Cloud

Five Cloud Trends: Delivering Mission-Critical Value Beyond IaaS, PaaS, AaaS

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Editor’s Note: Michael Skok, general partner of North Bridge Venture Partners, keeps his finger on the pulse and vision of cloud technologies. I talked with Michael a few days ago about the cloud trends he’s observed since conducting last year’s Future of Cloud Computing Survey and where the cloud is headed.

SandHill.com: I’m increasingly seeing very disparate information about cloud computing adoption. Some say that adoption is still mostly by SMBs; others tout that very large global enterprises are active in the cloud. Some say the cloud is not yet secure; others say it is. How can a business know where to find the right information so it can make proactive decisions?

Michael Skok: When a major disruption such as cloud blows through the industry, people have to figure out what the implications are and, very importantly, figure out what the pace of change is so they can either respond to it or be proactive and get ahead of it.

The problem with much of the cloud trends information in the market is that it’s presented from only one vendor’s point of view, so it’s very likely that you’re missing the bigger picture. That’s why the 2012 Future of Cloud Computing Survey is critical to benchmarking where the change is. Not being a vendor, we at North Bridge are in a neutral position as an industry observer. We’ve put together a large group of 40 collaborators on this year’s cloud survey — everybody from Amazon to Rackspace and many of the new and up-and-coming players. The survey findings will reveal what’s coming down the track so vendors and users can be proactive in deciding how they can take advantage of cloud.

SandHill.com: What information do you think will come out in the 2012 survey that is different from the findings in the 2011 survey?

Michael Skok: The big thing that I think is going to come out this year is that the cloud landscape is evolving to a much more three-dimensional form. Until recently, people described the cloud in two dimensions:

  • X axis: cloud types (Private, Public or Hybrid)
  • Y axis: cloud layers – Infrastructure as a service (IaaS), Platform as a service (PaaS) and Software applications as a service (SaaS)

On the x axis, some companies are still trying to understand the difference between private, public and hybrid clouds. Obviously the enterprise at large is still trying to organize their private infrastructure in a virtualized or cloud form … then they are more able to cloud burst and have a hybrid cloud. The more comfortable they get with some of the issues like security and compliance, then the more likely they are to use public cloud. But each of these steps takes time, and only a few CIOs are willing to step outside this model and jump straight to the public cloud. However, we’re finding that users are often going around those that don’t move fast enough.

On the y axis, SaaS applications like HR and CRM that were first generation and not mission-critical are now evolving to more mission-critical applications like ecommerce.

SandHill.com: What’s the new third dimension?

Michael Skok: We’re seeing a significant shift in the cloud landscape. It has gone from private, public or hybrid and from IaaS, PaaS and SaaS to a third dimension, the z axis, which I refer to as Cloud Formations. There are five forms, and each is becoming critical in cloud adoption.

1. Social / Collaboration cloud. Facebook is the eponymous consumer example and examples of this cloud formation in the business world are companies like Jive. In my own portfolio I see evidence of real ROI with companies like Acquia whose social business applications are enabling companies like Twitter and PayPal to organize their communities. As a result, these companies are able to achieve self-service and reduce support costs.

2. Mobile / Location cloud. Increasingly with the rise of smartphones and tablets, people are accessing the cloud from their mobile devices. These devices are becoming the on-ramp to the cloud, which is critical for connecting people to their email, BI systems and the back-end of their processes. The location piece provides data from the device back into the business process or personal connection to provide more relevant information to people on the go. And these devices will share more and more data as people use them as a hub for things like health and fitness monitors.

3. Media and entertainment cloud. Most people are familiar with iTunes. Content is held much better in the cloud than by physically saving everything to every device from which one might access the content. Even television vendors have to differentiate themselves and are trying to do that with cloud services to make their TVs “smarter.”

4. Ecommerce and payments cloud. Ecommerce and payments go together when people buy products or services online, but in practice are somewhat separate. There are a lot of different politics associated with managing payments across the different parties involved in the emerging mobile wallet. Regardless, the ecommerce and payments Cloud Formation is critical.

5. Big Data/ Analytics Cloud. All five of these cloud formations are producing and dispensing a tremendous volume of data, and the analytics around it are incredibly valuable.

SandHill.com: Is the cloud driving mobile, social and Big Data software; or are they driving the cloud?

