Building a company around cloud technology

Despite already causing revolutionary shifts in how businesses conduct themselves, and how the tech industry works, cloud technology can still seem extremely opaque to a normal person. Eric Bednash, CEO of cloud technology and security company Racktop Systems, helps to clear the air.

ABERMAN: Well, I just love when I have the opportunity to talk with an entrepreneur who’s making things happen. What is the cloud, for those of us that don’t understand the technology, and how does it really affect what you’re doing in data security right now?

BEDNASH: Well, the cloud is one of those things that’s technically been around for quite a number of years. It started out, when you think about cloud, as like co-location, and this area was very big for that, at the dawn of the internet, and it’s slowly evolved over time as more consumers utilize the cloud, and more services deliver over the cloud, it became more prevalent in what we talk about.

But specifically, with the cloud and enterprise, it’s an important part of how enterprises are dealing with some of challenges that they’re facing today, in terms of being agile, and nimble, and flexible, with a distributed workforce, and dealing with some of the scale challenges that they have to deal with.

ABERMAN: So the cloud, in effect, is the inter-connectivity of millions, trillion of devices, computers, phones, and so forth, where data and information gets exchanged seamlessly, so that people don’t have to be in the office, they can be everywhere, but work together. And what I understand, from people who don’t understand this industry, it’s terrifying. Like, well, what do you mean, now my information is everywhere? And that, I believe, is where your business comes in.

BEDNASH: Exactly. You know, the cloud used to be just the internet, and now it’s internet, apps, data, and information all together. And I think one of the key components there is really data in the cloud, because that’s really what it is we’re sharing, and that information that we’re utilizing to either advance our business or advance our personal lives.

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ABERMAN: As you’ve looked at this problem, and I know from your career you’ve been around technology, software, internet for a while now here in the region with different hats, what is it about this particular challenge that caused you to go after it?

BEDNASH: As business evolves, and technology evolves, taking advantage of new technologies is essential to grow and compete. And the cloud is definitely one of those technologies that all businesses that should be taking advantage of in one form or another. When we look at the cloud, our business is data-focused, and we’re focused on storage, and on data security, and for our business, data is one of the most critical assets within an organization, especially from an intellectual property perspective.

So, you need to be able to leverage the expanse of the cloud to share and collaborate with your own workforce, and with customers, but you also have to protect it. And so, our technology, and the reason why we’re using the cloud, and helping our customers do the same, is so that we can facilitate the benefits of the cloud, but while also protecting data that’s in there, so that it’s safe.

ABERMAN: So, it’s an important opportunity, and like an entrepreneur does, you find an opportunity and run after it. This business is what I would call a product business, your current company. You’ve taken technology, and reduced it to something that you’re selling on a fee basis, rather than a per-human-hour, which, when I think of selling on per-human-hour, that’s services. We have so many consulting service businesses in this region, and not enough product businesses. What’s the difference between a service business and a product business, since you’ve done both?

BEDNASH: So, this area is obviously very well known for services business, right? People think D.C. startups, D.C. area must be a government services company. And while that’s been true in the past, I think the tide is turning a little bit. And the big difference is, in terms of overall value that can be that can be brought to the customer. And so, I think from a services business, it’s very focused on contracts and specific pieces of work, but the innovation is very contained. It’s contained in a fee for service sort of way, and it doesn’t have a chance to proliferate throughout the market.

And I think the difference for a products business is that there’s a little bit more ramp up, and more capital, required to get the company off the ground. But in terms of creating a technology that can then be used by the broader market, both commercial and the government, really creates more value than a traditional services-based company would, and I really think that that’s the primary difference between the two

ABERMAN: It sounds to me that it comes down to ownership in a way. You know, if I build something for you on contract, I’m going to deliver it to you, and it’s going to be yours as a client. But if I’m an entrepreneur who builds a product on my own nickel, and the nickel of my investors, and my on sweat equity, I own that product, and I can sell it again and again, to whoever I like.

BEDNASH: Exactly. A lot of companies in this area have either founded their companies out of technology that they created once for somebody else, in the government space, and then created it again, or they built their products like we did, off of some key learnings that we learned from doing that for the customer. So, it’s definitely valuable to have that experience, but to be able to create, and be creative, and take that, and instead of just creating something for just one customer, being to help many customers, definitely creates a lot more scalability.

ABERMAN: Short question for you: is it more fun to do one than the other?

BEDNASH: I would say that it’s definitely, having a considerable amount of time in both at this point in my career, I would say that it’s more fun to do to product. It’s more stressful, and it’s different. And I think, this also gets into a certain East-Coast West-Coast thing where, in terms of how businesses are traditionally put together, but I think that from a products company perspective, it’s just definitely more fun.

ABERMAN: Well Eric, I really appreciate you coming into the studio today, and hearing about your journey, and teaching a bit about the difference between product and service. Thanks for joining us.

BEDNASH: Thanks for having me, I appreciate it.