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Cloud services are under-hyped, Updata VC says

February 28th, 2013

By Allan Maurer

Carter Griffin

Carter Griffin

Technology media has been raining coverage on the cloud services revolution, but Carter Griffin, general partner with Updata Partners, says, “The cloud is actually under-hyped.”

He means that there is still a sky full of growth to come for cloud services as they’re more widely adopted in the Enterprise space.

“Software as a service (SaaS) penetration of Enterprise customers is only 13 percent,” he says. He notes that the only areas with double-digit penetration are customer relationship management (pioneering SaaS firm salesforce.com) and collaboration.

Founded pioneering SaaS firm

“All other app tool sets are only single-digit penetration,” Griffin says.

Griffin joined Updata in 2005 and is a General Partner. Updata has $500 million in assets under management and invests from $5 million to $20 million per company in software, internet and business service firms.

Prior to Updata, Carter co-founded Brivo Systems in 1999 and served as Chairman and CEO until selling the company to a strategic acquirer. Brivo Systems pioneered the software-as-a-service model in the physical security market by introducing the first-ever on-demand system for facility access control.

Participating at the Southeast Venture Conference

SEVC 2013He’s one of more than two-dozen venture capitalists participating in the upcoming Southeast Venture Conference in Charlotte, NC, March 13-14.

Regarding cloud services being under-hyped, he adds, “Look at the consumer trends, the small and medium-sized business trends. Consumers are using Dropbox, iTunes, apps on smartphones, all touching the cloud to make them useful.”

SMBs, he points out, “Don’t have the legacy of an Oracle. With a clean slate to choose from, they pick a hosted cloud-based phone system, gmail, Webx for meetings, Dropbox for collaboration.”

Employees driving the trend in the Enterprise

cloud computingThose trends will ultimately influence Enterprises, “So you’re going to continue to see cloud adoption rise at a very fast rate,” Griffin says. “It’s penetrating the Enterprise because individual employees pull those mobile devices and work habits into the office. It’s truly a massive seachange.”

What makes the cloud model so interesting for startups and smaller firms?

“They’re much less expensive for a company (than buying and installing software and infrastructure) and allow a much shorter startup time. So you get time effectiveness at a lower cost.”

Mistake to “roll your own?”

He notes, however, “Over time you may wind up paying more with your cloud provider. Typically, you’ll use those tools on a recurring basis.”

Griffin says he thinks it may be a mistake even for larger companies with the luxury of big balance sheets to invest instead in the infrastructure to “roll their own.”

“It’s often wrong because the services required to maintain on premises apps can be five and ten times the cost of managed services.”

Griffin thinks we’ll see “across the board” adoption of cloud services by Enterprise firms. “The deepest penetration will be in firms with distributed employees – benefited by the mobile trend.”

He adds that he expects to see companies with heavy computing needs turn to the cloud as well. “In the past you needed your own data center with a lot of horsepower to crunch big data in house. It was the only way you could do it. Now look at genomics, oil and gas exploration – the thinking is to push all the computing to the cloud.”

Massive opportunity for startups

The laggards, Griffin says, “are the financial institutions and heavily regulated industries.”

Cloud-based tools also offer “A massive opportunity for startups,” he says. “All the old traditional on-premise tools have SaaS counterparts now. The obvious ones are taken, but there are many, many opportunities within that for growth.”

Another important factor for startups is that the cloud is “An equalizer for geography. All these tools are available to everyone in the developed world. That’s fantastic news for entrepreneurs who don’t live in Silicon Valley. If you have access to enough engineering talent, it’s just as easy to build a great company using the cloud if you’re in Topeka, Kansas.”

 

 

 

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One Response to “Cloud services are under-hyped, Updata VC says”

  1. Great points here Carter. Love your closing thought about cloud services democratizing access to affordable solutions across borders. It’s been interesting to me to see such international adoption of cloud services. Many cloud product companies acquire 20%+ of their customers internationally without targeting these locations specifically. There is great demand globally and selling online alone is good enough to get started with these customers.

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