Great discussion & dinner on Tuesday evening with some of the entrepreneurs leading the UK’s cloud computing charge on Tuesday night at Merrill Lynch in London.
Cloud computing is a simple concept – enterprises tap into services provided by others instead of installing and maintaining them in their own organisations.
Benefits for the enterprise, (and also to SMEs) include:
- Reducing the cost and complexity of customer’s IT infrastructure
- Allowing customers to focus on their core activities, not their infrastructure
- Ability to scale rapidly as required – if Stephen Fry tweets about your site, you can increase your capacity quickly and easily
The cloud is made up of three principle parts: Infrastructure, Platform and Applications. There is a great Goolge funded overview of the Cloud produced by Marketspace in the US here. We spent some time considering the opportunities for UK entrepreneurs in each of these three areas but it is clear that it is in the area of Applications that the most defined opportunities lie for UK entrepreneurs. Here’s why.
Infrastructure and Platform Applications are VERY expensive opportunities to pursue and have a potentially huge prize for the winners – Gartner suggests Cloud computing will be a $14.8 Bn business by 2012, (Oct 2008 ). Given the incumbents that are currently chasing the space – Amazon, Google, Microsoft, IBM, Salesforce amongst others, it is going to be very hard to come up with the capital to pursue the opportunity and win. Some commentators are suggesting Amazon will get more revenue from Cloud hosting than from retail sales by the end of 2010 and has already won the war although I suspect that there is a long way to go yet. What European VC is going to back a start up against such players?
Even entrepreneurs who have major plays into this market tend to go the the US – Xen Source, a Cambridge computer Lab spin-out got first round funding from Valley firms Kleiner Perkins and Sevin Rosen before being sold to Citrix. Whilst the VCs no doubt would like to have backed the business, they felt their customers were in the US.
The good news is that there is a huge amount of Applications being developed for delivery as a service – SaaS – in the UK. Lower barriers to entry and potentially high pay-offs for getting it right mean that not only is there a ready supply of ideas, investor are showing themselves more willing to back entrepreneurs in this part of the cloud.