Software as a Service & Cloud Computing:<br />The Reality & The Opportunity<br />Rory O’Driscoll, Managing Director<br />S...
SaaS: An Understood Concept<br />Average Worldwide Search & News Traffic<br />SaaS<br />Source: Google Trends.<br />
Cloud Computing: Newer and Murky<br />Average Worldwide Search & News Traffic<br />SaaS<br />Cloud Computing<br />Source: ...
Lady Gaga<br />Average Worldwide Search & News Traffic<br />SaaS<br />Cloud Computing<br />Lady Gaga<br />Source: Google T...
Start with the Person Who Has the Money<br />Consumer<br />Business<br />“Connie Consumer”<br />“Bill the Business Buyer”<...
Application<br />Infrastructure<br />Consumer Apps & Infrastructure:Running on a PC<br />
Business Apps & Infrastructure in the 1990s:Running in a Data Center<br />Application<br />Infrastructure<br />“Bill” Busi...
Business Apps & Infrastructure Today:Running in the Cloud<br />SaaS<br />Cloud<br />“Bill” Business Buyer<br />“Ivan” IT G...
 Basic Internet<br />Client/Server<br />PC<br />Minis<br />Mainframes<br />I.T. Has Re-Invented Itself Before	<br />1990s<...
Application Software Architecture Model:Before & After SaaS<br />Client Server<br />SaaS<br />Company A<br />Company A<br ...
Application Software Business Model:Before & After SaaS<br />Client Server<br />SaaS<br />!<br />?<br />SOFTWARE<br />“Try...
Small number of big deals
Deals close last day of quarter
Arduous implementation
Sales / marketing 50% of all expenses
Large number of smalldeals
Business model  high quality SW
Steady, predictable business</li></li></ul><li>SaaS: The Wisdom of a Decade<br />A model. Nota market.<br />Leverage the a...
2010 Market Cap<br />$40bn In Value Generated by SaaS Winners<br />Salesforce.com<br />$17.5B<br />RightNow<br />Technolog...
SaaS: Where from Here?<br />Land of a thousand niches.<br />Surprised by upside.<br />Consumer sets the tone.<br />Technol...
Architecture Evolving To Cloud Based I.T.<br />IT Before the Cloud <br />IT in the Cloud<br />Vendor<br />Vendors<br />SW<...
Virtualization Enables the Cloud<br />Traditional Architecture<br />Virtual Architecture<br />1 Company / Server<br />Many...
Where Is the Cloud World Now?<br />“<br />”<br />Will companies<br />really adopt it?<br />“<br />”<br />Where is cloudmos...
11mm PDFs Created in One Day<br />4 TB Data<br />100 Nodes<br />11 Million PDFs<br />100 instances<br />x   24 hours<br />...
5000 Servers Commissioned in 3 Days<br />Animoto Scales to Meet Demand for Photo Presentations<br />Amazon EC2 easily scal...
Will People Really Adopt It?<br />
Why Equipment Vendors Should Be Nervous<br />I.T. Before the Cloud <br />I.T. in the Cloud<br />Vendor<br />Vendors<br />V...
Winners: SaaS and Cloud<br />SaaS<br />Salesforce.com<br />$20B<br />RightNow<br />Technologies<br />Constant<br />Contact...
Clouds on the Horizon<br />“<br />”<br />Clouds are a large pool of easily usable and accessible virtualized resources (su...
Near Free Computing<br />10 Amazon Web Services Price Cuts in 18 Months<br />Spot Instances<br />Dec. 13, 2009<br />EC2 Pr...
Cheap Energy (1900s)			Cheap Computing (2000s)<br />Free consumer services.<br />Start ups abound; IT not a barrier.<br />...
