Trend Spotting: Platform Eco-Systems

Have you noticed how platform eco-systems are cropping up everywhere these days? There was a  time when only large companies used to market platforms. These days, everyone and their mother launches software platforms.

Of course, there are some that are much bigger than the others. Apple’s iOS and Google’s Android on the mobile side, Salesforce.com’s Platform-as-a-Service (Paas) Force.com on the cloud side are particularly successful ones. But there are also large platform eco-systems like Sencha from much smaller companies. [Read: Scaling a Platform for Device-Agnostic Web Interfaces]

In 2007, I met Kirk Krappe, CEO of a small startup called Apptus. Kirk and his two cofounders Neehar Giri and Nathan Krishnan had earlier done a venture-funded startup called Nextance. Nextance was an enterprise software company providing contract management software. It raised $60 million in venture capital, and eventually failed. The team then decided to take their domain knowledge and start Apptus as a cloud based contract management software company.

This time round, they decided to take no venture capital. They chose to build the company on Salesforce.com’s Force.com platform, which kept development costs low. The team was able to bootstrap the company, and within a couple of years, shot to $5 million in revenue.

In the 1M/1M portfolio, Mansa Systems is a company that has successfully built a $2 million revenue business offering integration services on the platform. And recently, they have also started launching apps built on it. [Read: How Mansa Systems crossed $2M leveraging Salesforce AppExchange]

The beauty of this model is that Salesforce.com has made available a cloud platform-as-a-service upon which entrepreneurs can rapidly and cost-effectively build businesses. The eco-system works really well, and Salesforce.com takes a percentage of the revenues for products built on their platform.

Today, thousands of developers are building on Salesforce.com’s multiple cloud platforms. They all pay royalties to the corporation.

The same phenomenon is evident all through the technology eco-system, and all over the world.

Brian Knight, CEO of Pragmatic Works has navigated the Microsoft eco-system, and built a $12 million dollar company around the SQL Server platform based in Florida.

Microsoft’s BizSpark program supports 72,000 small businesses building on their various platforms. Oracle’s partner network has a million companies. These massive eco-systems are gold mines of entrepreneurial potential.

As usual, over 99% of these eco-system partners are not venture fundable startups. But many of them can become million, five million, twenty million dollars a year businesses.

As it stands, there is no incubation support system to help these entrepreneurs grow. It is, however, in the interest of the companies who own the platforms and collect royalties from the developers, to build such systems.

Of course, no entrepreneur worth her salt would not respond to a gap like this 🙂

Check out the 1M/1M Incubator-in-a-Box for Platform Vendors!

This segment is a part in the series : Trend Spotting