1. 1 Re-engineering Engineering Vinod Khosla Kleiner Perkins Caufield & Byers vkhosla@kpcb.com Sept 2000

2. 2 …every strategic inflection point [is] characterized by a 10X change … Theres wind and then there is a typhoon, there are waves and then theres a tsunami - Andy Grove Theres Change And Then There Is Change!

3. 3 he Environment

4. 4 The Environment Hyper efficiency or Adam Smith II Hyper efficiency or Adam Smith II Hyper speed Hyper speed Winner take all economy Winner take all economy Value add transparency Value add transparency Risk as a requirement? Risk as a requirement? Change as a process Change as a process Technology as a driver Technology as a driver Diseconomy of Scale Diseconomy of Scale Technostructure & Infostructure Technostructure & Infostructure

5. 5 Environment: Change as a Process Business model evolution everyday! Business model evolution everyday! Infrastructure renovation Infrastructure renovation Systems evolution Systems evolution Strategy evolution Strategy evolution

6. 6 Environment : Technology as a Strategy Drivers

7. 7 Environment : Diseconomies of Scale Diseconomies of process / hierarchy Diseconomies of process / hierarchy Time for information disbursement Time for information disbursement Lack of real time – poor cost & poor partner experience Lack of real time – poor cost & poor partner experience The six month learning curve edge in a short product cycle world! The six month learning curve edge in a short product cycle world!

8. 8 Technostructure & Infostructure Specialization & complexity of technology Specialization & complexity of technology Decision-making: top down or bottom up? Decision-making: top down or bottom up? The role of the fringe employee The role of the fringe employee Nuances as pitfalls Nuances as pitfalls Horizontal & vertical communication & cooperation - not top down Horizontal & vertical communication & cooperation - not top down Information based, dynamic decision making Information based, dynamic decision making

9. 9 The Environment -Its Not About a Website Brand building – pull vs. push vs. information Brand building – pull vs. push vs. information Product marketing & research- a new paradigm? Product marketing & research- a new paradigm? Cost of services and goods Cost of services and goods New variables– customer database, personalized product New variables– customer database, personalized product Logistics (Fed Ex), buying (FreeMarkets), admin. Logistics (Fed Ex), buying (FreeMarkets), admin. Operations: ordering, billing, service, returns, inventory... Operations: ordering, billing, service, returns, inventory... Transparency Transparency New models- eLance, eBay, Priceline, Amazon New models- eLance, eBay, Priceline, Amazon

10. 10 New Networks, New Possibilities Internet data centers Internet data centers High bandwidth last mile High bandwidth last mile Total bandwidth exploding Total bandwidth exploding Connectivity - evernet, everyplace Connectivity - evernet, everyplace Applications over IP-VPNs Applications over IP-VPNs ASPs ASPs

11. 11 he CIOs Issues

12. 12 CIOs Issues The problem of legacy - systems, people,... The problem of legacy - systems, people,... Skills shortage Skills shortage Re-engineering the enterprise for technology based competition/strategy Re-engineering the enterprise for technology based competition/strategy Intranets & extranets among islands of information/systems Intranets & extranets among islands of information/systems Dynamic information architecture vs. static databases (enterprise models) Dynamic information architecture vs. static databases (enterprise models) Real time corporation & future of software Real time corporation & future of software New application proliferation New application proliferation

13. 13 CIOs Issues: Legacy Engineering Optimization for what Optimization for what – Cost – Performance – Reliability Systems Systems Business Process Business Process

14. 14 CIOs Issues: Skills Shortage Complexity increasing exponentially Complexity increasing exponentially – More systems – More applications – More devices Rapid change Rapid change – Faster versions – New requirements Human capital Human capital – Linear growth of supply – Outflow from MIS

15. 15 CIOs Issues: Change Management Old databases Old databases Old systems Old systems Legacy logic Legacy logic C/S architectures C/S architectures New applications New users New internet environment Multi-architecture systems

16. 16 CIOs Issues: Real-Time Corporation Manual processes Manual processes Batch processes Batch processes Disconnected systems Disconnected systems Limited partner connectivity (EDI) Limited partner connectivity (EDI) Increasing real time requirements Increasing real time requirements

