The Cloud Winners and Losers?
The cloud is revolutionising IT. However there are two sides to every story: the winners and the losers. Who are they going to be and why? If you can’t wait here are the losers: HP, Oracle, Dell, SAP, RedHat, Infosys, VMWare, EMC, Cisco, etc. Survivors: IBM, Accenture, Intel, Apple, etc. Winners: Amazon, Salesforce, Google, CSC, Workday, Canonical, Metaswitch, Microsoft, ARM, ODMs.
Now the question is why and is this list written in stone?
What has cloud changed?
If you are working in a hardware business (storage, networking, etc. is also included) then cloud computing is a value destroyer. You have an organisation that is assuming small, medium and large enterprises have and always will run their own data centre. As such you have been blown out of the water by the fact that cloud has changed this fundamental rule. All of a sudden Amazon, Google and Facebook go and buy specialised webscale hardware from your suppliers, the ODMs. Facebook all of a sudden open sources hardware, networking, rack and data centre designs and makes it that anybody can compete with you. Cloud is all about scale out and open source hence commodity storage, software defined networks and network virtualisation functions are converting your portfolio in commodity products. If you are an enterprise software vendor then you always assumed that companies will buy an instance of your product, customise it and manage it themselves. You did not expect that software can be offered as a service and that one platform can offer individual solutions to millions of enterprises. You also did not expect that software can be sold by the hour instead of licensed forever. If you are an outsourcing company then you assume that companies that have invested in customising Siebel will want you to run this forever and not move to Salesforce.
Reviewing the losers
HP’s Cloud Strategy
HP has been living from printers and hardware. Meg rightfully has taken the decision to separate the cashcow, stop subsidising other less profitable divisions and let it be milked till it dies. The other group will focus on Cloud, Big Data, etc. However HP Cloud is more expensive and slower moving than any of the big three so economies of scale will push it into niche areas or make it die. HP’s OpenStack is a product that came 2-3 years late to the market. A market as we will see later that is about to be commoditised. HP’s Big Data strategy? Overpay for Vertica and Autonomy and focus your marketing around the lawsuits with former owners, not any unique selling proposition. Also Big Data can only be sold if you have an open source solution that people can test. Big Data customers are small startups that quickly have become large dotcoms. Most enterprises would not know what to do with Hadoop even if they could download it for free [YES you can actually download it for free!!!].
Oracle’s Cloud Strategy
Oracle has been denying Cloud existed until their most laggard customer started asking questions. Until very recently you could only buy Oracle databases by the hour from Amazon. Oracle has been milking the enterprise software market for years and paying surprise visits to audit your usage of their database and send you an unexpected bill. Recently they have started to cloud-wash [and Big Data wash] their software portfolio but Salesforce and Workday already are too far ahead to catch them. A good Christmas book Larry could buy from Amazon would be “The Innovator’s Dilemma“.
Dell’s Cloud Strategy
Go to the main Dell page and you will not find the word Big Data or Cloud. I rest my case.
SAP’s Cloud Strategy
Workday is working hard on making SAP irrelevant. Salesforce overtook Siebel. Workday is likely to do the same with SAP. People don’t want to manage their ERP themselves.
RedHat’s Cloud Strategy
[I work for their biggest competitor] RedHat salesperson to its customers: There are three versions. Fedora if you need innovation but don’t want support. CentOS if you want free but no security updates. RHEL is expensive and old but with support. Compare this to Canonical. There is only one Ubuntu, it is innovative, free to use and if you want support you can buy it extra.
For Cloud the story is that RedHat is three times cheaper than VMWare and your old stuff can be made to work as long as you want it according to a prescribed recipe. Compare this with an innovator that wants to completely commoditise OpenStack [ten times cheaper] and bring the most innovative and flexible solution [any SDN, any storage, any hypervisor, etc.] that instantly solves your problems [deploy different flavours of OpenStack in minutes without needing any help].
