In my previous post on Containerization I covered some of the, somewhat substantial, advantages of using containerization (e.g. Docker) in your infrastructure. However, there are tradeoffs - many of them already covered, such as lack of true (secure) isolation between the containers.
This post will skip some of those technical drawbacks, which inevitably will need to be handled in the core technology. Instead, we'll be looking at other pieces of the management and orchestration ecosystem that may need to be updated, changed, or replaced.
What is the opportunity?
As an investor, I'm always looking for gaps that can be filled by new technologies, and preferably, new companies. Any time a new Infrastructure paradigm is introduced, it generally breaks many of the other tools around the old paradigm. Each time something breaks, there's an opportunity for a new technology, and hence company.
As I look at the Docker ecosystem the question then becomes - what other tools around this ecosystem need to be built, and which portions of it are large enough gaps that they will spawn new standalone companies.
I like to think of these tools in concentric circles, and the VMWare ecosystem is a good analogy for the opportunities we may see in the docker ecosystem:
What is clear is that, while VMware started just with the hypervisor, because of the lack of tools to manage virtualized environments, they had to build out the second layer of management and orchestration tools around that hypervisors themselves. This means that, while the virtualization ecosystem is massive, most of the 3rd party companies that were built around it were created in the 3rd tier: the tools such as monitoring and security around the core operations, orchestration and management of the environment. The core operational tools, however, were subsumed and built over time by VMWare.
Now let's juxtapose that against the KVM ecosystem. It's a closer analogy to Docker given the open source roots of the product. It turns out that the KVM ecosystem is similar to VMware's in that the tier-2 tools are also mainly provided with the core product.
Aside: This image is still not quite granular enough. There are key portions of the Tier 2 layer that are provided by 3rd parties, such as job scheduling and placement automation (which is slowly being improved by the core tools) and devops automation (see Chef, Puppet, Jenkins...). So it's not to say that there aren't opportunities in Tier 2; rather that they are often at the risk of being subsumed by the core technology.
So let's extend the analogy to the Docker ecosystem. Currently Docker provides the core Tier 1 Container technology, as well as a few key pieces of the management systems in Tier 2 (e.g. the Container image registry). But for now, these tools outside of the core Docker engine, are only provided by Docker because they're required to make the whole system work (e.g. you can't have sparse containers unless you have a core registry of standard container images - so they have to provide the image server):
Who Dares to Live in Tier 2?
So what are people actually using right now to fill out Tier 2 in containerized infrastructure? There are a few options, depending on the type of company:
- Build your own: This is the way the big guys are doing things (Google, FB, Twitter) They have the ability to build these tools internally. Differing levels of sophistication from simple collections of scripts, to fully fledged tools that could likely be open-sourced.
- Use specialized tools: There is a growing cadre of containerization-first management and orchestration tools. Most of them grew out of the aforementioned internal projects at the large web companies. Think Mesos, CoreOS
- Retool legacy tools: Many of the legacy orchestration tools are adding support for containers. There will be varying levels of capabilities and trade-offs that these tools have, depending on how tied to the assumptions of virtualization they are. The progressive ones (Chef, Puppet...) already have pretty good support; but don't hold your breath for tools from the true legacy providers (CA, BMC, Software.ag...)
So here's the question - how many of these core features will be subsumed by Docker as they expand their toolset; or how many will actually be long-term gaps that companies can grow into.
Frankly - it's a little early to tell; but as a betting man, I'd expect things to go along the lines of the VMWare / virtualization ecosystem. These features will eventually be features of the core Docker toolset.
The more interesting question as an investor is, how long will it take them to build them out? If it's a matter of 1-2 years there likely won't be any chance for companies to grow up in this space; but if they have so much work to do on the core Container system that it takes them much longer than ~2 years to roll out these tools, then there may actually be time for other companies to get a big enough foothold here to reach thermal runaway as standalone businesses.
I'd keep my eye on CoreOS and Mesos in this category.
What about Tier 3?
Tier 3 , in my mind, is a lower risk (but probably lower reward) place to look for investment opportunities.
The lower risk is because you eliminate the risk of Docker subsuming your features. Instead, you are saddled only with the underlying "market" risk of whether or not Docker takes off. Juxtapose this against tools in Tier 2 where you have both the market risk of needing Docker to take off, AND you run the risk of Docker eating your lunch.
Lower reward in this tier is a little more tenuous to prove. I'd have to point to the market cap of VMware itself at $42.5B, vs the (reported) valuations of virtualization monitoring companies AppDynamics and NewRelic in the $1.5B to $3B range.
In other words, the potential market size of running the core infrastructure appears to be orders of magnitude larger than the size of any particular tool category around it in Tier 3. All of the tools combined in Tier 3 may have a larger market size, but any particular category of tool will likely be much smaller.
So where are the areas of opportunity in Tier 3? Let's look back to the virtualization world for inspiration. Historically, the Tier 3 tools that have built interesting, growing, or large companies have been Monitoring (application layer, and infrastructure), Security, and Inventory Management (in large Enterprise). There are probably another 3-5 categories below this on the list, and arguably, these are very broad categories; but as we look for opportunities that will be buoyed by the rising tide of Docker, these are the first 3 areas we'll be looking.
Any fundamental change in core architecture forces all of the tools around that infrastructure to adapt. Some can, but many simply cannot and must be replaced - they are obsoleted. Any time a technology is obsoleted is an opportunity for a new company to be built in its wake.
If Docker truly takes off, there are going to be hundreds of technologies that are obsoleted and hence hundreds of opportunities to build new companies.
We're seeing just the start of this shift, and I'm excited to spend the next few years exploring all of the opportunities that will arise.