Microsoft, Twilio are fond of telling you all about their “moat” – The Denver Post
By Nico Grant, Bloomberg News
As technology companies race to invent the future, they’re turning to a metaphor borrowed from medieval times to explain their businesses.
“Moat” has become a favorite term of tech executives. It’s typically used to describe products or services that protect a company from incursions by competitors. The word has come up 89 times since last year in earnings calls, presentations and other tech company events, according to data compiled by Bloomberg. Two dozen of those were this year, and on the current trajectory, it’s likely to match 2016’s total.
Moats, in the business sense, were popularized around the turn of the century by billionaire Warren Buffett. It initially took off in the financial services sector and spread more recently to Silicon Valley. At a 2013 financial analyst meeting, Steve Ballmer, Microsoft’s then chief executive officer, likened the company’s investments in cloud infrastructure to a moat.
Use of the phrase within tech circles soon exploded exploded, including by Ballmer’s deputies. Scott Guthrie, the executive vice president of cloud and enterprise at Microsoft Corp., outlined the major initiatives his firm was undertaking to dominate cloud computing at the Deutsche Bank Technology Conference in September: “You ultimately need to have three things, which create kind of a moat, if you will, around the market.”
The tech industry loves its buzzwords. Apple’s Tim Cook and Google’s Sundar Pichai have their favorites. However, Buffett is an unlikely person to inspire a tech trend. He has a reputation for avoiding most tech investments, with rare exceptions.
Jonah and Noah Goodhart said Buffett was the inspiration for the name of their digital analytics startup, called Moat. They started the company seven years ago after hearing the investor outline the concept at an annual Berkshire Hathaway meeting.
“There’s something pretty phenomenal about that word ‘moat,’ ” Jonah Goodhart recalled telling his brother. “If we’re going to build something, we should use that word.” Last month, they sold Moat to Oracle Corp.
With time, the word has spread. Lee Kirkpatrick, chief financial officer of Twilio Inc., adopted the term to describe his cloud software company’s strategy at the Goldman Sachs Technology and Internet Conference in February. “We are continually investing in quality and trust and building that moat around the service,” he said.
SPS Commerce, which makes supply-chain management software, has been building the most moats of any company since the start of 2016, according to transcript data. IRobot Corp., maker of the Roomba, and Adobe Systems Inc., which owns PhotoShop, also were digging their own metaphorical water-based defense systems.
Another popular term in the tech industry is “runway.” Technology executives used the term 2,348 times in analyst calls, presentations and filings over the last decade, according to data compiled by Bloomberg. The word’s popularity doubled from 2009 to 2010 and peaked in 2015.
“CEOs convey their advantage by the type of vocabulary they use,” said L.J. Rittenhouse, a consultant who develops communication strategies for companies. “What’s wrong with saying ‘opportunity?’ ‘Runway’ conjures up the airline industry, which is not particularly attractive.”