CVS Health’s transformation rides on data, AI and customer experiences

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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CVS Health has big plans to deliver health care to consumers across multiple touch points, but its success will depend on how it leverages data across its multiple touch points to deliver good customer experiences.

What CVS Health is aiming to do is improve customer experiences (and patient outcomes) across its pharmacy infrastructure, benefit plans, retail stores and health care delivery services via clinics. CVS Health is also an omnichannel juggernaut with digital and physical touch points. The CVS Health transformation effort is worth watching ahead of Constellation Research’s Healthcare Transformation Summit December 14-15, 2023.

To understand the scale of what CVS Health hopes is a flywheel of customer engagement it helps to know a few key facts.

• CVS Health is expected to have $355 billion in revenue for 2023.
• The company serves more than 120 million consumers, processes more than 2.3 billion pharmacy claims and handles more than 10 million annual health services visits.
• 85% of the US population lives within 10 miles of a CVS location.
• CVS Health is comprised of Aetna, which has $104 billion in annual revenue and more than 35 million unique members, CVS Healthspire, which has $182.7 billion in revenue, and CVS Pharmacy with $115.9 billion in revenue.
• The company has more than 55 million digital customers who will have a more personalized experience via a new CVS Health App.
• CVS Health's Signify unit has 11,000 clinicians that will do nearly 3 million home visits in 2023.

According to CVS Health CEO Karen Lynch, the company is "dedicated to unlocking the value in health care by delivering superior experiences, improving health and lowering the total cost of care."

Speaking at CVS Health's Investor Day, Lynch said: "We have powerful assets that work together to integrate all the moments of care that matter. We're able to provide panoramic care for all of our 100 million members."

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Now all CVS Health has to do is connect the dots between its businesses and channels. "We're creating value by bringing all together these powerful assets to engage consumers and health across multiple channels," said Lynch. "The value generation that we will create is for all of our stakeholders, our clients, our customers, our providers, and our shareholders. Our segments individually each are profitable. However, when combined, they mutually reinforce growth and are more successful together than they are alone."

The economic gain from this customer experience effort is straightforward: Increase the lifetime value of a customer.

Here's an example of how CVS Health wants to move customers through its touch points.

Interim CFO Thomas Cowhey explained how this flywheel delivers returns.

"Once you understand how that flywheel works, understanding how we unlock value is pretty straightforward. We have to increase the number of interactions and the number of people we serve. Once they're in our ecosystem, we have to engage them. We have to make them help them play an active role in managing their health. We have to expand those interactions. We have to surround them with integrated services. And if we do that, we'll see enhanced persistency and more enhanced the value of those customers."

While CVS Health can drive returns with better engagement and cross-marketing of services, executives said the company can also drive better health outcomes.

Mike Pykosz, Interim President of Health Care Delivery at CVS Health, said patient and consumer engagement drives value on multiple fronts.

"One of the keys to increasing quality is improving patient engagement. You can't change a patient's health trajectory, if they're not engaged in their care," he explained. "Better quality and value-based contracts lead to your surplus and lead to savings that drives your economic model. And that means you can afford to invest in the innovative model. So, these things are all related."

Indeed, CVS Health estimates that when a member uses more than one of the company's services, she creates an integrated value that's up to 10% greater than the sum of the company's parts.

Data and generative AI

To reach its customer experience nirvana, CVS Health is betting on data, analytics and generative AI.

"We believe that AI and generative AI will transform healthcare," said Lynch. "We're applying technology, data and analytics to every single aspect of our business. The effects will be positive and profound."

Lynch added that the use of technology has preserved the importance of human connection. She added that AI will impact the following:

• In the CVS Caremark unit, AI is being used to automate underwriter and client contracting.
• Aetna is using AI to improve and automate operations.
• CVS Pharmacy is using AI to automate pharmacists’ workflows and improve experiences.
• Care delivery systems will use generative AI to summarize cases.
• CVS Health's Signify unit, which conducts home visits, has invested in a logistics and routing platform to optimize travel time and supply chains needed to transport vaccines and immunizations.

Prem Shah, Chief Pharmacy Officer at CVS Health, said the company is using technology to streamline workflows in pharmacies.

