VC Michael Skok on the State of Cloud Based on Latest North Bridge Annual Survey of Sellers and Users
VC Michael Skok on the State of Cloud Based on LatestNorth Bridge Annual Survey of Sellers and UsersTranscript of a BrieﬁngsDirect podcast on the state of cloud computing and its future outlook.Listen to the podcast. Find it on iTunes.Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and youre listening to BrieﬁngsDirect. Today, we present a special podcast discussion that draws on a new survey about cloud computing and explores the business growth opportunities for buyers and consumers of cloud services alike. First well hear the results of this multi-year annual survey on the cloud market and then explore some of the implications for where the growth opportunities are and where the inhibitors for the growth may be.Here to share his insights into where the cloud business has been and where it’s going, were verypleased to welcome Michael Skok, Partner at North Bridge Venture Partners since 2002.Before joining North Bridge to seek out great entrepreneurs and lead innovative softwareinvestments, Michael had himself been an entrepreneur and CEO in the software business for 21years.He founded, led, and attracted more than $100 million in venture backing to his investments inmultiple successful software companies. As a VC himself, Michael has invested in manyentrepreneurs who have built more than a $1 billion of value, focusing on large market-changingtechnologies and disruptive business models such as software as a service (SaaS), cloudcomputing, open source, and mobile.Current representative investments include Acquia, Akiban, Apperian, Demandware(NYSE:DWRE), and Unidesk, as well as Actiﬁo and Revolution Analytics.Michaels passion for innovation and entrepreneurship is also fueling his work mentoring anddeveloping the next generation of entrepreneurs. For example, he is currently developing andleading workshops such as the "Startup Secrets" series with the Harvard i Lab. You can followhim at www.mjskok.com and @mjskok.Im very happy to welcome you to the show, Michael.Michael Skok: Great to be here.
Cloud hype curveGardner: Im very intrigued by any survey on the cloud market nowadays, so let’s start at afairly high level. Id say were probably now in about the third year of a fairly steep cloud-hypecurve. Is there anything to indicate from your survey and your experience lately that there is awaning interest or enthusiasm for cloud? Are we past the peak? Are we still in a period of wherepeople are still building up their enthusiasm for clouds?Skok: That’s a great question, Dana, and it falls into two parts. Obviously, theres an increasinginterest in understanding cloud, but as cloud has captured so much attention, there is also arespectful, signiﬁcant actually, interest in understanding what the real applications and potentialfor it are. People are trying to get beyond the hype, at this stage, to understand the practicalapplications and opportunities.Gardner: Is it fair to say that conﬁdence is up because the perceived risks are down, or are westill working through how conﬁdent people are and whether there are signiﬁcant risks here?Skok: Maybe the best way to answer that is to give you some speciﬁc data from the survey, andrather than have my commentary, it will give you the market’s viewpoint on this. That’s one ofthe key reasons we run the survey -- to try to understand what vendors and customers believe aresome of the key issues, both driving and inhibiting the cloud.So Ill jump in and give you some of the inhibitors ﬁrst to answer your question on risk, forexample, and then perhaps we can talk about some of the drivers. Does that sound good?Gardner: Yeah.Skok: On the inhibitors, one of the things that’s interesting this year is that, if you look back to 2011, 10 percent of the survey respondents would have said that the cloud is just too risky, and they gave many reasons last year. This year, were down to 3 percent. So that’s a signiﬁcant drop. Now, Id argue that 3 percent says that youre at a point where people are beginning to understand cloud better, because the issues that they are raising are things like data sovereignty and the Patriot Act. Those are very real issues that are unlikely to just disappear, and they are beyond just cloud. They have to do with the reality of how people have to run their businesses.The good news is that 12 percent feel that the cloud still needs to mature. Thats not so signiﬁcant number, but it’s down from 26 percent in 2011. So again, people are starting to feel that the cloudis obviously meeting more of their needs.
