We are still in the early stages of a fundamental shift to cloud computing. The initial “as-a-service” disruption occurred at the application layer, but open-source software, virtualization and hardware commoditization have eroded the value in proprietary infrastructure and are driving the service model deeper down the stack.
Every architectural shift disrupts the existing ecosystem. As investors and operators, we have witnessed the shifts from mainframe computing to personal computers, and then, the shift from client-server to Web architectures. Each transition has created opportunities for new companies as the old guard failed to adapt. We have a long history of investing at the crux of these transitions, including successful investments in Zone Labs (PC security), OuterBay Technologies (information lifecycle management) and Tripwire (enterprise security).
Early on, ScaleVP focused on companies that capitalized on cloud computing and the SaaS business model. We invested in pioneers FrontBridge Technologies (email security), Omniture (Web analytics) and ScanSafe (Web security) – all of which used the cloud to deliver core IT services.
Our current portfolio includes more than a dozen cloud companies, including Box.net (online document collaboration) and Axcient (disaster recovery and data protection).
ScaleVP also invests in companies innovating in the fundamental building blocks of the cloud. These include Scale Computing (clustered storage) and NComputing (virtualized desktops).
The next phase in the progression of cloud computing promises to disrupt traditional IT even further as the focus on the cloud changes from delivering specific enterprise applications to generalized computing services. ScaleVP believes that the following trends will shape the cloud as it evolves:
The move to ‘horizontal computing’ is delivering tremendous benefits to entrepreneurs. Rather than buying expensive UNIX servers that run proprietary software and then scaling vertically, startups can now start by renting a fraction of a cheap, commoditized server running open-source software and scale horizontally with the success of the business. Open-source software drove software costs down 90 percent, and open cloud platforms will drive the entry operating costs down 90 percent. These two trends have combined to spur innovation and enable a new breed of nimble startups.
Over time, we believe that most data will reside in the cloud. This trend will take a decade to fully unfold, but it is driven by the falling cost of storage media, the need to access data from anywhere and the integration of data with Web applications.
The combination of cloud infrastructure and virtualization has enabled the delivery of cloud development platforms – allowing developers to instantly provision computing resources and automatically deploy applications into the cloud. Initially limited to scripting languages such as Ruby, Php and Python, cloud service platforms are now expanding to Java and C++.
An excess of compute power has led to widespread server virtualization and the consolidation of multiple applications onto a single physical server. Currently, less than one third of servers are running in a virtualized environment, but this is already driving a need for new server management tools, better server monitoring and new storage solutions.
Silicon-based storage allows performance to catch up to the recent increases in both processing power and bandwidth. Today, demand comes from Web-scale datacenters, but Moore’s law will ensure that this becomes a broadly horizontal market.
As the volume of machine- and user-generated data grows, the standardization of the big data analytic stack will enable companies to detect patterns in their data and extract information. Now that the public clouds have eliminated the capital expenditure required to build a meaningful compute cluster, we believe that true distributed analysis of large data sets will become commonplace.
ScaleVP seeks to partner with entrepreneurs who will both enable the transition driven by these trends and leverage the new business models it enables. If your company is innovating in these areas, please get in touch with us.