"We've launched a clinical decision support tool that generates patient specific alerts to support our pharmacists' clinical conversations at the counter with their patients," said Shah. "We leverage AI and we've augmented our capabilities and our pharmacists to support key tasks, such as the ability to perform prescription verification."

A pharmacy operating platform called RX Connect is also designed to enable CVS Health's more than 9,000 stores as one fleet and integrate digital engagement from the CVS Health app, according to Shah.

CVS Health is also looking to digitally engage with customers to improve satisfaction, improve Net Promoter Scores and reduce calls that can be handled with AI or digital tools.

These digital engagements can enable CVS Health to reach consumers over time since the average tenure of a CVS pharmacy patient is about 10 years.

Ultimately, CVS Health plans to integrate these touch points with last mile care health services from its CVS Healthspire brands, including Oak Street Health, Signify Health and MinuteClinic.

Shah said CVS Health has already lowered the acquisition cost of an Oak Street Health customer via engaging customers and leveraging its retail footprint.

"We're going to engage more consumers in the moments that matter to their health where and how they want to engage us in a local setting," said Shah. "We're going to harness the power and engagement and trust to build connections across the full breadth of our enterprise and care delivery assets."

The tech stack

CVS Health executives did not get into specifics about its technology stack, but like large enterprises built by acquisition the company has a bit of everything.

The operating environment includes public, private and hybrid cloud as well as several business transaction systems. And there are plenty of positions for mainframe developers and engineers and even a bit of COBOL is required.

A tour through three dozen job listings revealed the following about the CVS Health stack.

• Google Cloud is CVS Health's preferred platform, but AWS and Azure are listed in many job roles too. Multiple Google Cloud database, data services including BigQuery listed. CVS has talked about data discovery strategies with Google Cloud as well as working with Azure.
• BI platforms include MicroStrategy as well as Tableau.
• Databases include Oracle, PostgreSQL, MS SQL, MongoDB, Cosmos, Hadoop, Redis.
• SAS programming skills often cited.
• Snowflake and Teradata database integration skills are often required. Databricks or Jupyter Notebooks experience a plus for many positions.

Will VMware customers balk as Broadcom transitions them to subscriptions?

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Broadcom will begin shifting VMware customers to subscriptions from enterprise licensing agreements as it integrates the company over the next year. But there are already signs that VMware customers are beginning to look to rivals such as Nutanix.

During Broadcom's fiscal fourth quarter earnings call, CEO Hock Tan outlined the transition for VMware. In short, Broadcom will spend about $1 billion in transition spending for fiscal 2024, divest VMware's end user compute and Carbon Black businesses, and, more importantly, install a new revenue model.

For Broadcom, VMware's fiscal year contribution of $12 billion in revenue will give the total company about $50 billion in annual revenue. Software, VMware (excluding planned divestitures), CA and Symantec, will be about $20 billion of the total. Broadcom closed the VMware purchase Nov. 22. 

Tan said:

"Our strategy going forward is simply to enable global enterprises to run their applications across the other data centers as well as on public clouds by consuming VMware’s higher-value software stack. And to attract and keep these workloads across the environment, we are investing in a rich catalog of microservices tools. This will be our focus."

The other part of the plan is to convert VMware's installed base from perpetual licenses to subscriptions by the end of fiscal 2024. Today, 60% of VMware's revenue is perpetual. Like similar transitions to subscription models, growth will slow and then reaccelerate with more predictable revenue.

This VMware transition will occur as Broadcom's semiconductor and hardware units pick up steam due to generative AI infrastructure.

Constellation Research analyst Holger Mueller said VMware is seen as the lever to get Broadcom to grow at a double-digit clip. Mueller said:

"Broadcom needs a new spark to return back to double digit growth and hit Tan's ambition for $50 billion in annual revenue and $30 billion in EBITDA. The spark is VMware, which will have to show how much it can grow in the coming fiscal year. It is also clear that Broadcom wants and needs more revenue differentiation, with semiconductor revenue outgrowing the infrastructure software segment. That mix will change with VMware. And then we will see if Broadcom can make its software portfolio grow."

