will cloud data security concerns derail saa s companies
DESCRIPTION
Despite the $19 billion WhatsApp acquition by Facebook, the hottest market for technology right now is enterprise software, the kind purchased and deployed by big companies. So far this year 12 companies have filed to go public, 11 of them enterprise. Given the market opportunity, "It's shocking we don't see more entrepreneurs interested in enterprise," the Sequoia Capital partner Jim Goetz.TRANSCRIPT
Will Cloud Data Security Concerns Derail SaaS Companies?
Despite the $19 billion WhatsApp acquition by Facebook, the hottest market fortechnology right now is enterprise software, the kind purchased and deployed by bigcompanies. So far this year 12 companies have filed to go public, 11 of them enterprise.Given the market opportunity, "It's shocking we don't see more entrepreneurs interestedin enterprise," the Sequoia Capital partner Jim Goetz.
In the last few years, numerous Silicon Valley based firms focused on the enterprise havegone public with multi-billion dollars IPOs including Workday, Palo Alto Networks,FireEye, and Zendesk. However, a recent survey of IT leaders suggest cloud data securitycould actually be holding back a more rapid adoption of SaaS applications, with fear ofsecurity breaches holding back 41% of projects.
Many on Wall Stret are watching the Box IPO closely. The company filed to go publicearlier in 2014 but has delayed in offering due to market conditions. In the last severalmonths the SaaS industry has been hit by concerns about cloud data security from NSAPRISM to the Target breach that wiped 46% from the company’s Q4 profit. The CIO andCEO of the company recently resigned following that breach.
The question for entrepreneurs and investors is whether this is a temporary correction inthe market driven by macroeconomic factors or a more long-lasting change. There areseveral possibilities including the underlying subscription business model which forcesSaaS providers to accrue all costs upfront but recognize revenue overall several years foreach transaction.
Given that cloud data security concerns are the primary concern holding back SaaSprojects, it’s likely that this is having an impact on revenue for these companies. If theycan solve the security question and gain confidence of large enterprise customers, it lookslike they are poised for significant growth in the years ahead. Box recently announcedblue chip companies GE signed a multi-year purchase of its software that could signalcompanies are coming around to the cloud.