by Dave Welsh

Where startups are impacting long-term change for CIOs

Aug 06, 2018
CIOIT LeadershipStartups

Startups are showing up in big ways when it comes to ePrivacy, microservices, and fighting for talent. These are long-term shifts CIOs should keep in mind when it comes to figuring out what to devote attention and resources to.

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CIOs have a daunting task to keep their current systems humming while also staying up-to-date on emerging technologies, especially with the tech landscape changing faster than ever and startups innovating across so many fronts.

The challenge for CIOs, and even for us on the investor front, is to identify the new technologies that are long-term transformative as opposed to short-term trends. Right now, we see three areas where startups are driving significant change in the enterprise.

ePrivacy is bigger than GDPR

The EU’s GDPR regulations whipped up a frenzy among CIOs around the world not seen since Y2K came and went with a relative whimper. For some CIOs, GDPR triggered a massive overhaul of practices while others simply had to tighten existing practices. But GDPR is only the start of a number of ePrivacy initiatives CIOs will need to contend with over the next five to 10 years. 

Startups are active in this space in the EU and in the U.S. developing solutions to help with the added compliance and reporting requirements. We see a lot of companies developing point solutions, but we see bigger opportunities with startups who can tackle larger chunks of the security and privacy landscape.

The CIOs we speak with indicate that they want to have fewer disparate software platforms and more coordination between the ones they do have. This isn’t anything new to enterprise software, where the early stages of a movement are populated with very targeted vendors but sooner or later they broaden out and/or consolidate.

The ePrivacy marathon is already on and we’re still in the early stages. If you’re evaluating software from an ePrivacy-focused startup, ask about their roadmap and their point of view on how their space might evolve. This should tell you a lot about whether they will be around to actually see how it all plays out.

Microservices are here to stay

Cloud computing spurred the democratization of IT resources, driving costs down and decoupling software from hardware. Functionality that previously was only available as part of a large, complex, expensive suite from a handful of vendors is now cheap, agile, powerful and easy to use, and likely available from multiple vendors.

One additional offshoot of this trend that we see as very significant is the “appification” of the enterprise through microservices and low-code development platforms. Users want software that is easy and pleasant to use, and increasingly expecting that IT can internally create micro-applications for specific needs. Low code platforms like Appian, Mendix and OutSystems (a KKR portfolio company) enable these apps to be quickly spun up with a minimal of coding capabilities. Startups are rushing in here to provide the tool kits and building blocks to enable what we see as a long-term shift toward internally developed lightweight enterprise apps that can automate and improve critical tasks. We believe in this trend, but the downside to track is increased complexity: More vendors and apps to manage, more end devices to keep track of, and the potential for increased costs from an over-abundance of subscriptions.

Modern tools and the fight for talent

The next segment is not sector specific but rather it’s focused on an inherent advantage that startups have over larger companies. I hear repeatedly from CIOs of large and small companies about different approaches to attracting and retaining talent, especially as it concerns new and recent graduates. This is one of the hardest group of candidates to get in the door, but one of the most effective approaches we’ve seen is to provide an environment that affords the opportunities to work with modern tools and to develop skills on new development platforms.

Startups typically have an advantage because they are building their systems from scratch and so will default to newer platforms. They seek out the scrappy platforms and tools that are lightweight and efficient. They will take on a bit more risk if it means working with cutting edge tools that helps get the job done — no matter what that job is. These are all things that resonate with young workers, who want to know that they will get opportunities to learn and grow by working with modern tools.

CIOs at larger companies might have legacy systems and an aversion to change to deal with, but they also have more resources to experiment and evaluate. This is their opportunity to compete more effectively for talent. In an age when every company can be looked at as a tech company, it’s often the CIO who has to lead when it comes to providing an environment of learning and growth around technology that sets up the company for the future.