Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Companies hit by cyberattacks in the last quarter are detailing the financial hits with earnings on tap and rest assured there will be more disclosures to come. Clorox said it will see a big sales hit in its first quarter. MGM said it will incur costs of $100 million due to a data breach in September. And Caesar's reportedly paid ransomware to avoid a hit to its results.

The trio of disclosures is likely to be just the start. In July, the Securities and Exchange Commission adopted rules requiring public companies to disclose material cybersecurity incidents and report annually on risk management, strategy, and governance.

With the new regulatory requirements, it's possible that the quarterly confessional season will be as much about cyberattacks as earnings and revenue growth.

Here's a look at three recent incidents and the financial hits involved.

Clorox

Clorox quantified its sales hit due to a cyberattack--a fiscal first quarter loss and a sales decline ranging between 28% to 23% compared to a year ago. In the first quarter of a year ago, Clorox reported revenue of $1.74 billion. Based on Clorox's first quarter guidance sales will fall in a range between $1.25 billion and $1.34 billion.

As previously disclosed in a regulatory filing, Clorox was hit by a cyberattack disclosed in August hampered production. Business was on track leading up to the cyberattack. Because of the attack, Clorox had to restore its systems and manually take orders. On Sept. 25, Clorox began transitioning to automated order processing.

Clorox said in a statement that sales will be down significantly and well below the mid-single digit growth previously outlined. The company is now projecting a loss between 75 cents a share and 35 cents a share. In the first quarter of a year ago, Clorox delivered earnings of 68 cents a share.

According to the company, it expects "to experience ongoing, but lessening, operational impacts in the second quarter as it makes progress in returning to normalized operations." Clorox said it may benefit from retailer restocking. Clorox said it will update investors on the cyberattack impact for the rest of the fiscal year. 

MGM

MGM said that it suffered an attack on Sept. 11 and discovered the incident on Sept. 29. The high-profile attack forced MGM to go with manual customer facing processes.

Ultimately, MGM said it took a $100 million hit in the quarter. The attackers got information ranging from phone numbers, names, addresses, data of birth and driver's license numbers. A limited number of customers had Social Security numbers and/or passport numbers stolen.

MGM said it has put safeguards in place and the damage was confined to September. MGM said in a regulatory filing that the impact from the cyberattack is about $100 million for its Las Vegas resorts. The company also saw impacts to occupancy through its app and website but has mostly recovered. In addition, MGM had one-time expenses of $10 million in the third quarter due to the attack to cover consulting services, legal fees and third-party advisor expenses. That $10 million is likely to be covered by cyberinsurance.

Caesar's Entertainment

Caesar's Entertainment disclosed an attack due to a "a social engineering attack on an outsourced IT support vendor used by the company."

The company said that it detected the attack and contained the breach. On Sept. 7, Caesar's determined that the attackers acquired a copy of the company's loyalty database, which included driver's license numbers as well as Social Security numbers.

According to Caesar's the financial hit should be limited, but there will be expenses going forward to remediate. However, Caesar's reportedly paid a $15 million in ransomware to avoid any customer disruption, according to CNBC.

Caesar’s attack happened in the same time frame as MGM's breach.

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Kinetic is a company aiming to transform the aftermarket for electric vehicles (EVs) with a business model that rhymes with cloud infrastructure-as-a-service.

The effort is worth watching since Kinetic blends physical and digital services as automobiles evolve from mechanical systems to digital ones that resemble data centers on wheels. Who is going to maintain and repair all those EVs? While charging infrastructure is an issue, maintenance and repair could be just as critical.

Kinetic, which raised $10 million in Series A funding from Lux Capital and Construct Capital as well as early-stage venture capitalists, has a bevy of big backers with experience with disruptive models as well as the auto industry. Kinetic will use the money to expand its engineering team and scale its Kinetic Hubs. The company has one service hub in Orange County, CA with another one planned to launch in Las Vegas.

I caught up with Kinetic CEO and Co-founder Nikhil Naikal to talk shop. Naikal previously was CEO of Mapper.ai, which was an end-to-end provider of high-definition machine-readable maps. That company was sold to Velodyne Lidar, which makes lidar sensors for autonomous vehicles, robotics and other industries. Here are the key points from the conversation.

