How Can Young Cloud Computing Technology Companies Become Profitable and Reach Scale?

Cloud computing is the hottest business currently. 

Cloud computing's yearly revenue run rate is already at more than 100 billion USD. I forecast cloud computing's calendar year revenue will reach 370 billion USD in 7 years.

What is more, cloud computing is very profitable with the leading Amazon AWS, Microsoft Azure and Alphabet's Google Cloud making more or around 20 % net profit margins.

The "problem" with the cloud computing business is that around 60 % of the cloud business is held by Amazon, Microsoft and Alphabet's Google with 34 %, 19 % and 9 % approximately market shares. The excellent technology of Amazon, Microsoft and Alphabet's Google ensured these technology giants quickly reached the required scale, were able to leverage their entire businesses to support cloud computing which even in 2013 was regarded as the future of computing. Amazon reportedly even engaged in questionable business practices by allegedly copying small technology companies' businesses, products, ideas and knowhow and turning back and employing the copied knowhow into its AWS so that Amazon remains the leader in cloud computing.

This quasi oligopoly that the cloud market has turned into can be broken up in two ways. Either hot, innovative technology startups like GitLab and HashiCorp find an ingenious way to skirt  Amazon, Microsoft and Alphabet's Google's power and disrupt the cloud or the US government has to get involved and curtail Amazon, Microsoft and Alphabet's Google's power much like it did with the Bell Companies, IBM, Microsoft, Alphabet, Google and now Facebook, now called Meta which helped create IBM, Microsoft, Google and Facebook respectively. Or it could be a bit of both.

If GitLab or HashiCorp want to break into cloud computing they have to be very fast. In an interview a high ranking Facebook Inc, now Meta Inc employee informs that Mark Zuckerberg, Facebook's founder has said that Facebook overpowered the competition and became the dominant social network because "we", by we Mark Zuckerberg apparently meant Facebook's  founders and employees "wanted it more". Yes, I have heard many stories when young founders went "all in" and lost almost everything, their apartments, houses, dropped out of college with no degree and still could not develop a successful business. But risking everything does not always mean you are going "all in" really, according to my humble opinion. One has to be prepared to put in extraordinary both physical and mental effort, be also smart much above average, have a lot of patience, good health and also the proverbial luck. Developing a successful business, especially in the technology area involves many moving parts, many unknowns, many things out of the founder's control. One just has to be flexible and adapt.

Cloud computing, in particular is successful because it provides small and medium sized companies(SMEs) with powerful computing resources which enables SME's to quickly scale their business, become bigger, more profitable and powerful and actually avoid being taken over or overpowered by stronger, bigger incumbent corporations. In short, the cloud saves SME time, effort and especially money. 

So if GitLab, HashiCorp and other young technology cloud startups want to succeed, they "have to move fast and break things" as the proverbial Facebook Moto states, which got discredited a bit lately. And actually young technology companies must be profitable form day one, in my opinion. Or they at least must have a clear path to profitability, a net income road map.

An underestimated detail in tech startup's success stories is the hiring of brilliant software engineers or at least vast amount of computer code writing professionals. Yes, legacy code, different coding languages, egos, different personalities will hamper progress, but the sheer number of coders will ensure the  cloud computing startup moves fast without breaking too many things. The startups that are quickest will quickly get some revenue and higher future funding multiples, which will enable them to scale their businesses even more quickly.

Actually, part of Facebook success was choosing the right technology, namely the PHP programming language which is translated in C++ to make it faster and more powerful. Other powerful languages like Erlang came with successful acquisitions like WhatsApp, Instagram, Oculus Rift.

So, as is obvious by now, for young cloud computing technology startups having the right team is hugely important. Because, when you are attacking randomness by trying to build a business from scratch and taking on incumbent companies with trillion USDs in market capitalisations you have to adapt quickly and have staying power. Good quality employees ensure both the right culture and technology for a young nascent tech startup to have a fighting chance in this game, which not to a negligible extent is influenced by luck.