Infrastructure as Code: Insights from Investors | DevOps Transformation

The Expanding Role of Infrastructure as Code

Infrastructure as Code (IaC) is experiencing increased implementation by DevOps teams. Despite this growth, challenges persist in data center configuration and overall management, presenting both difficulties and potential advancements.

Insights from Leading Investors

A recent survey was conducted with prominent investors in IaC-focused startups to gain a deeper understanding of the current landscape.

The consensus among these investors is that significant growth potential remains. A substantial amount of manual effort is still required from DevOps teams, even within large organizations.

The Skills Gap in IaC

Successfully implementing and maintaining IaC demands engineers with specialized expertise. Currently, there is a notable scarcity of software infrastructure engineers proficient in IaC practices.

This shortage may provide a competitive advantage to IaC startups that concentrate on delivering comprehensive, end-to-end solutions to their clients.

Internal Development vs. Startup Solutions

Conversely, larger enterprises may opt to maintain internal control over their data centers. This approach would involve developing automation capabilities in-house, rather than relying on external startup providers.

Investor Perspectives

The following individuals contributed their insights to this analysis:

• Sheila Gulati, Managing Director, Tola Capital
• S. Somasegar, Managing Director, Madrona Venture Group
• Aaron Jacobson, Partner, New Enterprise Associates
• Sri Pangulur, Partner, Tribe Capital
• Teddie Wardi, Managing Director, Insight Partners
• Tim Tully, Partner, Menlo Ventures

Sheila Gulati, Managing Director, Tola Capital

Is infrastructure as code the answer to server implementation and configuration, mirroring the impact cloud technology had on physical servers? What specific areas will benefit most from IaC’s ability to provision any cloud resource?

The advent of the modern cloud has fundamentally altered our approach to infrastructure. We now operate in a multicloud and many-cloud environment, and these models are defining the current cloud landscape. IaC is essential for anyone developing on the modern cloud, applicable to any cloud workload or architecture.

The Necessity of IaC for Modern Architectures

This is particularly true for modern architectures like serverless applications, containerized applications utilizing Kubernetes, and AI/ML systems. These architectures offer benefits such as increased innovation, faster time to market, improved reliability, and cost reduction.

However, they also increase the complexity of managing cloud infrastructure. The expanding number of cloud services, coupled with the loosely coupled nature of modern architectures, leads to a rapid increase in the number of cloud resources needing management. IaC is the only viable solution for handling this growing complexity.

New Generation IaC Platforms

We are currently witnessing the emergence of a new generation of IaC platforms designed to address the demands of the modern cloud. Platforms like Pulumi, with its cloud engineering platform, empower infrastructure teams and developers to manage cloud complexity.

They achieve this by allowing the use of familiar programming languages and software engineering practices for building, deploying, and managing cloud infrastructure. Unlike older IaC tools relying on domain-specific languages, these modern platforms provide the full power of general-purpose programming languages.

This facilitates easier management of complex interdependencies within modern cloud applications. Developers can leverage existing tools like IDEs, package managers, and test frameworks, accelerating development and promoting best practices through frequent testing.

IaC and Startup Success

Does IaC’s streamlining potential attract startups in competitive sectors striving to be first to market with their products?

Absolutely. Companies within our portfolio that have adopted IaC and cloud engineering principles are the most focused on rapid product development and accelerating their time to market. This necessitates investment in both engineering talent and the underlying platform and engineering practices.

Leveraging new cloud innovations and utilizing IaC to build products efficiently to meet customer needs is crucial. Successful implementation requires collaboration between providers within the IaC ecosystem to deliver integrated components supporting engineering teams.

Furthermore, teams embracing modern development platforms find it easier to attract top developers – a key concern for all tech companies. The best developers gravitate towards dev-forward cultures genuinely embracing the shift-left movement!

Addressing Hesitancy Around IaC Adoption

Why are some companies reluctant to adopt infrastructure as code? How can IaC providers enhance their appeal through effective marketing?

IaC should be the logical choice for any organization aiming to deliver cloud applications at scale, reliably, and with speed. Past concerns are largely obsolete. However, companies may hesitate due to the required cultural and process changes, the risks associated with migrating existing applications, or a lack of necessary skills within their teams.

Historically, some IaC platforms required domain-specific languages, adding to the complexity. All these factors can create a perceived steep learning curve.

Marketing Strategies for IaC Providers

IaC providers should focus their marketing on the tangible benefits for engineering teams and demonstrate the business value of adopting IaC to gain stakeholder buy-in. Reducing onboarding friction, such as enabling developers to use languages they already know, is also imperative to shorten the time to productivity.