The transformation of the automobile industry. The core thesis behind Kinetic is that the aftermarket for automobiles will have to transform from one focused on internal combustion to one focused on digital systems and sensors. "If you strip down an electric car, half of it is what it used to be--brakes, tires, steering column--the other half isn't the same. The drive trains are different, there's more compute, more sensors, more self-driving," he said. "The infrastructure that is needed for repair and maintenance is going to be rethought and reimagined just because of the makeup of these new cars."

According to the International Energy Agency there were 26 million electric cars on the road in 2022, up 60% from 2022.

The problem Kinetic aims to solve. Today, an accident involving an EV or sensor-heavy auto involves a car to an insurer, who then orchestrates a drop-off for repair and a rental car. The repair center returns the car to its original state physically, but then gets hampered by what Naikal calls "last mile digital aspects." These digital repairs and calibration of systems today often require a house call and potentially days where the automobile sits in a lot. The repair center may have to eat the cost of the rental car for repair delays. Simply put, today's digital repair last mile is akin to a doctor making a house call. Kinetics is more like an urgent care facility. "You can start working with us and be done in an hour," said Naikal, who noted that Kinetic will operate behind the scenes. "We see ourselves slotting into the existing framework and we work with existing collision repair centers and dealerships."

Kinetic's plan. With the opening of the company's hub--each hub is about 5,000 square feet and looks more like a clean room than an auto shop--Naikal said Kinetic will focus on sensor repair and safety systems. Automobiles have millions of lines of code and sensors have proliferated. Those systems also need repair, reprogramming and recalibration that require robotics, software and AI to fix. "We are providing physical and digital infrastructure and there's already a vibrant market," said Naikal. "You'd be hard pressed to find a car without adaptive cruise control or lane changing sensors. It's real business today."

As EVs and ultimately autonomous vehicles gain share, Kinetic's business will evolve, said Naikal. That decision is smart since EV domination may be delayed by charging infrastructure and other hurdles. "We made an early decision to start focusing on an aspect of vehicles that lies at the intersection of both ICE (internal combustion engine) and EV," he said.

Simply put, Kinetic's hubs will have plenty of work to justify a build out today since cars of all types are only getting more sensors and digital systems. Each hub will serve a 10- to 12-mile radius and service auto repair shops, dealers, collision centers and other auto aftermarket players who need digital servicing. Kinetic will charge based on consumption of services and the benefit to customers is a 60-minute repair turnaround. Kinetic's goal is to halve the cycle time from pickup to digital repair, calibration and return as it scales.

Business model inspiration. Naikal said Kinetic's model rhymes with infrastructure as a service player such as AWS. Kinetic is a B2B company that will enable dealers, manufacturers, auto repair shops and aftermarket companies transform. Kinetic's hubs are multitenant and save the food chain upfront costs to equip their facilities with digital repair services. 

And like AWS, Naikal said Kinetic will continually add on services and evolve. "We do see the possibility of satellite locations and a shop within a shop approach to help consumers understand the digital system," said Naikal, who said a digital-based aftermarket for autos is inevitable. "There will also be an ecosystem of third-party applications." If successful, companies will be built that use Kinetic's infrastructure, added Naikal.

You could call Kinetic an EV aftermarket as a service company. 

Data and digital twins. One of the more interesting aspects of Kinetic's model is the potential data play. Naikal said Kinetic is "reconstructing digital twins of the cars we capture." "The data in the vehicle itself improves the experience," he added. Indeed, Kinetic could be in a position to help automakers determine the wear and tear of a model after a few years or provide data the improves engineering processes going forward. Kinetic could also provide insights that inform future models from automakers.

"When cars come into our centers, we'd be capturing 4 to 5 million data points on the car and supporting an ecosystem," he said.

Challenges ahead. Naikal said much of the focus for Kinetic is on finding locations and scaling locations. There's also a supply chain element where Kinetic must procure robots and automation tools in advance. "We want to scale as fast as possible. So, I think that's one of the challenges. The second challenge, of course, is we're basically a software company and a last mile integrator of hardware," said Naikal.

