The trend is your friend – leveraging the power of commoditization and the efficiency of the web

I always like to say that the "trend is your friend," and it is pretty clear that one of the most powerful trends in the technology industry is the commoditization of existing markets which are currently served by high-priced, proprietary vendors.  In addition, it is also quite clear that companies that can leverage the web for sales, marketing, and even product delivery (downloads or SAAS) can have some significant advantages.  When I look at the enterprise landscape, I am not necessarily looking for the cheap solution, but rather a disruptive one that will allow a company to offer orders of magnitude improvement in performance, price, and delivery.  In addition, there are a few must-have characteristics companies should possess in order to get me interested:

1. large projected market-new emerging markets are welcome as long as we can see the opportunity ahead.
2. capital efficient business models – leverage frictionless sales and the web (try before you buy model, low barrier to usage, downloads, etc.) to create a more efficient and less costly sales and marketing machine.  Also leverage the commoditization trend to deliver products faster, cheaper and better.
3. disruptive technology – orders of magnitude improvement in price, performance, and delivery

A great example of a company meeting a number of those characteristics is portfolio company Greenplum (yes, full disclosure, I am on the board and may be biased in my opinion 🙂 ).  Greenplum is leveraging the power of commoditization to turn the data warehousing market, traditionally led by proprietary vendors like Teradata, upside down.  Rather than rave about Greenplum, I thought I would share a recent article from Bill Inmon, a well known data warehousing analyst who some view as the father of data warehousing:

And with that explosion of data comes a corresponding increase in the costs of data warehousing. In particular, storage costs and the cost of the infrastructure required to support the storage needs are rising. The hardware vendors love to say that storage costs are going down all the time. This appeases the manager who has to pay large sums for the storage infrastructure. Storage costs may be decreasing at a factor of X, but the demand for storage is increasing at a rate of Y, and Y is a lot bigger than X.

It is reputed that one hardware vendor is selling storage for data warehouses at the rate of approximately $750,000 for a terabyte of storage.

So along comes Sun Microsystems and Greenplum with an offer you cannot ignore. How about $35,000 for a terabyte of data up to 24 terabytes?

If you are planning for a data warehouse in your future, you should take a close look at the Sun/Greenplum offering. No, let me say that a little bit more strongly – you cannot afford to not take a look at the Sun/Greenplum offer – not unless you enjoy throwing your corporate resources away.

It is about time that someone lowered the dreadful cost of data warehousing. Some of the leading vendors have been shameful in their gouging of customers. So the Sun/Greenplum offer comes as a godsend.

The offer is so good that in fact, you can afford to buy and install Sun/Greenplum, try it out, and if it doesn’t work, for whatever reason, use the gear for some other purpose. At the price ratio of $750,000 for one terabyte versus $35,000 for a terabyte of data up to 24 terabytes – you simply have to try this offer.

So you may ask yourself how we are able to offer that kind of pricing, 20x cheaper than some competitors, and still get profitable?  Well first, we are leveraging a hybrid sales model where partners like Sun help drive the high end opportunities and our open source street cred and our creation of helps fuel the download model.  In addition, rather than build expensive proprietary hardware solutions, we are leveraging the power of commodity boxes and clusters to deliver better performance at a fraction of the cost of existing competitors.  In addition, rather than start from scratch we have built some proprietary extensions on top of PostgreSQL, a leading open source database, to make it BI ready.  So combine lower costs to build with a highly leveraged sales model and you can quickly see why we can offer the pricing that we do and build a great business from it.  There is nothing like leveraging a powerful trend, so if you are an entrepreneur building a company with many of the characteristics outlined above, I would love to hear from you.

Published by Ed Sim

founder boldstart ventures, over 20 years experience seeding and leading first rounds in enterprise startups, @boldstartvc, googlization of IT, SaaS 3.0, security, smart data; cherish family time + enjoy lacrosse + hockey