2013 North Bridge Future of Cloud Computing Study|Results of industry-wide survey conducted in partnership with Gigaom + 57 collaborators.

1. North Bridge Future of Cloud Computing Survey in Partnership with GigaOM Research
3RD ANNUAL SURVEY 2013
@north_bridge @futureofcloud #futurecloud

2. North Bridge & GigaOM Thank Our 2013 Collaborators
#FutureCloud
2

3. #FutureCloud
3
Demographics
Section 1

4. #FutureCloud
4
“The fact that cloud vendor and user results
were consistent highlights the convergence
of provider and user needs and objectives.”
Jay Lyman, Senior Analyst

5. #FutureCloud
5
Broadest industry survey
INCREASE
YoY
49%57
COLLABORATORS

6. #FutureCloud
6
855
RESPONDENTS
Largest survey yet

7. #FutureCloud
7
“This survey provides new insights into how cloud
computing is transforming IT. In particular it shows
that businesses are using cloud computing to
outpace their competition and that, over the next
five years, hybrid cloud will become the norm. This
echoes what we hear from customers and it’s why
comprehensive, hybrid cloud solutions are core to
our strategy.”
Steven Martin, General Manager of Windows Azure
Marketing & Operations

8. Who took the survey?
57%
43%
VENDORS
BUSINESS USER
OR IT DECISION
MAKERS
#FutureCloud
8

9. One-third of respondents from C-suite
#FutureCloud
9
C-LEVEL BUSINESS +
MID-MGT
IT OTHER
36%
31%
21%
12%

10. #FutureCloud
10
Cloud Strategy & Growth
Section 2

11. #FutureCloud
11
“Demand for cloud services continues to
grow as we’ve seen traffic to our own cloud
double in the past year to more than 18
billion requests per month. We anticipate this
growth for vendors will continue to scale
upward as more enterprises look to the cloud
and open source as a powerful combination
for digital innovation and agility.“
Dries Buytaert, CTO & Founder
18 Billion

12. Software leads over Infrastructure and Platform
%
#FutureCloud
12
Software-as-a-service is now in use in nearly two-thirds of organizations
Growth of 15% from 2012
What types of cloud computing
technologies is your
organization using today?

13. Cloud growth is significantly outpacing traditional software
MEDIA & ENTERTAINMENT
BIG DATA
(+ ANALYTICS)
SOCIAL, COLLABORATION
eCOMMERCE
MOBILE
#FutureCloud
13
The cloud is expanding software’s reach.

14. How the cloud stacks up TODAY
#FutureCloud
14
Software
Infrastructure
Storage
CDN
Platform
Database
25%
31%
33%
46%
66%
70%
Shows the relative “stage of
adoption” across the
broader categories of “as-
a-service” offerings

15. Cloud coverage will increase
#FutureCloud
15
Software
Infrastructure
Storage
CDN
Platform
Database
25%
31%
33%
46%
66%
70%
0-12 mos
7%
11%
13%
11%
12%
13%

16. #FutureCloud
16
“This year’s survey confirms what we hear from our
MSP users every day - delivering new cloud
services is overly complex and costly – which
ultimately impact SLA’s. To help accelerate
adoption of new cloud based applications to
enhance both business agility and resiliency, it's
clear providers need to adopt solutions that
prevent vendor lock-in, while maximizing
interoperability, reliability and simplicity.”
Ash Ashutosh, Founder & CEO

17. But Infrastructure takes the biggest leap ahead
%
Infrastructure as a Service
Growth of 29% over 2012
#FutureCloud
17

18. How the cloud will stack up next year
#FutureCloud
18
Software
Infrastructure
Storage
CDN
Platform
Database
25%
31%
33%
46%
66%
70%
12+ mos
6%
8%
10%
11%
14%
13%

19. Platform growing but still early in adoption
%
Platform as a service growing rapidly
Growth of 22% from 2012
#FutureCloud
19

20. #FutureCloud
20
“This year’s Future of Cloud Computing survey
results confirm what we’re seeing in customer
demand for more choice and flexibility.
Companies want to balance automation and
control as their businesses and applications grow.
They want to be agile, scale rapidly, and focus on
building great apps, so they're relying increasingly
on PaaS providers to help them plan, build, deploy
and manage their applications in the cloud.”
Rob Walters, CTO

