28 July 2016
I've watched from a unique vantage point as the enterprise computing world has evolved from the mainframe to client-server, then web applications, and now cloud applications. I began my life in software as a programmer and then moved into consulting to help businesses navigate the fast-paced changes in technology. After that I moved to Wall Street to become a equity analyst covering public software companies and then to private equity where I helped transform businesses in the enterprise software space. With all of the changes I've lived through (and often helped lead), there is no question in my mind that the shift to the cloud is the largest transformation to enterprise computing since the introduction of the mainframe computer back in the early 1950s.

As significant as the mainframe was, it was overtaken by the superior look and feel of the personal computer. I was a programmer in the 1980s at Fortis, building insurance applications and then at Norwest Bank (now Wells Fargo) building Trust Accounting systems. I learned to appreciate the power of centralized computing, but even then it was clear that the "green screen" terminal interface offered a poor user experience. By the 1990s, I had joined Deloitte Consulting and was helping organizations start to replace their mainframe applications with new client-server applications from Oracle, SAP, PeopleSoft, and many others. As client-server technology matured, we saw enterprise computing increasingly shift to personal computers and local area networks.    

The biggest drawback to client-server applications was the cost of purchasing, configuring, and managing all the infrastructure elements that went into an enterprise application. Because of the battle for server, storage, and communications infrastructure market share between Sun, IBM, HP, Cisco, 3Com, EMC, DEC, WinTel, and others, application software developers were generally required to ship their products with support for each server/storage/communication infrastructure provider's unique configuration of hardware and operating systems.  Because each vendor had so many different versions of their hardware for just as many different versions of software, organizations were quickly overwhelmed by the task of testing their application software on each of these new versions.  

In the midst of the client-server era, Internet technologies were introduced. Their early usage was largely for consumer applications with simple user interface requirements. Then in the 2000s, enterprise computing over the Internet started to grow with the introduction of enterprise SaaS applications like Salesforce.com, which leveraged more robust web clients. The introduction of the smartphone and other mobile devices in the late 2000s propelled the growth of web browser-based applications as they led to mobile browser-based applications that were then turned into mobile apps.  

These new applications benefited from better user interfaces and offered new capabilities for downloading data into spreadsheets for offline analysis. However, perhaps the best thing about the packaged application wave was that organizations realized that they could configure packaged applications to meet their business requirements rather than making large investments in programmers to build custom applications. It also introduced the concept of best practices, where companies in specific vertical industries benefited from the continued introduction of new functionality to automate industry-specific processes in manufacturing, retail, banking, transportation/logistics, oil and gas, and many others.  
The shift to the cloud is the largest transformation to enterprise computing since the introduction of the mainframe computer.
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Netscape's IPO in 1995 was a big catalyst for the Internet revolution. An entirely new crop of software companies were built that were writing their software for the browser. About that time I joined the investment bank, Piper Jaffray, as a software analyst to help build out their new small capitalization software franchise. We started co-managing IPOs for a number of these new companies. At that time, they were still connecting the user interface back to on premise hardware servers from companies such as Sun, IBM, and HP, and running databases from Oracle, Sybase, Informix, and Microsoft.  Browser technology was immature, and most organizations used it primarily as an output rather than an input mechanism. However, consumer interest in on-line ecommerce led to the development of new technology that added input controls to the web browser. Those started to be used in enterprise applications, as well.  

I left Piper Jaffray to join Goldman Sachs in the thick of thick of the B2B ecommerce revolution -- in 1999 and on Sand Hill Road. New companies, such as FreeMarkets, Ariba, and Commerce One, were moving their entire infrastructure and applications to the cloud and hosting multi-tenant applications that replaced EDI networks in a diverse set of industries. The collapse of Internet 1.0 in the early 2000s did slow the adoption of cloud computing. Investment in the space returned, though, as companies weathered the storm. Salesforce.com continued to perform well, Workday went public and continued to grow, and a number of other cloud computing companies exhibited strength.

I've now spent the last decade in the enterprise software space on the private equity side, as CFO, CEO, or Operating partner in a number of different companies, including Actian (formerly Ingres), Corel, Saba, and TIBCO.  I made my transition to private equity at the same time the first true cloud platform was introduced, Amazon's EC2 (Elastic Cloud). This was the cornerstone of the monumental transition to the cloud. Many other infrastructure providers joined them, including Google, Microsoft, and Rackspace, to name just a few. As an operator, I saw a significant opportunity to reduce costs and increase availability. So, our teams started shifting our infrastructure to cloud providers and our applications to SaaS providers.  

Another big cloud advantage we've benefited from is simplified infrastructure stacks. No longer do developers have to certify their applications to run on a dozen different operating systems that run on several different servers and that come with many different permutations of storage architectures. This efficiency translates into significant savings.
I believe we are still in the early innings of cloud computing.
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Not only have we saved money, we have saved time. We have been able to dramatically accelerate timeframes for new product launches. The infrastructure stacks that operate in the cloud can be set up in minutes, enabling our developers and customers to test new software without going through expensive implementations reminiscent of the client-server era.  

I believe we are still in the early innings of cloud computing. Infrastructure cycles tend to run for 20-30 years. There will still be exciting new entrants into the market, and there are also numerous opportunities for existing software vendors to transform themselves into cloud companies. We have watched a number of client-server application companies successfully make this transition over the past decade, including Concur, Taleo, and Callidus. Microsoft and Adobe have both done it on the desktop side with Office 365 and Creative Cloud. Now it's time for the infrastructure software providers to make the transition.  

As you can tell, I've spent a lot of time in enterprise computing. As a software executive, a Wall Street analyst, a technology consultant, and a software developer, I've experienced its evolution first-hand. Over the coming months, I'm looking forward to sharing with you some of the things I've observed and learned. Here are just a few of the topics I'll dive into:

  1. Market Opportunity Assessment
  2. Business Models for Cloud-Oriented Companies
  3. Cloud Company Business and Financial Metrics
  4. Funding a Cloud Company
  5. Growing a Cloud Company
  6. Transitioning from On-Prem to Cloud
  7. Selling or Taking a Cloud Company Public
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