2Cloud Middleware Investment & Activity Accelerates in 2013 Adoption growing: Enterprises have widely embraced the economic benefits of SaaS and IaaSsolutions and are quickly moving to middleware solutions as the technology matures andprovides an increasingly compelling value proposition The market is separating: We are beginning to see leaders emerge and break away in anincreasingly crowded market place Platforms are assembling: The universe is extremely fragmented from both a programminglanguage and solution perspective. Larger PaaS players (e.g. EngineYard) and major enterprisevendors are beginning to build platforms through development and acquisition Investment and consolidation will continue: We expect the increasing activity in the cloudmiddleware space to accelerate in 2013- Investment activity will focus on enabling leading platforms to consolidate and betting ondisruptive point solutions- Acquisition activity will come from diverse industry sectors as larger vendors continue tobuild out their cloud strategiesWe expect the level of investment and transaction activity in the broad cloudmiddleware sector to accelerate in the coming year
3Software Development Paradigm is Shifting to CloudA paradigm shift in software development is underway, enabled by a growing numberof cloud middleware solutions Faster applicationdevelopment and deliverywith compelling economics Abstraction of “table stakes”back-end functionality toallow developers to focus onvalue-added services Shift to a service-orientedarchitecture Search for a standard:hybrid v. public clouds, openv. proprietary solutions, etc.MainframeDistributedCloudEVOLUTION OF SOFTWARE DEVELOPMENT
4PaaS Growth Outpaces SaaS and IaaS for Foreseeable FutureWider enterprise adoption of SaaS and IaaS will drive continued adoption and growthof PaaSSaaS - $16.0BPaaS - $0.6BIaaS - $6.0BPAAS MARKET SHARE OF CLOUD MARKET, 2013MARKET GROWTH OF CLOUD VERTICALS, 2012 – 2016SaaS, 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$35.0SaaS PaaS IaaS2012201620% CAGR 48% CAGR 41% CAGR
5What’s Fueling Growth of PaaS?Several trends in enterprise software development are forcing more IT departmentstowards adoption of PaaSCompelling EconomicsRise of DevOpsNeed for Custom ApplicationsViability of Private / Hybrid CloudPaaS market grows at 48% for the next 5 years Maturation of PaaS solutions hasprovided a compelling economicargument for development Allows IT to do “more with less” PaaS has been shown to reducedevelopment times by 50%+ anddeployment times from weeks to minutes Increasing interdependence in ITbetween developers and systemadministrators with goal of gettingapplications to market faster DevOps are the primary consumers ofPaaS Enterprise adoption of PaaS hamperedby security and compliance concerns Advent of viable private / hybrid PaaSsolutions provide the benefits of PaaSwhile mitigating security concerns Many expect gradual migration fromprivate / hybrid to public PaaS Developing custom applications is seenas a competitive advantage Advent of BigData / Analytics requiringapplications and reporting specific toeach business Integration of siloed applications anddata
6Cloud Market Movement: Converging on PaaSLarge SaaS and IaaS vendors are moving down and up the stack, respectively, as thePaaS market gains tractionSaaS Vendors IaaS VendorsPaaS Large-scale, mission-criticalSaaS vendors are releasing PaaSofferings so users can buldcustom applications to extendfunctionality of their core solutions Typically not acquiring PaaSvendors, but developing offeringsin-house Examples: Force.com andNetsuite SuiteCloud provideplatforms to extend core CRM andERP platforms IaaS has become a “race to thebottom” as the hardware layerbecomes increasinglycommoditized Margin is moving up the stackfrom IaaS to PaaS IaaS vendors are activelyacquiring and developing PaaStechnologies to move up thestack Example: Amazon releasingElastic Beanstalk, Joyentlaunching no.de, VMWarelaunching CloudFoundry