What the digital automotive aftermarket may look like. Naikal said it's likely that car companies and consumers will look to upgrade memory, install new driving models and add localized features. And yes, the auto aftermarket will have to solve for battery swaps. "If in 5 years, the technology changes so you can extend range there should be the ability to slot that in," said Naikal. "This will require automation since you just can't change a 700-volt battery easily. It's going to look a lot like slotting in memory on a much larger scale."

Going forward, it's also possible that consumers will want to change the body of a car, said Naikal. How that model evolves with automakers remains to be seen. "We are trying to think about consumer pain points today and build with an eye on tomorrow," said Naikal.

Related:

• Constellation Research 2023 ESG 50 highlights rise of Chief Sustainability Officers
• The Top 50 ESG Executives Leading the Charge for a Sustainable Future

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Clorox quantified its sales hit due a cyberattack--a fiscal first quarter loss and a sales decline ranging between 28% to 23%.

As previously disclosed in a regulatory filing, Clorox was hit by a cyberattack disclosed in August hampered production. Business was on track leading up to the cyberattack. 

Because of the attack, Clorox had to restore its systems and manually take orders. On Sept. 25, Clorox began transitioning to automated order processing.

Clorox said in a statement that sales will be down significantly and well below the mid-single digit growth previously outlined. The company is now projecting a loss between 75 cents a share and 35 cents a share. Adjusted earnings will range from a loss of 40 cents a share to breakeven.

According to the company, it expects "to experience ongoing, but lessening, operational impacts in the second quarter as it makes progress in returning to normalized operations." Clorox said it may benefit from retailer restocking.

Clorox said it will update investors on the cyberattack impact for the rest of the fiscal year.  

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Google launched its Pixel 8 Pro device and one of the main pitches beyond the usual software, camera and processor upgrades is that the device can run the company's foundational generative AI models locally.

Yes, your phone will be a little generative AI machine. 

If you've been following any of the recent hardware launches the next battle is on device model processing. Amazon's Alexa event also had a heavy LLM spin, Apple touched on running AI and machine learning models locally and PC makers are betting (more like praying) that there will be an upgrade cycle due to model training. Microsoft's Surface event was really about a barrage of Microsoft 365 Copilot launches. Bottom line: Hardware launches are increasingly about the models, algorithms and generative AI behind the services.

Google's event to launch the Pixel 8 and Pixel 8 Pro carried the foundational model with hardware theme farther. First, Google's latest pixel phones will feature the Google Tensor G3, a new processor that will enable on-device speech recognition, an update to Magic Eraser to remove larger distractions with on-device models and provide summaries to recordings.

Google Assistant with Bard will also be available on the Pixel 8 line. In practice, you can take a picture of a sign at the beginning of a trail and ask for hiking recommendations. Assistant for Bard is rolling out to select testers.

Rick Osterloh, Google's Senior Vice President of the company's Devices and Services unit, said on-device generative AI capabilities mean no latency and better experiences and features. He added that the device unit worked closely with Google Research to distill foundational models, so they run efficiently on Pixel Pro 8.

"Google's generative AI models can run right on the phones you have throughout the day," said Osterloh. "We engineered Pixel 8 Pro to run Google's foundational models right on device. This leads to directly improved experiences."

To that end, Google said it will support 7 years of software updates for Pixel 8 and Pixel 8 Pro.

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Zoom Video Communications expanded its reach into project management with its Zoom Docs and expanded its use of generative AI through its platform.

At Zoomtopia 2023, Zoom rolled out a bevy of new features and use cases for AI Companion, its generative AI play for hybrid work. CEO Eric Yuan said work is evolving and Zoom plans to reinvent its platform to go with that change.

In a nutshell, Zoom has been systematically expanding its reach beyond its core video communications tools that made the company a verb. Zoom Docs is an example of how it is broadening its hybrid work reach. The company is also looking to become a go-to employee and customer experience platform.

The big question here is whether enterprises will consolidate collaboration and engagement platforms and choose Zoom. With Zoom's expansion, the company will bump into multiple players including Google and Microsoft as well as customer experience vendors.

