One evening in late 2015, after the kids were in bed, I sat down next to my wife and said, “I’d like to do something irresponsible. I want to gamble some of our savings on DevOps. I’d like to buy some stock.”
Nicole Forsgren’s 2014 presentation, “DevOps and the Bottom Line,” opened my eyes to the business impact of DevOps. Then the 2015 State of DevOps Report rolled out with the following tucked into a footnote:
The publicly traded companies that had high-performing IT teams had 50 percent higher market capitalization growth over three years than those with low-performing organizations.
I believed the data. It matched my intuition and experience.
DevOps and the Market
Companies doing DevOps win in the market. In a world where digital transformation has made competition between companies increasingly dependent on their ability to differentiate through technology, the ones who do best in tech are likely to win. As I heard an executive at an airline put it, “Anyone can spend tens of millions on a new Boeing or Airbus jet. There’s no sustained differentiation there. But a great booking experience … a great mobile app … that can win loyalty.”
So I found myself thinking that I sit in the middle of a DevOps community and know which companies are bragging about their DevOps successes. I truly believe it helps the business win.
The Bet, and Winning It
So that brings me back to that evening in December and the proposal I took to my wife.
- This was gambling. We’d risk only a fraction of our savings.
- We would buy and hold for one year, then re-evaluate.
- I would do no research on the companies we’d invest in outside of their DevOps practices. We would assume other public information would be priced in by professionals acting in an efficient enough market.
- Investments would be in companies “doing,” not “selling,” DevOps. No vendors.
After getting the green-light, I bought a dozen stocks based mostly on the “who talks DevOps at conferences a lot” criteria: Amazon, Bank of America, Capital One, Cisco Systems, Etsy, Live Nation Entertainment, Macy’s, Netflix, Nordstrom, Sherwin-Williams, Target and Verizon Communications.
So let’s talk about a few of these companies. Amazon and Cisco arguably violate the “no vendors” rule. Amazon I’ve excepted, as the company has a good reputation for DevOps internally, and many of the other retailers included are motivated to DevOps by fear of Amazon. They’re included as a hedge against Amazon killing all retail. In fact, Amazon was my only retailer to beat the S&P. Over the past three years, I found Cisco’s talks of its transformation at conferences (including IBM’s) compelling. Further, the hardware-to-network functions virtualization (NFV) transformation they’re going through seems similar enough to a retailer’s brick-and-mortar to e-comm to warrant inclusion.
My employer, IBM, is not included because it is a vendor and as an employee its performance already has a big effect on my life. Etsy and Netflix are my “unicorn” contingent. Etsy crushed it for the year (+38 percent). Netflix underperformed (+6 percent) and was a major drag through the first half.
Retail and e-commerce was generally a weak segment with Live Nation (Ticketmaster), Macy’s, Nordstrom, Sherwin Williams and Target all underperforming the S&P 500. Compared to a retail index fund (XRT), all but Nordstrom and Target came out ahead, though. It was a rough year for the segment, but those investing DevOps seemed to outperform their competition.
All in all, the approach beat the S&P 500 by about half for the year, albeit with considerably more volatility.
Good Sentiment, Sketchy Investment Strategy
That said, a deeper look at this approach makes me think it was more luck than skill. While I believe that high-performing IT yields business wins, I didn’t actually know which companies have high-performing IT. The DORA team has the best data. I don’t. A big financial institution is likely to have more techies than Facebook. Do a handful of them presenting at conferences really say much about their thousands of colleagues? I have doubts.
DevOps transformations, like Agile transformation, are hard to do at scale. It’s the scale that counts, and will generate the business differentiation. Some transformations led by brilliant champions will end up failing. Mid-year, I was at one of our DevOps networking events talking with someone from one of the companies in this list and suggested that they must be nailing DevOps given what I heard at conferences. The answer was, “Not really … we’re kind of starting over and the people championing DevOps have all left.” I’m not surprised that company is one of my underperformers.
Sophisticated investors will point out approaches for managing exposure to segments and better isolate DevOps effects from overall market moves. Not researching and using those is another flaw in the approach.
And yet, if picking stocks at random would yield average results, but DevOps helps company win, and people talking about DevOps likely represent companies with more DevOps than others, it’s not shocking to see this strategy happen to get lucky.
What Will I Do Next?
My focus will remain on ensuring the IBM UrbanCode business embraces DevOps practices, mindsets and approaches in every way and supporting IBM’s overall transformation. While transforming myself, I’ll remained focused on helping my clients with their own transformations. Check out some DevOps success stories.
As for investing, I’m not a gambler at heart and may simply close down this experiment while I’m ahead and pick a nice index fund. Or, I may refine the picks to only take those that are publicly talking about how they spreading these practices to thousands of practitioners.
Disclaimer: I’m a techie, not a financial advisor. I recommend improving your own business with DevOps. I do not have a recommendation for how you should invest. Past performance is not indicative of future results. This experiment could have gone badly, and for a while in the first quarter, it looked as though it would. Please don’t take risks you can’t afford based on the experience of a rank amateur investor like myself. This experiment was mine and mine alone. I speak for myself, not my employer.
About the Author/ Eric Minick
Eric Minick is a technical evangelist. He joined IBM through its acquisition of UrbanCode. He has spent the last 10 years helping organizations large and small adopt continuous integration, delivery and, now, DevOps. He is a frequent speaker on the topic, and co-authored “Application Release and Deployment For Dummies.” Prior to consulting, Eric was a developer, test automation engineer and support engineer, and has contributed to multiple generations of UrbanCode products. Follow him on Twitter at @ericminick.