Sramana Mitra: I got what you’re doing. The question I’m asking is for other entrepreneurs, who are starting out now, what opportunities or gaps would you point them toward?
Matthew J. Schitz: In cloud storage and backup, or in cloud computing in general?
SM: Start with cloud storage and backup, and then we can look at cloud computing.
MJS: Well, I think there are a lot of opportunities that have traditionally been around storing data more efficiently. Some of the technologies around deduplication, compression – so moving and storing data more efficiently – have been rich opportunities for entrepreneurs for the past two to three years. I think they will continue to be for several years. There are lots of opportunities in our space, again because electronically stored data is growing so fast that companies need to react. These kinds of problems are well served by small entrepreneurial innovators rather than giant companies trying to figure it out on that type of scale.
SM: What other areas of cloud computing do you track, and where do you see opportunities? In your previous two companies, you’ve dealt with electronic signatures as one of the segments. That industry has matured somewhat. What are your observations on that space? Do you still track it?
MJS: Yes, I do. I think there are a lot of opportunities for entrepreneurs in cloud computing. It’s going to be that way for a long time. If you look at large companies and their desire to move to cloud computing and offer cloud computing services … the cloud came out of the term “software as a service.” The most important word in “software as a service” is service. So, there’s been a huge shift. When I started in the software industry, it was about packaged software and delivering packaged software. Now, for the past 10 years, I’ve been doing cloud computing software as a service companies where the industry had to learn how to provide services rather than packaged goods. For a large software company, that’s a difficult transition. That’s why it’s a tremendous opportunity for entrepreneurs to innovate, develop cloud computing companies, and then at the appropriate time, if that meets their business plan, actually merge or be acquired by a larger company. [Larger companies] have a difficult time with a services model and staying close enough to the customer that they provide outstanding service.
SM: Let me ask you a question about that. Obviously, this year we’ve seen an acquisition war starting between Oracle and SAP. Oracle acquired RightNow and then Taleo. SAP acquired SuccessFactors. They’re both on the way to building up software as a service portfolios, and they have gone the acquisition route. They didn’t even try to do it on their own. I knew that was going to happen. What are your predictions? What do you see Oracle or SAP picking up next? That’s one question. The second question is, who else do you see as major acquirers? Of course, Salesforce has become a major acquirer of slightly smaller companies.
MJS: I think this trend will continue. In fact, it’ll get stronger. The Oracles of the world, the Microsofts, they will be very active in acquiring cloud computing leaders, either leadership from a technology perspective or from a market segment perspective. You mentioned the examples of SuccessFactors and Taleo. They were market leaders in the HR segment. You’re going to see that continue in every major segment as they build out. They need to acquire rather than build it themselves because they don’t yet have the DNA of a cloud computing company. That’s why they’re acquiring rather than trying to build it themselves. They’ve tried to build it themselves and not been very successful.
SM: Do you have any predictions? One of my predictions is that one company that is going to be acquired this year is Concur, which is a major cloud computing company in expense report management. Either Oracle or SAP is going to pick that one up, I think. Or perhaps even Salesforce.com.
MJS: I think Concur is a likely target. I don’t know where they are in their evaluation of that. I think they’re an attractive target, an outstanding company. I know the company pretty well, and the senior execs there. Yes, I think that would be a great prediction. Companies that have that proven market leadership in a subsegment that’s a natural extension of an Oracle, an SAP or a Microsoft are absolutely top acquisition targets.
SM: Whom do you see rolling out the lower end of the market, the market that is targeting the pro-sumers, SOHO, SMEs, the market you’re going after? Which major companies do you see being active acquirers in those segments?
MJS: You already mentioned Salesforce, but I think Google’s going to be a major player there with their own offerings and then complementing them with acquisitions. Those two come to mind. I think Apple’s going to be super active as well.
SM: I don’t see Apple acquiring business software.
MJS: I think that will change. If you want to put me down for a prediction, I think that will change.
SM: The one I think is very likely to acquire in that segment is Intuit.
MJS: Intuit, yes. And then you take a look at Intel’s announcement, basically going into cable and consumer content. I think they will be a major player on the acquisition stage as well. The cloud computing market has had legs for a considerable time. There will be many attractive exits over the next 10 years in cloud computing.
SM: I do, too. Very good, Matt. It’s been a pleasure talking to you. Thank you for taking the time.
MJS: I really appreciate your time. Thank you.