There is an interesting series of recent article in the New York Times(NYT) that describes how Apple, Facebook, Alphabet, Microsoft and Amazon are embattled in a race to dominate consumer technology markets. The NYT column refers to this group of companies as the frightful 5. If we look at the enterprise software space, we can identify similar signs of how Microsoft, Alphabet, Amazon and IBM( yes IBM!) are aggressively trying to lead on every emerging technology market. Let’s call this group “The Frightful 4 of Enterprise Tech” or MAAI.
Pick your favorite emerging enterprise technology space: internet of things(IOT), artificial intelligence(AI), blockchain, virtual reality or even quantum computing and you are going to see clear the MAAI group among the leaders in each space. Without exception, the MAAI companies have been able to defy market rational and rapidly innovate their way to market leadership in every single emerging technology space. What are the specific market patterns and dynamics influencing the frightful 4 and what can we expect in the near future? There are a few observations about this topic that I think are worth debating:
1 — The Cloud Tax
One key reason why the MAAI group has been able to expand so efficiently into new technology markets is because of their dominance in the cloud platform space. Cloud is the main delivery channel for new technologies such as AI, IOTA, blockchain or quantum. At the same time, most enterprise are likely to be running the workloads of new solutions on MAAI’s clouds considering that those cloud platforms amount to over 85% market share. Consequently, it is very tempting for enterprises to embrace new technologies running on an infrastructure they are very comfortable with.
2 — M&A Fever: The Cost Gap Between Building and Acquiring
What do trends like AI, IOTA, blockchain, VR or quantum have in common? They require hard core computer science skills and they take time and resources to build. Starting in those markets typically require large amounts of venture capital in order to execute and get to critical mass. On the other hand, the balance sheets of the MAAI companies seem to be getting richer every earning season(except maybe, IBM) which has triggered an increase on M&A activity closing the door to new players to be able to compete with the MAAI group.
3 — IBM the Pioneer, Microsoft Brings the Tools, Alphabet and Amazon the Infrastructure
IBM research labs have been busy in the last decade. In almost every emerging tech market ( think AI, IOTA, blockchain and quantum), IBM has been first to market before facing competition from the rest of the MAAI group. The patterns become even more intriguing. In almost all markets, Microsoft has been able to lead by building impressive toolsets that lower the enterprise developers. similarly Alphabet and Amazon have excelled at building massive infrastructures to scale emerging tech applications. We can see those patterns playing forward in other emerging technology trends.
4 — Big R&D Budgets
Its becoming increasingly hard for startups to compete with the big research arms of the MAAI companies. Consequently, the MAAI group continues pushing the market into new areas and innovating more consistently than the competition.
5 — MAAI Soon Could be MAAAI
What company could soon join the MAAI group? I will give you a hit: is not SAP, Oracle or even Salesforce. Alibaba seems to be uniquely positioned to expand its relevance into emerging tech markets. A fast growing cloud platform(Alyun), a dominant position in the Asian market, an impressive R&D budget and a super healthy balance sheet seem to be the right ingredients to propel Alibaba to the MAAI group which could soon be MAAI.