OPPORTUNITIES IN CLOUD COMPUTINGInvestment Thesis & Market Map | Rei Kasai | Q3 2010 | reikasai@gmail.com

Source: Flickr.com/COTE

CLOUD COMPUTING IS THE DELIVERY OF APPLICATIONS OVER THE INTERNET

CLOUD COMPUTING IS NOT NEW… DO YOU REMEMBER ASPS?RK CO

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Cloud Computing is Internet-based computing for both Enterprise and Consumer markets, whereby software and information are provided to computers and other devices on-demand, like a public utility. –Wikipedia

Source: Wikipedia, Forrester

Cloud computing comes into focus only when you think about what IT always needs: a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. -Infoworld

IT WILL FINALLY BE ABLE TO CONSUME TECHNOLOGY SIMILAR TO HOW THEY CONSUME ELECTRICITY FROM UTILITIES, ON A PAY-AS-YOU USE BASIS THEREBY ELIMINATING LARGE CAPITAL EXPENDITURES

HOW IS CLOUD DIFFERENT THAN ASPS AND WHY IS IT IMPORTANT?RK CO

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Source: Lone Wolf Librarian

Key Attributes: Shared, standard service – built for a market (public),

not a single customer Solution-packaged – a “turnkey” offering, integrates

required resources Self-service – admin, provisioning; may require some

“on-boarding” support Elastic scaling – dynamic and fine-grained Use-based pricing – supported by service metering Accessible via the Internet/IP – ubiquitous (authorized)

network access Standard UI technologies – browsers, RIA clients and

underlying technologies Published service interface/API – e.g., web services APIs-IDC

Source: IDC, Infoworld, Lone Wolf Librarian

Garter’s Top 10 Strategic Technologies2006 2007 2008 2009 2010

1. Virtualization Open Source Green IT Virtualization Cloud Computing

2. Grid Computing Virtualization Unified Communications

Cloud Computing Advanced Analytics

3. Services Oriented Business Applications

Service Registries & Service Repositories

Business Process Modeling

Servers – Beyond Blades

Client Computing

4. Pervasive Computing Business Process Management Suites

Metadata Management

Web Oriented Architectures

IT for Green

5. OLED/LEP Technologies

Enterprise Information Management

Virtualization 2.0 Enterprise Mash-ups Reshaping the Data Center

6. Location-aware Services

Ubiquitous Computing Mash-ups & Composite Apps

Specialized Systems Social Computing

7. Linux Information Access Web Platform & Web Oriented Architectures

Social Software & Social Networks

Security- Actively Monitoring

8. Desktop Search Tools Web 2.0- AJAX Rich Clients

Computing Fabric Unified Communications

Flash Memory

9. Micro-commerce Web 2.0- Mash-up Composite Model

Real World Web Business Intelligence Virtualization for Availability

10. Instant Messaging Communities & Collective Intelligence

Social Software Green IT Mobile Applications

THE MATURATION AND ADOPTION OF VIRTUALIZATION HAS ENABLED CLOUD TO FINALLY EMERGE

CLOUD COMPUTING IS FINALLY TOP OF MIND OF CIOSRK CO

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Source: Gartner, Adapted from http://www.flickr.com/photos/mobian/3426349990/

PER GARTNER’S 2010 EMERGING TECHNOLOGIES HYPE CYCLE ANALYSIS, CLOUD IS CURRENTLY “IN THE PEAK OF INFLATED EXPECTATIONS.”= 2 TO 5 YEARS FROM MAINSTREAM ADOPTION

HOWEVER, MAINSTREAM ADOPTION IS STILL SEVERAL YEARS OUT…RK CO

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Cloud Computing in 2008 (First Time on Hype Cycle)

Source: Gartner

GOOG & MSFT ARE THE ONLY ONES THAT HAVE OFFERINGS IN ALL THREE CATEGORIES OF THE CLOUD

MERRILL LYNCH HAS IDENTIFIED THE FOLLOWING DOZEN WITH A STRATEGY TO PARTICIAPTE IN CLOUD COMPUTING

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Infrastructure SaaS

Platform

The overall Cloud market is a multi-billion dollar opportunity. IDC and Merrill forecast the TAM in 2013 to be approximately $44B and $108B respectively, which equals approximately 10% to 12% of total IT spend.

Source: IDC, Merrill Lynch

Cloud Applications(SaaS)•Provide business and consumer applications that are provided on-Demand (The application is paid for on a subscription basis and the software is hosted by the vendor and accessed by the customer through the web).•E.g. Salesforce.com and Google Mail (subsidized through Ads)Cloud Platform Services(PaaS)•Provide a set of capabilities exposed as services to help develop and deliver new cloud applications by partners or customers•E.g. Microsoft Windows AzureCloud Infrastructure Services(IaaS)•Provide the physical capacity for Cloud computing as a set of virtual hardware resources(i.e. compute, storage, and network)•Manage those resources based on scalability and availability needs•E.g. Amazon S3

THE CATEGORIES OF CLOUD IN MORE DETAIL…RK CO

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Source: Coord, Merrill Lynch

WHILE TAM ESTIMATES DRAMATICALLY RANGE FROM $44B TO $108B BY IDC AND MERRILL RESPECTIVELY, BOTH AGREE THAT SAAS WILL BE THE LARGEST PIECE OF THE CLOUD PIE

