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Ensuring Platform Success by Growing Ecosystems

Building a vibrant ecosystem is the core strategy of technology companies to improve success of a platform

In the past, innovation in the IT industry consisted of a few large vendors developing hardware and software products in virtual isolation. This behavior stemmed from the desire to hide trade secrets from competition and maintain a lead in the market. Few solutions dominated the IT landscape and gave customers limited options while allowing products to thrive on high profit margins. Ever since the success of Linux, the market has been moving to a new paradigm in which hardware and software platforms harness co-development supported by a larger ecosystem of developers and partners.

No single company is capable of delivering all the IT features required by today’s organizations. With that in mind, a number of ecosystems are being formed to provide customers with end-to-end trusted cloud solutions. An ecosystem helps components to harmoniously work together delivering very specific solutions for precise customer needs. This makes the work of CIOs much simpler and also meets critical business needs.

Currently, some technology vendors build ecosystems by helping partners with large technology enablement teams. New self-service and open innovation models are also redefining the business, which benefits both platform providers and solution builders.

There are different approaches to building an ecosystem. Here are three popular methods (with examples):

· Investment: The likelihood of platform success increases with the volume of unique solutions built on it. Start-up companies play an important role in filling in the gaps of needed features. Start-up success also depends on investment made by venture capitalists and other entities. Supporting a start-up also provides investors an opportunity to influence the company’s direction.

Example: SAP Ventures – Using investments from SAP and its executives, this independent firm provides expertise in addition to capital. Access to SAP’s ecosystem provides icing on the cake for start-ups to get even more value out of the investment. Financing a collection of developers to build products supporting HANA seems like a good focus item of SAP to promote the product with customers. Compared to some large public companies buying back stock, financing start-ups may perhaps bring back better return on investment (ROI).

· Sharing Intellectual Property (IP): Products can benefit by expanding the number of companies contributing intellectual property (IP) to its development. Compared to working in isolation, driving requirements from a diverse set of needs gained by broad collaboration adds value to the resulting product. Many companies, like HP and IBM, have built very innovative products by spending a significant percentage of their revenue on R&D and building a huge patent portfolio. At the pace which technology is progressing, licensing intellectual property is increasingly being used as a promising way to meet market needs.

Example: OpenPower Consortium – In recent years, while both server and mobile CPUs have progressed, the growth of the server market among non-Intel products has been limited. Just as ARM licenses their products to lead in the mobile market, IBM can similarly bring about change to customers for the server market. IBM’s decision to license its Power processor technology to several technology firms was surprising since Google is one of the founding members. It does show how Google would like to enhance its offerings by contributing to the underlying chip technology. With IBM already using the Power platform for their Watson platform, Google could use that capability to help its massive processing needs.

· Opening APIs: Opening a platform by making core components accessible through application programming interfaces (API’s) results in increased adoption by solution developers. Cloud solutions can be quickly composed from Software as a Service components connected through API’s. This approach is helped increase the pace of companies disposing high priced, on-premise solutions with web delivered capabilities. As a result, using open APIs is now a core component of business strategy for hardware and software vendors.

Example: Box - While Apple, Facebook and Microsoft have adopted this strategy and succeeded, recently companies like Box have shown that they can use this approach to enhance their own platforms. Box not only appeals to developers with a catchy phrase – “Build Your App on Box” - but also reaches out to enterprises with the Box Innovation Network. With recent additions to their ecosystem of a collection of partners targeting vertical segments like education and healthcare, Box may be growing its platform with such speed that enterprises may not be able to ignore the company as a potential solution.

IT vendors are embracing the open model, realizing that sharing intellectual property is neither risky nor unprofitable. Vendors who want to grow their platform adoption and provide customers with competitive solutions have to build a strong ecosystem. While choosing a cloud solution, customers need to pick a platform that has a strong and vibrant ecosystem to meet their needs.

This post was first published on Robustcloud.com. Republished with permission.

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Larry Carvalho runs Robust Cloud LLC, an advisory services company helping various ecosystem players develop a strategy to take advantage of cloud computing. As the 2010-12 Instructor of Cloud Expo's popular Cloud Computing Bootcamp, he has already led the bootcamp in New York, Silicon Valley, and Prague, receiving strong positive feedback from attendees about the value gained at these events. Carvalho has facilitated all-day sessions at customer locations to set a clear roadmap and gain consensus among attendees on strategy and product direction. He has participated in multiple discussion panels focused on cloud computing trends at information technology events, and he has delivered all-day cloud computing training to customers in conjunction with CloudCamps. To date, his role has taken him to clients in three continents.