In the last post, I suggested five key success factors for Industry Cloud providers:
- Focusing on the right set of value-adding services
- Evolving to a SaaS, multi-tenant, platform
- Understanding how to price in a two-, or multi-sided market
- Consolidating the competition
- Choosing an industry with high concentration on one side (e.g., buyers) and fragmentation on the other (e.g., sellers)
I’ll dive deeper into each of these success factors in a series of posts.
#1. Focusing on the right set of value adding services.
Of course, this is the key success factor for any business, not just Industry Clouds. The successful Industry Clouds lived up to both key parts of this admonition: focus and value-adding. Many of the failed market places of the late 90’s early 2000s lost sight of both. They tried to do sourcing, consulting, content management, collaborative planning and more all at once and did not try to think through what was the primary need of the industry and what would be best addressed through a platform approach, rather than simply through buyer supplier pairs. Successful Industry Clouds found one or two core value-adding services that often could only be offered by “many-to-one-to-many” platform and then expanded from there. Later posts will provide examples as I detail several success stories, but consider as an example, Concur’s single-minded focus on improving the expense report and booking process.
#2 Evolving to a SaaS, multi-tenant, cloud, on-demand platform. (Add your own synonyms as you see fit.)
This one is almost tautological. You cannot have an industry platform on which thousands of organizations participate without moving to the cloud. It’s as true for Industry Clouds as it is for app stores. Yet, this helps explain why Oracle and SAP are not major IC players and explains why people who made this move early succeeded.
Ariba, for instance, began behind the firewall with a procurement application, but between 1996 and 1999 realized they needed to add a SaaS, multi-tenant platform outside the firewall to connect to these applications. This became the Ariba Network. Concur made the same painful transition long before it was fashionable. Successful Industry Clouds from the marketplace days, like iTradeNetwork started that way.
Successful Industry Clouds saw value in industry standardization, shared components, processes, or information. Less successful players thought like traditional one-to-many portals that happened to share infrastructure–remember ASPs?!