World s Cloud Top 500 Applications Vendors

World s Cloud Top 500 Applications Vendors Worldwide Cloud Applications Market Forecast 2014-2018 31/07/2014 Copyright 2014, APPS RUN THE WORLD

Table of Contents World s Cloud Top 500 Applications Vendors... 3 Worldwide Cloud Applications Market Forecast 2014-2018... 9 Forecast By Region... 12 Forecast By Functional Area... 13 Merger Mania Grips Cloud Apps... 19 Investors Pile Into Cloud Apps Vendors... 23 Research Methodology... 27 2

World s Cloud Top 500 Applications Vendors In 2013, the Cloud applications market soared 32% to hit $30.3 billion in Cloud subscription revenues, compared with $23 billion in the previous year. The big gain came as a growing number of enterprise applications vendors switched gears by going after Cloud subscription sales in a concerted effort to boost their recurring revenues, sometimes at the expense of their conventional license and maintenance revenues. The change of heart was inevitable as companies large and small companies embraced Cloud Computing as a clear alternative to on-premise implementations, reducing their IT infrastructure and support expenses along the way. Adding to that momentum was the continuing expansion of Cloud-only applications vendors that have outpaced the growth of their counterparts in the on-premise world for three reasons. First, since the end of the financial crisis, institutional investors ranging from private equity firms to venture capitalists and public investors have poured tens of billions of dollars into the Cloud applications market bankrolling a smattering of Cloud-only vendors in hopes of displacing the onpremise vendors. For an extended period of time, these on-premise vendors have been feasting on their maintenance revenues by collecting annual fees ranging anywhere from 10% to 25% of the initial sale of software license. Now both license and maintenance revenues are being undermined by the proliferation of Cloud subscription revenues, underscoring a not very subtle sign that investors are essentially betting against the incumbents. Second, an increasing number of Cloud-only applications vendors have been able to establish a critical mass in a compressed time frame. For example, Zendesk, which specializes in Cloud-based customer service applications, achieved a critical mass of nearly 39,000 customers by successfully leveraging a scalable multi-tenant platform in the first seven years of its history since its founding in 2007. That is a steeper ramp than Cloud pioneer Salesforce.com, which saw the growth of its customer count to 13,900 in its first seven years. For incumbents such as SAP and Oracle, these Cloud upstarts unlike niche vendors playing on the sideline now pose greater threat to their market and mind shares on a global scale. Third, one hardly wants to stand before a locomotive in motion and few enterprise applications vendors can take the risks of stopping the train in its tracks. Under such pressures, most vendors have started selling some variations of Cloud applications through public, private, hybrid, hosting or managed services, while switching their one-off licensing scheme to a more dependable subscription model. The behavioral changes are throwing more on-premise vendors over the 3

fences, transforming the way they deliver their applications and services and making their Cloud offerings the fastest growing part of their business. Through a combination of accelerated product development, mergers and acquisitions and ecosystem expansion, the blistering growth of the top 25 Cloud applications vendors over the past year has been nothing but spectacular, as shown in the following table. These top 25 vendors accounted for $13.7 billion in Cloud subscription revenues, or 45% of the total market in 2013. By comparison, their contributions to the market in 2012 amounted to $9.6 billion, or 42% of the market. Altogether their Cloud subscription revenues spiked 42% in 2013, compared with 32% for the whole market. Twelve of them actually grew faster than the overall market in 2013, some by a wide margin. As a whole one-third of Cloud applications vendors on our Cloud Top 500 actually outperformed the overall market with at least a 32% jump in their subscription revenues last year. Table 1 Top 25 Cloud Applications Vendors, Key Markets, 2012-2013 Cloud Subscription Revenues, and Major Developments Rank Vendor Key Markets 2013 Cloud Subscription Revenues, $M 2012 Cloud Subscription Revenues, $M Growth, % 1 Salesforce.com CRM 3632 2742 32.46% 2 Microsoft 3 SAP Content Management, Collaboration, CRM HCM, Procurement, ERP, CRM 1360 453 200.22% 1023 463 120.95% Major Developments Granddaddy of Cloud applications with first mover advantage, acquired ExactTarget for marketing automation in 2013. "Grew its Cloud applications revenues largely as a result of Office 365, which achieved $1.5 billion annual run rate by end of FY13. SuccessFactors and Ariba accounted for the bulk of SAP's Cloud Applications subscription revenues in 2013. Recent acquisitions included Fieldglass for contingent labor management and Seewhy for Cloud marketing. 4

