AI Agent Affordability, ServiceNow’s Armis Interest, and NVIDIA Buys SchedMD | TSG Ep. 988

On, don't they know it's Christmas, we're supposed to be slowing down. Um, what are we kicking off with? You're Trying to rush some stuff into the fourth Quarter.

I guess everybody wants to stick it in there. What are we starting off with? Well, let's start off with this conversation about the cost of AI agents.

And Mark Benioff weighed into this debate saying that at least customers or so he claims are telling him that the agents are gonna be priced maybe, or should be on a per seat basis. Well, you know, there's a lot of folks who say that a might make sense. And then there's others who say, well, that's not gonna make sense, because each of us might wind up having 10 agents.

And right now agents are kind of expensive. And you can start looking at a model where, I don't know, it could be as much as anywhere from 250 to $500 per agent. So, you know, what's the cost structure look like and how affordable is that?

And some folks are even saying, you know, well this whole current token based model for pricing of AI is also not working either. So Dan, how do you see this playing out? Because every software vendor and every customer is kind of scratching their head about this issue about, well, how will we afford to al's point billions of AI agents?

Yeah, I mean, I think this is really getting at the fundamental question, which is, you know, what is the ROI on ai? Right? You know, to date, there's been a, a very small few number of companies that have really made money on ai, right?

It's the kind of joke has been, it's been Nvidia and consultants that have made all the profit here, right? And it's not really wrong in a lot of ways. Um, you know, obviously the supply chain, you know, infrastructure, you know, there's been, you know, been money to be made there as well.

But, you know, the software side has been been tougher. Um, model companies are starting to make a little money maybe where they're actually turning the model itself into an application. Um, but you know, the big enterprise software companies that are really adding ai, you know, kind of embedding ai, um, you know, there's been tension there.

You know, uh, if AI really does play out, maybe there's less people. Maybe a seat based model isn't great there. Um, I think we saw with, you know, the Doge work earlier this year that a lot of enterprise software makes a lot of money for selling software nobody's using, right?

So, you know, does, uh, does a a a fixed fee model make more sense? And, you know, this is obviously the case more around, you know, kind of consumption and usage. You know, do we go with a token model?

I think what you're seeing out playing in the market right now is really kind of that tension between the seller and the buyer kind of playing out in real time. Um, you know, I, I think the buyer's looking for some level of predictability on cost. I think the vendor's looking for, you know, some level of kind of, you know, minimum commitment along with the ability to scale up, you know, with usage, but have a little bit of protection on the, the, you know, the expense side if really these tokens get burned up in a really quick and meaningful way.

So, you know, I think we're, we're all wrestling with this fundamental question of we all see it immense potential with ai. We know that it is incredibly costly to build and to put in. Um, but you know, as we're kind of getting to the value, you know, what is that business model ultimately gonna look like?

Clearly we haven't answered that question yet, and there's a lot of push and pull in the market. And, you know, I think we're getting closer to that business model, but not there yet. I'm a simple-minded guy, and I'm gonna throw this over to Tom 'cause I know he is like-minded, but, um, I don't understand.

How come we're like setting up a separate price points for AI as opposed to just saying, here's the new cost per seat for using your software and it's gonna be more expensive 'cause we are using ai and then let's let the market determine what it will bear in terms of its actual cost versus, you know, right now it feels like, you know, the software vendors are trying to like say, all right, we wanna recoup what we're spending on AI and then add on 50% on top of that for our margins and pass that along to the customers. And I think the customers are gonna be smarter than that. Well, you would hope that, and, and if you're gonna break up a paradigm, you can't do it the old way by charging people for stuff they use, you've gotta come up with a creative and novel way to do billing so that Wall Street will reward you with an extra big stock price.

And I was just, uh, looking through my email because I feel like I've heard this conversation before 12 years ago when software defined networking was all the rage. I know that that was like back in the days of Captain Kangaroo, but really what's going on is that people who want to stick around in a company need to find a way to more closely tie usage to the dollars that they get out of it. And the reason why I bring up this email from 12 years ago is because a, an executive that used to work for a software company then went to a company that was a networking hardware company, and in the middle of a big meeting said, well, why don't we charge people to use software defined networking, in this case, OpenFlow per flow.

And everyone in the room immediately turned and looked at him like he was insane. Because you can't do that in a networking company, right? Like, think about trying to just keep track of the flows that you're gonna be billing, and now you're gonna go to a company and you're gonna say, oh, well, you know, per flow will charge you X amount of dollars or x amount of cents or whatever.

