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PRIVATE AND CONFIDENTIAL TECHNOLOGY FOCUS. BROAD REACH. OPTIMAL RESULTS.
Cloud Middleware Overview
Peter Falvey
Managing Director
P. 1.617.598.0437
Jason Myler
Managing Director
P. 1.617.598.0438
Jeffrey Cook
Vice President
P. 1.617.598.0439
2
Cloud Middleware Investment & Activity Accelerates in 2013
Adoption growing: Enterprises have widely embraced the economic benefits of SaaS and IaaS
solutions and are quickly moving to middleware solutions as the technology matures and
provides an increasingly compelling value proposition
The market is separating: We are beginning to see leaders emerge and break away in an
increasingly crowded market place
Platforms are assembling: The universe is extremely fragmented from both a programming
language and solution perspective. Larger PaaS players (e.g. EngineYard) and major enterprise
vendors are beginning to build platforms through development and acquisition
Investment and consolidation will continue: We expect the increasing activity in the cloud
middleware space to accelerate in 2013
- Investment activity will focus on enabling leading platforms to consolidate and betting on
disruptive point solutions
- Acquisition activity will come from diverse industry sectors as larger vendors continue to
build out their cloud strategies
We expect the level of investment and transaction activity in the broad cloud
middleware sector to accelerate in the coming year
3
Software Development Paradigm is Shifting to Cloud
A paradigm shift in software development is underway, enabled by a growing number
of cloud middleware solutions
Faster application development and delivery with compelling economics
Abstraction of “table stakes” back-end functionality to allow developers to focus on value-added services
Shift to a service-oriented architecture
Search for a standard: hybrid v. public clouds, open v. proprietary solutions, etc.
Mainframe
Distributed
Cloud
EVOLUTION OF SOFTWARE DEVELOPMENT
4
PaaS Growth Outpaces SaaS and IaaS for Foreseeable Future
Wider enterprise adoption of SaaS and IaaS will drive continued adoption and growth
of PaaS
SaaS - $16.0B
PaaS - $0.6B
IaaS - $6.0B
PAAS MARKET SHARE OF CLOUD MARKET, 2013
MARKET GROWTH OF CLOUD VERTICALS, 2012 – 2016
SaaS, 70.8%
PaaS, 2.7%
IaaS, 26.5%
$16.0
$0.6
$6.0
$33.0
$2.9
$24.0
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
SaaS PaaS IaaS
2012
2016
20% CAGR 48% CAGR 41% CAGR
5
What’s Fueling Growth of PaaS?
Several trends in enterprise software development are forcing more IT departments
towards adoption of PaaS
Compelling Economics
Rise of DevOps
Need for Custom Applications
Viability of Private / Hybrid Cloud
PaaS market grows at 48% for the next 5 years
Maturation of PaaS solutions has
provided a compelling economic
argument for development
Allows IT to do “more with less”
PaaS has been shown to reduce
development times by 50%+ and
deployment times from weeks to minutes
Increasing interdependence in IT
between developers and system
administrators with goal of getting
applications to market faster
DevOps are the primary consumers of
PaaS
Enterprise adoption of PaaS hampered
by security and compliance concerns
Advent of viable private / hybrid PaaS
solutions provide the benefits of PaaS
while mitigating security concerns
Many expect gradual migration from
private / hybrid to public PaaS
Developing custom applications is seen
as a competitive advantage
Advent of BigData / Analytics requiring
applications and reporting specific to
each business
Integration of siloed applications and
data
6
Cloud Market Movement: Converging on PaaS
Large SaaS and IaaS vendors are moving down and up the stack, respectively, as the
PaaS market gains traction
SaaS Vendors IaaS Vendors
PaaS
Large-scale, mission-critical
SaaS vendors are releasing PaaS
offerings so users can buld
custom applications to extend
functionality of their core solutions
Typically not acquiring PaaS
vendors, but developing offerings
in-house
Examples: Force.com and
Netsuite SuiteCloud provide
platforms to extend core CRM and
ERP platforms
IaaS has become a “race to the
bottom” as the hardware layer
becomes increasingly
commoditized
Margin is moving up the stack
from IaaS to PaaS
IaaS vendors are actively
acquiring and developing PaaS
technologies to move up the
stack
Example: Amazon releasing
Elastic Beanstalk, Joyent
launching no.de, VMWare
launching CloudFoundry
7
Defining the PaaS Market
Application
Database
Virtualization Layer
Servers Storage CPU
Virtual
Machine
Virtual
Machine
Virtual
Machine Virtual
Machine
Virtual
Machine
O/S O/S O/S O/S
Application Server
App
Lifecycle
Mgmt
SOA Tools Business
Process Tools
User Interface
Components
Identity &
Security Mgmt
Ap
p D
ev &
Te
sti
ng
To
ols
PaaS players offer a varying degree of tools and services that abstract the
“middleware” layer between the infrastructure and the application
CLOUD APPLICATION TECHNOLOGY STACK TYPES OF PAAS
Application PaaS
Platform for new application development,
deployment, run-time and management
Two Main Types:
I. Pure Platform: Move existing and
develop new custom applications in
cloud, typically will adhere to
frameworks specified by the PaaS
vendor
II. Platform + Dev Tools: Create native
applications in a vendor-supplied
designer and deploy on their
infrastructure
Application & Data Integration Layer
Integration PaaS
Tools to integrate cloud applications and
data
O/S
Other: PaaS Point Solutions
Cloud services delivering specific point
functionality in the PaaS stack (Database,
BPM, MBaaS, Identity Mgmt, etc.)