4 Oracle CRM, HCM, ERP 1021 742 37.60% 5 Adobe CRM 901 613 46.98% 6 Concur 7 AthenaHealth 8 IBM Travel and Expense Management Healthcare ERP CRM, HCM, Procurement 516 425 21.41% 460 367 25.34% 425 388 9.54% 9 Workday HCM, ERP 337 181 86.19% 10 Ultimate Software HCM 334 267 25.09% Successfully transitioned itself from onpremise to Cloud applications through a series of well-timed acquisitions including Taleo for HCM, Eloqua, RightNow and Responsys for CRM. Marketing Cloud and Creative Cloud help transform Adobe from a packaged apps vendor to one that captures volume subscription sales from professional marketers, designers. Since 1993 Concur has been delivering integrated travel and expense management applications to more than 20,000 customers, reshaping the travel industry with a mix of Cloud apps and network scalability Athenahealth has emerged as a leading Cloud vendor for over 50,000 healthcare providers including 36,000 physicians that run its apps to manage their practices, revenues, patients and heath records. Acquisition of Kenexa in 2012 helped boost IBM's Cloud apps revenues, along with a host of Cloud offerings for marketing, ecomemrce and procurement. Fueled by its intuitive HCM offerings, Workday added 200 customers resulting in a total of over 600 clients in 2013. Cloud revenues per customer topped $561,000, far above the industry average. For more than a decade since Ultimate moved its business model from conventional license sales to Cloud subscription, its recurring revenues have surged over 17 times from $19 million in 2002 to $334 million in 2013. 5

11 NetSuite 12 RealPage ERP, ecommerce, HCM, PSA Real-Estate ERP 334 253 32.02% 326 275 18.55% 13 Citrix Collaboration 292 265 10.19% 14 Digital Insight 15 Constant Contact Online Banking 290 292-0.68% CRM 282 249 13.25% In 2013 NetSuite accelerated its growth in the Cloudbased ERP applications market with a 32% growth in subscription revenues, compared with 27% in 2012. Installed base jumped to nearly 20,000 from 16,000 a year earlier. Focusing on rental housing market, RealPage s key attributes is its Cloud infrastructure that supports its fast-growing installed base as well as heavy daily transactions. In 2013 rental units being managed by RealPage apps reached nine million, up 11% from 8.1 million units a year ago. Citrix has established a loyal following in the online collaboration space with products such as GoToMeeting, GoToWebinar, GoToTraining, GoToAssist, and ShareFile, a cloud-based file sharing and storage solution. Digital Insight continues to wield considerable influence in the online banking market with an array of customerfacing products as well as electronic bill presentment and payment services for its banking customers. It was acquired by NCR in 2014. Constant Contact specializes in on-demand Engagement Marketing tools for small to midsized organizations. Its applications are being used 600,000 companies for email marketing, social media marketing, event marketing, local deals and survey products. 6

16 Cisco Collaboration 270 275-1.82% 17 18 LinkedIn Corporation Medidata Solutions 19 eclinicalworks HCM 258 130 98.46% Healthcare ERP Healthcare ERP 228 177 28.81% 220 200 10.00% 20 DATEV ERP 215 205 4.88% 21 Blackbaud CRM 213 162 31.48% Cisco s Collaboration Cloud portfolio covers WebEx Meetings for online collaboration as well as other applications for customer service and support. The products are available as a hosted service from Cisco or its partners and service providers. Leveraging its popular social network, LinkedIn has emerged as a major force in the HCM applications market offering an increasing number of talent management products designed for corporate recruiters and professional users. Medidata Solutions provides cloud-based clinical development solutions for life sciences organizations in the United States and internationally. With approximately one in five Americans health data stored using eclinicalworks software, the vendor has established one of the largest Software as a Service (SaaS) networks for the healthcare industry. DATEV is one of the largest European software companies and IT service providers for tax consultants, auditors and lawyers as well as their clients. Blackbaud is considered the gold standard in nonprofit vertical. Its Raiser's Edge has been deployed at more than 13,000 organizations including the biggest charities to automate constituent relationship management and fundraising activities. 7