You're quickly going to just be out of pocket with the amount that you're gonna be charging. And Mike, to what you said, that's what the companies who are making this stuff want because they've spent billions of dollars investing in whatever this is gonna be. And we've gotta get our money back out of this.

So we've gotta figure out how to closely tie what you're using to what we can charge that, uh, charge for the amount. Oh, and by the way, if we can continue to make 50% profit off of it, that's even better. Because ultimately we're not beholden to Nvidia or to the analyst.

We're beholden to the shareholders who want their return. Or more specifically, they want you to take those 50% profits and buy back some more of the stock. So the value of my stock goes up.

So Mike, Tom, Dan, with all due respect, the technology industry has never been known for, for good visibility into billing and why and how. Just take a look at your cell phone bill or your cloud bill and to, to see the state of the art there, right? You, you usually, there's a whole cottage industry.

Well, it's not even cottage anymore. It's called FinTech, not FinTech. Uh, yes.

Finops, you know, to help you get ahold of these things. 'cause they, they do tend to run away with themselves and they often bear no talk. This is the craziness of it.

They bear no connection to actual cost. It's just whatever they can go for. But here's what I believe we are in a Cambrian explosion kind of, uh, era with, with, with this ai, with Agentic AI and everything else.

We may look back on it and say, why did we think eight eye creatures would be better than two eyes or six legs are better than four legs or two legs or what have you. It's a, it's a grand experiment. The market will determine this.

Uh, you know what, in 19 96, 97, I started one first company. I started in Tech Tristar Web. I was getting 49 95 to host a website, a brochure website that did nothing.

There was no SSL, there was no real commerce. They were brochures. People paid me $50 a month.

I had 5,000 people paying me $50 a month to store their websites on Sun Ultras Sparks. Two years later, that same website was hosting for $9 and 95 cents, and people were still making money at it. That nothing's changed.

It's, it's going to be the same thing. However, if 10 agents a person, you're kidding yourself, we're gonna have as many agents as we have passwords today. I don't know.

We'll see. Jennifer, I'd love to get your opinion. 'cause I'm getting ready to run for mayor of TechTown on an AI affordability campaign.

What do you say? So as, as someone who, and you know, use is the power of Salesforce user and my role in Go to market, I was thinking a lot about this. And what I don't understand is, you know, Salesforce already has a very advanced pricing model.

And it's one of the reasons why a lot of companies don't start with them in their early days because they're too expensive. They start with HubSpot, what have you, try to do all their sales and marketing automation, then just move their sales into Salesforce. 'cause marketing is too expensive to do.

Marketing clouds too expensive to do both. But they have a really good structure for different groups and types of users. And then packages of how much data you can consume or how much data you can process.

And I don't know why they didn't do that with, with agents. And also it would make them more competitive for Marketing Cloud because HubSpot does not have great ai, sorry, HubSpot friends out there. Um, and would allow them to be able to combine workflows of marketing and sales much better if everybody had their marketing and sales under one umbrella.

But they could only really do that if they priced, if Salesforce priced similarly to what they do now, which is based on the user, um, understanding that the agents are very expensive, but also so is a lot of the sort, a lot of the other things that they do. So for me personally, that would affect my buying decision. Dan.

No, there's a lesson there for us, you realize, right? Chris? You have not heard from, we have not heard from Chris yet.

Gimme a second. Yeah, that's rare enough. Um, as I thought of before on the show, this, this is this weekly thing I do with you folks is, is an interesting metric.

And Dan, you know, uh, I think about the conversation we've had, and a fascinating thing happened this week as we're all talking about this. You know, we helped a, a very, very small business in a very, uh, uh, uh, economically impoverished, war torn area, stand up an agent on an old Windows laptop. And that agent now is operating in this commercial environment, running this business on no hardware whatsoever, right?

Without the GPUs and everything else, with all the information right there, no internet connection and already changing the economics of the situation, better clarity and so forth. And it's all these things we talk about without, you know, Palo Alto and data centers with GPUs out the wazoo, right? You know, as I think about this issue, and Jennifer, everything you were saying, right?

You know, we have these complex systems and they're working just fine, right? You know, everybody's worked really hard, built these wonderful things, but sometimes they reach points. And last week, you know, last week on, on, uh, LinkedIn, both, uh, Rob Lee and Dragos and Mark Weatherford, you know, both publicly posted, uh, comments about different issues that speak to the same thing.

