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Archive for July 5th, 2011

The Two Most Desirable Features of a Platform as a Service

Posted by Bob Warfield on July 5, 2011

Big Data?


Uber DB scaling?

Mad Hadoopishness?

Faster app development?

Universal Social Connectivity?

Not so much.  Some platform or other claims all of those things, but the two most desirable features of a PaaS appear to be revenue generation and commodity pricing, not necessarily in that order.

Let me first say that I’ve come to view AppStores as PaaS offerings of a sort, and their ability to generate revenue for developers drives those developers into their arms.  This also applies to more traditional PaaS offerings such as Salesforce’s  As nearly as I can tell talking to folks and scanning the blogosphere for activity, people write for either because they need to integrate with the Salesforce CRM app or because they want the revenue tailwind you can get via

The commodity pricing piece applies to what many prefer to call IaaS, or Infrastructure as a Service, with  Amazon Web Services being the most widely used example so far.  Let’s go ahead and keep them in our PaaS list for this discussion and ignore the IaaS moniker.  If we start cutting out things like Amazon and for various reasons, there is so little left it’s hard to talk about it.  I would submit we may have divided up the market into too many A-A-S’s a little prematurely without waiting to see what would stick.

This is the gist of my problem, BTW.  There’s been plenty of time for PaaS to get big, but it is kind of lumbering along.  Yes, we get things like Heroku.  Doesn’t that qualify largely under the Commodity category though? we’ve already talked about and Amazon too.  But in this Cloudy-Cloudy-*aaSy-*aaSy world, what else is flying high?  There’s room for a ton of things, but you have to solve the revenue and commodity checkboxes first.

Here is the problem for all you would-be PaaS vendors out there–it’s darned hard to get design wins if your platform involves heavy lock-in, heavy rewriting, too much cost, or isn’t otherwise a requirement for a Minimum Viable Product.   Yup, there’s that darned MVP concept rearing its ugly head again.  The trouble is, it’s no longer just something the Cool Kids bandy about while sipping lattes.  It’s become something of a requirement for survival and an article of How Things Are Done In The Valley.  You can’t get capital to fool around with fancy products any more, so you have to go MVP all the way because you’re likely starving on your own nickel until you do.  In addition to the VC’s, Agile thinking and a general suspicion of Premature Optimizaton have really made it hard to sell Feature Density.  The trouble with that list of things at the top is they’re either not that commonly needed, they involve dealing with scale you should be so lucky as to get to (and are therefore not MVP material), or they solve problems you’re convinced you can easily solve as you’re starting your journey (e.g. multitenant).  Yes, those problems are harder than you think, but it doesn’t matter.  They don’t look harder when you’re eyeing what it takes to get an MVP off the ground.

PaaS vendors, you have a couple of choices available to deal with this.  You can ignore it, argue that it’s early days yet and your time will come.  It’s pretty hard to dispute that because it is early days yet.  But don’t get too target fixated at such an early stage either lest some upstart take the early days away.  You can still be Zucked pretty darned easily precisely because it is early days.  Note: To be “Zucked” is to be treated to the same fait Facebook dished out to MySpace.  Call it Fast Follower on Steroids with a Heavy Case of Rabies.  It’s not a pleasant thing to happen to your life’s dream.

Okay, so what’s the alternative for would-be PaaS Masters of the Universe?

Hey, this is a good time for the Cloud.  You know that.  We hear less and less whining about security and all that.  Clever marketers are even now letting IT get just a little bit infected with “Private Clouds”, a potent Trojan Horse strategy to win over their hearts and minds.  Whatever it takes, resistance is futile.  Once their apps and data are on my servers it’s only a matter of reconfiguring the subnets and voila!  All your Apps are be in my Cloud!

Given that is the case, there may be some first mover, network effect, and momentum issues to think about.  In other words, stop being so darned pure to your vision and line up as many customers as you can as fast as you can.  That’s how we win in this part of the Bubble, um I mean Business, Cycle.

