Tech Start-Ups Force Giants to Innovate

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Hardware start-ups focusing on building machines that handle specific tasks are vying for the big guys' market share. These Hardware 2.0 companies, as a Business Week article recently called them, are building specialty servers, like ones to handle Web traffic or storing data, with low-cost, off-the-shelf parts. The "cheaper" assembly can make them a more affordable option for companies looking to beef up their server capacity on a budget.

With the Web playing an increasing role in many companies, and more applications being built specifically for the Internet, this next-generation of computers seems to offer companies with smaller tech budgets viable options, but they also are making computer stalwarts like IBM and HP rethink their products and help companies do more with less.

While these entrepreneurial companies don't pose a threat to the big guns, just yet, they are pushing the industry to innovate, which harkens back to Clayton Christensen's whole idea of the disruptive start-up, which he discussed with former Inc. editor Nancy Lyons in February 2002. His thesis: even the best-run large corporations are vulnerable to being outwitted by disruptive innovators. These innovators hone in on segments of the market that are being ignored or underserved, and develop solutions that meet their needs. Larger corporations often overlook these segments, as they are perceived to be markets that won't produce the revenue they seek.

In this whole Web 2.0 world, we're likely to see more of Christensen's thesis played out as technology and the Internet continue to provide entrepreneurial companies with fertile ground to take on the big guys. Some, of course, will fail, but we can be sure that these innovative start-ups will continue to push the envelope for this industry.