22 ADP HCM 199 150 32.67% 23 SABRE Corp. 24 25 ServiceNow, Inc. Cornerstone OnDemand Transportation ERP Project Portfolio Management, ESM 185 120 54.17% 175 102 71.57% HCM 170 106 60.38% Subtotal 13666 9602 42.32% For payroll service giant ADP taps into the Cloud positioning Workforce Now as its major Cloud HCM product, while RUN is its Cloud-based payroll service. Sabre is a heavyweight in the travel and tourism industry with its system processing over $100 billion of travel spending and more than 1.1 trillion messages for airlines and hotels in 2013 via Cloud or hosted model. ServiceNow has become one of the fastest-growing Cloud applications vendors focusing on project portfolio management and IT service management software. Customer count jumped to 2,195 in 2013, up 34% a year ago. Cornerstone OnDemand is the talent management apps vendor to beat these days as it wins over enterprises by giving them a better way to manage their recruiting, performance management, elearning processes. Number of users topped 14 million in 2013, up 32% a year ago. Other 16683 13448 24.06% Total 30349 23050 31.67% Source: Apps Run The World, July 2014 Click here as you drill into the rankings of the top 500 Cloud applications vendors in 2013 and their growth rates last year. Paid subscribers will have full access to the 2011-2013 Cloud subscription revenues of these top 500 vendors, along with their profiles, which are based on our SCORES methodology that measures their growth along six dimensions: Strengths, Customers, Opportunities, Risks, Ecosystem, and Share. For more on our SCORES methodology, check here. Don't forget to look up our Cloud Applications taxonomy as well as a searchable database of thousands of Cloud applications customers that have been taking advantage of the latest innovation from these vendors. 8

Worldwide Cloud Applications Market Forecast 2014-2018 Backed by across-the-board customer acceptance and investor support, the $30-billion Cloud applications market is poised to rack up big gains over the next five years. The question is how fast will it grow and whether the market expansion will be evenly distributed across different regions and functional areas. Another pressing issue is whether the Cloud applications market growth will come at the expense of software license and maintenance revenues. In other words, is game over for conventional way of selling software if the Cloud becomes the preferred mode of delivering enterprise applications? Before we answer any of the above questions, our latest forecast for scores of Cloud applications market segments(see taxonomy here) shows that the $30 billion-plus that thousands of vendors(there are more than 2,000 in our database) have generated in subscription fees over the past 12 to 18 months will continue to swell through 2018. Based on the explosive growth of Cloud applications subscription revenues over the past three years, the market is projected to soar at a compound annual growth rate of 17.3% to reach a total of $67 billion by 2018, as shown in the following table. 9

IMAGE 1: ENTERPRISE APPLICATIONS, CLOUD VS NON CLOUD REVENUES, $M Source: Apps Run The World, July 2014 Our forecast assumptions are three-fold. First, the recurring revenues that these vendors have captured are only the beginning of a long tail of deferred payments that will manifest themselves more profoundly in the forms of contract renewals, market expansions as well as price increases. In February 2014, SAP executives told investors that in a seven-year period a Cloud deal is likely to generate 28% more in cumulative payment than an on-premise implementation. Oracle executives echoed that optimism during its recent earnings call in June, reiterating that it could generate more annual recurring revenues from Cloud deals than conventional software sales. In fact both vendors are so confident that their Cloud subscriptions would multiply that they are breaking out such recurring revenue streams every quarter. In other words, heads would roll if they fail to live up to their promises. Second, customer demand for Cloud applications and services has continued to surge. In 2013 the UK government launched an expanded G-Cloud supplier framework that would support growth in Cloud Computing. Cost is one of the biggest reasons behind the government push, which estimates that off-the-shelf products from the Cloud can be up to 30% of the cost of bespoke solutions. 10

Similarly, our 2013 user survey indicated that 65% of enterprises were pursuing Cloud software investment plans over the next 12 to 24 months. Cost is only part of the equation. HP, the giant computer firm with more than 300,000 employees, now runs Workday s Cloud HCM applications for managing its global HR processes, citing speed, efficiency and unprecedented ease of use. Third, the network effect is working its magic through layers of partnerships that vendors, resellers, systems integrators, data center operators, and telcos have been stitching together to ensure Cloud applications can be delivered with ease, maximum security guarantee, and increasingly the ability to customize. While the first two gating factors enable the key stakeholders to put their skin in the game, the last may have the biggest implication. As customers are fully engaged in new Cloud product release cycle and perhaps given the opportunity to add specific features to their liking, vendors may be able to wield considerable pricing power over how and when these quasicustomized features should be made available and at what price point. Amazon likes to point out it has been continuously lowering Cloud computing costs to its customers through its Amazon Web Services. The reverse could happen when the utility model works to the benefit of a handful of suppliers similar to the demand-based pricing that energy producers are charging their customers these days. Currently many Cloud applications vendors are practically giving their products away through a freemium approach, which is likely to be replaced by a premium model once they reach a critical mass. In addition the expected shakeout in the Cloud applications market will inevitably leave the survivors with the biggest leverage in terms of market coverage and pricing power. 11