21. Which model will predominate?
#FutureCloud
21
PUBLIC private HYBRID

22. Public cloud use to decline relatively
39%
32%
TODAY
5 YEARS
#FutureCloud
22

23. Hybrid clouds rising
#FutureCloud
23
27%
TODAY 5 YEARS
43%

24. Reasons to be private
#FutureCloud
24
security, compliance

25. Reasons to be private
#FutureCloud
25
security, compliance
fear
greed
hunger

26. Reasons to be private
#FutureCloud
26
security, compliance
control (fear)
cost (greed)
reliability (hunger)

27. #FutureCloud
27
can HYBRID be the
best of both

28. Public leads today
#FutureCloud
28
HYBRID
27%
Almost neck-and-neck between
Public and private clouds
PUBLIC
39%
PRIVATE
34%

29. Hybrid leads in 5 years
#FutureCloud
29
HYBRID
43% PRIVATE
25%
Overtaking both private
and public clouds
PUBLIC
32%

30. #FutureCloud
30
“The ideal end-state for businesses is a flexible hybrid cloud
strategy where IT is able to aggregate and deliver self-
service access to a variety of cloud services, both internal
and 3rd party, and run these workloads on any cloud that
best fits the service. Citrix sees the future of cloud providing
businesses the flexibility to deploy across internal and
external clouds, while seamlessly aggregating internal and
3rd party SaaS services, ultimately giving line-of-businesses
the agility and rapid response they need.”
Sameer Dholakia, Group VP and GM, Cloud Platforms
Group

31. #FutureCloud
31
still matters

32. Economies of scale mean infrastructure is not for startups
#FutureCloud
32
10.96% 7.88%
6.19% 2.22%
14.3%
2% <2%OTHER
Large infrastructure players lead the pack of up and coming
companies, with 43% of responses

33. Long tail of up and coming vendors
#FutureCloud
33
300 companies had less than 2% of votes
…indicating a wide open playing field for
upstarts.
DEMANDWARE

34. Section 3
Drivers & Inhibitors
#FutureCloud
34

35. Section 3
Drivers
#FutureCloud
35

36. CONSISTENT drivers of adoption
#FutureCloud
36
AGILITY
COSTSCALABILITY
54.5%
- 4%
54.3%
+ 1%
48.1%
- 2%

37. Organizations looking for AGILITY adopt SaaS
#FutureCloud
37
1
2
3
4
55Xmore likely to use SaaS

38. Organizations looking for INNOVATION adopt SaaS
#FutureCloud
38
1
2
3
44Xmore likely to use SaaS

39. Reasons for IAAS adoption
#FutureCloud
39
Companies who see Capex to Opex and
agility as critical are 2.5X more likely to use
IaaS technologies
Companies who view Internal Mandates as
important for the cloud are 3X more likely to
use IaaS solutions
2.5
X
3X

40. 2.5X
Scalability is the strongest driver of PaaS adoption
#FutureCloud
40
1
2
3
2.5Xmore likely to use PaaS
However, the relationships between drivers and PaaS adoption weaker than other forms of cloud computing,
indicating a more diverse landscape and lower adoption.
Support for Open Source
projects is also a very strong
driver for a small niche.

41. Investment in cloud ahead of internal mandates and customer demand
#FutureCloud
41
Investments Internal Corp
Mandates
Customer
Demand

42. #FutureCloud
42
Section 3
Inhibitors

43. Security concerns easing, cost growing
#FutureCloud
43
55%
46%
-18%
20%
28%
+50%

44. #FutureCloud
44
“Security concerns continue to be the number one
barrier to adoption of cloud services. This isn't
surprising: companies are understandably reluctant
to move sensitive data and business functions to
the cloud when they don't understand the cloud
provider's capabilities. To further accelerate
adoption, cloud providers need to provide
increased clarity, more transparency, and better
assurance about their security controls."
Andrew Jaquith, CTO & SVP Cloud Strategy

45. Shift in emphasis from expense to TCO
5% 19%
71%
17% 10%
68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
INCREASED SPENDING LESS SPENDING SAME TO BETTER OVERALL TCO
2012 2013
#FutureCloud
45

46. “Technology buyers expect cloud adoption
will make managing IT increasingly complex,
yet the plurality also expect overall better
cost of ownership. That's either wishful
thinking or an intriguing opportunity for
suppliers and systems integrators.”
David Card, Vice President Research
#FutureCloud
46

47. Top inhibitors to cloud adoption
#FutureCloud
47
65% 63%
RELIABILITY/BANDWITH/COM
PLEXITY
REGULATORY/COMPLIANCE/P
RIVACY

48. Top inhibitors to cloud adoption
#FutureCloud
48
65% 63%
RELIABILITY/BANDWITH/COM
PLEXITY
REGULATORY/COMPLIANCE/P
RIVACY
… these are also reasons for private &hybrid cloud
choice as shown earlier ...