When you look at the issues behind those 12 percent who are looking for greater maturity, thereare things that again you would expect to see in an early-stage market -- things like security andcompliance, and that’s very typical.If you looked at any major trend that comes into the marketplace, if you looked at the initialearly days of the web and eCommerce, people said things like, "Well never put our credit cardson the web." Now, not only do we put our credit cards on the web, but we allow people to doInternet banking and take photos of the checks as a means to make deposits from theircellphones.So things have come a long way, and that’s just the time scale that it takes. It’s typically severalyears before things mature and get people conﬁdent in these kinds of applications.Encouraged by resultsSo Im encouraged by those results. The next obvious thing that comes out of the survey is howmany people are still experimenting. About a third are experimenting, 34 percent to be precise,with concepts in the cloud, driving applications, and using the cloud in some innovative ways.For example, you see companies like Bank of America, who do trials using the cloud, and if theyare successful, they use the cloud’s elasticity to quickly expand their trials. If theyre not, theyjust throw them away. That’s a great example of how the cloud is speciﬁcally enabling people todo trials and get to market faster and be more effective.And the other side of the coin, the great news this year is the rapid growth in conﬁdence overallin the marketplace. If you had asked how many people had complete conﬁdence in 2011, youwould have gotten an answer about 13 percent, and this year it was fully 50 percent.So were not quite at a tipping point, because you have to double-click on that 50 percent. Youhave to understand the split between vendors and customers, and vendors were over half. In fact,56 percent of them have complete conﬁdence in the cloud. So youre seeing net newdevelopment in cloud from independent software vendors (ISVs), absolutely the tipping point.You see very few companies starting up today that aren’t building in a cloud.But if you look at the customers, theyre not quite at that same level of conﬁdence. Just over athird, 37 percent in fact, have complete conﬁdence. More of them are experimenting and waitingfor it to mature, as we were just talking about, and some of them still feel it’s too risky.So it’s a long answer to your question. I hope it gives you some substance backed up by thesurvey to get a sense of this, and I am happy to answer any questions behind that.Gardner: It’s interesting that those who are in the cloud ecosystem themselves are veryconﬁdent, and youd think that they would have the most to lose. Theyre making theirinvestments, but the longer tail towards the consumer side is still catching up to that.
It certainly seems optimistic for the market in general that those in the know, those that are usingthese to build business, that they themselves will be providing cloud services, are so optimisticand conﬁdent.Skok: It turns out that there’s an interesting representation of players in the survey here, in thatwe have got both vendors and users responding. There were over 785 in total, mostly C-suite, butmore than a third of it are customers.Of the vendors that are represented, were covering everything from Amazon to Citrix, to someof the mid-tier players like Rackspace, Red Hat, and others, and also up-and-coming andemerging players, for example, Eucalyptus and Acquia.Bridge the gapSo it’s a very good breadth of players to drill one level beneath this, and we did that. We tried tounderstand what’s going to bridge the gap between vendor’s conﬁdence and user’s conﬁdenceand we heard ﬁve speciﬁc things.Number one, people want more complete value propositions. A lot of what’s being sold at themoment is technology and what people really want is the second key thing, which is clearbusiness beneﬁts. And they want that in the form of case studies, which is the third thing thatwould help people.The fourth thing is more proof of speciﬁc opportunities that are being addressed in their industry,the vertical speciﬁc applications if you will. The bottom line, the ﬁfth thing, is that people wantgreater return-on-investment (ROI) case studies to be presented to them so that they can put thatforward as they champion this on an economic basis.So to answer your question in summary, Dana, what well see is this gap between the conﬁdencein the cloud the vendors are seeing and what users are seeing it is going to get bridged, as webecome more able to deliver on the beneﬁts with speciﬁc examples that drop right to the bottomline.Gardner: Just to allow our audience to evaluate the data that were presenting, tell us a little bitabout the survey -- how it was sponsored, when it took place. Youve told us already about theparticipants being C-suite level folks in both the sell and buy side, but tell us a bit more, just sowe have a better sense of the quality of this data?Skok: Sure and by the way, the full results of the survey, as you may have already pointed out,are available on our site at mjskok.com. Just look under the "Industry for Cloud," and youll see"Future Cloud."