Infosys or any outsourcing company
If the data centre is going away then the first thing that will go away is that CRM solution we bought in the 90’s from a company that no longer exists.
VMWare
For the company that brought virtualisation into the enterprise it is hard to admit that by putting a rest API in front of it, you don’t need their solution in each enterprise any more.
EMC
Commodity storage means that scale out storage can be offered at a fraction of the price of a regular EMC SAN solution. However the big killer is Amazon’s S3 that can give you unlimited storage in minutes without worries.
Cisco
A Cisco router is an extremely expensive device that is hard to manage and build on top of proprietary hardware, a proprietary OS and proprietary software. What do you think will happen in a world where cheap ASIC + commodity CPU, general purpose OS and many thousands of network apps from an app store become available? Or worse, a network will no longer need many physical boxes because most of it is virtualised.
What does a cloud loser mean?
A cloud loser means that their existing cash cows will be crunched by disruptive innovations. Does this mean that losers will disappear or can not recuperate? Some might disappear. However if smart executives in these losing companies would be given the freedom to bring to market new solutions that build on top of the new reality then they might come out stronger. IBM has shown they were able to do so many times.
Let’s look at the cloud survivors.
IBM
IBM has shown over and over again that it can reinvent itself. It sold its x86 servers in order to show its employees and the world that the future is no longer there. In the past it bought PWC’s consultancy which will keep on reinventing new service offerings for customers that are lost in the cloud.
Accenture
Just like PWC’s consultancy arm within IBM, Accenture will have consultants that help people make the transition from data centre to the cloud. Accenture will not be leading the revolution but will be a “me-to” player that can put more people faster than others.
Intel
X86 is not going to die soon. The cloud just means others will be buying it. Intel will keep on trying to innovate in software and go nowhere [e.g. Intel’s Hadoop was going to eat the world] but at least its processors will keep it above the water.
Apple
Apple knows what consumers want but they still need to prove they understand enterprises. Having a locked-in world is fine for consumers but enterprises don’t like it. Either they come up with a creative solution or the billions will not keep on growing.
What does a cloud survivor mean?
A cloud survivor means that the key cash cows will not be killed by the cloud. It does not give a guarantee that the company will grow. It just means that in this revolution, the eye of the tornado rushed over your neighbours house, not yours. You can still have lots of collateral damage…
Amazon
IaaS = Amazon. No further words needed. Amazon will extend Gov Cloud into Health Cloud, Bank Cloud, Energy Cloud, etc. and remove the main laggard’s argument: “for legal & security reasons I can’t move to the cloud”. Amazon currently has 40-50 Anything-as-a-Service offerings in 36 months they will have 500.
Salesforce
PaaS & SaaS = Salesforce. Salesforce will become more than a CRM on steroids, it will be the world’s business solutions platform. If there is no business solution for it on Salesforce then it is not a business problem worth solving. They are likely to buy competitors like Workday.
Google
Google is the king of the consumer cloud. Google Apps has taken the SME market by storm. Enterprise cloud is not going anywhere soon however. Google was too late with IaaS and is not solving on-premise transitional problems unlike its competitors. With Kubernetes Google will re-educate the current star programmers and over time will revolutionise the way software is written and managed and might win in the long run. Google’s cloud future will be decided in 5-10 years. They invented most of it and showed the world 5 years later in a paper.
CSC
CSC has moved away from being a bodyshop to having several strategic important products for cloud orchestration and big data. They have a long-term future focus, employing cloud visionaries like Simon Wardley, that few others match. You don’t win a cloud war in the next quarter. It took Simon 4 years to take Ubuntu from 0% to 70% on public clouds.
Workday
What Salesforce did to Oracle’s Siebel, Workday is doing to SAP. Companies that have bought into Salesforce will easily switch to Workday in phase 2.
