The Future of Cloud Computing And its disruptive affect on enterprises and markets Vikram Rana T’08 Agenda • Evolution to SaaS and Cloud Computing • Current Cloud Computing Market Overview • Webdesc: Case Study • Barriers to Adoption • Future Catalysts • Recommendations 2 Evolution to SaaS and Cloud Computing 3 Source: Forrester Research, “Is Cloud Computing Ready for the Enterprise”, March 7, 2008 Agenda • Evolution to SaaS and Cloud Computing • Current Cloud Computing Market Overview • Webdesc: Case Study • Barriers to Adoption • Future Catalysts • Recommendations 4 What do you mean Cloud Computing? “A pool of abstracted, highly scalable, and managed compute infrastructure capable of hosting end- customer applications and billed by consumption.” Segment Description Value Prop Competitors Customers Packaged apps • Lower cost of ownership •Salesforce.com • Large delivered over the • Reduced up-front •Google Apps enterprises SaaS Internet investment •ZoHo Office • SMBs Virtual datacenter • Lower costs •Amazon Web Services • SMBs HaaS/Utility (enterprise) • Reduce time-to-market •Akamai • Consumers •3Tera AppLogic (early adopters) Computing Virtual hardware (consumers) •Goowy desktop APIs delivered over • Reduce time-to-market • Google Maps API • SMBs the Internet • Increased functionality • ADP Payroll processing • Large Web • USPS enterprises Services Complete development • Similar to HaaS •Google App Engine • SMBs environments • Adds integration layer •Force.com PaaS 5 Source: Info World, “What cloud computing really means”, April 7, 2008 Cloud computing is a classic disruptive technology Incumbent Responses: Windows Vista Installed Enterprise Apps Traditional Data Centers Overshot customers: Startups SMBs Performance Utility computing SaaS Web Services Time Disruptive innovation: cloud computing 6 Cloud computing: access to world-class IT for the low-end enterprise market Application to Cloud In-Market Disruption Computing SMBs and start-ups who can’t Overshot customer at low end of afford the initial investment in or Customers existing market complexity of enterprise IT • Standardized, virtual H/W Technology (product/ prescribed by the cloud vendor Good enough performance at • High Availability through service/ lower prices process) dynamic infrastructure S/W • Pay-by-consumption (free in some cases) • Flexibility to expand or drop Attractive returns at lower prices Business Model service instantly (no contracts) • No S/W or H/W installation • Greatly reduced time to market • Large ERP/CRM and data center Incumbent Response Motivated to flee providers not serving smaller startups b/c of scale 7 Cloud Computing revenues are mainly SaaS driven Worldwide SaaS revenue forecast Worldwide SaaS revenue leaders s 16 2006 r 14.8 Market a l Company Revenues l Share (%) o 14 (MIL $) d 13.2 f o Salesforce.com 451.7 12.4 s 12 n 11.1 o i Webex 365.0 10.0 l l i b 10 8.4 Digital Insight 211.8 5.8 8 Citrix Online 148.8 4.1 5.7 6 Microsoft (Live 138.4 3.8 Meeting) 4 3.7 Others 2338.9 64.0 2 0 2006 2007 2008 2009 2010 2011 • SaaS revenue is 1.6% of $237B worldwide software market (2006) • Salesforce.com has 2.1M subscribers, 677M in sub revenues (’07) , and over 50% share of on-demand CRM • Leading utility computing provider AWS has 300K developers, <$50M in revenues 8 Source: Standard&Poor’s, “Computers: Software Industry Survey”, April 2008 Agenda • Evolution to SaaS and Cloud Computing • Current Cloud Computing Market Overview • Webdesc: Case Study • Barriers to Adoption • Future Catalysts • Recommendations 9 webdesc: a new breed of start-up powered by the cloud • Ultramobile communications • Online virtual computing platform device - Hardware as a Service - Real keyboard & large screen - Two years prepaid - Less than 2 lbs - Office + email suite - Multi-day battery - Can install software - ~$400 - 10GB storage • Comes with Firefox, Skype, IM, - Can run Windows for more $ (XP or e-book, MP3, video Vista) Internet webdesc servers 10 How does webdesc work? Any standard browser currentfuture webdesc webdesc cloud cloud platform platform web3rd descpartyvirtualization cloud provider platform webdesc value addedserver appsnode The Internet VM1 Regular clients 3rd party cloud HW server node VM2 VM2 Ultramobile/diskless VM3 clients VM3 11 webdesc business model is financially nimble and market responsive webdesc competitive position Product Company competitiveness competitiveness Barriers Better Competing Product? directly? Switching Entry Exit •Painless, instant •Going after •Mainly due to •On-demand model upgrades overshot means little up-front consumers/SMB migrating investment •Instant customer data backup/data •Exit is easy too