One was the Apple ui, uh, rud launch, right? Know the UI died and, uh, in the Apple space. And the other one was, uh, mark was talking about just the popups.

So I took American Pie and rewrote it as, uh, the day the UI died. I think we were speaking to the same thing. We're reaching levels of complexity where we had to do things differently.

So Salesforce, great friends working there, we've done great stuff. However, how do I consume that as a, in this world, we're moving into where agents are like, you know, spreading out and getting cheaper and modeling out. It's, it's falling a certain arc.

And, and am I gonna need 10 agents to your point, or will I have maybe four agents that are kind of super agents that are invoking a bunch of backend services? So I don't need all these, you know, 32 SaaS applications that I'm supposed to buy. I maybe only need five.

Eric, we're, we're gonna talk about that in the next segment on, on, uh, with ServiceNow about SaaS versus agents. But look, I I think it depends. Are you talking about persistent agents, alter egos, digital twins, or are you talking ephemeral agents that are kind of disposable, do a job and move on like containers, many containers in a, a Kubernetes environment?

Listen, I, I think we're, I think we're kind of looking a little bit of the symptoms of the bigger problem here with this whole discussion around how we price ai, right? Like, you know, if I zoom out, you know, the conclusion for me is that, you know, we got used to a world in which SaaS companies were these insanely profitable entities. And the reality is, is as you add AI to software, you massively increase the amount of compute you're gonna consume to run said software.

And so therefore, the conclusion should be, being a SaaS company is still a great business model, but it's gonna be lower margin than what you're used to. And that's probably okay. If the AI provides a value above and beyond what you used to get out of it, Is, is it still a great business model?

Although Satya, Satya says SaaS is dead, right? Uh, I, I think that's splitting hairs a little bit. I I think when he says SaaS is dead, he's talk, he's talking that agents are gonna live.

I, I I'm blending all of it into this, you know, category of software, you know, whether it's SAS or an agent, still software to me, I think he said that to drive the value of the companies he wants to roll up down that, my opinion, Why you think he would do that Anyway, Hey, we're over our 15 minutes on this segment. Let's take a break. We're gonna come back.

You know what, this continues to be crazy news around fundraising and acquisitions and just in securities, especially cyber, we're gonna talk more about it. You're watching Textron Gang, you've Earned it. The spotlight, the responsibility, the weight of teams, companies, and entire industries fall on your shoulders, lives depend on your decisions, your home life included that work.

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Hey folks, we're back and we're talking about some merger and acquisition activity spanning SaaS and cybersecurity. Uh, ServiceNow allegedly is coming close to a bid for amis that's supposed to be somewhere in the neighborhood of about $7 billion. And meanwhile, we also have a report up on Security Boulevard just talking about the massive amount of money being important to the cybersecurity space, especially outta Israel.

Alan, I know we talked about AI agents in the last section, but before we get to that, just kind of set the stage here, it seems like there's a massive amount of VC capital in the cybersecurity space. So is there just gonna be a wave of these m and a activity? And then how might SAS play into that?

So, and, and it's tied into the Israeli story too, right? Because a bunch of the companies I'm gonna talk about actually come out of Israel, you know what, for the last couple years, and, and we've got three or four security folks on our panel today, right? The, what we've heard at RSA is where's the innovation?

Where's the dynamic new stuff? And there was a lot of dry powder on the sidelines, I think the Google whiz acquisition for whatever it was, $34 billion, what broke the dam for really bringing this money out to the forefront. Ever since that Wiz acquisition, we've seen a steady drum bait drumbeat of some really eye popping numbers, uh, on, on acquisitions.

Now, Aramis, I, Amis, excuse me, amis, I, I first met the co-founders of amis, had an insight, uh, in Insight Ignite event in Iceland six years ago, seven years ago. They were fairly new. They were singularly focused back then on iot security, and they still have a great IOT security, uh, uh, product service, whatever you want to call it.

But they've expanded since then. They've been hyper aggressive as many of the Israeli cyber companies are, quite frankly. Um, they just did a raise two or three months ago, I think it was a $430 million raise.

1 billion, right? So a $7 billion buy here by ServiceNow in today's market, where a hundred million here, a hundred million, there is no big deal, is not crazy. I think you also gotta look at it in the broad as part of a, this broader pattern that I spoke about, right?

I, the, the, the article you mentioned, Mike, was my article. I did off a report out, uh, venture while Ventures, Jennifer, I know you know them. Our friend Andy Ellis was there for a while.

