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Cloud Stocks: The PaaS Landscape

Posted on Monday, Aug 10th 2020

At the end of 2019, I had published Cloud Stocks: Top 20 for 2020 with a summary of which SaaS companies are succeeding on the basis of a strong PaaS strategy, AI, and robust developer ecosystems. I now want to focus on how the PaaS landscape is evolving: who are the established giants, the top mature players, the promising players, and the potentials.

Cloud Stocks are doing exceptionally well through the pandemic. If you’re wondering which ones are likely to go further, please pay attention to their PaaS strategies. PaaS creates exit barriers, deep moats, excellent pipelines for new products, acquisition prospects, and overall multipliers that strong SaaS companies should all consider. Over time, I expect hundreds of PaaS eco-systems to develop, each spawning a thousand smaller companies.

Established PaaS Giants

This list includes cloud companies with a thriving PaaS ecosystem that has spawned several businesses.

1. Salesforce (NYSE: CRM)

Salesforce leads the PaaS pack. Its AppExchange Marketplace has empowered smaller companies like Vlocity to build industry-specific solutions and build sustainable businesses that translate to billion-dollar valuations and exits. Vlocity was recently acquired by Salesforce for $1.33 billion. Veeva is another great example that leveraged Salesforce’s Force.com platform to build a $30+ billion-dollar company in a very capital efficient way. Salesforce’s stock is currently trading at $201 with a market cap of $181 billion.

2. Amazon (NASDAQ: AMZN)

AWS is known primarily for IaaS, but it has a mix of both IaaS and PaaS offerings. Its PaaS offerings support AI and machine learning, IoT, storage, migration services, security and governance, content delivery, database and analytics. Popular Paas offerings include Elastic Beanstalk, Fargate, and Lambada. Lambda powers Atlassian’s Forge, a new app development platform. Amazon’s stock is currently trading at $3,167 with a market cap of $1.59 trillion.

3. Microsoft (NASDAQ: MSFT)

The Azure PaaS allows developers to build and deploy apps through software development kits that are available for several languages and server-side technologies including .NET, Node.js, PHP, Python, Java, GO, and Ruby. Its apps cover an entire range of services such as analytics, AI, collaboration, sales and marketing and many more. The use cases of these apps scale across industries such as agriculture, education, health and retail to name a few. However, like Amazon, Microsoft is not a pure play PaaS vendor and with its PaaS statistics not distinct, it’s difficult to gauge the impact of PaaS on its business and stock. Its stock is currently trading at $212.5 with a market cap of $1.61 trillion.

Top Mature PaaS Players

Here, we will focus on cloud companies that have a mature PaaS strategy with thriving app marketplaces and developer ecosystems. Note that the focus is on platforms that support thousands of app entrepreneurs through their PaaS marketplaces.

1. Atlassian (NASDAQ: TEAM)

Atlassian’s Marketplace has reached massive scale, recently surpassing $1 billion in lifetime sales. There are currently over 4,000 apps available on the Marketplace and developers have built 28,000 apps for their in-house teams. Across Jira Software and Confluence, over 60% of customer instances use at least one Marketplace app. Atlassian seems to be inspired by the Salesforce playbook on several levels – it has recently acquired numerous companies from its PaaS ecosystem. Its stock is currently trading at $171 with a market cap of $41.95 billion.

2. Shopify (NYSE: SHOP)

Shopify has a thriving developer community and app marketplace. It offers more than 2,500 apps, most of which cannot be bought anywhere else. About 87% of its merchants rely on apps created by this community for their e-commerce transactions. For the period 2014-2018, Shopify has helped these developers earn $280 million in revenues. Nearly 25% of its developers have an annual income of over $272,000 through its platform. Its stock is currently trading at $1,053 with a market cap of $126.5 billion.

3. Twilio (NYSE: TWLO)

Back in 2014 when I interviewed CEO Jeff Lawson, Twilio’s PaaS ecosystem included over 400,000 developers ranging from Fortune 500 companies like Home Depot and Walmart to startups. Twilio now has 179,000 clients and over 5 million developers building apps on its platforms.

In my recent PaaS post, I refer to Twilio as a case study to avoid lumpy revenues. In 2017, Uber, which accounted for 12% of Twilio’s revenue, suddenly decided to stop using Twilio and move its cloud communications development in-house. Obviously, there’s a lesson to learn from Twilio’s Uber fiasco: it’s better to have 100 clients, each producing a solid chunk of revenue, than one client producing 12%. Since then, Twilio has recovered from the fiasco and its stock is currently trading at $249 with a market cap of $35.6 billion.

4. Splunk (NASDAQ: SPLK)

Splunk runs a focused developer program that allows third party developers to build apps for its platform. It currently offers over 2000 apps on its marketplace called Splunkbase. Developers can build apps and integrations that offer data-based insights. Developers can leverage the Splunk Enterprise customer base that has over 15,000 customers. They can also access Splunk Cloud Services via REST APIs and SDKs from their custom-built cloud-native app. Its stock is currently trading at $200.4 with a market cap of $31.8 billion.

Promising Players: Cloud Companies likely to Build PaaS Ecosystems

Let’s now look at promising PaaS players that are likely to build PaaS ecosystems.

1. Intuit (NASDAQ: INTU)

Intuit’s Quickbooks Online platform allows developers to build apps that could work with basic Intuit products. Its Apps store has hundreds of apps specific to the tax and accounting industry.

Its stock is trading at $302.91 with a market cap of $79 billion. With millions of customers, it should be able to amplify its $79 billion market cap greatly by emphasizing a PaaS strategy.

