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Business Strategy for Enterprise Cloud Startups

If you want to play in the cloud space you need to look at two different points of view

With cloud computing becoming the center of almost every new enterprise IT project, more and more startups decide to compete in the area. This raises the question: "Are they ready to fulfill the enterprise needs?" Forget the need to have one big customer. This can open few doors but if your startup's business strategy is wrong those will be shut down soon. It is true that one prominent customer can boost your sales but in my opinion there are two more important things that can help your startup get customers fast.

BusinessSuccessFirst question you need to ask yourself is: "Do I target the right audience?" If you want to play in the cloud space you need to look at two different points of view - the developer one and the IT one, and make sure that you understand both. And trust me, John Engates, CTO of Rackspace, is right by saying "the traditional datacenter admin, even the CIO, don't necessary understand a developer's standpoint" (see Cloud Operability and the Battle for the Open Cloud at forbes.com).

If your product is targeted to a developers audience the capabilities you should outline are speed and agility (aka faster time-to-market), integration with existing development tools and abstraction from the underlying infrastructure. Think whether your product offers services that developers can use to stitch together and deliver their application faster. Or whether it makes the build and deployment process smooth and faster. Or whether your product allows them to run their application uninterrupted without the need to deploy and configure new instances every time something fails.

If you target IT admins on the other side you need to think more about cost savings, standards and security, and integration with the underlying infrastructure. A customer once told me: "IT will always be on the expense side of the balance sheet. The more we are able to save costs the longer we will keep our jobs". Does your product help IT teams reduce operating expenses or reduces capital expenditures? Does it follow established standards and allows easy integration with existing infrastructure and applications? Does it require extensive training and ramp-up time?

The other question you need to ask yourself is: "What is my pricing strategy?" Subscription models are nice because they guarantee you regular payments but they not always work. Some enterprises may have rules to finance their IT through credit instruments like bonds, and such can only be issued for capital expenditures. On the other side if you only offer perpetual licenses then the customer may not be willing to upgrade at the pace you ant them to. Getting the right balance between pricing and needs can only be achieved if you know your audience. If you target developer organizations OpEx may be fine because they are revenue driven. On the other side IT teams are  expense driven and they may need more time to prove that your product saves money than your subscription license allows them.

The more traction the cloud industry gains the harder will be for new startups to enter the area. Hence, defining your audience and pricing strategy early on will be crucial for the  success of your venture.

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More Stories By Toddy Mladenov

Toddy Mladenov has more than 15 years experience in software development and technology consulting at companies like Microsoft, SAP and 3Com. Currently he is a CTO of Agitare Technologies, Inc. - a boutique consulting company that specializes in Cloud Computing and Big Data Solutions. Before Agitare Tech Toddy spent few years with PaaS startup Apprenda and more than six years working on Microsft's cloud computing platform Windows Azure, Windows Client and MSN/Windows Live. During his career at Microsoft he managed different aspects of the software development process for Windows Azure and Windows Services. He also evangelized Microsoft cloud services among open source communities like PHP and Java. In the past he developed enterprise software for German's software giant SAP and several startups in Europe, and managed the technical sales for 3Com in the Balkan region.

With his broad industry experience, international background and end-user point of view Toddy has an unique approach towards technology. He believes that technology should be develop to improve people's lives and is eager to share his knowledge in topics like cloud computing, mobile and web development.

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