They pioneered the, what I call the underground railroad of Israeli cybersecurity companies to the us primarily to Boston. They all seem to have moved to Boston, but, um, their report this year just shows that that market is through the roof. I think 40 something deals, I think how many billions of dollars.

What's interesting, it's not just a US-based VCs funding. There's, there's homegrown VCs now in Israel. There's this whole, it's not just cybersecurity companies.

It's a cybersecurity ecosystem. And it's, it's fueling that country. It's fueling our industry, right?

And, and we're just seeing, you know, it almost seems like people walk out of unit, what is it? 8100, 8200 and VCs waiting there for them to start some company. So it, it's, it, it's definitely a real thing.

Here's the part where I think rubber meets the road for ServiceNow, and I'm interested in your comments. Is this the second acquisition ServiceNow is done in cyber in the last couple weeks, it seems like. What are they seeing, right?

What are, are they, are they just, I think, Ann, you said it in the opening, are they just, you know, a big company who's looking to buy organic revenue? But, you know, I, I know those people. They're smart as heck.

ServiceNow. They've been some of the smartest guys in our business for a long time. They see something, they see something there, and I, you know, I'm, I wouldn't where they go.

I'll follow Chris. You got your hand up. Yeah.

So ServiceNow has been very involved in the supply chain for, for a long time, for good reasons, you know, develop some of the, uh, good, good, uh, uh, protocols and, and a lot of work there. And I, I, my read is that they're making a play to be the control plane for, for the, the internet, you know, the, the, the system of record, right? You know, where did things come from and so forth.

And that makes sense. And like everything else, you know, I think it's a logical play. I think it goes right down the path.

You're, you're talking, um, I would I say to sort of what we talked about in the last segment, though. Do we need a single unitary? Is that, is this the era we're going into?

Or will this be a good play for ServiceNow? So they could be a control plane that makes this easier for people in their space, but we still need to, you know, this has to be like everything else. A dare I say fully age agentic, federated process, right?

Having big players like ServiceNow go down that path indicates this is where we're going. And I would just not read too much in, in into this as being v it's just a, Jennifer, what's your take there? Because, you know, part of what Chris is sort of alluding to is that, well, does cybersecurity, as we know it as a separate segment in the industry, just become a feature?

No, I think that might be the way we're heading. Um, not just because of the moves with ServiceNow, but some of the moves with, you know, AI that we've been talking about in general. Because what happens, just a side thought, what happens when the AI companies start turning around and building security features, right?

So there's, there's that thread as well. But with ServiceNow, I find it fascinating. So I spent a little bit of time, a couple years of clarity, and we competed with amis and they were all about, at the time, we all talked about was digital transformation for, for ot, for ot.

And ARM did a lot of that as well. And if you look at ServiceNow and how they're positioning themselves as the business platform for companies, they did the, they did the acquisition of, I believe it was Visa, visa, visa to say that. So za, so they've done the acquisition there, they've done the ac they allegedly doing the acquisition of arm.

I, so they've got OT covered. They've made some really smart investments as well into continuous controls monitoring and third party risk. I think there's an op I think they're trying to, it's almost like they're taking a backward approach from where they used to be to GR gain more security relevance and be that big platform for everyone versus the security companies that started like Palo with NGFW and then have expanded out to take on a bunch of different use cases.

So I'm curious to see how that all comes together. Dan, Dan, you got any thoughts on this about the, the merging of these segments, or how does this look to you? I, I, I was gonna go down the path.

Jennifer went down. I mean, this feels to me like ServiceNow kinda, you know, blending the it ot, you know, you look at some of the other acquisitions they've made, they're clearly gonna be big and AgTech and, you know, kind of building out these business workflows. You know, they've brought, brought in some of the, you know, identity security stuff to, you know, shore up the agent side.

I mean, I, these all feel like really highly relevant kind of Bolton acquisitions that extend their platform capability down into these new use cases where they can kind of really reimagine what the business workflow looks like using ai. So, you know, to me, I think there's a little bit of an element of, you know, they've become a really big software company, and like most big software companies, you, you tend to need a little bit of inorganic alongside the organic to keep the growth machine going, keep Wall Street happy. But if you look at the areas they're picking off, they're highly strategic extensions of their core platform in a lot of ways, right?