Forecast By Region Across the regions, the Cloud applications market is projected to experience sustained growth in the three major theaters with the biggest showing likely to be coming from Asia Pacific, as shown in the --following table. TABLE 1: CLOUD APPLICATIONS MARKET FORECAST 2014-2018, BY REGION, $M Region 2013 2014 2015 2016 2017 2018 2014-2018 CAGR, % Americas 19926 24920 29615 33289 37700 41611 15.9 EMEA 7449 9615 11808 13766 15956 17884 19.1 APAC 2974 4020 5079 5995 7025 7952 21.7 Total 30349 38555 46502 53050 60681 67447 17.3 Source: Apps Run The World, July 2014 Of the Cloud Top 500 vendors, only 18 are headquartered in Asia Pacific. However one can hardly underestimate the power and influence of such vendors as Yonyou, OBIC, and Ramco in China, Japan and India, respectively. All of them are expected to boost their Cloud applications offerings significantly having already amassed a huge following with their on-premise systems. Silverlake Axis, one of the major enterprise applications vendors in Malaysia that caters to the financial services industry, expanded its Cloud offerings in 2013 by acquiring Cyber Village, which offers Cloud-based CRM and ecommerce applications in Asia. At the same time, the burgeoning number of Cloud users in Asia, unencumbered by legacy systems that are prevalent in other regions, will attract heavy investment from other Cloud applications vendors. Then there are Cloud-only startups like Xero in New Zealand, which has been doubling its revenues over the past three years since it started offering online accounting applications in 2006. Its customer count soared to 284,000 in March 2014, up from 1,000 in 2008. In the EMEA region, the same upward trajectory is being played out in far-flung places from Finland to Israel. Almost one-fifth of the Cloud Top 500 are based in the EMEA region and their ability to grow their Cloud subscription revenues has no boundaries. SuperOffice, a CRM application vendor based in Norway, has secured 12,000 customers following its successes in winning deals close to home and abroad. With an aggressive channel strategy, SuperOffice now sells its Cloud applications under OEM arrangements with Visma, a major ERP and HR application vendor in Norway; as well as MYOB, an accounting applications vendor in Australia. 12

Forecast By Functional Area Our forecast calls for splitting the total enterprise applications market into 10 horizontal and the Verticals segments. The former runs the gamut from analytics to treasury and risk management. The latter in itself is comprised of 21 vertical industries from aerospace and defense to utilities. TABLE 2: TOTAL ENTERPRISE APPLICATIONS MARKET FORECAST 2013-2018, BY REVENUE TYPE AND BY FUNCTIONAL MARKET, $B Source: Apps Run The World, July 2014 Among these segments, content management is expected to post the steepest climb with a 38% CAGR through the forecast period as Microsoft flexes its muscle by extending its Office 365 franchise to a global audience. The vendor said over 50% of Office 365 revenue now comes from 13

international markets and sales of Office 365 commercial seats have been growing at 174% year over year. Other functional areas like analytics, ecommerce, ERP, supply chain management and treasury and risk management are also expected to post above 20% in CAGR through 2018 because of their relatively small base to start with as shown in the following graphic. IMAGE 2: CLOUD APPLICATIONS MARKET FORECAST BY FUNCTIONAL MARKET, BY COMPOUND ANNUAL GROWTH RATE Source: Apps Run The World, July 2014 CRM and HCM, the twin-engine behind the explosive growth of the Cloud applications market over the past few years, stand to show decelerating momentum because of the law of big numbers. While big vendors like Salesforce.com and Workday are confident about their growth prospects either organically or through acquisitions, other CRM and HCM vendors may not fare as well because of a lack of differentiating factors as well as near-term pricing pressures. For example, Resumator, an HCM vendor, now offers its products at a fixed price of $99 for unlimited number of users. What it boils down to is that the acronym war will continue to redefine the Cloud applications market. Based on our forecast, CRM applications market will still account for 24% of the market by 2018, down from 30% in 2013, as other segments are fast catching up in terms of Cloud ubiquity. 14