49. Vendor lock-in remains a significant issue
#FutureCloud
49

50. Section 4
The Cloud Market & Ecosystem
#FutureCloud
50

51. “We see the availability of consumer-grade
cloud services dramatically increasing the
complexity of IT infrastructure and that's
reflected in this survey. This so-called
‘Shadow IT’ is a major corporate risk and
complexity headache for IT managers.”
Matt Ravden, Chief Strategy Officer
#FutureCloud
51

52. Business leads IT
#FutureCloud
52
Organizations average
52% current use of
applications that advance
business priorities
Organizations average
36% current use of
applications that
advance IT priorities
Meanwhile…

53. And numbers of SaaS in
#FutureCloud
53
business cloud applications
are in use by 50% or more
of all organizations
IT cloud applications are in
use by 50% or more of all
organizations4 0

54. The cloud is used extensively for business activities
#FutureCloud
54
0
50
100
150
200
250
300
350
400
450
FILE SHARING BOX BUSINESS
PRODUCTIVITY
CRM/MARKETING SOCIAL BUSINESS &
COLLABORATION
CONTENT
MANAGEMENT
HR ERP/FINANCE ECOMMERCE
Business Systems
50%

55. And more will gain usage in the next 12 months
#FutureCloud
55
0
50
100
150
200
250
300
350
400
450
FILE SHARING BOX BUSINESS
PRODUCTIVITY
CRM/MARKETING SOCIAL BUSINESS &
COLLABORATION
CONTENT
MANAGEMENT
HR ERP/FINANCE ECOMMERCE
Business Systems
13% plan to
add
50%
Currently use
Plan to use

56. No SaaS IT applications used in half of all companies
#FutureCloud
56
0
50
100
150
200
250
DEVELOPMENT &
TESTING
BACKUP, DR, BC PROJECT
MANAGEMENT
SECURITY HELPDESK SYSTEMS
MANAGEMENT
BIG DATA &
ANALYTICS
MOBILE
CURRENTLY USE
IT Management
50%

57. 0
50
100
150
200
250
300
350
DEVELOPMENT &
TESTING
BACKUP, DR, BC PROJECT
MANAGEMENT
SECURITY HELPDESK SYSTEMS
MANAGEMENT
BIG DATA &
ANALYTICS
MOBILE
But, fastest growth in SaaS application use to come in IT areas
#FutureCloud
57
21% plan to
add
IT Management
15% plan to
add
14% plan to
add
14% plan to
add 13% plan to
add
13% plan to
add
6 out of top 7 fastest areas of growth are all in IT Areas: Big Data, followed closely by
Mobile, then Systems Management, Backup/DR/BC, Helpdesk and Security
50%
Currently use
Plan to use

58. Lots of growth in SaaS application use to come
0
50
100
150
200
250
300
350
400
450
#FutureCloud
58
21% plan to
add
Business Systems IT Management
15% plan to
add
14% plan to
add
14% plan to
add
13% plan to
add
13% plan to
add
13% plan to
add
Currently use
Plan to use
50%

59. Tech industry expected to see most benefit from cloud software
#FutureCloud
59
MEDIA & ENTERTAINMENT
EDUCATION
PUBLIC SECTOR FINANCIAL
TECHNOLOGY

60. Industry buzz in cloud verticals
#FutureCloud
60
3Suffer legacy drag,
but still a leader in Cloud
1Initially just
email and DR
5CRM is most
popular app
6A place to test
“beachheads” or
industry-specific cloud
platforms – less
regulatory/compliance
constrained
1Accounts for 20% of
public cloud storage
2Driven by mobile, storage,
budget cuts and hybrid classes
Communication & Media
Banking
Manufacturing
Insurance
Healthcare
Education
1 IDC; 2 Edudemic; 3 Cloud Times; 4 CA; 5 Computer Science Corp; 6 Forbes

61. Cloud services market size & growth
#FutureCloud
61
2013
$117 B
2016
PUBLIC CLOUD
ALONE
$110 B
2020
$220 B

62. #FutureCloud
62
IT Readiness / Competitiveness
Section 5

63. #FutureCloud
63
“Most organizations are going to adopt
cloud computing in multiple forms as part of
a hybrid IT infrastructure. Maintaining
application and data portability within such
environments requires open approaches,
such as open source and open standards.”
Gordon Haff, Cloud Evangelist