Tan said that VMware's business will revolve around VMware Cloud Foundation and the aim is to virtualize data centers across enterprises for multiple cloud deployments. "We are converting more and more customers step-by-step as they come up for renewal into this higher value stack, and we’re doing it on a subscription basis," said Tan, adding that even during the transition VMware will see double-digit growth for the next three years. Tan said this growth can occur due to "the fact that we are also upselling a higher-value product."

Broadcom expects VMware to be able to accelerate its cloud foundation products via partnerships with Nvidia, Intel and IBM. The game plan is to leverage VMware's platform to enable data centers to run AI workloads easily as well as recently announced updates.

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Tan said he has been meeting with CIOs in small groups and VMware's largest customers and they see the value of the company's stack.

What could go wrong? In a word, business model transitions usually give customers an excuse to look at other options. Nutanix, which reported its fiscal first quarter results at the end of November, is already seeing interest from VMware customers.

To be sure, there are a lot of customers that use VMware and Nutanix in a dual vendor strategy. Nutanix has a Red Hat partnership on OpenShift. That Nutanix-Red Hat option will also be an option for VMware customers.

"(Red Hat) competes against VMware on the application side, we compete with VMware on the infrastructure side," said Nutanix CEO Rajiv Ramaswami. "So, the partnership was very good from that perspective, good synergies on our side. Now, we have seen several customers adopt OpenShift on top of Nutanix, that continues."

Ramaswami said that even before the Broadcom-VMware deal was closed, Nutanix saw interest. "We did close some additional deals that I would consider to be influenced by the Broadcom VMware transaction," he said.

The CEO cited a global 2000 bank that had a dual vendor strategy but plans to standardize on Nutanix given the VMware transition. "They liked us. They were comfortable with us. And then now they have this additional trigger, and they were concerned about what would happen on the other side. So, they went with us as a sole vendor," he said.

According to Ramaswami, enterprise customers are likely to evaluate multiple vendors beyond VMware, but deals will also be unpredictable and cover multiple years. Nutanix could win deals or just be used as a negotiating option as Broadcom tries to transition VMware customers to subscriptions. Ramaswami, said:

"Many customers have signed multiyear ELAs with VMware, prior to the deal closing. And for those that have signed that gives them some time to evaluate options going forward. There certainly continues to be a lot of concerns around all the stuff we've talked about in the past, pricing, increased pricing, potentially dropping support levels, et cetera.

So, we have a significant pipeline of opportunities, and it's growing and a good degree of engagement with prospects, driven by these concerns. It's just difficult to predict timing and magnitude of wins."

BT150 interview: Doug Benalan, CIO Cure Insurance

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Doug Benalan, CIO CURE Insurance, NJ PURE, and Silver Rock Risk Solutions, is in the business of delivering affordable insurance via premiums based primarily on their driving record.

His company underwrites car insurance based on how well a customer drives, not their education, job or credit history. NJ Pure is a business that directly writes medical malpractice insurance in New Jersey. In addition, the company is expanding into new states.

We caught up with Benalan, a 2023-2024 BT150 member at Constellation Research's Connected Enterprise 2023 to talk shop. Here are some of the takeaways from our conversation and the roadmap for 2024.

Standardization. Benalan said Cure Insurance has been focused on expanding into Michigan and recently implemented Guidewire as its core system. "Guidewire is being used for claims and billing and other items," said Benalan. "It's really challenging because there are a lot of rules, regulations and government forms to follow. Guidewire standardizes that."

Customer experience. "Where we differentiate is being able to sell you a policy online regardless of the forms and procedures," said Benalan. "We do that through our automation and data sanitization procedures. We are using some OCR technology to scan the personal injury production forms, medical forms and those types of things so we can issue a policy in real time."

Continual process improvement. Benalan said 2024 will be a focus on strengthening core processes to speed up policy delivery. "We want to standardize processes, so customer time is not wasted," he said. "We want to minimize cost and maximize the use of technology."

Focusing teams on customer needs. "My advice to my team is to focus on the most value to the customer and let's go at speed rather than waiting for an entire release," said Benalan. "If you wait, technology and business can change. We aim for strategic delivery."