Canonical
Since RedHat is probably reading this blog post, I can’t be explicit. But a company of 600 people that controls up to 70% of the operating systems on public clouds, more than 50% of OpenStack, brings out a new server OS every 6 months, a phone OS in the next months, a desktop every 6 months, a complete cloud solution every 6 months, can convert bare-metal into virtual-like cloud resources in minutes, enables anybody to deploy/integrate/scale any software on any cloud or bare-metal server [Intel, IBM Power 8, ARM 64] and is on a mission to completely commoditise cloud infrastructure via open source solutions in 2015 deserves to make it to the list.
Metaswitch
Metaswitch has been developing network software for the big network guys for years. These big network guys would put it in a box and sell it extremely expensive. In a world of commodity hardware, open source and scale out, Clearwater and Calico have catapulted Metaswitch to the list of most innovative telecom supplier. Telecom providers will be like cloud providers, they will go to the ODM that really knows how things work and will ignore the OEM that just puts a brand on the box. The Cloud still needs WAN networks. Google Fibre will not rule the world in one day. Telecom operators will have to spend their billions with somebody.
Microsoft
If you are into Windows you will be on Azure and it will be business as usual for Microsoft.
ARM
In an ODM dominated world, ARM processors are likely to move from smart phones into network and into cloud.
ODM
Nobody knows them but they are the ones designing everybody’s hardware. Over time Amazon, Google and Microsoft might make their own hardware but for the foreseeable future they will keep on buying it “en masse” from ODMs.
What does a cloud winner mean?
Billions and fame for some, large take-overs or IPOs for others. But the cloud war is not over yet. It is not because the first battles were won that enemies can’t invent new weapons or join forces. So the war is not over, it is just beginning. History is written today…
Software Defined Everything
The other day Taxis in London where on strike because Uber was setting up shop in London. Do you know a lot of people that still send paper letters? Book holiday flights via a travel agent? Buy books in book stores? Rent DVD movies?
5 smart programmers can bring down a whole multi-billion industry and change people’s habits. It has long been known that any company that changes people habits becomes a multi-billion company. Cereals for breakfast, brown coloured sweet water, throw-away shaving equipment, online bookstore, online search & ads, etc. You probably figured out the name of the brand already.
Software Defined Everything is Accelerating
The Cloud, crowd funding, open source, open hardware, 3D printing, Big Data, machine learning, Internet of Things, mobile, wearables, nanotechnology, social networks, etc. all seem individual technology innovations. However things are changing.
Your Fitbit will send your vital signs via your mobile to the cloud where deep belief networks analyse it and find out that you are stressed. Your smart hub detects you are approaching your garage and your Arduino controller linked to your IP camera encased in a 3D printing housing detects that you brought a visitor. A LinkedIn and Facebook image scan finds that your visitor is your boss’s boss. Your Fitbit and Google Calendar have given away over the last months that whenever you have a meeting with your boss’s boss, you get stressed. Your boss’s boss music preferences are guesses based on public information available on social networks. Your smart watch gets a push notification with the personal profile data that could be gathered from your boss’s boss: he has two boys and a girl, got recently divorced, the girl recently won a chess award, a facebook tagged picture shows your boss in a golf tournament three weeks ago, an Amazon book review indicates that he likes Shakespeare but only the early work, etc. All of a sudden your house shows pictures of that one time you plaid golf. Music plays according to what 96.5% of Shakespeare lovers like from a crowd-funded bluetooth in-house speaker system…
It might be a bit farfetched but what used to be disjoint technologies and innovations are fast coming together. Those companies that can both understand the latest cutting-edge innovations and be able to apply them to improve their customer’s life or solve business problems will have a big competitive edge.
Software is fast defining more and more industries. Media, logistics, telecom, banking, retail, industrial, even agriculture will see major changes due to software (and hardware) innovations.
What should you do? If you are technology savvy?
You should look for customers that want faster horses and draw a picture of a car. Make a slide deck. Get feedback and adjust. Build a prototype. Get feedback and adjust. Create a minimum valuable product. Get feedback and adjust… Change the world.
