ITRS CEO Ryan Terpstra on AI, Outages, and Infrastructure Risk

0:00Welcome back at Alex Coffey into the conversation as well, Ryan Turbstra. Here's the CEO of ITRS, Ryan. Nice to have you on the program. Given everything we know right now and everything that we don't know, how are you thinking about this current event as it pertains to IT infrastructure in this market? Yeah, I mean, I ran, represents a real continuation of geopolitical events that have created unprecedented market volatility and trading volumes. So this really started when Russia invaded Ukraine and we saw market data. So we're talking about the pricing data that fuels electronic trading, or even the ticker tape on Shwab Network. The peak message volumes went from 10 million to about 15 million per second. And then one truck came into the office. We see those exceeding 20 million messages per second. So it's put a real focus on the IT infrastructure that underpins the market. And if you look at ITRS, we are building the monitoring and observability software

1:00that nine of the top largest investment banks use to understand performance and prevent outages. Okay, so speaking on those outages or the potential for them or the avoidance of them, from where you sit, do these firms just holistically or IT infrastructure holistically? Is it more resilient today or is it just more complex trying to keep up? We've seen a huge increase in complexity because what the underestimated market risk has been, has really been cloud concentration, 70% of cloud infrastructure markets sits only on three firms. So what we've seen the banks do is adopt hybrid IT stances. What does that mean? So they're using the public cloud, the private cloud, and then self-hosted environments. But this is increased complexity dramatically. So they're making big investments into what we call IT observability, but also putting a real focus on rolling out

2:02agente AI to deal with that complexity. You've talked about in your notes are some of the risks being underestimated. And one of those is the market interconnectedness, meaning that if you have a stress event in one area could have ripple effects in others. Could you just sort of talk to us about that, to what sort of examples you would see then and the magnitude of the risk in this market right now that perhaps investors are underestimating? Yeah, if you look at the markets, they're more interconnected, more automated, individual than ever before. So let's use an example. The AWS Outage last October impacted 70,000 firms. We had many of our clients suffer outages as well, and that produced, we think, over half a billion dollars of cyber liability risk. So that was a real wake-up call to understand just how concentrated some of this IT infrastructure is on only a handful of these hyperscalers. Okay, so, Ryan, how do you deal with that, though? Because if I think about sort of,

3:05the market is rewarded, maybe the most efficient, the best technology, or the best value perceived technology, perhaps it's been prior relationships, I think of a couple of like Microsoft really leaned on some of those relationships, particularly with bigger firms. But I'll throw a crowd strike, and I know that was sort of a human error that caused that as my understanding, but it highlighted just how interconnected it was, what you're saying with AWS, and things that we've seen. But it seems also like at the same time, we're watching the amount of choice we have in the marketplace, shrink and shrink and shrink. So how do you deal with that risk when also we almost have this winner take all, and it's like these magnificent seven companies are winning by such a wide margin? Yeah, you've seen a real decentralization and a wake-up call for bank CIOs. They want optionality, and the regulators are demanding optionality. So they have adopted multi-cloud vendors, they have adopted private clouds, they have invested in self-hosted

4:07environments, and also observability tools that can visibility across that entire stack. And what about the AI disruption fears? I mean, from the position where you sit right now, Ryan, you know, what's your take on all of this is to what it takes to actually win in all of this, when we continue to just see a barrage of headlines, I think there was another one around anthropic and cyber security firms, for instance, today, which took a little bit of a hit, but it's going sort of sector by sector somewhat like a tidal wave or sort of Mexican wave right now. The agente revolution is going to create a real bifurcation in the market of winners and losers. What I pay attention to is how our large enterprises changing how they buy enterprise technology, and what I can tell you is they are investing in agenteic-enabled platforms versus vibe coding. So I had one managing director at a large bank say, look, we conducted a test, we vibe coded an app,

5:08the codebase from anthropic was 5x, the codebase that the human wrote. We have a responsibility to our regulators to understand that code before it goes into production. So what we're seeing is a real investment into agenteic AI using the platforms that exist today versus, for example, vibe coding their own CRM system. Okay, so Ryan, I'm sure you have thoughts. What about sort of the efficiency paradoxes that exist, which is, hey, things are tough right now with some of that AI software. We're ramping up this capacity, and then there's the fears of like, okay, maybe we're way over ramping up, and once things get figured out they can do this way more efficiently, there's going to be way too much of this capacity and overestimation of what we need. Are you in that camp, or you in the camp that it just makes it a little bit more accessible, and it just makes it a little bit easier to more and more to get involved with some of these AI softwares, and that same usage

6:09kind of remains, it just gets a lot more productivity out of it. We are supply constrained. We are to not demand constraint, and when a commodity becomes more available, you typically see demand increase. That is why my company and other companies are actually hiring more software engineers, not less software engineers, because we're seeing a 10X in their productivity and their effectiveness of using some of these code generation tools. So I think the democratization of intelligence through agente AI will create a massive boom in demand, and we are still supply constrained. There are headlines out there that 30 to 50% of the data center builds are on hold. Why? Because we don't have enough parts for the energy production that is going to go fuel these data centers. It is not a demand issue, it's actually a supply issue. And what's interesting is when I talk to the CIs of the banks, they are carving out billions of dollars to invest in agente AI, and you just saw a great headline today, Anthropic 30 billion of ARR, which tells me a lot of these proof of

7:14concepts are now going into production, and we're seeing that front and center in IT operations. So these are the personas and clients that we serve at the banks that are starting to use agents to create more resilient infrastructure that supports the capital markets. But what do they actually want from that software, Ryan? What are they actually trying to achieve? We're trying to achieve reduced downtime. So if you look at capital markets, minutes can represent millions of dollars of lost revenues. So because of the increased complexity of their IT infrastructure, they're now using agents, thinking of them as digital workers, that can observe these systems in real time and help them get in front of outages or outages more quickly to bring those systems back online. So it's an incredibly high-states game where you now have digital workers paired with the site reliability engineer or the application support professional to create more resilient IT infrastructure.

8:16Well, it's nice to hear of a firm that's hiring in the business of actually looking for people to work. Ryan, so I've got a couple of college grads. I'll send your way. Thanks so much for joining us here on Schwab Network. Really appreciate your time. That is Ryan Terpstra, the CEO of ITRRS.