IMAGE 3: CLOUD APPLICATIONS MARKET BY FUNCTIONAL MARKET, 2013 IMAGE 4: CLOUD APPLICATIONS MARKET BY FUNCTIONAL MARKET, 2018 Source: Apps Run The World, July 2014 15

Within the fragmented vertical industries, the diversity of the user population will make Cloud adoptions a moving target. One thing is clear. Cloud ubiquity is here to stay. Temenos, a Swissbased financial services applications vendor, expects all new core banking replacements will be in the Cloud by 2020, yielding up to $1.8 billion in cost savings for Temenos T24 users mostly in the form of shared infrastructure. Regardless of how the horizontal and vertical segments are going to evolve, the existing Cloud applications vendors are expanding beyond their given slots by accelerating their platform and ecosystem development efforts. One possible outcome is for them to layer multiple Cloud services on top of a robust core system, which has been fully accepted and standardized by their customers. The poster child of this brand extension is ServiceNow, which started its Cloud journey as an IT Service Management applications vendor in 2003. Soon it moved into project portfolio management and more recently enterprise service management with a clear mandate to expand into CRM and HCM. What it underscores is the fact that many Cloud applications vendors are banking not on bagging the largest share in any given market, but rather the position of having the biggest wallet share within their customers through upselling and cross-selling of different Cloud services, thereby establishing the most sticky relationship that could end up paying them the most dividends in the long run. Finally there is the knotty question of what will happen to on-premise license and maintenance revenues, which still represented 83% of the market in 2013. Even with the incursion of Cloud applications vendors, on-premise software sales are projected to hold onto about 70% of the market by 2018. 16

IMAGE 5: TOTAL ENTERPRISE APPLICATIONS MARKET FORECAST 2013-2018, BY REVENUE TYPE AND FUNCTIONAL MARKET, IN PERCENTAGE Source: Apps Run The World, July 2014 17

The long-term outlook for on-premise applications revenues is somewhat mixed. Markets such as analytics, CRM, ecommerce and HCM are expected to see the bulk of their revenues converting to Cloud sales. On-premise revenues in areas like ERP and Verticals are likely to retain their stronghold because of the sheer size of their markets, as well as the propensity of some customers to take their time to mull over their options. On the other hand, many of these verticals healthcare being the shining example - are undergoing major transformation as they seek to clamp down their costs, while boosting their efficiency. At the same time, banking and financial services vertical, which has been one of the biggest IT spenders for years, is hoping to rebound after the end of the financial crisis. In both cases, Cloud applications appear to be ready to come to their rescue. One telling example of this rescue lies in the US banking industry, which has seen a 21% drop in the number of FDIC-insured financial institutions from 8,494 in March 2008 to 6,730 in March 2014 because of bank closures and mergers and acquisitions. During that period, Q2ebanking, a Cloud-based applications vendor that caters to regional banks and credit unions since its founding in 2005, has grown its customer count to over 334. In 2013 Q2 Banking saw a 38% jump in Cloud subscription revenues to $51 million, outstripping the growth of its counterparts in the on-premise banking applications space by a wide margin. While the game may not be over for on-premise applications vendors, all signs are pointing toward the growing momentum of a moving locomotive that could knock down any object in its tracks. 18

Merger Mania Grips Cloud Apps The rising valuation of Cloud vendors, coupled with an insatiable appetite for well-established enterprise applications companies, could fuel a merger mania in 2014 bidding up targets and final prices to the highest level since 2007. IMAGE 6: ENTERPRISE APPS M&A ACTIVITIES COULD RIVAL 2007 PEAK LEVEL Source: Apps Run The World, March 2014 For the first half of 2014 the announced value of mergers and acquisitions in the enterprise applications market has already approached $21.1 billion. If the same trend pervades in the second half, 2014 could end up becoming the bonanza year for investment bankers, eager sellers as well as anybody else hankering for a piece of the Cloud action. And Cloud applications vendors were hotly sought after during the first six months of the year, accounting for some of the biggest deals. ExactTarget, Skillsoft, Digital Insight, Active Network, and Dealer.com were all picked up this year north of $1 billion each by Salesforce.com, Charterhouse Capital, NCR, Vista Equity Partners and Dealertrack, respectively. Adding to the mix were Evolution1, KANA Software, Vocus, PeopleAnswers and Dude Solutions(stock sale) fetching a total sum of over $10 billion for these 10 Cloud applications vendors. Fattening the $10 19

