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May Planning Silicon Valley R&D

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Agenda

• Overview• Process• Current Initiatives• “Coming Soon” Initiatives and Considerations

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Silicon Valley R&D Overview

• Charter – To bring the GMO CLOUD Engineering Department turnkey technologies and products to create revenue opportunities

• Providing GMO CLOUD’s presence in the leading hub for Cloud Computing Technology Development

• Extensive Silicon Valley relationships, with the ability to reach out to any international emerging organization or company

• Proven methodology for technology evaluation and selection• Lean but highly functional team

– Business Intern

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Japan Increases in R&D Capabilities and Spending

• All of our peer companies are investing in R&D, so our investment is paramount to keep parody

• Japan is ranked very high in Global R&D abilities– Global R&D Spend as reported by R&D Magazine and Battelle

Group has Japan ranked at #3– http://www.battelle.org/docs/tpp/2014_global_rd_funding_fore

cast.pdf?sfvrsn=4• Upward trend in R&D Spending by the APAC Region at large

as compared to Global • APAC has grown to 40% of Global R&D Spend in 2013

– China – 15.3%, Japan – 10.5%, India – 2.7%• Average Spend for Japan’s R&D is 3.4% of Gross Revenues

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Latest Market News• Our industry indicators are all positive with new opportunities on

the horizon• The latest Cisco Global Cloud Index predicts that cloud traffic will

account for two-thirds of global data center traffic by 2017 growing at 35% per year

• Gartner forecasts 2014 as the tipping point of Cloud adoption• IDC forecasts that Large and Enterprise companies will remain

with Hybrid Cloud Solutions (owning some)• IDC forecasts the SMB vertical will adopt the Cloud wholly as

ease of use increases and security problems wane (put it all in the cloud)

• Apps will drive a new market segment called Personal Clouds or App Specific Clouds (deals with App Developers)

• Overall IT spend in APAC for 2014 is estimated at $767B– (http://www.gartner.com/newsroom/id/2614815)

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R&D Investigative Flow

1. Initial Investigation

2. Decision to take Next Steps

3. Deep Dive

4. Top Three Selection

5. Decision Matrix and Presentation

6. Contractual Work

7. Project Plan

8. Integrating into P&L

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Hot off the Presses – GMO is Attracting Substantial Partnerships

Partners Function Release Target Date

Current Status

1 ShapeBlue Integration Partner

April Contract is done

2 CloudFlare Security Products Partner

August (Scan)Sept (WAF)

Waiting Legal Check

3 New Relic Monitoring Partner

Sept Reviewing Partner Agreement

4 Proofpoint/Armorize Scanning End of May Canceling old agreement and developing LOI

5 Email AV / Spam AV / Spam Sept Working with Japanese Co.

5 Others (Coming Soon) Late Fall DBaaS, SSaaS, Partners

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Release Time Line

April May June July Aug Sept

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1. Shape Blue~ R&D Press Releases ~• Shape Blue is the leading CloudStack consultancy in the US

and UK. They have partnered with GMO CLOUD to rapidly deploy CloudStack for our customers worldwide when we are short on resources

• This partnership is also positioned to help Shape Blue expand into APAC

• Shape Blue Cloud Stack Partner – 1st Engagement in progress– INET Cloudstack based Public Cloud build up– Target customers are the domestic game publishers (potentially

other content providers going forward)– The initial contract is being developed between KK and Thai local

staff

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2. CloudFlare~ R&D Press Releases (cont.) ~• CloudFlare is looking to expand their business in APAC and

would like to partner with GMO CLOUD. They offer a wide variety of SaaS based services including WAF, Web Acceleration, DDoS, and CDN. (They have also just acquired StopTheHacker who is a Symmetric Scanning SaaS provider)

• CloudFlare WAF - LOI complete and under legal review, demo accounts provided, estimated 20% discount for wholesale– List price $20/mo. for individual websites, $200/mo. for SMBs,

$5000/mo. for Enterprises (profit share 20%)– Adoption of our customer base (TBD)– Projected Annual Net Revenues (TBD)

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3. New Relic~ R&D Press Releases (cont.) ~

• New Relic is the market leader in real-time online Application Performance Monitoring

• New Relic – NDA complete, demo accounts provided (just voted top five SF startups to watch)

• Internal testing is being performed to come up with performance metrics for later use

• The resale model (with PaaS offering or standalone offering) is still being determined

• Business term and condition as well as the pricing model is still under discussion.