Cloud benefits. Benalan said CURE focused on Guidewire, which runs on AWS, because it was an opportunity to offer policies, claims and billing on one platform. "From a resilience, disaster recovery and customer perspective, Guidewire and the cloud enabled us to deploy to multiple regions."

"In addition, the maintenance and enhancements are modernized," said Benalan. "There's less firefighting on the daily operations side so that means the CIO can focus on the real business."

Discipline in customization. Benalan acknowledges that it's sometimes difficult to refrain from customization. "There should be some level of customization, but there will be problems when you need to do upgrades and enhancements," said Benalan. "My vision is that we can't use the product (Guidewire) right out of the box, but we don't want to customize too much so we have a failure down the line."

Technologies on the roadmap. Benalan said Cure is focused on improving mobile experiences as well as continual data integration. "We also are upgrading our analytics platform and data infrastructure," said Benalan. "We also are focused on AI and natural language processing and its use in fraud detection. We are working on fraud detection technologies."

Scaling the business. Speed to market is a critical component of Cure's business model, said Benalan. "In this industry, I don't see many carriers being able to implement in a new state within six months to eight months," said Benalan, noting CURE has been able to expand in Michigan quickly. "We have been able to get all the requirements, put together a team, plan and ready sprints quickly. Speed to market means you have to be ready on the first day when the product is launched. The most important thing to me is that customers are fully satisfied right away."

C3.ai's next move: Convert generative AI pilots to production deals

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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C3.ai's fiscal second quarter results showed promise, but the biggest challenge facing the company is abundantly clear: It has to convert pilots to production to start collecting consumption revenue at scale.

If pilots with customers (prospective or existing) were revenue, C3.ai would be putting up stronger sales gains. Part of the issue with C3.ai's second quarter is expectations. If the company is going to live up to its billing as an enterprise generative AI juggernaut it should have stronger growth.

Another wrinkle is that C3.ai transitioned its revenue model to one based on consumption-based pricing from licensing. That transition equates to more predictable revenue in the future, but there is a transition. C3.ai used to live on large enterprise subscriptions that were lumpy and now has a model more in line with cloud providers and companies like Snowflake.

That transition, which appears to be largely complete, is highlighted in C3.ai's investor deck.

C3.ai reported second quarter revenue of $73.2 million, up 17% from a year ago. Subscription revenue was up 12% from a year ago. C3.ai reported a net loss of 59 cents a share and a non-GAAP net loss of 13 cents a share.

The company projected third quarter revenue of $74 million to $78 million, up 11% to 17% from a year ago.

In many ways, C3.ai is in the right place at the right time. Generative AI has taken off and C3.ai is a key player. I recently detailed a C3.ai project at Baker Hughes illustrating a sustainability generative AI use case (PDF).

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The challenge is that C3.ai's go-to-market ground game is a work in progress. C3.ai has been building out its partner network with AWS becoming a big channel as the two companies target overlapping industries. C3.ai's qualified pipeline with AWS more than doubled in the second quarter. C3.ai also has partnerships with Google Cloud, Microsoft, Booz Allen and others.

There's clearly interest in what C3.ai can offer. Bookings in the second quarter were up 100% from a year ago, new agreements were up 148% and pilots grew 177%.

Yet, these deals start small and have yet to deliver in full just yet. C3.ai is more a steady climb than a revenue rocket ship at this point. C3.ai launched with massive deals from a small number of customers--often US government agencies and large enterprises--and now is more land and expand due to generative AI.

CEO Tom Siebel said the company is converting pilots to more projects. C3.ai converted two Department of Defense logistics pilots into projects. Siebel said:

"In Q2, we closed 62 agreements, including 36 pilots and trials. Our new pilot count is up 270% from a year ago. Notably, 20 of these were generative AI pilots, a 150% increase from Q1. With the lower entry price points of our pilots, we are more easily able to land new accounts. With our pilots, we are engaging customers across a diverse set of industries in this quarter. Our pilots came from manufacturing, federal, defense, aerospace, pharmaceuticals and other industries."

Over time, C3.ai's business is going to look different. Nearly half of the company's revenue comes from federal, defense and aerospace customers. The pilots and trials underway cover many more industries.