17. 17 CIOs Issues: Information Architecture Intranets Intranets Extranets Extranets Multi-architecture environment Multi-architecture environment Personalization Personalization Manageability Manageability Business strategy ready infrastructure Business strategy ready infrastructure Unified customer data (Epiphany)Unified customer data (Epiphany) Partner information integration (contract manufacturer)Partner information integration (contract manufacturer) Billing & moreBilling & more

18. 18 CIOs Issues: Engineering Methodology Evolvability Evolvability Specialization Specialization Experimentation Experimentation Change isolation Change isolation Diversity Diversity Connectivity oriented Connectivity oriented Best of breed oriented Best of breed oriented Standards Standards

19. 19 he Road Ahead

20. 20 The Road Ahead... New Networks, New Possibilities New Networks, New Possibilities New goals New goals Reliability Reliability Gene pool Gene pool Process - organized chaos? Process - organized chaos?

21. 21 New Networks, New Possibilities Internet scale data centers Internet scale data centers High bandwidth (really!) last mile High bandwidth (really!) last mile Total bandwidth explosion (Continues…) Total bandwidth explosion (Continues…) Connectivity - evernet, everyplace, everydevice (wireless plus more) Connectivity - evernet, everyplace, everydevice (wireless plus more) Applications over IP, wireless, … transition Applications over IP, wireless, … transition ASPs ASPs

22. 22 Road Ahead: New Goals Complexity thru federation NOT integration Complexity thru federation NOT integration Adaptability & evolvability Adaptability & evolvability Configurable NOT customized Configurable NOT customized Modularity – micro open systems model Modularity – micro open systems model Personalization Personalization Application interoperability, unified UI Application interoperability, unified UI Dramatically new management systems Dramatically new management systems

23. 23 Road Ahead : A new Reliability The shuttle Challenger: designed not to fail The shuttle Challenger: designed not to fail Biological systems: designed to fail gracefully Biological systems: designed to fail gracefully Complex systems: evolutionary approach Complex systems: evolutionary approach 24/7 mission critical systems (Routers vs. phone network) 24/7 mission critical systems (Routers vs. phone network)

24. 24 Road Ahead: Diverse Gene Pool Mix of skills Mix of skills Mix of areas Mix of areas Mix of personalities Mix of personalities Mix of biases Mix of biases

25. 25 The Shepherd or the Sargent? Road Ahead: Organized Chaos process The flakes vs. architects vs. implementors The flakes vs. architects vs. implementors Experimentation Experimentation Execution Execution Budgets, schedules, tasks vs. project stage Budgets, schedules, tasks vs. project stage

26. 26 ew Areas for Innovation

27. 27 New Areas for Innovation Extranet information architecture Extranet information architecture Virtual computer Virtual computer Network services - decomposing the computer Network services - decomposing the computer

28. 28 New Area: Ibase for the Extranet Multi-architecture architectures Multi-architecture architectures Messaging paradigms Messaging paradigms Heterogeneous databases Heterogeneous databases Metadata Metadata Entitlement: authentication, authorization... Entitlement: authentication, authorization... Inter-enterprise MIS, diverse environments Inter-enterprise MIS, diverse environments Translation Translation EAI EAI Connectivity- speeds, modes, devices Connectivity- speeds, modes, devices The Extranet Information Architecture

29. 29 Case Study: Asera IBASE Architecture for multi-architecture integration Architecture for multi-architecture integration Unification of the UI - personal portal Unification of the UI - personal portal Universal, application independent entitlement system Universal, application independent entitlement system Messaging, EAI, translation… Messaging, EAI, translation… Customizable and personalized Customizable and personalized Not quite flexible business object modeling Not quite flexible business object modeling Not quite the work flow and rules engine Not quite the work flow and rules engine

30. 30 Architecture connecting architectures...

