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Piper Jaffray has published a 300+ page study on the cloud computing industry based on a recent survey undertaken of 100 CIOs. Bottom line, cloud computing is expected to grow significantly over the next five years. 

    Survey respondents expect the mix of cloud computing to escalate strongly to 13.5% in five years. This equates to a five-year CAGR of 19.2%, or 23.9% when we also incorporate IDC’s forecast that total software budgets will grow 4.7% annually. In other words, software spending will grow gradually in the next five years, but the mix of spend allocated to cloud-based applications will likely surge rapidly. Another way to think about the data is that the Cloud Computing market is expected to grow five times as fast as the broader software market: 23.9% vs. 4.7%.

If anything, I think the prediction is conservative and the impact could be much larger in magnitude when mainstream adoption occurs.  But the risk is that adoption takes longer, just as it did for open source software.  And as the report indicates, open source is powering much of the cloud computing that's going on:

    The next-generation Cloud Computing data centers are NOT running Microsoft Windows; they are increasingly leveraging the compelling economics of open source components. For example, the data centers powering Amazon, Google, and salesforce.com all run on Linux and other open source technologies. In fact, Red Hat’s operating system and the MySQL database are key components to many of the leading-edge Clouds being developed today. 

Why is this occurring? Because open source leverages a global community development process which results in a product that evolves rapidly, provides transparency into the source code dynamics, and surpasses other products in terms of security and reliability – all at a lower total cost of ownership (TCO) than traditional offerings.

• RedMonk: Who's Winning in the Cloud Marketing Battle? 
• Information Week: Piper Jaffray Sees Gold Rush in Cloud

As usual, Michael Skok of North Bridge ventures will be presenting the results of the annual Future of Open Source survey at this year's OSBC conference, March 17-18 in San Francisco.  This is a great opportunity to weigh in and provide your perspective on some important business questions. Here are the 2009 Results as reported by Ostatic.

• Survey: Future of Open Source survey, 2009 Results, 2009 Presentation
  
• OSBC Conference: Main site, Agenda, Advisory Board
• North Bridge Ventures: Main site, Team, Portfolio, News

Around a year ago, I took on a new role at Sun as vice president of lifecycle marketing. While the title was an odd one, the charter was pretty straightforward: Bring the best practices of open source, Web 2.0, and modern online marketing to Sun's portfolio of servers, storage, software, and services in order to drive up revenues and drive down customer acquisition costs.

Open source was an incredible calling card that we could use to determine what customers were interested in. Now we just needed to figure out how to harvest that interest.  It worked for MySQL as a startup, but how would these techniques apply in a bigger company like Sun?  Pretty well, as the graph below illustrates.

(Click to expand the image)

We achieved more than 100-fold growth during the year in terms of top-of-funnel raw leads as well as qualified BANT (Budget, Authority, Need, Timeframe) and pre-BANT leads. And while there was sometimes skepticism that online marketing activities could generate real revenues, we finished calendar Q4 with a sales-accepted pipeline value that would be on par with what you might see in a 5- to 10-year-old startup company.

In fact, the group operates a lot like a startup within Sun and has achieved the kind of growth that would be the envy of any startup in the Valley. We haven't reached the point of having a perfect closed-loop system to track every deal that closes anywhere in the world, so the pipeline metric is fairly conservative. From a cost perspective, we achieved more than a 10X ROI on fully loaded costs, including all program dollars and head count costs. We've seen our efficiencies improve through the year, with response rates increasing by a factor of 10 to 20, while cost per lead has gone down and average deal size has gone up. (Note that these numbers are exclusive of MySQL's results, which continue to operate as a well-oiled lead machine.)

Even more promising is the fact that there's still plenty of room for growth. I expect that over time these efforts could approach half a billion in pipeline if they are connected to an expanded inside sales effort. Limited calling resources have been the gating factor in our growth at Sun and that's an area where Oracle has considerable expertise.

The most common question we get when we present our results is "what was the one thing that drove the growth?" Unfortunately, it isn't that simple. As Brian Halligan, CEO of Hubspot has said, for 99 percent of companies, marketing doesn't require automation -- it requires a transformation. And that's exactly what we did. It wasn't a question of doing one thing, it was more like getting hundreds of things going across many different areas of the business, ranging from holding product-positioning workshops with engineering teams to establishing broad efforts to generate leads with white papers, Web seminars, and product registration incentives. There was relentless A/B testing of e-mail campaigns, new efforts for lead nurturing, scoring, and routing optimization.

Mostly it came down to continuous experimentation, measurement, and refinement. There wasn't a single quarter where we didn't overachieve on our results and still feel that we had more room for improvement. That approach is alive and well in the lifecycle marketing and online marketing teams at Sun, and I hope it will continue on at Oracle.

In a subsequent post, I'll describe some of the specific techniques we've used to drive growth, many of which are described in the excellent book "Inbound Marketing" by the marketing gurus over at HubSpot.

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