Dwayanu:
EXDS...king in hypergrowth; definitions???
Hey, didn't your parents ever teach you to respect your elders; by extension, shouldn't that include us elders and oldtimers here on the G&K thread? <g>
When I challenged you to tell me why EXDS isn't a King or in a tornado, I was only kidding; you weren't really supposed to run to the RFM and pick out some obscure text and post it for all to see. <vbg> In any event, nicely done.
RFM p136 re overall services sector: there are no gorillas in this sector and ...at the end of the day, there is nothing in this sector that directly compares to gorilla power. ... There are no gorillas here. If the sector is denied participation in the Gorilla Game, are we allowed to define a player there as a King?
EXDS does not feature proprietary architecture with high switching costs, and therefore is not a gorilla; web hosting, by exclusion, is a royalty game in which each web-hoster must prove its ability to serve well each customer each and every day. In a royalty game, the players are each duking it out, hoping to out-execute eachother. To become the market leader in a royalty game, capital, first mover advantage, quality of management, etc. become ultra-important. As the Web-Hosting market leader by a longshot, EXDS is a King in this royalty game. OK? As we say in my profession, "next case!"
EXDS is selling a commodity with professional services around the edges to increase profit margin. If we declare EXDS a King-to-be, then we must also crown some of the above telcos.
Your explanation of what EXDS does is fairly accurate. The other players, within the segment that constitutes Web-Hosting are presently princes! EXDS has only been on the throne for a short period of time, ~ 1 year or so. So its clutch on the Kingdom is shaky at best. Hence, it requires lots of watching, for changes in market share or revenue growth. It is an unsure king at best, for the moment. However, as I have pointed out before, a play on EXDS is a PLAY ON B2B, WITH ALL OF THE GROWTH THAT THAT ENTAILS. Check out these results for the past 12 months since EXDS assumed the throne: siliconinvestor.com
As Moore says on p. 140 of the RFM, Internet stocks (like EXDS) "are susceptible to... commoditization through competition over time. How well will brand power hold up? How sticky are these sticky features? To what degree are the leaders going to be safe from serf-like attacks from the bargain basement? The answer, of course, is, who knows? This should not preclude investment, but it does preclude calling such equities gorillas." No dispute from me......EXDS is a king.
RFM p152 Tornadoes occur when - and only when - a new value chain comes into existence. EXDS has a highly 'plain vanilla' web hosting business model. They sell space, hardware, and bandwidth to their tenants, and add services in order to make the whole thing profitable. There is no significant value chain built around EXDS' business, except in the trivial sense that EXDS is a distribution channel for Sun servers, Cisco routers, and telco bandwidth. Rather, EXDS is simply a new part of Sun/Cisco/telco's value chains.
Hypergrowth market? OK. Tornado? Not in the RFM strict definition?.
Well, actually, I think you quite nicely make the case that EXDS is in the midst of a value chain. Web Hosting is a new field that requires a new value chain to come into existence. Hence, the tornado. As displayed in Figure 6.1 on p. 152, EXDS would fit into the middle of the value chain. The domain of gorillas is at the start of the value chain, using product architectures, and is comprised of technology providers, component manufacturers, etc. At the end of the value chain are the end-users/customers/buyers of services. In the middle lays EXDS, which integrates equipment and services to reliably host mission-critical websites and B2B information/commerce for high-margin high-end enterprise customers.
A number of firms have indicated that B2B E-commerce will grow from $90 billion in 1999 to $1.3 trillion in 2003. EXDS is in the middle of this as an Internet enabler, providing web hosting services to the entire enterprise world as these players trip all over themselves in a headlong rush to sell goods and services to eachother over the internet. The coming question to answer, in addition to encroachment by competition, will be how well EXDS can reliably meet customers' needs while withstanding the pressures of hypergrowth, iterating their formula over and over without fail.
EXDS.....King, in the tornado of web-hosting, amidst the greater paradigm shift to E-commerce.
Apollo |