TAM ESTIMATES BY CLOUD CATEGORY IN 2013RK CO

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SaaS44%

IaaS32%

PaaS24%

Merrill Lynch $108B

SaaS38%

IaaS33%

PaaS29%

IDC $44B

Source: IDC, Merrill Lynch

CIOS ARE MOVING MISSION CRITICAL APPLICATIONS TO THE CLOUD PER IDCRK CO

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(Scale: 1 = Very Unlikely 5 = Very Likely)

Q: Rate your likelihood to pursue the cloud model for the following

48.6%

49.1%

49.8%

50.6%

51.3%

52.9%

54.8%

55.1%

55.6%

59.4%

66.9%

67.3%

0% 10% 20% 30% 40% 50% 60% 70% 80%

IT/Information Security

Application dev/test/deploy platform

Business Intelligence/Analytics

Server capacity on demand

IT Management software

Storage capacity on demand

Data/Content Distribution services

Personal productivity apps

Business apps (CRM, HR, ERP)

Data Back-up or Archive services

Web applications/Web serving

Collaboration applications

Source: IDC Enterprise Panel, 3Q09, n = 263, September 2009

PAIN POINTS OF CIOS = OPPORTUNITIES IN CLOUDRK CO

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(Scale: 1 = Not at all concerned 5 = Very concerned)

Q: Rate the challenges/issues of the 'cloud'/on-demand model

76.0%

76.8%

79.8%

80.2%

81.0%

82.9%

83.3%

87.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Not enough ability to customize

Hard to integrate with in-house IT

Bringing back in-house may be difficult

Lack of interoperability standards

On-demand paym’t model may cost more

Performance

Availability

Security

Source: IDC Enterprise Panel, 3Q09, n = 263, September 2009

•Large enterprises are building their own private clouds to resolve the security problems

•Coding & development skills will take a back seat to project management, quality assurance testing, business analysis, and other high-level abstraction thinking

•IT departments will shrink as users go directly to the cloud for IT resources

•Cloud computing providers will support information security as if banks secure money

•Small-sized to medium-sized businesses as well as large enterprises will be run on the cloud

•The browser will be all the desktop software you need

•Game services will be one of the most interesting applications of Cloud Computing

FUTURE OUTLOOKRK CO

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Source: Focus Research

•Opportunities:• Help enterprise adopt cloud• Drive operational expenses for

cloud down

OPPORTUNITIES IN INFRASTRUCTURE SEGMENTRK CO

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Cloud BrokersAppirio PrivateCloudKick PrivateCloudSwitch PrivateElastra PrivateenStratus PrivateKaavo PrivateRightScale Private

Services ManagementAbiquo PrivateCloud42 open sourceCloudShare PrivateCohesiveFT PrivateDelphix PrivateLayerboom Systems PrivateRiverMuse PrivateScalr PrivateVMTurbo PrivateYlastic Private

Source: RK Consulting

•One of cloud’s strengths is ability to scale and process data efficiently, which is perfect for analytics. Challenge is integration and security•Opportunities are:

• Help adopt BI in the cloud• Integrate enterprise/private data

better with the cloud• Compliance- Moving data

outside the firewall and into the cloud requires new processes to ensure data is not compromised

• Security management- Distributed cloud environment is a nightmare for IT admins.

OPPORTUNITIES IN PLATFORM SEGMENTRK CO

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BIAster DB PrivateClario Analytics PrivateCloud9 Analytics PrivateColdLight Neuron PrivateCrowdcast PrivateDatameer PrivateGoodData PrivateIndicee PrivateLogiXML PrivateOco PrivatePivotLink PrivateQuantivo PrivateVertica Private

IntegrationAppian Anywhere PrivateBoomi Privategnip PrivateHubSpan PrivateNephos PrivateSnapLogic Private

SecurityAprigo PrivateConformity PrivateKinamik PrivateNavajo PrivateOkta PrivatePerspecSys Private

Source: RK Consulting

•Opportunities are:• Collaboration/social services to

augment existing enterprise products

• Billing/monetization services for SaaS/Cloud services

OPPORTUNITIES IN SOFTWARE SEGMENTRK CO

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BillingAria Systems PrivateeVapt PrivateRedi2 PrivateZuora Private

Collaboration/SocialAssembla PrivateAwayFind PrivateBasecamp (37Signals) PrivateBox.net PrivateFonolo PrivateJive SBS PrivateNing PrivateSendGrid PrivateSocialText PrivateThreadbox PrivateTwiki PrivateYammer Private

Source: RK Consulting

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•Venture Advisor for Sierra Ventures, VC-firm with $1.5B under management•Focus on early-stage mobile and cloud technologies

•8+ years of mobile, 11+ in software•M&A strategy for a mobile payments venture•BD and Product leader for Dexterra, a multi-OS (iOS, Symbian, RIM, and Windows Mobile) mobile applications platform for carriers and ISVs•Customer development for Net6 (Acquired by Citrix for $50M in 2002), a mobile internet platform for consumer internet•IT Consulting for Octane Software (Acquired by E.piphany for $3.2B in 1999), first internet-based CRM software for enterprise

•UC Berkeley-Haas MBA•Contact info: reikasai@gmail.com, www.linkedin.com/in/reikasai

ABOUT THE AUTHOR- REI KASAI