Analysis that Cloudflare's strategy to steal market share from other companies' cloud services is similar to Go

Cloudflare is a company founded on September 27, 2010, and in recent years has been announcing new services around this date of establishment almost every year. Sean Wang, an engineer and angel investor, analyzes how Cloudflare is trying to challenge the famous cloud companies such as AWS, Azure, and GCP from the contents of each service.

Eating the Cloud from Outside In

https://www.swyx.io/cloudflare-go/

Since Cloudflare released 'Cloudflare Workers ' in 2017, we have released the following enhancements to Workers.

2017: Serverless computing 'Cloudflare Workers'

2018: Eventually Consistent Data Store

2019: Website Hosting

2020: Strongly consistent data store

And in 2021, a storage service called R2 was announced, and at the same time Cloudflare said that it aims to be the fourth major cloud service. When startups develop new services, they often choose services that can coexist with AWS rather than services that compete with AWS, which can be said to be the winner of the cloud industry, and the market capitalization of Amazon, Microsoft, Google, etc. is 100 trillion yen. It can be said that it is a very bold challenge for Cloudflare, which has a market capitalization of 4 trillion yen, to challenge over-company to secure market share.

Clayton Christensen theorizes the phenomenon of start-ups replacing large existing companies as 'disruptive innovation.' Based on Christensen's theory, Wang said Cloudflare is causing 'low-end' disruptive innovation.

Cloudflare started its business as a CDN service and has grown to gain more than 80% market share by providing high quality services for free. There is a CDN service 'CloudFront ' that provides the same function on AWS, but it is not widely used. Cloudflare builds security services based on CDN services, and is expanding added value with a business model in which fixed costs are high but marginal costs are almost zero.

Mr. Wang analyzes that the storage service R2 announced in 2021 has a strategy of 'surrounding' the position of S3, not a strategy of directly replacing S3 of AWS. Mr. Wang likened this to Go and expressed that Cloudflare was trying to squeeze the ' no good ' of S3 by ensuring API compatibility, and it was in the state of 'Atari'. When the market considers R2 to be upward compatible with S3, Cloudflare can put the last stone in place to secure space for 'cloud storage.'

In addition, Mr. Wang said that Cloudflare's Go-like strategy is legal because the result of the Google vs. Oracle trial in which it was disputed whether the API copy was a copyright violation was decided that 'API copy is legal'. It is pointed out that the protection by the above is also secured.

'Cloudflare is playing a game that is completely different from existing companies,' Wang said. For example, while AWS has ' more than 260 edge locations ' as its appealing point, Cloudflare has ' more than 10,000 connections in total with networks such as ISPs, cloud providers, and companies. ' .. In addition, Mr. Wang pointed out that the cloud industry market continues to expand, 'In the non-growth zero-sum market, companies compete for positions like chess, but in the fast-growing market, networks like Go A strategy that extends the territory and surrounds the enemy is suitable. '

By comparing Cloudflare's strategy to Microsoft's 3E strategy , Mr. Wang concludes the article by expressing it with three Es as follows.

・ Establish: Establish a foothold in areas that existing companies do not care about
・ Envelop: Develop a service that relays and complements the access of the part where the service of the existing company is insufficient
· Expand: Sell a combination of other products and services until you have more customers than your existing company