This year’s survey is an opportunity to get a level set as to what’s going on in the industry, whereare we, and to understand what’s going on in the key drivers and inhibitors, because everybodyin the ecosystem is trying to understand how to better address the tsunami that’s rolling over theindustry in cloud computing.So the beauty of the survey is that it represents a broad swath, about 40 of the key vendors, bothdriving and enabling cloud, and also key buyers and C-suite members who are trying to evaluateand deploy cloud.The idea behind the survey obviously is to enable both sides to get a better understanding of howto take actionable steps toward implementing what might be the next generation of IT. Prettymuch everybody recognizes cloud as the platform on which not just applications and solutionsare going to get built, but IT is going to transform to the next generation of providing itself as aservice in an effective form.Gardner: Once again, this is a North Bridge sponsored survey. When were the results gathered?Skok: The results were gathered in the summer, and theyre continuously updated.Independent surveyFor example, were in constant conversations with these vendors and also with the CIOs tocontinue to keep them fresh. But while we sponsor it, 40 collaborators are driving it. Again, thedetails of that are on the web, but the point is that it’s an independent survey so that no onevendor is driving it, it’s a collaboration of the industry as a whole to ensure that its anindependent survey.Gardner: One of the things that jumped out at me, as you were trying to deﬁne what we couldstart to call loosely "killer applications of the cloud," where this is going to get traction, clearlyone of the areas was platform as a service (PaaS). So let’s address that. Then, theres also big data-- fast data, analytics in the cloud. How prominent were they in the survey in terms of thepriorities or the endgame for these two types of uses?Skok: That’s a great question. You only skipped one, so Ill cover it brieﬂy. The most surprisingthing is just how much SaaS has gained in the survey since last year.We also worked with Goldman Sachs, to give credit to them, and some of the information is alsopulled from the industry as a whole. We found that 67 percent of the survey respondents arealready deploying SaaS applications, and the value that people are seeing is in the applicationsolving real business problems.Of course, SaaS is built on PaaS and infrastructure as a service (IaaS) too. The important thingthat you are pointing out is that there was a signiﬁcant jump of interest in PaaS this year. In fact,
looking forward to the future, the respondents were saying that 75 percent of them thought thatthey would be building software with PaaS in the next ﬁve years, which is a big jump.We have a viewpoint on that, and Ill come back at it in a second, but what’s interesting here isthat people recognize that theyre going to be building applications. Why would they build themin anything other than in a cloud-based manner? That’s what’s so interesting here.Now, Ill come back to that, because there’s some interesting controversy around how PaaS willplay out and that came out of the survey too. But to talk a little bit about what you weredescribing as key application areas, big data was certainly one of them. It was top of the list onwhat people thought would be changed by cloud. As far as which application categories wouldbe disrupted most, big data was at the top of the list.Beneath that, were others that wouldnt surprise you, for example, customer relationshipmanagement (CRM). With Salesforce having led that charge, it’s not surprising that people seethat continue to be a key area.What was exciting to me was that number three was eCommerce. In our own portfolio, forexample, we saw one of my investments, Demandware, go public this year and that was realevidence to me that youre going to be able to build conﬁdence in mission-critical applications.eCommerce applications, like Demandware, are the front door representing major vendors andbrands, and people can track the nature of their business literally second by second and measurehow much revenue would be lost if eCommerce applications were down.Mature and strongSo the fact that major retailers and brands now bet billion of dollars on eCommerce as a servicegives you a sense that people feel like the technology is in place and mature, strong, and reliableenough for them to back it with their brand and have it at their front door. That was veryinteresting.Gardner: Just to expand on that a bit, in addition to retail and consumer side eCommerce, wesaw SAP acquire Ariba. So there is obviously some interest in the B2B side as well.Skok: Exactly. The B2B side is very early, and there is tremendous potential there too. We thinkthat’s relatively untapped and that theres great white space there. Youre quite right.Gardner: So continuing down your list.Skok: The list obviously is long, but what we did was to look forward and try to understandsome of the key areas that are driving cloud and some of the opportunities. Ill cover what wetalked about as the future cloud formations and the potential opportunities for applications.Would that be helpful?