31. 31

32. 32 Single sign-on Back Office ERP SFA CRM Catalog News Message Boards Security EAI Profile EAI Profile User workflow

33. 33 New Area: Virtual Computer Scalability of hardware - add & delete Scalability of hardware - add & delete Self management Self management Geographic distribution Geographic distribution Load balancing, caching, COS, … services Load balancing, caching, COS, … services Network operating system for the IBASE Network operating system for the IBASE A Computer Distributed Over the Internet

34. 34 Case Study: Router Networks Behave as one machine Behave as one machine System self-adjusts to node failures System self-adjusts to node failures Capacity can be added/deleted - self organizing Capacity can be added/deleted - self organizing Geographically disbursed Geographically disbursed

35. 35 New Areas: Network Services Storage services Storage services Database services Database services Web servers/HTTP servers Web servers/HTTP servers TCP/IP session servers TCP/IP session servers Application servers Application servers Composite services Composite services – Replication – Load balancing – Distribution The decomposed Computer Architecture

36. 36 Case Study: Zambeel …distributed data services

37. 37 Databases Changing Needs Re-engineering Databases Data vs. other Data vs. other Metadata Metadata QOS, reliability vs cost vs. access time QOS, reliability vs cost vs. access time Distribution Distribution Scalability: size, concurrent users... Scalability: size, concurrent users... Security Security

38. 38 Re-engineering Databases Entitlement system, security Entitlement system, security Changing hardware – routers as a model of HW/SW interaction & evolution Changing hardware – routers as a model of HW/SW interaction & evolution Changing application environments Changing application environments Need diversity: traditional databases, content, portal data, evolution, free web vs. corporate Need diversity: traditional databases, content, portal data, evolution, free web vs. corporate Database use: tables, relations, emergent behavior, analysis types, browsing, version control, logic vs. data Database use: tables, relations, emergent behavior, analysis types, browsing, version control, logic vs. data Databases Changing Needs

39. 39 Re-engineering Databases Large enterprises have hundreds, sometimes thousands, of large-scale, complex packaged and custom applications. Interoperation between these applications is essential for the flexibility needed by enterprises to introduce new web-based applications services, meet regulator requirements, reduce time to market, reduce costs, and execute business mergers. Large enterprises have hundreds, sometimes thousands, of large-scale, complex packaged and custom applications. Interoperation between these applications is essential for the flexibility needed by enterprises to introduce new web-based applications services, meet regulator requirements, reduce time to market, reduce costs, and execute business mergers. Because of gizmos, we foresee an explosion in the size and scale of data clients and servers -- trillions of gizmos will need billions of servers. The number, mobility, and intermittent connectivity of gizmos render current client-server and three-tier software architectures unsuitable for supporting such devices. Most gizmos will not have a user interface and cannot have a database administrator -- they must be self-managing, very secure, and very reliable. Because of gizmos, we foresee an explosion in the size and scale of data clients and servers -- trillions of gizmos will need billions of servers. The number, mobility, and intermittent connectivity of gizmos render current client-server and three-tier software architectures unsuitable for supporting such devices. Most gizmos will not have a user interface and cannot have a database administrator -- they must be self-managing, very secure, and very reliable. Database Needs Asilomar Report on Database (12/98)

40. 40 Plug & Play Database Management Systems Report Asilomar Report on Database (12/98) Re-engineering Databases No knobs operation; a no-knobs system must adapt as conditions change No knobs operation; a no-knobs system must adapt as conditions change Have the database system automatically discover and interact with the other database systems accessible on the network. This information discovery process will require that database systems provide substantially more metadata that describes the meaning of the objects they manage. Have the database system automatically discover and interact with the other database systems accessible on the network. This information discovery process will require that database systems provide substantially more metadata that describes the meaning of the objects they manage. Billions of web clients will be accessing millions of databases. Enterprises will set up large-scale federated database systems. Billions of web clients will be accessing millions of databases. Enterprises will set up large-scale federated database systems. Imprecise information will not only appear as the output of queries; it already appears in data sources as well Imprecise information will not only appear as the output of queries; it already appears in data sources as well Most organizations need continuous system operation. Designing a software system that never fails requires remote replicas and dynamic reconfiguration. Made to not fail or fail gracefully? Most organizations need continuous system operation. Designing a software system that never fails requires remote replicas and dynamic reconfiguration. Made to not fail or fail gracefully? Changing needs at the app level and changing hardware environment – no assumptions Changing needs at the app level and changing hardware environment – no assumptions The information utility: make it easy for everyone to store, organize, access, and analyze the majority of human information online The information utility: make it easy for everyone to store, organize, access, and analyze the majority of human information online

