DigitalOcean is a cloud infrastructure provider that began operations in 2011. Rising under the shadow of the “big three” public cloud giants, it has steadily gained market share among a particular niche it targets: the Small-Medium Enterprise (SME), developers, and startups. Today it runs 13 data centers, two of which are in Asia (Singapore and India).
After several rounds of funding, the company crossed US$1.15 billion in valuation this year. Yancey Spruill, the current CEO, joined the company in July 2019 — he was previously CFO and CEO at SendGrid and before that at DigitalGlobe (both of which he led towards IPOs).
We talk to Spruill about the challenges involved in moving to the cloud (especially for SMEs and developers), the “born in the cloud” market in Asia, and the evolution of the IaaS market that is currently dominated by the big three.
You’ve done tech roles as well as finance roles over your career. Which one do you prefer?
I’m not sure I prefer one part of my career over any other, they are all complementary, and they have enabled me to do some amazing things.
I started my career as a manufacturing engineer. Later on, I spent a number of years as an investment banker focusing on mergers and acquisitions advising technology, media, healthcare, and energy companies with their inorganic growth strategies to meet the needs of their customers.
Ultimately, I found my way back to my roots in the technology industry and discovered my true passion: scaling rapidly growing companies, including DigitalGlobe, SendGrid, and now DigitalOcean. What I’ve loved most about these companies was their focus on and passion for customer and employee experience. I’ve seen across many different businesses during my career that these are critical elements in any company’s success.
Why are cloud adoption rates still low among SMEs, in spite of the fact that it’s cheaper and more scalable? What in your estimation are the top 3 impediments for SMEs to get onto the cloud?
Despite more and more small- and medium-sized businesses (SMBs) turning to the cloud, when it comes to cloud services they are largely underserved relative to their enterprise counterparts. They often face unique technical challenges, internal capabilities, and economic constraints when it comes to deploying new technology. Yet there’s comparatively little focus on this segment by most cloud providers relative to their focus on serving larger organizations. According to our most recent Currents report, the top three barriers of entry for new businesses include the cost and technical know-how of maintaining infrastructure and security concerns with open source software.
While some legacy SMBs may have resisted the trend of going digital, we see millions of businesses being started each year, and the majority of them are building on the cloud. The widespread availability of technical infrastructure like cloud computing has lowered the barriers of entry for entrepreneurs, regardless of their background or expertise. This is precisely what DigitalOcean’s focus is, serving individual developers, startups and SMBs.
What is your advice for SMEs who would like to get onto the cloud but don’t have a large in-house IT team or expertise to support the migration? This is the primary complaint we hear from them.
Enterprise offerings are inherently complex by design and can be difficult to implement and manage without in-house expertise. This is why offerings tailored to the unique needs of startups and SMBs are so important. Unlike cloud offerings targeting enterprises, DigitalOcean focuses on providing an experience that lowers the barrier of entry for many of these organizations by focusing on simplicity, community, service, and openness.
We strip away infrastructure, pricing, and feature complexity so developers don’t need to worry about their infrastructure and can instead focus on innovation and building great apps. We prioritize developer education and enablement through free, high-quality tutorials, forums, and support on cloud-agnostic topics from programming languages to server configurations. We also provide hands-on support for customers of all sizes and share our knowledge and guide developers through the powerful landscape of cloud-native and open source technologies on their journeys to create modern apps.
How do you compete with giants like AWS, Azure, GCP who have far more resources? How are you able to keep your prices competitive in comparison? (Disclosure: we use DigitalOcean as well, for our websites, and no complaints so far).
DigitalOcean serves a very specific segment of the market – developers, startups, and SMBs. From our product to our support and our billing, everything we do is tailored to the needs of our unique customer base.
We differentiate our service across four critical dimensions:
1. First, we offer simplicity and embed our entire customer experience in making it easy for people to become a customer, remain a customer, and grow as a customer.
2. Next, we invest in community’s learning by providing tens of thousands of documents on our website that help entrepreneurs and developers get answers to their critical questions.
3. Third, we offer customer support to every customer regardless of size, as we think it’s vital to invest in our customer’s success
4. Finally, we are an open source platform. We don’t tie our customers into a proprietary tech platform and we make it easier for them to integrate open source solutions into their capabilities.
All of these serve to provide an incredible experience for our customers, and we are committed to maintaining these key differentiators.
What is the role of your partners like the managed providers, for example? How is the DigitalOcean ecosystem going to evolve in the future?
While much of our historical growth has happened organically through direct-to-customer channels, such as our self-serve model, partners play an important role in our overall go-to-market strategy. Partners and managed service providers help extend the reach of DigitalOcean to new customer bases and geographies and we see this continuing to drive success in the future.
Managed service providers provide a key conduit to customers seeking solutions where we have an ability to meet their needs with our global cloud infrastructure and software applications.
Do you see any specific patterns in cloud adoption in Asia vs the rest of the world, especially the US and Europe?
Asia is home to some of the fastest growing developer and startup communities in the world. It is also a key geographical region for our business.
In Asia, we see a lot more “born-in-the-cloud” businesses and the rate at which small- and medium-sized businesses seem to adopt technology and leapfrog to the digital realm is very encouraging.
Cloud enables developers and entrepreneurs to quickly build, test, and deploy their innovative applications and products. The faster build-test-deploy lifecycles mean that they can more easily iterate their idea or concept before building a full-fledged product and eventually scaling their business to build long term sustainable companies. Also, with costs of cloud infrastructure being lower than traditional on-premise infrastructure, the barriers to entry are constantly being lowered for startups and developers. This enables them to scale their business much faster.
How do you see the IaaS market evolve in the coming years? What long-term impact do you think the pandemic will have on it?
Major technology advancements like cloud have made it much easier to start a business compared to 10 or 15 years ago. Many entrepreneurs and professionals are likely to start new businesses in this period of significant economic turmoil. Increasingly they are seeking infrastructure solutions that enable them to focus their people and capital on their customer applications and not on IT infrastructure. With the creation of more businesses, and the likelihood that they will be digital-native businesses seeking the ease of use of IT infrastructure in the cloud, it sets the stage for persistent high growth for Infrastructure as a Service (IaaS) businesses like DigitalOcean.