Pivotal WTF-PO?

Pivotal's WTF Public Offering?

Pivotal and The Cloud, sitting in a tree, F A I L I N G.

This week we cover Pivotal's failing management, unstable products masquerading as production ready turn-key solutions, and how to construct business models for maximal customer exploitation instead of creating measurable benefits.

Previously on...

TOC

Review

Last time, we covered:

  • Dell retains 97.7% voting control over Pivotal.
    • so Pivotal is officially designated a "controlled company," and because of the dual-class stock structure (Class B shares have 10x voting power), Pivotal is ineligible to be listed on many exchanges and ineligible to be included in many funds.
  • Pivotal's investors pay Pivotal ~$50 million per year for software and services from their own investment, which greatly skews the balance sheet revenue story depending on where those numbers fall.
    • Having 10% of your revenue come from "friends and family" seems shady as all get out.
  • Dell is basically attempting to liquidate Pivotal because Dell currently has over $50 billion (with a B) in debt so it's time for yet another Michael S. Dell financial manipulation engineering miracle.
    • This IPO is purely financial engineering for the benefit of Dell. Pivotal doesn't have the financials to support being a public company, but if Dell can burn it to the ground quickly, they win. Who cares if everybody gets laid off with no notice in December?
    • I'd be surprised if Pivotal still existed in 3 years.
    • Likely chain of events: Pivotal will IPO underwater, get acquired by one of Michael S[hithead] Dell's private equity friends from Billionaire Island, then Pivotal will be put on indefinite revenue-rundown maintenance mode until all the "irrevocable contracts" Pivotal likes to brag about expire and no customers return (i hear k8s welcomes PCF refugees).

Today, we continue our investigation into Why Pivotal Is Worthless, So Let's Destroy Their Market Cap By Shining Light On Truths.

Glassholes

Look! Un-blurred Glassdoor reviews. Oooooweeee these get juicy.

Here's a preview of some employee-written reviews of Pivotal:


Extremely clic driven culture and organization


If you are not part of the favorited group and get special treatment you are dead in the water


"Amateur night" level of management


Best sales practices consist of historical revisionism and blatant ignorance of facts


Regularly miss release dates, constant reorganization and micro management from senior leaders. Lots of churn in the developer community. Too much toying with org structures and not enough focus on releases, release priorities, Data in or out. Too many egotistical chiefs.


Good luck with the Dell acquisition and be careful that your stock option plan is not incinerated as I cannot see them keeping it intact to pay down the level of debt that they need to service


The company is going downhill and accelerating. Stay away.


See? It's not just me.

Management with an extra side of Man

What is Pivotal?

Skip this section if you don't care about the history of 1989 Pivotal Labs LLC -> 2013 GoPivotal Inc -> Pivotal Inc

Nobody seems to know what Pivotal even is.

Lots of the reporting around this IPO says "Pivotal, a company founded in 1989, filed for an IPO!" which is bigly wrong.

Pivotal Labs LLC was founded in 1989 as a software consulting company based on "pair programming" where you trick customers into paying for twice as many consultants as they need combined with telling customers experience is overrated, nobody should know anything, and everybody (except for the CEO) is interchangeable and therefore replaceable.

Pivotal Labs LLC eventually failed and was purchased by an old guy at EMC in 2012 while retaining their consulting operations.

Then in 2013, EMC combined failed assets from EMC and VMware and Pivotal Labs into a new company called GoPivotal with Pivotal Labs existing as only one department inside.

Then, because "GoPivotal" is a dumb company name, they changed their name to "Pivotal Inc."

Then the CEO of GoPivotal left ("suddenly retired not because the company is failing and he has no faith in it, but because he just got too old—who knew?!") and put the original CEO of Pivotal Labs from 1989 in charge of Pivotal Inc which is hella confusing.

So, when you see reporting saying "Pivotal from 1989 is having an IPO!!!" that's a lie. Pivotal Inc didn't exist in 1989. Pivotal Labs LLC existed, was purchased, wrapped into GoPivotal as just a division, company renamed itself Pivotal, then Pivotal Labs LLC CEO got put in charge of Pivotal Inc almost 30 years later.

It makes no sense. It feels like an industrial scale three-card monte. That's the world we live in.

Pivotal Management Itself

Usually in IPO filings, you want to show you've grown and attracted multiple accomplished, experienced, stable, and trustworthy management team members with an eye towards growing into the future.

Pivotal's filing shows they actually have no modern-day management experience. Pivotal's filing shows they can't attract outside talent (because have you seen their awful revenue numbers and market prospects?). They just move around existing employees and hope nobody notices the lack of adult supervision.

