Ninefold Cloud Falls Out Of the Sky. Are More Destined To Follow

Wed, 4th November 2015, 01:20

Ever wonder why all those big, puffy clouds “floating” in the sky on a summer’s day stay in the sky? Why don’t they fall down? Are they lighter than air. Everyone knows clouds are made of water and water is heavier than air. So why don't they fall down? Well enough with the philosophical confabulation. They do fall down! Australian cloud hoster Ninefold is throwing in the towel and giving up the race against richer rivals.

In a news announcement on its website, the company said it has decided to discontinue its operations after realizing that it would cost the business significantly more to take its existing platform to the next level.

For nearly five years, Ninefold has delivered a cloud computing platform focused on our brand promise of ease and performance, delivered through simplicity. We were the first Australian provider to invest in Aussie infrastructure that was truly cloud - multiple availability zones, instant horizontal and vertical scaling (at cloud capacities), purchased online by the hour. We developed a simple to use user interface and made it easy to integrate via API. We achieved many great milestones on the platform’s journey. Thank you to those that were part of the journey, and thank you to our customers who have made us who we are.

Significantly more investment is required if we are to make what we’ve built go to the next level. After an evaluation of the underlying technical platform, much consideration and deep reflection, we have decided not to embark on this journey. We will shortly notify our customers that we will be sunsetting our Public Cloud Computing (Server) platform, the last day of operation being January 30, 2016.

Many armchair commentators will point out that Ninefold's main selling point in the Australian market was its local presence. With key players like Amazon, Microsoft Azure, and Google Cloud opening datacentres in Australia, all while slashing prices, Ninefold just became collateral damage in a natural normal Darwinian part of late 20th century economics.


Taking it to the next level...

The competitive strategies adopted by tech giants is quite simple. Acquire, or outspend smaller competitors. It’s not uncommon to see corporate giants spend small fortunes to achieve similar level of product development obtained by their smaller counterparts on a shoestring budget. (editor’s note: more perplexing is how casually giants decide something has failed and the decision is made to scrap the entire project).

A member of Harvard Business School’s Forum for Growth and Innovation, Maxwell Wessel, published a series of posts in the Harvard Business Review titled “Why Big Companies Can’t Innovate.”

In the first post in the series Wessel tells how back in the 70’s, Gerber company’s growth potential was waning so to grow profitability and fight margin pressure, groupthinking execs pivoted towards a market they hadn’t successfully penetrated for decades: adult food. With people spending more time at work, Gerber’s knew if they could develop a quick, healthy meal for adults, they had an avenue into meaningful growth.

Gerber created a product for adults that looked and felt just like its product for children and slapped a new label — excitingly named “Gerber Singles” — on existing pureed products and shipped them out. (editor’s note between heaves.. the only way to get a baby to eat this stuff is strap them into a chair and sneak it in their mouth while making airplane sounds. Facial expressions were priceless though) The product design allowed them to use their existing processes for sourcing and distributing food as well as empowered them to use excess manufacturing capacity.

Needless to say the whole exercise was a colossal flop and the product was pulled from the grocers shelves. Companies like Gerber don’t struggle to identify the next great idea. Their idea had merit, and the market trends were real. Hundreds of millions of dollars of similar type products are now sold annually meeting market demand that Gerber first identified.

Gerber did exactly what it was designed to do: create operational efficiency. This deeply-rooted tendency goes all the way back to a corporation’s typical life cycle. In it’s infancy, it’s designed to bring innovation to the market. A start-up’s success is not gauged by earnings or quarterly reports; it’s measured by how well it identifies a problem in the market and matches it to a solution.

Conversely, mature company use a different matrix: profit. Successful mature companies do what they’re designed to do: create operational efficiency and deliver profit. Seasoned managers steer their employees from pursuing the art of discovery and towards engaging in the science of delivery.

In the end it can be summed up as big companies are really bad innovators because they’re designed to be bad at innovation. The dilemma faced by Ninefold is similar to the paradox not being addressed by many small and medium sized web hosting companies today. Company growth potential is waning and transformational growth will not be achieved by asking how can we do what we’re already doing, a tiny bit better and a tiny bit cheaper.

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