Gardner: Yes, please.Skok: They fall into what we call ﬁve cloud formations, and were speciﬁc in talking aboutformations, as opposed to cloud-washed opportunities. What we mean by that is that youve seena lot of vendors try to bring out just another level of their application and host it in some shape orform and deliver it via the cloud. That’s really not what were talking about here.Those kinds of things that aren’t true multi-tenant applications that are born in the cloud, and wethink theyre not the real future here. We think the future is in applications that have been builtspeciﬁcally for the cloud and enable you to do things that you wouldn’t ﬁnd possible should younot have had the cloud available to you.The formations we talk about ﬁrst are media and entertainment. People have gotten used to thatwith iTunes and their music and Netﬂix to get their movies online. That was a major revolutionand it started initially with web ordering where Netﬂix was delivering physical DVDs. As thepipes got fatter, we could just physically deliver over the web, and youre seeing more and moreof those opportunities.If you look at gaming, it has also all gone online, and people are taking it for granted. That’sactually a lot of what drove the cloud initially. This media and entertainment formation is veryreal, here to stay, and we think has tremendous opportunity, especially as the mobile platformexpands too.The second key area is what we call social and collaboration. The social and collaborative cloudis very much understood by people who use Facebook in the consumer world. Whats interestingis that it has moved into the enterprise with applications important to supply chain managementthat are enabling things like tighter inventory control.Also, theres collaboration all the way down to the customer, so that people can get better serviceand support, and in many instances self-service, which has a great cost savings and ROI payback.Easier to collaborateYoure seeing that now start to play out. People are getting used to the fact that its so mucheasier to collaborate in the cloud than it is to try to send people on-premise applications to workwith, when you want to collaborate with them. Well see a great expansion of that going forwardtoo.The third key area, which I would describe as almost a platform shift, is identiﬁed as mobile andthat includes location data too. Mobile, if you think about it, is not possible without the cloud.Again, it goes to a real, true cloud application.
These devices that we carry with us, smart as they are, are nothing without the connections backto the cloud, to be able to do everything from synchronizing our contacts, calendars, and email,to much more important and signiﬁcant things, such as to connect back to business processes andprovide such key information as price lists and contracts for the people in the ﬁeld to be able todo their job in situ.That’s a really important shift, and the incredible rise, its unparalleled, of new devices like theiPad, which has been the fastest growing device ever, in both consumer and enterprise, are givingrise to new demands and new services.Whats perhaps obvious when you think about it, but less obvious in this context, is how muchlocation data is being generated from that. Well talk about that in terms of the big data formationin a second, but location data is providing new opportunities for new applications. That linksnicely to the fourth key cloud formation that we think about. Thats commerce and that includespayments.eCommerce, as we were just talking about, has really become something that people take forgranted that they can do over the web. Its not just Amazon anymore, as you said, its even B2Bcommerce, for example, that companies are taking a lot of the supply chain, collapsing it, andtaking out cost.That’s being enabled by the cloud. As mobile payments and the payment system in generalbecome more accessible by the cloud, which is more of a political challenge than it is a technicalone, that will become a very interesting opportunity for new applications that will be spawnedand connected back to the cloud.All of those applications, as I started to hint at with location data, are generating a huge amountof data, and that’s giving rise to the big data cloud. Big data is interesting on two fronts. Itsinteresting because with every click and step we take were creating information that is beingcollected in the cloud, in a form that you can consider part of the big-data opportunity.Whats interesting on the second side of the coin is that the cloud itself provides the kind of scale,indeed economy of scale, for crunching that data, analyzing it, and providing insight from it.The fact that you can spin out an analysis of anything from the human genome to a click streamin the cloud, and then provide insight, in some cases in real time, to drive applications whereverthey may be and reach them with things like your mobile devices, is really changing the game.Cloud formationsSo these ﬁve cloud formations: media and entertainment, social collaboration, mobile andlocation, eCommerce and payments, big data and analytics, are where we think cloud isdramatically changing the scope of the landscape.
When you look at them, whats really exciting here is whats happening at the intersection. Id behappy to give you an example of that, if its useful to you.Gardner: Whats very fascinating to me, Michael, is not just these impressive arenas that youhave described on their own, but how they intersect and in many ways multiply each other --being mobile, having the big data to crunch, relating that data into a commerce activity, andbringing that back out through collaboration or social activities. Its really the whole greater thanthe sum of the parts here. Please explain a bit where you think that is going or where the surveytells you its going?Skok: You said it very well. The sum is greater than the parts here, and youve obviously pickedright up on it. We could give you many examples, but Ill take one that’s simple, so thateverybody can relate to it.It used to be that if you thought about going to see a movie, you would have to go and checkyour local listings, but obviously people are way beyond that today. We can go right online and ifits not available to you at Netﬂix, you can quickly check to see where it is available on yourlocal cinema from your cellphone geo tag where you are and it can quickly tell you that theclosest place to go to see the movie.Of course, you can use commerce in the cloud to buy it on something like Fandango. Thenwhats interesting is that you can choose at that time to check out what your friends think of themovie, see the collaboration that’s