Michael Skok: I believe they go hand in hand. I’ll give you an example. The arrival of the smartphone and tablet absolutely drove cloud adoption. The minute people had multiple devices — and most people now have at least three — the reality was that keeping content synched between those devices is not possible without the cloud. And that pain point occurred very quickly. People started to do things like adopt their tablet as their travel device and get on the road and then suddenly didn’t have access to the documents they needed. So in turn, the mobile revolution drove the cloud; but the more the cloud became an enabler, the more it enabled the mobile and location and the other four cloud formations. So it is a self-reinforcing virtuous circle.

SandHill.com: What’s your vision today? Where do you see the cloud heading because of these new formations in the third dimension?

Michael Skok: I predict that we’ll see fascinating new intersections of those cloud formations that generate great new applications. For example:

  • As an obvious starting point, when you combine Social and ecommerce, you get Social Commerce. As we already know, one of the best ways to get advice on what to buy is from people you know and trust. Social Commerce is an important aspect of how people are going to use socially driven ratings and review of products and services to influence their purchasing online.
  • If you add to that Mobile and Location, you get location-based or what I call “situational commerce” enabling local offers. Companies can see exactly where someone is and understand what would be relevant in that situation and then provide an offering for the consumer.
  • If you then add in Big Data and Analytics, you get personally targeted, closed-loop, predictive marketing. Companies will have all the data on an individual and know how to target them. Then, because of being able to see how they respond in a closed loop, in the future, companies will be able to move toward the Holy Grail of measurable, predictive marketing to individuals.

These key intersections in the cloud formations will drive some fantastic new applications that will result in differentiation and competitive advantage. Cloud adoption will really start taking off at that point because companies won’t be able to afford to ignore those kinds of advantages. Indeed to take advantage of those opportunities, they will overlook some of the issues that might have initially held them back from the cloud.

SandHill is a survey collaborator on North Bridge’s 2012 Future of Cloud Computing Survey. We’ll share the survey findings in June. 

Michael Skok joined North Bridge Venture Partners in 2002. Michael has been a software entrepreneur and CEO for 21 years. He founded, led and attracted over $100M in private equity to investments in several successful software companies, and built a significant multiple of that in value for investors as a VC. Michael focuses on market-changing technologies such as cloud computing and disruptive business models such as open source. He created the first industry-wide open source survey; in SaaS he led CIO forums as early as 2003, culminating in his work at www.futurecloudcomputing.net with the first multi-vendor industry-wide survey and collaboration on the Future of Cloud Computing. Michael also focuses on applications in ecommerce, enterprise mobililty and Big Data. Representative investments include Acquia, Akiban, Apperian, Demandware, Unidesk, Actifio and Revolution Analytics. Contact him at [email protected] and www.mjskok.com @mjskok.

Kathleen Goolsby is managing editor at SandHill.com

Comments

By Lauren Kelley

Michael, really cogent summary of the cloud landscape and how the cloud allows for the synergies between different technologies or applications to drive greater overall adoption and expansion. Zach Nelson, CEO of Netsuite, just announced yesterday at their user conference their new direction of expanding their ERP systems into ecommerce websites, plus point of sales systems, through the cloud. So, where you are describing ecommerce expanding into payment processing, he’s expanding ecommerce back into the whole erp system. Interestingly, he mentioned that the genesis for this vision was a suggestion by Larry Ellison early on when Netsuite was founded – of course, the database sits at the center of most business applications, whether cloud based or not. Oracle gets to stay relevant to the new technology expansions, either way.

By Michael Skok

Lauren,

Thanks for the feedback and imho your thinking is dead on.

Zach is a sharp guy and someone I respect. And he has been early in thinking about SaaS and his new CaaS approach makes sense for him as expansion for an ERP player…just as you say for Larry at Oracle, ERP and Applications made sense as an expansion for the Database. Full disclosure: I am on the board of Demandware and have been since day 0 as the co-lead investor there through multiple rounds of funding and their recent IPO.

My personal opinion is that the database, or even the application won’t matter as much. Instead, the focus will be on the business problem or process at hand. That’s why the emerging 3D cloud is so exciting; it’s going to ultimately enable customers to just take the “tech” out of technology and enable them to focus on their core differentiation, applying their knowledge to what they do best.

For example in Demandware’s case, that is enabling customers to focus on multi-channel merchandising and marketing. Not infrastructure or applications as a service. That’s why they have a very strong team of retail practitioners supporting their customers and their business model is aligned that way. So in the end, the benefit of the cloud will appear to customers as a way for vendors to deliver rapid innovation on demand.

That can be competitive advantage.

I hope that shows how we align. Regardless, thanks for your perspective.

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