The document discusses opportunities in the growing cloud computing market. It finds the market size is around $109 billion and growing. Successful software-as-a-service companies have narrow product footprints, attractive pricing, and leverage scalable infrastructure like Amazon Web Services. Virtualization allows customization while reducing costs and enabling infrastructure scaling. The document evaluates areas like CRM, ERP, and analytics software as existing investment opportunities being moved to cloud-based, software-as-a-service models.
3. Conclusions
• Keys to Successful SAAS Offering
• Narrow footprint, attractive price point, sold through inside salesforce, then grow into
large enterprise sales
• Infrastructure (“Internal”) Software
• Storage requirements continue to rise dramatically
• Server/Virtualization creates highly scalable infrastructure
• High BTE due to necessary scale for IAAS
• Relationship starts in smaller department functions
• Eventually centralized purchaser, fewer number of customers, larger customer
footprint
• User-facing (“External”) Applications
• Large scale
• Most apps today are new version of legacy application
• Need ease of use, configurability, low maintenance 3
7. Investment Thesis
Product Footprint/Price Point/Web-marketing tactics
Startups Benefit from Scalable Infrastructure: Salesforce & Amazon
Corporate IT Outsourcing More
Virtualization
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8. Investment Thesis
Product Footprint/Price Point/Web-marketing tactics
Startups Benefit from Scalable Infrastructure: Salesforce & Amazon
Corporate IT Outsourcing More
Virtualization
8
9. Consumer Foreshadows Enterprise
What drives your internet behavior?
What drives your smartphone decision?
• Applications
• Carrier
• Price
• Ease of Use
• Functionality
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Source: Goldman Sachs Research Estimates, Synovate 2007
10. Winning SAAS Business Characteristics
• Target Large Enterprises
• Smaller version HP Openview or IBM Tivoli
• Converting customers to spokespersons
• Product Design Process
• Controlled process to build to produce but uncontrolled to
sell/market
• Build pool of ready users
• Keep testing quickly and frequently
• Manage global functionality
• Consistent Product Releases
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Source: Goldman Sachs Research Estimates, Synovate 2007
11. Investment Thesis
Product Footprint/Price Point/Web-marketing tactics
Startups Benefit from Scalable Infrastructure: Salesforce & Amazon
Corporate IT Outsourcing More
Virtualization
11
13. Developer Ecosystems of Choice
IT Web
Social Networking Infrastructure
Suite
Application/Device
Force.com Partnerships: Pay Only for
No upfront
Google & expense or long-
Agnostic
Facebook
Consumption EC2 term contract
Service Cloud
SimpleDB
AppExchange
S3
Chatter
SQS
VisualForce
Reliable & Scalability
Content Create business Secure Without Capex
Management app on-demand
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Source: BofA Merrill Lynch Research
14. Investment Thesis
Product Footprint/Price Point/Web-marketing tactics
Startups Benefit from Scalable Infrastructure: Salesforce & Amazon
Corporate IT Outsourcing More
Virtualization
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15. Areas of Existing SAAS Investment
• B2B/Inter-company applications: E2Open, Quadrem, Agentrics, SPS Commerce, Management Dynamics
• System Integration: Astadia, Bluewolf, Appirio
• Website Analytics: Omniture (Adobe)
• CRM: Salesforce, Eloqua, Right90
Right90: Increased revenue 240% in 2008 (1)
Eloqua: Increased revenue 75% in 2008 (1)
• ERP: Netsuite, Workday
Client/Server: Infor, Consona, Epicor, and Activant
• Demand Analytics: DemandTec
• Talent Management: Ultimate Software, SilkRoad, Authoria, Kenexa
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(1) Source: Deutsche Bank Research
16. Investment Thesis
Product Footprint/Price Point/Web-marketing tactics
Startups Benefit from Scalable Infrastructure: Salesforce & Amazon
Corporate IT Outsourcing More
Virtualization
16
17. Client Server with Virtualization vs. Multi-Tenancy
Shifts Customization at Metadata layer to reduce application management
and infrastructure costs while enabling architecture scaling
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Source: Deutsche Bank Research
18. Next Steps to Find Investment Opportunities
Evaluate major enterprise applications
Large Installed Base
High maintenance expenses
Find/Build SAAS team that knows legacy space
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