The Cloudwagon Blog

Superpower 2.0 Alliance Patterns, Part Two: The Java Cloud

2010-08-05T18:01:00.000-07:00

"Asymmetric marketers seek to build their businesses on the basis of superpower symbiosis, and so they think in terms of the TAO (targets of asymmetric opportunity). This TAO of Asymmetric Marketing...these targets of asymmetric opportunity...are the installed base ecozones, and discrete product/partner ecoregions of the superpowers."
"Asymmetric Marketing: Tossing the 'chasm' in the Age of the Software Superpowers" Joseph E. Bentzel

Nature abhors a vacuum. So does the 21st century software industry. When market gaps open up in the installed base of the software superpowers, innovators rush in. This is the common sense framework from which I view the VMforce alliance announced earlier this year between Salesforce.com, a cloud pacesetter and VMware, the virtualization standard.

In this case, the TAO, the target of asymmetric opportunity being pursued by the VMforce alliance, is the enterprise Java customer base currently served by IBM and Oracle, the two most dominant software superpowers in the world of business applications and infrastructure. And the market gap being filled is IBM and Oracle's perceived lack of a public cloud computing offering for Java ISVs and developers.

Salesforce.com Pulls a Bill Gates "Embrace and Extend"
For more than a decade, Salesforce.com has been the pacesetter and most-imitated company in SaaS markets. The company has provided much of the basic product template used by the software industry for business application functionality delivered as a web experience. So let's just give credit where credit is due and say the same thing somewhat more forcefully---Salesforce.com defined the product category we now refer to as cloud applications.

Additionally, the company broke new product marketing ground with its pricing and business model innovation (the "No Software" subscription pitch), its distribution-as-a-service app marketplace initiative (years before the iPhone appstore), and its pioneering thrust into Platform-as-a-Service, i.e. Force.com.

But in regard to Force.com and PaaS, Salesforce has had to fight an uphill battle for both enterprise accounts and new developers, based largely on its historic policy of providing its own proprietary development environment, vs. focusing in on what I describe above as a 'Target of Asymmetric Opportunity' or TAO.

But all that changed in April when Salesforce pulled an "embrace and extend" strategic move right out of the Bill Gates browser wars playbook---A joint announcement with VMware of VMforce, a Salesforce-powered Platform-as-a-Service offering targeting the enterprise Java space currently dominated by Oracle (Sun/BEA) and IBM. And since IBM and Oracle are not currently perceived as major supporters of public cloud models (focusing instead on protecting their installed base franchises via a private cloud model), and have no comparable offering themselves, the VMforce alliance gives Salesforce a solid market headstart, and bragging rights to being the power behind the "Java cloud".

VMware Pulls an "Intel Inside"
For VMware, the VMforce alliance validates its role as a core enabler of public cloud computing, and clearly lays out a future path along which they can become the virtualization ingredient in many different PaaS environments.

In other words, think of VMware as the Intel Inside of public cloud computing, i.e. they will become the branded, familiar 'powered by' logo you will see on many different flavors of public cloud PaaS in coming months and years. Because there is no doubt in my mind that as VMforce Alliance succeeds, many other PaaS players will turn to them and standardize on them, just as the original generation of IBM PC clone companies (Compaq, Dell, Gateway, etc.) turned to Intel to ensure 'industry standard compatibility'.

Three Takeaways
The VMforce alliance model is different from the "Ruby Cloud" model I described in Part One in discussing the relationship between IaaS pioneer Amazon.com, and Ruby innovator Heroku. In that case you have a pure play IaaS leader (Amazon) with a pure play PaaS startup in close mutualistic symbiosis. It's a model that Amazon has pioneered in enabling, i.e. an alliance not openly targeting the software superpowers for competition, but focused on advantaging new breed ISVs and adaptive enterprises.

However, in the case of the Salesforce/VMware alliance there is more complexity and more 'blood in the water' relative to the Oracle/IBM Java installed base. So here's 3 takeaways.

1. The VMforce Alliance will force both Oracle and IBM to not only change their messaging around public cloud, but force them both to enter the public cloud market sooner than they would prefer. This will have the effect of driving Java ISVs into public cloud PaaS environments by the boatload, or 'cloudwagon'-load. In the near term get ready for an enterprise marketing 'FUD-fight' (fear-uncertainty-doubt) of massive proportions as Oracle and IBM use arguments around 'security' etc. to scatter the new VMforce Java cloud, and fight to keep Salesforce out of their installed base.

