Platform as a Service

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Insight from @morganphilo - April 2019
Platform as a Service Primary Image

When investing in your online systems, why not allow other organisations to benefit from your innovation? If you take a look at some of the most successful web systems you will see that they are all platforms which allow 3rd parties to run their business within them. Close to home we can see Xero has built a successful model around allowing other businesses to grow all while using their innovation.

For me, I see there is many benefits in allowing an ecosystem to flourish inside your platform instead of trying to control every aspect of a system and providing it as a typical SaaS model. For one, no one company can get everything right, look at the now defunct Google Plus which was built by one of the most innovative companies in the world and it just didn't get the uptake - no matter how much money they had to throw at it.
Build the platform, support the innovators and the market will pick the winner. This not only allows you handover the risk of implementing the end functionality, but allows the most innovative companies to succeed; which is better for your platform and the end users. All while being at the helm, gently guiding the direction of companies who's best interest is to champion your system to lure sales for their own product built upon yours.

The base Xero product is fairly small and by no means comprehensive. But it becomes clear that this is to it's benefit, the marketplace is what gives it strength. Instead of Xero trying to build a one size fits all accounting system, they provide the core system and infrastructure and a fairly clean surface for other business to build their systems on. I have worked on systems that try and do everything, adapt to every business type and every customer complains that it doesn't quite match their business process.

This is not to say that every platform is going to get the uptake of these big companies, but why not build with platform considerations in mind?

An E commerce Model

The successes here are very clear as most people use them fairly regularly - Trade Me which sells itself as an auction site but is just another e commerce platform where vendors now have listings that stay up. Alibaba which took the complicated and risky process of buying from China and consolidated the market and provided the buyer protection business were looking for. Then pivoted to consumer e commerce with a roaring reception - the write ups on their success are extensive on the internet so I will spare the details, but their model is to allow sellers to connect with consumers they don't hold any stock (sort of - they now have Amazon like fulfilment centres around the world).

Gaining businesses on your platform is not an easy process and by no means guaranteed of success. How can you convince business that are starting up to invest in code that only runs on your platform, when the incumbents have much larger traffic throughput? Attracting them may not be viable, so you need to go and get them. Here is the Dropshipping model, you integrate with them initially, then, once you build your brand and consumer trust, they will come to you.
At the end of day, for the 3rd party business, it is hard to justify investing in software let alone having to wonder if you picked the correct platform. The best you can do as a platform owner is connect openly with as many systems as you can. Connect systems as much as possible and iron out all the issues for the potential contributors to the market place. Don't go for feature complete, get the core offering rock solid and expand slowly. Building upon an unstable platform has people looking away very quickly.

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