Facilitating discovery through open-source community engagement is also a valuable strategy.

Framework vs. Implementation: Which Model Wins?

Some IaC providers offer both implementation and maintenance services, while others provide only the framework. Which model is likely to be more successful?

Providers offering the framework will likely achieve greater scalability and growth. For a critical function like infrastructure management, an open-source framework allowing community review, contribution, and growth is essential.

Increasingly, purchasing decisions are made by practitioners through grassroots adoption. Therefore, providing a framework backed by a SaaS offering with high-value features is critical. Building strong technical communities is the best investment a company can make, as my career experience has shown.

Standing Out in the IaC Space

How can a startup establishing itself in the IaC space differentiate itself from competitors? Do you foresee a single company dominating the market in the long term?

Having observed the evolution of cloud technology, starting with Azure’s early days, I recognized that evolving cloud architectures would impact application development, team collaboration, and the role of the developer. Developers are assuming an increasingly critical and expanding role in delivering cloud-enabled code while navigating the complexities of its creation.

The shift-left movement places greater demands on developers, encompassing both security and infrastructure considerations. When we first encountered Pulumi, we were impressed by its vision of making IaC more accessible through support for general-purpose languages and its focus on unifying infrastructure, development, and security teams.

Pulumi’s approach is squarely focused on the developer experience. We see innovative engineering teams at companies like Snowflake, Lemonade, and Mercedes-Benz adopting Pulumi.

Pulumi’s cloud engineering platform empowers companies to apply standard software engineering practices and tools consistently across infrastructure, application development, and security teams, simplifying the delivery and management of modern cloud applications.

Notably, the recent Stack Overflow Developer Survey revealed that developers proficient in Pulumi earn the highest salaries – $109,800 – significantly exceeding those skilled in Terraform, Docker, and Git. This highlights the substantial opportunity cloud engineering, and Pulumi, present for developers seeking to enhance their financial standing and career prospects.

The demand for cloud solutions is growing and will continue to rise as more companies migrate to the cloud. Different organizations have varying requirements for managing their cloud infrastructure. Therefore, there is room for multiple players in this space, without a single company consolidating market share.

S. Somasegar, Managing Director, Madrona Venture Group

Is infrastructure as code a viable solution for server implementation and configuration, mirroring the impact cloud technology had on physical servers? In what specific areas will IaC’s ability to provision any cloud resource be most impactful?

We are optimistic about infrastructure as code, as it places the complete lifecycle of cloud infrastructure and servers under software control. IaC effectively addresses challenges related to server automation and configuration management. The contemporary cloud environment is distinguished by its fully programmable, internet-accessible REST APIs for all infrastructure management aspects. IaC provides a standardized programming and resource model, enabling code-based management.

This allows the application of established software engineering principles to cloud applications and infrastructure, a practice increasingly known as “cloud engineering.”

With the growth of cloud computing, the number of infrastructure components within an application requiring continuous release to production and frequent scaling is increasing. Consider multiple microservices deployed across various environments for a geographically dispersed application. While IaC significantly simplifies compute implementation, it can also be utilized to provision and manage storage, networking, monitoring, security, and software deployments/updates.

Over recent decades, we’ve witnessed the development of programming languages, frameworks, and tools to manage application complexity. Now, IaC is applying a similar approach to address the complexities inherent in the modern cloud.

Does IaC’s potential to streamline processes appeal to startups in competitive industries striving to be first to market?

Undoubtedly, yes. We observe that rapidly growing startups and innovative companies leveraging the cloud for competitive advantage are actively adopting IaC. They frequently empower developers, while infrastructure teams play a crucial role in enabling organizational speed while maintaining security, compliance, cost control, and reliability.

By implementing IaC, startups can minimize errors, enhance infrastructure consistency, and accelerate deployment speeds. In highly competitive sectors, the ability to deliver stable environments rapidly and at scale not only facilitates a quicker product launch but also enables swift iteration based on customer feedback.

What factors contribute to companies’ reluctance to adopt infrastructure as code? How can IaC providers enhance their market appeal?

Most organizations now recognize the value of adopting IaC, given the widespread impact of software. We are not seeing significant hesitation currently. The challenge lies in determining the appropriate level of developer empowerment, enforcing security and IT standards, ensuring adherence to best practices, and managing costs effectively.

IaC providers can increase their appeal by addressing these end-to-end challenges. Offering a point solution is valuable, but a comprehensive solution for adopting cloud engineering at scale is even more impactful. Providers can target end-users – engineers – with a bottom-up approach.