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4. Proofpoint~ R&D Press Releases (cont.) ~• Proofpoint acquired Armorize and we are negotiating a

fresh contract with them to support our customers who still use Armorize, but also for the potential future use of other ProofPoint Products such as AV/SPAM

• Proofpoint – MOU under development (Cancelling the existing agreement with Armorize), followed by MSA w Proofpoint

• Proofpoint resale model is still being determined • Business term and condition as well as the pricing

model is still under discussion.

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5. Others~ R&D Coming Soon ~• Security Symmetric Scanning• Streamline deal, favorizes our case

– StopTheHacker (est. 20% discount)• Basic $96 year• Professional $192 year• Business $480 year• Business+ $960 year

– In comparison, yearly License from Nessus is $1500 on AWS• Gartner forecasts Security as a Service with a 22% CAGR,

with nearly all Enterprises planning on adopting some portion, employing a multilayered approach due to recent public break-ins

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~ R&D Coming Soon (cont.) ~

• Cumulogic DBaaS– Cumulogic is growing stronger in the positioning of its

DBaaS technology with greater reliability and capability which is attracting large customers

– SVRD is currently completing a SOW for the POC due late summer

– Research suggests that early adoption in this market will bring in significant revenues in just a couple years

– Market Research https://451research.com/report-short?entityId=78105&referrer=marketing

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DBaaS Global Picture

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~ R&D Coming Soon (cont.) ~

• Additional CloudStack Consultancies and Migration Technologies – RiverMeadow– CloudOps

• Monitoring and Management– Scalr– RightScale– WS02– ComputeNext

• Email AV/Spam/Encryption– ProofPoint– Qualsys – Local Japanese Company

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Strategic Consideration

• Deepen Cloudstack Collaboration Partnership– Cloudstack is structurally sound and expanding its technology

in a metered way– CloudStack Collaboration Community has asked for support to

combat OpenStack Hype– GMO Cloud has excess capacity in Silicon Valley, perhaps we

should offer a free large sandbox to the CloudStack Community of Developers?

– Load-test, capacity planning, and application compatibility testing

• Will act as a catalyst to garnering new US Cloud Business

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Appendix

• More stuff about SVRD processes and vision

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Silicon Valley View

• IaaS is a commodity that will ostensibly be free in the near future, fiscally supported by upper layers

• Today’s customers see cloud services as at least a 50% savings over traditional services

• PaaS is a means for making a profit on top of that infrastructure, and each Cloud Provider takes a share of everything sold in their Application Store or from SaaS offerings found on their platform– AWS Market Place takes 10-15%

• Rackspace is a good example of a company trying to move from Hosting/ISP to Cloud Provisioning, we should learn from their struggles, as is GoDaddy who perhaps has a better focus

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The US Market is MaturingThe recent 2014 RightScale State of the Cloud Survey identified several key findings:• Cloud adoption reaches ubiquity

– 94 percent of organizations surveyed are running applications or experimenting with infrastructure-as-a-service

– 87 percent of organizations are using public cloud• Hybrid cloud is the approach of choice

– 74 percent of enterprises have a hybrid cloud strategy and more than half of those are already using both public and private cloud

• Enterprise cloud governance lags adoption.– Less than a third of organizations have defined such critical aspects of governance as

which clouds can be used, disaster recovery approaches, and cost management• The challenge of cloud security is abating

– The number of respondents who regard cloud security as a significant challenge has decreased among both cloud beginners and cloud pros

• Next-generation IT shapes up as Cloud + DevOps + Self-Service IT– Cloud-focused companies embrace DevOps (71 %) and Self-Service IT (68 %)

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Basic Technology Preparedness

• PaaS Readiness– http://c4sa.nifty.com/– http://wso2.com/products/– www.cumulogic.com

• Market Place Readiness– Cloudstack Marketplace in proposal stage– https://www.usharesoft.com/home/– http://shapeblue.com/cloud-server-template-creat

ion/

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Cloud Functional PreparednessCatalog Management Workflow AutomationCurrent portfolio – Migration and on going gap analysis Order-to-cash process

Sourcing – public, private, hybrid, in-house Self-service storefronts

Creating / maintaining catalog taxonomies Multi-tier catalog

Consumption vs. distribution models User on-boarding

Service definitions, SLAs, cost, and pricing User-to-service provisioning and administration

Single or multiple storefronts/catalogs Entitlements management

Centralized vs. decentralized admin Security – IdM, SSO, and auditability

Entitlement policies Reporting dashboards

Single vs. multiple tiers DNS Automation

Operations and Management Services IntegrationHosted vs. On-premise vs. Hybrid Cloud services providers (external)

L1/L2 support and SLA monitoring Core services (internally hosted)

Third-party cloud provider settlement Integration adapter build and certification