If you have a business problem and money but are not technology savvy?
Organise a competition in which you ask people to solve your problem and give prices to the best solution. You will be amazed by what can come out of these.
If you work in a traditional industry and think software is not going to redefine what you do?
Call your investment manager and ask them if you have enough money in the bank to retire in case you would get fired next year and wouldn’t be able to find a job any more. If the answer is no! Then start reading the top of the blog post again…
Data Analytics as a Service
Every company is using Microsoft Office and especially Excel to do some sort of data analytics. However data volumes have grown exponentially and have outgrown Spreadsheets. You need experts in the business domain, in data analytics, in data migration/extraction/transformation/loading, in server management, etc. to get data analytics done on Big Data scale. This makes it expensive and only usable for the happy few.
Why? There must be easier ways to do it.
I think there are. For those unfamiliar with data analytics but eager to learn, you should take a look at a product called RapidMiner. It is close to amazing how a non-expert is able to use Neural Networks, Decision Trees, Support Vector Machines, Genetic Algorithms, etc. and get meaningful results in minutes. The amazing part is also that RapidMiner is open source hence for usage by 1 analyst it is free.
Rapid-i.com, the company behind RapidMiner, also offers server software to run data analytics remotely. It is here where big data opportunities meet easy data analytics. What if RapidMiner data analytics could be ran on hundreds of servers in parallel and you pay by usage just as you pay for any Cloud compute and storage instances?
RapidMiner as a Service
RapidMiner as a Service, RMaaS, would allow millions of business people to be able to analyse Big Data “without Big Investments”. This type of Data Analytics as a Service would provide any SME with the same data analytics tools as large corporations. Data could come from Amazon S3, Amazon’s DynamoDB, Hosted Hadoops, any webservices, any social network, etc.
Visual as a Service
RapidMiner as a Service is only one of the many domain specific tools that could be offered as a visual drag-and-drop Cloud service. VAS as a Service is another example in which complex telecom assets can be easily combined in a drag-and-drop manner. There are many more. These services will be the real revolution of Cloud Computing since they combine IaaS/PaaS/SaaS into a new generation of solutions that bring large savings for new users and potential large revenues for their providers…
How Fon could become disruptive?
Recently I wrote an article about Ryancom. I received a comment that Fon.com was already doing certain things like making broadband access available for free globally.
I want to take the opportunity to make some suggestions that would make Fon a really disruptive player.
Fon has some really nice residential WiFi routers. A basic version, the Fonera Simpl with an optional antenna, Fontenna, to reach more distance. Additionally there is the Fonera 2.0 N which allows a community of developers to extend the product with new functionality. Finally they can embed their software into operator’s existing WiFi routers.
Fon’s routers are based on OpenWrt, an open source Linux firmware distribution for embedded devices. Developers can create extra plugins / packages that can be deployed on the router.
How to make Fon more disruptive?
For many technical people having access to a global set of WiFi points all over the globe is a really good reason to buy a Fon WiFi. Unfortunately non-technical people might be lost in the technical details about how you can access somebody’s else Internet and might be scared of other people using their Internet. So for most people the Fon offering is like a vitamine and not really a painkiller.
By changing the value proposition of Fon towards becoming a painkiller for more people, Fon would be able to get more active demand for its products from consumers and also via telecom operators.
Fon painkiller example: Parental Control
Most parents would not care less which router is used to access the Internet. The only thing they know is that their offspring knows a hundred times more about Internet then they do. Additionally they know that Internet is full of dangers for kids and teenagers. Children always tell their parents they need Internet to do their home work. But reality is that most surfing is not done for homework 😉
So what if Fon would have an OpenFlow compatible WiFi router with FlowVisor combined with a Cloud solution. To spare the technical details, the summary is that parents would be able to partition their Internet access based on who is accessing. What would this bring?