In addition, Zoom has rolled out a pricing strategy with its Zoom AI Companion that could help it grab market share. Zoom isn't doing the standard $30 per user per month add-on approach with its AI tools. Zoom is also encouraging usage as it is adding Zoom AI Companion to Zoom Mail, Meeting, Team Chat and other areas. It's too early to see whether Zoom's generative AI pricing strategy pays off, but CIOs are likely to get sticker shock as add-ons add up.

• Zoom sets AI Companion roadmap across platform
• Zoom's customer data terms for training AI may be just the beginning
• Zoom sees enterprise traction, cites Contact Center, Team Chat wins

Here's an overview of what Zoom announced at Zoomtopia.

Hybrid work and collaboration

• Zoom Docs, which is an AI-powered workspace aimed at helping enterprises collaborate and mange projects. Although the name makes Zoom Docs sound like a collaborative document creator, Zoom argued that Zoom Docs will enable teams to manage projects, create wikis, tables, and tasks in addition to providing typical document functions. According to Zoom, Zoom Docs is an example of how AI Companion can be leveraged throughout the platform. Zoom Docs is tightly integrated with Zoom Meetings, which can use content summaries and documents to create docs. Zoom Docs will be generally available in 2024. 

• Zoom AI Companion will be able to generate and organize ideas in Zoom Whiteboard. Zoom added that it will expand the capabilities of its industry plays including healthcare and higher education.
• Zoom's Workspace Reservation will add a feature called Wayfinding to reserve seats and make it easier for employees to find their desks when hoteling in an office.
• My Office View in Huddles will get presence indicators and location information so employees know whether collaboration will be physical or in a virtual huddle.
• Zoom Scheduler will get single-booking links and updates to incorporate unique schedules. Zoom Scheduler will be integrated into Salesforce.

Also see:

• 12 lessons for when work, life collide
• 7 future of work themes to know now
• Hybrid Work in 2023

Customer and employee experience

• AI Expert Assist will be available for customer support agents in supervisors in the first quarter to surface customer data and knowledge base information as well as provide actions and insights.

• Zoom Virtual Agent and Zoom Contact Center will integrate WhatsApp and Messenger in the months ahead.
• Zoom Contact Center will further integrate with Salesforce, add outbound dialer capabilities, and remote desktop control for helpdesk agents.
• Generative AI will be used in Zoom Events to compose invitations, lobby chats and sessions.
• Zoom added Workvivo, which was acquired by Zoom, to its Zoom desktop software for Workvivo users. Workvivo is an employee engagement tool.

Constellation Research's take

Constellation Research analyst Liz Miller broke down the Zoom announcements. She said:

"Zoom is taking on work from where it can happen (office, zoom reserved rooms, AMC Theaters, your living room) to how collaboration intersects with work. And this has been Zoom's strategy for several years now. First, Zoom expanded beyond the Zoom interface and identified specific surfaces where Zoom can be the interface for work. Then Zoom layered in its hardware partnerships with Poly, experience partnerships with the likes of AMC Theaters and even investments into Zoom Phone, which as announced by CEO Eric S Yuan at Zoomtopia, is now available in 47 countries. 

From there, Zoom took on the the event management solution buildout so Zoom can enable hybrid, fully digital AND live engagement management. That move is giving marketers and event planners a common platform for experiential opportunities. And now we see voice and cross-channel communication and collaboration enter the mix with an increasingly robust CCaaS solution that includes a flexible agent workspace.

Underpinning it all is this idea that communication should always feel like an opportunity for collaboration. With the addition of Zoom Docs, you can now include documents, notes, tables, sheets and even tasks and reminders, turning project management and orchestration into a moment of collaboration.

And then there is the AI news. Like many competitors and platforms, Zoom has put genAI to work in summaries and connecting the communications dots as one would expect. The unexpected moment was that Zoom does not plan to pass along the COST of generative AI to its paid users, at least not at the moment. It is including AI Companion at no cost to customers with paid subscription accounts. It can be turned on or off at the user’s requirement and request. Some questions still linger around who is providing permission to have their data used in these models and summary moments. Zoom account admins provide consent on behalf of the account, but individual users opt out the old fashion way of just hanging up on the experience."

