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2010 was the year of the start-up... what's next?

Risk takers and adventurers clawed into the market this year. Indeed, we saw an aggressive frenzy hit the ICT market: cloud start-up fever

Risk takers and adventurers clawed into the market this year. Indeed, we saw an aggressive frenzy hit the ICT market: cloud start-up fever.

With cloud start-ups getting ABN’s quicker than the flick of a switch, the industry is left wondering whether the bubble is about to burst like it did in the Wild West days of the dot com. TrackITOnline managing director, Phil Lancaster, doesn’t think the cloud market will follow in the same footsteps.

“The dot com era was a much bigger shift, and a significant event in that it recognised the Internet for the first time. Cloud is a migration of the internet by comparison,” Lancaster said.

The notable trend is the push towards acquisitions. “There are a lot of start-ups, but there is also a lot of acquiring going on: Quest buying Surgient, or HP buying 3Par in recognising the storage demands of a cloud environment.”

Lancaster said the definition of cloud is rapidly becoming confused – and that’s the bigger issue.

“I’ve seen cases where start-ups have slapped the label on because it sounds good from a marketing point of view. There are a lot of definitions floating around and not a lot of them have understood all that cloud entails.”

He said the cloud space requires a gamut of skills to offer a full cloud solution – a situation that often makes it difficult for a start-up player to full-fill.

“To achieve a full cloud capacity, a lot of scaling is necessary, which is why there has been a lot of acquisitions.”

Asked when we can expect a standard definition of cloud to emerge, he said it will depend on the actions of the dominant players in the industry.

“I think that the necessity for standards comes to the fore when enough of the big players come together to discuss these things. History tells us that this will happen at some stage, when vendors realise that sales are being inhibited by a lack of an open architecture.”

Like Lancaster, Vadis sales and marketing director, Gerry Tucker, isn’t losing any sleep over the gamut of cloud start-ups and the comparisons to the free-wheeling days of the dot com era. “Like with a lot of technology there comes a level of saturation at some point, but I believe it’s different with where we are with the dot com era,” Tucker said.

“There’s the lack of the kinds of wild investments that happened in that time – which has led to a better pedigree of organisation that is involved in the cloud now.

“There are good opportunities to invest in cloud, but investors are also more conservative. I think some of the projections for the direction of the market have been overenthusiastic, but we do have a bullish attitude into the future.”

Start-up veteran

HubOne managing director, Nick Beaugeard, is no stranger to the start-up environment. He has run a host of start-ups – the most notable being the Microsoft deployment specialist, Bellerephon Group, he sold to Dimension Data in 2005.

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He lived through the heady days of the dot com bubble. “Things are different this time around. I was around in the dot com days and even crashed a company,” he said.

“Rather than having ridiculous levels of investment, organisations today have a better grounding in terms of customers, cash flow and revenue. They are not just webfronts, but have the actual people involved.”

Beaugeard said he’s not worried about the frenzy of start-up activity in the cloud space.

“According to the Australian Bureau of Statistics there are 1.8 million eligible customers for the cloud. I won’t hit all of those. There’s enough business there for a vibrant community of organisations – an ecosystem of companies doing cloud in various forms from CRM customisation to SharePoint to document management.”

But he sees a big change on the horizon: The channel landscape will be drastically different in the next three years.

“This reminds me of the days when distributed computing took over from mainframe – it went from a whole bunch of established players to new entrants taking charge,” he said.

Similarly, the traditional system integrator is not growing to adopt cloud – instead new players with a diverse mix of skills are jumping on-board to take advantage of the massive channel opportunities.

Services guru

While not a full-blown cloud start-up, Insentra managing director, Ronnie Altit, is a services start-up that is having the same challenges and issues that any start-up would face: maintaining a positive cash flow, building customer trust and loyalty and attracting talent.

“There aren’t a lot of organisations that just do services as a core focus – there’s a hole in the market we are trying to fill,” he said. “There was an opportunity in the market for something that was focused, niche and high value.”

While its services are varied, one area of focus is augmenting the services of the cloud providers to enable the easier migration from on-premise to cloud.

“We’re only just starting to scratch the surface in terms of opportunities. Sure there are challenges, but the opportunities of being a start-up far outweigh the negatives.”