Why startups love the Cloud?

entrepeneurStartups are born into the Cloud era and they feel as comfortable with it as my 3-yr old with the touch screen. What’s the psychology behind this other than evolution and the cool behavior of generation X/Y folks?

When I joined the Cloud business, I made an assumption that Moore’s Crossing the Chasm technology adoption principle works for Cloud as well. I think, I was right. Looking at all the companies who I worked with since, I can place any of them on Moore’s technology adoption lifecycle and they exhibit the exact behavior Moore assumed they follow.

Moore's technology adoption lifecycle

This is how the 5 “psychology prototypes” of technology adoption worked out for me in the Cloud business at Microsoft:

Innovators

Enthusiastic geeks who want to be the first to try new technology. Typical geeks, geniuses with no viable business model in mind. Most of the time, they build solutions for similar minded technologists – libraries, plug-ins, APIs, etc. Architecturally, implementation-wise perfect. What they really value is the outsider, business perspective. I apply the 6 questions technique a lot with these folks and really enjoy seeing the results.

Early Adopters

A typical startup profile. They want to use the Cloud for their business advantage, they take risks for rewards, no security questions or blockers whatsoever. They use the Cloud as simply as if they just upgraded their broadband to a faster one. This is the ideal profile for a quick boom. Only in the last 2 months I’ve seen investments of over a million US dollars into 3 of these startups amongst my friends. They are born into the Cloud era and they take advantage of it.

Early Majority

Relatively young (5-10 yrs) ISVs or corporations. Or an Early Adopter management board trapped in the body of a large company. They build business cases and carefully think about existing customers, but sooner or later, they will use the Cloud for their advantage. One typical mistake they do is keep their existing business model once they transitioned into SaaS. They aren’t moving very fast, but their advantage (and sometimes this is also their disadvantage) is that they have a professional experienced staff and won’t do a lot of technical mistakes. Business-wise, they can use some coaching to adapt to the SaaS mindset.

Late Majority

Public sector, large corporations, Conservative ISVs. I meet these companies only once. No, that’s not true, I met one of them twice …

Laggards

I’ve never met them, but I guess, it’s good this way …

Simple, isn’t it?

The equation above may seem simple but I have to admin that I’ve left the most exciting variable to the end: the customer. The stronger in the equation, the customer’s preference dictates which way the solution is built and what way the ISV behaves.

Conflicts of ISV and customer beliefs

Sometimes, conflict happens, sometimes the customer is not aware of the conflict. There are ISVs who are already in the hosting business for years in a way that they host the SaaS version of their product and store their customers’ data. So, the customer is happy with their data stored outside of their company address to some extent. I’ve seen experiments of ISVs not telling their customers that they are switching over to the Cloud from their own data centre. The customer doesn’t even notice the change and everyone is happy. Not a nice way to convince customers, but yet another proof that negative PR is affecting cloud adoption.

Conclusion

Startups who target similar minded customers are very comfortable with the cloud – this is where the biggest booms will happen in the market. No doubt why we at Microsoft take this question very seriously (BizSpark) and Amazon does a constant startup competition, too. Startups are the ideal profile for the cloud. Don’t worry if you are not one of them … with a pinch of “startup mentality”, you can move mounts and are welcome to challenge Moore’s model.

Linkedin David Szabo, Intrapreneur at Microsoft. Startup-addict, blogger at http://cloudstrategyblog.com and LEGO serious play facilitator. Follow me on Twitter!

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3 Responses to Why startups love the Cloud?

  1. Douglas says:

    This is true, in general, with most innovations.

    See this Diffusion of Innovations process: http://en.wikipedia.org/wiki/Diffusion_of_innovations

  2. David says:

    Thanks for the comment Douglas. It looks like that the marketing discipline slowly but surely turns into psychology. It’s great to be a customer in this era. 🙂

  3. Pingback: Napkin Series: Crossing the Chasm, SaaS, Sales and the Psychology Behind | The Cloud Strategy Blog

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