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PaaS: Six Cloud Stock Picks Based on PaaS Prospects

Posted on Tuesday, May 7th 2019
Image by Dimitris Vetsikas from Pixabay

Cloud products often tend to have low switching costs. The best way to create exit barriers is to have a Platform-as-a-Service (PaaS) strategy and invite entrepreneurial developers to come develop apps on it. As apps gain traction, some of the startups developing them can be acquired. Integration is easy because of the technology stack compatibility.

This is my analysis of how SaaS companies need to be scaled inorganically.

With this lens on, I have identified a set of cloud stocks that look promising for the next decade.

1. (NYSE: CRM). Their lead is so great in this space, that the chance of anyone else catching up is minuscule if not zero. Further analysis here.

2. ServiceNow (NYSE: NOW). Their PaaS strategy is more recent, but it is starting to gain traction. I foresee excellent execution on this front, and the performance will be reflected in the stock price. Currently, about 350 applications are in the marketplace. I also expect ServiceNow to acquire from this pool. Further analysis here.

3. Workday (NYSE: WDAY). Their PaaS strategy is relatively new.  Further analysis here.

4. Twilio (NYSE:TWLO). PaaS is core to their strategy. What they need, however, are System Integrator partners that take the PaaS into enterprises and find new use cases. Startups like Uber constitute a very large percentage of their revenue mix. I am watching for signals on what other startups have the potential for significant revenue impact. Further analysis here.

5. Atlassian (Nasdaq: TEAM). Excellent company. Excellent PaaS strategy that is starting to take off. They have also started acquiring from their PaaS developer eco-system. It has a thriving marketplace that offers more than 1,500 Jira apps and nearly 850 Confluence apps. Further analysis here.

6. Splunk (NASDAQ: SPLK). PaaS is core to their strategy. Cyber Security is becoming a core use case. I would want to know what other use cases are gaining traction besides security. Further analysis here.

A number of companies are currently following API strategies and haven’t come up with fullyfleshed out PaaS yet. These include Zendesk (NYSE: ZEN), Hubspot (NYSE:HUBS), and Smartsheet (Nasdaq: SMAR). Further analysis here:

Zendesk and Freshworks Follow Different Acquisition Strategies

HubSpot Acquired 9 Smaller Start-ups

What Apps Would Add Fuel to Smartsheet’s PaaS Strategy?

There are some other companies to look at that have interesting PaaS strategies: Amazon, Google, Microsoft. None of them, however, are pure plays, and their stocks have many other factors influencing them. I have, however, analyzed their PaaS strategies if you’re interested:

Which Amazon PaaS Products are Gaining Traction?

Google Should Emphasize PaaS and AI Strategy to Mitigate Advertising Slowdown

Microsoft Became a Trillion Dollar Company Thanks to Azure

Intuit and Xero have interesting PaaS strategies, but are not pure plays. You can review my analysis here:

Open Platform Strategy Stands Intuit in Good Stead

Xero Grows Through International Acquisitions

SAP and Oracle also have PaaS strategies that you can review here:

What Should SAP Acquire to Triple its Value by 2023?

A Look at Oracle’s 2018 M&A Activity

Adobe has a PaaS strategy: Adobe Delivers Via PaaS

Finally, Shopify has had a tremendous stock run up and has a very good PaaS strategy. Further analysis here. I do not recommend this stock because it has a significant looming threat from Amazon.

If you’re an equity analysis covering any of these stocks, happy to dialog here.

Related readings:

SaaS Companies NEED PaaS Strategy

Calling ALL PaaS Leaders

This segment is a part in the series : PaaS

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