Anyscale's plan to stay open and win business

Welcome to Runtime! Today: Anyscale wants to prove you can maintain a healthy open-source project while making money, Microsoft changes the way it reports Azure revenue, and the latest enterprise moves.

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Roll on, you Bears?

Open-source software was an essential component of enterprise tech infrastructure over the last decade, but it has proven less resilient as a business model for companies built around open-source projects in recent years. As a generation of infrastructure startups backs away from open-source software licensing, Anyscale is moving in the opposite direction.

Founded in late 2019 by a team of University of California, Berkeley computer scientists, Anyscale is built around Ray, an open-source project that was released under the permissive Apache 2.0 license. Ray was designed to help AI workloads scale to reach users around the globe, which is an even more challenging problem than scaling traditional applications, according to Anyscale co-founder Robert Nishihara, who first developed Ray alongside Anyscale co-founder Philipp Mortiz inside Berkeley's RISELab.

In a recent interview, Nishihara and Keerti Melkote, who joined Anyscale as its new CEO last month, outlined how they think the company will be able to compete against any number of other companies that might want to offer commercial services based around Ray.

On open-source competition:

Nishihara: The value of our platform, of our product, can't just be managing the open-source project. That's not enough. And you're rightly calling out that's not enough. If the main value you're providing on top of open source is managing it, then you may have to do things like protect yourself with various licensing [strategies] and so forth.

For example, we have customers spinning up, say, data processing workloads that run on many hundreds or thousands of CPU cores, thousands of [Nvidia] H100s that are running for four weeks at a time. If that crashes in the middle of the night five days in, it's just not a great place to be. It's very expensive, it slows you down. And so making this rock-solid infrastructure, that's something people will pay for.

On cloud AI versus on-premises:

Nishihara: I would say one of our strengths is actually flexibility in deployment. We have customers that bring their own different, multiple cloud providers [and customers] that even bring their own on-prem GPUs that they purchased. So we have a mixture but the majority is on the cloud.

On competing and partnering with Big Cloud:

Melkote: I think it goes back to the differentiation point. I think they can also put a managed service on the open source and that's fine as an entry point. But if you're a customer that is serious about scaling, then all the other parts that we talked about become extremely important: Developer productivity, velocity, and integrations, a lot of enterprise specific integrations become extremely important, both on the data side and observability. There's a whole bunch of tooling that's needed.

Having said that, we are going to be partnering with all these cloud providers. They are a pretty significant go-to-market for us, and so we'll have to work through that.

Nishihara: I think it'd be a different story if the challenges that we're trying to solve were easy challenges to solve. But there's so much depth in scaling AI workloads, and the scale is growing every year. The systems and infrastructure challenges are growing harder and harder, and they're going to keep getting harder.

Read the rest of the full interview on Runtime here.

Kind of blue

Microsoft's steadfast refusal to provide actual revenue numbers for Azure, arguably the most important business unit in the $3 trillion company for almost a decade, has long frustrated financial analysts and company watchers. It took a step closer to providing more insight into its cloud infrastructure division this week, but stopped short of true transparency.

Microsoft will no longer include revenue from its Power BI tool and its Enterprise Mobility and Security Group in a metric usually referred to in earnings reports as "Azure and other cloud services," CNBC reported Wednesday. Those products now will be counted under the Productivity and Business Processes segment, which means the "Azure metric now more closely aligns to consumption business," it said in a filing with the SEC.

Power BI and EMS are sold on a per-user basis, which apparently isn't growing as fast as Azure itself. Microsoft is right that per-user enterprise software licenses are sold very differently than cloud infrastructure services that charge for the number of computing resources used, but its ongoing disinterest in discussing the real performance of its crown jewel remains lame.

Enterprise moves

Matt Thompson is the new chief revenue officer at Socure, after serving as senior vice president and general manager of the identity verification company's public sector business for the last three years.

The Runtime roundup

Zoom beat Wall Street estimates for revenue and profit and raised its guidance for the upcoming quarter, although growth remains slow.

Snowflake beat revenue estimates with a 30% increase compared to last year and raised revenue guidance, but investors were annoyed it didn't also raise profit guidance, which sent its stock down nearly 15% Thursday.

Workday also beat the Street's estimates for revenue and profit, and announced a partnership with Equifax to help Workday customers make it easier for their employees to verify employment and income status when applying for loans.

Halliburton confirmed that it was hit by some sort of cyberattack this week, which has impacted operations at the energy services company and does not appear to have been resolved as of Thursday afternoon.

Thanks for reading — see you Tuesday!