and through them, all of us
As Ballmer put it so energetically in the past, it always comes down to developers. Developers are always at the forefront of technology, but they haven’t always been served directly by technology. The previous paradigm of tech unicorns built their fortune on the backs of developers by convincing them to build within their walled gardens and then taking profits off the top. These tech giants subsidized the tooling as a public good since they reaped most of the value created within their gardens. Developers had plenty free tools to build with, but the experience was always what you’d expect with a public good — sufficiently working, but never mindblowingly good. VCs also hesitated to invest into the space because it’s hard to compete with free, and the value accrued to platforms.
However, more recently, as developers began to take power back from the walled gardens, some of the most valuable tech companies have won by building directly for developers — from public giants like Atlassian, MongoDB, Splunk, Datadog, Elastic, and Twilio to private unicorns like Stripe, Auth0, HashiCorp, Elastic, Snyk, and Unity. These companies and their peers have already created hundreds of millions of dollars in enterprise value and are still growing quickly. We are seeing an acceleration in the funding and adoption of developer-serving technologies which not only gives developer more superpowers but also has huge implications for businesses and product in the next iteration of the web.
Huge seismic shifts creating new building blocks
One of the reasons we’re seeing more innovation than ever in the developer space is because the existing landscape of software development is undergoing seismic shifts, at a faster pace than ever before. This not creates more opportunities for new products to solve new problems, carving out both wallet-share and mind-share from developers, it also creates new building blocks and dynamic infrastructures for developers to experiment with:
1.Breaking down of monolithic applications into microservices adds a lot of devops complexity but also entry & exit points for new software and data feeds. 84% of surveyed mid-to-large organizations have embraced microservices, on average, deploying 180+ microservices each.
Kong 2020 Digital Innovation Survey of 200 Senior IT leaders in orgs with >1K employoees
2. There are now way more composable building units for developers to build on top of as APIs proliferate, partially due to microservices & popularity of GraphQL. There are more than 50,000 public APIs, and >60% of companies invested in a public-facing API.
Cloud Elements State of API Integration Survey 2019 of 350 API enthusiasts in >20 industries
3. Crypto protocols with native capabilities like payments, compute, identity, and liquidity allows developers to easily build business models into their projects without expending too much capital upfront to build out entire infrastructures to support these.
4. Accelerated adoption of containers and Kubernetes means applications are portable across different infrastructures, with ~90% of companies running containers to maintain flexibility, save on infrastructure, and increase developer efficiency.
Portworx Container Adoption Survey 2019 501 IT pros in companies >500 employees
6. Process innovations accelerating as well. Increased CI/CD adoption across enterprises requires new tools and processes across the organization.
7. How companies work with data is changing rapidly with advances in ML, with increasing focus on operationalizing big data and data engineering. 62% of companies are getting ML models deployed into production or have deployed them for already for several years.
These shifting landscapes create new complexities but also new building blocks for developers, and the core value prop of the next web is developers building with powerful web functionalities at a fraction of the risk. This will undoubtedly lead to a proliferation of experimentation and innovation.
From a “support” to a “build” mindset
Meanwhile, as all companies start to become technology companies, business priorities converge with developer priorities, so developers are empowered to build business solutions directly:
There used to be a bifurcation between technology needs and business needs, because technology was seen as efficiency tooling (thus a cost center) for the business functions, but a whole lot was lost in translation between the builders and the users, and you’d end up with systems that looked like this:
Actual VMDS Interface from 2006
This is increasingly no longer the case. As all companies transform into technology companies, technology becomes a core part of the product. It only makes sense that the people building that technology are empowered to make the most important decisions about the products and services the companies use.
This is extremely good for enterprises because business priorities can be integrated directly into the developer workflow rather than outsourced to separate, siloed teams. For example, as system performance became increasingly important to software companies, these metrics became integral to the developer workflow rather than outsourced to a separate ops team. Datadog emerged as a unicorn by helping dev teams directly monitor performance for the full stack as enterprise infrastructures shifted to cloud and the processes shifted towards DevOps. Synk similarly helped developers build open source code security into the process itself, allowing its customers to address issues at the root rather than rely on separate processes to find and fix them. We think there is room for many more business priorities to be integrated directly into the development workflow, such as authentication and privacy (Magic.Link, Evervault, Metomic) and cloud optimization (Northflank, Env0, Cloudskiff).
