The Two-Second Advantage: Talking with TIBCO’s Vivek Ranadivé
He might not have the profile of a Jobs, Ellison, or Zuckerberg, but in a region where so many corporations are identified with their iconic CEOs, Vivek Ranadivé stands out even more than most as the face and voice of his company. The tagline at Palo Alto, CA-based TIBCO Software (NASDAQ: TIBX) is “The Power of Now,” which was also the title of Ranadivé’s 1999 New York Times business bestseller. Ranadivé headlines TIBCO’s annual user conferences in Las Vegas, was the starring character in a recent Malcolm Gladwell New Yorker article on underdogs, and is ubiquitous on the cable business shows, always extolling software’s ability to help companies respond more intelligently to events in real time and predict what’s going to happen next.
“If you have just a little bit of the right information a couple of seconds or minutes in advance, it’s more valuable than all of the information in the world six months after the fact,” Ranadivé says. It’s a premise he calls “the two-second advantage,” which will also be the title of his next book. The theme in nearly all of Ranadivé’s writings, speeches, and TV appearances is that certain kinds of information—say, what a customer in a grocery store is ready to spend money on—have a very short shelf-life. If businesses want to act on this information before it’s too late, he argues, they need a special kind of software.
TIBCO’s answer, which is baked into the name of the company, is The Information Bus. A bus, in the hardware world, is a computer’s central data spine, carrying information between the processor, memory, and input/output devices. At his first company, Teknekron, Ranadivé developed the idea of a software bus, which would link different programs and carry crucial information between them. The idea transformed the way electronic trading floors work on Wall Street, and after Ranadivé sold Teknekron to Reuters, he decided to export the concept to other industries. TIBCO Software, founded in 1997, succeeded almost immediately, going public on the NASDAQ in 1999.
These days the Information Bus is more a theme than a specific product; it pervades all of TIBCO’s product lines, from messaging systems to private cloud infrastructure software to the adapters that allow applications from companies like SAP, Oracle, IBM, and Salesforce to talk to each other. But Ranadivé says that for all of his books and speeches, the idea of responding to events in real time has only just started to sink in with businesses around the world. In fact, he’s fond of saying that the 21st century started in 2009. “Just as the 20th century started in 1908, with the advent of the automobile, 2009 was the year when we saw that there were more cell phones than landlines, more laptops than desktops, more girls in college than boys, when our first post-Baby Boomer president took office, and when more money was spent using debit cards than credit cards.” 2009, as it happens, was also the year when TIBCO’s offshore services revenue tripled.
I sat down with Ranadivé recently for an hour-long conversation at the company’s headquarters. He offered numerous cases of real-time information in action, drawing on examples from the wireless industry, the casino business, and other areas. The Mumbai, India-born engineer, who trained at MIT and Harvard, also offered unvarnished opinions about competitors like Oracle and Progress Software, and talked about Silicon Valley’s strengths and potential weaknesses as a hub of innovation. He’s bullish on technology’s ability to keep transforming our lives, but worried that the U.S. isn’t investing enough in educating the next generation of innovators. A condensed version of our conversation follows.
Xconomy: How would you describe TIBCO’s mission?
Vivek Ranadivé: At TIBCO, our mission is that if you get the right information in the right place at the right time you can make the world a better place. We are now at that proverbial tipping point when companies are flocking to this kind of real-time, event-driven technology. So for us that is very exciting. Everything I have worked toward for my entire working life is now going mainstream. Fifteen years ago, real-time information was only available on the trading floor. Now everywhere is a trading floor.
The next big trend is, how do you put that information in the right context. It’s not sufficient simply to have the nervous system that gets you the information. You have to make sense out of it.
X: What you’re talking about sounds a little bit like the semantic Web—having not just data, but an understanding of what the data is about.
VR: We were way ahead of our time. We didn’t call it the semantic Web, but we’ve been doing that for the last 10 or 15 years. But that’s not sufficient. You don’t want to have to ask the question. You want to have the information find you, rather than having to search for the information. So it goes beyond talk about the semantic Web.
Say that you’re married and your wife goes to the bank. Say you are a valued customer of the bank. Then the bank should know the context, and should know that your wife is as important as, maybe more important than, you. Right now banks can’t do that, but banking is becoming more event-driven.
Reliance in India is one of the world’s largest phone companies. They add two to three million customers every month, but they also lose a million customers every month. They were using 20th-century technology and looking at the [customer churn] information six months after the fact. They couldn’t solve the problem. We gave them the two-second advantage. Now you are able to see that this guy is a valued customer, and if you drop his calls six times in one 24-hour period, he is probably going to switch to another service. We pick up every single event—so now, after the fifth dropped call, we can offer free SMS messaging, so he doesn’t switch. To do all that, you need access to the data in real time. You need a real-time rules engine, complex event processing, adding context to that data to find patterns, and then you need a business process that you can activate in real time.
X: I’ve covered a company in Massachusetts called Progress Software that also emphasizes complex event processing. How do TIBCO’s offerings compare?
