At the Cloud Connect event in San Jose, Allister Croll gave an excellent presentation, actually as an aside, Croll ran close to half of the Cloud Connect sessions and really did a sterling job of managing the conference. Anyway – in his session Croll was talking about the opportunities for investment in the cloud and specifically talked about the a strategy of differentiation versus one of transparent commoditization.

You see more and more services generally, and cloud services in particular, are reaching a point where they’re becoming a commodity, and in doing so they’re inevitably competing based on the only facet that commodities are able to compete on – price. Croll talked about what it takes to differentiate a service – aspects of brand, of special features, or some kind of “secret sauce” that enables them to raise their heads above the rabble. And how to do this with a service that essentially (in the case of IaaS and PaaS solutions) disappears into the background.

A couple of conversations I’ve had recently spoke to this point. At the Cloud Connect event I spent a bit of time with Leonard Chung, CEO of Syncplicity (more on them here). Syncplicity is a lovely syncing and backup application that really is a treat to use. And why? Simply because it disappears into the background and I don’t notice it. Now that’s fine with an early adopter, cloud-centric person like myself whose day-job revolves around talking about these apps – but extend that to the mainstream and you have a difficulty: mass market users who can’t remember what an application is called let-alone what it does.

Recently some friends at Expanz sent me a Gartner report that they were included in (congratulations guys, by the way). For background, Expanz is an Australian PaaS startup enabling great model-based development on top of .NET. Anyway, reading the Gartner report, I was struck by the challenges they saw for Expanz. Quoting the report:

Typical market awareness, partnership and viability problems of a small, startup company aside, expanz faces some more-specific challenges… The recent announcements of Microsoft Windows AppFabric and Microsoft Azure validate some aspects of the expanz approach, but they also pose positioning challenges…Microsoft Azure platform will target the APaaS market with Microsoft Azure platform AppFabric and will compete directly with expanzPLATFORM. Therefore, expanz will have to articulate a value proposition complementary to Microsoft’s and will need to devise way to add technical value atop Microsoft Windows platform to maintain its appeal in the long term.

Essentially you have a platform that has limited exposure and is constantly having to differentiate itself in the face of predation by one of the dominant players. While it is true (as Xero CEO Rod Drury likes to say) that it’s not the big that eat the small but rather the fast that eat the slow, the fact is that bigness on a Redmond scale makes up for any lack of agility that might exist.

The difficulty here is that as Croll put it during his presentation, almost all vendors are trying to:

make everything below the level at which a business plays on transparent

This strive for transparency, and the tendency of the big to eat the small means it’s hard work for a small start-up that plays in a space which isn’t highly visible. My advice? Find some nub of differentiation and at all costs do what you need to do to grow fast. While generally against early stage funding for start-up companies, this advice changes in the event that the company plays in a space that is difficult to differentiate and threatened by big incumbents (as does Expanz) for them it’s a case of having to gain traction as fast as possible.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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