Usage auditing / license management Service / offer lifecycle changes

Integration lifecycle management User repositories

Billing or charge / show back (internal products) Billing system

Disaster Recover Operations Helpdesk / ticketing federation

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SV Cloud Application Examples• Web Services - Static and dynamic web content, streaming media, RSS,

mash-ups and SMS• Web Applications - Web service-enabled applications, eCommerce,

eBusiness, Java application servers• Rich Internet Applications - Videos, online gaming and mobile apps (Adobe

Flex, Flash, Air, Silverlight, iPhone)• Disaster Recovery - Onsite/Offsite backup and recovery, live failover, cloud

bursting for scale• HPC - Engineering design and analysis, scientific applications, high

performance computing• Collaboration/Social Media - Web 2.0 applications for online sharing and

collaboration (blog, CMS, file share, wiki, IM)• SSaaS – Security as a Service that may manifest as an auditable Secure

Virtual Environment, or as a Cloud Edge Service

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SV Work Load Examples

• Batch processing - Predictive usage for processing large workloads such as data mining, warehousing, analytics, business intelligence

• DBaaS adoption in growing globally, but market is still less than $1B, which may mean it is at a good early adopter point

• Development and test - Software development and test processes and image management

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GMO Cloud Potential Initial Offerings

• Cloud Migration Services* - basic technology that facilitates companies moving into the cloud wholesale

• Hybrid Cloud - providing compute and storage elasticity for customers seems to be the current market revenue leader

• Security Products* - cover the basic security needs of our customers actually doing business in the Cloud (SSaaS)

• DRaaS* - a “SaaS” that is gaining momentum as cloud security becomes more trusted, and because it is service that is relatively easy to resell

* Indicates current investigations

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Potential Initial Offerings (cont.)

• VDI - seems to be finally getting some traction in 2014, good to be a Citrix Partner, and thanks to GPU improvements

• CRM Software - (Non-Salesforce like http://zoho.com/)

• Partnerships** Indicates current investigations

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DBaaS Growing Trend

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Selection Method Phases• There are two sequential process methods that SVR&D executes in

helping GMO Cloud Engineering Groups make technology and partnership decisions:– Initial Investigations and Communications (to choose)– Deep Dive Analysis (due diligence)

• Phases labeled in these processes are (can be in either process depending on complexity): – Abandon (not worth further investigation)– eMail (establish contact after reviewing public materials) – Call (initial call to test for potential)– Meeting (deeper dive into potential)– NDA (to enable more disclosure)– RFI (request all information)– Analysis (analyze material, only in deep dive phase))– LOI (to start partnership or purchase)– Project Plan (the plan to facilitate doing business)– Contract (in parallel to Project Plan, enter into contract)Initial Investigation

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Factors Considered in Evaluation– Is the Target a Good Technology Fit?– …Good Leading Edge Technology?– …Good Business Direction Fit?– …Good Partner Fit?– …Good Activity Fit?– …Good Resource Fit?– …Good Value Proposition?– …Good Customer Relationship Fit?– …Good Channel Fit?– …Good Customer Segment Fit?– …Good Cost Structure Fit?– …Good Revenue Stream Fit?

Initial Investigation

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Method for Selection

RSA Alley Companies

Phase - Abandon, eMail, Call, Meeting, NDA, RFI, Analysis, LOI, Contract

Investigation Score for Use/Resale

Abandon 3

Neustar - Real time Cloud based montering and management services

Management at the base with packages to Plan, Monitor, Diagnose, Respond http://www.neustar.biz/it-security-services#.Uxj9TPldWSo

Meeting 7 Seculert - Cloud based ATP

realtime cloud based malware detection, simply, and with rich analytics http://www.seculert.com/why-seculert/

Call 8 DBAPPSecurity DB Scanner, Web App Scanner, WAF, http://www.dbappsecurity.com/index.php

Initial Investigation and Communications (ex.)

Decision to take Next Steps

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Method for Selection (cont.)

Firm Name Product Name

Status (Private/Public) Round of funding (if any)

Environment (Public/Private or both)

Customers(name a few) Initial Cost Unit Cost

Difficulty of deployment(# of days)

TurnKey Option and Cost (no GMO involvement) Yes or No

Targeted Customer Range(Novice, Web site, EC site, Enterprise)

Other factors (biz/tech or others) to be considered Discussion

LOI Signed Shape Blue

CloudStack Solution Partner

Private company providing consultancy to MSPs, Hosting Providers, Enterprise customers

Entire Citrix Stack - CloudStack, Netscalr, Apache, CloudBridge, etc

Orange, Sungard, TomTom, ASG, and Control Circle (similar to GMO Cloud) TBD

Interested in Partnership role with revenue sharing TBD Nearly

MSPs, Hosting Providers, Enterprise customers

Have direct experience helping to take similar companies to market

2nd call Scheduled for Thursday 4pm PT? Follow the Sun Service Desk.