64. Ready or not?
#FutureCloud
64
0
50
100
150
200
250
IT DEPARTMENT COST
ALLOCATION
OPERATIONS SYSTEMS
SUPPORT
INTERNAL PROCESSES POLICIES AROUND
BUSINESS NEEDS VS IT
REQUIREMENTS AND
PRIORITIES
PROCESSES FOR
SUPPORTING EXTERNAL
SERVICES THAT IT DOES
NOT PROVIDE
More than half of
respondents are not
tracking or reporting
service costs…

65. With greater adoption, cloud is now seen adding complexity
#FutureCloud
65
The cloud was originally expected to reduce complexity, but with
experience many are seeing the opposite. This is typical of an early market.
COMPLEXITY NO COMPLEXITY /
NO IMPACT

66. #FutureCloud
66
“The increased focus on cloud complexity
and training speak to lessons from enterprise
virtualization, as well as a lack of standards in
cloud computing implementation, where key
technologies are being used and vendors
are working to fill the gaps.”
Jay Lyman, Senior Analyst

67. Application growth, rise in complexity and need for interoperability create opportunity
#FutureCloud
67
HYBRID / MULTI-CLOUD
PROVIDERS
CLOUD INTEGRATORS CLOUD BROKERS
CLOUD
MANAGEMENT
PRIVATE CLOUD
PROVIDERS
PUBLIC CLOUD
PROVIDERS
As new integrators and multi-cloud providers challenge the existing landscape with new
capabilities, cloud providers will need to increase interoperability in their services.

68. The cloud is leading to reduced IT headcount
17%
24%
20%
23%
38%
34%
16%
6%
9%
13%
2012
2013
#FutureCloud
68
Reduced
Headcount
+7%
Plan to
Reduce
Headcount
+3%
No Impact
-4%
Expect to
Increase
Headcount
-10%
Increased
Headcount
+4%
-6%+10%

69. …But an increase in training
#FutureCloud
69
EXPECT TO
INCREASE TRAINING
39%
INTEND TO HIRE
OUTSIDE RESOURCES
17%
SEE NO CHANGE IN
MY TRAINING NEEDS
25%
N/A
19%
….and may be looking to outside organizations to manage the gap

70. #FutureCloud
70
Cloud Investment & Business Models
Section 6

71. #FutureCloud
71
“We've seen that revenue growth among our 2013
‘Cloud 10’ comprised of the leading cloud
companies was very strong for 2012 registering
35.6% average growth – well above the muted
global IT spending growth of 2.1%. Going forward,
we expect that revenue momentum will continue
with average growth estimated at 23% across the
Cloud basket, outpacing broader IT spending
growth of 4.1% globally."
Kash Rangan, Research Analyst

72. Cloud investment - VC
#FutureCloud
72
SOURCE: DOW JONES-VENTURE
2011
2.4B
2010
1.6B
2012
1.8B
Through
May 2013
$281M

73. Cloud mergers and acquisitions
#FutureCloud
73
Although venture numbers may be down,
innovation and acquisition thereof is on the rise.

74. #FutureCloud
74
“It was interesting to see that almost half (45.7%) of survey
takers said cloud computing was adding complexity to
the management of IT, which is a problem the industry
must address if it expects enterprises to fully embrace this
model. On the upside, more than half of respondents
(55.1%) said hybrid/multi-cloud providers will offer the
biggest growth opportunities in the cloud ecosystem over
the next 2-3 years - potentially a key to easing the
complexity problem.”
Jo Maitland, Research Director, Cloud Computing

75. Subscription fees dominate for cloud vendors
#FutureCloud
75
77%
23%
13% 16%
10%
4%
66%
28%
21%
16% 15% 12%
5%
2012 2013
The cloud business is still a subscription business, but around a quarter of
vendors are finding additional revenue through services and consulting.

