Cloud Futures Pt. 3: Focused Clouds
Happiness in Business
If you can't be 'best' or 'cheapest', that only leaves being 'first' (see Pt. 1: Service Clouds and Pt. 2: Commodity Clouds). Since Amazon Web Services (AWS) clinched the 'first' and 'best' titles for the general marketplace, your best bet is to pick a subset of the market to focus on. Focused clouds find a sweet spot and exploit it. This is really Business 101 for Startups. A diagram I saw recently by Ben Caddell brought this into focus and provides a very simple to understand reminder for those of us who may have forgotten (see right).
Let's look at some of today's focused clouds. I'll mostly talk to Infrastructure-as-a-Service (IaaS), but also touch on Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS) briefly.
Horizontally-Focused Clouds
By 'horizontal', people usually mean a longitudinal slice of the general market focusing on either a stakeholder (e.g. QA, IT, business management) or a business size (e.g. large enterprise, small/medium enterprise (SME), small/medium business (SMB), startups, or individuals). A horizontal focus, by definition crosses multiple verticals (e.g. financial services, health, etc. — see below).
We have some interesting examples of these available to us today. I've picked just three to highlight my point: SkyTap, Terremark, and EngineYard.
SkyTap
Perhaps my personal favorite is SkyTap. SkyTap focuses tightly on providing a unique experience for those in Quality Assurance (QA). They allow a rich workflow experience that greatly facilitates deploying and saving the state of multi-server applications. A QA person can find a bug that affects multiple servers in a complex application and literally save the entire system for reuse or re-play by the affected developer at any time. Combined with easy replication of multi-server environments and other great features designed for this segment only, SkyTap, even though technically an Infrastructure-as-a-Service (IaaS) play is generally under the radar when folks talk about infrastructure clouds.
Terremark
A relatively new entrant into IaaS, Terremark is making it's mark by focusing on the enterprise. In fact, their offering is called simply The Enterprise Cloud, showing where they plan to focus. Terremark uses VMware, which hasn't had a lot of traction in the public clouds to date. Presumably this is because they plan to offer some of the more advanced enterprise-class VMware features like HA and DRS. From my sources at VMware I've heard that the Terremark cloud product is quite good and they have developed quite a bit of secret sauce on top of VMware. [1]
Regardless, by picking an area of the market that has been under-served by the heavyweights I think they have a good opportunity.
EngineYard
It's quite a bit easier, as you move from Infrastructure to Platforms and Software to differentiate and focus on a particular target market. EngineYard (and their close cousin Heroku who I have mentioned before) focuses on providing a fully managed and automated Ruby-on-Rails (RoR) stack to web startups. This has already distinguished them amongst the platform crowd and allowed them to ramp up a very respectable business in less than 2 years time.
Vertically-Focused Clouds
If you can't go horizontal, go vertical. A vertical focus is an industry focus, be it financial services, health, construction, high-tech, life sciences, energy, or other. A vertical focus tends to be more solutions-oriented. When you put together a package that focuses on a single industry it is rarely transferrable, without major changes, to another industry. However, this kind of focus can be very beneficial for a smaller cloud trying to make a mark early. This also means it can be rather hard to build a vertical infrastructure cloud. An example might be someone building a cloud that was highly secure and HIPAA compliant for the medical industry. Or one that focused on PCI compliance for financial services companies.
Outside of infrastructure, many Software-as-a-Service (SaaS) businesses focus tightly on a given industry. I don't know of any current IaaS clouds who are vertically focused and the list of SaaS providers who are vertically focused is too long to list. A couple of brief examples:
athenahealth
athenahealth provides doctor and patient management services online.
BankServ
BankServ provides online payment processing specifically for financial institutions.
Focus, Focus, Focus
As you can see, if the general market already has dominant players who are 'first', 'best', and 'cheapest', then picking a subset of the market that is not currently served and being 'first' there is a great strategy for any new cloud. In the final part of this series I'll talk about the particular importance of focus for those players currently in the general market who need to compete on value, not price to survive. Ultimately, the best way to make money is to help your customers. Don't help them on price. Provide value instead.
