VCs that Know Nothing

On Friday, December 9, 2011, Ms. Maha Ibrahim of Canaan Partners was interviewed by Ms. Emily Chang on Bloomberg West. Bloomberg West is a television show that is broadcast Monday through Friday of each week. The topic of conversation was Zynga’s IPO. Zynga is in the business of manufacturing online games. Online games are far removed from the type of complex product that I have focused on in this blog. Further, online games are not the typical product of interest to enterprise business customers. Nevertheless, this pair went on to posit absurd claims about the enterprise market for software, seemingly out of nowhere.

Ms. Chang opened the gate when she asked Ms. Ibrahmi to speak to “what does [SAP’s acquisition of Success Factors] say about traditional software’s business model?” When Ms Ibrahim jokingly mentioned that there was “no reason to have client server software anymore” and, further, that there was no longer any need for enterprise business to bring in “large Ernst & Young or large integration firms for years to help you to implement your software for your employee base” as the result of the supposed revolutionary nature of “cloud” computing, I needed to put type to page on this one. The fact is that Ms. Ibrahim is, in fact, dead wrong.

As I’ve written elsewhere in this blog, “cloud computing” is nothing new. Just reflect back on computer timesharing which was a business with some heft to it back in the mid 70s and 80s. Yes, mid size companies opted for the economies of scale represented by buying time on systems that were otherwise out of reach. Further, large businesses leveraged IBM mainframe computing systems via 3270 terminal emulation to deliver the features of mainframe computing to desktop PCs distributed across the enterprise. But in neither case did these early instances of cloud computing displace on premises computing systems. In fact, with the advent of the Graphical User Interface (GUI) and powerful PCs, timesharing went the way of the dinosaur.

“Own your own” has always been the preference and always will be the preference for those businesses with the financial capability to do things the right way. Cloud computing for enterprise business is simply a side track to be taken while ISVs take necessary steps to improve their ability to deliver bonafide value to customers. The real “meat” to this “motion” for under the radar innovators is still to be found in the enterprise sale of precisely the multi year engagement that Ms. Ibrahim claims is now gone for ever.

Not so, says Mr. Marin Petry, CIO of Hilti Corporation. Mr. Petri participated in a panel discussion of the definition of Cloud computing hosted by the Tuck School at Dartmouth in October of this year: Risk and Rewards in Cloud Computing. Mr. Petry clearly states ” . . . I do not understand cloud computing as I basically turn the key on my data center and said ‘that was it’ and everything else that I’m doing from that point onward is coming out of the cloud. We do actually at Hilti do quite a bit with cloud computing but that is peripheral additional applications that I do not have to run in my data center. I still have my data centers. I still run SAP in my data centers. I still run Microsoft Office in my data centers. That will not change in the next few months. That might change over the next 10 to 15 years, very likely, in different steps, but that’s not reality today. I do not believe that the larger industries today can close the data centers because everything is coming out of the cloud.”

Another participant in this panel discussion, Mr. Olivier Gouin, Group CIO of Nestlé speaks of a private cloud that is specific to a larger enterprise business as opposed to a public cloud that is “more appropriate” for smaller businesses. He cautions against a “wrong perception” that cloud computing is antithetical to the typical method of implementing software (meaning via data centers) for larger businesses. Rather, the sole utility cloud computing represents for the enterprise is specifically within an entirely private “cloud” that, Mr. Gouin makes clear, ought to be separated from external facing websites. Finally, Mr. Gouin voices his opinion that the public Internet is still not ready for “prime time” as the result of the insecurity of data communication. Perhaps in a “few years” that may improve, but not the case at present.

I know that Ms Ibrahim is entirely off the mark. I would be happy to elaborate. Call me at 631-673-2929 to learn more.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2011 All Rights Reserved

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.