Is this Tech Stock the square of Cloud Computing?
In this segment of Motley Fool Live, recorded on January 6, Fool contributor Trevor Jennewine explores how DigitalOcean (NYSE: DOCN) was able to gain significant traction in the crowded cloud computing space.
Trevor Jennewin: DigitalOcean is in the cloud computing business. It will be a high-growth technology company. It provides a range of infrastructure services such as compute, storage, networking, and platform services such as application development tools.
When most people think of cloud computing I guess Amazon (NASDAQ:AMZN) web-services, google (NASDAQ:GOOGL) Cloud, Microsoft (NASDAQ: MSFT) Azure comes to mind, and with good reason, these three companies have over 60% market share in the cloud computing industry, and they all have much larger portfolios than DigitalOcean.
But these cloud titans tend to tailor their products for large enterprises. This means that they are often too complex for the world’s small and medium-sized businesses and individual developers.
I think the situation is a bit like how financial institutions used to prioritize large corporations. It was difficult to integrate third-party payment processing hardware, software and services, then Square [now known as Block (NYSE:SQ)] came along and it provided this end-to-end self-service solution and catered to the needs of these small and medium-sized businesses and it really gained a lot of ground.
Now Block is moving upstream, it is gaining traction with middle market sellers, and I can see DigitalOcean following a similar path in cloud computing. The great thing here is that they make cloud computing simple. They adapt their platform to these small and medium enterprises. They have a very simple user interface. They actually say it’s possible to be up and running in just three clicks without any formal training.
The company also provides free infrastructure performance monitoring tools. Customers can troubleshoot and resolve issues. Besides that, they have an extensive library of tutorials. There is 24/7 technical support for every customer, regardless of how much they pay.
I think this is especially important, especially if you’re unfamiliar with cloud computing or are new to the technology. I think they hold your hand and I think that’s important. I also think there is a small network effect.
Developers can access these preconfigured apps through the DigitalOcean Marketplace. As the company’s customer base increases, the number of products available in the market is also expected to increase, which creates value for all DigitalOcean customers.
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