I have always been fairly thematic in my investment approach. For me, the process starts with identifying big markets that are either 1) emerging (and will therefore be created over the next several years) or 2) undergoing some structural shift that will enable new entrants to grab market share from incumbents. I have seen Companies succeed in both types of markets and so I don’t have a preference for either approach. In 2010, there are a several big themes that I’m tracking which are likely to influence my investment selection during the year.
Everything is a service
For several years I’ve been spouting off about the notion that “everything is turning into a service”.
One of the trends I’ve observed over the past several years is that more and more technology entrepreneurs are starting service-delivery business. By services businesses, I’m referring to the category of businesses that some venture investors refer to as technology-enabled services (“TES”). We at Meritage prefer the term network-enabled services (“NES”), which we think more accurately demonstrates the fundamental innovation in the business model, which is that there is a high-level of connectivity between the service delivery platform and the customer. Services is a big tent, so to ground it, put your mind on business models like SaaS, cloud computing, and even search.
Last week, I attended GigaOm’s Structure ’09 Conference: Put Cloud Computing to Work. It was worthwhile to attend and I intend to return next year. It was exciting to see how the services business model is being rapidly adopted by the technology-delivery value-chain.
In a talk titled The Cloud in Context, Russ Daniels, VP and CTO of Cloud Services Strategy at HP put it most succinctly, describing HP’s vision as:
“Everything is a Service”.
Full video of Daniels’ talk here. While the “everything is a service” mantra is almost certainly overreaching, it drives home an undeniable point; the action is in services. To make it fully, I think you have to start with the view from the customer’s perspective.
A post by Ben Kepes over at CloudAve got me thinking about the economics of on-demand services, so I thought I’d do a quick blog. On-demand services businesses come in all shapes and sizes. This is particularly true today with the emergence of SaaS, where the vendor diversity is staggering. Despite the diversity of services – ranging from traditional communications services (think voice, video and data) to highly verticalized SaaS applications (think point of sale applications for yoga studios) – the fundamental economic building blocks of these businesses are, for the most part, the same.