We’ve been running a series of posts on startups to watch in 2012, including open source startups to watch and big data startups to watch. Now here’s a look at five startups that are poised for breakout success or acquisition, but face considerable challenges in their respective markets. These are companies that are underdogs taking on either entrenched companies or other startups that have more traction. But they’ve all got a real fighting chance at shaking up their respective markets.

Cloudant

Cloudant offers Apache CouchDB hosting and develops a more scalable version of CouchDB called BigCouch, which applies concepts from Amazon Dynamo. Cloudant faces serious challenges arising from MongoDB’s perceived dominance in the NoSQL market. MongoDB has become the most discussed NoSQL database, and is the NoSQL job skill with the most growth on Indeed.com. Also, CouchDB has had a rough year since CouchOne was acquired by Membase to form Couchbase, leading to confusion about CouchDB and its future.

“There’s an unfilled spot in the NoSQL world: a go to company when CouchDB services and support are needed,” Alex Popescu recently wrote about Cloudant. “Truth is I don’t have enough data to decide if there’s also a need in the market for it though.”

However, Derrik Harris notes that Couchbase may have more revenue than 10gen, the company behind MongoDB. So even if MongoDB has more deployments, the real money might be in other technologies.

Meanwhile, Cloudant has recently hired a new CEO with a strong background in both cloud services and big data, closed a new round of funding and signed Monsanto as a banner customer. Don’t count Cloudant out.

Basho

Basho develops and offers commercial support and tools for Riak, an open source NoSQL database. Like BigCouch, it combines elements of document databases with concepts from Dynamo. But unlike BigCouch, Riak can’t rely on Apache CouchDB’s established brand.

That could prove to be an advantage for Basho, given the (probably unwarranted) concerns regarding CouchDB’s scalability and the project’s future. Basho has technology that’s been battle tested at companies like Comcast, Conduit and Wikia and it has beat Apache Cassandra and Hbase in testing conducted by Mozilla. Basho’s CEO Donald J. Rippert, who joined the company in 2011, was previously the CTO of Accenture, which should bring customers to the table.

Basho also closed two rounds of funding in 2011, one in $7.5M in February and another $5 million November. That’s a nice war chest for 2012. Basho could also be an acquisition candidate. Don’t forget that Red Hat is sniffing around for a NoSQL vendor.

AppFog

AppFog offers a Cloud Foundry based platform-as-a-service with support for several programming languages.

Given the acquisitions of Heroku by Salesforce.com and Makara by Red Hat at the end of 2010, I expected to see platform-as-a-service consolidate this year. Although we did see dotCloud acquire DuoStack and Engine Yard acquire Orchestra, we’ve seen more PaaS proliferation than consolidation, with IBM, Oracle, VMware and Zend joining Microsoft, Red Hat and Salesforce.com in the game. Meanwhile, infrastructure-as-a-service providers like Joyent and Amazon Web Services are dipping their toes into the PaaS waters. That’s some big competition for the remaining smaller startups (though Engine Yard is in a good position with its partnership with Amazon).

The big thing AppFog has going for it is its early adoption of the open source Cloud Foundry platform that VMware released in 2011. AppFog is doing some great “coopetition” with VMware on the project. For example, AppFog added PHP support to Cloud Foundry and contributed it back to the the open source project. That helps AppFog gain deep expertise in Cloud Foundry that will help the company as it begins to roll out future features, such as on-premise deployments of AppFog and support for multiple IaaS providers.

Podio

Podio is a social collaboration software-as-a-service similar to Jive and Yammer. But Podio gives users the ability to build their own simple apps using a form driven interface, making it somewhat similar to Microsoft SharePoint.

Podio was actually one of my picks as an enterprise startup to watch in 2011. Podio made its official launch in 2011, but it entered a crowded market. Jive filed for an IPO, Socialcast was acquired by VMware and Yammer has continued to hog the spotlight. Meanwhile, Oracle announced that it is adding activity streams to Fusion Applications and Microsoft announced that it will add activity streams to Dynamics CRM. Podio also faces competition from products from major vendors, like TIBCO tibbr and IBM Lotus Connections, and from well established smaller companies like Socialtext and Telligent. Like the other companies on this list, it faces an uphill battle to be seen.

But 2011 was still a good year for Podio. The company closed a round of series A funding, landed customers like Alcatel-Lucent, BMW and InMobi (though the product isn’t used company wide at Alcatel-Lucent or BMW), and added better mobile support. Podio remains a favorite among analysts and industry insiders I’ve spoken with, and its app creation tool is truly slick. Podio could carve a real niche, especially in the European market, or be an acquisition target for a company that wants to get into the social collaboration market.

HPCC Systems

HPCC Systems isn’t actually a startup, it’s part of LexisNexis. LexisNexis Risk Solutions open sourced its cluster computing system and HPCC Systems is the team at the company dedicated to commercializing it. HPCC competes with Apache Hadoop, which is clearly the big dog in the big data world. Oracle, EMC, Microsoft, Dell and other major players have latched on to Hadoop and three out of five of our Big Data Startups to Watch are Hadoop focused (Cloudera, Hortonworks and MapR). Hadoop has known weaknesses in real-time data streaming and complexity, but companies like HStreaming and Tresata are aiming to address these issues. HPCC Systems faces an uphill battle building awareness and shifting the conversation away from Hadoop.

But HPCC is a proven system with years of use at Risk Solutions. And Risk Solutions CTO Armando Escalante says that in 2012, Amazon Web Services will offer HPCC as an option on its Elastic Map Reduce service, which will be renamed to reflect the fact that HPCC doesn’t use Map Reduce. That should be a big boost for HPCC’s visibility, and make it easier to evaluate. Also, given LexisNexis’ extensive customer base, HPCC Systems should have no issues drumming up business in 2012.

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