Tuesday, February 5, 2013

The Cloud Integration Stumbling block

One problem is that while Cloud infrastructures do great things to automate ONE application in the cloud, or the Amazon model, provide a bunch of services to work in the cloud to support you, they don't really provide cross-service functionality. A person can't register a cool application, use MySql, a workflow engine, and a messaging service, and then try to use a third party service which builds on that data. So you get a lot of silo'd apps in the cloud when the whole point is flexibility. And single point vendors are going to quickly realize that the cloud is more like the app store than a business offering, it is a marketplace and will grow organically.

But getting all the hooks in place is difficult especially where billing is involved. In most cases read only access is enough but how would  a service provider handle someone who is pummeling their service - bill the original buyer? These kinds of contractual things and costs keep the cloud stuck in silo land. Moving large chunks of data around isn't practical. Simpler non data services like workflows or notification services fit in easily with todays model but advanced services that require more of the facebook model - access to data and ability to write to it - are a ways off.

I was looking at some of the local austin companies which got funded and one was Digby. Digby does exactly what I've railed AGAINST over and over by providing only half a solution - a solution users don't want. They've got such an impressive sales force they've gotten lots of big name companies to buy their service - locationpoint - which effectively broadcasts messages or coupons to users as they pass a store. But we've seen this before in several other companies. The problem is what's the incentive for the USER to install your software? Just to see this? I don't think so it's far from enough. All of these types of companies that try to sell dry bread to users with no filling will go the same route. They'll get some sales from big companies who are clueless and want some kind of mobile strategy but users will never adopt it. And yet many go on with such huge and impressive teams that they get funding and seem like legitimate companies. I think this market of crusty bread apps will wither and die. People need strong content before they will be incentivized to download something that isn't a game and will only blast them with advertising.

Foursquare suffers from exactly this which is why they are changing from their boring check in model. Checkins are great at airports, boring in life. Its one more sandwich that skimps on the meat for its users. I mean, sorry I'm too busy with my life to "check in" just to be hip and social. and no, getting a dopey "mayor of the pizza joint" competition doesn't really float my boat enough to bother with it either.

Then you have companies like Dish.fm which when no users would eat their stale sandwich decided to just SCAN YELP for all the data and reviews. Well at least they are providing some information to users but it's hardly very accurate or relevant in a way that's novel. Why not just read yelp?

Finally I began to read up on Austin's own Capital Factory and I have to say it seems to mean and I mean this in the best way, that a lot of dingbat companies with ridiculous business plans go through the place. They get to compete and finally earn 20,000 bucks in investment and a place in the incubator but really its like a bottom feeding VC business model. They get lucky 1 out of 20 but chew up a lot of companies in the way. Really its hard to say they do any worse than regular VC but the vetting for people who can actually SELL their product should be tougher. Maybe they need to focus on that instead of how to live on ramen noodles. Austin is a great city for startups if only that its so much cheaper I can't imagine doing a startup in san francisco with the two thousand dollar a month studio apartment. These places USED to be the startup mecas because they were cheap and people had garages. The vc's moved there and refuse to leave or branch out. But the startup companies can no longer afford to be there.

So the second kind of company takes it further and builds a mobile advertising platform which all the other mobile developers are just supposed to use. But do they have a profit sharing model and enough subscribers to make it worthwhile for the mobile developer to hassle and add it? Heck no! Another stale bread only sandwich for the users. Yet again, these kinds of companies are getting funding left and right. Come on VC, always ask the basic question - for whom does the bell toll. If users aren't going to enjoy eating it, there's just no way it will be successful.

There's a whole host of great startups that have great ideas that require an ECOSYSTEM of users and rewards for them. It's so tough to build and so risky. In todays pulled back investment environment the VCs arent going for them very much either but thats the kind of company that would work not the stale bread ones. Instead everyone is forced into bootstrapping and chicken mcNuggeet SaaS designs for their startups because that's what VCs are looking for. Empty and contains silicone, and in the end might kill you, but they seem tasty for the first few bites. 

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