Canadian cloud companies to watch

Keep your eyes on these companies: Asigra Inc., BoardSuite Corp., CiRBA Inc., Enomaly Inc., FreshBooks (a service of 2ndSite Inc.), Nulogy Corp., PollStream Inc., Rypple (2Catalyze Inc.), Teradici Corp., ThinDesk Inc..

It’s not a Top 10 list, but these are 10 interesting companies in the space, said Krista Napier, senior analyst of competitive intelligence and emerging technology at IDC Canada Ltd. and author of a new study profiling Canadian-headquartered tech companies that provide cloud solutions.

The companies listed come from all three cloud categories: software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS). “We tried to get a selection of all three,” said Napier.

The study also highlights trends, such as the tendency for cloud solutions to be adopted by informal channels first and then gradually adopted by more formal IT or line-of-business users once the value has been demonstrated, Napier said.

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Many cloud companies get their solution to individuals through a free version, but this popular cloud strategy doesn’t work as well for solutions that promise to deliver high-value service or require a lot of hands-on work, she said.

A further challenge with the “freemium” model is getting customers to start paying for something after they have grown accustomed to getting it for free, said Napier.

The study includes suggestions for emerging cloud companies, such as increasing visibility and legitimacy through partnerships with larger firms.

Some Canadian vendors are receiving positive uptake from organizations hesitant to use cloud services that store or host their data in the U.S. In some respects, The Patriot Act represents a procedure risk to companies since they are subject to the act if they store their data in the U.S., she said.

A very limited number of customers in Canada currently prefer the cloud approach, but Napier predicts the market will pick up rapidly in the next year. “It’s still very much a nascent market,” she said. “Most solutions are in the early adopter stage.”

Customers that are using cloud solutions are realizing benefits such as reduced IT operating and maintenance costs, Napier noted. “In terms of IT planning and budgeting, it’s predictable. It’s the devil they know versus the devil they don’t,” she said.

But many remain resistant due to data portability, lack of trust, privacy issues and security concerns, she said. Customers are also not willing to replace their infrastructure yet and still prefer the traditional licence-and-maintenance approach to acquiring enterprise software, said Napier.

IDC estimates the Canadian SaaS market at $150 million in 2008 and forecasts the number will reach $550 million by 2012.

SaaS and private cloud solutions will experience the most significant growth in the short-term, according to Napier, but interest in infrastructure software and packaged software are also expected to increase.

A lot of factors have lead to Enomaly’s success, but “there’s something to be said about perseverance,” said Reuven Cohen, founder and chief technologist. “We’ve been doing this for a long time, well before there was any talk of cloud computing.”

Enomaly came up with the idea of “elastic computing” back in 2005, Cohen pointed out, and has been involved in several key moments throughout the emergence of cloud computing. This includes being one of the first involved in the Amazon EC2 beta and creating Cloud Camp.

Cohen also created a cloud interoperability forum for the discussion of cloud standards and recently joined a select group of companies in Washington, D.C., to investigate cloud use and adoption in a meeting with CIOs from various agencies within the U.S. federal government.

The Etobicoke, Ont.-based company works with hosting providers, service providers, carriers and telecommunications companies to create regionalized compute clouds. “We are an infrastructure-as-a-service enabler, so our platform allows you to create your own compute cloud,” said Cohen.

Two versions of the software platform are available, including a free, open source option that has been downloaded roughly 75,000 times and has 15,000 active users, noted Cohen.

Enomaly also works closely with Intel Corp. “Intel was one of our early customers who took the initiative to fund the development of our platform and we’ve been working with them for more than two and a half years. We’ve been an integral point of input for their cloud strategy,” he said.

Toronto-based FreshBooks provides an online invoicing and time-tracking Web application for freelancers, agencies and consultants. Sunir Shah, “chief handshaker” at FreshBooks, attributes the company’s success to good customer service.

“A lot of people think of SaaS and think it’s a delivery mechanism for software, but it’s not. It’s really more about the service. It’s the other ‘S’ that matters most,” he said.

FreshBooks’ deliberate efforts to spend time and energy with customers including phone calls, online communication and even taking them out for dinner. “It’s critical to have those old-fashion values on the Internet and you can do it with the Internet. That’s the advantage – you can talk directly with your customers,” said Shah.

Challenges include getting people to know you and convincing them that SaaS is a valuable way to run their business, but the latter is getting easier, Shah pointed out. “SalesForce alone has 1.5 million accounts, which is pretty indicative, I think, of where things are heading,” he said.

FreshBooks is working to develop a whole product solution by partnering with other small business SaaS firms through The Small Business Web, which Shah founded with four other members from BatchBlue Software, MailChimp, Shoeboxed and Outright.

“We’re integrated with each other, data flows from one app to another. It’s a very powerful concept and we’ve been expanding this as an industry-wide effort,” said Shah.

The SaaS market has created a lot more opportunity for Canadian companies because they don’t need to be in Silicon Valley to do this, said Shah.

Canadian-based businesses have an advantage, according to Shah, because such a high percentage of the Canadian population has broadband access. “Canadians are very networked. Toronto itself has tons of small businesses and everyone is online,” he said.

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