Middleware in the Cloud: New SaaS Business Growth Segment

Wall Street Transcript

67 WALL STREET, New York - November 5, 2012 - The Wall Street Transcript has just published its Internet Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Increased Mobile Content Traffic - Chinese Online Monetization Trends - Internet Infrastructure and Services Consolidation - Enterprise Adoption of Cloud Computing - Social Networking Economics

Companies include: Salesforce.com (CRM), Oracle Corp. (ORCL), SAP AG (SAP), Concur Technologies, Inc. (CNQR), LivePerson Inc. (LPSN), Red Hat Inc. (RHT), Ultimate Software Group Inc. (ULTI), Callidus Software Inc. (CALD), Constant Contact, Inc. (CTCT), Kenexa Corp. (KNXA), Tibco Software Inc. (TIBX), Dell Inc. (DELL) and many more.

In the following excerpt from the Internet Services Report, an expert analyst discusses the outlook for the sector for investors:

TWST: You see data integration as a challenge in the SaaS sector. What do you believe may be some possible solutions to that challenge, and which companies do you foresee being at the forefront of alleviating the problem?

Mr. Schwartz: We think data integration really continues to be a sore spot and a considerable pain point for the Global 2000 out there. And data volumes continue to explode, they continue to grow exponentially and with the emergence of the software-as-a-service phenomenon, they tend to be isolated in the software-as-a-service vendors' data centers. So for instance, if I'm a sales rep at an enterprise and I've accessed my Salesforce.com (CRM) data through the Salesforce.com data center, that's wonderful. However, there may be other people in the enterprise, maybe an operations person, maybe someone in billing, in finance, that could potentially like some visibility into the sales process or any potential sales or new receivables that could be generated in the near term. This is not capable in today's IT infrastructure.

These software-as-a-service data sets tend to be siloed as they enter businesses' infrastructure. So we think that there are really two problems that exist today. One is just a lack of intelligence derived from these massive, but highly fragmented data sets. We think there is a huge opportunity here for picking mass amounts of business now that is from all the different data sets that are involved in businesses, IT infrastructure. And the second issue is really just being around storage and efficiencies, cost-savings efficiencies. We do believe that storage is going to become an issue due to regulations that mandate storing our data in certain industries as well as being able to have access to storage from management standpoint. So we think that's going to continue to be a concern out there.

And what we think is really the takeaway of all this is we do think that there is an opportunity for a new application segment to emerge. It's a function that I refer to as middleware in the cloud, where you have almost another application layer that could fit in between businesses, internal IT infrastructure, as well as all the different data sets that are sitting in different cloud vendors' data centers. You could imagine that the middleware layer that could amalgamate all these different data sets into one layer to run analytics for intelligence. And now you made all the sets together, bringing them into the enterprise where everyone would have access to potentially run intelligence on these different data sets to gain business knowledge and potentially improve the collaboration that could be occurring among the workers in the enterprise. So we do see an opportunity for a new application segment to help solve the data integration challenge called middleware in the cloud.

We think some of the companies that are early movers in the segment, one is TIBCO Software (TIBX). They've got a cloud middleware solution called TIBCO Silver. They were very early to develop this type of capability. There is a private company called Boomi that was acquired by Dell (DELL) a couple of years back that was pushing down this road of this middleware and then cloud. And we just think it's a matter of time before all the very large data management providers move into this type of capability or this type of segment, and really are able to create and develop a compelling solution that we think can add enormous value to the business, especially on the intelligence side.

TWST: Even though you're generally bullish on the sector, what do you see as the most significant headwinds for your group right now? And in your conversations with management teams, do they see their potential risks the same as you do or do they identify other challenges. If not, where do they diverge?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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