Developer-Led Landscape: Some 2022 Predictions

Thoughts, observations, and concerns after a stunning 2021.

2021 was a stunning year for companies in the Developer-Led Landscape.

There are now 1050 companies that make for-profit products that are sold to or purchased by software developers. These companies collectively raised $16B in 2021 and obtained $35B in market liquidity.

This is financial evidence that the demand for software continues to outstrip the talent supply of engineers who can craft and maintain solutions. The excess spills over into the growth of the businesses in this landscape.

What will 2022 become?

We are working on a (significant) paper that looks at the three waves driving the industrialization of the software supply chain that we’ll publish later this year. As we work on these thoughts and observe the activity from 2021, we have compiled some predictions, observations … and concerns.

Previous Developer-Led Landscape Papers

Developer-Led Landscape: 2021 Edition
Developer-Led Landscape: Latency-Optimized Development
Developer-Led Landscape: 2021 Trends Foretell New Approaches To DevOps
Developer-Led Landscape: Cloud-Native Development
Developer-Led Landscape: The Original

Fewer Developer-Led Companies Will Be Started In 2022 vs. 2021

While it is true that cheap, fractional access to cloud services; broad availability of (nearly) free open source components; increased accessibility to cheap venture capital; and the always-present motivation for developers to “roll their own” exists, there are headwinds forming that will make startup life less attractive for speculative entrepreneurs.

This includes a heavily fragmented and hyper competitive landscape with (often times) dozens of competitors working to define new categories; increased labor rates and retention compensation packages that diminishes the risk:reward profile of an engineer considering a startup; the beginning chapters of a 15 year consolidation wave that marks the end of the second wave of software industrialization will cause platform providers like Gitlab, GitHub, and Cloudbees to get an abnormal share of the market; Web3 and distributed application development concepts confuse and dilute forward progress on core system advancements.

We Will See Evidence of “Peak DevOps”

Due to limited liquidity for developer-led landscape businesses, the presence of fewer “strategic” developer platforms driven by consolidation, and (historically) limited private equity interest in developer-led businesses, investors will experience losses in high potential developer businesses which will in turn limit new VC available for developer businesses, create more (profitable, but small) zombie companies, and reduce acqui-hire acquisition pace.

This may signal that we are in a period of “Peak DevOps," a period where the developer-led landscape will have many high quality, profitable businesses, but generate underwhelming investor returns.

As an investor, my pace of investing into these companies will not slow in 2022, though my thesis for where opportunity lies has shifted and is targeted.

Machine Learning For Dev Tasks Will Be Popularized But Not Mainstream

Machine learning is in the earliest stages of leverage across many aspects of the developer lifecycle:

1. Code autocomplete, such as the widely discussed, controversial release of GitHub Copilot.

2. Test authoring and maintenance for QA, for which we now track 25 companies with varying levels of capabilities, and none of which have exceeded $10M in ML-driven revenues.

3. Extracting unseen insights for engineering intelligence products like Code Climate, for which we now track 29 companies.

4. Identifying risky behaviors and code for code compliance and security products.

5. Specifying and maintaining SLOs and SLAs for running systems to alleviate and automate operations teams.

We will see discussion of these capabilities become mainstream in 2022, though we will have limited adoption as questions around explainability, copyright, licensing, and software security prevent every day adoption in major software projects.

Secure Software Supply Chain Standards Will Be Adopted Faster than Kubernetes Was During Its Infancy

Congress and glaciers move faster than standards bodies.

However, with many of 2021’s biggest cyber breaches traced back to vulnerabilities found in open source, the delivery lifecycle, developer tooling, and rogue developer behavior … securing the software supply chain has leapt to the top of the CIO / CDO’s imperatives for 2022.

There are multiple standards across industry and government that have gone through multiple iterations and acceptance within the past 18 months, a stunning pace.

Starting a new software project historically meant the team first got a code repository, a CI system, and a means to deploy.

By the end of 2022, we’ll add “supply chain security” as table stakes to this list.

Agility As a Dominant Paradigm For Lifecycle Design Will Wane

For the past 20 years, agility has been the core design principle for organizing software product teams and their tooling. The belief has been that improving cycle times lead to happier developers and better software.

Working from home, all-remote software organizations, overwhelming social media storms, instant continual access fatigue, and hyper competitive pressures are overwhelming many high-agile dev teams leading to unsustainable wage pressure and higher attrition.

Empathy, for users, colleagues, and partners, is increasingly seen as a more sustainable organizing principle for product teams. The early success of SRE and observability vendors (some raising at unicorn valuations in 2021) are a reflection of this empathy trend since transparency is the foundation for empathetic connection.

DevOps Intelligence & Governance Will Emerge As a New Category In The Developer-Led Landscape

As the data management market has grown to create trillions in value and zettabytes of global data, the complexity and regulated nature of data led to Data Governance as an essential GRC category that grew commensurately with its larger data management cousin.

Software development will follow suit with Service Governance, or perhaps it’s called DevOps Intelligence & Governance.

Software systems have become so complex that it’s getting too difficult for humans to reason about the systems they design. The complexity spans the team (even small projects with 20 dependencies have a broader committer graph of 10K engineers), the tooling, the architecture, and the users.

Service Governance will be the creation of service catalogues, metadata stores about *how* the software was created, and intelligence systems that inform stakeholders on insights for the system.

Backstage is an early open source project popularized by Spotify’s diverse software organization and architecture. 2022 will have this category become mainstream with multiple vendors and at least one major software project re-organizing to depend upon governance solutions.

High Flying CDNs And Modern PaaS Like Netlify and Vercel Will Under Perform Relative To Expectations

The extremely high growth of modern PaaS has led to terrific unicorn valuations. This growth is a reflection of pent up demand for CDNs and modern PaaS that understand the structure of modern Web apps along with cloud-inspired workflows.

While controversial, I believe this growth is a reflection of unserved demand, and that growth will normalize to a less impressive adoption curve in 2022. These modern systems are powerful, but usually impose an opinionated approach that will not cater to all dev teams universally.

These companies will still be remarkably valuable, just less so on a relative basis.

Gas Fees Will Shrink Enough to Make dApp Dev Experimentation Viable; Though The Market Will Still Be Searching For Viable Use Cases

Gas fees on popular blockchains make the economics for Web3 nonviable for mainstream developers to build new systems in ways that can unlock (whatever) potential may exist for distributed applications.

Developers that work on distributed applications today number in the thousands, not millions. Only once the entry cost for development approaches free can the potential for broad development occur.

Beyond the gas fees being prohibitive, there are numerous other challenges tied to tooling and infrastructure: L2 support, discoverability of services, identity management through wallets, broad cyber security risk area, limited integration brokers that bridges off-chain data, and blockchain querying / intelligence.

NFTs, DAOs, and Crypto hype currently outstrips their value, so we will hear more stories about failed and struggling issues as the market continues to search for a mainstream use case that validates distributed application architecture.