7Defining the PaaS MarketApplicationDatabaseVirtualization LayerServers Storage CPUVirtualMachineVirtualMachineVirtualMachineVirtualMachineVirtualMachineO/S O/S O/SO/SApplication ServerAppLifecycleMgmtSOA ToolsBusinessProcess ToolsUser InterfaceComponentsIdentity &Security MgmtAppDev&TestingToolsPaaS players offer a varying degree of tools and services that abstract the“middleware” layer between the infrastructure and the applicationCLOUD APPLICATION TECHNOLOGY STACK TYPES OF PAASApplication PaaSPlatform for new application development,deployment, run-time and managementTwo Main Types:I. Pure Platform: Move existing anddevelop new custom applications incloud, typically will adhere toframeworks specified by the PaaSvendorII. Platform + Dev Tools: Create nativeapplications in a vendor-supplieddesigner and deploy on theirinfrastructureApplication & Data Integration LayerIntegration PaaSTools to integrate cloud applications anddataO/SOther: PaaS Point SolutionsCloud services delivering specific pointfunctionality in the PaaS stack (Database,BPM, MBaaS, Identity Mgmt, etc.)Application and integration servicesvendors are gaining the most tractionCredit: OrangescapePlatform-as-a-Service Layer Infrastructure-as-a-Service LayerMiddleware
8Market Map for Application & Integration PlatformsApplication / SuiteAPI DataScaleSmallLargeScaleSmallLargeAPPLICATION PAASINTEGRATION PAASPURE 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 anddevelopers 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 anddeployed in studio provided by vendor- App development adheres to design templatesprovided by vendor in visual studioPaaSScale based on company funding and revenue, where availableAcquired
9Market Map for Point Solutions & SpecialistsAPP DEVELOPMENT & TESTING- Tools for rapid application design, development andtesting prior to deployment through a platformSECURITY & IDENTITY TOOLS- Point solutions to manage private or public PaaSsecurity and user identityDATABASE & ANALYTICS- Outsourced database platforms and BigDataanalytics platformsBUSINESS PROCESS MANAGEMENT- Supports software development and SOA byproviding defined, reusable business processesMBAAS- Mobile back-end-as-a-service- Focused exclusively on the stacks used for mobileapplicationsSecurity IdentityDevelopment Testing Data AnalyticsDeveloper EnterpriseScale based on company funding and revenue, where availableAcquired
10Leading Consolidators’ Offerings in the Technology StackLarge enterprise software vendors have started to build out functionality across thestack to offer a complete solution to end customersApplicationMiddlewareVirtualization LayerHardware / IaaSConverging interest in cloud middleware
11ApplicationPaaSIntegrationPaaSInterest Comes From Several DirectionsPoint SolutionPaaSDiversified Technology ConsolidatorsUpgrading product offerings as software development shifts awayfrom legacy products to the new paradigmWhile there will be interest in cloud middleware from diverse industry sectors, webelieve three main industry sectors will drive the consolidationEXAMPLES OF PAAS CONSOLIDATORS
14Falvey Partners OverviewFOCUS SELECT TRANSACTION EXPERIENCEDecember 2011Has acquiredJuly 2012Has beenacquired bySeptember 2011Series DConvertiblePreferred StockLed bySeptember 2012Has beenacquired byA portfolio company ofJuly 2011Has been acquiredby a portfoliocompany ofApril 2011Has beenacquired byJuly 2011Has beenacquired byFebruary 2011Growth equityinvestment fromJuly 2011Has beenacquired byMarch 2011Has divestedits diagnosticsolutions unitNovember 2010Has received aninvestment fromA portfolio company ofOctober 2010PGI Notify and Sendplatforms acquired byAugust 2010Two divisions have beenacquired by a portfoliocompany ofApril 2010Has beenacquired byAugust 2010Series CConvertiblePreferred StockLed bySERVICES Sell-side or buy-side M&A Growth capital raising Board and corporate advisorySECTOR Software / SaaS Tech-enabled business services IT services Internet / digital mediaCOMPANY TYPE $50M - $250M in enterprise value Growing, with established scale Profitable or near-term path to profitabilityFalvey Partners is a leading advisory firm servingmid-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 ofdollars in transaction value
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