been going on of reviews from people that you know, anddecide whether its that movie or something else you should see.So youre using all of the things we are just talking about, media and entertainment, socialcollaboration, mobile and location, commerce and payment, to do all of that.What gets to be exciting is all that data that’s being generated, if you go and see the movie, or ifyou rate it yourself, it gets fed back to you in things like recommendations for the next movieyou might want to see, or if you take your kids, the kind of merchandizing that follows up withoffers to you, and payments that can drive you to make further additional purchases.And that’s just a simple example. There are many others I can think of that are, exactly as yousay, the whole being much greater than the sum of these individual client formations. Its reallyquite game changing.Gardner: So who are the beneﬁciaries? Clearly there is a business to be had providing cloudservices and in integrating process beneﬁts across some of these domains. You can sell hardwareand software. You can build new business models by either giving consumers things theycouldnt get before or making what they had done before far more efﬁcient and productive. Butwhere is the margin?This gets to the business of cloud. We see Amazon being very aggressive on price, maybe racingto the bottom on some of the commodity services for IaaS for example. And we certainly expect
a lot of competition between the likes of Google and Microsoft for cloud and PaaS types ofservices. Salesforce of course is in there.But where is the point in all of this where you could say, "Here is another Apple with the iPad.Here is the margin. Here is the place where the business is as revolutionary as the productivebeneﬁts of cloud activities?"Three examplesSkok: Very good question. Im going to give you three examples at the different levels: so oneat the application level, one at the PaaS level, and then one at the infrastructure level. I hope thatwill be helpful.At the application level, the big game changer is going to be what I call social commerce. Its theintersection of two of those cloud formations, if not three of them, which is social connectionsand recommendations, connected with eCommerce, and potentially mobile within there too.Youre going to see there is tremendous opportunity, because what people most rely on whenthey are actually buying things is their friends and trusted recommendations, and were very earlyin that. Surely, people have begun to recognize the power of the like button, but we haven’t yetseen that translate into commerce. Were early in Facebook trying to realize that.The other extreme, the eCommerce companies, are taking off doing what we call omni-channelcommerce, connecting everything from bricks and mortar, and are also recognizing the power ofbeing able to do that as people are out and about with the mobile devices and gaining data on, forexample, local offers and so forth.The next great opportunity is going to come in the combination between social and commerce,and it might involve mobile and local as well. We haven’t seen the next great company emergefrom that, but were certainly seeing many opportunities. At the application level, that’s probablya good example.To deliver on all of that, one of the things were taking for granted is that the infrastructure isgoing to be in place to do all that. A part of the survey that we always take time to ensure wecover is to understand the things that people are actually spending money on right now.If we look at the intersection between vendors and users, and in the survey its a slide called"Rainmakers," at the bottom of the infrastructure stack theres still a tremendous amount to do toenable the kinds of applications that you and I are talking about here.Some things are very basic, the things like single sign-on on authentication to enable thiscollaboration across the supply chain. More speciﬁcally, in mission-critical businesses, its thingslike backup, archiving, and business continuity to ensure that all this information is being storedand managed on a signiﬁcantly scalable basis.
When we looked at all that, the thing that stood out, which is not going to surprise you probably,given that we talked about big data, is that people expect one of their greatest areas of spend tobe analytics.So at the infrastructure level, I think we are going to see some of the things that I talked aboutthat are basic, like next generation of single sign-on. But the big thing that came out was thatpeople are looking for more analytics, and more of the capabilities that are going to bespeciﬁcally taking advantage of cloud scale.Insights in real timeWhether that’s using things like Hadoop or next generation NoSQL or NewSQL, ourcapability is to get those kind of insights in real-time. In the end, the more data that’s beinggenerated, the more were going to have to step up the scale of analytics to provide insight in aneffective time scale.Those two would exemplify the application opportunities and the infrastructure opportunities. Inthe middle, as we talked about earlier, there’s a great deal of interest in PaaS, and its less clear tome what the opportunity is for a speciﬁc breakout.Ill say both what the survey revealed and what it didn’t reveal, which is interesting. We talkedabout how it revealed that there is a strong interest in PaaS, but when we dig in with vendors,what we see is that the vendors are actually at the bottom of the stack. The IaaS vendors, peoplelike Amazon, VMware, and others, are actually trying to add more capabilities to their IaaSplatform, to enable them to feel more like a PaaS.If you look at Amazon, theyve added numerous new services to make themselves more platformlike, and they have become the de facto standard there. So they are moving from the bottomupwards.But you also see the SaaS vendors, exempliﬁed by Salesforce.com, introducing their PaaS, likeForce.com, to extend the use of their infrastructure or their applications to be more platform liketoo. Theres a pretty big squeeze from the top and the bottom that’s making it difﬁcult to see whatwill be the white space for a PaaS vendor.The honest truth is that I can describe the ﬁrst two, what the opportunities for the SaaS and IaaSare, but its not clear to me where the white space is in PaaS, and it feels like its gettingsqueezed, if that makes sense.Gardner: So to sum up, perhaps there is a signiﬁcant business to be had up and down thespectrum, infrastructure, hardware-software, facilities, management, building out theapplications, but perhaps one of the larger two opportunities thats yet to be solidiﬁed or clear isin the analytics and in the PaaS.