Application and integration services
vendors are gaining the most traction
Credit: Orangescape
Platform-as-a-Service Layer Infrastructure-as-a-Service Layer
Mid
dle
wa
re
8
Market Map for Application & Integration Platforms
Application / Suite API Data
Sc
ale
S
mall
Larg
e
Sc
ale
S
mall
Larg
e
APPLICATION PAAS
INTEGRATION PAAS
PURE PLATFORM PLATFORM + DEV TOOLS
- Used for deployment and scaling of existing or new custom applications developed in-house
- Mainly in use in business environments where application development takes places in-house and
developers are looking to abstract the back-end
- Developers will typically need to adhere to an architecture specified by the PaaS vendor
- Front and back-end of application developed and
deployed in studio provided by vendor
- App development adheres to design templates
provided by vendor in visual studio
PaaS
Scale based on company funding and revenue, where available
Acquired
9
Market Map for Point Solutions & Specialists APP DEVELOPMENT & TESTING
- Tools for rapid application design, development and
testing prior to deployment through a platform
SECURITY & IDENTITY TOOLS
- Point solutions to manage private or public PaaS
security and user identity
DATABASE & ANALYTICS
- Outsourced database platforms and BigData
analytics platforms
BUSINESS PROCESS MANAGEMENT
- Supports software development and SOA by
providing defined, reusable business processes
MBAAS - Mobile back-end-as-a-service
- Focused exclusively on the stacks used for mobile
applications
Security Identity Development Testing Data Analytics
Developer Enterprise
Scale based on company funding and revenue, where available
Acquired
10
Leading Consolidators’ Offerings in the Technology Stack
Large enterprise software vendors have started to build out functionality across the
stack to offer a complete solution to end customers
Application
Middleware
Virtualization Layer
Hardware / IaaS
Converging interest in cloud middleware
11
Application
PaaS
Integration
PaaS
Interest Comes From Several Directions
Point Solution
PaaS
Diversified Technology Consolidators
Upgrading product offerings as software development shifts away
from legacy products to the new paradigm
While there will be interest in cloud middleware from diverse industry sectors, we
believe three main industry sectors will drive the consolidation
EXAMPLES OF PAAS CONSOLIDATORS
12
Recent Acquisition Activity
Target Acquirer Date Solution
April 2013 MBaaS
April 2013 Visual PaaS
April 2013 Integration PaaS
April 2013 Integration PaaS
March 2013 Security
February 2013 Visual PaaS
January 2013 Integration PaaS
August 2012 Visual PaaS
August 2012 Business Process Management
March 2012 Security
February 2012 MBaaS
September 2011 Visual PaaS
August 2011 Integration PaaS
April 2011 IaaS
March 2011 App development & testing
13
Recent Investment Activity
Target Date Solution Amt. / Total Raised Investors
Apr 2013 Application PaaS $7.5M / $18M Atlas Venture, Citrix, Maayan Ventures
Apr 2013 Integration PaaS $4.2M / $4.2M Javelin Venture Partners, Costanoa VC
Apr 2013 Integration PaaS $37M / $80.5M NEA, Salesforce, Morgenthaler, Others
Mar 2013 Data & Analytics $30M / $60M Lightspeed Venture Partners, NEA, Redpoint
Mar 2013 MBaaS $5M / $70M Undisclosed
Feb 2013 MBaaS $25M / $46.6M August Capital, Intel Capital, True Ventures
Feb 2013 Data & Analytics Undisclosed Samsung Venture Investment
Feb 2013 Security $31M / $51M JMI Equity, Investor Growth Capital
Dec 2012 Security $25M / $54M Sequoia Capital, Andreessen Horowitz, Others
Dec 2012 Data & Analytics $65M / $141M Accel, Greylock, Ignition Partners, Others
Nov 2012 Data & Analytics $6.8M / $16.9M Undisclosed
Nov 2012 Integration PaaS Undisclosed Primera Capital
Oct 2012 Framework PaaS $10M / $18.5M Intel Capital, Madrona, Ignition Partners, Others
Oct 2012 Data & Analytics $25.5M / $39.6M Meritech Capital Partners, Crosslink Capital
Sep 2012 Integration PaaS $22.4M / $37.3M Ignition Partners, Triangle Peak Partners, Others
Aug 2012 Visual PaaS $7.1M / $10.1M Longworth Venture Partners, Others
Jul 2012 Integration $20M / $82.6M Focus Ventures, Norwest Venture, SAP, Others
Jul 2012 App Dev & Testing $5M / $10M SEB Merchant Banking, Others
14
Falvey Partners Overview
FOCUS SELECT TRANSACTION EXPERIENCE
December 2011
Has acquired
July 2012
Has been
acquired by
September 2011
Series D
Convertible
Preferred Stock
Led by
September 2012
Has been
acquired by
A portfolio company of
July 2011
Has been acquired
by a portfolio
company of
April 2011
Has been
acquired by
July 2011
Has been
acquired by
February 2011
Growth equity
investment from
July 2011
Has been
acquired by
March 2011
Has divested
its diagnostic
solutions unit
November 2010
Has received an
investment from
A portfolio company of
October 2010
PGI Notify and Send
platforms acquired by
August 2010
Two divisions have been
acquired by a portfolio
company of
April 2010
Has been
acquired by
August 2010
Series C
Convertible
Preferred Stock
Led by
SERVICES
Sell-side or buy-side M&A
Growth capital raising
Board and corporate advisory
SECTOR
Software / SaaS
Tech-enabled business services
IT services
Internet / digital media
COMPANY TYPE
$50M - $250M in enterprise value
Growing, with established scale
Profitable or near-term path to profitability
Falvey Partners is a leading advisory firm serving
mid-market clients across technology sectors
Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team
Falvey Partners professionals have closed dozens of software transactions representing billions of
dollars in transaction value
