When the Internet started to mature in the late 90's, many start-ups got generated around the concept of taking advantage of the internet to do business. Many of them did not have a sound business model, but generated a lot of hype. I remember the existence at one moment of more than 700 B2B hubs. Nobody really knew how to make money, but the concept sounded cool and venture capitalists poured large amounts of money in them. This money was used to buy IT equipment as it was necessary to have a website that responded fast. Some of our competitors made millions in that phase. Unfortunately, most of these asset-heavy start-ups burned through their capital quickly and had to stop operations. These days, there are only a handful of hubs left. Not to speak about all the other internet companies of those days and which pave the graveyard of the internet bubble.
Cloud computing offers a great advantage to today's start-ups in the way that they do no longer need to acquire a lot of assets. They can just operate of a small office and an Amazon ACS or other Cloud Service provider account. As pointed out by Adil Mohammed, co-founder of entrip, a site where you can share your trips, in a web posted presentation, titled "Startups in the Cloud", "Cloud computing has hugely contributed towards leveling the playing field between startups and established online players". Startups like animoto.com were able to scale from 2500 users to 250.000 users in three days thanks to the use of Amazon EC2. Obviously this would not have been possible in the previous paradigm. And Amazon for example includes store front capabilities to facilitate transactions on the web.
Does this mean that everything is wonderful? Well, there is one small hick-up that companies still need to address, and this is the question how to make money in what they do. It's actually frightening to see multiple blogs asking a simple question: "How will Twitter make money?" . And I use Twitter as it is quickly becoming a well known name. Many other companies are or will face similar issues.
Cloud Computing actually covers three different areas, an infrastructure space where compute and storage power can be rented (eg. Amazon EC2); an environment providing services (eg. Amazon AWS) that can be integrated to support a business and applications that allow an on-line experience. Most Cloud Start-ups seem to focus on the latter, although I found a couple that provided services, for example Cloud Service. The first one, the infrastructure space, starts to be referred to as PAAS, Platform as a Service (PaaS). I refer you to the interesting blog entry from Dare Obasanjo describing the differences between PaaS and Utility Computing.
But cloud related start-ups do not limit themselves to companies using the cloud infrastructure provided by large players. I was shocked when I found an article titled "20 cloud computing startups you should know", and realizing a number of the ones highlighted were actually building cloud infrastructures. Companies such as 3Tera, Elastra and Parascale also focus on the "private" or "enterprise cloud", which may become an alternative for CIO's if security can be guaranteed.
So, are we on the verge of something new and something that could facilitate the working of companies around the globe? Could this be THE solution to streamline global supply chains and facilitate us through the current economical downturn? Or are we going through a major investment phase that will result in a similar burst as in 2000? I do not have the answer and can only hope people are more cautious these days. Unfortunately as people are looking for good news, they may over estimate what's available. I will never forget this quote from Snoopy I saw years ago: "The neighbor's grass is always greener till you realize it is in plastic."