Japan team reaching out Creationline

CloudStack Solution Partner

Private Japanese company with several partnerships including Scalr Need help evaluating TBD TBD TBD TBD TBD TBD TBD TBD

Deep Dive Analysis (ex.)

Deep Dive

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Top Three Selection

• From the Deep Dive Analysis, Japan and SV teams decide upon top three contenders

• The decisions are made from as many criteria as possible

• A decision matrix is created with a report for management decision making

Top Three Selection

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Decision Support Matrix (ex.)

Decision Matrix and Presentation

Company Multi Tennant Refresh Time Descreet BoB Ops Costs CloudStack

Trustwave X X Qualsys X X Impervia X X X X

CloudFlare / StoptheHacker

X

X

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Shape Blue Partnership Plan• Objective: Find Cloudstack Partnerships – Shape Blue• Product Overview: Partner with deep experience in Cloudstack

deployments including having templates, recipes, and etc• Current Phase: LOI done, Contract development (from spreadsheet)• Initial Costs: None• Profit: Profit share determined by each deal size• Localized: Not yet, will need help from GMO Cloud• Schedule: Partnership agreement in 3 months• Risks: Shape Blue is the premier provider in this space, there may be

a concern about resource limitations• Other Options: • Pros/Cons: Best in the market place /

Decision Matrix and Presentation

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Business Contract Work

• Depending on each deal, several of the below may be required:– Non Disclosure Agreement– Letter of Understanding– Terms and Conditions– Partnership Agreement– Business Agreement

Contractual Work

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Frame Project Plan• After the LOI stage, each potential deal should frame a related

project plan:– An overview of the reasons for the project– A detailed description of intended results– A list of all constraints the project must address– A list of all assumptions related to the project– A list of all required work across organizations– A breakdown of the roles all team members will play– A detailed project schedule– Needs for personnel, funds, and non-personnel resources (such as

equipment, facilities, and information)– A description of how to manage any significant risks and uncertainties– Plans for project communications– Plans for ensuring project quality

Project Plan

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Role of OperationsExample role chart from project plan for Operations:

Role Gmo Partner

Support Layer1 layer2

Promotion Yes No

Development No Yes

QA No Yes

Software operations No Yes

IaaS operations Yes No

Server resource Yes No

Project Plan

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P&L

• Next step after Product and Partnership decisions is to insert expenses and revenues into the GMO CLOUD K.K. P&L

Integrating into P&L

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Business Model Painter’s Pallett

• The Business Model– Key Partners– Key Activities– Key Resources– Value Propositions– Customer Relationships– Channels– Customer Segments– Cost Structure– Revenue Streams

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Key Partners

• Key Partners– Who are our Key Partners? – Who are our key suppliers?– Which Key Resources are we acquiring from partners?– Which Key Activities do partners perform?

• Motivations for Partnerships– Optimization and economy – Reduction of risk and uncertainty– Acquisition of particular resources and activities

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Key Activities

• Key Activities– What Key Activities do our Value Propositions require?– Our Distribution Channels? – Customer Relationships?– Revenue streams?

• Categories– Production– Problem Solving– Platform/Network

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Key Resources

• Key Resources– What Key Resources do our Value Propositions require?– Our Distribution Channels? Customer Relationships?– Revenue Streams?

• Types of resources– Physical– Intellectual (brand patents, copyrights, data)– Human– Financial– Time

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Value Propositions• Value Propositions

– What value do we deliver to the customer?– Which one of our customer’s problems are we helping to solve? – What bundles of products and services are we offering to each Customer Segment?– Which customer needs are we satisfying?

• Characteristics– Newness– Performance– Customization– “Getting the Job Done”– Design– Brand/Status– Price– Cost Reduction– Risk Reduction– Accessibility– Convenience/Usability

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Customer Relations• Customer Relations

– What type of relationship does each of our Customer Segments expect us to establish and maintain with them?

– Which ones have we established? – How are they integrated with the rest of our – business model?– How costly are they?

• Examples– Personal assistance– Dedicated Personal Assistance– Self-Service– Automated Services– Communities– Co-creation

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Channels• Channels

– Through which Channels do our Customer Segments – want to be reached? – How are we reaching them now?– How are our Channels integrated? – Which ones work best?– Which ones are most cost-efficient? – How are we integrating them with customer routines?

