Standing Out in the Clouds

The success of the cloud movement over the past year has spawned a proliferation of players seeking to win a share of this rapidly growing market. While the market opportunities appear to be endless, the “cloud rush” effect that has overtaken the industry is making it more difficult than ever for companies to clearly differentiate themselves and gain a leadership position in their particular segment of the market. Overcoming these challenges will become even harder in 2012 as the market becomes more cluttered.

As an indication of the vast array of players permeating the marketplace, THINKstrategies’ cloud computing Showplace has more than 1,870 SaaS, Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) companies listed across more than 90 application, industry, technology and service categories. While this number may seem significant, I’m convinced that the Showplace may only include half of the companies currently offering cloud services today.

The number of cloud companies is growing on a daily basis because of the lack of barriers to entry; furthermore, a growing number of established hardware, software and service companies are rebranding their existing products and services, and calling them “cloud” solutions. This “cloud-washing” trend is further confusing corporate decision-makers tasked with sorting out what is real and what is hype, and trying to select cloud providers and solutions that can best meet their needs.

New Rules

Cloud computing has changed many of the rules of the game when it comes to developing, promoting, selling, delivering and supporting business applications and computing power. From a marketing perspective, cloud vendors seeking to gain a competitive advantage in the market must shift their tactics from selling “speeds and feeds,” which only paint them into a commodity corner.

In order to avoid this trap, successful cloud vendors must sell the strategic value of their services. This means positioning their solutions as essential business services rather than simple utilities. It also means quantifying the business benefits of the services and using customer success stories to demonstrate their value.

In addition, it requires building a meaningful ecosystem of third-party relationships that enhance the functional capabilities of the cloud vendor’s offerings and create additional channels to market to expand the vendor’s reach. These alliances must go beyond shallow press release announcements, or “Barney partnerships,” to provide a unique value to potential customers. Making them meaningful means being selective and putting a concerted effort into making them work.

New Challenges

The most important consideration for aspiring cloud vendors is to be honest about strategic marketing objectives. Many startups, especially in Silicon Valley, are simply developing point products in the hope of winning a quick acquisition by a bigger player that will use them as piece-parts for the acquirer’s long-term success. Demonstrating the strategic value of these cloud gadgets isn’t necessary, but it is essential in the enterprise world in which the buyer is increasingly becoming the corporate executive, business unit manager or end-user.

THINKstrategies has been helping solution providers of all sizes grapple with these strategic marketing issues for the past decade, and I’ve been helping IT companies clearly differentiate themselves in the market for nearly 30 years. It is amazing to me how the basic principles of marketing continue to be misunderstood by tech companies moving to the cloud. Compounding the typical challenges of following these principles is the changing scale and velocity of the marketing programs that must be employed to compete in today’s rapidly changing competitive environment.

Cloud companies with strategic ambitions that don’t understand these marketing rules of engagement are unlikely to survive in 2012.