Kids Internet – 3-8 year olds would only have access to a strict whitelist of Internet pages. Parents would not have to find this white page themselves. Instead people and companies could make white lists and parents could subscribe to them. Examples could be a Disney white list, a SuperNanny [the television show] whitelist. Parents would know that their young children could never go to pages that are unsuitable. Young children would have a start page with icons like the iPad in which they can click on the page and immediately go their favourite games or watch cartoons. Children could be limited in the time they can spend on Internet and special bonus points for good behaviour could buy them more time or bad behaviour could be punished with less time. Parents would need an “Apple” friendly interface to pick whitelists and set-up and manage Internet access times.
Pre-teens / Teens Internet – 9-17 years od – restrictions apply. Parents could define studying time slots in which only certain Internet content can be accessed, e.g. Wikipedia. Also here external entities could define whitelists. Time-based filters for open Internet access could also be set. Additionally special purpose filters are set-up, e.g. Facebook, Twitter, MSN, Skype, eMule, Google+ etc. This would allow teens to access Facebook and other sites but to have their behaviour screened. Teens could be prohibited to upload pictures of persons, share email/telephone or physical addresses, use F* words, access adult content, etc. There would be a dynamic firewall for each service. Parents could have a high-level reporting interface to see what their kids are doing.
Other painkillers
Parental control is just one example of how a generic router that is connected to a niche Cloud application could be a painkiller for parents. Operators could have other pain points, e.g. reduce botnets, spam, P2P content optimization, etc. Shop owners could have other pain points, e.g. social games for bars, etc.
A lot of possibilities are opening up if routers could be externally managed and very specific easy to use interfaces and solutions are build towards which communities and external companies can contribute and generate new revenue with.
The fact that every Fon router will give you access to a global free broadband network will be a nice add-on for most…
Changing from Telco Grade to Web 2.0 Grade by fighting telecom myths
Most telecom operators are still thinking that software should be upgraded at most twice a year. Oracle RAC is the only valid database solution. RFQ’s bring innovation. If you pay higher software licenses, the software will have more features and as such will be better.
All of these myths will have to be changed in the coming 12 months if operators want to be stay on top of the game.
Upgrade twice a year
For telecom network equipment, two upgrades a year are fine. However for everything related to services that are offered to consumers or businesses, that means that operators are 180 times less competitive then their direct competition. The large dotcoms like Facebook and Google make software upgrades on a daily basis. 50% of all the files that contain Google software code change every month. Even if “a revolution” would happen and software upgrades would come every month, it would still mean a 30 times lag.
Operators need to start using cloud computing, even if they are private clouds, to deploy their back-office systems. The business needs software solutions to move at market speed. That means that if a new social networking site is hot, then it should be integrated into telecom solution offerings in days. Not in months or a year.
There are many techniques to make deployments more predictable, more frequent and more reliable. Offering extra features or integrations quickly can be done via plugins. You can have a group of early adopters, give feedback. If they don’t survive this feedback, kill them. If they do, scale up quickly.
Oracle RAC
Nothing bad about the quality of Oracle RAC but it is a very expensive solution that needs a lot of man-power to keep on running smoothly. Operators often pay a premium for services that could run equally well on cheaper or Open Source alternatives. Also NOSQL should be embraced.
If the cost of deploying a new service is millions, then only a couple of them will be deployed. By lowering hardware and software costs, innovative projects are more likely to see daylight.
RFQ’s and Innovation
It takes 3 months from idea to finalizing an RFQ document. 1,5 month to get a reply. 1,5 month to do procurement. Half a year in total. Not counting the deployment time which is likely to be another 6 months. The result is that the operator takes 12 months for any “new” system.
Now the question is if that system is really new. Because if an operator was able to define in detail what they want and how they want it, then the technology was probably quite mature to begin with. So operators spend fortunes installing yesterday’s technology 12 months late. Can anybody explain what innovation this is going to bring?
