Software as a Service & Cloud Computing: The Reality & The Opportunity Rory O’Driscoll, Managing Director Scale Venture Partners
SaaS: An Understood Concept Average Worldwide Search & News Traffic SaaS Source: Google Trends.
Cloud Computing: Newer and Murky Average Worldwide Search & News Traffic SaaS Cloud Computing Source: Google Trends.
Lady Gaga Average Worldwide Search & News Traffic SaaS Cloud Computing Lady Gaga Source: Google Trends.
Start with the Person Who Has the Money Consumer Business “Connie Consumer” “Bill the Business Buyer” “Ivan the IT Guy” Annual Software Spend $20B $50B $70B Source: IDC.
Application Infrastructure Consumer Apps & Infrastructure:Running on a PC
Business Apps & Infrastructure in the 1990s:Running in a Data Center Application Infrastructure “Bill” Business Buyer “Ivan” IT Guy
Business Apps & Infrastructure Today:Running in the Cloud SaaS Cloud “Bill” Business Buyer “Ivan” IT Guy
Basic Internet Client/Server PC Minis Mainframes I.T. Has Re-Invented Itself Before 1990s 2000s 1960s 1980s 1970s
Application Software Architecture Model:Before & After SaaS Client Server SaaS Company A Company A Vendor Datacenter SW SW HW HW Company B Bill buys it. Ivan makes it run. Bill buys it. Ivan never knows.
Application Software Business Model:Before & After SaaS Client Server SaaS ! ? SOFTWARE “Try Before You Buy” Plan A: $100 / mo. Plan B: $199 / mo. PURCHASE $ $ 1,000,000 Bill Sales Guy Bill http://
SaaS: The Wisdom of a Decade A model. Nota market. Leverage the architecture. GAAP: Unflattering to annuity business. Compounders not rocket ships. Play to win.
2010 Market Cap $40bn In Value Generated by SaaS Winners Salesforce.com $17.5B RightNow Technologies Constant Contact Taleo Corp. Athenahealth LogMein Zendesk DealerTrack Holdings Vocus Kenexa Omniture NetSuite SPS Commerce DemandTec Convio RealPage SuccessFactors Postini Frontbridge ScanSafe Zantaz Paycycle ExactTarget Concur Technologies WebEx Responsys Eloqua Indeca <$1B $1-5B $5B+ Source: Public financials, Capital IQ, industry research.
SaaS: Where from Here? Land of a thousand niches. Surprised by upside. Consumer sets the tone. Technology drives the potential.
Architecture Evolving To Cloud Based I.T. IT Before the Cloud IT in the Cloud Vendor Vendors SW HW HW SW SW SW SW SW HW SW Cloud Services Vendor HW Company A Datacenter Company A Company B Ivan buys software + hardware. Ivan makes it work. Ivan buys a service. Vendor makes it work.
Virtualization Enables the Cloud Traditional Architecture Virtual Architecture 1 Company / Server Many Companies / Server Virtualization allows multiple companies to share infrastructure
Where Is the Cloud World Now? “ ” Will companies really adopt it? “ ” Where is cloudmost valuable? ? “ ” What does this meanto equipment vendors? Some panic? “ ” What level of cloudservice do people want? ─ PAS, SaaS, IAS
11mm PDFs Created in One Day 4 TB Data 100 Nodes 11 Million PDFs 100 instances x 24 hours x $0.10 / Hr = $240
5000 Servers Commissioned in 3 Days Animoto Scales to Meet Demand for Photo Presentations Amazon EC2 easily scaledto handle additional traffic Peak of 5000 instances Number of EC2 Instances Launch of Facebook modification Steady state of ~40 instances
Why Equipment Vendors Should Be Nervous I.T. Before the Cloud I.T. in the Cloud Vendor Vendors Vendor Vendor HW SW SW HW SW SW SW SW HW HW Cloud Services Vendor SW Company A Datacenter Company A Company B Customer concentration
Winners: SaaS and Cloud SaaS Salesforce.com $20B RightNow Technologies Constant Contact DealerTrack Holdings Taleo Athenhealth NetSuite Omniture LogMein $40bn created SPS Commerce Vocus Kenexa DemandTec Concur Technologies RealPage SuccessFactors WebEx Convio, Inc. Postini Frontbridge ScanSafe Zantaz Paycycle ExactTarget Responsys Eloqua Indeca Zendesk Cloud VMWare, Inc. $40B Heroku Rightscale Go Grid Cloudera Data Domain Isilon $50bn created Eucalyptus System Rackspace Holdings Cloudkick Nimsoft Engine Yard 3PAR <$1B $1-5B $5B+ Source: Public financials, Capital IQ, industry research.
Clouds on the Horizon “ ” Clouds are a large pool of easily usable and accessible virtualized resources (such as hardware, development platforms and/or services). These resources can be dynamically reconfigured to adjust to a variable load (scale), allowing also for an optimum resource utilization. This pool of resources is typically exploited by a pay-per-use model in which guarantees are offered by the Infrastructure provider by means of customized SLAs. — Vaquero, Rodero-Merino, Caceres, Linder “ ” … outsourced, pay-as-you-go, SaaS, on-demand, somewhere in the Internet, etc. … using the internet to allow people to access technology enabled services.Those services must be massively scalable. “ ” “ ” We've redefined cloud computing to include everything that we already do. Maybe I'm an idiot, but I have no idea what anyone is talking about. What is it? It's complete gibberish. It's insane. When is this idiocy going to stop? — Larry Ellison
Near Free Computing 10 Amazon Web Services Price Cuts in 18 Months Spot Instances Dec. 13, 2009 EC2 Price Reduced Oct. 26, 2010 Lower S3 and EU Windows Dec. 2, 2009 CloudFront Price Reduction June 7, 2010 Lower Reserve Instance Price Aug. 19, 2009 Combined Bandwidth Mar. 25, 2010 High Memory Price Reduced Sept. 1, 2010 Free Tier and Increased SQS Limits June 30, 2010 Reserve Instances Mar. 12, 2009 Data Transfer Feb. 1, 2010 March 2009 January 2010 September 2010 Source: AWS announced price cuts.
Cheap Energy (1900s) Cheap Computing (2000s) Free consumer services. Start ups abound; IT not a barrier. Connecting services in the cloud. Your stuff is in the cloud.
The Pain of GAAP + a Sales Rep One New Rep = $200K Loss in Year One; $700K Profit by Year Five
The Pain of GAAP Per Sales Rep Revenue Operating Income