Now, in the past, development was often a tricky market to make money in -- tools, frameworks,IDEs, but in many cases there was a deferment involved. You might break even or even losemoney on some of those areas in order to capitalize on the deployment side or even gain lock-infor those applications on a platform, and thats where you would have a very good business.I think what were seeing with cloud is something a bit different. When it comes to lock-in, andyou have had experience of course in open source software, what are some of the good thingsand some of the more risky things when it comes to this desire, as weve seen in the past, to lockpeople in to either a platform, a service, a standard, or even a toolset?Skok: Youre on the money on a number of different fronts. First of all, as you say, people havehistorically very rarely made money out of tools. I dont think it will be any different in thecloud. The interesting piece in the cloud is you have the runtime potential to make money, buteven then, its an economy of scale game, so its not a place thats easy for startups to play.Platform lock-inThe second key point youre making is that people traditionally have looked at it as a means toget lock-in to a platform, and that is the exact thing that people are worried about in this cloudrevolution too. The third biggest item of whats inhibiting cloud adoption in the survey is lock-in,and the fourth was interoperability. They were both very high on the ranking.What people are worried about there is very simple. If we double-click on it, theyre looking forthree things to avoid lock-in. They want to avoid data lock-in, they want to avoid programmaticlock-in with application programming interfaces (APIs), and they want to avoid being lockedinto proprietary services or features that cant be transparently supported on other platforms.Thats a real challenge for the PaaS players at this point, because the giant here is Amazon, andtheyve got a series of de-facto standards. There are some companies like Eucalyptus who havebeen very smart and are reverse engineering or making sure they are compatible with thosestandards.But those that are trying to compete on new grounds are certainly going to have to struggle withgaining critical mass and then answer the question about how theyll provide that interoperabilityon those three layers we just talked about, to get over that inhibitor of an adoption that people areworried about around lock-in.Gardner: So perhaps theres a de-facto standard around Amazon, but being challenged byOpenStack and CloudStack as well. Is there any inference in the survey as to whether theOpenStack and CloudStack approaches would mitigate a de-facto standard evolving rapidly, andhow do you view that?
Skok: Im going to slightly branch outside of the survey and mention that for several years,weve run an equivalent industry survey on open source. Its very widely adopted now, but whenwe started several years ago, it was early.Weve seen that cloud has very much become a part of open source, not just because a lot ofcloud is built on open source, but because, as you say, people are looking at open source as ameans to answer this lock-in. It answers one of the key areas, which is certainly programmatic,an API type lock-in.People will have open access to the source to modify, adopt, and even change to create their ownabstraction layers, but that will potentially enable this kind of interoperability.Things like OpenStack, CloudStack, OpenShift, and other platforms are potentially an answer tothat. The challenge there is that theyre relatively young and early in their adoption. Whiletheyve got signiﬁcant backing, you have yet to see broad deployment of them yet.Im hopeful that open source will provide some of the answer to vendor lock-in. Its certainlybeing proposed that way and its being supported that way. If you talk to a certain segment of theuser population, they would tell you that its exactly what theyre relying on, but in reality, weretoo early to call that one.Making good moneyGardner: One observation from me would be that the folks that are in a position to make goodmoney on infrastructure, hardware or software facilities, and management, seem to be a naturalafﬁnity environment with the OpenStack, CloudStack approach, but those higher up the foodchain in cloud that have more of a pure-services business model might be interested in having thede facto standard land in their particular data center. It will be interesting to see how that pansout.Tell us once again, Michael, how people can get more information on your survey. Where couldthey go to get the nitty-gritty?Skok: They can just go to mjskok.com under Industry, Future of Cloud Computing, and the fullsurvey is available from that site on a slideshow for people to click through. Also, its beingcovered in many different places by many of the vendors who have supported it. Theres a lot ofinformation being disseminated by the collaborators. You have full access to it.Just to answer your question, because its too good a question, who has what interest to gowhere? Its best exempliﬁed by Oracle. Oracle took a long time to enter the cloud market. Ofcourse, they have beneﬁt all the way from hardware out to the applications because of theacquisition of Sun.