As technology shifts further from a cost center to a profit center, developers can help the whole organization become superusers of technology to ruthlessly optimize productivity. Developers are naturally power users, and translating their processes to the rest of the organization can mean huge productivity gains. This A16Z talk from David Ulevich describes some compelling examples of developers’ typical ways of working which can seem eons ahead of our business processes. For example, developers are used to collaborating asynchronously in a seamless way using tools like Github, and products like Figma and Jam.dev are helping to extend this concepts to the design and product teams, but many business users are still stuck using inefficient naming conventions (v1, v2, vFinal, vFinalFinal, etc.) on static files to keep track of versions and sending them back and forth via email. Developers also prefer to use the most simple method of communication as that is basically what code is, and business users are also starting to catch on to command line communication in tasks like email (Superhuman), notes (Notion), and messaging (Slack).
As advances in ML continues to perfect machines’ ability to synthesize what already exists, being on the forefront of what’s new will become one of the most marketable skills. Developers don’t just write code, they hang out on the bleeding edge of technology for fun. While many have enterprise day jobs, they also have nights and weekend projects which are fertile grounds for testing the newest advances in technology, essentially serving as a free R&D product pipeline for enterprises. This is also a sweet spot for many developer-facing companies to address with free or low-cost product. Whereas it may be difficult to convince a fortune 100 to shift to a completely new user authentication tool, it is much easier to convince a developer to use it for his/her nights and weekend project, until there is enough critical mass for the many superusers together to champion the adoption of these new technologies into larger enterprises.
This kind of technology adoption has two GTM motions — the bottoms up product-driven growth of a consumer-facing product with the potential of achieving virality — and the top down enterprise sales approach with the potential of achieving high ACVs and loyalty. Perfecting this growth strategy is a powerful opportunity for developer facing companies. This leads us to us to our next topic.
New ways to think about sales and product
Developers at the center of businesses have huge implications on marketing and sales, product, and business models. Companies like Asana, Slack, and Figma have already begun to refine these methodologies, but the science area is still nascent compared to traditional enterprise sales. These are just a few non-exhaustive examples:
“Consumery” customer acquisition channels such as digital communities, developer evangelism, conferences / hackathons, great documentation, agency partnerships, etc. with implications on how to measure and refine the funnel and ROI for each.
A single stakeholder (or champion) sale with multiple “checkpoints” baked into the product journey, signaling depth of enterprise penetration, rather than a multi-stakeholder sign-off, all-or-nothing sale. This has implications on which initial stakeholder to target and how to help your champion sell into the enterprise (tiered pricing, documentation, case studies, business cases, etc.).
More potential for virality thus a need to better harness it when it happens but also how to precisely layer in the more cadenced, predictable enterprise sales approach once “landed”.
Developers are the most critical customers, so product experience is really important, much earlier than a traditional enterprise product. The “buttery-smoothness” of a user’s experience, which we often ascribe to consumer products applies much more here, with emphasis on documentation and onboarding.
More informed and vocal customers as well requiring innovative ways to channel product feedback. Many developer-facing companies include their customers in the product development process as well as roadmap prioritization decisions as a core product feature. This can sometimes be a key reason for adoption because devs, unlike any other enterprise customers, have the option of potentially building it themselves.
Sales needs to support product. You cannot over-sell and under-deliver for developer-facing products, but there are important applications of the science of enterprise sales to increase ACV once the product has gained a foothold within an organization.
Different monetization paths paves the way for more flexibility in the business models and a reduction in risks overall. From paid APIs, licensing agreements, to crypto tokens, developer-facing companies can price their services in a plethora of ways to carve out value. Companies can also use this to lengthen or shorten the timeline of value realization to make better decisions about how to capitalize the company.
The next level of abstraction in software development: doing more with more
Some may say that the low/no-code movement one day will eliminate the need for developers, and while it is true we are already seeing a blurring of the lines between developer tools and business productivity tools, I highly doubt this will be the case. At the highest level, developer are just experts at abstracting technology tools up a level to help other users use them. The better the tools get, the less work the developer has to do each time. When a business user can leverage basic technology building blocks themselves to achieve their outcomes, the entire organization benefits. Low/no-code platforms help fill the gap in developer resources within an enterprise.
Meanwhile, the components making up these building blocks are also getting more complex and powerful, requiring more developers to abstract them up into useful business applications. For example, the level of developer experimentation we’ve already seen with extremely complex open source technologies such as ML (e.g. GPT-3) and Crypto-protocols (e.g. Ethereum) is already staggering, but it will still take a while before an average business user will touch these technologies using low/no-code tools.
Also, if you think about how much of the world is still unserved by technology, it’s easier to imagine that the no/low-code movement will only create more need for developers. Developers will be the shepherds of technology to the rest of the organization, and these no/low-code platforms will be their collaboration ground.
Ultimately the venn diagram of creators technology, consumers of technology, and the buyers of technology are converging on developers, a population that is growing in its definition day-by-day. This means the pace of technological innovation should accelerate dramatically in the coming years, in ways we can’t yet envision.
We have been diving deeply into this space at Northzone and are excited for what’s to come. The future looks bright for devs, and through them, all of us.