Commoditisation of Cloud
How Google Cloud Platform is changing the rules of differentiation in the SaaS industry.
Before you dive into this post, I want to clarify that I’m looking at commoditisation of technology, more specifically cloud computing, its consequence in the SaaS market (not IaaS) and things to bear in mind as a product manager or tech vendor.
Democratisation
In 1999, Salesforce.com introduced the idea of serving Enterprise applications through a website and since then, cloud computing has come a long way.
In 2002, Amazon introduced Amazon Web Services (AWS) and from there on we have witnessed an acceleration of access to cloud computing infrastructure, especially in 2006 when Amazon released its Elastic Compute Cloud (EC2).
Standardisation
Cloud Infrastructure providers have been here for a decade now:
SoftLayer Technologies (2005), AWS (2006), Google Cloud Platform (premise in 2008 with GCE), Microsoft Azure (2010), and a lot has happened since. The cloud infrastructure market has undergone significant transformation in go-to-market strategy, product management and, at it’s core, technological advances.
To be able to compete in a market where AWS has 31% of the pie (Synergy — Q4 2015), other providers have had to offer services that could be translated from AWS equivalents to facilitate on boarding of existing AWS customers but also allowing comparison of services, performance and cost.
A good example of this forced adaptation was Google with it’s initial offering of Google App Engine.
Back then, Google’s offering for cloud infrastructure was abstract and prospective clients could not compare their existing stacks to what Google was proposing. This has pushed Google to re-position and align with industry standards, set by Amazon.
The result is an almost completely homogeneous cloud infrastructure offering whereby for every AWS product, other suppliers have an equivalent.
This facilitates the prospective clients’ reading of the offering as well as the on boarding that might follow.
Commoditisation
Today, one can easily create a company, hack an MVP and start a VM instance within minutes on one of these cloud infrastructures. All you need is an email address, a credit card and a ton of creativity.
As the competition gets fiercer and fiercer between the cloud infrastructure Goliaths, pricing is significantly improved for clients, bleeding edge computing becomes highly accessible and this creates an enabling environment for startups to blossom.
I attended the GCP Next Conference in both Amsterdam and London last year and was impressed with how Google was very transparent and almost taking an educational stance towards it’s penetration strategy.
You can see an example below of how one can build a real time event processing pipeline or find a model for a product recommendations engine here.
You still need teams of engineers but, as Google say themselves, they want to move towards a world of NoOps and let developers create great applications without having to worry where they run and the resources they need.
Differentiation
Ultimately, what Google Cloud Platform is doing to increase its market penetration through educating potential clients about possibilities of IaaS and PaaS on GCP, is actually pushing most companies to meaningfully differentiate along other key competitive axes, freeing up a lot of time so they can focus on what truly matters.
If all tech companies have the same infrastructure underpinning their products and services then you’d think they have to compete on different axes, right?
I believe this is particularly true for B2B companies that target the Enterprise segment where a “build vs. buy” conversation is likely to become more and more common.
In a world where machine learning and AI are now common place and where code is literally writing itself, I believe true (market) differentiation will happen in the application and experience layers.
Put simply, I believe that competing on the plumbing might not be the best strategy in a crowded market given your competitors also have access to that plumbing. Revenue-generating differentiation takes place on the application layer with solutions that address business pains and benefits that are legible for your clients.
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