FRAMINGHAM, 16 FEBRUARY 2011 - If you want to know what IT tools and technologies you'll be using in a few years, it pays to keep an eye on enterprise technology start-ups.
Seasoned VCs and entrepreneurs agree that IT start-ups looking for funding should have an offering that makes the CIO's life easier -- and it had better not involve lots of capital investments on software installations and supporting infrastructure. Instead, backers are looking for software-as-a-service, cloud-based and mobile innovations that improve the IT cost proposition.
"There are too many inefficiencies that exist in large enterprise software, such as platforms that have to be upgraded, and that translates into a lot of money for IT," says Will Indest, vice president of venture development at Tech Columbus in Ohio. Indest says that many companies just don't have the budget for large software and hardware buildouts -- especially when there are options like SaaS and cloud storage.
That's a sentiment echoed by Maria Cirino, co-founder of venture capital firm .406 Ventures in Boston, who calls the move to cloud computing the biggest shift since client/server computing took hold in the '90s. "We see small to midsize companies embracing cloud right away, and large enterprises will soon," she says, adding that companies stand to gain too much economic leverage to ignore the trend.
Cirino says she's been culling her stack of prospects to find companies that focus on securing the cloud, because she feels that's the biggest obstacle for larger enterprises. For instance, she's working with a pre-beta start-up called CloudCop that will provide monitoring and analytics for companies that want to move their data to the public cloud. She says that CloudCop aims to provide an audit trail for businesses facing compliance regulations.
Start-ups and more established vendors are offering cloud-based tools that can help IT departments with everything from chargeback to backing up data that users enter on social media sites. Industry experts say the timing for these services is good as IT shops warm to the idea of having their infrastructure and data off-site.
Deborah Magid, director of software strategy for IBM Venture Capital Group in San Mateo, Calif., is closely watching the cloud-based storage arena. She predicts that many large enterprises will adopt a hybrid approach to storing data, where some is on-site and some is in the cloud. However, she notes that vendors still need to work out the speed of search and retrieval, as well as international regulatory issues -- areas ripe for innovation.
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