Special Feature
Part of a ZDNet Special Feature: The Industry Cloud: Why It's Next

The top five industry clouds VCs are investing in

The emergence and popularity of cloud technology has led many companies to develop industry-specific cloud applications. Here are the vertical clouds that are drawing the biggest VC investments.

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As the cloud continues to settle in the enterprise, it's becoming increasingly apparent that the majority of the public cloud options are not one-size-fits-all solutions for certain industries.

As such, vertical-specific solutions have emerged to address specific needs and adhere to regulations. These 'industry clouds' are giving enterprises an alternative to the big vendors and their more monolithic solutions.

Christian Jensen, a partner at Accel, said that it's natural for software companies in an emerging market to first address the horizontal needs before stepping into niche markets.

As more and more companies address specific needs, we will see more investments in these industry clouds as well. According to Jensen, the industries to watch out for are the ones that exist in a big vertical with differentiated workflows, that are highly regulated, and can benefit from the insights gleaned by new data.

Additionally, industries with high dissatisfaction with incumbent service providers are also ripe for the change that can come from a verticalized cloud offering. Here are the top five industries seeing the biggest investments in vertical cloud solutions.

1. Healthcare

Healthcare is an industry that's ripe for the change that could come from a secure, compliant cloud system. This is especially true when it comes to accessing patient charts and records.

"The concept of being able to to scan everything and have it waiting for you in a secure location that doesn't violate HIPAA protocols and things like that for doctors, that's going to be huge," said angel investor Peter Shankman.

If startups can build an effective healthcare cloud solution, patient care and efficiency could be improved, but it could also lead to a more data-driven healthcare system. And, that data will have to be protected under the same strict security as the patient records.

"Data sovereignty is another important driver for healthcare," said Ariel Tseitlin, a partner at Scale Venture Partners.

2. Insurance

When it comes to insurance, not much has changed over the years. Insurors basically only have access to a limited amount of data.

"Insurance has been underwritten using actuarial tables and not much data for a long time," said Accel's Jensen. "When you buy car insurance, they basically look up your zip code, your age, the car you drive. There's not much else that goes into it."

A proper industry cloud system, though, would give insurance agents and underwriters access to even more data, such as how often you drive, your driving habits, and other data that may not be obvious, Jensen said, but could affect the bottom line.

Of course, this will take a big investment in IoT as well, since gathering and analyzing that data will require sensors and connected cars to work well together. Jensen said that it could also help insurance companies mitigate risk by allowing them to do things such as alert people to prepare for inclement weather.

3. Financial services

The financial services industry is the king of pen-and-paper transactions. Notoriously slow to adopt new technologies, it's an industry that stands to gain a lot from a cloud application by digitizing a lot more of its processes.

As far as regulations go, Scale Venture Partners' Tseitlin said that PCI and SOX lead the charge, so startups need to be wary of compliance when stepping in to this industry. However, with legacy leader Oracle recently launching its own cloud offering for financial services, the clock is ticking for young companies to move in and capture a piece of the market.

4. Field services

When it comes to employees in specialized roles who don't really work at a desk, often referred to as 'field services', there aren't many advanced technology options available that cater for their workflows.

This is especially true for the cloud. In many cases, the unique workflows of the field services industry don't properly fit into a normal, horizontal solution.

"If you're examining an oil rig, or if you're determining where drainage pipes should be drilled in a municipality, those are unique workflows that can benefit from a different tool," Jensen said.

The combination of cloud services optimized for mobile devices could obviously have powerful effect in this industry.

5. Agricultural technology

Steps have been made in the AgTech industry to modernize, but they have been piecemeal so far. Companies like John Deere have started working with IoT and big data to help farmers better understand their crop yields, but much could be done with the cloud to improve the process.

Better access to historical weather data or soil analysis data could help farmers prepare for planting season and track crop diseases and parasites. Additionally, 2014 was a record-breaking year in terms of AgTech investment, according to AgFunder. For more on the progress in this sector, read the TechRepublic cover story How big data is going to help feed nine billion people by 2050.

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