Cloud Computing

Cloud Computing is topic that has been on our minds at Hummer Winblad for a few years now. It represents a very interesting shift in the data center that we are all used to working with.

You can see a recent cloud computing session I moderated here. This event was organized by the good team over at DealMakerMedia who also recently published the cloud computing ecosystem map. This map covers a large and growing (thanks to some creative rebranding of many companies around cloud computing) list of companies in the space. We were pleased to see several of our companies there including Elastra - the enterprise cloud company, VKernel - Systems management and chargeback for private clouds (virtualization), Birst - cloud BI and Aria Systems - cloud billing infrastructure.

Cloud computing is following some interesting adoption patterns. Amazon.com has lead the way by providing a public cloud offering and they are rapidly adding enterprise features and partners such as IBM. The adoption of cloud computing is rapid in the start-up space - almost every company we meet now has some leverage on the back end from cloud infrastructure. From our discussions with larger companies, CIO's and enterprise developers cloud is also starting to get traction there as well. This is one of those trends where if the corporate IT department cannot offer cloud solutions that are blessed, the developers will put their credit card in and start using Amazon Web Services. It just takes too long to get resources inside an organization compared to firing up an instance on EC2 in 5 minutes to beta test an idea.

In our informal survey the adoption of cloud is progressing in the following categories:
- financial services
- technology (including startups)
- Medical
- education
- government

The initial use cases are usually non-core applications and batch processes. It is being followed by more sustaining use cases over time. This wave is happening...and corporate good corporate IT departments are trying to get ahead. We believe the future of cloud computing will include public clouds like Amazon, private clouds run in corporate datacenters, semi-private clouds managed and run by the likes of IBM on behalf of corporate clients - and a common language/infrastructure to move between these infrastructures.

Gartner Gives the Nod to SaaS Model

In a report that was released this Wednesday, Gartner made some bold predictions around the near-term future of SaaS...

(from Antone Gonsalvez at InformationWeek)

SaaS Revenue Growing, Market Set To Double By 2012
Driving the growth in SaaS deployments is businesses' desire to reduce their IT capital expenditure budget and to rapidly implement software that supports a specific business need, Gartner said.

Worldwide software-as-a-service revenue in the enterprise application market is
on pace to surpass 2007 sales by 27% and to more than double by 2012, a market
research firm said Wednesday. Revenue this year is on track to rise above
$6.4 billion, compared with $5.1 billion last year, Gartner said. In four years,
revenue is expected to reach $14.8 billion.

While it is always a little dangerous to follow predictions from analysts with considering your specific market or application, this announcement is an interesting one given the current economic conditions. In essence they are endorsing that the SaaS model has increasing leverage over existing software models as the IT spending tightens.

We share this premise at Hummer Winblad and have invested heavily in the SaaS model...with over 15 portfolio companies to date including Omniture (web analytics), EmployEase (HR management), Aria Systems (Subscription Billing), etc. We see the model having some key strengths in this market:

1) Lower entry point customers - easier to get started, lower risk to trial, limited upfront expenditure. Also, the ability to buy or try without getting all the traditional enterprise sales points involved (IT, finance, etc)

2) Build vs Buy for business services - SaaS models become more interesting as companies debate if they should try to build out the service themselves via internal teams, or go with a known working solution where they can leverage existing best practices.

3) Lower TCO - often the best way to justify a SaaS offering is to have a customer lay out the true cost of the internal infrastructure

The SaaS wave appears to be continuing to gain momentum...lets hope we can really see the category double by 2012...

SlideRocket Now in Public Beta

This week one of our portfolio SaaS companies as launched into public beta - this means that now I can just direct all those email requests for accounts straight to this link.

SlideRocket is a rich Internet application that provides everything you need to design professional quality presentations, manage and share libraries of slides and assets, and to deliver presentations in person or remotely over the web. It also has analytics that tell you who spends time on each slide when they view the presentation.

SlideRocket announced this release at the Office2.0 conference in San Francisco. If the blog coverage of the show is any indication then they won 'best in show':

Finally, my favorite demo - and one I even signed up for. SlideRocket is like
Powerpoint on steroids. If you’re a presentation
builder, be sure to check this out. It went into public beta this week and will
head into a full-scale launch later this month

Full story at ZDNet.

Take a tour.
Like to learn more? Click here to take a tour of SlideRocket.

Sign up.
SlideRocket is now in public beta! Sign up for a free SlideRocket account and get started today.

