How did “Industry Clouds” (ICs) evolve?

Some of the successful Industry Clouds listed in the last post began as traditional “behind-the-firewall” software providers–though in most cases their applications lent themselves to reaching across the firewall.  Examples would include Ariba and Concur.  Some of these success stories began in the heady “marketplace” days of 1998 through 2000 and were prematurely “written off” in 2001!  (Back then, remember, only instant success was recognized as success!) Examples of this latter group would include GHX, iTradeNetwork, and Descartes to name a few.

While there was no one way the successful Industry Clouds started, there are common themes among these success stories that we can learn from.  After all, literally hundreds of marketplaces and new internet-based enterprise software providers failed in this same time frame.  The successful Industry Clouds solved the “chicken/egg” problem of industry participation and they did so using patience and perseverance, as well as a combination of:

• 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
• Ideally, choosing industries with high concentration on one side (e.g., buyers) and fragmentation on the other (e.g., sellers)

In the next post we will dive into these key success factors, but I do first want to pay tribute to simple patience and perseverance.   Anyone who has worked in B2B and studied the diffusion of innovation among enterprises –especially inter-enterprise technology–knows that there is “no tipping point” in B2B.  Whether the innovation is EDI, ACH payments, p-cards, or anything involving money, the adoption “S” curve will be a lot slower than it is in B2C businesses for obvious reasons.  On the other hand, the business can grow at double-digit rates for decades and can be quite sticky.  In the end, deriving value from inter-enterprise platforms requires different companies to align their businesses processes and this is something many large companies cannot even achieve within their divisions, much less across their demand and supply chains.