billion pot further would be the estimated value of another $1 billion for the combined purchases of three other Cloud applications vendors Fieldglass, Seewhy and Silverpop. That could mean a grand total of $11 billion, more than half of the announced value of the major deals in 2014. Based on our vendor database, the number and the size of deals over the past 12 months has been increasing every quarter all pointing to a blockbuster year for buyers and sellers in the enterprise applications market. Stroking the enthusiasm of acquisitive vendors and institutional investors namely private equity firms is the specter that 2014 could emerge as the second most active year for enterprise software M&A since the peak of 2007, as shown in the following table. TABLE 3: ANNOUNCED VALUE OF MERGERS AND ACQUISITIONS IN ENTERPRISE APPLICATIONS MARKET, $B 2005 2007 2010 2012 1H2014 Total Announced Value of Deals, $B 35.5 59.5 22.2 16.5 21.1 Source: Apps Run The World, July 2014 Serial acquirers like Constellation Software, Real Page, and Trimble have continued to push into new markets through relentless purchases. ERP vendor Constellation Software, for one, typically buys anywhere from a dozen to two dozen companies in any given year. Less well-known ones are getting into the action in a convincing fashion. Cloud-based elearning vendor Desire2Learn is a case in point. In 2014 Desire2Learn purchased the Achievement Standards Network for digital data representations for the education vertical. That followed its 2013 purchases of Wiggio, a collaboration tool for students; and Knowillage Systems for its adaptive learning engine. Such frenetic tie-ups are expected to redraw the competitive landscape, especially in hotlycontested markets such as CRM, HCM and even contingent labor management. In December 2013, elance and Odesk merged to form a huge player in the contingent labor management applications space with combined billing of more than $750 million for millions of freelancers and contractors that subscribe to the two sites. That touched off a frenzy among the incumbents. In January 2014, IQNavigator acquired ProcureStaff Technologies, a division of Volt Information Sciences, adding more customers to consume an enlarged portfolio of indirect spend and contingent labor management applications. Two months later, SAP topped it off by announcing its deal to buy Fieldglass for contingent labor management applications. For customers, the segment consolidation could prompt them to raise questions about the future of the remaining contingent labor management players such as Avionte Staffing, Beeline, Peoplefluent, and Provade, which may find it necessary to find partners to merge in order to safeguard their territories. 20

Contingent labor management is only a microcosm of a larger force at work when the draw of Cloud applications is attracting so many vendors to emerging segments such as subscription billing management that are getting crowded by the day. Aria Systems, Avangate, Billing Platform, Chargebee, Cleverbridge, ElasticPath, Fusebill, Pay Simple, Recurly, SaaSoptics, SaaSy, Simplify, Stripe, Vindicia, and Zuora are among dozens of Cloud applications vendors that specialize in subscription billing management in the Cloud. That does not even take into account of first-generation ecommerce billing vendors like CyberSource, Digital River and many others. For these vendors and their backers, the consolidation wave may not be too far off. The following table shows the growing number of mergers and acquisitions among major enterprise applications vendors since the beginning of 2013. TABLE 4: SELECTED MERGERS AND ACQUISITIONS IN ENTERPRISE APPLICATIONS MARKET BETWEEN 2013 AND FIRST HALF OF 2014 Acquired Vendors Key Markets Acquirers Announce d Value, $M Year Announced Micros Systems Retail apps Oracle 5300 2014 ExactTarget CRM Salesforce.com 2500 2014 Skillsoft elearning Charterhouse Capital Partners 2325 2014 Applied Systems Insurance ERP Hellman & Friedman 1800 2014 Digital Insight Online banking NCR 1650 2014 UNIT4 ERP Advent International 1600 2013 Responsys CRM Oracle 1500 2013 GXS ecommerce Open Text 1065 2014 Active Network CRM Vista Equity Partners 1050 2014 Dealer.com Automotive ERP Dealertrack 1000 2014 Passport Health Healthcare ERP Experian Health 850 2013 Kronos(stock sale) HCM Blackstone and GIC 750 2014 Accelrys Product Lifecycle Management Dassault Systemes 750 2014 Evolution1 HCM WEX 533 2014 Cegedim Life Sciences CRM IMS Health 520 2014 KANA Software CRM Verint 514 2014 Vocus, Inc. CRM GTCR 447 2014 API Healthcare HCM GE Healthcare 340 2014 Total Specific Government, Solutions Healthcare ERP Constellation Software 324 2013 PeopleAnswers HCM Infor 200 2014 21

