The Original 10 Laws of Cloud Computing 2008

Bessemer’s canonical principles for building and growing cloud businesses

At Bessemer Venture Partners, we have had the privilege of working closely with over 50 of the leading cloud computing companies over more than a dozen years. We continue to fundamentally believe that the emergence of cloud computing – and its three core components of Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS) – is completely changing the landscape of the multi-billion dollar software industry.

We first presented Bessemer’s Top 10 Laws for Being “SaaS-y” at our annual Cloud CEO Summit in 2012 and were overwhelmed by requests to share the content more broadly. We decided to not only share the insights and the discussion openly but to treat these laws as an active dialogue with ongoing updates to reflect the collective learning of the cloud community. This most recent update is the most extensive we have ever undertaken and includes many changes and several entirely new concepts.

This work is the result of thousands of conversations that the Bessemer partners have had with cloud executives, including our past and current portfolio companies, as well as other leading public and private cloud companies.

Death of the suite; long live best-of-breed and even best-of-feature

For most of the last two decades, major software vendors such as SAP, Oracle, Microsoft, and others have pushed the concept of an “integrated” software suite on the market.

The pendulum is swinging back forcefully in favor of best-of-breed applications.

4. Measuring the impact of churn and renewal rates

These metrics also include logo churn, CMRR churn, and CMRR renewed.

It’s very difficult and expensive to grow subscription businesses if you have moderate customer churn, and prohibitive if your churn is high.

If you find yourself questioning several of these 10 laws however, it’s probably time to step back and take a hard look at your business. As former cloud executives and investors ourselves, we have learned the hard way that much of the battle is just learning from the mistakes of those who went before us. In our analysis of hundreds of cloud businesses, we encountered several successful companies that were on the borderline with one or two of these laws, but none that successfully challenged several of them.

We hope that you can benefit from some of these best practices we’ve learned through the years and these laws can help you run your cloud business more effectively.