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CloudSwitch launches in SF; CEO lists five reasons corporate customers still fear the cloud

Posted by Scott Kirsner  June 22, 2010 04:00 PM

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Burlington-based CloudSwitch, one of the better-funded cloud computing start-ups in town, officially launches Wednesday at the Structure 2010 conference in San Francisco. While many small businesses have gravitated to cloud-based storage and server horsepower because of the cost savings and flexibility they offer, CloudSwitch aims to make cloud computing "safe" for larger companies. Run by former SolidWorks CEO John McEleney, CloudSwitch has raised $15.5 million from a trio of local venture firms: Matrix Partners, Atlas Venture, and Commonwealth Capital Ventures.

CloudSwitch sells software that's installed in a corporate data center to enable a customer to easily use cloud services from providers like Amazon and Terramark to run their own applications. "You make no changes at all to your underlying app," McEleney says. "And you get complete encryption of all the data. The customer keeps the keys, and no one else has them."

CloudSwitch co-founder Ellen Rubin explains that big companies may want to "spin up" a few hundred extra servers when they're testing a new application to see how it will work in the real world, or for already-live applications during times of high demand, like a travel Web site during the height of summer vacation season.

"We see people saving from 30 to 50 percent, compared to maintaining servers and storage in their own data center," Rubin says. "The real savings is being able to shut it off when you don't need it, rather than running it 24/7."

The company charges a minimum of $25,000 a year for access to up to twenty servers, with pricing scaling up based on the customer's needs. McEleney says they're selling mainly to directors or VPs of IT infrastructure, and executives responsible for application development, as opposed to CIOs. "We don't want to get caught in the spin cycle of someone asking, how does this fit into our 10-year cloud strategy," says McEleney.

CloudSwitch has 24 full-time employees, and McEleney says they're hiring a bit on the business side, and "even more on the engineering side."

I asked McEleney for his list of the top five reasons big companies are still anxious about cloud-based services. Here's his run-down:

1. The cloud is not as secure as your data center (primary concern around multi-tenancy)
2. Moving to the cloud is hard
3. If I move to the cloud, am I going to be “locked in”?
4. The cloud is more expensive than buying hardware
5. No one is really using the cloud

As for that last concern, McEleney concedes that there isn't yet a list of Wal-Mart-sized companies using cloud-based services (or at least talking publicly about it.) But he says CloudSwitch is already working with some big financial services and pharmaceutical companies that just aren't willing to be named, and has been having meetings with a number of other potential customers in the Fortune 500.

At the Structure 2010 conference this week, there are a few other local folks speaking, including Akamai CEO Paul Sagan and Michael Skok of North Bridge Venture Partners. Also, Somerville-based Cloudant will be launching its "cloud ready" database service at the conference, along with CloudSwitch.

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About Scott Kirsner

Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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