WHOLE NEW GAME
It takes two to Tango as they say, and now that Google has officially entered the web services business with Google App Engine, it joins Amazon in offering global-internet scale web infrastructure services. TechCrunch's Michael Arrington describes it thus:
"Google isn’t just talking about hosting applications in the cloud any more. Tonight at 9pm PT they’re launching Google App Engine (Update: The site is live), an ambitious new project that offers a full-stack, hosted, automatically scalable web application platform. It consists of Python application servers, BigTable database access (anticipated here and here) and GFS data store services.
"What this all means: Google App Engine is designed for developers who want to run their entire application stack, soup to nuts, on Google resources. Amazon, by contrast, offers more of an a la carte offering with which developers can pick and choose what resources they want to use."
This is all major goodness for web startups anywhere, and it obviously affects the economics of startups and venture financing, as Fred Wilson points out in a timely post today:
"With the announcement last night of Google App Engine, it's literally possible to build your entire web app on top of Google's vaunted infrastructure. It's already been possible to do that on top of Amazon's for some time now."
So it's not surprising to me that the Y Combinator model is being adopted and adapted by others. Last summer my friend Brad Feld helped sponsor TechStars in Boulder Colorado and a number of interesting startups have come out of that program."
But what struck me reading about the Google announcement, is not just how important this trend is for startups, but how important could it be for enterprises in deploying their internet strategies for their enterprises.
It's not just startups that are doing startups.
Businesses of every size and shape have in recent years been coping with the enormous opportunities and challenges of turning their businesses inside out, and make their products and services available to consumers and partners online, in ways never before envisioned.
And the challenges of globally scaling these efforts with in-house resources, have never been greater.
In the old days of enterprise computing, businesses, especially medium to larger ones, would have turned to IT outsourcing firms for help in deploying these strategies.
Today, with web services like those from Google and Amazon, there potentially are cheaper, and far more scalable options.
Businesses can try out new ways to engage with their prospective markets online cheaper and faster than before, and see what works and what doesn't. Just like early stage venture investors. As Fred Wilson puts it well:
"...look at the Y Combinator model for inspiration and suggested that they back 10 teams at $25k each instead of one team at $250k.
Two reasons. First it's hard to know who will get it right, by backing 10 opportunities instead of one, you vastly increase your chances of success. And second, you can get a lot done on $25k now, particularly if you back young software engineers right out of school (or even in school) who can live for at least six months on $25k."
I'm not suggesting that businesses will be backing young software engineers out of school for mission-critical enterprise-grade web services (they can if they want to, of course), but I am suggesting that similar economics can apply to things they'd like to try online, but can't otherwise with the traditional process of building enterprise applications.
Even if they eventually move the applications later to their own, in-house infrastructure later, trying them out first online via these web services may be useful in the development stage.
With these new global-scale internet web services providers, we're likely to see not just startups in the traditional sense taking advantage of these new web services, but "enterprise startups" as well, for lack of a better term.
I don't have the metrics for this yet, but it's a potential trend that merits more study.