Blogs & Articles

Wednesday, Oct 20, 2010

Lessons from History…or how emerging technology can destroy a thriving business – if you let it.

The business history books are filled with stories of companies that once dominated their markets, but lost their market-leading positions with the emergence of new technology.  In many cases, not only did companies lose their market lead – they lost their way, and eventually saw their businesses fail.  A classic example of this phenomenon – one that has been the subject of many MBA debates – is the rise and fall of Wang Laboratories.


Wang introduced the world’s first stand-alone word processor in the mid-70’s, and the company exploded.  The Wang 1200 dominated the market, and quickly emerged as the de facto standard for document processing.  According to business lore, many in the company were concerned about the competitive threat posed by computers, but the company’s founder  and controlling shareholder just wouldn’t accept that something as big as a computer (i.e. a massive back-room mainframe device) could threaten his desktop solution.  So, he did nothing and when the IBM PC arrived, Wang’s market stranglehold was broken, and the company took its first steps toward its eventual bankruptcy (in 1992).


I think this story could very easily play out again, and this time the competitive threat isn’t coming from a single device or from one powerful company.  It’s coming from an emerging technology trend that has companies of every size pursuing the economic and operational advantages afforded by the Cloud.


And my prediction: Companies that are today very strong will be weakened and could eventually fail if they do not take the cloud seriously, and embrace its capacity to change the norm and its promise.


So, what kind of companies should be concerned by the threat posed by the Cloud?  There are obvious ones, like any company that relies on selling “in-house” infrastructure, but I believe there are some less obvious companies whose businesses could be very negatively impacted by the Cloud.


Like the “technical support providers.”  I Googled this term and was presented with over 20,000 companies worldwide who make their living proving tech support to small and medium-sized enterprises.  The list certainly includes many small firms, but it also includes some very big companies whose reach is global.  So, imagine you are the leader or major shareholder in one of these larger tech support entities.  You have a thriving business, have filled a niche for many companies for many years, and have your IT support personnel on site in businesses throughout the world. 


Then, one of your long-term customers informs you that they have been approached, not by one of your traditional competitors, but by a new kind of company that makes its living in The Cloud.  Their value proposition is simple.  Don’t purchase and maintain premises-based infrastructure. Don’t worry about providing local IT support.  Forget about capital expenditure on IT.  Move everything to The Cloud, save money and receive a higher, more reliable grade of service.   You lose this account to The Cloud.  Then another and another still.  It appears that, almost overnight, your company might be in serious trouble.  So, what do you do?


I think that today’s IT Support Providers need to re-visit their current business model and find a way to embrace the Cloud, not compete with it.  They could partner with existing Cloud Providers, launch their own Cloud services, do something to get in the Cloud game and not just sit back on the sidelines watching the IT world change around them.  If they don’t embrace the Cloud, they may be reduced to MBA Case study status, like Wang. 


I believe that the major Software application providers are in a similar position to that of the IT support providers.  Ask yourself, “will companies still pay exorbitant license and maintenances fees for software solutions that require extensive, ongoing support?”  I think the answer is obvious.  They won’t if there are better, more economical options out there – and therein lies the promise of The Cloud.    As it matures, and the security and performance milestones that earlier plagued the Cloud are eliminated, Cloud-enabled, software on-demand solutions will increasingly become available, and forever change the landscape for the big software application providers.    


The emerging technology in and enabling the Cloud is creating wonderful opportunities for many new and existing companies, and it will also lead to some pain for the IT Service and Software Providers – if they let it.


The best won’t.  The rest will pay the price.


Joshua Geist is Founder and CEO of Geminare Incorporated, a leading provider of turnkey business continuity, server replication and data protection solutions and innovator of the Cloud “Recovery as a Service” model. A solution junkie at heart, Joshua lives, breathes and dreams of all things DR Cloud-related and loves nothing better than to hear a story about how another customer experienced first-hand the tremendous value inherent in the technology that Geminare created.

Joshua lives in Toronto, with his lovely wife Liane and three beautiful daughters, Samantha, Chloe and Alexa – with a combined age of 8! Suffice to say that between introducing the world to Geminare’s RaaS and raising a family, Josh is a very busy guy but always seems to be reachable at .(JavaScript must be enabled to view this email address) or followed on Twitter @CloudRecovery.

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