A fascinating week in terms of the evolution of PaaS, cloud computing and SaaS has been upon us. I wonder if people noticed? The two big items that I saw were the collapse of Coghead and the hypothesis by Phil Wainewright as to why Gmail in Europe went down.
While most commentators are highlighting (and rightfully so) the impact and risk PaaS could provide on customers, I saw something very different.
Let me role this out as I saw it
Firstly it is increasingly obvious that PaaS and cloud computing is a very long way from being mature. I say this because of a number of factors. Just look at the market, everyone is racing to achieve scale. If that didn’t tell you it was a new market nothing will. There is also a general lack of standards (no two platforms are the same), evolving business models, a lack of channel maturity (who is wholesaling to get scale?) etc. It seems to me that PaaS providers need to truly understand what the ‘P’ bit means. Get clear on the role of a Platform. Historical evidence would point to the fact that you can’t have a plethora of ‘platforms’ in the same space. There is only 1 ‘internet’ (the network guys will hate that), HTTP and its evolutions is a platform of, smpt another. This is true in other industries too, Telco (Bell, BT, Telstra), Rail (take your pick), Banking (two big credit card schemes globally) etc. In this regard I 100% agree with Jeff Kaplan, we are going to see a lot more consolidation. Economically this just has to happen for any of the PaaS providers to make any serious money, somebody has to get to true scale (60% market share).
Counter to this scale based play is regionalisation of data. Geo-fencing isn’t new, ask content distributors, but how this works in a converged world is. This same phenomenon has been highlighted by the global economy. Up until now, I don’t think people truly realised how intertwined and boundrieless economies were, that’s changing fast. Similarly PaaS attacks this notion of nationhood. Google has no data centre in my home country, how then do they enforce our sovereign rules on SPAM, privacy and data protection? They simply can’t. People have commented on this effect before.
So then what is the future that I saw? I still believe you will see the emergence of one dominant PaaS player, but there will be one in every region or country. I think this will happen for a couple of reasons. Focus, big companies tend to focus on big markets first (elephant hunting or bang for buck). This gives the rest of the world breathing space to home develop a similar offering. Trademe is a great example of this. The second reason is regional legislation differences. While technology standards may eventually emerge, legal standards take even longer.
If you believe this, then you will see one large player and one mid-to-small player emerge in every geography and be quite successful. For some services (maybe low end consumer stuff) you will see some internationalisation impact (that horse may have bolted), but not so on the wealth creating business segment. I also think you will see a bunch of small niche players emerge who have specific domain expertise. I also think that all this is likely to occur in the next 2 – 3 years.
Any other views?