Cloud Infrastructure Startups are Red hot with Investors! Why?

From a  recently posted blog  “Cloud Startup Values Are Getting Insane”  by Gigaom, There is a flood of investments going in to Cloud start ups focused on providing niche products and services  in the area of Cloud computing Infrastructure. For instance recent funding in companies like RightScale Inc ($25m), Aster data ($30m) etc . The blog cites about the evolving investments from the industry in this field and early cloud doubters such as Oracle’s Larry Ellison rethinking the opportunities being offered by the cloud.

Specifically , the blog indicates about the so called insane valuations attributed to these startups. For instance,it says StorSimple, which is yet to bring a dollor in revenues is valueD at $ 50 million.

I believe,Cloud infrastructure and services providers are at a very interesting point in the emerging business of Cloud computing, especially those who have been early movers in this regard and have demonstrated their capabilities. But more than these fundamental positioning elements, I believe that significant investments and steep valuations of these companies are driven by a key factor which is the “expected demand for cloud based infrastructure”.

Yes. The “demand” is coming and a great demand is going to be seen in the areas of

  • Cloud computing management platforms and services
  • Cloud based storage ,data ,analytic and value added Infrastructure & Services

In June 2010 ,Analysys Mason in its executive summary of a report cites that “The global market for enterprise cloud-based services will grow from USD12.1 billion in 2010 to USD35.6 billion in 2015 .  Similarly, Informationweek’s article published during the same time cites that “Large enterprises flocking to cloud services will drive upwards of 15% growth in cloud services this year as said by Gartner with projected growth approaching $150 billion in 2014”

Basically all these assimilated information indicates or suggests that a number of enterprises as well as SMBs are looking at leveraging the prime benefits surrounding the Cloud computing model such as (a) Pay for use model (b) Elasticity (c) Multi-Tenancy and (d) External services and their adoption rate may grow significantly.

Especially, if I think about where such demand driven volumes are going to be originating from , I can imagine that enterprises will require a lot of cloud life cycle service management capabilities such as various deployment layers,service provisioning , management and multi-cloud deployment options for hundreds of hetrogeneous enterprise apps, they may want to move and run on the cloud. Parallel to this, in terms of volumes a huge amount of data storage,management and value added layers such as analytics and DR will see a lot of demand.

As of today, there are only a few promising startups such as the ones reported in Gigaom blog who offer the right solution with demonstrable capabilities and growth potential. This situation can potentially  create a mismatch of the ‘demand’ outstripping the supplies, if the demand for cloud computing raises rapidly and sharply globally.

As such large volumes spurred by the demand for cloud services  grows and becomes a ubiquity , such products and services will get commodotised.  In this evolution,It is going to be somewhat very similar to how Computer Hardware ,Platform,Middleware and Database products got commodotised in today’s world of  on-premise computing environments.

From this anology , I think the RightScales,Aster datas and Clouderas that we know today, seems to have a significant potential to grow and be the HPs ,Oracles and Sun  in their own respect in the Cloud computing business.

So, No wonder the investors pouring in to and premium valuations that these start ups carry today may be justifiable!!  My speculation is not very distant in the future, we might likely be seeing some very successful IPOs from this stable if the US and Global economic conditions are stable and positive .


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Cloudshoring is a popular blog on Cloud computing and Big data
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