Increased emphasis on marketing materials showcasing the platform’s ease of learning through sample code, tutorials, articles, and demo videos would be beneficial. Highlighting time savings with real-world examples and case studies will further enhance their appeal.

Some IaC providers offer both implementation and maintenance, while others provide only the framework. Which model is likely to be more successful?

We believe companies adopting a holistic approach will achieve greater success. The cloud ecosystem is expansive and rapidly evolving, encompassing numerous innovative technologies. Therefore, companies must embrace this ecosystem. Proprietary solutions and languages will likely underperform compared to those that foster community collaboration and integrate with expert companies in areas like cloud security and networking.

Smaller organizations can benefit from an IaC solution that provides both implementation and maintenance, automating tasks for engineering teams to focus on application development. Conversely, larger organizations with established DevOps teams may prefer the customization and control offered by a framework-only approach.

How can a startup aiming to establish itself as an IaC provider differentiate itself from competitors? Do you anticipate a single company dominating the market share in the long term?

The IaC landscape in 2021 differs significantly from just a few years prior. There’s a shift in control from central IT to distributed responsibilities within business units responsible for application delivery and customer functionality. Consequently, those empowering developers are poised for long-term success.

We believe an approach similar to Pulumi’s – leveraging existing programming languages and developer tool ecosystems – is advantageous. This brings the cloud closer to application architectures while simultaneously enhancing infrastructure team capabilities. This will cultivate a thriving cloud engineering community and simplify cloud software development, improving security and reliability.

Aaron Jacobson, Partner, New Enterprise Associates

Is infrastructure as code poised to revolutionize server implementation and configuration, mirroring the impact cloud technology had on physical servers? Furthermore, in what specific areas will IaC’s capacity to provision any cloud resource find its most significant applications?

Indeed, IaC is rapidly establishing itself as the standard approach to cloud infrastructure configuration. It delivers the automation and consistency vital for deploying complex, large-scale applications across multiple cloud environments, crucially aiding in the prevention of vendor lock-in. Specifically, I anticipate IaC proving exceptionally valuable for the deployment and management of Kubernetes, given the inherent complexities of its orchestration layer.

Does IaC’s potential to streamline operational processes appeal to startups operating in highly competitive markets, seeking to accelerate their product launch?

Absolutely. A startup’s competitive edge – and even its survival – is fundamentally linked to speed of market entry. IaC simplifies cloud infrastructure, allowing a startup to concentrate its resources on developing a unique and differentiated application. Within our extensive portfolio of early-stage companies, we are observing a growing trend of businesses utilizing Pulumi (an innovative IaC solution in which we have also invested) from the very beginning.

What factors contribute to companies’ reluctance to embrace infrastructure as code? How can IaC providers effectively position themselves to enhance their market appeal?

A primary obstacle to IaC adoption is often cultural. IaC dissolves the traditional boundaries between operations and development teams, fostering closer collaboration and increased productivity, while simultaneously bolstering security. However, many operations teams, particularly within large Fortune 500 companies, are hesitant to cede control as the infrastructure authority, fearing that granting developers excessive autonomy could lead to security breaches or performance issues. Additionally, larger organizations tend to be more cautious, preferring to observe wider adoption of new technologies like IaC before committing. To address these cultural challenges, IaC solutions should emphasize their robust security policies, elegant state management capabilities, and demonstrate tangible ROI through case studies featuring prominent clients.

Some IaC providers offer both implementation and ongoing maintenance services, while others solely provide the underlying framework. Which of these models do you foresee achieving greater success?

We believe that companies concentrating on the framework itself will ultimately be the most successful. However, it’s essential for these companies to furnish comprehensive documentation, training, and support, enabling customers and partners to effectively manage implementation and maintenance.

What strategies can a startup employ to differentiate itself within the IaC market? Do you anticipate a single company ultimately dominating market share in the long term?

The key lies in developer satisfaction. The most effective IaC solutions simplify developers’ workflows without demanding substantial additional time investment. They integrate seamlessly into existing processes, rather than requiring alterations to established behaviors or toolchains. Furthermore, they offer robust support for contemporary infrastructure technologies like Kubernetes and serverless computing, allowing developers to fully leverage their capabilities. This focus on developer delight was a key factor in our decision to invest in Pulumi. Drawing parallels from other software markets, we predict a “winner-take-most” scenario, with one dominant player emerging, although opportunities will remain for specialized solutions catering to niche segments.

