Skytap, Fresh Off Boston-Led $10M Financing, Seeks to Make Cloud Computing Work Better

1/4/11Follow @xconomy

[Update: 3:45 pm] Turn on a TV, and you’ll see Microsoft running commercials touting something few men on the street know much about—cloud computing. So if the concept is starting to go mainstream, it shouldn’t come as a surprise that one of Seattle’s early movers in the space, Skytap, has already made some serious headway with its cloud computing offering in the past year.

Skytap made news yesterday when it said it pulled in a $10 million Series C venture round, led by Boston-based OpenView Venture Partners, and which included a trio of the company’s Seattle-based backers—Madrona Venture Group, Ignition Partners, and the Washington Research Foundation. I chatted with CEO Scott Roza yesterday to find out more about what the company is really doing to collect that kind of cash.

[Updated: 3:45 pm, to include Gribble and Richardson as co-founders.] The company was founded in 2006 by University of Washington computer science professors Brian Bershad, Hank Levy, and Steve Gribble, as well as grad student David Richardson, back when there most certainly weren’t TV commercials on cloud computing. The basic idea with the cloud is that customers rent servers on a pay-as-you-go basis, and get access to their data (and processing power) anytime over the Internet. It’s supposed to allow organizations to save money and headaches by not having to buy and maintain their own in-house servers and other equipment. The big boys of tech—Amazon, Microsoft, Google—are all duking it out for market share in the early days of what some analysts predict will grow into a $60 billion market based on this recent model of computing.

So where does a little company like Skytap, with 30 employees, fit into this equation? While the big players are providing the essential infrastructure, Skytap sees itself as a maker of software that sits on top of the cloud systems offered by the other guys. The software applications are supposed to make sure everything runs automatically and seamlessly, especially when engineers are testing a new product, and teams from multiple geographic locations are trying to collaborate. The software layer of the cloud computing market, where Skytap sees itself playing, is probably worth more like $4 to $8 billion over time, Roza says.

Scott Roza

Scott Roza

“The power of Skytap is in the software, not infrastructure,” Roza says.

These are still very early days in the shift toward the cloud, and there’s a lot of curiosity among customers about what they might consider doing there, Roza says. Skytap has certainly had an interesting lens on how this market is evolving. The startup introduced its product about two and a half years ago. So far, early adopters on the IT side of organizations like Ellie Mae, Nuance Communications, Apptio, and Hargis Engineers have bought what Skytap is selling. Skytap also found its way into an important new stream of government agency customers last September when it struck a partnership with CSC (NYSE: CSC) to provide software for that company’s cloud-based development and test service.

Last year was a big one for market adoption, and that caught the eyes of the VCs. Skytap doubled its customer base, and has a goal of doing it again this year. The company doesn’t disclose its finances, but it has 150 customers now, and it’s close enough to profitability that the $10 million financing provides “indefinite runway,” Roza says. It’s possible that Skytap could double … Next Page »

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