Thats how theyre pushing their cloud approach as a series of applications that are totallyintegrated from hardware, all the way through to software. Thats certainly going to suit someclass of buyers.But if you look at major waves like this, its always a while before people can afford to have bestof breed at various different layers. If you started building application, as we did in some of ourinvestments like Demandware eight or nine years ago, there was no IaaS, there was no real depthof Amazon and no service-level agreements (SLAs) that you could have built a mission-criticaleCommerce application on.That is evolving, and the more stable and capable the IaaS and PaaS players become, newapplications will be to take advantage of those, and new vendors will potentially be able to takeadvantage of best of breed. Thats whats interesting about the surveys, but its all about verifyingand tagging the state of the industry to see where we are and benchmark how the future is goingto play out.Gardner: Perhaps what were seeing is a ﬂip from best of breed being a technology to best ofbreed being a service or ecosystem approach. And if you can perhaps sweeten the offer ofmoving your best of breed mentality in that direction by not locking people in, or at least givingthem an option to have interoperability, or mobility of their services, then that might be anirresistible offer that the market cant refuse. We just dont know who is going to make it, right?Skok: Thats exactly right. Thats perfectly said. A good example to highlight how this is stillplaying out is Zynga, who reverse burst to their own zCloud because the economies of scalemade it worth their while to do that.If you look forward, people are even talking about cloud brokerages. I think its too early to dothat. Forrester had some thoughts about that and was talking about cloud brokers like travelagents. I think we are a ways off from that.But in the ultimate scenario, exactly as you were talking about it, you might see a place whereyou have best of breed, cloud services, and all kinds of cloud formations that we were talkingabout.Best of breedApplications will effectively be an amalgamation of the best-of-breed cloud services and cloudformations that will enable new classes of applications that have interoperability, or at the bareminimum of things like data thats passed up and down supply chains or along applicationsstreams. The consumer is the ultimate benefactor, because theyre getting those, not only at bestof breed, but hopefully at the lowest cost and at highest value.Gardner: Then, perhaps it would be embedded services across those best of breed processes thatwould include widespread analytics, mobility, and location services, so those become more
sweeteners to the offerer. There would be a race to who can put together the best banquets ofservices under the best interoperability terms and licensing terms. So again, it could be a veryinteresting next ﬁve years.I assume that over the next several years, youre going to be continuing to do this survey eachsummer and therefore get the gravitas that we have seen with your open-source survey.Skok: Indeed. Theres been unbelievable response to it. In fact, just to give you a sense of it, theopen-source survey took a number of years to gain the kind of momentum that its now enjoyingin its seventh year here.This survey gained such incredible popularity that within the ﬁrst couple of years, it already hasas much support from the industry as the entire open-source survey does. And we have gottremendous demand to continue doing it, from both vendors and customers alike.Were continuing to use it to keep dialogue between vendors and customers and enhance theindustry’s ability to respond to what they see as the future. So with your support, we willcontinue to do it.Gardner: I look forward to periodically dropping in and learning more about the survey resultsand, of course, some of the insights and inferences that we can draw.Skok: Thanks.Gardner: Youve been listening to a special BrieﬁngsDirect podcast discussion on the cloud-computing market and how a recent survey at North Bridge Venture Partners helps deﬁne thebusiness growth opportunities for buyers and consumers of cloud services alike.I want to extend a huge thank you to our special guest, Michael Skok, a partner at North BridgeVenture Partners. Thank you so much, Michael.Skok: Pleasure. Great being with you here, Dana.Gardner: This is Dana Gardner, Principal Analyst at Interarbor Solutions. Thanks to you alsoour audience for joining us, and dont forget to come back next time.Listen to the podcast. Find it on iTunes.Transcript of a BrieﬁngsDirect podcast on the state of cloud computing and its future outlook.Copyright Interarbor Solutions, LLC, 2005-2012. All rights reserved.You may also be interested in: • CloudNOW Unveils its 2013 Cloud Computing Predictions • Businesses Starting to Use Cloud Without Knowing What Theyll Do With It
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