You can imagine, you know, for the types of things they do in, you know, logistics and shipping and, you know, all of the, you know, kind of IT OT processes around those kind of things. Um, it makes a lot of sense, you know, kinda where they're going. Um, but, you know, these are relatively smaller deals from a revenue perspective, but I think they give them a core capability.

And you can bet that there's likely some lead customers who are already trying to stitch this stuff together on their end, working across these suppliers. Uh, and ServiceNow is gonna help, you know, kind of make the easy button for them on putting all this together. You know, this, this deal reminds me of when ServiceNow bought, was it called Lightspeed?

It was the four guys from Google who basically started o hotel Open telemetry, um, and it gave, it gave now a catbird seed into that whole observability space. Um, I, I think this deal is, is a similar back, back to what Jennifer said. And Tom, I I'm interested in your thoughts on this.

So are we seeing security going out to the rest of the world, or are we seeing the rest of the world coming into security, right, in terms of Terra force here? So I, I think it's the second one that you're saying. And, and when you think about what ServiceNow offers, right, they are the software as a service platform, right?

Like Jennifer said, if I don't know how to do marketing, I call these people. If I don't know how to do ticketing, I call these people. What about the, the market that amis is serving, right?

They're serving things like hospitals and, and if you thought IOT was a pain in the neck for sensors, wait until you have to treat, keep track of insulin pumps and heart monitors and all that other stuff. And now you have to keep them secure. And you know, Alan and I had a great conversation about this in a yesterday on a Security Boulevard recording that we did, where we talked about the fact that, you know, old school folks, like, well, frankly, everybody on this call didn't come to security naturally.

We came to something else and then picked up security along the way as an adjunct. Whereas now there is a group of people that are kind of graduating from college, you know, uh, gen Alpha, probably the very beginnings of Gen Z, who are security native, right? Like they can make security their full-time job.

But what does that mean for the people who are trying to find those jobs? It means that companies see the gap there and can say, what if I offer that to you? So you don't have to go out and hire those people.

Now, ServiceNow is gonna go out and hire them because they want people who are kind of security native, so to speak. But as a company, if you're overwhelmed by this, I can just take care of it for you. We'll bump your license cost, I don't know, a couple bucks per seat.

You get all this security knowledge and you don't have to worry about paying benefits and all that other stuff. And oh, hey, by the way, all that money that you save by not having to hire all those new security analysts, 'cause you're paying us to do it. You can invest that in ai.

You can invest that in other cool technology that isn't boring and, and kind of ugly like security. Just, just let us handle that. And then they're super sticky because now that your security has been offloaded to a SaaS company, if you ever drop that company for any reason, or if you ever need to negotiate and make moves to try to reduce your licensing costs, oh, that's gonna be bad because we're gonna lose a lot of security expertise if we do that.

So in a way, ServiceNow is kind of positioning themselves for the future when those markets start opening up as more tools are being enabled to become very hyper-focused on those attacks. Because we've already seen that over the last couple of years where healthcare organizations are becoming targets for ransomware and criminal organizations. Because if you want to get people to pay fast, hit something that's absolutely mission critical.

Like an MRI machine, I would just point out that, um, this is kind of like you ever seen that movie Highlander? Mm-hmm. So whether security is taken over it or it is taken over security, it doesn't really matter.

'cause there can only be one. It Could be only one. All right, that's a good place to end this segment.

We've got one more great segment coming back more on m and a news. Nvidia seems to, what a surprise. Nvidia is active again, you're watching Textron Gang.

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Hey folks, we're at Bank and if you watch this show, when we were at Cube Con, we had a whole segment talking about, uh, slum, which is a job schedule, a favored by the folks who build high-end high performance computing systems versus Kubernetes, which is more favored by a subset of the IT community for orchestrating things. And now NVIDIA's turned around and bought, uh, Schmid, which is the company that kind of drives s SLM in the first place, and they're gonna incorporate that into their portfolio, but Nvidia also has some tools for Kubernetes as well. And then at the same time, NVIDIA's also sending signals now that it intends to become a major provider of AI models itself.

And it seems like it's trying to build this entire stack. Tom, what's your arena and what's going on here? This is what I expect Nvidia has to do.

In order to continue to get people to buy all of their chips, all of their GPUs, they have to find a way to differentiate what their GPUs offer. So like you said, the first one is buying schmid. Now listen to what they're saying.

We're, we're still gonna keep s LM open source. You guys can still learn how to use it. Um, implement it on your smaller tasks.

