The Case for Ephemeral Environments

Industry Category

Ephemeral environments sit firmly within the DevOps industry. But it also sits within the Developer Tools and Software Testing industry because the real end customers are the developers and QA engineers, not the DevOps team. This is because ephemeral environments are meant to be spun up and down seamlessly without the DevOps team being involved on a daily basis. They most closely mimic end-to-end system testing because it involves testing the complete application environment that mimics real-world usage.

Market Size

There are several approaches that we can use to get to an estimated market size for ephemeral environments. When I’m thinking about market sizing I’m looking at the use cases and validating the demand.

  • $0 / user / month for companies just starting (0–10)
  • $20 / user / month for small size companies (11–100)
  • $40 / user / month for medium size companies (101–250)
  • $100 / user / month for large size companies (250+)
  1. End User Approach
  • Sales engineers 41,000
  • Software quality assurance analysts and testers 74,000
  • Web developers 81,000
  • Software developers 1,932,000
  • Computer programmers 444,000

Market Growth

With the recent work from shift/hybrid work model shift, companies are searching for tools to help their employees do their work more efficiently. Ephemeral environments are starting to make a movement in the market and can soon overtake traditional continuous integration (CI) platforms as one of the most valuable assets for engineers.

Competitive Landscape (competitors + their positioning)

Kubernetes is an open source system for operating containerized applications at scale and is the industry standard. Kubernetes itself has documentation on how to create ephemeral containers but requires a lot of technical know-how to do so.

Legacy incumbents

Companies such as Amazon, Microsoft, Google, IBM, and VMWare all have their own solutions to deploy, test, and scale containers that are built on top of Kubernetes.

Emerging players

Emerging companies are increasingly building off established platforms such as Docker and Kubernetes. Successful companies that preach CI/CD include CircleCI and Chef, and offer a full suite of solutions that include hosting and infrastructure management.

Companies within this space

I’ve been following 8 pre-seed to series A startups within this space that are helping companies create ephemeral environments faster and cheaper: Shipyard, Roost.ai, Release, Garden, Bunnyshell, Loft, webapp.io, and Signadot. Many of them aim to educate the market about why ephemeral environments are the “new kids on the block” and I will look to disucss them further in a separate post.

Conclusion

The ephemeral environment market is still nascent. From speaking with my network, many people are slightly hesitant about how ephemeral environments work at scale, but see the value. However, compared to legacy incumbent platforms such as Amazon EKS clusters, ephemeral environments are less complicated and more intuitive.

Recommendation

Ephemeral environments fit venture firms who have developed theses in areas such as cloud infrastructure. Here are some of the reasons:

  1. While not the biggest market, the market for ephemeral environments is over $2B and will continue growing at a good CAGR
  2. There is good defensibility because this is not an easy problem to solve. There are many software teams in the US and globally that have specific workflows that they have developed or are developing (albeit generally for the same few tools). If a company is able to develop a solution that fits with different processes, they can build a competitive moat and land and expand with an existing customer
  3. Being that this is a nascent and still fragmented market, there is opportunity for startups to build differentiated technology
  4. Entrenched incumbents do not offer quick set ups for ephemeral environments
  5. This will save companies a lot of money in the long run because they don’t have to constantly think about how many machines they need to run end to end tests
  6. Almost most importantly, the startups in the space that focus on ephemeral environments have already began to validate the market with the customers they have been acquiring
  1. Large teams will provide higher ACVs to emerging companies. However, many large software teams have automated test systems that have taken years to build and are built off open source community projects such as Buildbot and may therefore be less willing to change their workflows
  2. The new Environment as a Service (EaaS) business model is so new that companies that are already paying for other subscription services may be unwilling to go for another unless there is clear immediate ROI
  3. There are many free open source projects that offer sophisticated teams an opportunity to build their own infrastructure without leveraging the technology of startups that cost money

References

https://www.slintel.com/tech/containerization/ https://devops.com/a-new-devops-test-environment-platform-is-needed/ https://www.datadoghq.com/docker-adoption/ https://www.docker.com/blog/docker-index-dramatic-growth-in-docker-usage-affirms-the -continued-rising-power-of-developers

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