with security few physical assets •Ubiquitous or long term Sales contracts access/sharing Financial Marketing Distribution •No IP, must innovate customer experience •Positive working •Marketing is done online rapidly capital cycle •low-touch sales/service •Scale up/down on model for SMB market demand - H/W fixed costs become variable 12 costs Agenda • Evolution to SaaS and Cloud Computing • Current Cloud Computing Market Overview • Webdesc: Case Study • Barriers to Adoption • Future Catalysts • Recommendations 13 Cloud computing is still relatively unproven Business Model •Few referenceable successes •Few large players offering •Concerns over data security clouds •May not support industry •Lack of commercial vendor compliance standards support Barrier to Adoption •Technical complexity •Instability/lack of SLAs •Less integrated vs. stand- alone platform, reinvent the wheel •No geographic locality •Doesn’t support monitoring/management Technical Low High Risk to Enterprise Enterprises should begin to experiment with cloud computing in areas of the business where they can afford risk 14 Agenda • Evolution to SaaS and Cloud Computing • Current Cloud Computing Market Overview • Webdesc: Case Study • Barriers to Adoption • Future Catalysts • Recommendations 15 Catalysts for Cloud Computing Catalysts New Business Business Provider Technology Models Catalysts Catalysts catalysts • Leverage clouds to • Better reliability • Continued entrance • Scale to support get to market with through service level of web giants such massive enterprise new business models contracts as Microsoft applications • Generation of Web • Compliance with • ISVs conversion of • Seamless support for 2.0 startups “born in enterprise business legacy apps to SaaS 3rd party applications the cloud” needs • Substitutes for in- • Open Standards to house management reduce lock-in & monitoring tools • Solution to data • Hardened Internet security issues • Commoditization of H/W & bandwidth 16 Potential opportunities for cloud computing in future IT value chain Utility Cloud computing computing SaaS providers bridges Providers Infrastructure PaaS Virtualization Enterprises Data Center Providers Opportunities • Opportunities • Opportunity for • Good opportunity for • Good for next computing giants bridge providers and opportunity for generation of with massive data integrated Platform as a SaaS systems cloud centers Service (PaaS) providers: computing - databases, virtualization app servers, providers and business intelligence Current Offerings: 17 Agenda • Evolution to SaaS and Cloud Computing • Current Cloud Computing Market Overview • Webdesc: Case Study • Barriers to Adoption • Future Catalysts • Recommendations 18 Recommendations for Enterprises Drivers/ Segment Recommendations Competitive Threats • Use clouds for hyper-prototyping and provisioning of applications Hyper-competitive markets are pushing the business to demand ever • Roll-out lower risk areas of the business on clouds, e.g. internal Web2.0 apps such as Large enterprises faster time to market, reduced wikis, blogs, virtual worlds as well as entry/exit barriers, while reducing IT external collaboration sites costs • For those with massive internal data centers, consider becoming a cloud Cloud computing allows SMBs to have • Take advantage of enterprise class SaaS world-class enterprise application offerings in CRM, HRM, and collaboration SMBs functionality at affordable price points • New entrants should build their infrastructure on clouds from the ground up Start-ups Most startups in SaaS or Web 2.0 are to gain cost advantages using clouds • Existing companies should consider migrating to remain at par 19 Recommendations for ISVs, Data Center Providers, and Channel Partners Drivers/ Segment Recommendations Competitive Threats • Start thinking about transforming to a cloud through migrating to a virtualized infrastructure platform such as 3Tera’s Data Center Run the risk of total disruption from Applogic Providers data centers in the cloud • Think about adding other value added services on top of clouds such as enterprise tools like Business Intelligence (BI), and databases Cloud computing allows SMBs to have • Start migrating value-added pieces of world-class enterprise application applications to the cloud as SaaS offerings functionality at affordable price points • Manage channel partners to migrate to SaaS ISVs • Guard against channel conflicts and saturation • Develop new skillsets such as business Revenue losses due to disruptive process and change management consulting Mid-market VARs/SIs nature of Clouds/SaaS on skills implementation projects • Adjust to smaller, ratable cash flows 20.