Today we had the chance to get inside the head of one of the top entrepreneurs in cloud computing - a guy who also just happens to be an investor at one of the Valley's top firms. Satish Dharmaraj, former founder and CEO of Zimbra, spoke with us about the trends he is looking at in his role at Redpoint Ventures, a Silicon Valley venture firm. Redpoint recently closed a $400 million fund that is focusing on mobile, cloud computing and clean technology.
We wanted to ask Satish where the sweet spot is in cloud computing and share it with you - just in case you're starting a killer cloud venture today.
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'Computing Utility'
To start off, we asked Satish what the cloud is today versus where it was several years ago.
When Amazon put EC2 and S3 came out, for the first time you could rent compute and storage power at a moments notice. Elastic on-demand provisioning is what it originally meant when Amazon invented the concept of the cloud.Now, cloud computing also includes SaaS. It also includes apps that sit on top of the cloud. Additionally, with the invention of the private cloud, large enterprises are able to look at their datacenter with a new focus. The evolution is underway on how to leverage the concept of "computing utility" in the enterprise and run the datacenter as an on-demand cloud for hosting internal applications.
Redpoint's Investment Thesis for the Cloud
First, a bit of background on where Redpoint sits in the investment spectrum. Redpoint's fund is focused on early-stage companies, with 75% allocated to Series A investments and 25% in Series B. Additionally, this fund sometimes looks at seed investments between f $250,000 and $1 million, where Series A runs from $2 million to $5 million.
There are two areas Redpoint is looking at for cloud computing and virtualization.
- Taking applications that used to run behind firewall and moving them to the cloud. This as a big trend for SMB and emerging for enterprise-class applications. SMBs are enjoying this trend now because they don't have large IT departments already in place. In some cases, Redpoint also thinks that large enterprises will adopt these. It gives them more freedom of choice.
- The second thing Redpoint is looking at is where large enterprises have data centers that are becoming a private cloud, and running vendor software on your own infrastructure that has been packaged for virtualization footprint. The new data center is an on-demand set of services that supports elastic computing. In the future, there will be similar advantages the public cloud offers, but for internal departments. They will be able to order computing services with a Web form and expect their delivery in hours, rather than weeks or months. With this will come applications for billing, provisioning and configuration management. Redpoint ahs invested in one company already in this space, VMOps, which is considered a IaaS (Infrastructure as a Service) company.
Additionally, there is a big trend in service providers with Web hosting operations (like 1&1 and Savvis). They are finding that they can cut costs by 1/10th by moving dedicated server business to virtual server business. Most of dedicated servers are running at 10% of the time and it makes sense for them - and for their customers - to reduce the data center footprint and cost infrastructure.
Is There a Way to Summarize This Generation?
We took advantage of Satish's background as an early Java developer, unified messaging architect, and cloud computing leader to ask him if there was a way to summarize what is happening in this technology movement.
If Java's promise was "write once run anywhere", what is the promise of the cloud?
According to Satish, previously the method was write once and target any processor. Now companies can package the whole thing as a virtual machine and don't even need to care about where it runs - the virtualization layer removes that problem. A new way to think about it might be: "write once and run everywhere".
Will there be a Dominant Company in the Cloud?
Following up our recent post , we asked Satish, "Will there be a dominant company in the cloud?"
In essence the answer is, "It's possible". Satish believes one company could be the nexus for cloud computing, but he's not sure which one, yet. Here is a summation of his thoughts on some of today's top leaders in cloud computing:
- SalesForce is an interesting company that is growing as a cloud company. They might have a cross-channel relationship challenge in the concept of the AppExchange. It's too early to tell if they have enough channel leverage to enable other companies to build large businesses on their platform.
- VMware is really an OS company and is extending its reach and presence to take advantage of its leadership position. They could grow a lot in coming years.
- Facebook is in an interesting role already. They've already seen a big win in the market with Zynga. A big, big win.
- Amazon is really leading the pack. It could be a different company today than in the next decade. They biggest on-demand software as a service player and have the vision and leadership to grow.
What do you think about Redpoint Venture's focus? Are there any companies that come to mind that you might suggest, if you were to meet with Satish and his team? Let us know by posting in the comments section below.
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