Harnessing the Power of the Cloud
The enterprise technology landscape has seen tremendous evolution in the past several years as disruptive change has hit almost every corner of the market. Nowhere is this more evident than in the move to cloud computing, where momentum continues to build. Consider:
- IT Cloud services spending is expected to reach $72.9 billion by 2015
• Spend on cloud computing is growing 6x faster than traditional IT spending
• 77 percent of companies plan to increase SaaS spending in the next two years
• More than half of all data workloads will be processed in the cloud by 2014
The Cloud means different things to different people, but it encompasses a number of exciting capabilities. It means that employees of a global corporation can all access the same documents, and collaborate on them in real time. It means large swaths of IT no longer need to exist “on-premise” in an organization, saving companies an enormous amount of time, money and management.
In many ways the move to the Cloud is similar to the dawn of public utilities more than a century ago, when most companies had to make their own power. Many were located near rivers for just that reason. But in the early 1900s utility companies expanded to provide increasing amounts of electricity at lower costs to a greater number of customers. This eliminated the need for individual companies to produce their own power, enabling them to buy it for less and often with greater reliability. So will be the path for much of IT. Raw compute and storage capacity are already readily available from cloud-based infrastructure providers. Many leading business applications are delivered ‘as-a-service.’ Platform as a Service is coming on strong. This migration is accelerating and affecting companies in all corners of the economy.
Our assertion, now shared by many, is that large portions of IT will continue to shift to outside providers (the Cloud) as it becomes clearer that while banks are good at banking, and pharmaceutical companies good at marketing drugs, they do not also need to operate all of their own IT. They can now have an outside provider deliver better IT service to their company for less cost. Internal IT can then refocus their efforts and dollars towards core, strategic capabilities where they can deliver true competitive advantage for the company. And while there are clear concerns about security, they are not slowing the migration to the cloud. Attendees of our recent Technical Advisory Board meeting (senior executive technology folks) largely said the cloud’s benefits outweigh the potential security risks.
While the Cloud is maturing, entrepreneurs are pushing the envelope of what it can offer. They continue to enhance the reach, speed, usability and efficiency of the Cloud, enabling numerous benefits like rapid implementation, seamless scaling, native analytics and much more. These same entrepreneurs are also solving new challenges that result from the shift to the Cloud, including managing multiple outside vendors, cross platform integration, security (outside the firewall), compliance (especially within healthcare and financial services companies), as well as issues related to corporate governance and ownership.
All of this entrepreneurial activity creates an enormous opportunity for venture investors. In many respects, we expect every investment we make will have an element of the Cloud, as it has become a core aspect of most companies’ IT strategies. And perhaps decades from now, history may look back upon these trailblazing cloud services providers in the same light as the early electric utilities companies of a century ago.