Due to Pivotal filing as an "emerging company" under the JOBS Act, they don't have to list all executive compensation. This seems an abuse of the term "emerging company" when you're controlled by megacorps, but lawyers gonna law.

Pivotal's IPO filing lists the CEO and the next two highest paid positions:

  • CEO: Rob Me ($2.7 million; $500k base + stock+bonus)
  • President: Will Cook ($2.5 million; $400k base + stock+bonus)
  • Senior VP Cloud: Onsi Fakhouri ($1.6 million; $280k base + stock+bonus)

...and that's it? Where's the CFO? Marketing executive? Sales executive? It's disturbing Pivotal thinks it can float an IPO without any properly compensated adult leadership.

You really and truly have no executives paid more than a fake "Senior Vice President, Cloud R&D?"

If we look into the background of this fake "Senior Vice President, Cloud R&D" we see something really really really disturbing. The S-1 outlines his history:

Mr. Fakhouri has served as our Senior Vice President, Cloud R&D, since May 2017, and is responsible for the development of Pivotal's cloud-native offerings. Prior to that, Mr. Fakhouri was Vice President, Cloud R&D from January 2016 to May 2017, and Vice President, Engineering for Cloud Foundry from April 2015 to January 2016. He also was a distinguished software engineer and product manager from 2013 to April 2015. Prior to joining Pivotal in 2013, Mr. Fakhouri was a senior software engineer in the Pivotal Labs Division at DellEMC from 2012 to 2013. Prior to DellEMC, he was a software engineer at Pivotal Labs LLC from September 2010 until it was acquired by DellEMC in 2012.

That's a big wall of text. Basically, it says this SVPCR&D Onsi has never worked at any other company except Pivotal Labs and Pivotal Inc. Hired directly out of school, his entire career has been operating under the brainwashing of doin'-software-80s-style pair programming cultsultants.

Reformatting that big paragraph into a timeline of his entire career:

  • 2010-2012: Software Engineer at Pivotal Labs
  • 2012-2013: Software Engineer at Pivotal Labs owned by EMC
  • 2013-2015: "Distinguished" Software Engineer at Pivotal Labs owned by EMC
  • 2015-2016: "VP Engineering for Cloud Foundry" at Pivotal Inc
  • 2016-2017: "VP Cloud R&D" at Pivotal Inc
  • 2017-2018: "Senior VP Cloud R&D" at Pivotal Inc

What the holy fuckity bye is that? Why would you trust someone who has never run production services in real data centers for real global companies to be in charge of "cloud R&D" for end-user products? What special insight does a sheltered pair programming consultant have about the state of globally redundant self-healing on-premise services? More like Offsi, amirite?

PLUS, he's the third highest paid person in the entire company. With no real world experience outside of being under the same executive management for the past 8 years?

Where's the experienced leadership at Pivotal? Oh, there isn't any? Why? Pivotal can't attract any experienced leadership due to the cultish mandates of "look at me i did something in the 80s" CEO? Alternatively, the experienced people they had all left after being continually underpaid and second guessed and got tired of 🎵programmin' like it's 1989🎵 by executive mandate?

But, it turns out failed leadership doesn't matter. Failed management doesn't matter. Failed products don't matter. Just slap some Rails scaffolding over all the failed backends and customers will be happy with a pretty web interface they can refresh while sales reassures them all problems will be fixed in the next release, for realsies this time, unlike the other 16 times over the past 3 years sales has lied to them.

Remember: only sell your failed products into big companies where CTO decision makers are at least 8 layers above actual workers. Gotta make sure employees can't tell the CTO his championed products are absolute banana garbage.

Until then: undeserved sales commission moneyhats!

Stable and trustworthy businesses are not built by placing cult loyalist sycophants in executive roles.

Fun fact: MongoDB also filed as an "emerging company" and listed their executive compensation as:

  • CEO: $6 million
  • CRO: $1.7 million
  • CFO: $1.7 million

Not a huge surprise MongoDB has no highly paid people in technical leadership (web scale burn), but MongoDB did list actual executives, while Pivotal doesn't even hand out C[X]O titles. Pivotal places everybody at "Senior VP" titles unless mandated by law (CEO, CFO).

Glassdoor Reviews About Pivotal Management

A good ole boy club is probably the best way to describe it. Most of the individuals in management roles have no experience as a leader and it is very apparent.


It is embarrassing that these men (all men, BTW) are puppets and not making their own decisions. They simply get frustrated and follow the fold.