Um, basically the people that Nvidia won't get out of bed to sell to because they don't have enough commas in their revenue. But once you're ready to play ball for real, once you're ready to build your business on this, don't you want to use the, the tools that we own that we may or may not have optimized to work on our GPUs? Yeah, you don't wanna use Google GPUs or a MD GPUs.

They don't work nearly as well with schmid's professional offerings because we've never seen a company do that before. Cough, cough, Microsoft. Um, but more importantly, when they start then producing these models, uh, believe the model variants that you're looking for is nron.

Um, and of course they have, they call them something different, but they're like the tall grande vente model and, and it's very focused on multi-agent ai. Now they're starting to realize that they've gotta pick up with the new trends and run with them as fast as possible because so many companies are making those leaps. You know, we, we joke about the fact that we still can't figure out, you know, how many Rs are in the word strawberry, but that jokes from 2024 LLMs are kind of passe now.

Nobody cares about that. Agentic is what's hot, and now it's multi-agent, as we've even talked about on this call, that people really want to be ahead of the technology curve. And there's so many NVIDIA systems out there that have been deployed.

They've got to find a way to make people want to choose to use them, because this isn't like cloud computing where there's resources out there, and I'll just use whatever's the cheapest today. If you are not the cheapest, which Nvidia is not, they've, there's gotta be a reason for people to want to go through the dropdown box and select that they're using an H 200 or whatever it is. And I think that this is a smart move by them because the hardware itself is not differentiated.

I mean, yes, there's speeds and feeds that will tell you that it is, but it's the software applications that are optimized to run on specific hardware that are gonna make people want to choose that. And if you bought the, the one that everybody wants to use, S slm, that's your end. Mike.

Chris, gimme one sec. I I just, I got a question. The naming conventions here, Schlom Schmid, I thought that Snort, I had seen it all right 20 years ago.

Snort, who comes up with a name like Snort, but you know, Marty did okay with it. Jennifer was there, but Schlemm Schmid, have we scraping the bottom of the barrel? No, Man, we we're waiting on slurp.

That'll be the next thing. Look, yeah, I, I came into the, the industry with the scuzzy interface, right? SCSI for the old folks remember that?

And the first thing I did was got the book by the person who wrote the Standard. And as I related, it's pretty damn close. There's like a 17 page introduction that is just him ranting about the fact that he meant it to be pronounced sexy, right?

So don't get starter with slums and scuzzy and so forth. But, you know, to Tom's point, right? You know, I, I, I agree, right?

And 25 years ago, I sold billions of dollars of, of Cisco firewalls with Bill McGee and the, and the, and the six foot and the team by saying exactly that. You're buying a, a Cisco infrastructure, a firewall's a thing. You can buy checkpoint great stuff and everything else, good companies all, but why wouldn't you just, right?

And in the last segment, we talked about this with Salesforce, right? You and Jennifer, right? You were talking about, and there's that, and, and that's, those are both true.

But I think, let me argue the counterpoint, right? You know, that's the, the scheduling thing with Nvidia. I get it.

Absolutely. However, that's, that's a big issue. And as, as all the regulars know, you know, where I'm going down this path, where we're going is narrative, uh, integrity, sovereignty, put it here, run your ais here, you know, the ability to schedule, see, you know, loads across meshes.

The way we would look at it is kind of an intrinsic and emergent from the bottom. I think that's where we're going in a lot of things. So Salesforce, Nvidia think absolutely should do that.

Lots of, uh, benefit from that. But I'm interested in the multi-year playout is the concentration and control at, at, you know, each of these organizations we're talking about gonna be the big win, or do we get more dis distribution and federation? So I talked to Nvidia about just what is their strategy as it pertains to open source?

And Dan, I'm gonna tos this your way, but what they were saying was the further up the stack it is, the more open source it is. So if it's a framework for building an application, they're perfectly content to have it open source. But when you get closer down to the kernel, it's more and more proprietary and that's where the kind of the lock-ins gonna be.

But if, if all the tools are free above, do I as a customer, am I gonna care? Or, you know, what is the danger hit here? Yeah, no, I mean, listen, I think that strategy makes a lot of sense, right?

The more abstracted, you know, the more you know, likely it is to be open source. And, you know, the more you know, kind of specific and down into the, the kernel, you know, the more they're gonna wanna put proprietary, uh, fingertips on it, right? I mean, you know, I, I do think buying Storm makes a lot of sense.

It's, you know, NVIDIA's not in a hardware company. You know, people call them a software company. I, I'd call them a platform company.

