Does Skytap's $10M Signal a Strong Year for IaaS Clouds?

Seattle-based cloud computing startup Skytap has closed a $10 million Series C round, bringing the company’s total funding to $23 million since its first round closed in August 2007. OpenView Venture Partners, Ignition Partners, Madrona Venture Group and the Washington Research Foundation contributed to this round. The funding comes after some interesting IaaS developments late in 2010, and might signal that 2011 will be a big year for IaaS cloud providers targeting traditional businesses. But Skytap will need to work hard to get out its message.

If security and availability really are important to skeptical organizations, the barriers to adopting cloud computing are falling. In November, Amazon Web Services (AWS) achieved Level 1 compliance with the Payment Card Industry (PCI) Data Security Standard, which means its cloud can process credit card transactions and store credit card data. This is a big deal, and not just because it helps validate claims that multitenant, “credit card” cloud infrastructures can be secure. Cloud providers have long talked about cloudbursting during holiday shopping periods as a way to keep sites up and running, and now they can offload entire applications into AWS, not just portions that don’t involve credit card data.

Availability also has been in IaaS providers’ crosshairs lately. Availability is the reason we’ve seen AWS seriously upgrade its CloudWatch service in the past few months, and why Rackspace bought Cloudkick last month. Customers want to know what’s going on with their cloud servers so they can take corrective actions if need be. Availability also is the reason Rackspace rolled out its managed cloud offering, which brings managed-service-level support to its Cloud Servers offering. In October, MSP Datapipe announced a similar managed service for AWS.

On a related note, Rackspace also further fused its hosting business with its cloud business by developing a hybrid (i.e., on-premise and cloud-based servers) model consisting of dedicated servers and cloud servers. Customers that trust the security of managed dedicated servers can have hybrid clouds without maintaining their own servers. GoGrid, actually, has been offering this capability for two years.

Skytap takes a different, but still enterprise-friendly approach to cloud computing. With its focus on configuration libraries, advanced user controls and virtual private networks, Skytap appears to be a good choice for organizations wanting to take baby steps into the cloud by replicating their existing application stacks and policies. However, after bursting onto the scene a few years ago, it has largely faded into the background as other cloud providers took center stage. By giving it another $10 million—its largest single round to date—it appears Skytap’s investors think the time is right for the company to gain some serious traction. As larger providers begin really selling to traditional businesses with their new features, Skytap would be wise to turn up the volume of its message and insert itself into the enterprise cloud discussion.