Jaspersoft Analytics Tibco 185 2014 Sage Nonprofit Nonprofit ERP Accel KKR 101 2013 Dude Solutions(stock ERP Warburg Pincus 100 2014 sale) PNI Digital Media Retail apps Staples 74 2014 Andera Banking apps Bottomline 47 2014 Vertical Response CRM Deluxe Corp. 27 2013 SERUS Supply chain management E2Open 26 2014 Autotask Project management apps Vista Equity Partners NA 2014 Axium ERP for Professional Services Deltek, Inc. NA 2014 Fieldglass Contingent Labor Management SAP NA 2014 Homecare Homebase Healthcare ERP Hearst NA 2014 Hybris ecommerce SAP NA 2013 Maxwell Construction ERP Viewpoint Construction Software NA 2014 P2 Energy ERP for Energy Advent International NA 2013 Seewhy CRM SAP NA 2014 Silverpop CRM IBM NA 2014 Tradecard Supply chain management GTNexus NA 2013 TribeHR HCM NetSuite NA 2013 Triple Point Treasury and Risk Technology Management ION Trading NA 2013 Source: Apps Run The World, July 2014 22

Investors Pile Into Cloud Apps Vendors The drive to bankroll some of the fastest-growing Cloud applications vendors has reached a milestone with at least $21 billion being raised so far. That includes recent investments from private-equity firms, venture capitalists, and sovereign funds as well as measures by these entities to place some vendors under their control often by going private. IMAGE 7: CLOUD APPS VENDORS RAISE $21B One of the largest investments was the $2.3-billion purchase of Skillsoft in March 2014 by UK private-equity firm Charterhouse Capital Partners from Berkshire Partners LLC, Advent International Corp and Bain Capital LLC. That followed the $1.8-billion purchase of Applied Systems in November 2013 by PE firm Hellman & Friedman from Bain Capital LLC. There were similar purchases such as UNIT4, Active Network and Vocus as shown in the following table. The majority of the transactions involved follow-on financing by new investors that are increasingly drawn to the Cloud applications space. Dropbox and Box Inc. were the shiny examples of over-the-top investments that VCs and PE firms have piled onto these collaboration vendors without blinking their eyes. Between them, investors have put in at least $1.6 billion in 23

debt financing, direct and indirect ownerships. Box s valuation has reached more than $2 billion, while Dropbox s hovers around $10 billion. The table shows 32 transactions with each Cloud applications vendor raising at least $100 million in recent funding rounds mostly within the past three years. Not shown are more than 200 deals that other Cloud applications vendors have raised through the same period. The total amount of funding raised so far for these 230 vendors reaches more than $21 billion, or about $91 million for each vendor. The outsized investment comes at a time when many of these Cloud applications vendors have begun to gain wide acceptance, albeit at a steep cost. Box, for example, has secured over 27 million registered users including 39,000 paying customers for its storage and collaboration offerings in the Cloud. Over the past three years, Box has secured about $207 million in aggregated revenues, but its sales and marketing expenses have exceeded $310 million during the same period. It s difficult to draw the conclusion that these vendors have been prodded by investors to spend lavishly on sales and marketing in order to succeed in the Cloud or if they have been emboldened to invest heavily in order to get the attention of customers and investors. In either case, the piggybank of these Cloud applications vendors appears to show no sign of shrinking. Check back this space often since we are going to track and update the status of these big money grabbers in order to show the flow of money coming in and changing hands among investors in the coming quarters. TABLE 5: CLOUD APPLICATIONS VENDORS WITH AT LEAST $100M IN PRIVATE FUNDING AND/OR PRIVATE-LED ACQUISITIONS Vendor Amount Raised Market Key Investors Skillsoft 2325 elearning Charterhouse Capital Partners Applied Systems 1800 Insurance ERP Hellman & Friedman UNIT4 1600 ERP Advent International Dropbox 1100 Collaboration Black Rock, JP Morgan, Sequoia Capital, Accel Partners, Index Ventures, Benchmark Capital, Goldman Sachs, Greylock Partners, Institutional Venture Partners, RIT Capital Partners, Valiant Capital Partners. 24