YouTube...An Unexpected Enterprise Friend

A few months back one of our portfolio companies did something unexpected - the results were even more unexpected. At Hummer Winblad we often joke that we focus on the "boring side of software". By this we mean that many of our companies tend to be described with words like core, infrastructure, B2B, backend, etc. We believe that these companies provide the infrastructure under which the next generations of software are built. They will be interesting and successful companies but it is unlikely your mom will ever know their names.

What we don’t usually expect is for our companies to make YouTube videos.

The team over at vKernel did exactly that. Here is a company that is busy making the system management tools to help enterprises cope with the explosion of virtualization in their environments...and driving traffic from a YouTube video. The team made a quick parody of the now-classic PC-Mac advertisement to talk about the fight against companies that solve this problem with bloatware.

Bloatware companies (the PC) are big, cumbersome products that are IT intensive to use and packed with hard-to use features. Counter that with vKernel (the Mac) where they are using virtual appliances as their model for one product to solve one problem.

You can see the video here.

The message worked - they don’t have a huge volume of hits given that the average YouTube search is more likely to be "Britney Spears" not "virtualization system management". But in the first day they had prospects that jumped straight to the qualified lead status.

This kind of social media marketing is covered in a book by Charlene Li and Josh Bernoff called Groundswell. In the book I was introduced to another "boring" software company that has a whole series of successful YouTube videos. Greg the Architect is the new social media evangelist for the SOA vendor TIBCO. Greg happens to be a Ken doll but if you care about things like ROI around SOA then you might be one of the 75,000 viewers of his videos...an impressive following. [anyone looking for SOA, please take a look at Mulesource, the opensource ESB portfolio company]

My hat goes off to vKernel and TIBCO for riding the groundswell in their respective markets. I think you will be seeing a lot more social media from both companies based on this success.

If you are looking to do something similar at your company I would suggest reading Groundswell where the authors give lots of background on how to gauge your customers and target the community with the right tools.

ACM Ecommerce Conference

Last Friday I had the pleasure of attending the ACM Ecommerce conference in Chicago. I would like to thank John Riedl, the organizer, for putting the conference together and inviting me for the keynote. I had the pleasure of meeting members of the core technical teams from Amazon, Yahoo!, YellowPages, and researchers from great technical schools like Carnegie Mellon and Stanford.

This conference delved deeply into the algorithms and science underlying ecommerce. There were talks ranging from combinatorial auctions, revenue optimization and game theory applied to ecommmerce. My talk, which can be found on SlideRocket here, was titled "Investing in Algorithms". Below is an excerpt from my abstract:

In 2008, the software market is rapidly evolving towards Software-as-a-Service
and Cloud computing, and away from the on-premise delivery model. In exploring
these new models we will see that this is more than a business or delivery model
phenomena affecting ecommerce - it is a shift that fundamentally changes
expectations of what software can accomplish. In this model data is king.
Algorithms and analytics become significantly more relevant as the data is now
housed in a central location.

The talk let me highlight several key areas of investment for Hummer Winblad through the lens of a few of our portfolio companies. Because I gave the presentation in SlideRocket I was able to show how SaaS drives new sources of data compared to on-premise solutions. During the presentation I pulled up the historical data of a previous presentation that I had emailed to a different group - and show how many times the presentation was viewed and which slides the audience spend the most time reviewing. Hard data to collect with PowerPoint!

I then talked about Baynote as an example where SaaS companies can use their own products as part of the sales cycle. Baynote requires only a few lines of code to be integrated to a customers site to be up and running. Data is then fed back to the Baynote SaaS application and quickly the recommendation/search results can be surfaced. Baynote quickly gathers A/B testing to show the uplift of revenue. If you attempt this type of solution on-premise there is a limit to the data that a vendor will see, and you have many steps (procure hardware, configure hardware, install software, integrate product, etc) before these uplift effects could be shown.

The last theme I touched on in my talk was the ability of SaaS to provide closed loop actionable analytics. I highlighted our companies Omniture and Signal Demand as examples where the SaaS vendors can both make recommendations and stick around to quantify the results.

Upcoming Talk on R

UPDATE - The slides from this presentation are now awailable here courtesy of SDForum.


For those of you interested in R - the open source analytics platform - I have copied an announcement for a great event in Palo Alto next week hosted by SDForum.

At Hummer Winblad, I have noticed that many of the companies we talk to and many of our portfolio companies are using R as a core technology in their product. It allows for developers to use statistical and data analysis tools without paying money to SAS or another vendor for each copy of their software. I think that we are seeing an increasing use of these type of tools with the SaaS model because in general the applications have more data available to them. For example, SaaS allows application vendors to also use analytics across their customer set to watch for usage trends.