41. 41 Case Studies - Issues Oracle Oracle – Poor implementations – Is Oracle or the implementation the problem? – People or technology the invariant problem? Windows/NT Windows/NT – Slow innovation – One size fits all – Not very flexible

42. 42 Case Study: Solutions- Linux Modularity Modularity High customizability High customizability Higher reliability Higher reliability Short version cycle Short version cycle

43. 43 Linux …engineering from the bottom up …powerful testimony to the power of evolution …the invisible hand of Adam smith

44. 44 Linux: Cathedral and the Bazaar Ideas are many…..the trick is to recognize the good ones. Ideas are many…..the trick is to recognize the good ones. Be Modular Be Modular Be flexible: Change your mind and approach. Be flexible: Change your mind and approach. Release early and often Release early and often Peer review is essential Peer review is essential Feedback is key to rapid and effective code development and debugging. Feedback is key to rapid and effective code development and debugging. Beta testers are your most valuable resource Beta testers are your most valuable resource Eric Raymond:

45. 45 Evolvable Systems (Sharky) Centrally designed protocols start out strong and improve logarithmically….evolvable protocols start up weak and improve exponentially Only solutions that produce partial results when partially implemented are evolvable What is, is wrong Evolution is cleverer than you are

46. 46 Linux has dazzled engineers, users, and critics alike with its immense complexity and dazzling performance. Its existence owes as much to accidental luck as to ingenious hack. It is a story of something out of nothing, a powerful testimony to the power of evolution. Analytically, Linux is twice improbably - once for its technical complexity, and twice for its social complexity. Given the essential ingredients of evolution … any system, natural or artificial, can evolve into a complex design through incremental changes explored in parallel. Linux: A Bazaar at the Edge of Chaos

47. 47 It is not individual efficacy that propels collective action, but group efficacy that motivates individual contribution. The Linux project has neither top-down planning nor a central body vested with binding and enforcing authorities. Its power, the source of its bubbling creativity, is instead in the ceaseless interactivity among its developers. Coordination is a crucial element sustaining collective efforts, giving the Linux project its integrity that unfolds the seemingly chaotic yet infinitely creative process of evolution. Linux: A Bazaar at the Edge of Chaos

48. 48 Given the essential ingredients of evolution … any system, natural or artificial, can evolve into a complex design through incremental changes explored in parallel. Providing a public good is not simply a matter of pooling efforts, but also of coordinating efforts. Linux: A Bazaar at the Edge of Chaos

49. 49 Linux: Personal Views Powerful Development Mechanisms Powerful Development Mechanisms Methodology : Ultimate open system Methodology : Ultimate open system Maybe evolutionary biological systems approach works? Maybe evolutionary biological systems approach works?

50. 50 Personal Views : Development Mechanisms Modular development Modular development Successive refinement Successive refinement Aggressive peer review Aggressive peer review Forced Architecture, Architecture, Architecture Forced Architecture, Architecture, Architecture

51. 51 Personal Views : Methodology Ultimate Open System Origin of open systems circa 1982 Origin of open systems circa 1982 Methodologically forced openness Methodologically forced openness Methodologically forced modularity Methodologically forced modularity Methodologically forced adaptability Methodologically forced adaptability

52. 52 Personal Views : Biological System? Emergent? Emergent? Biological resiliency? Biological resiliency? Biological, incremental evolution? Biological, incremental evolution? Defects cause variation/experimentation? Defects cause variation/experimentation? Complexity theory proof? Complexity theory proof?

