Cloud has won. Having lingered on the horizon for the last two decades, cloud companies across the value chain — IaaS, PaaS and SaaS (infrastructure, platform and software as services) — are now dominating software markets.
Valuations have increased on both the public and private markets over the last 12 months, and dramatically. Billion-dollar companies exist across the cloud value chain. And cloud’s still only been adopted by about 25 percent of businesses — meaning there’s plenty of headroom for further growth.
What’s driven cloud adoption so far?
Two decades ago, on-premise data centres were the norm. Since then, there’s been a slow transition to the cloud. The inflection point came in the late 2000s — at Dawn, we started to invest in around 2008, and cloud computing was still seen as very novel then. While cloud still hasn’t reached critical mass (only around a quarter of businesses have made the move from on-premise solutions so far), it’s widely accepted as standard today.
A few key factors have driven that change. What businesses love about cloud is the amount of flexibility it offers. That’s critical for growing businesses, or those that experience fluctuating bandwidth demands. It makes it easier for them to bring on additional servers or tailor to specific applications, without reconfiguring operationally-heavy hardware. Cloud is better on cost and performance, too. It allows businesses to achieve true agility, driving efficiency and slashing costs. Instead of investing in permanent racks, they can subscribe monthly or annually to the services they need.
The increasing need for collaboration is accelerating cloud adoption even more. Large enterprises are starting to move to the cloud, and not of the sort that we would have expected. Capital One is a notable example. Three years ago it would have been unthinkable that a large bank or FS business would have operated in the cloud. But thanks in part to Covid, digital transformation plans have sped up radically. Remote collaboration is more important than ever, and cloud enables it.
What’s the state of the market for cloud today?
The reality is that even at 25 percent adoption, cloud has already won. Valuations in both public and private markets have rocketed, with high multiples becoming commonplace. And they’re justified. As the likes of Snowflake have shown us, there really is a multi-billion dollar opportunity for cloud innovators. The category-defining companies of tomorrow have the potential to not only win but own markets, and become extremely large.
That said, there are still a lot of late adopters who need to be convinced. While cloud computing offers a lot of security, there’s still nervousness around potential loss of data — the cost of which can be catastrophic. In particular, some large financial institutions are still reticent about moving away from on-premise solutions and want to maintain ownership of the racks where their sensitive data sits. Some are dipping their toe into the water with hybrid infrastructure and managed cloud solutions instead.
Which key trends are shaping the future of cloud?
Security is a big one. With businesses building more diverse and distributed tech stacks, and relying increasingly on APIs to power them, there’s a need for more robust security and oversight. As the blockchain moves from consumer excitement to validated institutional tool, it could start to compete with cloud solutions. Storing files in 10 different locations on the blockchain may be even more secure than storing it one cloud location, after all. But for now, the pool of cloud security tools is growing at pace.
Visibility is another area of interest. While cloud is flexible and cost-efficient, it’s also quite opaque. Those used to on-premise infrastructure can find its slow, deliberate integration and installation a comfort; it’s clear, manageable and logical. By contrast, what can often happen with cloud solutions is that businesses get notified of issues or additional costs, but don’t know where they’ve come from. As such, there’s a growing appetite for tools that can shed light on how different pieces of the stack interact and perform.
We’re seeing more democratisation of tools across different user personas within businesses. There’s a dearth of technical talent and STEM education can’t catch up quickly enough, so businesses are keen to empower their non-tech knowledge workers.
And intra-enterprise collaboration is another key area of growth. True collaboration that goes beyond working on shared docs, to cross-enterprise data analysis and actioning, is the next challenge for cloud computing to solve.
How is Dawn investing in this space?
At Dawn, we’ve focused investment in companies optimising the utilisation of cloud for business. There’s a wealth of promising companies out there — these are some of the recent investments we’ve made in the space:
Granulate is an ‘infrastructure 3.0’ company that enables businesses to slash cloud costs while increasing performance. It uses AI and ML to look at servers all the way down to the OS level, and understand how specific applications run, their requirements and dependencies, and how to optimise them. It’s the cloud equivalent of using a smart meter to see and adjust energy consumption in real-time, rather than being landed with a bill at the end of the month.
Bryter is a no-code platform that allows non-technical knowledge workers to offer automation-as-a-service, supercharging what they offer customers. They can build their own applications, develop virtual assistants, chatbots, self-servicing applications and other intelligent automation tools, with no programming skills or experience necessary.
Harbr enables internal and external collaboration on data. The worlds of data and infrastructure are merging, and every enterprise now understands the value of collecting, analysing, and acting on data. This means they need more tooling to do just that, driving ROI not just from simpler, cloud-first workflows but from the underlying data itself. Harbr helps enterprises realise the full value of their data by generating new insights, improving decision-making and monetising data — both inside and outside the business.
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* Last month, Evgenia joined Akash Bajwa and Susie Meier on Clubhouse.They had an insightful discussion on the evolution of cloud to date, some of which has fed into this article. Akash is founder of The European Tech Club and an investor at Augmentum, and Susie is an investor at Notion.