First of all operators should not organize multi-million RFQs for business or end-user solutions. These are likely to come late to market and can only be focused on mass markets.
Instead operators should focus on letting the customer decide what they want by offering a large open eco-system of partners the possibility to offer a very large list of competing services to their customers. The operator should offer open APIs to key assets (charging, numbering plans, call control, network QoS, etc.). As well as offer revenue share and extra services like common marketplaces and support 2.0 (social CRM, helpdesk as a service, etc.). This is called Telecom Platform-as-a-Service or Telco PaaS.
High licenses, more features, better
More features does not mean better. Most people want simplicity, not a long list of features. Easy of use comes at a premium price. Look at Apple’s stock price if you don’t believe it.
It is better to have basic systems that are extremely easy to use with open APIs and plug-ins. A feature by feature comparison will make you choose the most expensive one. However it is hard to put as a feature that the system needs to be easy to use.
In telecom, there is a natural tendency to make things hard. In Web 2.0 the tendency is the opposite. You can see the difference between Nokia and Apple. The Nokia phone would win every feature on feature comparison but the iPhone is winning the market battle…
Instead of organizing an RFP, let end-users and employees play around with early betas or proof-of-concepts. No training, no documentation. Let’s see which solution makes them more productive, the feature rich or the more straight forward. Just ask open APIs and a plugin-mechanism and you will be set…
Separating the 3G/LTE bit-pipe and voice from data to survive
Large operators are focusing on building the fastest and most reliable networks; increasing call and SMS traffic; offering the best data plans for surfing; offering excellent business communication services; building a machine to machine business; offering impressive IPTV; etc. Management effort has to be divided between all these and other businesses. The quest to get departmental budget is long and hard.
So if you are a telecom CxO and you get three business cases, which one do you choose?
1) LTE business case – heavy investment but strategically key and very good ROI
2) IP PBX vs on-site equipment business case – low initial investment and clear business model
3) Telco PaaS business case – low initial investment but unclear business model
Any business leader would say 1 is best, then 2 and do not invest in 3. However there is something called “The Innovator Dilemma“. LTE will make it easier for dotcoms to offer IP PBX as well as cannibalize voice and SMS revenues because over-the-top players will be able to offer mobile VoIP and IM. Even if a CxO would invest outside of LTE in disruptive technologies then it is still very likely that the best people will want to work in the LTE project and not in a disruptive technologies project.
Note: An operator that does not invest in LTE will be dead in 2 years so investment in new network technologies is crucial for operators to survive in the short-term. So the solution is not to invest only in disruptive technologies.So what should operators do?
Create a holding company and three independent sub-companies:
- The bit-pipe
- The cash-cow manager
- The future
The bit-pipe company is focusing on the network and its operations. Cost reductions, stability, network quality and new network technologies, e.g. LTE, are key for this company. This company should be able to work on low margins and even work together with competitors if it makes financial sense, e.g. share network resources or resell capacity to competitors.
The cash-cow manager should also be a company focused on maximizing profits and minimizing costs. The cash-cow manager gets to manage the circuits and deliver voice, SMS and traditional telco services. They have the liberty to provide these services on top of other networks if it makes financial sense.
The future is a company that will have the bulk of the people and some seed capital that will pay salaries for the next 18-24 months. The mission should be clear: “Focus on new revenues coming from data”. There will be no cross-charging between the other two companies. Either you get new revenues or your future is looking very bad. Why would you be so extreme? Look at McKinsey, Telco2Research, etc. they all say the same. Key telco assets will loose their value in the coming 2-3 years as has happened with location. Or operators start to work on new data revenues NOW or they will have to fire tens or hundreds of thousands of employees in 2-3 years. Telefonica already started a process to fire 20% of the workforce. Separating employees into a new company and giving them one mission will make everybody focus on success. Innovative revenue-generating data services is what the telecom industry needs. Without it everybody will start feeling the pain very soon…