2. Salesforce.com will realize accelerated growth around VMforce if they execute well. By focusing on a Target of Asymmetric Opportunity or TAO---the enterprise Java market---developer recruitment will accelerate and they will have bragging rights to being the Enterprise Java Cloud (despite the overwhelming market share dominance of Oracle and IBM). The number of titles in the App Exchange will also accelerate, enabling new breed Java cloud ISVs to leverage distribution-as-a-service to grow their businesses.

3. As big a coup as this alliance is for Salesforce, it may even be bigger over the long term for VMware. As the new generation of PaaS vendors expands, VMware is strategically positioned as the common ingredient. And as the common ingredient, their bragging rights to cloud leadership and market power will grow exponentially.

Simply put, the VMware Alliance could morph into the most interesting development to shake up the software superpower food chain since Apple introduced the iPhone.

In Part 3 I'll look at the Apple/ATT alliance around mobile cloud computing.

Superpower 2.0 Alliance Patterns, Part One: The Ruby Cloud

2010-07-19T11:18:00.000-07:00

"By adopting symbiosis as the starting point for marketing strategy in the age of the superpowers, ISVs place themselves in a position to capitalize on market opportunity in both the installed base of the superpowers (their locked in cage), as well as in the new market creation activities of the superpowers outside their existing installed base. In those emerging and disruptive technology-driven segments that the superpowers are co-opting." "Asymmetric Marketing: Tossing the 'chasm' in the Age of the Software Superpowers", Joseph E. Bentzel

The Ruby Cloud: Amazon IaaS + Heroku PaaS
In "Asymmetric Marketing" I introduce and advance the notion that streetsmart ISVs can capture significant business upside by thinking in terms of 'strategic symbiosis', i.e. deep partnering with incumbent market leaders.

I base my point of view on the facts underlying the rise of Microsoft, Google, and other multi-category software superpowers---That in their startup phase they aggressively partnered with established players (IBM in the case of MS, Yahoo in the case of startup Google) and rode those alliances to success.

Fast forward to 2010 and the explosive rise of cloud computing---Strategic symbiosis is fast becoming the new normal for startup ISVs as they co-create compelling value with incumbent leaders focused on the cloud opportunity. The form of symbiosis practiced by IaaS (infrastructure-as-a-service) leader Amazon.com and new breed PaaS (platform-as-a-service) ISV Heroku is a compelling example of Superpower 2.0 symbiosis in action.

Amazon.com Web Services: Stealth Superpower 2.0
Amazon.com is on track in 2010 to generate $25 Billion plus in annual revenue, about $700 million of which is booked in the 'Other' category (in which Amazon Web Services is accounted for, along with other e-commerce hosting revenue). By way of comparison, Oracle, a dominant enterprise software superpower is also a $25 Billion business, albeit with a much different P&L model.

My comparison here is a simple one. While Amazon.com may have entered the software industry through the 'side-door service entrance' of hosted e-commerce storefronts and cloud computing infrastructure (not the high margin software license business familiar with enterprise IT buyers), it is nevertheless entering from a position of strength by leveraging both its strong brand recognition and deep domain experience as an enterprise user of information technology. In fact, one could correctly think of Amazon as the first cloud superpower.

It's instructive to see how Amazon itself describes AWS: "Amazon Web Services provides Amazon’s developer customers with access to in-the-cloud infrastructure services based on Amazon’s own back-end technology platform, which developers can use to enable virtually any type of business" (my emphasis). "Enable virtually any type of business" sure sounds like a cross-category software superpower (IBM, Oracle) value proposition to me---And it also sounds like a shot across the bow to these traditional software superpowers who have invested decades and billions to power enterprise IT.

But the other part of the above quote is equally important to look at, i.e. the part about AWS being based on "Amazon's own back-end technology platform". In "Asymmetric Marketing" I refer to this form of innovation as 'process to product re-incarnation', i.e. what happens when an organization productizes its own internal processes and makes them available to external customers. I use Fedex/Kinkos, UPS and Starbucks as examples.

In terms of cloud computing innovation, Amazon's process-to-product exercise around AWS infrastructure-as-a-service has clearly been a game-changer for both Amazon and the software industry as a whole. Not only has it lit an 'all in' cloud fire under software superpowers like Microsoft, it has enabled a new generation of developer partners (some involved in the hottest social app and Web 2.0 trends) to build exciting new cloud platform offerings on top of Amazon IaaS. Heroku, a provider of Ruby on Rails platform-as-a-service is one of those developers.

Heroku PaaS: 70,000 Plus Running Apps & Counting
Ruby on Rails (RoR) is an increasingly popular developer framework and has been utilized by leading innovators in social and Web 2.0 app development (including high-profile brands like Twitter and Hulu) as well as by forward-thinking ISVs in the emerging recombinant communications developer community.