What remains to be seen is how long it takes C3.ai to develop its revenue growth flywheel. Siebel said the sales cycle for generative AI use cases can be as fast as 24 hours with a live application in a month or two with low price points. These customers will ultimately expand their deals as C3.ai delivers value.

"The standard pilot that we have for generative AI and the enterprise is like $250,000. You can get the C3 Generative AI: AWS Marketplace Edition that’s free for 14 days," said Siebel.

Siebel did say that C3.ai is seeing interest in generative AI applications, decisions are taking longer as enterprise put governance around AI. He said:

"Virtually every company in the last 3 to 6 months has created a new AI governance function as part of its decision-making process. These AI governance functions assess and approve those AI applications that will be allowed to be installed in the enterprise. This has candidly added a step to the decision process in AI. You might have heard it here first, but you will be hearing this from every AI vendor in the next few quarters. Take it to the bank."

Overall, Siebel said more AI governance is a good development even if it lengthens the sales cycle. See: The Urgent Case for a Chief AI Officer

Siebel added that the C3 AI Platform will gain traction because it can "solve the disqualifying hobgoblins that are preventing the adoption of generative AI in government, in defense, intelligence, in the private sector."

Those issues include answers from large language models (LLMs) that aren't easily traced and can leak intellectual property and create other liabilities. Enterprises will also move toward an LLM agnostic strategy.

Siebel said:

"I don’t think anybody wants to hook their wagon on to any given LLM today with all the innovation that’s going on in the market and to be dependent on any LLM provider. Our solution is LLM agnostic and addresses every one of those hobgoblins that prevent the installation of generative AI in the enterprise. It took 14 years and $2 billion of software engineering for us to be ready for this."

Google launches Gemini, its ChatGPT rival, adds AI Hypercomputer to Google Cloud

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Alphabet's Google has launched Gemini, its most powerful model designed to compete with OpenAI's ChatGPT, in three sizes Gemini Ultra focused on complex tasks, Gemini Pro, an all-purpose model, and Gemini Nano, which is aimed at on-device usage.

The Gemini 1.0 rollout will catch some folks by surprise given that there were reports that Gemini would be pushed to early 2024. With the introduction of Gemini, all three hyperscale cloud providers have announced or upgraded models in recent days. Amazon Web Services outlined Amazon Q at re:Invent. Microsoft is upgrading Copilot with the latest from OpenAI.

"These are the first models of the Gemini era and the first realization of the vision we had when we formed Google DeepMind earlier this year. This new era of models represents one of the biggest science and engineering efforts we’ve undertaken as a company," said Alphabet CEO Sundar Pichai.

In a blog post, Demis Hassabis, CEO of Google DeepMind, said the company set out to make Gemini multimodal from the start. Typically, large language models (LLM) have different modes stitched together.

Hassabis said:

"Until now, the standard approach to creating multimodal models involved training separate components for different modalities and then stitching them together to roughly mimic some of this functionality. These models can sometimes be good at performing certain tasks, like describing images, but struggle with more conceptual and complex reasoning.

We designed Gemini to be natively multimodal, pre-trained from the start on different modalities. Then we fine-tuned it with additional multimodal data to further refine its effectiveness. This helps Gemini seamlessly understand and reason about all kinds of inputs from the ground up, far better than existing multimodal models — and its capabilities are state-of-the-art in nearly every domain."

Google cited a bevy of benchmarks for Gemini and said the model "exceeds current state-of-the-art results on 30 of the 32 widely used academic benchmarks used in LLM research and development."

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For instance, Gemini Ultra scored 90% on MMLU (massive multitask language understanding), which is based on a combination of 57 subjects, world knowledge and problem solving. Google said its approach to Gemini enables it to think more carefully before answering difficult questions.

In a chart, Google outlined Gemini benchmarks vs. ChatGPT. Gemini 1.0 fared well vs. ChatGPT, but lagged in HellaSwag, a benchmark for commonsense reasoning for everyday tasks. Both models scored about 53% on challenging math problems, which is still better than I'd do. Overall, Gemini 1.0 benchmarks are slightly better than the ChatGPT-4 comparison.