Jim Porzak and Michael Driscoll will present...

A Gentle Introduction to R and its Applications in Business Intelligence

R, the open source environment for statistical computing and data analysis, has been adopted by over one million users worldwide since its V1.0 release in February, 2000. Although primarily used within academia, the life sciences, and financial engineering firms, R has promise in areas overlapping with "Business Intelligence."

Specifically, R is a powerful tool for marketing applications such as customer segmentation and cluster analysis, and can be used to achieve a better understanding of business data in general.

We will start with a brief history of R and its present areas of use.

We will then position R's functionality within the BI space and highlight its strengths compared to classical BI tools.

For the techies, we'll show R in action and discuss some of the language's powerful features. Most of the presentation, however, will be a series of brief case studies showing concrete uses of R in our respective practices. After the formal presentation, we invite interested R users to stay for a few minutes to discuss forming a local "Use R" group.

SPEAKERS:

Jim Porzak

Jim is the Senior Director of Analytics at Responsys, Inc. in San Francisco. He has been doing Business Intelligence for the last 20 years, focusing on marketing applications for the last decade. He has actively used R, since 2002 and last presented R to the BI Sig in October, 2004. Next month Jim will give one of the dozen invited tutorials at useR 2008, in Dortmund, Germany - "Using R for Customer Segmentation" a sequel to his 2006 presentation in Vienna on Customer Intelligence.

Michael Driscoll

Michael is a Principal at Dataspora, Inc. a business analytics consultancy in San Francisco. He has a decade of experience using large-scale databases and data mining algorithms within industry, government, and academic institutions. He founded and since 2000 has served on the board of CustomInk.com, an Inc. 500 e-commerce firm.

Michael has a Ph.D. in Bioinformatics & Systems Biology from Boston University, where he used R for the analysis and visualization of genome data.

6:30 PM - 9:00 PM July 15, 2008

SAP

Building D, Southern Cross Room

3410 Hillview Avenue

Palo Alto,, CA

94304

FULL INFO AT

http://www.sdforum.org/index.cfm?fuseaction=Calendar.eventDetail&eventID=13118

SaaS - Multitenancy Debates

There has been a really interesting discussion started by Phil Wainwright on Why Multitenancy Matters for SaaS companies...the latest post with a response from the Intacct CTO, Aaron Harris, is very enlightening. Harris points out that many of these decisions on infrastructure are made both on the technical merits but also with a strong emphasis on the impact to the economics of the SaaS model. It is worth a read.

Phil in his earlier post walks through the various back-end definitions of what a SaaS multitenant solution could look like. If you look at the 15 SaaS portfolio companies of Hummer Winblad you can see that we have a pretty strong religion on the approach that is best...this includes Intacct, Omniture and Aria Systems. The approach outlined by Harris - few instances of the back end and every customer on the same instance of the code - is the one where we see the best patterns for success.

There was also a post by the constant instigator, our own Dave Rosenberg, CEO of Mulesource (one of our portfolio companies and a regular ZDNet blogger). He argues that customers dont care. At the risk of setting off a fiery debate with Dave I will respectfully add some thoughts...that customers care because of the derivative effects of good backend choices.

Why customers DO care...

Market Leadership

Market leadership in a category can be a derivative of the efficiency of the SaaS providers organization. If you read the response provided by Harris on their multitenancy choices it boils down to economics. With a lean and mean back end infrastructure the SaaS provider has less administrators, less mixed hardware, less outages, etc and an overall lower cost to provide the service - do the customers care?

I would argue they do - most companies want to partner with the best companies in their category. The derivative reasons are a safer vendor choice, less risk of having to change later, often better pricing and usually a stronger product development capability.

Support

There is often a temptation for SaaS companies to bend to large customers who want separate notification and processes for upgrading code. If you play out this scenario for the SaaS provider you end up in a situation quickly where a few customers don't want the upgrade, or delay it by six months, or advocate for a different feature mix...and the small decision to allow different upgrade paths blossoms into a large subset of code versions across customers a few years out. I believe the saying is that if you let the nose of the camel in the tent and it wont be long before he is sitting beside you.

If you play out the scenario, every support call starts with the old software model question "what version are you running" and "was it Bob who knew how to deal with this"? This slows down support, diverts development resources to support and slows down the innovation at the company. Not good.


I don't expect all customers will start asking all these questions about how a SaaS company manages their back end infrastructure during the sales process...but I do expect them to make choices based on market leadership, support time, pricing, product development, etc.