I think that's really what they become. And they've done what platform company do platform companies do, which is when there's another company that builds, you know, something of real value in and around your ecosystem, you know, eventually it becomes important enough that you want to control it. You wanna own it, right?

And I think that's exactly what happened here, right? They've become, slums become the standard, you know, for running, you know, kind of big model tasks on Nvidia hardware. And, you know, they, they're gonna wanna get control over that because, uh, it's become a critical path for their customers in a lot of way.

I, I think the Nron stuff is more interesting. I mean, to me, this is a little bit like the deep seek moment in that, you know, they have kind of activated this, uh, Jevons paradox, you know, uh, you know, kind of principle where, you know, for reasoning tasks, which is kind of really key to getting AgTech to take off, they've made those a heck of a lot more efficient. And as we make the AI cheaper and easier, you know, easier to do, the more we will consume of it, right?

You know, I, I, I haven't seen that take out there, but it's immediately where my head went on this was you. They have offered something that is materially better, uh, you know, as a reasoning model to, to drive these agents. And the more we can bring that cost down, the more we're gonna give adoption.

We are still very, very early on the adoption curve. I think we forget that sometimes, Tom, you hear, uh, Nvidia used the phrase AI factory, are you ready to leave to live in the AI factory town owned by Nvidia? What do you say?

Yeah, I, I'm a curmudgeon. I'm, I'm not ready to work in the AI factory salt mines any day of the week. But I'm glad that they're at least looking at these models because they have to provide leadership somewhere.

If they are effectively gonna turn the model development over to other companies, they're surrendering any advantage that they might have. Because as soon as I tweak or tune that model to run, you know, basically the same across any hardware, then it becomes a race to the bottom for price. And we all know that there are companies out there that are willing to cut their prices to the bone to establish a foothold.

And that's what Nvidia more or less did kind of at the beginning. They're like, we're gonna give as many of these things away as we can not give away, but, you know, basically sell it a reduced cost so that you become reliant on using our hardware to build these models. And then once we know that they're the dominant ones in the market, then we can start saying, oh, well the next version that you're gonna have to use, it's gonna cost a little bit more.

'cause we, there's more technology in it, you know, insert business rationale here. So Nvidia really has to kind of be kind of the counterpoint to open AI to say, well, you know, yes, you could run maybe more generalized thing over here, or, you know, maybe what they're wanting to say is, we're gonna take the lead in multi-agent because it runs best on Nvidia. And if you don't believe that that works, I want everyone who's watching this to go around their house and find a laptop that still has an Intel inside sticker on it, because that was probably the most successful hardware marketing campaign of all time.

So, so Mike, I, I think though, we've, you gotta come up and take a 500,000 or a 50,000 foot view of this and admire the genius of Nvidia, right? And I, I say it in all seriousness, listen to me, Jensen Wong and the rest of his team realized what the opportunity is here and where they're, where they're weak or not, where they're weak, but where the potential can, can go wrong. Right?

Now, they've got a generation or two lead over everybody in the market around AI chips, GPU chips, they know that the rest of the world is hot on their tails. It may very well be that China invades Taiwan just for TSMC and, and to make these kinds of chips, right? Because that, that might be the only way they could catch up.

So what they're doing is knowing that they have that finite runway, the time is now for them to establish themselves as the platform for AI and all of its different flavors and permutations. And so you are going to see them with Nron and Lumm and Schmid and, and all these other shimel. I don't know what else they'll have, but you know, they're gonna establish that platform because now is their time.

They, they have this window of opportunity, and once it's gone, th there's a big world out there, even a $5 trillion, there's a lot of people nipping at their heels. They've gotta make it happen now. And, and so they're moving into this, you know, beyond hardware to, as Dan said, a platform.

And they're gonna make that the dominant platform. Not to be overly dramatic about it, but if China does invade Taiwan, the very first missile, the United States fire is gonna be aimed at that TMSC path. Don't be so, so sure.

We were, we we're fire and missiles uhhuh, but who knows? I mean, but that, I mean, those are like the global stakes here, right? This is, this is a race, this was, it could be a race that determines who's, what's this next century?

What is the 21st century about and who leads it, right? And I, I think Nvidia has, they're not dumb Jensen, and those guys are smart as heck, and they know they've got the opportunity right now. They've got double down their bets.

Yeah. I, I honestly do see them as the John Chambers of, of 2000. You know, they're at exactly that spot.