Total boys club, this is the most nepotistic environment I've ever worked in. The place is a popularity contest, many people in senior management are there because of who they are rather than what they did. Lack of honesty and minimal integrity valued over intelligence, dedication and hard work.


The management team is total boys club with serious favoritism problems, and oblivious to what happens in the field.


Fire the entire boys club majority of management team. Stop being condescending to employees and acting like know it alls. Listen to employees suggestions. Show employees they are valued. Stop changing company focus every year.


The founder focuses on his own "vision" and how that vision can help other companies that he is already invested in. His affiliations are obvious. He runs the company without knowledge on how a company works.


Toxic, high-pressure atmosphere, many abusive bosses, some people leave after 2 months. Very high turnover, there is a reason for this.

Cut-throat, Machiavellian internal competition, especially in middle management ranks, watch your back at all times.


How many Pivotal people does it take to change a light bulb?

It depends on how long it takes you to complete your 'Work Stream'. Which is directly proportional to the time to get 'Alignment' between the dozens of people you'll have on conference calls. If you don't stay in your 'Swim Lane' then you have to start all over again.


That's a lot of emotional stress on all employees for something as inconsequential as a failing cloud consulting company.

What's the value of a company where every employee hates the entire management?

Here's an except from a 2016 article about how Rob Me decided Pivotal's mission:

In 2013 after Mee, a self-described software developer who is "allergic to mission statements, corporate values, and things like that," was cornered in his office by one of his senior vice presidents who threatened not to leave until Mee clarified Pivotal's mission.

"I realized he was right," says Mee, who recalls saying: "It sounds grandiose, but what I'd really love to do is be able to transform how the world builds software."

And there you have it.

He had to be cornered in his office by actual leaders because he didn't even understand what he should be doing. Now Pivotal is under a "lol imma programmurrr not a managurrr!" CEO who was given control of a soon-to-be-public company? Way to go.

(Plus: in his office? what about the mandate for open office pair programming with no privacy and no owned workspaces? Why aren't you required to be a Pair-CEO? Oh, because "pairing" is just a scam to reduce the value of labor while billing twice as many hours as necessary and doesn't make sense for professional settings? That's why you're not required to be a Pair-CEO?)

Pivotology

What happens if we compare Pivotal to Scientology?

Much like cult religions, Pivotal entices customers with fanciful lies of a better future:

  • "What if you could release software every day instead of once every 12 years?"
  • "Are you feeling sad and alone? Only we can save you! We are a big family of empathy and love! Just give us all your time and money and you'll live forever as you are now!"

Pivotal's Description

The results are transformational. Through adoption of our platform, tools, and methodology, these companies have unleashed innovation and reduced time-to-market, spending less to maintain their existing application portfolio.

From Pivotal's own "Why Pivotal":

A typical day at Pivotal is strong work. It’s different from any previous job. It’s exhausting.

So... product death march consulting as a service? Maybe this isn't the kind of Digital Transformation you're looking for (though I'm sure executives love the idea of working cheap programmers to death then hiring new ones on a 3-month churn forever).

From a viewpoint of Transformation Consulting, Scientology sounds just as appealing as Pivotal.

Scientology Description

Imposing a transformational vision upon the world requires a coordinated effort to obtain resources from internal sources while at the same time acquiring resources from the external world of nonbelievers. Members must remain motivated to work diligently for the ideological vision, often in the face of adversity and apparent setbacks. At the same time, resources must flow into the organization and then be utilized by decision-makers, staff, and workers for the group's ideological purpose.

Scientology's view of work:

One begins to feel after he has been long on a job, has been considerably abused on that job, that to work any more would be quite beyond his endurance. He is tired. The thought of doing certain things makes him tired.

An individual can become a sort of hectic puppet that goes on working and working and working, without even realizing that he is working at all, and suddenly collapsing from a tiredness he was not experiencing.

Pivotal is basically Scientology as a consulting service.

Pivotal's sales slides are essentially codified Scientology applied to tech consulting. They tell stories about how customers buy multi-year "Dojo" commitments to level up Digital Transformations exactly like how a Scientology leveling chart works.

Both Pivotal's "Dojo" sales flows and Scientology leveling are all custom weirdo made-up terminology about how only we can enable your enlightenment, and only if you pay us lots of money and follow exactly these steps laid out by our infallible founder pbuh.

Oh, you say Pivotal isn't a consultancy anymore because software revenue is 1% higher than consulting revenue?