76. 451 Research Market Monitor Report
Cloud Segments and Overall Market Growth Through 2013
#FutureCloud
76
$2,772
$9,194
$1,400
$3,775
$5,531
$17,95
8
$1,359
$4,988
2012 2016 2012 2016 2012 2016 2012 2016
35%
CAGR
12-16
38%
CAGR
12-16
28%
CAGR
12-16
CAGR
12-16
PaaSIaaS SaaS Cloud
$17,958
34%

77. 2013 cloud IPOs are performing well
recent IPOs in SaaS
3
$1.4B market capitalization at offer
#FutureCloud
77

78. North Bridge investments in cloud companies
$2Bn+
Doubled
1 IPO
1 Filed to go public
4 Acquisitions
4 New investments
Belmont
Technology
Incorporated
#FutureCloud
78

79. Cloud formed is differentiated
#FutureCloud
79
Cloud Formed
Cloud Washed
NOT investing INVESTING

80. The A B C ’s of Cloud Forming
#FutureCloud
80

81. Amazing Because Cloud
#FutureCloud
81

82. #FutureCloud
82
“While businesses are still seeing some benefit in moving
standard applications to the cloud—CRM, HRM, etc.—the
greatest potential for innovation and competitive
advantage is no longer in ‘same but cloud’ but instead in
‘amazing because cloud’. That is, the most exciting
innovations focus on benefits that can only be achieved in
the cloud. There were source control, document
management, and message buses behind the firewall
before GitHub, Box, and Zapier, but they all use the cloud
to provide a fundamentally different and more valuable
experience. They are all ‘amazing because cloud’”
Rob Gonzalez, Co-Founder

83. #FutureCloud
83
Predictions are tricky, especially when they involve the future
Section 7

84. Predictions
• Boundary-less computing
• New cloud formations
• BYOC - Bring Your Own Cloud (services)
• Out-Servicing
#FutureCloud
84

85. Clouds will blow with the winds of change
#FutureCloud
85
Internal Hybrid Public
SaaS
PaaS
IaaS
Boundaries blurring…

86. Clouds will blow with the winds of change
#FutureCloud
86
Internal Hybrid Public
SaaS
PaaS
IaaS
APaaS
Boundary-less computing
IPaaS
“PaaS squeeze ?”

87. New formations
#FutureCloud
87
SENSOR CLOUD

88. Expanding formations – including Sensor Cloud
MEDIA & ENTERTAINMENT
BIG DATA
(+ ANALYTICS)
SOCIAL, COLLABORATION
eCOMMERCE
(+ PAYMENTS)
MOBILE
(+ LOCATION)
#FutureCloud
88
SENSOR NET

89. APIs for business processes as a service
MEDIA & ENTERTAINMENT
BIG DATA
(+ ANALYTICS)
SOCIAL, COLLABORATION
eCOMMERCE
(+ PAYMENTS)
MOBILE
(+ LOCATION)
#FutureCloud
89
SENSOR NET
APIS
APIS
APISAPIS
APISAPIS

90. Additionally, year-over-year, cloud APIs on the rise
#FutureCloud
90
CLOUD APIs
INCREASING YOY
11.3%

91. API growth & value
#FutureCloud
91
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
2005 2013
Programmable Web API Growth 2005-2013
Valued at $250M
Sold to Intel for $180M
In addition to continuing the rise of the enterprise, the latest APIs show
mobile as a driving force.

92. Everything-as-a-service
#FutureCloud
92
Merging

93. BYOC
#FutureCloud
93
Bring your own cloud
• Bring services used at home to work
• Sharing services to link customers and partners
• Combining data between services
• Combining shared services as new business
processes

94. Boundary-less computing
#FutureCloud
94
PARTNERS
IPAD
CUSTOMERS
EMPLOYEES
WORK
HOME
NIKE FUEL
NEST
THERMOSTAT
TELEVISION INTERNET
OF THINGS

95. Cloudburst of Big Data
#FutureCloud
95
IPAD
PARTNERS
CUSTOMERS
EMPLOYEES
WORK
HOME
NIKE FUEL
NEST
THERMOSTAT
TELEVISION INTERNET
OF THINGS
BIG DATA

96. #FutureCloud
96

97. To 4 things customers want vendors to know
that could hurt vendors…
Lack of Control
Lack of Standards
Lack of Integration
Lack of ROI on TCO
… and pain relief customers want
Monitoring, Management & Transparency
Interoperability, Portability
Integration, Open APIs, Open Source
Business cases & proof
#FutureCloud
97

98. Agility
Top themes in cloud
#FutureCloud
98
Scalability
Drivers
Inhibitors
Now Future
Compliance/Pri
vacySecurity
Reliability
Business
Leads IT
TCOCost
Interoperability
CUSTOMERS
EMPLOYEE
S
WORK
HOME PARTNERS
Boundary-less
Computing
Complexity
New
Formations
BYOC
SENSOR NET

99. North Bridge & GigaOM Thank Our 2013 Collaborators
#FutureCloud
99