• Channel phases– 1. Awareness

• How do we raise awareness about our company’s products and services?– 2. Evaluation

• How do we help customers evaluate our organization’s Value Proposition?– 3. Purchase

• How do we allow customers to purchase specific products and services?– 4. Delivery

• How do we deliver a Value Proposition to customers?– 5. After sales

• How do we provide post-purchase customer support?

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Customer Segments

• Customer Segments– For whom are we creating value?– Who are our most important customers?

• Types– Mass Market– Niche Market– Segmented– Diversified– Multi-sided Platform

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Cost Structure• Cost Structure

– What are the most important costs inherent in our business model? – Which Key Resources are most expensive? – Which Key Activities are most expensive?

• Is your business more– Cost Driven (leanest cost structure, low price value proposition, maximum

automation, extensive outsourcing)– Value Driven (focused on value creation, premium value proposition)

• Sample characteristics– Fixed Costs (salaries, rents, utilities)– Variable costs– Economies of scale– Economies of scope

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Revenue Streams• Revenue Streams

– For what value are our customers really willing to pay?– For what do they currently pay? – How are they currently paying? – How would they prefer to pay? – How much does each Revenue Stream contribute to overall revenues?

• Types– Asset sale– Usage fee– Subscription Fees– Lending/Renting/Leasing– Licensing– Brokerage fees– Advertising

• Fixed Pricing– List Price– Product Feature Dependent– Customer Segment Dependent– Volume Dependent

• Dynamic Pricing– Negotiation (bargaining– Yield Management– Real-time Marget

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Product Plan Template• Objective: ex. Make a reseller contract with XXXXX (Current focus DRaaS, Security,

Consultancy Partnerships)• Product Overview: ex. DRaaS offering with great user interface, CloudStack tested,

and etc.• Current Phase: Meeting (from spreadsheet)• Initial Costs: ex. $100K License Fee • Profit: ex. Estimated $100M in 5 years based on US partnership• Localized: ex. Not yet, will need help from GMO Cloud• Schedule: ex. Product launch in 3 months with English version, Localized version

available 3 months later.• Risks: ex. The company is start up company so that they will have trouble with

funding, etc.• Other Options: ex. not a resale deal, investment of $xxM• Pros/Cons:• Roles of Operations: Which part of operation do we have to take? Please see next

page.• Business models: ex. Revenue Share, Subscription, Deposit, Commitment

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References

• http://www.citrix.com/content/dam/citrix/en_us/documents/products-solutions/citrix-cloudplatform-for-the-service-provider.pdf

• http://beta.fool.com/zernov/2013/05/16/six-reasons-why-rackspace-hosting-would-fall-furth/33949/

• http://cloudcomputing.sys-con.com/node/2909439

• http://www.computerweekly.com/opinion/The-state-of-the-VDI-industry-in-2014

• http://www.actifio.com/products/• http://www.top-10-online-backups.com/best-

cloud-storage.php• http://aws.amazon.com/pricing/• http://www.ubersmith.com/business-case/cl

oud-providers

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Logic Towards Our Next Steps• I have been looking at Silicon Valley Cloud Companies trying to judge

what is going well and what are the challenges for our business:– Firstly, the choice of CloudStack was smart as Rackspace and others are

struggling with OpenStack, handling the volume of changes, managing at scale takes a lot of resources

– That said, the CloudStack consultancy community is small because the companies that have chosen it as their platform have their own resources

– Finding Products or Services that fit the Japanese market• But what seems to be important in order to make money from a

cloud platform business are full migration technologies, hybrid elasticity technologies, Application Stores that provide necessary services and products to run businesses in the cloud, and popular SaaS products that can service any comers

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Problems

• I hear from the Japan office, over and over again, classic Catch22:– Present up and coming product or service– Sorry need localization– I offer companies that have localized products– Sorry, they are too big or already have a presence in Japan

• I believe we need to step up and offer localization to companies so we can have our own deep partnerships

• SVRD is not kept in the loop on progress in Japan. Ex. Was the surprise of the selection of Nifty for PaaS

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DRaaS Mentions• - Acronis

- Allsstream- Amazon Web Services Llc- Ca Technologies- Carpathia Hosting- Commvault Systems- Datagardens- Datto- Doyenz- Evault- Fusionstorm- Geminare- Hosting.Com- Hp- Ibm- Iland- It-Lifeline- Microsoft- Nexica- Nscaled- Ntt Communications- Other Key Players- Quorum Labs- Rackspace- Riverbed Technology- Savvis- Storagecraft- Sungard- Twinstrata- Veeam- Veristor Systems- Verizon Terremark- Virtualsharp- Vision- Vmware Inc.- Windstream Corp- Zerto- Zmanda