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Posted December 19, 2011

Can you Make Money with a Cloud Database as a Service?

By Sean Michael Kerner

Is the cloud the right place to power your database driven apps? Startup Xeround certainly thinks so, and has convinced its investors of that too.

To date, Xeround has raised $38.8 million in three rounds of funding, the most recent a C series last week for $9.3 million. Xeround develops a cloud database-as-a-service technology that leverages the open source MySQL database. The company has multiple channel partnerships including Amazon and Rackspace, which are helping to drive adoption. Xeround's service officially become generally available in June of this year as a scale-out MySQL platform.

In terms of what Xeround plans to with their latest round of funding, Xeround CEO Razi Sharir told InternetNews.com that the plan is to expand the cloud offering.

"Within the next few quarters you will see more and more Platform-as-a-Service (PaaS) providers delivering our database as the database of choice," Sharir said.

Sharir noted that he's excited about the PaaS space since he expects over time that they will take an increasing share of developer and enterprise deployments. He added that the plan is that within the next six months, Xeround will be the core backend database for the majority of PaaS offerings.

From a revenues perspective, Sharir noted that it's still early days for his company and as such the focus is on future revenues. He added that the key performance indicators that he had for the database initially didn't turn out to be accurate. Initially Xeround forecast that they would go to market with databases in the range of 0 to 50 GB. As it turns out, most databases in their cloud deployments range between 0 and 10 GB.

"We went to market with a pay-per-use model, where the more you use, the more you pay," Sharir said. "In the coming months, we'll be going to market with additional pricing models that will allow people to work with models that will be a better fit for their needs with things like tiered pricing."

The tiered pricing could include a fixed price for one portion with pay-per-use on the rest.

"We're exploring some pricing models that will better fit what we have seen so far and that will affect revenues," Sharir said.

From a user conversion perspective, Sharir said that adoption and traffic are strong. He noted that the conversion rates from trial to paying customers is above 10 percent for Xeround.

As far as who is actually using cloud database as-a-service, Sharir noted that it's all over the map.

"We haven't seen a specific use-case that is particularly strong," Sharir said. "On the flip side, the only use-cases that we have seen that we don't support are data warehousing and business intelligence."

Sharir explained that the Xeround database is a distributed structure, which means if a user wants to do a full table scan from multiple sources it will take a long time. He added that use-cases have included iPhone apps and gaming all the way to business to consumer and business to business applications.

The market for database-as-a-service has expanded in recent months with Oracle and VMware both entering the market. In VMware's case they are using the PostgreSQL database, which Sharir noted is not a comparable offering to Xeround's MySQL approach.

"PostgreSQL is mostly perceived as an open source alternative to Oracle or Microsoft SQL, which are perceived as more of an enterprise, private datacenter type of databases," Sharir said. "We took the web cloud angle and gave away the enterprise in the short term."

Sharir added that Xeround's client base is typically people that have used MySQL before or have a need for MySQL in the cloud. He stressed that Xeround is 100 percent compatible with the open source MySQL base. Xeround adds scalability, usability and performance improvements to the open source base.

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals.

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