Future of Work research:

• Connecting Experiences From Employees to Customers
• Constellation ShortListâ„¢ Virtual Events: Webcasts and Meetings
• How Generative AI Has Supercharged the Future of Work

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Enterprises are prioritizing artificial intelligence projects, but shortchanging the collaboration and orchestration needed across all business functions including HR, IT, finance, operations, and other areas. What's needed: Chief AI Officers.

That take is the short version of a Constellation Research report "The Urgent Case for a Chief AI Officer," by Andy Thurai and Ray Wang. The argument is that boards are giving AI projects above all other projects--including cybersecurity. And just like the rise of the chief information security officer you'll need a C-level focused on AI.

The bet is that enterprises will embed AI into all aspects of the business by 2026. Without a leader, AI projects are likely to run amok.

According to Thurai and Wang, who interviewed two dozen current chief AI officers (CAIOs), AI projects are already rolling with proofs of concepts. What's lacking is a long-term strategy to become an AI-first enterprise. Toss in a bevy of AI features--and add-ons to match--from vendors and this landscape is going to get complicated in a hurry.

Thurai and Wang wrote in the report:

"The case for a CAIO is simple. AI is still immature; hasn’t been proven in most enterprise settings; and needs many surrounding acts such as security, privacy, governance, provenance, ethicality, and truthfulness before it can offer real value to enterprises. With great power comes great liability: Such is the case with AI. There is a lot of liability in using external tools as well as using decisions proposed by AI with full confidence in real-world applications. A single point of responsibility and accountability will ensure the right orchestration and collaboration across the organization. Furthermore, organizations need a champion for AI, just as they did for digital transformation."

While the CAIO will have to set a long-term strategy, know business and technology and balance risks with rewards, there will be a more immediate chore: Delivering returns on investments.

Generative AI, commoditization and ROI

With boards pushing for AI projects, there’ll come a point where these same executives ask for results. Enter the CAIO. In recent days, Salesforce, Microsoft, Oracle, ServiceNow, SAP and Workday have all announced generative AI features across their cloud application portfolios.

We've talked names. We've talked generative AI sprawl as domain specific LLMs proliferate. And we've also talked about sticker shock as add-ons add up.

Next up: Generative AI commoditization. Yes, your enterprise software vendors will raise prices in various ways as they monetize generative AI. That approach will work for a bit.

But at some point, say 2025, enterprise software buyers will look to cull the generative AI upsell herd. Technology vendors call this optimizing the cloud spend. This copilot culling will happen because generative AI features will be commoditized. At that point, CIOs and CFOs will acknowledge early productivity wins and then start questioning returns.

Did that ServiceNow Now Assist feature really drive returns? Or was that the generative AI in that other suite? How will you know if Joule or Einstein was responsible for that productivity boost? Maybe we should give credit to Anthropic's Claude via AWS or OpenAI's ChatGPT or some open source model.

Here's the theme to watch: CAIOs are going to have to instrument their employee generative AI usage of each bot, query and pieces of content created with LLMs to quantify productivity gains. And that chore could get complicated. But first companies will need to add the CAIO role.

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Akamai Technologies wants to be your infrastructure as a service alternative by offering compute at the edge of networks for low-latency workloads. Akamai, which acquired cloud services provider Linode in 2022, has just completed its third wave of new compute regions.

The company added locations in Latin America as well as Europe and now has cloud centers around the world. Akamai has core compute regions around the U.S., London, Frankfurt, Singapore, Sydney, Tokyo as well as Sao Paulo. Akamai's cloud infrastructure is designed to reach hard-to-access markets by connecting compute to the 4,100 edge points of presence in 131 countries.

Akamai is best known for its content delivery network, but also has a large security business. In its latest quarter, Akamai's cloud business hit an annual revenue run rate approaching $500 million. Security and content delivery each have an annual revenue run rate of about $1.6 billion or so.

Tom Leighton, CEO of Akamai, said on the company's second quarter earnings conference call that there's room for another cloud provider focused on edge applications and optimization. "A common theme that I heard when I met with executives from around the world in Q2 was their growing concern about being locked into contracts with cloud giants that are consuming large and rapidly increasing shares of their IT budgets," he said. "They want more choice in compute."

