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Why invest in SaaS and Cloud A VC Perspective Erez Ofer Greylock Partners June 1 st 2009

Why invest in SaaS and Cloud A VC Perspective Erez Ofer Greylock Partners June 1 st 2009. Even the government talks about it …. You know a specific hype is everywhere when …. Optimizing Common Services and Solutions/ Cloud-Computing Platform — The Federal technology

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Why invest in SaaS and Cloud A VC Perspective Erez Ofer Greylock Partners June 1 st 2009

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  1. Why invest in SaaS and Cloud A VC Perspective Erez Ofer Greylock Partners June 1st 2009

  2. Even the government talks about it …. You know a specific hype is everywhere when ….. Optimizing Common Services and Solutions/ Cloud-Computing Platform—The Federal technology environment requires a fundamental reexamination of investments in technology infrastructure. The Infrastructure Modernization Program will be taking on new challenges and responsibilities. Pilot projects will be implemented to offer an opportunity to utilize more fully and broadly departmental and agency architectures to identify enterprise-wide common services and solutions, with a new emphasis on cloud-computing.

  3. Why is this Big ? • Technologies finally coming together to enable utility computing: • Standardized hardware / VMs • Network throughput / Always On • Understanding of utility computing “Compute Model” • SaaS • As pioneered at large datacenters at Google, Yahoo, Amazon, eBay and the likes • A lot of hype …. but … a huge potential • Think back to other big shifts in IT / Software

  4. Why is this Big ? • Technologies finally coming together to enable utility computing: • Standardized hardware / VMs • Network throughput / Always On • Understanding of utility computing “Compute Model” • SaaS • As pioneered at large datacenters at Google, Yahoo, Amazon, eBay and the likes • A lot of hype …. but … a huge potential • Think back to other big shifts in IT / Software • Potential for major change  Investors take notice

  5. Basically - • Enterprises of all sizes can deliver/consume IT services in a more affordable and efficient way • Said differently – Spending on IT could be matched to business needs. Spending can be adjusted over time • Enterprises will do so by paying for the following as needed – • Applications/Software • Platforms • Infrastructure

  6. Opportunities in SaaS • Started in CRM and HCM and spreading • Notable companies – Salesforce.com, Webex, Blackbaud, Kenexa, SuccessFactors, Taleo, RightNow, Omniture • Large horizontal opportunities present largest potential. e.g. ERP • Niche plays might be just that • Interesting opportunities: • Vertical applications (Industry specific), if they are large • SaaS for IT organizations

  7. SaaS Startups – Keep in Mind • Size of Market and opportunity • Market and customer dynamics • Financing • Public SaaS companies (Wachovia report, May 2008), money raised - • Mean                               $43.5M • Median                            $39.5M • Go-To-Market , Marketing expenses, Viral spread, Automation / Self Service • Annual contract value vs. Contract acquisition cost

  8. Opportunities in Cloud • Trends • On demand services • Platform as a service • Infrastructure as a Service • What are main opportunities ? • Additional services that are not provided today • Facilitating Infrastructure as a Service

  9. Availability / Management • What Apps / Data are out there ? • Control • SLAs • Availability . Managing external clouds (multiple) + Internal clouds • Apps / Data movement • Consistency . Databases on the cloud, anyone? • Avoiding Lock-In • Governance

  10. Security / Confidentiality • When providing infrastructure or platform: • What Apps / Data are out there • Privacy • Access • Integration with in house systems • Loss of Control

  11. With Scale Come Issues • Scalability of cloud infrastructures • Data Transfer penalty and dealing with it • Getting consistent Performance / SLA • Quick Elasticity • Using the right building blocks ?

  12. Cloud – Keep in Mind • Areas of opportunity • E.g. – Base hardware services hard to do given scale • Market and customer dynamics • Financing • Service charged over time • Go-To-Market , Marketing expenses, Automation / Self Service • Annual contract value vs. Contract acquisition cost

  13. Bottom line • Peak Hype • Many signs that transition is real • SaaS here to stay • Platform as a service & Infrastructure as a service ramping up • Still lots to do , The IT industry never changes over night

  14. GREYLOCK • US Fund, Since 1965 • Greylock Israel – Dedicated fund , $200M • All Tech areas, All stages (Mostly early) • Some portfolio relevant to discussion today - RightNow, SuccessFactors, Workday, Metiis • Others – Precise S/W, Aeroscout, Imperva, Redband, Zend, DataDomain, DoubleClick, ISS, Red Hat, Wily, Digg, LinkedIn, Facebook

  15. Thank you eofer@greylock.com

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