While these benchmarks for models are interesting, enterprises are likely to get a bit of Deja vu with the semiconductor benchmark battles. Read the fine print, conditions and realize that in real-world use cases a slightly better benchmark score may not matter.

According to Google, Gemini Ultra excels in "several coding benchmarks." Coding ability is perhaps the use case with the most returns for LLMs as developer productivity has been a game changer for enterprises.

Google also said that Gemini has built-in safety evaluations including safety classifiers to identify, label and sort out content that's toxic. Gemini Ultra is currently completing trust and safety checks before rolling out broadly. Bard Advanced will launch with Gemini Ultra early in 2024.

Gemini will be used to upgrade Google's Bard and Gemini Nano will power generative AI features on Pixel 8 Pro. 

Infrastructure on Google Cloud

No model is complete without an announcement about training infrastructure and in-house processors.

Google trained Gemini on its in-house Tensor Processing Units v4 and v5e. Google is launching Cloud TPU v5p, which is aimed at training AI models.

Cloud TPU v5p, which powers a pod composed of 8,960 chips and an inter-chip interconnect at 4,800 Gbps/chip.

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Those TPUs will be part of Google Cloud's upcoming AI Hypercomputer, a supercomputer that will include integrated hardware, open software and flexible consumption models.

Here's a look at the AI Hypercomputer stack:

Constellation Research analyst Andy Thurai said:

"Google is taking on competitors in three major categories -- OpenAI/Microsoft ChatGPT with their Gemini, AWS and NVIDIA on infrastructure with new TPU chips to become the AI training platform, and IBM/HP/Oracle/ with the AI Hypercomputer.

Gemini was delayed due to concerns about the readiness, safety concerns, and especially the problems with non-English queries. It is clear that Google wants to be careful with Gemini since it will be embedded in multiple products. That caution is another reason the live version got replaced with "virtual demos." But Google can't afford to wait with Gemini and lose mindshare as OpenAI/Microsoft and AWS continually release models.

Gemini has a few differentiators. First, Gemini is multimodal from the ground up. Technically, this LLM could cross the boundary limitations of modalities. Second, Google also released three model sizes rather than one size fits all categories. Third, there are safety guardrails to avoid any toxic content.

Bottom line: Google is trying to become a one stop shop for large enterprises to train their massive LLMs and run on Google Cloud."

GitLab sees traction as it competes against GitHub, Atlassian

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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GitLab is on a $559 million revenue run rate exiting the third quarter with 8,175 base customers. While that quarter is garnering Wall Street attention, enterprises should focus on the competitive dynamics moving GitLab's results as its DevSecOps platform gains traction.

The company reported third-quarter revenue of $149.7 million, up 32% from a year ago, with a net loss of $1.84 a share. Non-GAAP earnings for the third quarter checked in at 9 cents a share.

Gitlab's portfolio includes GitLab Duo, a suite of AI tools, and a platform for agile development, automated software delivery, source code management, security and compliance and continuous integration and delivery.

Constellation Research analyst Holger Mueller said:

"Gitlab is on a path to break half a billion in revenue for the first time in its history, fueled by software powered enterprises. Whether the security angle of its DevOps product is the key driver remains to be seen, as the market and the competition is growing."

Here's a look at why GitLab's third quarter was better than expected.

Jira switching to cloud-only model opens the door. GitLab CEO Sid Sijbrandij said Atlassian Jira customers are evaluating platforms and GitLab is competitive. He said:

"Atlassian’s decision to stop support for its server offering is making customers reconsider what product they use for Enterprise Agile Planning. We are focused on making it easier for these customers to move to GitLab SaaS and self-managed. We recently launched a new Enterprise Agile Planning SKU. Now, GitLab Ultimate customers can easily bring non-technical users into the platform.

Because of that server offering being deprecated, a lot of customers are taking stock of where they're at. It is a natural point for enterprises to evaluate."

AWS and Google Cloud are strong partners and motivated to replace Microsoft's GitHub. Sijbrandij said that it won a third quarter deal with a European telecom against GitHub in partnership with AWS.

