The First Mover Disadvantage

There is always an advantage to being first to market with a new product or technology, except it seems, in storage and networking. It seems companies that are the first in the space have the most difficult time staying viable. Certainly there are exceptions but it seems that there is a first mover disadvantage in technology.

George Crump

November 19, 2009

2 Min Read
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There is always an advantage to being first to market with a newproduct or technology, except in storage and networking. Companies that are first in the space have the most difficulttime staying viable. Certainly there are exceptions, but it seems thatthere is a first mover disadvantage in this area of technology.

The first mover almost always has to explain what this new wrinkle instorage is, how it works and why you might want it. I'll never forgetthe first deduplication company years ago that I met with, and how theytried to explain how deduplication worked. Basically, I got the impression that they were saying, "we are going to save you money but not store all your backup data,"and that did not seem like a good idea to me. The second company thatcame through had the advantage of refining the message a little bit andbuilding on the groundwork that the early mover laid.

Another luxury the second movers have is time. Time for the market toevolve and time for customers to absorb what this new technology cando. People rarely get it the first time. Repetition after all is themother of perfection. Time is needed for the problem thatthe new company is solving to really become a problem. A great example is file virtualization or global file systems. We have seen a fewof the early movers in the space disappear and others evolve or getpurchased. In some cases, these companies may have acted before the extend of the need was clear;the problem appeared like a bruise not a broken bone. Now, unstructured data is amassive problem in many data centers, and they are actively looking tocompanies like F5 and AutoVirt to help address it.

The masters of the second mover advantage are the larger, moreestablished companies that wait for the market to develop and for thevarious competitors to work themselves out before deciding which one to acquire. While it probably costs them more to wait until a leadershows itself, the extra money spent is well worth picking a more viableentrance to the market. Many end-users simply won't buy a newtechnology until it is purchased, not even OEM'ed, through a largerstorage manufacturer. They know how to play the waiting game too.

There are exceptions to every rule. There are first movers who aresuccessful or at least viable right out of the gate. These are addressing a problem that you are having right now or who fill a gap left by other manufacturers. Automatedtiering solutions, like those from Avere, Storspeed and Dataram, are goodexamples. There is a gap between SSD and mechanical drives, and thesecompanies are looking to fill it. Interestingly, an indicator ofsuccess for a market is how many of these companies enter at nearly the same time, thus avoiding being the lone pioneer gettingall the arrows. Multiple organizations telling the importance of atechnology increases the chances for success.

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