Pardon the nautical references; this blog was inspired by the recent fundraising announcement from Digital Ocean, a relative newcomer to the Cloud Industry.

The Rising Tide

In a Forbes article, Ben Kepes writes:

DigitalOcean is a strange kind of an infrastructure vendor. With the cloud space typified by massive vendors, one would have thought that after Amazon Web Services, Microsoft Azure, Rackspace and IBM had used their share of the market there would be nothing left for the small guys. But DigitalOcean challenges that assessment. Since its founding back in 2011, DigitalOcean has grown massively off the back of a “cheap and cheerful” cloud infrastructure service. 

Until now the company had only raised a modest $3.2M in funding and yet had expanded to six individual data centers, a 49 person head count and a 30% month-on-month growth rate all fuelled by some high profile customers… And DigitalOcean’s individual growth was actually higher than that of AWS (a gain of 6514 as opposed to 6269 for AWS). Stellar performance indeed! DigitalOcean, in only a couple of years, became the 15th largest hosting company in the world. 

All that growth is exciting to investors and hence it comes as no surprise that DigitalOcean have closed a monster $37.2M funding round led by none other than VC poster-company, Andreesen Horowitz.

So how has a confident little upstart, only three years old managed to achieve what so many long established  hosting companies have miserably failed at (if they have even tried properly!)?

Do they have amazing, unique technology that makes them better/faster/clever than anyone else?  No not really.

Do they have a radically different cost model that enables them to deliver services more efficiently?  Perhaps, but unlikely compared to established hosts with large scale infrastructure.

Did they have massive amounts of funding to grow through large scale advertising or promotion?  No, in fact the $3.21M the company had before this last round is a pittance for building an infrastructure business.

Do they have massive amounts of functionality giving them a clear advantage in terms of completeness?  No, in fact one of the reasons people praise them is for the simplicity of use.

So what was it?.  Digital Ocean completely understands its target market – developers.  The company developed:

a) A compelling business/usage model, around pay-as-you-go usage with maximum caps.

b) A very cost effective solution through high degrees of automation.

c) Deep integrations with a wide range of developer tools.

In short, they nailed the product and market fit.

I should add, Digital Ocean is not a customer of Flexiant, the founders built their own technology, and well done to them for that, it’s not an easy task.  They still have a long battle ahead as they continue to roll out new features, functionality and scale, but are in a great position.

So, existing service providers, what is stopping you from achieving the same thing?  It isn’t the technology; Flexiant can easily solve that problem.  It shouldn’t be scale, if you are an existing provider you already have more scale than when Digital Ocean started. So start by following these steps:

Identify existing customers

  1. Understand how these customer segment into specific groups
  2. Identify the detailed needs of each segment
  3. Understand existing strengths and weaknesses in existing service offers
  4. Design service offers that create greater value for each segment than those that currently exist
  5. Rapidly configure and launch new service offers
  6. Continuously adapt based on market feedback

Will you rise with the cloud tide, or will you sink, the choice is yours…

Image provided by: ARG_Flick

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