And you s Cisco at the time, you know, that that Chambers did, and the team and that everybody involved did a great job. But, you know, life moved on. So they have to be planning for that.

And I think they are right. But I, I'm, I'm with Tom though. I think for everything I've said in this, in this episode, I think they'll be fine.

I think big infrastructure still works, however, I think we have an opportunity again, and, you know, history does rhymes. This is similar with the internet or whatever, but the opportunity to move this down and build it from the bottom up, like literally from a tiny little organization in the least resourced who's using AI today, not asking or paying anybody for it, that is gonna have a big play in this as well. Maybe a bigger play in the long run.

Yeah. I can't help but to think, you know, we, we, we learn from history, right? And going in the way back machine, you know, I think about the market just is the security market's always just kind of, and the tech market's always kind of billowed, kind of like me around the holidays.

And so the, um, you know, I think back to my early days in the first, you know, a hundred people at Fortinet and how UTM started to develop because there were all these other technologies out there that weren't necessarily competing for firewall mind share or market share, but they could have taken budget away from a security buyer, Hey, why don't we integrate all this stuff? Even though half of it at the time wasn't really integrated. Sorry, Ken.

Um, and so, you know, and then you saw POW come with NGFW and then we saw all this consolidation and all these multi technology platforms in the industry, and people would buy up what they might see as competitive, and then they started buying the things that their competitors did. And then we had a whole bunch of innovation of new types of technologies, and now we're seeing everything kind of back together again. And, you know, it's reminding me that Chris said, and Chris and I worked at Cisco for a bit too after the Sourcefire acquisition.

He's like, so who's gonna be there? You can't get fired for buying Cisco in all of this when we're done. Mm-hmm.

That's what I'm really curious about. This is true. I think people, I mean, I understand Tom's point, but a lot of folks are more interested in the output than they are, you know, the components.

And basically, you know, the golden handcuffs are a small price to pay for the output. Okay. Schmid, Lumm, it's all here.

Hey, I know we've got maybe a minute left for some of you on the panel. This may be your last show we do this year. So I wanted to give you everyone a chance of, you know, what, what, what, what's coming down your way, Tom, why don't you kick off?

com. We already have events scheduled for January. Uh, we are gonna be at RSA this year.

It's our first opportunity to have a, a field of extra event at RSA and we are adding new stuff to the calendar all the time. We're gonna be really, really busy. And in addition to that, I do this, uh, weekly podcast with, uh, some guy named Alan, uh, called Security Boulevard.

So make sure you check that out because we have a lot of fun over there too. It's not just Tom and I though. We also have Fernando Montenegro and Mitch Ashley, future Analyst.

So it's great show. Check that out. Thank you, Tom.

Jen, what about you? I've got lots of stuff coming up. Um, as, as Alan knows, dude, some more doing this, doing some more stuff with Textron, which I'm pretty excited about.

Uh, I also started a new job, um, January 5th, the chief marketing officer role. So putting a lot of focus there. What will I be doing?

Where will I be going? Probably everywhere, because that is the role of the chief marketing officer at a startup that may or may not be invested in by one of the companies we talk about today. So that's Clear.

I'll more on that later. Absolutely. And and your guest star, was that Hemingway?

That was Hemingway. I am so sorry. He cannot Be, no, don't be sorry.

We love, we're a pet friendly kind of show. As long as he doesn't have any talking lines, we don't have to pay him under, you know, union rules or anything. He had some pretty strong, uh, thoughts about, you know, s slm and I would imagine And everything else.

Well, he probably have quiet down, Take out one of your snort pigs. Chris, how about you? I, uh, it is been a, a year of building semantic structures and canonical, uh, distributed architectures and ai.

And, and now as, as I mentioned, you know, we've got things actually deployed in the world and they're happening and we have pilots in Q1 in different sectors will play out, you know, all these, and, and with, with a, with a open source project and a new startup and everything else, all these different hats on. And as, and being like old and looking at these patterns, everything we're talking about here, I'm looking forward to the next year playing out. I, I don't think the world's gonna change.

It's not u utopia, but I think if I'm, if I'm right, and if we're right, interesting things start to invert, you know, the control planes we're talking about that are trying to stabilize at this level will be subverted supported by more individuals and enterprises, you know, coming up from the bottom instead of, you know, accepting down from the top. But anyways, I can go on all about that, uh, long, for a long time, but I think next year is gonna be fascinating in, in big issues. Cool.

Dan, you.