Brian: Yes.

DMR: And what does it mean? What’s the difference in this business model to the business of an Application Service Provider?

Brian: We’ve gone through a lot of industry cycles over the past several decades. We started off with large mainframes where you would basically have to timeshare yourself, have punch cards, a schedule, et cetera. Back then, that was a “Cloud”. And then it got so cheap that you could build PC’s and have every person having one – or now, multiple netbooks, laptops, devices in your house. And that became ubiquitous. But the problem was, because of the ubiquity, the cost of management went up.

So now we’re back to the point of: “The cost of management is too high. Let me just put it all in a centralized location because bandwidth is basically a lot cheaper and more accessible today.” We’re kind of back to the mainframe business. That’s what Cloud is. So it’s a business model. Technology is no different.

DMR: You said that there are going to be a lot of exits in this industry. From a VC perspective it’s a hot sector right now.

Brian: Yes, we made one investment in a company called ConteXtream. They do network virtualization. So the concept there is basically there’s a lot of transport and routing and switching infrastructure in a network operator that has its own cycle of evolution – technology cycle, depreciation schedule, et cetera. And then there’s the application domain, which is changing much more rapidly than the underlying infrastructure. Today the way applications for networks get built is that they’re very much tied to a specific set of hardware, software, et cetera.

In the case of ConteXstream, they build software that sits on a compute resource, like a server, and segregates the application domain from the network domain. So it’s network virtualization. They do load balancing, global load balancing, traffic steering, these sorts of things – a kind of virtualization combined with Cloud computing. But it’s for the network operator’s infrastructure itself. Not as a service to sell.

In terms of enterprise Cloud, which is where the majority of the activity is, we haven’t done any investments in that space. I don’t think there’s many good opportunities unless you’re really willing to make a lot of investments.