The Pain of GAAP + a Sales Rep<br />One New Rep = <br />$200K Loss in Year One;<br />$700K Profit by Year Five<br />
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Saas and the Cloud Ten Years In

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Saas and the Cloud Ten Years In

  1. 1. Software as a Service & Cloud Computing:<br />The Reality & The Opportunity<br />Rory O’Driscoll, Managing Director<br />Scale Venture Partners<br />
  2. 2. SaaS: An Understood Concept<br />Average Worldwide Search & News Traffic<br />SaaS<br />Source: Google Trends.<br />
  3. 3. Cloud Computing: Newer and Murky<br />Average Worldwide Search & News Traffic<br />SaaS<br />Cloud Computing<br />Source: Google Trends.<br />
  4. 4. Lady Gaga<br />Average Worldwide Search & News Traffic<br />SaaS<br />Cloud Computing<br />Lady Gaga<br />Source: Google Trends.<br />
  5. 5. Start with the Person Who Has the Money<br />Consumer<br />Business<br />“Connie Consumer”<br />“Bill the Business Buyer”<br />“Ivan the IT Guy”<br />Annual Software Spend<br />$20B<br />$50B<br />$70B<br />Source: IDC.<br />
  6. 6. Application<br />Infrastructure<br />Consumer Apps & Infrastructure:Running on a PC<br />
  7. 7. Business Apps & Infrastructure in the 1990s:Running in a Data Center<br />Application<br />Infrastructure<br />“Bill” Business Buyer<br />“Ivan” IT Guy<br />
  8. 8. Business Apps & Infrastructure Today:Running in the Cloud<br />SaaS<br />Cloud<br />“Bill” Business Buyer<br />“Ivan” IT Guy<br />
  9. 9. Basic Internet<br />Client/Server<br />PC<br />Minis<br />Mainframes<br />I.T. Has Re-Invented Itself Before <br />1990s<br />2000s<br />1960s<br />1980s<br />1970s<br />
  10. 10. Application Software Architecture Model:Before & After SaaS<br />Client Server<br />SaaS<br />Company A<br />Company A<br />Vendor<br />Datacenter<br />SW<br />SW<br />HW<br />HW<br />Company B<br />Bill buys it.<br />Ivan makes it run.<br />Bill buys it.<br />Ivan never knows.<br />
  11. 11. Application Software Business Model:Before & After SaaS<br />Client Server<br />SaaS<br />!<br />?<br />SOFTWARE<br />“Try Before You Buy”<br />Plan A: $100 / mo.<br />Plan B: $199 / mo.<br />PURCHASE<br />$<br />$<br />1,000,000<br />Bill<br />Sales Guy<br />Bill<br />http://<br /><ul><li>Sales / marketing 50% of all expenses
  12. 12. Small number of big deals
  13. 13. Deals close last day of quarter
  14. 14. Arduous implementation
  15. 15. Sales / marketing 50% of all expenses
  16. 16. Large number of smalldeals
  17. 17. Business model  high quality SW
  18. 18. Steady, predictable business</li></li></ul><li>SaaS: The Wisdom of a Decade<br />A model. Nota market.<br />Leverage the architecture.<br />GAAP: Unflattering to annuity business. <br />Compounders not rocket ships.<br />Play to win.<br />
  19. 19. 2010 Market Cap<br />$40bn In Value Generated by SaaS Winners<br />Salesforce.com<br />$17.5B<br />RightNow<br />Technologies<br />Constant<br />Contact<br />Taleo Corp.<br />Athenahealth<br />LogMein<br />Zendesk<br />DealerTrack<br />Holdings<br />Vocus<br />Kenexa<br />Omniture<br />NetSuite<br />SPS<br />Commerce<br />DemandTec<br />Convio<br />RealPage<br />SuccessFactors<br />Postini<br />Frontbridge<br />ScanSafe<br />Zantaz<br />Paycycle<br />ExactTarget<br />Concur<br />Technologies<br />WebEx<br />Responsys<br />Eloqua<br />Indeca<br /><$1B<br />$1-5B<br />$5B+<br />Source: Public financials, Capital IQ, industry research.<br />
  20. 20. SaaS: Where from Here?<br />Land of a thousand niches.<br />Surprised by upside.<br />Consumer sets the tone.<br />Technology drives the potential.<br />
  21. 21. Architecture Evolving To Cloud Based I.T.<br />IT Before the Cloud <br />IT in the Cloud<br />Vendor<br />Vendors<br />SW<br />HW<br />HW<br />SW<br />SW<br />SW<br />SW<br />SW<br />HW<br />SW<br />Cloud Services Vendor<br />HW<br />Company A<br />Datacenter<br />Company A<br />Company B<br />Ivan buys software + hardware.<br />Ivan makes it work.<br />Ivan buys a service.<br />Vendor makes it work.<br />
  22. 22. Virtualization Enables the Cloud<br />Traditional Architecture<br />Virtual Architecture<br />1 Company / Server<br />Many Companies / Server<br />Virtualization allows multiple companies to share infrastructure<br />