Active Network 1050 CRM Vista Equity Partners SurveyMonkey 900 Collaboration Tiger Global Management, ICONIQ Capital, Social+Capital Partnership, Laurel Crown Partners, TPG Growth, Google Kronos 750 HCM Blackstone, GIC, Hellman & Friedman Box 546 Collaboration Andreessen Horowitz, Bessemer Venture Partners, Draper Fisher Jurvetson, Emergence Capital Partners, General Atlantic, Meritech Capital Partners, Social+Capital Partnership, NEA, Scale Venture Partners, and U.S. Venture Partners, and strategic investors salesforce.com and SAP Deem 467 ecommerce Fidelity, Keating Capital, Foundation Capital, Oak Investment Partners, American Express, JPMorgan Chase & Co Vocus 447 CRM GTCR Evernote 250.5 Collaboration Meritech Capital, CBC Capital, Sequoia Capital, Morgenthaler Ventures, and DOCOMO Capital P2 Energy Solutions 250 Energy ERP Vista Equity Partners sold P2 to Advent International for undisclosed amount in October 2013 Domo 248.6 BI Benchmark, GGV Capital, IVP, Greylock Partners, Founders Fund, Andreessen Horowitz, Hummer Winblad, WPP Viewpoint Construction 230 Construction ERP Bain Capital Software Atlassian 210 PPM T. Rowe Price, Dragoneer Investment Capital, Accel Partners DocuSign 203.5 Collaboration Kleiner Perkins Caufield & Byers, Accel Partners, Scale Venture Partners, Sigma West, Ignition Partners, SAP Ventures, Frazier Technology Ventures, Second Century Ventures, WestRiver Capital, Google Ventures EventBrite 200 Collaboration DAG Ventures, Sequoia Capital, T. Rowe Price, Tenaya Capital and Tiger Global SilkRoad 192 HCM Keating Capital, NTT Finance, Intel Capital, Crosslink Capital, Foundation Capital, Azure Capital and Tenaya Capital HootSuite 189.9 CRM Blumberg Capital, Hearst Interactive Media, Geoff Entress, Social Concepts, Millennium Technology Ventures, OMERS Ventures, Lithium Technologies 151.7 CRM Insight Venture Partners, Accel Partners Emergence Capital Partners, Shasta Ventures, Benchmark Capital, New Enterprise Associates, SAP Ventures, DAG 25

Ventures, Tenaya Capital, Greenspring Associates Anaplan 144.4 BI Shasta Ventures, Meritech, Salesforce, Granite Ventures SugarCRM 143.7 CRM Goldman Sachs Group, Draper Fisher Jurvetson, Walden International, New Enterprise Associates Intacct 139.8 Accounting Battery Ventures, Costanoa Venture Capital, Emergence Capital, Sigma Partners, Split Rock Partners, Morgan Creek Capital Management, Silicon Valley Bank Vulcan Capital, Northgate, Next World Zuora 132.5 Capital, Benchmark Capital, Shasta Subscription Ventures, Tenaya Capital, Redpoint Management Ventures, Index Ventures, Greylock Partners Adams Street Partners, Crosslin Capitalk, ServiceMax 122 ERP Emergence Capital, Mayfield Fund, Salesforce.com, Trinity Ventures Shopify 122 ecommerce OMERS, Insight Venture Partners, Bessemer Venture Partners, FirstMark Capital, Georgian Partners, Felicis Ventures MINDBODY 108 Healthcare ERP Bessemer Venture Partners, Institutional Venture Partners, Catalyst Investors, W Capital Partners, Montreux Equity Partners Ipipeline 104.4 CRM NewSpring Capital, Technology Crossover Ventures, Volition Capital Sage Nonprofit 101 Nonprofit ERP Accel KKR HubSpot 100.5 CRM General Catalyst, Matrix Partners, Scale Venture Partners, Sequoia Capital, Google Ventures, Altimeter Capital, Salesforce.com, Cross Creek Capital Avalara 100 Financials Battery Ventures, Sageview Capital, Benaroya Capital, Buckhead Investment Partners, Pioneer Venture Partners Dude Solutions 100 School ERP Warburg Pincus Other 6500 Total 21029.5 Source: Apps Run The World, July 2014 26

Research Methodology Data used in research reports are derived from publicly available documents, continuous surveys of applications vendors, customers, resellers, Independent Software Vendors, systems integrators and other verifiable sources. Vendor shares and market forecast results are based on a combination of existing databases as well as demand side and supply side research conducted throughout the year with validation from vendors, customers, channel partners and documentations such as earnings releases and 10Q and 10K filings, vertical industry studies, regional and country-level statistics from public and private institutions(i.e. colleges, universities, government agencies and trade associations). For additional information on our methodology, here's the link: http://www.appsruntheworld.com/research Copyright 2014, APPS RUN THE WORLD 27