Sri Pangulur, Partner, Tribe Capital

Is infrastructure as code poised to revolutionize server implementation and configuration, mirroring the impact the cloud had on physical servers? In what specific areas will IaC’s capacity to deploy any cloud resource prove most valuable?

While IaC primarily addresses the ongoing management of cloud resources, a distinction must be made between standard cloud infrastructure and application servers. IaC excels with stateful resources – databases, compute instances, load balancers, and those not easily recreated – whereas stateless applications running in the cloud are readily rebuilt without state concerns, leveraging CI/CD and GitOps methodologies.

The key benefits of IaC lie in the reproducibility of environments, simplified infrastructure change auditing, and enhanced separation of duties through CI/CD pipelines and pull requests.

Organizations can further optimize cloud resource ownership and cost allocation, leading to streamlined billing and improved governance.

Startup Adoption and Time to Market

Does IaC’s process streamlining capability attract startups in highly competitive fields aiming for rapid product launch?

The applicability depends on the specific product. Cloud services have already significantly accelerated this process. IaC primarily supports infrastructure maintenance and scaling, rather than necessarily speeding up initial development and time to market. Many early-stage startups initially utilize their cloud provider’s user interface before adopting IaC, due to the added engineering complexity and required expertise.

Hesitancy and Marketing Strategies

What factors contribute to companies’ reluctance to embrace infrastructure as code? How can IaC providers effectively market their solutions to increase adoption?

Adoption can be complex, particularly requiring specialized expertise for smaller companies. Larger organizations face the challenge of shifting from established paradigms. Integrating IaC with existing resources can be difficult, especially when those resources are managed by different tools. Simply adding IaC to current infrastructure isn’t usually feasible; the focus is often on migration.

Furthermore, IaC products often lag in supporting newly released cloud resources. Even the IaC offerings from major cloud providers can experience delays in supporting new features or parameters.

To enhance appeal, providers could focus on establishing shared specifications and vendor-neutral APIs. OpenTelemetry serves as a strong example in the tracing domain, while Kubernetes CRD specifications offer a parallel in the infrastructure space. Tools such as CrossPlane aim to provide developers with a unified API for managing Kubernetes workloads and provisioning cloud infrastructure.

Service Models: Implementation vs. Framework

Some IaC providers offer both implementation and maintenance services, while others solely provide the underlying framework. Which model is likely to achieve greater success?

The framework is fundamental; without it, no services can be built. Terraform’s initial appeal was clear, but before Terraform Cloud, companies faced risks due to its stateful nature and potential state loss. Terraform Cloud alleviates this concern by entrusting Terraform state management to HashiCorp professionals.

Differentiation and Market Consolidation

How can a startup entering the IaC market differentiate itself from established competitors? Is a single company likely to dominate the market in the long term?

Traditional IaC tools often fail to bridge the gap between developers and infrastructure without requiring extensive infrastructure expertise. These tools lean more towards configuration than true coding. Newer solutions, like Pulumi, enable infrastructure development in familiar programming languages, but may also introduce application-level bugs alongside potential infrastructure misconfigurations.

The future of infrastructure management will likely involve abstracting complex configurations and custom software, enabling organizations to easily deploy best-practice infrastructure with minimal underlying infrastructure knowledge.

Market consolidation by a single entity will be challenging. Developers have preferred languages, which explains the emergence and success of products like Pulumi. However, the current state of IaC tools often leads to inefficient engineering efforts with limited return on investment, diverting resources from high-value application development. To achieve market dominance, a company must provide developers with seamless infrastructure access, without requiring them to assume the additional role of operations specialists.

Teddie Wardi, Managing Director, Insight Partners

Could infrastructure as code represent the solution for server implementation and configuration, mirroring the impact cloud technology had on physical servers? In what specific areas do you anticipate the greatest utilization of IaC’s capacity to deploy any cloud resource?

IaC is fundamentally important for bridging the divide between development and IT operations teams. While it’s been available for some time, it remains a prominent subject within the DevOps landscape. A significant advantage lies in its ability to create uniform environments across development, staging, and production, minimizing errors stemming from manual processes. IaC is also crucial for leveraging the scalability of cloud resources through automated scaling based on workload demands.

Docker containers and a microservices-based architecture are essential components for effectively utilizing IaC. However, Docker also facilitates the definition of more intricate, combined applications, each specifying its required environment and configuration.

Does IaC’s potential to optimize workflows appeal to startups in highly competitive industries striving to be first to market with their products?