Heroku, founded in 2007, built out an RoR platform-as-a-service on top of Amazon Web Services, and is one of a number of Ruby innovators to do so. The company currently powers more than 70,000 live applications running in the Heroku cloud and in May of this year raised $10 million in expansion capital from its VC backers, after seeing 50% growth in the number of apps it hosted in only 6 months.

In addition to providing 'Ruby as a service' on top of AWS, Heroku has also differentiated itself by promoting 'Add-ons' that extend their platform, add premium features or connect to 3rd party services. This is not dissimilar to the approach taken by Salesforce.com AppExchange, i.e. seamless enhancement of the basic platform in minutes, not months.

Heroku's perception of its offering is clearly based on an intimate understanding of the different relative contributions and competancies of IaaS and PaaS vendors, and the importance of pro-active symbiosis between these two roles in the emerging cloud computing ecosystem. Here is a presentation titled "Cloud Services: What They Are & Why You Should Build One" by Adam Wiggins, a Heroku co-founder that makes this point. Additionally here is a video interview with Wiggins drilling down further on their decision to use Amazon Web Services, and telegraphing Heroku's future expansion into non-Ruby markets (and potential alignment with other IaaS superpowers).

Summary
The cloud computing paradigm has opened the door to Amazon.com to engage the ISV community as an infrastructure software superpower in its own right---A Superpower 2.0 based on its own 'process to product re-incarnation'.

Amazon's Superpower 2.0 profile has enabled Platform-as-a-Service innovators like Heroku to focus on its Ruby offering and build a vibrant developer community and add-ons business in only 3 years.

This IaaS/PaaS collaboration model has been helpful in enabling both parties to the alliance to engage in a mutually profitable business relationship, and is an important example of how ISVs can leverage Superpower 2.0 market initiatives.

In Part Two of Superpower 2.0 Alliance Patterns, I'll look at VMforce, the joint offering of Salesforce.com and VMware.

"Mashfrastructure": Introducing the Enterprise App Store

2010-07-08T12:05:00.000-07:00

As Enterprise 2.0 takes shape against the background of cloud computing, innovative ISVs are transforming the 'mashup' developer tools category into an exciting new kind of agile enterprise 'mashfrastructure' empowering both IT and LOB users to enable software 'distribution-as-a-service' (DaaS). Here's yesterday's announcement by mashup pioneer JackBe of their new Presto 3.0 platform incorporating support for Enterprise App Store development.

JackBe's evolution beyond platform tools into full spectrum mashfrastructure should carry significant weight for any enterprise committed to any form of public and/or private cloud computing, even those not consistently experimenting with mashups. Why? Simple.

On the road of cloud the new breed Enterprise App Store (like those exchanges and marketplaces from PaaS/IaaS players Salesforce, Google, Microsoft, VMware and Amazon) will evolve into a critical focal point of business process innovation, enabling users, teams, departments and business units to really function as collaborative internal markets for both IT and 'crowdsourced' innovation.

Mashfrastructure of the JackBe type empowers the emergence of real 'social IT' at some point in the not too distant future. And innovative cloud vendors will need a shift to social IT to accelerate adoption of their solutions and services.

VMware: Superpower 2.0 Poster Child

2010-07-06T11:11:00.000-07:00

Software superpowers evolve into dominant, cross-category natural monopolies along a well-documented market development path I refer to as asymmetric marketing.

This path is based on various 'small events at the start' of their market ascendance that enable them to capitalize on the market power of larger partners, e.g. Microsoft's OEM deal with IBM on the original PC OS, Google's paid search box deal with Yahoo from 2000 to 2003, Adobe's firmware deal on the original Apple Laser Writer printer, etc.

As emergent superpowers come to terms with the market muscle they have coopted from their larger partners, they rapidly multiply their 'small events effect'---As Microsoft did when it marketed it's OS to IBM's clone competitors, or as Google did when it signed on hundreds of search box 'affiliates', or as Adobe did when it jumped into the Windows printer market as Wintel became the standard.

In each case the emergent asymmetric marketer (Microsoft, Google, Adobe), by virtue of the fact that it creatively positioned itself to become 'baked in' to other providers' offerings, captures a market advantage that drives multi-decade dominance. For example, Microsoft's defeat of Netscape during the Web 1.0 'browser wars' was based on its market dominance with PC OEMs and PC users, not on any internet technology headstart or disruptive innovation.

So where is the process of natural monopoly (software superpower) evolution playing out in the cloud computing wave? How about at VMware, a company I would characterize as the poster child for Software Superpower 2.0 strategy in action. Let's review a few facts.

