The Next Evolution in Cloud Software

Should your business move to the cloud? At most companies in developed countries, that question has been answered with an emphatic affirmative. The cloud is now mainstream and it is transforming operations at organizations large and small. In fact, 95 percent of companies now use cloud technologies in some way.

But what about businesses in remote regions and emerging economies? They’re not connected to the cloud to the same extent. This is about to change, however, because cloud technology is extending its reach around the globe. The worldwide public cloud services market grew 18 percent in 2017 to $246.8 billion, up from $209.2 billion in 2016, according to Gartner. And that rapid pace of expansion is expected to continue.

When the cloud market was new, cloud providers focused on the U.S. market, as technology providers tend to do when they launch. The bulk of revenue for many of the largest cloud software providers still comes primarily from the U.S., even though they have operations globally.

Now, though, with the expansion of the internet to all but the far corners of the world, the global market for cloud solutions can be so much larger. Startups can get out of the gate with a global perspective and a global customer base. Cloud entrepreneurs can build global companies from the word go—and often they can do it faster than the incumbents. Consider the startup GoFormz. It has customer accounts in more than 150 countries. By contrast, the biggest cloud software company still has most of its accounts concentrated in just eight countries.

The good news for emerging cloud companies is that the total addressable market opportunity is so much bigger now. If you’re only selling to the U.S. market, your total available market opportunity might be just $1 billion. But if it’s the world market, it could easily be 5x that number. The scale changes exponentially.

A cloud for every job title

The cloud market is expanding not only geographically but institutionally. Cloud software is well suited to job titles it never reached before, like general counsel, plant manager and VP of field operations. And now, because the market it is global and exponentially larger, it makes economic sense to go after those job titles. It’s even possible to build a global cloud company based on job titles like those.

Before, relatively few job titles were addressed by the cloud. For instance, there was Salesforce for the VP of Sales, Workday for the VP of HR, and NetSuite for the VP of Finance. It made sense, because those titles were the low hanging fruit. But now there are so many other workers who can be addressed by and benefit from cloud software.

In fact, new cloud companies can be formed just by owning a specific job title and bringing a really compelling solution to that role. For example, GoFormz targets VPs of operations. This used to be a very paper-intensive role. GoFormz found a way to take those paper forms and render them on tablets and phones. So now a VP of field operations can replace paper while adding the capability to do reporting on the data. This means better workflow and analytics to improve business processes and empower the job of operations VP.

In every meeting, we ask the entrepreneur: what title are you building your business around? We’ve invested in one company that’s going after the general counsel role by redefining the way contracts are managed. This is a very exciting market.

Ultimately, we think there are still hundreds of titles that can be transformed by the cloud.

Another important consideration is that best of breed cloud applications for those new titles can also leverage their own API and the APIs of other cloud systems to integrate beautifully to the salesforce.com’s or Oracle Netsuite’s of the world. This means the target title gets a great app suite built for them and still integrates to other key apps in a scalable way. Salesforce.com pioneered the API and Appexhange/ISV integration strategy and I was the executive who started and led the Appexchange ISV ecosystem, so we real opportunity here.

Cloud for mission-critical

The next evolution of the cloud happening now is its move from non-mission-critical apps to mission-critical ones.

Sales-force automation started as a tool for sales reps to put their contacts online. But if the system goes down, the sales rep can still go out and sell. HR, too, is important but if the HR system goes down, the business can still operate, the factory can still make products. If your financial software has a glitch, you can still run your business.

But what about mission-critical apps? Our thesis is that today the cloud is so reliable that mission-critical applications can also be moved to the cloud.

Take product lifecycle management, which helps mechanical engineers, operations and manufacturing teams collaborate on new product designs. It’s the fourth-largest software market in the world and it’s truly mission critical. And it’s time for PLM to move to the cloud.

Let’s see how it can do that. Say the engineering team is working on a new smartphone. They’re defining the chipsets, the screen type, the power supply, etc. They’re also managing all the documentation and communicating with suppliers and vendors. This is a mission critical operation that is responsible for the crown jewels of the business: its next product.

In the past, product lifecycle management at this scale could not move to the cloud. It just wasn’t ready. Today it is. Cloud technology enables PLM to be more customer-centric and share product information like sales, marketing and services for the first time.

A lot of investors look at the cloud market and see saturation—maturity even. We don’t. We see opportunities for startups to reach out to new regions of the world and address new job titles in the U.S. and abroad. We see a lot more clouds to come.

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