jenkins master server
23、s across a global development operations).CloudBees Operations Center provides centralized management across Jenkins masters.Cluster operations enable admins to seamlessly run Groovy scripts and other actions across specific Jenkins master servers.Operations Center enables the sharing of nodes provi
24、ding specialized capabilities across masters in the Operations Center cluster.With Operations Center,a large organization can move away from a single master and into a multi-master and distributed pipeline architecture,reducing upgrade/administration complexity and eliminating the risk from a single
25、 point of failure.Security:o CloudBees Role Based Access Control(RBAC)plugin enables role-based access control within Jenkins,preventing users intentionally/accidentally accessing repositories they shouldnt have access to.o CloudBees Folders Plus plugin provides additional capabilities not available
26、 in the free Folders plugin,including the ability to restrict the use of build agents to specific folders,and get additional health reports for jobs within a folder.This enables segregation of specific job executions onto specific agents only.o Pipeline Templates enable template to be designed as pe
27、r the organizations security policies.Other Enterprise Functionality:o Ability to verify plugin compatibility with a new version of Jenkins before upgrading,as well ability to copy jobs from one Jenkins master to another.Versions:CloudBees Core comes in two flavors-traditional VM-based and Kubernete
28、s-based.CloudBees Core is the flagship product for the company,providing enterprise functionality on top of open source Jenkins.CloudBees Core can be deployed on-premise or on the cloud via cloud marketplaces(AWS,Azure and GCP)Select Competitors17 September 2019 Disruptive Software Series 4 Transcri
29、pt Brad Zelnick:Good morning,everybody.Welcome to the latest installment of our Disruptive Software series,a conference call series where we are joined by the most innovative companies out there in the wild.This time,very delighted to be joined by somebody who I have known for several years and is m
30、ore recently the CEO of CloudBees.I think I originally got to know you at Red Hat.But welcome today,Sacha.Sacha Labourey:Thank you,Brad.Very happy to be here with you today.Brad Zelnick:Awesome.So again,the format of this call is going to be a fireside chat.Ive got a bunch of questions I wanted to a
31、sk Sacha so we can all learn more about CloudBees and whats happening with this DevOps revolution more broadly.If anybody online would like to ask a question,just go ahead and send an email to me at brad.zelnickcredit- and Ill try to work it into the conversation,but without further ado,lets jump ri
32、ght in.Actually,my last point before we jump in is I want to congratulate Sacha for just this week having been awarded CloudBees as part of the Forbes Top Cloud 100 awards,which I think you guys received just a couple of days ago,so congratulations on that.But maybe just to kick off,Sacha,you had a
33、very successful stint at Red Hat before you founded CloudBees as part of the JBoss business I recall initially.Can you just tell us why you started CloudBees?What was the opportunity you saw back then and how its unfolded since starting the company?Sacha Labourey:Sure.Yes,absolutely,and thank you,Br
34、ad.We were very happy for the award,indeed.Yes,weve known each other for quite a while and I know youve been following Red Hat very closely as well,so open source was always very cost structure focused with Win X.And JBoss was interesting because it was one of the first open source phenomena for dev
35、elopers,by developers with a commercial frontend.And the idea was really how to make the life of developers better and easier.So that was pretty unique.And so,when AWS started,so the first cloud players started,for us it really clicked that we could get an even better way to 17 September 2019 Disrup
36、tive Software Series 5 help developers so they can have an impact by removing the friction that still existed,right,because with JBoss you still had to deploy it,talk to ops,get servers running,and so on.So“could we do better”was really the idea.And so,we created this first platform as a service,and
37、 our vision was really to enable developers to go from an idea to production in just minutes.And our background was pretty specific given that we were coming from Red Hat and JBoss who are more focused on bigger organizations which was more JBoss-like,and were not so much focused on what wed call th
38、e one man,one dog company-There were already a number of PaaS offerings for that.And I mentioned that because for more enterprise type of customers,software has to follow some processes,right,some lifecycle.Its not just“I create some post script or ruby code and I push it to production”.You need to
39、store the code to continuously build,test,deliver.So it was really covering the full lifecycle,and that was pretty unique.We were really the first ones to do that.And at the core of the story was an open source project called Jenkins.That was core to our platform as a service.It was really orchestra
40、ting this lifecycle Im talking about.And at the end of this lifecycle,it was deploying application to the PaaS.And it worked really great.Thats what we did for the first few years at CloudBees.We enabled developers to have an impact.We got pretty good success with business units,smaller companies be
41、cause they were not getting what they needed from central IT essentially.So you had gray IT or shadow IT that was really a good customer for us,but we felt that the business was not accelerating fast enough.It was fine,right,but more linear than anything else.And I think one of the reasons was there
42、 was no standardization.I was just talking about JBoss,there was a J2EE standard,so companies could bet on one thing and trust that.Remember at that time there was no Docker,no Kubernetes.Kubernetes is only 4-years-old even though it seems weve been talking about Kubernetes forever.But its only 4-ye
43、ars-old now since their wonderful release.17 September 2019 Disruptive Software Series 6 And the bottom line is that there was not this fast adoption cycle,but the reality was that everybody liked the idea of iterating fast,deploying,and constantly deploying new features to production to measure the
44、 impact,but they always wanted something different.They wanted to do it on-premise or with their own app server and their own PaaS.So in 2014,we decided to really focus on what was working on the CI/CD notion continuous integration and continuous delivery.And on Jenkins,that was a core of that,and s
45、ince then thats what weve been doing in the cloud,on-premise or in the hybrid fashion.And so,thats where we are today.Brad Zelnick:Excellent.Thank you for that for that intro.And just to dig a little bit deeper,if I think of CloudBees and Jenkins,these are some of the most recognized faces of the De
46、vOps community.Can you tell us how you see the DevOps revolution playing out over the next decade?How far along are we and what are some of the biggest challenges in going from the old waterfall software development paradigms to iterating and moving quickly and continuously developing and deploying
47、as we are today?Sacha Labourey:Yes,its very interesting because obviously some organizations were born in DevOps and do CI/CD from scratch.Everybody has the Netflix of the world in mind.We also have some younger organizations where they were born this way.And so,its just very normal to them.But I th
48、ink its more interesting to watch the bigger organizations with some history.And while a few organizations are pretty far along,I think today its very much a minority,and weve certainly reached a point where a lot of the organizations are aware they need to become a software company,but the brain ha
49、snt quite connected with the body yet if you know what I mean.Its one thing to say Yes,we should this is where we need to go,but to actually put things in motion and walk the talk is a different thing.And so,I think what makes this so exciting and an amazing time to be in IT with public cloud,contai
50、ners,Kubernetes,CI/CD,its actually also what makes it very challenging for those organizations because its not just how I can adopt CI/CD.Their entire world has been challenged.17 September 2019 Disruptive Software Series 7 The way theyve done things,built things,the way they did infrastructure and