Software Vet Offers 3 Truths of the Cloud

Acquisitions should continue to ramp up

   

Andrew “Flip” Filipowski is among the top business software players in the game.  During the 1980s, he created the largest software company, Cullinet, and then went on to lead Platinum, which was sold to CA (NYSE:CA) for $4 billion.

But Filipowski hasn’t stopped.  His latest company is SilkRoad, which is a Web-based software (the so-called cloud) operator that’s focused on human resources and performance management.  The company has raised $94 million.

As should be no surprise, Filipowski has some interesting views on the tidal changes in business technology. Here are his “three truths of the cloud”:

Truth  No. 1: Capitulation of the legacy software companies.  “The next generation of enterprise applications will be residing in the cloud,” Filipowski says.  “This is clear from the latest deals, such as SAP’s (NYSE:SAP) $3.4 billion acquisition of SuccessFactors (Nasdaq:SFSF) and Oracle’s (Nasdaq:ORCL) $1.5 billion purchase of RightNow (Nasdaq:RNOW).  Implied is that there are no legacy vendors, which also include IBM (NYSE:IBM), Microsoft (Nasdaq:MSFT), Dell (Nasdaq:DELL) and even VMware (NYSE:VMW), that are capable of developing these applications in-house.  They will have to rely on acquistions.”

Truth No. 2:  The tax and transfer of wealth.  “This capitulation of the legacy players is a clear indication for investors that there will be a transfer of wealth from legacy vendor shareholders to cloud-based technology shareholders, “Filopowski explains. “As additional acquisitions follow, the cloud shareholders will be liquefied at very handsome premiums.  This liquidity will put even more pressure on the valuations as they seek to reinvest those dollars back into the cloud players.”

Truth No. 3: The legacy vendors have plenty of capital to move to the cloud.  “These companies must stake out a place in the cloud for their future sustainability and to stay relevant.  So we may see mega-deals like Microsoft buying Salesforce.com (NYSE:CRM), which would put an exclamation point on the transformation.  As these big players stake out their space in the cloud, it will entice a host of others, like Google (Nasdaq:GOOG), Apple (Nasdaq:AAPL), Amazon (Nasdaq:AMZN) and perhaps even Cisco (Nasdaq:CSCO), to acquire properties.”


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/software-3-truths-of-the-cloud/.

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