Tech Shift Drives Investment — Hybrid Cloud
In my last post, I talked about the five tech shifts we are tracking in our tech investments. In this post I will dive into the first shift in more detail.
The major replacement cycle in B2B software infrastructure happens around tech platform shifts. In recent years, one such shift is the shift to the public cloud. In the US, the public cloud market is dominated by Amazon AWS, Microsoft Azure, and Alphabet’s Google Cloud. These three are also the top global players with Alibaba being the biggest and fastest growing non-US player.
As public cloud spend continues to rise significantly (this IDC report forecasts $160B global spend this year with 22% annual growth rate), a good investment in this sector will enjoy a big boost from the sector growth.
Infrastructure vs Application
While cloud-based infrastructure improvement can yield many startup ideas, I’m generally cautious about it as they tend to run into the major cloud platform companies’ direct path.
On the other hand, of the total $160B annually spent in public cloud, less than a quarter is on cloud platform providers. The remaining 75% are spent on a wide variety of SaaS tools and services. Separate estimates of the SaaS market in general put it beyond $200B annually. Whichever estimate we take here, providing new and improved SaaS tools is the the bigger slice of the market.
While many of the cloud-based software re-investment has already been baked in, we believe in a hybrid-cloud environment, enterprise security, data management and Smart Enterprise Apps are a few areas still have significant opportunities.
Enterprise Security
As enterprise run stack and product development move to hybrid cloud, the physical boundary is broken. Enterprise security thus needs an entirely new set of technologies such as distribution and AI based solutions. In our own portfolio we have invested in Aella Data — which has orchestrated a cyber security system that has responded to the complexities exacerbated by hybrid clouds. We are sure that there could be many companies in this space catering to diverse needs of all businesses.
Data Management
Enterprise data volume continues to increase exponentially while processing tools become more distributed. We see a bottleneck in data management in the hybrid cloud movement. In our own portfolio we have invested in an early stage startup JuiceFS which is trying to optimize the file system for enterprise applications.
Smart Enterprise Applications
Some say after “software eats the world”, it’s “cloud eats software”. I think it won’t be the cost savings of having everything in the cloud. It would come true because the connectedness of cloud-based software would introduce a higher level of intelligence and therefore can give birth to a new wave of productivity gains. One of our investments in this space is Jane.AI (an intelligent assistant aimed at enterprises). But we are just scratching the surface of this space as many more smart enterprise apps could be built in the next few years. Armed with more data and the ability to talk between different apps, the level of intelligence and automation is unlimited.