  23. 23. Where Is the Cloud World Now?<br />“<br />”<br />Will companies<br />really adopt it?<br />“<br />”<br />Where is cloudmost valuable?<br />?<br />“<br />”<br />What does this meanto equipment vendors? Some panic?<br />“<br />”<br />What level of cloudservice do people want?<br />─ PAS, SaaS, IAS<br />
  24. 24. 11mm PDFs Created in One Day<br />4 TB Data<br />100 Nodes<br />11 Million PDFs<br />100 instances<br />x 24 hours<br />x $0.10 / Hr<br />= $240<br />
  25. 25. 5000 Servers Commissioned in 3 Days<br />Animoto Scales to Meet Demand for Photo Presentations<br />Amazon EC2 easily scaledto handle additional traffic<br />Peak of 5000 instances<br />Number<br />of EC2<br />Instances<br />Launch of Facebook modification<br />Steady state of ~40 instances<br />
  26. 26. Will People Really Adopt It?<br />
  27. 27. Why Equipment Vendors Should Be Nervous<br />I.T. Before the Cloud <br />I.T. in the Cloud<br />Vendor<br />Vendors<br />Vendor<br />Vendor<br />HW<br />SW<br />SW<br />HW<br />SW<br />SW<br />SW<br />SW<br />HW<br />HW<br />Cloud Services Vendor<br />SW<br />Company A<br />Datacenter<br />Company A<br />Company B<br />Customer concentration<br />
  28. 28. Winners: SaaS and Cloud<br />SaaS<br />Salesforce.com<br />$20B<br />RightNow<br />Technologies<br />Constant<br />Contact<br />DealerTrack<br />Holdings<br />Taleo<br />Athenhealth<br />NetSuite<br />Omniture<br />LogMein<br />$40bn<br />created<br />SPS<br />Commerce<br />Vocus<br />Kenexa<br />DemandTec<br />Concur<br />Technologies<br />RealPage<br />SuccessFactors<br />WebEx<br />Convio, Inc.<br />Postini<br />Frontbridge<br />ScanSafe<br />Zantaz<br />Paycycle<br />ExactTarget<br />Responsys<br />Eloqua<br />Indeca<br />Zendesk<br />Cloud<br />VMWare, Inc.<br />$40B<br />Heroku<br />Rightscale<br />Go Grid<br />Cloudera<br />Data Domain<br />Isilon<br />$50bn<br />created<br />Eucalyptus<br />System<br />Rackspace Holdings<br />Cloudkick<br />Nimsoft<br />Engine Yard<br />3PAR<br /><$1B<br />$1-5B<br />$5B+<br />Source: Public financials, Capital IQ, industry research.<br />
  29. 29. Clouds on the Horizon<br />“<br />”<br />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.<br />— Vaquero, Rodero-Merino, Caceres, Linder<br />“<br />”<br />… outsourced, pay-as-you-go, SaaS, on-demand, somewhere in the Internet, etc.<br />… using the internet to allow people to access technology enabled services.Those services must be massively scalable.<br />“<br />”<br />“<br />”<br />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?<br />— Larry Ellison<br />
  30. 30. Near Free Computing<br />10 Amazon Web Services Price Cuts in 18 Months<br />Spot Instances<br />Dec. 13, 2009<br />EC2 Price<br />Reduced<br />Oct. 26, 2010<br />Lower S3 and EU Windows<br />Dec. 2, 2009<br />CloudFront Price Reduction<br />June 7, 2010<br />Lower Reserve<br />Instance Price<br />Aug. 19, 2009<br />Combined<br />Bandwidth<br />Mar. 25, 2010<br />High Memory<br />Price Reduced<br />Sept. 1, 2010<br />Free Tier and Increased SQS Limits<br />June 30, 2010<br />Reserve Instances<br />Mar. 12, 2009<br />Data Transfer<br />Feb. 1, 2010<br />March 2009<br />January 2010<br />September 2010<br />Source: AWS announced price cuts.<br />
  31. 31. Cheap Energy (1900s) Cheap Computing (2000s)<br />Free consumer services.<br />Start ups abound; IT not a barrier.<br />Connecting services in the cloud.<br />Your stuff is in the cloud.<br />
  32. 32. The Pain of GAAP + a Sales Rep<br />One New Rep = <br />$200K Loss in Year One;<br />$700K Profit by Year Five<br />
  33. 33. The Pain of GAAP Per Sales Rep<br />Revenue<br />Operating Income<br />
  34. 34. Compounders Not Rocket Ships<br />
  35. 35. Invest to Win<br />ExactTarget<br />Profit<br />Company X<br />Time<br />Loss<br />
  36. 36. Winning in SaaS<br />Web Analytics<br />#1 Omniture- $1.8B<br />#2 Webside - $.3B<br />Web Conferencing<br />#1 WebEx - $3.6B<br />#2 Placeware - $.2B<br />CRM<br />#1 Salesforce - $17.5B<br />#2 X - $.1B<br />Distribution + Technology<br />
  37. 37. As hot as it is, remember…<br />It’s still no Lady Gaga.<br />
  38. 38. Software as a Service & Cloud Computing:<br />The Reality & The Opportunity<br />Rory O’Driscoll, Managing Director<br />Scale Venture Partners<br />

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