What the heck does that mean?

I’m glad you asked, but it should be obvious:  PaaS vendors need to embrace these two desirable features and nail them before worrying about much else.  There are two simple questions:

1.  Are you directly delivering revenue producing traffic to your customers by virtue of some aspect of your PaaS?

2.  Do you have an offering that lets people buy into some commodity-priced-let’s-get-started-without-boiling-the-ocean version of your PaaS?

If you do, Hallelujah Brothers and Sisters!  You have a shot at the promised land and you can now start looking at more potent differentiation rather than table stakes.  If you don’t, back up and let’s figure something out, because this PaaS stuff can turn into a Darwin Test if you’re not careful.

There is room for innovation on the commodity side, but it’s getting harder.  The days may be gone when you can deliver commodity infrastructure.  Storage and CPU like S3 and EC2, in other words.  If you aren’t already spun up and doing good things, you need to start skating where the puck is going to be.  I have offered up my PaaS-as-bite-sized-pieces strategy before (Sell the Condiments, not the Sandwiches).  Check it out.  Lots to commoditize there.

There is also room for tons of innovation on the “delivering revenue producing traffic” front.  We’ve seen it for mobile platforms, in fact, one could argue the appstores are the defining element there coupled with the relative desirability of the platforms to their users.  The participants seem to be pretty mercenary about those two related dimensions.  I am mystified about why Amazon, which ought to understand App Stores better than anyone, is not doing so great with their Android App Store and doesn’t appear to have one at all for Amazon Web Services.  The latter is inexcusable.  There’s got to be all sorts of opportunity to create an App Store there.

Salesforce keeps wanting to be a major PaaS vendor, but they somehow misunderstand the data they were among the first to collect.  Yes, they do have the revenue producing traffic piece nailed.  But, they seem to be very much in denial about whether that is the main reason people will use, and totally opposed to solving the commodity issue.  Every time I talk to an entrepreneur or investor that wonders whether they should use or one of its offshoots, I ask them to consider a simple thought experiment.  Look up Salesforce’s current cost of service as a percentage of revenue.  Take the cost they will be charged to use Force.comand divide by SFDC’s cost of service.  That number is what they must charge to have the same margins as Salesforce, and that assumes they don’t spend another dime on anything else to deliver their service.  Most of the time that makes for a short conversation.  Oh, I didn’t think about it like that.  There’s no way we can be competitive if we have to charge that much.  And so it goes with a lot of other PaaS offerings too, BTW.  Perhaps Heroku is their way of covering both bases and a sign that they do understand.

For other PaaS vendors, maybe there is a sliver of hope.  If you can change that cost of service to be cost of service plus some cost of marketing, because the PaaS will deliver revenue producing traffic, you can afford to pay more.  Heck, Steve Jobs gets 30% just for delivering the traffic and not helping you in much of any other way.

The revenue producing traffic is by far the hardest thing to do.  You can’t materialize it out of thin air.  You either already have a solid traffic stream you can repurpose (that’s what Salesforce did), or you may have to look at partnering opportunities.  For those that have a stream, now is your chance to enter the PaaS business in an interesting way.  Casting eyes around, Adobe is well positioned for this.  Get an AppStore together, Adobe, and link your dev tools and *aaS efforts to it.  There are bound to be others too.  Open Source vendors in the tools business, maybe you have this sort of opportunity as well.  IBM, Oracle, HP, and whomever else this is a huge opportunity for you.  Maybe Cisco too as I think about it.  Trouble is, your Big Sales Force may think it hampers them in some way.  Ignore their parochial interests and charge ahead.  This is a Silver Bullet for PaaS and Cloud ascendancy.

Give it some thought.  It’s high time for some break out PaaS action.

Posted in amazon, bootstrapping, business, cloud, platforms, saas, venture | 7 Comments »

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