With Google Cloud, GitLab is being built into the console. Sijbrandij cited a handful of customer wins against GitHub as enterprises aimed to centralize platforms. Sijbrandij said:

"We've got strong partnerships with both Google and AWS. And they're interested because we help their customers move to their cloud faster. We help them accelerate moving those workloads. And an interesting thing we did with Google recently, we announced at Google Next that they'll be integrating GitLab into their development console for GCP. I think that's a really interesting development that will pay off as many things over the longer term. I think it speaks to the strength of these partnerships together with the AWS example."

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Compliance and governance. Sijbrandij said security and compliance integration has become a key selling point. GitHub appears to be landing customers like Lockheed Martin and Carfax because it builds security and compliance directly into workflows.

The ability to set controls and governance frameworks that's integrated into developer workflows has become a selling point. Sijbrandij said:

"With point solutions, developers have to wait on security teams to identify vulnerabilities. Or, if they have access to a security scanner to assess their code, they need to manually copy and paste the scanner results back into their development tool. The result is code that isn’t scanned at the time it’s written. This increases the time required to detect and resolve vulnerabilities."

GitLab has GitLab Dedicated, a single-tenant SaaS platform that gives customers data isolation and residency. Sijbrandij added:

“GitLab is the only DevSecOps platform that brings together security, compliance & governance, AI, and enterprise agile planning. Enterprises face complexity from all directions in the form of rapidly increasing user expectations, more advanced cyber-attacks, and more strict industry regulations. We believe they need GitLab to help them navigate this complexity and realize business value. Our platform improves engineering productivity, reduces software spending."

DevSecOps is a critical category as AI workloads grow. Sijbrandij said that AI and integrating it with developer workflows is also driving sales.

"AI needs to be throughout the life cycle and for multiple things, like only 25% of the time of a developer spends on coding, 75% is other tasks. And as developers get more productive, they write more code, you need to also increase the productivity of security and operations. So, we're focused on making it work throughout the life cycle," he said.

Expansion beyond developers. GitLab's enterprise planning suite is attracting usage beyond developers. Business users that have to interact with developers and engineers can use portfolio and project management tools without getting bogged down.

Microsoft updates Copilot with ChatGPT-4 Turbo

Larry Dignan

Editor in Chief of Constellation Insights
Constellation Research

Larry Dignan is Editor in Chief of Constellation Insights at Constellation Research, where he leads editorial coverage focused on enterprise technology, digital transformation, and emerging trends shaping the future of business. He oversees research-driven news, analysis, interviews, and event coverage designed to help technology buyers and vendors navigate complex markets with clarity and context. ...

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Microsoft Copilot is being upgraded to OpenAI's GPT-4 Turbo model as the software giant rolls out a series of generative AI updates. The move comes as Microsoft and OpenAI move to put the Sam Altman kerfuffle in the rear-view mirror.

In a blog post, Microsoft said Copilot will soon be able to answer with OpenAI's latest model, which is being tested and will roll out more widely in the weeks ahead.

What remains to be seen is whether these model updates affect usage or become a simple behind-the-scenes rollout. With model choice becoming more of a concern, enterprises are likely to wonder about model updates and what it would take to swap out foundational models if needed.

For now, the Copilot model updates land between the OpenAI soap opera and AWS' launch of its Q generative AI assistant that runs across its services.

• AWS, Microsoft Azure, Google Cloud battle about to get chippy
• How much generative AI model choice is too much?
• Microsoft launches Azure Models as a Service
• Microsoft launches AI chips, Copilot Studio at Ignite 2023

In addition to GPT-4 Turbo upgrades, Copilot will get OpenAI's new DALL-E 3 Model for images and capabilities that combine GPT-4, vision with Bing image search and web search data.

Microsoft also said it is testing Code Interpreter, a service that will provide more accurate calculations, coding, data analysis and visualization. Code Interpreter is in limited testing too. Bing will also get Deep Search, which will use GPT-4 to provide better search results for complex topics.

Also see: How Generative AI Has Supercharged the Future of Work | Generative AI articles | Why you need a Chief AI Officer | Software development becomes generative AI's flagship use case | Enterprises seeing savings, productivity gains from generative AI | Work in a generative AI world will need critical, creative thinking