I often wish the Brits would just stop moaning about how tough it is to be successful as a tech startup in this country and just get on with it. Fortunately many of them have already done so — and more than you'd think; the success stories are obscured by a number of factors including that oh-so-British trait of self-deprecation.
In a quest to build on what's been achieved so far, London & Partners, an offshoot of the London Mayor's office, has branded next week as London Technology Week, coinciding with two major shows — Internet World and Cloud World Forum — along with a number of smaller events timed to fall under the branding, including June's EuroCloud UK meeting (disclosure: of which I'm chair).
The politicians are hoping to establish London as the go-to tech hub to flock to in Europe, creating a global rival to Silicon Valley. Hence the disparaging comment by deputy mayor Kit Malthouse at a press conference two weeks ago to preview the event:
We want to avoid the San Francisco problem, where the tech industry is separate from everything else. We want London to be a crossroads, rather than a cul-de-sac, for technology.
They've seen how California's success has made the Bay area a magnet for prosperity. Who can blame them for wanting some of that in these austere times? But is it realistic, and what role does cloud computing play?
Who owns the cloud?
With more than 90 percent of the global infrastructure-as-a-service market already captured by Amazon, Microsoft, Google, IBM, Rackspace and other US based companies, it's possible to argue we're already at 'game over' as far as the cloud is concerned. This striking statistic was just one of a wealth of information provided by 451 Research co-founder William Fellows at a roundtable discussion in London yesterday organised by Dell on the theme of cloud's role in powering the future UK tech economy.
In terms of where that spend actually happens, Fellows spelt out some further details:
- 61 percent is in North America, 22 percent EMEA, 14 percent Asia Pacific and 3 percent Latin America.
- 30 percent of all Western Europe spend on IaaS is in the UK.
- The UK market is valued at $266 million (around 5 percent of the global total).
- 451 Research tracks 159 IaaS vendors operating in the UK out of a total 165 globally.
- Amazon Web Services revenue globally is 1.2x the aggregate amount of all the 165 other IaaS companies in the market.
- Spend on IaaS is rising at a compound annual growth rate of 36 percent.
- This despite IaaS price deflation at a rate "six times faster than Moore's Law predicts."
- IaaS represents 56 percent of the total $9 billion global market for PaaS, IaaS, and related management technologies delivered as a service.
- Spend on cloud services by industry (see chart) splits 29 percent tech and telecom, 16 percent each financial and government, 9 percent healthcare, 8 percent retail and 6 percent manufacturing
- That $9 billion is just 25 percent of the total public cloud market. Software as a service accounts for the other 75 percent.
- The global managed services market is about eight times as big as IaaS.
- As big as Amazon's revenues are, the figure is still smaller than some global enterprises spend each year on their own in-house IT.
All to play for?
One interpretaton of those figures, then, is that we're still very early in the development of this market and there's all to play for. SaaS remains a huge market and far more fragmented market. Furthermore, in IaaS, the UK is an early adopter with 5 percent of the global market. Indigenous UK providers are thus in a unique position to become battle-hardened for the global market as virtually every player of note is already operating here.
But even if start-ups are building their operations on infrastructure that others provide, that in itself makes it easier to get started. Steve Edkins, CEO of Fusion Experience, a London-based solution provider, commented on the ease with which it can build solutions for customers using cloud platforms:
"We are literally just configuring and bringing features to market ...
"From a startup point of view it's all done for you, you can spend value just innovating."
Sid Singh, head of programmes at innovation accelerator Pivotal Innovations said that on-demand availability of cloud infrastructure means startups can develop big data solutions in ways that would have been impossible just a few years ago:
"The ability to think about algorithms is something I think start ups are alert to. You have access to incredible processing power."
Under a bushel
Of course all of this is true anywhere in the world. Are London-based startups taking advantage of these capabilities? The answer from attendees at the roundtable seemed to be an emphatic yes, but for various reasons their efforts are hidden under a bushel.
For example, London is often considered a leader for fintech — technology firms serving the financial sector. But with financial firms notoriously shy of publicity and unwilling to reveal their competitive advantage to competitors, it's almost impossible for startups to get publicity for their successes.
In many areas, developers are using cloud platforms to deliver results within larger organizations but no one wants to draw attention to it in case of nervousness about the cloud. Technology consultant and writer Simon Bisson noted that:
"Public sector developers are probably the biggest users of (salesforce.com's PaaS platform) Heroku in the UK. But they don't talk about it ...
"Public sector is using cloud to build minimum viable product because they're being asked to produce results."
And then once startups do become successful, they seek to expand into the larger US market and end up relocating their headquarters to Silicon Valley because there's more venture capital available there. Jordan Fantaay, founder and CEO of Fantoo, said the British government is advising his company to look to the US west coast for funding:
"We are looking west coast because it is a tech play. The UK DTI [Department of Trade and Industry] is working with us to introduce us to US investors. They realize there's a funding gap here."
My contribution to the debate was to note that there were opportunities to foster disruptive competitors that use cloud connectivity, big data and smart devices to disrupt established industries, citing banking as an industry ripe for such treatment. We should not just be looking at cloud as a replacement for existing IT but as a means to transform entire business models.
The discussion continues
That discussion continues at Monday's EuroCloud UK meeting on the theme of Innovation and Growth, which I'm now going to give a shameless plug. This will feature some interesting insights from keynote speaker Steve Norris, a former UK government minister and London mayoral candidate, who is currently chairman of datacenter provider Virtus and president of the Data Centre Alliance.
I will moderate the discussion as a range of provocative speakers add their perspectives: Richard Davies, CEO of UK-based IaaS vendor Elastichosts, John Glover, CEO of collaboration provider and G-Cloud supplier Inovem, Gary Turner, UK MD of New Zealand accounting software vendor Xero and Lance Mercereau, CMO of Rosslyn Analytics. A European view will come from EuroCloud Europe president Bernd Becker, while Bernard Golden of Active State Software will be on hand to present a US perspective.
Disclosure: Salesforce.com is a diginomica premier partner and 451 Research is a diginomica affiliate partner. Dell hosted yesterday's roundtable discussion and is a former consulting client of the writer, who is volunteer chair of EuroCloud UK.
Image credits: Stormy London © jovannig - Fotolia.com; chart © 451 Research; headshots courtesy of vendors.