1. VMware's history as an acquired 'colony' of storage leader EMC enabled it to gain permissioned access to enterprise markets and establish virtualization as a must-have category within the datacenter. In 2010, virtualization is a $2.5 billion business for VMware, and a much larger one moving forward, as cloud adoption accelerates.

2. VMware today has 100% of the Fortune 100 and 96% of the Fortune 1000 as customers. By any definition, this describes a 'natural' or customer-sanctioned market monopoly, the real market advantage of a software superpower.

3. VMware's initiative with Google, which they call Open PaaS, will place them in a strong position relative to Google's cloud strategy going forward.

4. VMware's initiave with Salesforce.com, which they call VMforce, will enable the global community of Java developers to migrate their apps to the Force.com cloud. This will be a major dose of adrenalina for the Salesforce PaaS developer community.

5. VMware's Distribution-as-a-Service for their partners, i.e. the Virtual Appliance Marketplace, now has over 1000 offerings virtualized and ready to run in any cloud environment supporting VMware.

To sum up, VMware is moving to establish itself as the most critical software superpower currently focused on cloud computing, having:

Validated both public and private cloud categories for enterprise customers;
Creatively embedded itself in other Superpower 2.0 PaaS stacks, e.g. Google and/or Force.com:
Packaged virtualized 'appliances' for online distribution that enable current enterprise stacks to be migrated to public and/or private cloud environments.

As VMware goes, so goes the road of cloud.

On the Road of Cloud . . .

2010-06-30T18:08:00.000-07:00

Let's kick off this blog by referencing a marketing campaign that in its time burned a brand into the popular culture of the planet. A campaign most everybody with a TV or web browser has seen or heard, liked or ignored. You'll probably remember it. It goes like this.

"On the road of life there are passengers and there are drivers. Drivers wanted."
Signed, Volkswagen.

Now, as software superpowers like Microsoft get organized to re-invent themselves and go 'all in' on the cloud technology wave, is it possible that a 2.0 evolution of VW's uber-campaign is playing out in the 21st century software industry? With a message that goes something like this.

On the road of cloud there are "PaaS-engineers" and there are ISV drivers. ISV drivers wanted!

And it's not just marketing rhetoric, as the inducements for 'wanted' ISVs to participate in and drive the evolution of new Superpower 2.0 cloud ecosystems are becoming increasingly tangible---Especially for today's generation of capital efficient software startups born into a challenging global economy and a hard-sell VC environment.

The ISV 'drivers wanted' inducements come in 3 flavors---Cost displacement, permissioned customer access, and distribution efficiency. Let's review.

1. PaaS & IaaS Mean Real ISV Cost Displacement: Platform-as-a-Service and Infrastructure-as-a-Service vendors like Salesforce, Microsoft, Amazon, VMWare and Google can play a powerful role in reducing barriers to entry for new breed software innovators, one undeniable growth engine of the 21st century economy. On the road of cloud, these Superpower 2.0 'Paas-engineers' are becoming increasingly relevant to ISV drivers as startup teams look for ways to build and power compelling SaaS applications at a fraction of the cost of previous generations of entrepreneurs.

2. Superpower 2.0 PaaS Ecosystems Mean Permissioned Customer Access: In addition to changing the cost structure and initial capitalization model of startup ISVs, the Superpower 2.0 PaaS leaders are enabling ISVs at every stage of development to have direct customer access to their installed base customers. Here's a recent joint announcement of Salesforce.com and BMC (a near $2Billion ISV) for a new BMC on Force.com offering---An offering which enabled BMC to immediately access and capitalize on the Salesforce.com installed base footprint. Other PaaS leaders will imitate this Force.com best practice, and this means that new breed ISVs will have the opportunity to go asymmetric from day one, creatively leveraging the installed base footprint of established market leaders.

3. Distribution-as-a-Service (DaaS) Brings Ongoing Sales Operations Efficiency: Beyond cost reduction and permissioned customer access, the Superpower 2.0 model makes app stores, app marketplaces and app exchanges open to ISVs at all stages of development. This means that capital efficient ISVs can leverage these new distribution outlets to gain direct access to target markets, and can make their offerings available in multiple superpower app stores thereby gaining direct feedback on product adoption by paying customers. In fact, one could argue that distribution-as-a-service support is the determining factor of ISV success in a given PaaS/IaaS ecosystem. Think of it as the drive shaft that makes the Superpower 2.0 'cloudwagon' actually revenue-drivable by ISVs.

As this blog plays out, I'll be exploring this theme of Superpower 2.0 evolution in the age of cloud computing, and how ISVs can capitalize on the 'all in' initiatives of these cross-category leaders to grow their own businesses. Thanks in advance for tuning in.