The Changing Nature of Startups

Michael Vizard

As a general rule, chief technologists within any IT organization have the greatest appreciation for the potential benefits of new technology. As a result, they tend to take the most interest in hearing what any given start-up company has to say about the next generation of information technology.

But as the economic climate has changed, so too has the character of the typical start-up company. There are a lot fewer ambitious start-ups out there backed by millions of dollars of venture capital money. Instead, we're seeing a lot more startups based around an idea that typically extends a major platform, rather than trying to usurp it.

None of this has gone unnoticed by the major vendors, which have increasingly become an important source of seed capital for startups. IBM, for example, is now working with more than 1,500 venture capital-based startup companies. From IBM's perspective, the ideal startup is a company that extends, for example, its Cognos franchise in business intelligence, as opposed to say a company that want to reinvent middleware and, in so doing, disenfranchise Websphere.

There are, of course, a few attempts out there in the weeds that will try to revolutionize some part of the IT universe. But for the most part, the venture capital community has pulled in its horns to concentrate on extending the platforms of the major vendors. In so doing, they hope to eventually get acquired by that major vendor, while the major vendor hopes to mitigate its research and development risks by essentially outsourcing that work to a start-up company.

These types of start-up companies are pretty easy to identify because they usually have a representative of the company they hope will acquire them sitting on their board of directors. What this means for IT departments is an extended period where emerging technologies will feel more like a natural extension of what they have previously invested in.

And while that may not be as exciting as a company trying to take down a major vendor, from a practical perspective it means there should be a little more order in the universe that ultimately will result in a better ability to see and plan for how the next generation of technologies will find their way into the larger IT ecosystem.



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