When AWS, Azure, or GCP Becomes the Competition

It starts with someone posting an AWS press release in the company chat. “AWS Announces FooBar,” the headline reads.<br>The announcement skirts around technical details, as usual, but contains a worrying amount of buzzwords that overlap with the company’s product. Somebody responds with a grimace emoji 😬. Others reply with all the ways AWS FooBar is totally not like our product and, anyway, ours is better, and, and… The flurry of replies betrays their true collective emotion: We’re screwed.<br>They’re right to be worried.<br>As a marketing consultant to enterprise software startups for the past six years, I’ve helped companies navigate and succeed in this scenario at least eight times.[1] In this article I explain why every software startup should be prepared for this scenario, why the initial panic is justified, and how to position products against alternatives from “Big Cloud” (AWS, Azure, GCP).<br>Every Software Startup Should Be Prepared to Compete Against AWS, Azure, and GCP<br>Even if you’re not competing with Big Cloud today, there’s a good chance you will soon.<br>This is especially true if your product is in the serverless, stream processing, machine learning, containerization, IoT, data warehousing, or batch processing space. Those are the fastest growing cloud services—according to a survey from Rightscale—and Big Cloud companies know it.<br>Big Cloud companies earn the bulk of their revenues from metered billing of storage, compute, and streaming. Having turned those infrastructure workloads into commodities, the Big Cloud companies are in a race to provide differentiated products higher in the stack just to bring more customers onto their infrastructure.<br>That is evident in the sheer size of their product portfolios and pace of product releases: AWS has 182 products and made 83 major product announcements (launches or major releases) in 2018.[2]<br>You Should Worry When Big Cloud Launches a Similar Product<br>There is a tendency, upon learning of a Big Cloud intrusion, to bury our heads. Internal emails will include explanations for why the Big Cloud product “is not really competitive,” “is not as good as ours,” and “can only take a small piece of the market.”<br>Maybe those things turn true, but there are good reasons to at least take the competition seriously:<br>1. Resource Imbalance<br>Big Cloud companies can win by brute force: Pouring obscene amounts of resources into engineering, marketing, and sales until they outrun or outlast the competition. It won’t be enough to have a better product by a smidgen, or to have a small head start in the market.<br>2. Complicated Relationship<br>Startups participating in Big Cloud partner programs, such as the AWS Partner Network, will find themselves sharing sensitive information and valuable resources with the competition. For them, leaving the program would mean relinquishing a potentially significant acquisition channel.<br>Meanwhile, Big Cloud wouldn’t flinch at losing a startup partner, and therefore has no incentive to be prudent with the information it obtains.<br>3. Broad Reach and Influence<br>AWS can get on stage and influence a thousand people, or send an email and influence a hundred thousand, or play a TV commercial and influence millions. Using their broad reach and brand recognition, Big Cloud can influence how people perceive the market and make their decisions.<br>4. Captive Audience<br>Even better than a reachable audience is a captive audience. Big Cloud companies have millions of users, already running on their platforms and familiar with their products. They can reach this audience to upsell and cross-sell products in a few clicks.<br>5. Pricing<br>The objective for most Big Cloud products is not to make profit, but to bring customers onto the platform and increase infrastructure usage (compute, storage, streaming). Therefore the products can be used as loss leaders: Priced at very low or no cost, provided they drive increased infrastructure usage. For startups, at best this eliminates the option to compete on price, at worst it forces them to lower prices with no way to make up for it.<br>6. Easy Access<br>Engineers at companies already running on AWS can buy, deploy, and integrate an AWS product before their coffee cools. Metered billing means there are no upfront costs or negotiations. Being on the same platform means seamless integration between tools and services.<br>7. Early decision<br>In the past, decision makers had to choose whether to build a solution in-house or purchase software from a vendor. Today, the low prices, easy access, and brainshare of Big Cloud offerings create a new option for decision makers: Use what their cloud platform is offering.<br>It used to be “buy vs build.” Now it’s “buy vs build vs big cloud.”<br>For software startups, this means they can be ruled out even earlier in the buying process, before any conversation, evaluation, or feature comparison takes place.<br>How to Win Against Big Cloud<br>Prepare<br>Attend trade shows, seek out...