Why do these CXOs want more cloud choices? Data egress fees. Compute has to go where the data resides or enterprises get crushed with egress fees. For Akamai customers that use the company's security and content delivery services there are no egress fees if you get compute. Akamai offers a set of cloud services including compute, Kubernetes, storage, database (MySQL, PostgreSQL), networking and developer tools

Media companies are a likely target for Akamai's cloud infrastructure since their cloud providers (notably Amazon and Google) are also competitors. Given that backdrop I caught up with Akamai CTO Robert Blumofe to talk shop. Here's the recap and key points of our chat.

The vision. Blumofe said Akamai is progressing with the vision laid out in 2022. One part of the vision is to grow Akamai's cloud compute capacity and by the end of 2023, it will have 26 new locations. The second part of the vision was to create an enterprise level offering. "Linode focused on developers with its primary offering. It had the core technology, but there was a gap with what enterprise customers expected," explained Blumofe. "We are working to close those gaps."

Blumofe added that Akamai is adding compliance, ID management, virtual private cloud and other features for enterprises. "The third part of the vision is building out a distributed cloud infrastructure where you can run arbitrary compute functions in a large number of locations near the edge," said Blumofe. "It's the next generation of edge computing and a longer development process that's proceeding well. You'll hear announcements in 2024."

• Constellation ShortListâ„¢ Global IaaS for Next-Gen Applications
• Constellation ShortListâ„¢ Digital Performance Management

Timing. Blumofe noted that Akamai has always been involved with edge computing in some form, but the timing is right for a distributed cloud architecture. "The time is right now," said Blumofe. "Applications are architected for micro services and have components in different places with a container model. The world is ready for edge computing to come into its own."

Use cases. Typically, edge use cases will be dominated by CPUs where GPUs will be training models at the core. "For edge inference the computation load is small and done nicely on CPUs," he said. Media companies will have multiple use cases since they need low latency interactions with customers for entertainment and games. "So many enterprises are seeing cloud costs spin out of control due to egress," said Blumofe, who added that B2C companies with distributed users will look to distributed cloud services. E-commerce and financial services will also find use cases.

Overall, the use cases for the distributed cloud will revolve around applications where computation needs to be near the data from users, devices and things. "Compute is location sensitive and developers and will be able to put computation where it should be," said Blumofe. "We're moving compute to data rather than data to compute."

Another flavor of IaaS. Blumofe said Akamai's cloud computing business isn't designed to compete with hyperscalers and isn't focusing on a niche either. It fits in the middle. "I'd classify us as another flavor of IaaS. With hyperscalers you get locked into a platform where there are costs, vulnerabilities and single points of failure," explained Blumofe. "As multicloud approaches evolve enterprises will reduce platform lock0in and focus on infrastructure. There's a lot you can do without being locked in. We focus on infrastructure that does simple things very well with containers, autoscaling and load balancing."

The evolution of multicloud. Blumofe said many companies are using multiple clouds due to acquisitions and independent divisions, but that doesn't classify as multicloud. "You are truly multicloud when you use multiple clouds for any given application," he said. "That's where people want to go--using multicloud to run any given application on any cloud."

What's driving sales? Blumofe said Akamai is adding locations because two big drivers for the business are data sovereignty requirements and egress charges. Customers are also looking for more options, a simple cost model and low latency. "The structure of the Internet has become more distributed. It happened with content delivery and then security. It'll happen to compute too," said Blumofe.

Larry Dignan

Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Kathleen McLaughlin, Walmart's Chief Sustainability Officer, said Walmart has integrated sustainability and ESG efforts into its business operations as well as its planning cycles.

Speaking at the Goldman Sachs Sustainability Forum, McLaughlin gave an overview of Walmart's integrated approach to environmental, social and governance (ESG) initiatives and how it is driving business results via supply chain savings and other initiatives. Constellation Research analyst Doug Henschen said:

"Walmart's leadership in sustainability, disclosure and, most particularly, bringing some 70% of its supply chain along on that journey is commendable. Its supply chain successes show that efforts by large public companies will have a ripple effect down through smaller suppliers, including private companies that may not be directly required to meet coming ESG regulations."

Here's a look at Walmart's approach to ESG by category.