53. 53 Reading: The Cathedral and the Bazaar (Eric Raymond) The Cathedral and the Bazaar (Eric Raymond) In Praise of Evolvable Systems (Clay Shirky) In Praise of Evolvable Systems (Clay Shirky) The Circus Midget and the Fossilized Dinosaur Turd (Martin Hock) The Circus Midget and the Fossilized Dinosaur Turd (Martin Hock) Linux: A Bazaar at the Edge of Chaos (Ko Kusabara) Linux: A Bazaar at the Edge of Chaos (Ko Kusabara)

54. 54 Economics The relative cost of computing and human attention has changed The relative cost of computing and human attention has changed This new economics requires that computer systems be autoeverything: autoinstalling automanaging, autohealing, and autoprogramming This new economics requires that computer systems be autoeverything: autoinstalling automanaging, autohealing, and autoprogramming Computers can augment human intelligence by analyzing and summarizing data, by organizing it, by intelligently answering direct questions and by informing people when interesting things happen Computers can augment human intelligence by analyzing and summarizing data, by organizing it, by intelligently answering direct questions and by informing people when interesting things happen The cost of failure is increasing exponentially The cost of failure is increasing exponentially

55. 55 The Weather Forecast … Rate of change will accelerate - life will be more complex, busier... Rate of change will accelerate - life will be more complex, busier... Adaptability, agility & momentum will be the key to success! Adaptability, agility & momentum will be the key to success! Innovation, opportunities & entrepreneurship will thrive Innovation, opportunities & entrepreneurship will thrive Disruption will be the order of the day Disruption will be the order of the day Fun, fortunes & failure will be in abundance Fun, fortunes & failure will be in abundance

56. Comments? Resumes? Business Plans? vkhosla@kpcb.com www.kpcb.com/team/vinod.html vkhosla@kpcb.com Comments? Resumes? Business Plans? vkhosla@kpcb.com www.kpcb.com/team/vinod.html vkhosla@kpcb.com

57. 57 Impact on Software Architecture New tradeoffs for the new, diverse networked environment New tradeoffs for the new, diverse networked environment Architecture for integration -- plug and play application architecture Architecture for integration -- plug and play application architecture Configurable and personalized Configurable and personalized Rapid deployment Rapid deployment Ease of change management Ease of change management Continuous availability Continuous availability

58. 58 Application Challenges Flexible business object modeling Flexible business object modeling Business workflow engines Business workflow engines – Rapid business process modeling – Rapid business process change – Intranet/Extranet enabled Business rule engines Business rule engines – Complex business processing rules – Customization/profiling rules Doing all these right! Doing all these right!

59. 59 1999 Annual Report on KPCB 350 99 Stats 1999 Annual Report on KPCB 350 99 Stats Total Revenue$80+ billion Employment195,000 Market Value$658 billion 1999 Annual Report on KPCB 350 99 Stats 1999 Annual Report on KPCB 350 99 Stats Total Revenue$80+ billion Employment195,000 Market Value$658 billion KPCB Founding investors in 11 of Forbes 500: Founding investors in 11 of Forbes 500: – Sun, Compaq, Genentech, AOL, LSI Logic, Ascend, Juniper, Cerent, Netscape, Amazon, Excite, @HOME... Not financiers: technologists, operating execs Not financiers: technologists, operating execs

60. 60 Share Price on 1/31/00 KP Net Services Leadership $230B 42M Users #1 Revenue $230B 42M Users #1 Revenue $22B 20M Users #1 E-commerce $22B 20M Users #1 E-commerce $14B 0.2M Subs19M Users #1 Broadband#6 Audience $14B 0.2M Subs19M Users #1 Broadband#6 Audience $11B 12M Users #1 Revenue SW $11B 12M Users #1 Revenue SW $6.8B #1 Online Home Related Site $9.5B #1 Healthcare Site $9.5B #1 Healthcare Site $1.3B #1 Online Drugstore #1 Online Grocer $4.2B #1 CRM Software $1.7B #1 Online Credit Card Total Shareholder Value: $300B +

61. 61 Kleiner Perkins B2B Leadership IronPlanet Vertically focused

62. 62 KPs Long History of Building Big, Relevant Companies

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