Absolutely. Speed to market often provides a key competitive edge for startups aiming to build strong brand recognition and gain positive endorsements from influential figures in their respective markets. IaC can undoubtedly serve as a core element within that deployment toolkit. Startups with robust DevOps practices can also realize benefits such as reduced costs and improved delivery quality.

What factors contribute to companies’ reluctance to embrace infrastructure as code? How can IaC providers refine their marketing strategies to enhance their attractiveness?

A frequently mentioned challenge with IaC is a lack of transparency. While it functions effectively for individual developers, it can become opaque when used by larger teams. Furthermore, there's a shortage of skilled engineers proficient in IaC and capable of implementing best practices. IaC vendors can address this by simplifying their products and lowering the skill level required for developers to use them effectively.

Some IaC providers offer both implementation and ongoing maintenance, while others solely provide the underlying framework. Which business model do you foresee achieving greater success?

We believe that vendors offering tools for maintenance and visibility will ultimately thrive. Frameworks are certainly valuable, but organizations are primarily interested in automating the resolution of time-consuming and expensive issues like policy deviations and configuration alterations. A delicate balance must be struck between providing automated solutions and relying on professional services for manual upkeep. We are decidedly more optimistic about the former approach.

For a startup seeking to establish a foothold in the IaC market, what strategies can be employed to differentiate itself from competitors? Do you anticipate a single company dominating the market share in the future?

We believe startups that focus on the convergence of contextual awareness and security within the DevOps pipeline will be the most compelling. Cycode, a company within our portfolio, exemplifies this approach, featuring a policy engine and numerous remediation workflows. Cycode’s knowledge graph and scanning capabilities assist in identifying IaC and cloud misconfigurations, source control issues, exposed secrets, and critical code vulnerabilities. Looking ahead, we don’t expect a single company to control the entire market, but rather three to five vendors who will differentiate themselves based on pricing tiers for small and medium-sized businesses versus enterprises, or by catering to specific use cases.

Tim Tully, Partner, Menlo Ventures

Is infrastructure as code poised to revolutionize server implementation and configuration, mirroring the impact cloud computing had on physical servers? Where do you anticipate the most significant utilization of IaC’s capacity to provision any cloud resource?

Undoubtedly, this is the direction we're heading. Those familiar with cloud platform tools will recognize their often cumbersome and usability-challenged interfaces, stemming from the sheer volume of crucial configuration choices and interconnected elements. Automation offers a faster, and importantly, a more secure approach. This security arises from the ability to thoroughly examine configuration safety and minimize the potential for human error.

Does IaC’s potential to streamline operations appeal to startups in highly competitive fields striving for rapid product launches?

Certainly. It’s vital to understand that IaC extends beyond simply configuring compute, storage, and networking. Its scope is considerably broader than resource allocation alone. A key benefit IaC unlocks is security as code (SaC), enabling security configurations to be defined declaratively alongside the IaC itself. Companies such as Oak9, which focus on providing security layers on top of IaC and assisting developers in identifying security vulnerabilities within configured resources during the CI/CD pipeline, will also accelerate product development. This is achieved by automating both infrastructure and security in a declarative manner.

What factors contribute to companies’ reluctance to embrace infrastructure as code? How can IaC providers refine their marketing strategies to enhance their attractiveness?

A degree of resistance to change is certainly present among developers at organizations hesitant to adopt IaC. Engineers generally favor established, dependable procedures. Without a compelling incentive, persuading them to alter their established workflows can be challenging. However, I believe IaC presents a substantial enough advantage – a significant “carrot” – that developers will ultimately embrace widespread adoption.

Some IaC providers offer both implementation and ongoing maintenance, while others solely provide the underlying framework. Which business model do you foresee achieving greater success?

Both models will thrive and ultimately converge, in my assessment. Maintaining a strict separation between these services proves difficult, and developers will increasingly demand a unified workflow. The company that successfully integrates these aspects will ultimately prevail.

What strategies can a startup employ to differentiate itself within the IaC market? Do you anticipate a single company ultimately dominating market share?

Two key areas stand out. First, integrating the various functions and features of the IaC workflow into a cohesive platform is paramount. Developers frequently rely on a collection of services to construct a functional CI/CD pipeline. Consolidating these into single platforms or offerings simplifies developers’ tasks. Second, usability is crucial. A common criticism of cloud service providers (CSPs) is the overwhelming complexity of their configuration options and service offerings. The IaC startup that can streamline the workflow and deliver an intuitive developer experience will gain a competitive edge as IaC functionalities become increasingly standardized.