The business value of ESG.  McLaughlin said Walmart's strategy touches multiple areas of the business and is integrated across functions. In other words, ESG isn't a side project and aligns with saving money and bringing affordable products across multiple channels. ESG drives economic value via its people by developing new skills and being more productive, supply chain, partners and customers.

McLaughlin added that the circular economy also drives returns. "How do we shift consumption toward a more circular approach, not only of packaging and things like that, but the materials themselves and products?" said McLaughlin. Walmart can also leverage its real estate for sustainable energy and other services, she added.

"I think one of the more exciting things for me in this whole arena the last few years has been a shift from maybe the past 15 years ago from a corporate social responsibility mind-set and a side project mentality to something that's been more, 'these things matter for business," said McLaughlin.

Walmart's ESG initiatives are integrated with business initiatives and capital and operating expense planning. "It is part of our core operations," she said.

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Supply chain. Sustainability in the supply chain is driving returns and represents a lot of potential.  McLaughlin said that supply chain efficiency has a direct impact on emissions and returns, but also needs to be nimble as supplies and commodities shift based on weather events.

Walmart has 5,200 suppliers involved with its Project Gigaton, which focuses on emissions avoidance as well as sequestering and removing carbon. McLaughlin said:

"The projects are in energy, transportation, product design, packaging, waste reduction and nature. So regenerative agriculture practices, animal, ag and crops and then also avoidance of deforestation and conversion. And so, what we do is help our suppliers that target in a way that is science-based make progress on initiatives by sharing best practices, supporting with playbooks, summits, knowledge exchange, advice. We also then provide a series of resources."

Emissions. Walmart's McLaughlin said the retailing giant can tackle Scope 1 and Scope 2 emissions without offsets but will have to experiment. As a refresher:

• Scope 1 represents direct emissions from company facilities and vehicles.
• Scope 2 is indirect upstream emissions from purchased electricity, steam, heating and cooling.
• Scope 3 includes indirect upstream and downstream emissions from purchased goods and services, capital goods, fuel & energy activities, transportation, waste, business travel, commuting, leased assets; processing & use of sold products, investments.

Electrification and refrigeration can help bring Walmart to net zero by 2040. Electricity is "the lion's share of our emissions in Scope 1 and 2," she said. "It's refrigeration that's technically possible, but incredibly complex at our scale to convert to low global warming potential refrigerants in our entire fleet globally. That's not going to be easy, and we're still experimenting with different technologies. But we think it's doable. And by 2040, we need to figure out how to get there."

Last mile delivery is another key area for Walmart and the company is looking toward EVs. Longer deliveries are going to be more challenging. "The tough one there is our heavy tractor where we don't have the technology today given our loads and the distances that we run those trucks. Today's battery technology, EV that's not going to do it. So there needs to be innovation there. Or is it fuel cells or what?" she said.

There can also be business value with cutting ecosystem emissions. Walmart is expanding its EV charging infrastructure so "it will be great and attractive for customers. They come and plug in." Another initiative is using Walmart locations to provide solar energy to the community and grid.

Scope 3 is going to be a challenge largely due to data. McLaughlin said:

"Our challenge now as we kind of go into a world where there's more expectation of reporting total footprint is how do we connect these very real projects in very real parts of the supply chain with very real evidence of progress and so on to a foot printing like a comprehensive foot printing analysis. It's a different set of numbers and assumptions. For a retailer like us, we have 400 million items, different SKUs, like different items that we sell between in-person, online, at least that many. There isn't a data set about the comprehensive Scope 3 of every single one of those items, especially when you consider how customers use those items."

She added that Walmart's plan is to focus on emissions where they are heavily concentrated in the supply chain and focus on innovation there.

Human capital. McLaughlin said that human capital is a big part of ESG. The big focus for Walmart is training and providing marketable skills. For instance, sustainable refrigeration will require a new skill set for people managing equipment. There are paths to move hourly workers to key areas such as truck driving and management. "We need truck drivers. It's a $100,000 a year job. We can teach people the skills to do it. And so, we've got people flowing into those positions. That's just one, same thing in pharmacy, same thing in coding, you pick it," she said. "75% of our managerial roles are filled by people who started as hourly. 80% of our openings we fill with internal Walmart people because that's what we're trying to do is kind of create these development paths."