Sure, okay, let's just not mention 10% of revenue is from their own investors propping up a chosen balance sheet narrative of 90% software margins instead of 15% consulting margins (while they emphatically brag about how consulting drives cross-sales of recurring subscriptions because consultants implement their "consulting" using subscription software on unsophisticated customers like much synergy wow).

🦆 Products? More like Amatuerducts 🦆

quack! they're all quacks!

A very insightful commenter on Twitter pointed out a few things:

  • Pivotal adds ~4 customers a month, as we saw previously.
    • Plus, Pivotal filing doesn't address the one existential threat to the recurring "irrevocable license" PCF model: Google's Kubernetes project which has 1000% better engineering combined with real world experience and a global contributor pool.
      • Pivotal can't use pair-programming-9-6-experience-free-rotate-rotate-rotate to remain relevant in a Kubernetes world when the competition is creating free software from experience based on running literally millions of servers globally.
  • Stable companies tend to have 80%+ recurring revenue, not mostly low margin butts-in-seats pair programming consulting revenue.
  • Pivotal has just a few big customers who are out-sized revenue risks when they all wake up and jump ship at once.
  • Pivotal is setting cash on fire to the tune of $500k/day.

There's something intrinsically post-modern about a company that's burned through a billion dollars of investment yet is still almost completely out of money.

Not only out of money, but out of money and trying to sell shares in itself as if it were worth something to the public in an attempt to offset it's controlling company's debt load. what are we even doing. there's no public benefit here. you are being taken for a ride, and not a fun ride like to the beach, but a scary ride like through a storm with tornado warnings all around.

Failure by Failure

Unreported in Pivotal's IPO filing is how many previous customers outright refuse to do business with them again. programma non grata.

Pivotal thinks all problems need continuous pair programmers. So, you can't ever not contract Pivotal once you start. If you stop, everything you thought was automated suddenly fails. There is no automation! It's all people babysitting nosediving systems hoping nobody notices the supposedly automated failovers are actually fail-then-recover-manually-overs.

In reality, Pivotal deploys consultants or sales engineers into billion dollar companies, then they fall flat on their faces. After the companies see Pivotal's own employees can't even stand up Pivotal's own software on-prem, emergency patch-by-patch, day-by-day, lie-by-lie, the customers get more and more upset.

What are we paying for? Your system literally can't handle more than 4 requests per second? Your platform has 8 different message queue systems because each component is designed by independent teams ("pair programming! rotations! nobody knows anything!") and each team copied different suggestions from google queries into your production platform?

Yeah, that doesn't cut it. gtfo. rtfn. We're calling our CEO and our lawyers to void our contracts. You are in breach. Let's see how your "irrevocable" contracts hold up against blatant non-delivery of services. We won't allow your unstable garbage-scale environment to infest our company any longer.

Glassdoor Reviews about Pivotal Productized Malfunction

Does not invest in product stability, maddening when enterprise customers keep complaining about same issues and product management does not correct problems.


Develop products to be mature enough to run in enterprise production, don’t keep switching to shiny new object and leaving products half baked.


The top management is totally clueless on how to leverage the talent pool and don't even know basics of product development.


major changes every 3 months to product direction left employees with the impression that upper management had zero clue.


Their idea of sales strategy is to present super-smart engineers who talk shop for two hours straight, and expect the customer to be reality distortion field’ed into wanting to sign a large contract.


“Big data” has been abandoned. Their Big Data division laid off dozens of workers, open sourced all data software to cut R&D, and shipped nearly all professional services personnel to EMC or E9Data. Not to mention, there has been a huge exodus by senior data engineering talent over the past two years. Since Pivotal’s business strategy is software, and not services or appliances, there is no big data revenue to be realized by Pivotal ever again. Pivotal claims publicity for the Open Data Platform while dedicating very few resources to it. There is no commitment to big data anymore, but it sounds like a good buzzword so they leave it in their pitch. This is hollow.


I had dealings with most of Pivotal's senior executives, and I would say that most senior managers are well-meaning but clueless, while most mid-level managers are fear-driven opportunists. It is a dangerous combination.


Many communications come from management down to field, no communications allowed from the field up to management.

Unrelated Relevance

An online commenter points out something relevant to Pivotal's ground truth model in our post-value business climate:

Financialization of everything and everything strikes again; we're now routinely applying quality of income measurements to determine book of business value - this means that increasing the current revenue take from recurring customers gives you a huge expected customer LTV bump prior to the increased churn. During this period, your numbers look great, so analysts pop up your ratings, which affords you access to cheaper capital - or alternately you can cash in and sell with a higher valuation multiple on your book.