2. Hubspot (NYSE: HUBS)

HubSpot’s platform allows developers to build apps and sell them through its App Marketplace. It has delivered about a million app installs. Over 90% of its paying subscribers use apps to grow their business and each of these users installs an average of five apps from its platform. Its stock is currently trading at $258.46 with a market cap of $11.3 billion.

3. MongoDB (NASDAQ: MDB)

MongoDB also has a thriving developer ecosystem. Over the past few years, MongoDB has grown rapidly by allowing developers to download the open source version of the database and recorded over 40 million downloads. MongoDB also supports the startup environment by operating a MongoDB for Startups program that has registered over 700 startups. Finally, the integration of its $39 million acquisition of Realm with its serverless platform Stitch has fuelled its PaaS strategy. There are more than 100,000 active developers using Realm. Read more about MongoDB’s journey in my Interview with its former CEO Max Schireson.  Its stock is currently trading at $199.6 with a market cap of $11.6 billion.

4. ServiceNow (NYSE: NOW)

ServiceNow is trying to follow a comprehensive PaaS strategy. It allows developers to build apps on the Now platform that can also be accessed by other organizations through their app store. ServiceNow does not divulge detailed statistics and usage metrics about these apps, but it focuses on large system integrators, not smaller startups. I would have liked to see them provide similar commitment to the startup ecosystem. For this reason, it is not in the mature players list. Its stock is currently trading at $431.2 with a market cap of $82.7 billion.

5. Workday (NASDAQ: WDAY)

Workday has recently launched its PaaS strategy. Its Extend platform allows customers and partners to build and customize to build applications and extensions on top of the delivered capabilities in Workday to meet their unique business needs. Workday Extend is focused on extensibility for its customers and not on opening up an ISV community to build commercial applications. Over 50 customers had built over 90 different solutions on the Extend platform in the last quarter. Its stock is trading at $183.43 with a market capitalization of $43 billion.

The Potentials: Cloud Companies with Integrations/APIs

This list features cloud companies that are showing the beginnings of a PaaS strategy. With time, I expect them to have a more active PaaS strategy rather than relying on integrations.

1. Alteryx (NYSE: AYX)

Alteryx allows third party developers to build apps, workflows, and macros in the Alteryx Public Gallery that are built using Alteryx Designer. Alteryx Designer is a platform that offers an intuitive workflow for data blending and advanced analytics. Alteryx recently unveiled its enhanced analytic process automation (APA) platform, which unifies analytics, data science and business process automation in one, end-to-end platform. Its stock is currently trading at $121.38 with a market cap of $8 billion.

2. Zendesk (NYSE: ZEN)

Zendesk has recently launched its app marketplace called Marketplace for Sell. It will enable customers to build private apps with a new application development framework. They would have the ability to connect their apps to an internal system or build functionality customized to their needs. Zendesk’s platform has been open to ISVs for development of custom apps on the customer support side, but the new marketplace will now allow ISVs to build these apps on the Sell platform as well. Zendesk will also allow industry partners to add connections to their software so that users can access their other applications while remaining on Sell. It provides offerings from companies like HubSpot, MailChimp, and QuickBooks.

Zendesk’s stock is currently trading at $86.33 with a market capitalization of $9.96 billion. 

3. Veeva (NYSE: VEEV)

Veeva has built a very successful platform on top of Salesforce’s PaaS capabilities. Now, Veeva has built its own proprietary platform called Vault, which is built on AWS and powers 20 Veeva applications.

Veeva has a broad range of IT partners that support product development. Partners can use its REST-based API to create custom applications that are powered by Vault Platform and offer integrations and other tools such as data loaders of schema visualization. Veeva does not have an App Marketplace as such, but it showcases the integrations built by these partners.

It is a very unique example of how a company that is built on another company’s PaaS is trying to put together its own PaaS strategy and App Marketplace. Read my interview with its co-founder Peter Gassner for the beginnings of its journey. Its stock is currently trading at $201 with a market cap of $181 billion. Its stock is currently trading at $261.2 with a market cap of $39.2 billion.

4. SurveyMonkey (NASDAQ: SVMK)

SurveyMonkey’s PaaS strategy currently involves an API integration model. Its mobile SDK allows app developers to integrate SurveyMonkey surveys and responses into their iOS or Android apps. It has built several integrations with other platforms to provide pre-built apps that empower them to quickly integrate with other popular tools. It has more than a hundred apps and plug-ins with these partners. Its stock is currently trading at $22.97 with a market cap of $3.7 billion.

5. Five9 (NASDAQ: FIVN)

Five9 has been focusing on improving its platform capabilities. It launched an App Marketplace late last year where it showcases its partner integrations. It has strengthened its CRM and partner integrations and made the platform increasingly open through enhanced APIs and SDKs. Its stock is currently trading at $123.3 with a market cap of $8 billion.

Related readings:

PaaS: How PaaS Impacts the Stock Prices of SaaS Companies

PaaS: Why I Am So Excited

Cloud Stocks: SaaS Companies NEED PaaS Strategy

SaaS Companies: You Have An Unprecedented Opportunity

Cloud Stocks: Why Salesforce Buying Vlocity Proves the Growing Importance of PaaS

The Buy Side of Bootstrapping to Exit

Bootstrapping to Exit Case Studies

Billion Dollar Unicorns: Qualys Acquires 1Mby1M Company Adya

This segment is a part in the series : Cloud Stocks


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