VR: Progress uses a point-to-point architecture. They are not inherently real-time in nature. The analogy is, suppose you want to do a talk show and you want to have 10 listeners. But suppose radio hasn’t been invented yet, and all you have is the telephone. Progress is the telephone. The first guy calls up and says, “Hey, what’s the latest news.” Then the second guy calls up. And so on. When the eleventh person comes along, they have to wait in line. The quantum leap was that was my invention was when something happens, it goes out like a radio signal, and you can tune into subjects the way you would tune into a radio station. When the 101st person comes along it does not degrade performance for the first 100.
X: You’re talking about the bus—the B in TIBCO. So that’s still the idea at the heart of the company’s products?
VR: It all starts with the real-time infrastructure, then builds on top of that. In the human body, the nervous system is the bus. Imagine if your nervous system wasn’t real-time: you’d be getting burned all the time, you’d be getting hurt all the time. Then you have the brain that picks up billions of events every day and makes sense out of them. The brain is what sees that the cell phone company has dropped five calls; it looks at the events and the historical patterns and makes a prediction. The same predictions allow you to know that a customer on a website is playing with a mortgage calculator and you better make him an offer before he leaves the site. They allow you to see that a guy is using an ATM in Boston and five minutes later he’s using an ATM in New York City, so that could be fraud. It says that these transformers on the grid are vulnerable and rather than letting them cause an outage, let’s do something about it. I could go on and on.
The third part of what we do is the business process management capability—the muscles that take action and allow business processes to work. I was talking to an East Coast supermarket chain, and they wanted help with their data warehouse. I said “Aren’t you in the wrong place? Shouldn’t you be at IBM?” And they said, “No sir, we want to operate in real time. When the customer leaves the store, it’s too late—we want to make an offer while they’re there.” We showed, for another retailer, that if a customer is buying seeds for their garden, there is also a very high probability that they will also need some new garden furniture. So you can make an offer on the spot and have an impact on your top line.
X: You started talking about the importance of real-time awareness of business data even before you started TIBCO. At the time it was a novel message, but in many ways it seems like those ideas have sunk in and are completely accepted now. Do you agree?
VR: I think the tipping point in the movement toward real-time awareness and predictive technology has really only been hit in the last 12 months. We have seen a tripling in our offshore service business from a year ago. When we do a beta test, we used to have six or seven customers, but when we announced our last beta we had to shut the door at 500. Now when you talk to business people, they understand that the nature of customer relationship management used to be that people call in when they have problems, but what if you can avoid the problem in the first place.
X: What technological changes have brought businesses to this tipping point?
VR: It’s a combination of things. The cost of solid-state memory has plummeted. An iPhone now has more memory than a big computer did 10 years ago. Also, our type of software has now made it possible to make use of information in real time with a very simple interface. That’s on the consumer side. On the business side, the amount of information has grown explosively, and the amount of time you have to react to it has gone down dramatically. If your passport gets stolen and three days later somebody shows up at a border crossing with our passport, there’s a good chance it’s a bad guy, but you have less than 9 seconds to determine that. If you have to sort through mountains of data in a database, it’s not going to cut it.
X: I bet the casino industry loves this idea.
VR: The casinos all use TIBCO. They used to use a data warehousing model. You would go to the casino, you would lose $500, and you’d leave. Six months later, the data warehouse would kick in, and it would send a letter saying, “You usually come every four months and it’s been six months and you haven’t been here.” How did we move this into the 21st century? We put in the nervous system. So now every hotel reservation system, every restaurant, every theater, every slot machine knows who you are. Every pull on the slot machine is an event. So it looks and says, ‘”You just lost $300, $400.” It goes to the brain, and the brain says, “If this guy loses $500, he’s not going to be happy.” Since everything is in the nervous system, it knows that there is some food at the restaurant that will go to waste in two hours, and it knows that there is a magic show coming up with a seat empty in the front row. That activates the muscle, the business processes. So a young lady, the casino ambassador, taps you on the shoulder, and says “Good news sir, we have your table set at your favorite restaurant and some show tickets compliments of the house.” And it’s all stuff that would have gone to waste anyway.
X: What comes after The Power of Now and your second book, The Power to Predict? Do you have another book in the works?
VR: Yes, the title of the next book is The Two-Second Advantage. The concept is very simple—that whether it’s people or corporations, it turns out that if you have just a little bit of the right information, just a little bit beforehand—just a couple of seconds or hours, but not weeks or months—it’s more valuable than all the information in the world six months after the fact. If you know where the ball is going to, as Roger Federer knows, you have an advantage. The message of the book is that corporations that have the two-second advantage will outperform their competitors.
X: What’s your take on cloud computing? Larry Ellison has called it “gibberish,” and argued that it’s just a rebranding of existing ways of doing computing.