In larger firms, you'd think the incentive would be to account for the drop-off caused by eroded goodwill, but functionally there's a middle level manager who is using this spike in numbers to jump to another role before the piper has to be paid by his replacement. Even if the company blows up, he can lateral safely with his new title.

Between the gap [of decreasing quality] and long term change in churn, a third party isn't going to be able to quantitatively monitor future churn rates before they happen.

The problem is quality of business models just plain don't sample for customer goodwill - they measure sales metrics rather than feelings. So the sales metrics are gamed at the expense of the consumer feelings that create the metrics in the first place.

Basically, that's where Pivotal bragging about all their "irrevocable customer contracts" comes into play. Long term contracts secure a multi-year valuation you'd price into any wholesale purchase of the company.

The goal is for Pivotal to sell Pivotal off as a short term annuity to an acquirer where customers legally can't cancel their contracts for failing subscription software.

Illegal? No. Immoral and unethical and anti-value and anti-business? Hella yea.

Glassdoor Reviews about Failure as Business Model

Does not invest in product stability, maddening when enterprise customers keep complaining about same issues and product management does not correct problems.


Constantly changing company priorities—“all in on Hadoop”, “Pivotal One is going to change things forever”, etc, no focus.


don’t keep switching to shiny new object and leaving products half baked.


The top management is totally clueless on how to leverage the talent pool and don't even know basics of product development.


Stop treating Labs as just a sales tool for Cloud Foundry, and stop taking morally dubious military contracts.

The above insight by an employee was directly mentioned in the S-1:

Our strategy is to leverage our strategic services, including Labs, to increase our customers' pace of innovation, usage of our platform and the number of workloads they deploy on PCF as they realize the benefits of our platform.


Pivotal is not good at closing Cloud Foundry deals, and the feedback I heard from (now former) clients is Pivotal places too much emphasis on building excitement for tomorrow and not enough on delivering practical solutions for today.

Building excitement for tomorrow, you say? Like a cult promising you happiness and fulfillment if only you believe in Dear Leader and give your trust and money and time over to him for he is light and love and the embodiment of god himself? Like naming your interview process "RPI (Rob’s Pairing Interview)" because this "Rob" person is infallible?


the only reasons people remain enthusiastic is because they want their stock options to be worth something


Conclusion

We found some great IPO insight by Joseph Jacks this week and could afford a deeper dive into some management issues and public employee reviews.

Nobody has a positive outlook on this IPO except extremely brainwashed Pivotal Labs employees and the Dell CFO salivating for ways to extract money out of any Dell-controlled holdings.

It's clear something just isn't right here. The numbers are a bit too weird in places—a bit too convenient. The lack of experienced leadership is such a glaring error the market should reject this IPO on sight. Pivotal has the leadership team of a 3 week old startup, not a megacorp pretending to control the engineering decisions of other billion dollar companies.

The glassdoor reviews all coalesce around the same four insights. They were written independently, but all share:

  • Pivotal management is insular/incompetent ("old boys club"), has no integrity, and can't retain talent ("you'll have 6 managers in 2 years")
  • Pivotal products don't live up to the sales hype—aggressive sales knowingly lies to close deals
  • Direction from executives is just MAKE MONEY THIS QUARTER. There is no creative vision. There are no goals. There is just chasing easy money with no long term outcome in mind (after all, products can always be canceled, so who cares about products beyond next quarter?).
    • also why the company's mission is meaningless. The CEO's expert wisdom created this mission statement: "transform how the world builds software"
  • ...all of which leads to growing Pivotal Marketing delusions as quickly as possible so CTO whales bite on irrevocable recurring sales contracts so quarterly numbers plump up nice and juicy.

Where do all the revelations leave us? There's no happy ending for a company with no creative goal—no soul. Companies based on manipulating quarterly sales figures (and pumping up sales commissions) only exist as long as extraordinary expense is spent on growing sales because existing customers don't stick around.

You can always artificially inflate a company's sales by paying more people to sell more stuff. The more you try to sell, the more you will sell, but this model is not sustainable outside of pump-and-dump scams.

As soon as sales growth stops, the company dies because churn collapses the balance sheet.

Pivotal and PCF will be remembered as just a historical curiosity of financial manipulation—yet another one of Dell's financial conquests in his attempts to leverage every tech asset he can destroy. And maybe, just perhaps, Pivotal will remain a case study in corporate culthood.

Cloud Xenu may be proud of pivotal, but you shouldn't be.

Stay tuned.

Operation minus $1 billion market cap continues onward and downward.


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