Cloud Computing V1

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First version of investment thesis on cloud computing market - next update will include investment opportunities

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Cloud Computing V1

  1. 1. Cloud Computing: Sector Overview and Potential InvestmentOpportunitiesAuthor: Casey SimmonsApril 21, 2011
  2. 2. Agenda• Conclusions• Cloud Computing Market Overview  Market Opportunity  Investment Thesis  Product Footprint/Price Point/Web-marketing tactics  Startups Benefit from Scalable Infrastructure: Salesforce & Amazon  Corporate IT Outsourcing More  Virtualization 2
  3. 3. Conclusions• Keys to Successful SAAS Offering • Narrow footprint, attractive price point, sold through inside salesforce, then grow into large enterprise sales• Infrastructure (“Internal”) Software • Storage requirements continue to rise dramatically • Server/Virtualization creates highly scalable infrastructure • High BTE due to necessary scale for IAAS • Relationship starts in smaller department functions • Eventually centralized purchaser, fewer number of customers, larger customer footprint• User-facing (“External”) Applications • Large scale • Most apps today are new version of legacy application • Need ease of use, configurability, low maintenance 3
  4. 4. Agenda• Conclusions• Cloud Computing Market Overview  Market Opportunity  Investment Thesis  Product Footprint/Price Point/Web-marketing tactics  Startups Benefit from Scalable Infrastructure: Salesforce & Amazon  Corporate IT Outsourcing More  Virtualization 4
  5. 5. Cloud Market Opportunity ~ $109 Billion 5Source: BofA Merrill Lynch Research
  6. 6. Agenda• Conclusions• Cloud Computing Market Overview  Market Opportunity  Investment Thesis  Product Footprint/Price Point/Web-marketing tactics  Startups Benefit from Scalable Infrastructure: Salesforce & Amazon  Corporate IT Outsourcing More  Virtualization 6
  7. 7. Investment Thesis Product Footprint/Price Point/Web-marketing tactics Startups Benefit from Scalable Infrastructure: Salesforce & Amazon Corporate IT Outsourcing More Virtualization 7
  8. 8. Investment Thesis Product Footprint/Price Point/Web-marketing tactics Startups Benefit from Scalable Infrastructure: Salesforce & Amazon Corporate IT Outsourcing More Virtualization 8
  9. 9. Consumer Foreshadows Enterprise What drives your internet behavior? What drives your smartphone decision? • Applications • Carrier • Price • Ease of Use • Functionality 9Source: Goldman Sachs Research Estimates, Synovate 2007
  10. 10. Winning SAAS Business Characteristics • Target Large Enterprises • Smaller version HP Openview or IBM Tivoli • Converting customers to spokespersons • Product Design Process • Controlled process to build to produce but uncontrolled to sell/market • Build pool of ready users • Keep testing quickly and frequently • Manage global functionality • Consistent Product Releases 10Source: Goldman Sachs Research Estimates, Synovate 2007
  11. 11. Investment Thesis Product Footprint/Price Point/Web-marketing tactics Startups Benefit from Scalable Infrastructure: Salesforce & Amazon Corporate IT Outsourcing More Virtualization 11
  12. 12. Cloud Landscape 12Source: BofA Merrill Lynch Research
  13. 13. Developer Ecosystems of Choice IT Web Social Networking Infrastructure Suite Application/Device Force.com Partnerships: Pay Only for No upfront Google & expense or long- Agnostic Facebook Consumption EC2 term contract Service Cloud SimpleDB AppExchange S3 Chatter SQS VisualForce Reliable & Scalability Content Create business Secure Without Capex Management app on-demand 13Source: BofA Merrill Lynch Research
  14. 14. Investment Thesis Product Footprint/Price Point/Web-marketing tactics Startups Benefit from Scalable Infrastructure: Salesforce & Amazon Corporate IT Outsourcing More Virtualization 14
  15. 15. Areas of Existing SAAS Investment • B2B/Inter-company applications: E2Open, Quadrem, Agentrics, SPS Commerce, Management Dynamics • System Integration: Astadia, Bluewolf, Appirio • Website Analytics: Omniture (Adobe) • CRM: Salesforce, Eloqua, Right90  Right90: Increased revenue 240% in 2008 (1)  Eloqua: Increased revenue 75% in 2008 (1) • ERP: Netsuite, Workday  Client/Server: Infor, Consona, Epicor, and Activant • Demand Analytics: DemandTec • Talent Management: Ultimate Software, SilkRoad, Authoria, Kenexa 15(1) Source: Deutsche Bank Research
  16. 16. Investment Thesis Product Footprint/Price Point/Web-marketing tactics Startups Benefit from Scalable Infrastructure: Salesforce & Amazon Corporate IT Outsourcing More Virtualization 16
  17. 17. Client Server with Virtualization vs. Multi-Tenancy Shifts Customization at Metadata layer to reduce application management and infrastructure costs while enabling architecture scaling 17Source: Deutsche Bank Research
  18. 18. Next Steps to Find Investment Opportunities Evaluate major enterprise applications  Large Installed Base  High maintenance expenses  Find/Build SAAS team that knows legacy space 18
  19. 19. Appendix 19

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