VR: The way he’s doing it, it is. If you just take Enterprise 2.0 and put it in the cloud, you have just paved the cowpath. You haven’t done anything new. You are still using the buggy and whip. So not all clouds are equal, and he’s right about that part. What Oracle does, he calls “Cloud in a Box,” which sounds to me a bit like an oxymoron, further demonstrating their lack of understanding of the cloud.
What we do is help companies create what we call enterprise clouds. It’s in memory, it’s event driven, it’s real-time. It’s not just taking what you have and making it so that everyone can use it. TIBCO’s role is that we are the largest independent provider of cloud middleware—the software that allows you to create a cloud. The average enterprise will create clouds, but they will be combinations of the public cloud and private clouds, and there’s a lot of work to be done in terms of scaling and security and usability and access. Just as we are the infrastructure for the enterprise, we are the infrastructure for the cloud.
X: Can’t putting your company’s information in the cloud actually slow things down, given that the data is more distributed and has to travel over the Internet?
VR: That’s where our technology comes into play. Those things are all non-trivial technologies, and we have a great deal of experience building these kinds of facilities, like public-private clouds that don’t suffer from latency.
X: TIBCO bought a Massachusetts company called Spotfire in 2007, for $195 million. What was the significance of that acquisition for you?
VR: What Spotfire does is the next generation of visual analytics based on in-memory computing. It’s really a 21st-century spreadsheet. The appeal of it is very wide. On the one hand you have scientists trying to find a cure for cancer using it to look at massive datasets, and on the other hand you have sports fans using it to run their fantasy football leagues. The kinds of insights that pop out when you are visualizing something can be quite satisfying. Say you’re looking for a running back for your fantasy football team. [Ranadivé's example is not entirely accidental: TIBCO Director of Business Development Roger Craig is a former NFL running back who won three Super Bowl rings with the San Francisco 49ers.] Say you have one guy who averages a hundred yards a game, and another who averages 90 yards a game. You might say, I’ll take the guy who averages 100 yards a game. But if you visualize the data you might find that the guy who averaged 100 yards a game piled up a huge amount of yardage in one game, and then didn’t have as much yardage in the others. Whereas the guy who has 90 yards a game gains yards consistently game after game. Now, take that an apply it to your sales force. Which one do you want—the guy who outperforms on 1 out of 15 sales calls or the other guy who is more reliable? Visual analytics are very powerful and now we are expanding it to real time.
X: You’ve been building businesses in Silicon Valley for a couple of decades now. What’s your sense of how the innovation culture in Silicon Valley has changed over those years? Is it getting easier to start a technology company? What are the weaknesses in the Valley’s ecosystem?
VR: I think in some ways it’s easier, because there is a lot of money that wasn’t here before. I think we’re in a whole new cycle of innovation right now. We through these cycles, and some of the best companies were started in times of distress. If you go through the history, you find that great companies like FedEx, Apple, Cisco, were all launched during economic crises. I’m very optimistic about Silicon Valley. Just look at what has come out of the Valley in the last five years. Think how many people can’t live without their iPod, without Facebook, and the list goes on and on. This is really a good time.
X: But if you look at a lot of startups today, their innovations seem very incremental—the latest twist on social games or daily deals or behavioral targeting for Web ads. This stuff doesn’t feel comparable to what Intel was doing in the 1970s, or Netscape in the 1990s. Do you feel that there is as much fundamental innovation going on today?
VR: I think there is. We have made dramatic progress with semiconductor technology, with communications technology, with software technology. I think that being able to leverage all that is a good thing. You need the killer apps—people who can connect the dots and convert it all into value for the human being. So I think there is a lot of innovation out there. On a different level, there is a more philosophical question about whether we are investing adequately in the university system. The thinking at universities is not about what happens in the next 10 years, but what happens in the next 50 years. I don’t want to delve into political territory, but we really need to make sure that universities are well funded, because that return is proven.
X: TIBCO went public in 1999, only two years after its founding, in the midst of the dot-com bubble. Do you feel that this kind of growth would have been possible if you’d started out in, say, 2008?
VR: Oh, sure. Look at how big Facebook is. Groupon is only a year and a half old, and in their first year they did $200 million in revenue. You thought Facebook was doing well, and then a Groupon comes along. If you are on the right side of history, you are going to be successful. One of the great things about Silicon Valley is that not only do we have the 21st-century technology and 21st-century thinkers—the modern Leonardo da Vincis in the form of people like Steve Jobs—but we also have 21st-century consumers. That is a great advantage. They are adventurous enough to go out and buy all these technologies.
Every now and then I get concerned. We went through a phase during the bubble when there were a lot of so-called entrepreneurs who were really just trying to make a fast buck, and not to create great companies or change the world. We went through a phase when I was concerned that the VCs had corrupted the Valley by throwing around huge amounts of money, and the public markets were also playing that game, when the companies [they were investing in] didn’t have customers and didn’t really have sustainable value propositions. But it corrected itself, which is good. The problems we have right now are with education. Are our schools good enough? Are we creating the next generation of entrepreneurs? Those are the things I worry about.