Despite the current hype, cloud computing is not really new – at least, not in concept. In fact, it can be seen as the evolution of utility or grid computing, which also revolved around the consumption of computing resources and IT services via an on-demand, pay-per-use basis. But cloud computing entails an important twist: Where utility/grid computing is concerned with the technical underpinning for dynamic, scalable, and flexible IT infrastructure, cloud computing focuses more on the business side of provisioning and delivering services on top of this infrastructure. The cloud vision could not have been realized without advances in computing architecture and technologies like virtualization and automation. In a slow economy, which is driving organizations to shift from CAPEX to OPEX and reduce up-front andongoing costs, cloud computing has become perhaps the most important technological trend of our time. Of the above-mentioned cloud subcategories, SaaS is the most mature. In many ways, SaaS is an evolution of the application service provider (ASP) model of the late ’90s. ASP failed chiefly due to high delivery costs, complicated and lengthy implementations, and technology issues. The SaaS model, on the other hand, has been able to overcome these issues by improving on both the technology and the business model.Where ASP enabled organizations to outsource the management and maintenance of applications to third parties, SaaS uses a multi-tenancy architecture, in which a single instance of the application runs on a server and is delivered to multiple customers,making it more suitable for mass-market adoption.As a result, SaaS enjoys the biggest share of the cloud services market. SaaS applications accounted for 49.0% of the $17.40 billion cloud market in2009. Although share is expected to decrease to 38.0% (of $44.20 billion) in 2013, SaaS will continue to account for the largest share of the cloud services market.
As one of the global hubs of software innovation, Israeli companies have been among the early entrants into the cloud computing space. The emerging Israeli cloudcomputing scene is a reflection of traditional fields of expertise in the local IT industry. This includes, for example, such areas as security, IT management, Web applications, automated software quality, telecoms applications, business intelligence,
and various enterprise application domains – most notably, CRM, ERP, collaborative applications, HR management, knowledge and content management, and various industry-specific applications. In these areas and others, many Israeli companies are offering either pure-play SaaS solutions or SaaS solutions alongside their existing onpremises offerings. Historically, Israeli software companies have been acquisition targets for leading IT and software vendors. In this regard, despite being part of a relatively new trend, Israeli cloud-related players are already making their mark. As shown in Table 1, since 2007, 11 Israeli cloud-related companies have been acquired – in most cases, at relatively high company valuations. In addition, some recently acquired Israeli companies, including security companies Finjan and Aladdin, have been moving to provide SaaS solutions alongside their traditional on-premises offerings.
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