Mike Olson, the Chief Strategy Officer at Cloudera, eloquently articulated the philosophy behind their business model in this LinkedIn article titled The Cloudera Model. I highly recommend anyone working on open source platforms and building value on top to stop coding, and read this article. Like right now!
I would like to highlight one quote from the article:
You can no longer win with a closed-source platform, and you can’t build a successful stand-alone company purely on open source
Finally somebody said it!
For years, I have been convinced of this model. I have often wondered how pure open source companies actually make money and justify such large valuations without offering any kind of monetization other than offering training, support and development services on top of the open source projects. Some do it via dual-licensing model, as Mike points out in his example of how SleepyCat worked it before getting acquired by Oracle.
Now, I don’t know if this is the best model that Mike has articulated, but it is close to Winston Churchill’s idea of democracy where he said something along the lines of:
…it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time.
I feel the similarly about the Mike’s call, and I believe this is the best model of all the models out there currently to think of how you want to build a company and balance between open source and closed source to create unique value on top of open source. For most part, it seems that people agree with Mike’s article (based on LinkedIn comments and tweets). Those that don’t agree are in denial.
Use, contribute back, innovate (both open and closed) and create value – that sounds like a good viable business model.
Is this going to be the big guys’ game or can innovative companies break through?
I am not at the conference, but this tweet got my attention. The big guys I am guessing is a reference to companies like IBM, Cisco, GE, Orange, Vodafone, Verizon, AT&T, and others in similar size and stature. However, expecting the big guys to innovate in something that is so rapidly changing in such a short time is unrealistic. This is where new, smaller, and smart companies can innovate faster and create solutions, products and technologies. Over the next 5 years, I see this as a space that will be more dominated by smaller guys with innovative approaches. Big guys sure will be involved, watching, and sometimes collaborating with the smaller guys. But this is a huge opportunity for everyone, small or big to participate. After all, just yesterday, Brian Profitt reported on Read Write Web that this industry could be as large as 14 Trillion dollars, if not bigger. This space is big enough for the behemoths and the miniscule.
Machine to Machine (M2M), Industrial Internet, Internet of Things (IoT)… different names, but they all in a way converge on the same thing, looked through different lenses. This is one of the biggest emerging trends in network computing. Mega-trends like these happen once in a decade or longer. At Sun Microsystems where I spent 10 years, we used to have a tag line from start till the end which said: The Network is the Computer. What a vision that was, and it outlasted the company! Scott McNealy and others at Sun frequently would talk about the connected refrigerator. Today, it is a reality. Smart machines are here to stay and not only stay, but to grow and thrive. A company that sells any kind of hardware (washing machines to MRI machines, cars to planes, computers to mobile devices, the list goes on to virtually every physical object sold by someone), cannot afford to sit by on the sidelines and watch this mega-trend demolish them. These companies have to react and respond, and do it now.
GE, Cisco, and many other large corporations have long realized the importance of IoT. One of my favorite ads on TV (I don’t see it on anymore) comes from GE where all kinds of machines are coming home (I found this, but those videos are no longer active on youtube, however I did find this one that still works, sort of). Also check out what Dave Evans, Chief Futurist at Cisco says about this topic.
The point is, we have not only been talking about IoT for a long time, in fact, it has silently become a reality. Those that are still asleep at the wheel of their organizations can now ill afford to not notice and take some action.
I was talking to my friends Alok Batra and Jane Ren, who just launched their new company MQIdentity. Alok and Jane are well-known thought leaders and change leaders behind the Industrial Internet and M2M related transformations at Cisco and GE. Their knowledge of this space is quite vast and impressive. So I asked them, what is MQ? They explained it stands for Machine Quotient. They went on to describe two concepts: Machine Quotient (MQ), the technical measure of efficient machines. You want MQ to be really high. And Service Coefficient (SC), the business measure of service competency. For your organization, you need to find the right combination of MQ and SC to bring the maximum effective business value out. All this sound too complex? This is where I think Alok and Jane with their MQIdentity methodology can help.
For me the most fascinating aspect dawned on me when I read their white paper titled Technology-as-a-Service (TaaS), which they just released on their website. It is a well-written, thought provoking paper that lays down a solid foundation to think about how to transform your business into the new IoT economy. They argue that TaaS will be the path of technology transformations for tech industries into service-centric economy. The paper is quite detailed and there is a lot to think about. But if I were to distill it to a few key take aways, here they are 1:
TaaS gives you a new way to expand your proprietary IP and technology, by unlocking its access to new customer base leveraging other proven services model (IaaS, SaaS, etc.).
Your business is heavily disrupted by technology trends and you cannot stand by any longer and watch your customer base erode to newer solutions while you still have huge value locked inside your proprietary technology/products that can generate new revenues and expand in ways that you can’t otherwise think of expanding.
Your business is also disrupted by new startups who are going to offer the state-of-the-art solutions at a much lesser price, even though their solution may not be as excellent as yours, you will see customers erode to the “good-enough” solutions.
In short, this is a space (M2M/IoT) that I am totally fascinated about, and this space is going through tremendous innovation. As a result, in the coming years, there will be a new emergence of creative solutions, products, business models. In my opinion, Alok and Jane are right in the thick of it. So watch this space, it will be exciting!
1 – There are many other implications, consequences and micro-disruptions at work in this area, read their white paper or their executive summary for more details. Don’t just take my word for it.