Investing on a Cloud? Latest Industry Release Could Send Profits Skyward

When the Rolling Stones sang the lyrics that ordered people off of their cloud, the band was way ahead of their time – they just didn’t know it. Now, the world of cloud computing and virtualization is offering significant investment opportunities. The key is to identify those opportunities that offer true promise in the market.

Cloud computing offers an interesting debate for angel investors as it represents considerable growth patterns in times of a weak economy. The challenge is that while the growth has been healthy, returns have been seen more in terms of money savings and increases in value to companies that deploy open source solutions.

Most investors have yet to recoup the $3.2 billion already invested in the industry. And, while cloud computing and virtualization have found a comfortable place in the market, the lack of visibility and control the infrastructure delivers have kept the technology at bay throughout nearly 80% of the enterprise. A new launch may be changing the game and creating its own market niche in the process. [1]

New Opportunity

HyTrust Inc. has now launched with a mandate to enable the virtualization of enterprise critical production applications through ensuring operational readiness of the virtual infrastructure. For those not versed in technology speak, the company hopes to bring the virtual infrastructure to a whole new level, allowing even critical applications to run on a cloud. [2]

So, why is this launch a good thing for both companies and potential investors? In light of a tighter economy and even as we move into a recovery, IT executives are struggling with large budget cuts without a reduction in expectations. As a result, they are searching for ways to maximize the funding they do have, and virtualization provides a low cost solution.

The Market Significance

Considering that virtualization has been a market focus for nearly a decade, the HyTrust launch could easily get lost in the shuffle of new companies offering cloud solutions. But those who follow this market will recognize a significant differentiation.

Cloud computing does offer flexibility and scalability without large capital investments, but it also delivers an enhanced risk as information is shared and stored outside the firewalls of the enterprise. This makes some IT executives nervous and as a result, much of the virtualization deployed within the enterprise has been relegated to those areas where this risk had a lesser impact on the company.

The HyTrust Appliance is designed to address this issue, providing the visibility and control that IT directors want, along with the benefits that virtualization was designed to deliver. Until now, virtual infrastructures could not promise security and operational readiness that would match that of the physical environment or what is expected in regulatory compliance.

Growing Demand

Technology has always been an interesting area for investors as it provides excitement and constant change. The challenge continues to be found in identifying those opportunities that are sustainable and can actually deliver on the promise of a return.

Consider the “Top 10 Strategic Technology Areas for 2009″ issued by Gartner analysts Carl Claunch and Dave Cearley. In this report, the authors highlight virtualization and cloud computing as the #1 and #2 areas of focus. These technologies are expected to provide important strategic advantages over the next three years.

Industry research firm, IDC supports these assumptions, predicting that the virtualization software market will reach $3.5 billion by 2011. The services market is expected to be $11.7 billion. With such promise, it is those companies that provide the greatest security and control in addition to flexibility that will lead the market until standards are in place. [2]

The Market Promise

In light of the demand in the market, if you are still unclear as to what promise cloud computing holds for your investments, consider the insight provided by Gamiel Gran, vice president of business development at Sierra Ventures. In a CNet News report, he told James Urquhart that cloud computing is a catalyst for broader thinking of innovation. Remember that innovation dislocates incumbents and unlocks new variations of opportunities. [3]

Gran believes that there is a major, multi-trillion dollar IT transformational wave occurring and we are still on the very tip of the innovative solutions that are possible. Even as enterprises of all sizes and locations have fully leveraged virtualization, only about 15-20% of their application resources have been put on this path. That leaves significant opportunity still within the enterprise – the key is to hone in on the remaining percentage and capture it.

It appears that HyTrust has done just that, understanding that the obstacles preventing complete virtualization and cloud computing for the enterprise have largely been due to a lack of visibility and control. This limited the ability of the enterprise to monitor their operations and react to changes. In tackling this aspect of the market, HyTrust is likely to enjoy rapid success.

Notes:

1. Open-source VC investments: Time for payback

2. HyTrust Launches; Brings New Level of Compliance and Control to Virtual Infrastructure

3. Maybe “cloud-computing” hasn’t lost its VC luster