Barriers to Entry

A MBA candidate recently asked me to help him understand what barriers to entry exist for cloud computing and virtualization start ups.  This simple question could easily turn into a Master's Thesis.  Although I don't know this for a fact, I bet that is exactly what this interesting person is doing.

Here's a portion of my response:

Only in few cases will organizations abandon their investment in previous generations of technology - they've been purchased by a company that already has a preferred solution to a given problem or they've chosen to exit a given business.  The second may be due to selling a line of business to another firm or closing down a business due to changing customer requirements.

Organizations may bring on new technology or new approaches if the following conditions are met:

• The new technology is compatible with their current operations (it doesn't break anything)
• The new technology offers sufficient benefits to offset the costs of new systems, new software, new storage, retraining people or hiring people already having the required skills.
• Adding that new technology will either save the company money or help the company make more money.

Firms typically don't add new technology, just because it is new and interesting.

What do you think?