XaaP and the platform business model: How Netflix, Uber, Airbnb are forging ahead
The primary business context for cloud native case studies like Netflix is the ‘Platform Business Model‘, the conceptual design model for the particular commercial models they implement as well, one that is directly enabled by the technology.
Considering the business wealth a ‘simple’ mobile phone app has generated for Uber, this relationship is not hard to identify in action, and is often communicated through social media, highlighting that neither owns any taxis or hotels but in a few short years now command the largest fleets and room availability, vastly larger than their traditional competitors who took decades to do so.
The platform revolution
The repeatable secret sauce is the Platform Business Model, described in detail through academic literature and popular business books; for example, the MIT book ‘Platform Revolution’ sets the scene for the market trend that Cloud Foundry is addressing and is ideal for.
The Platform Business Model has emerged as the moniker for defining the hyper-scale disruptors like Netflix, Uber, Airbnb, Facebook, Twitter et al, as the book describes:
“Facebook, PayPal, Alibaba, Uber-these seemingly disparate companies have upended entire industries by harnessing a single phenomenon: the platform business model.”
The book builds on prior MIT research, such as this detailed 2007 research report on Platform Networks, this highly recommended presentation Platform Strategy and Open Business Models, and in a simpler format in this presentation, which defines:
“A “network platform” is defined by the subset of components used in common across a suite of products (Boudreau, 2006) that also exhibit network effects. Value is exchanged among a triangular set of relationships including users, component suppliers (co-developers), and platform firms.”
Throughout these materials they provide an anatomy of these business models, exploring dynamics such as “multi-sided pricing“.
Platforms are marketplace models, ranging from the people-centric services like Uber taxis and Airbnb accommodation, through to electronic distribution channels like Apple and Xbox. MIT examines the different permutations and shares those best practice insights.
The sharing economy meets elastic cloud business models
The MIT research explores the different dynamics of platform scenarios and markets, like Microsoft vs Apple across computers, portable music players and ultimately smartphones.
The trend has also been described as ‘The Sharing Economy‘, a wave that the disruptors ride through technology innovation.
The dynamism of cloud computing is a perfect match for this equally ‘organic’ approach to resource management, both scaling in real-time to actual market demand experienced.
As the new breed of hyper-scale startups like Uber, Netflix, Airbnb are demonstrating when it is combined with massive investment financing and highly scalable mobile and cloud application services, it very quickly becomes an all-dominating behemoth, unstoppable unless you compete on the same level.
Hence why the business model itself has become so important and popular. For example Dan Woods says your CDO efforts will fail unless you adopt platforms.
XaaP: Industry scenarios for platform adoption
The enabling relationship between cloud computing and the increasing maturity of the model, as demonstrated by real-world adoption successes, is characterised by how they’re described as “XaaP” initiatives, by which I mean for example: