The ICT Optimist

It looks like the industry analysts have started to model the LTE market and it adds up to a big, a very big, market. Juniper Research is estimating that LTE will be a $70B market by 2014 with most of that being in the developed world. What is particularly interesting is that they are now starting to model that the LTE market will not be based exclusively on the number of human beings using the network but rather based on the number of diverse devices that will be attached. It has been my position all along that the scaling of revenue in cellular 4G would have little to do with more people on the network(since we are pretty well 100% connected today in the west) but rather that as the cost per bit came down the threshold to add consumer electronics, industrial and sensor systems would be crossed. Given that there are tens of billions of those devices out there the growth could be huge and these new numbers seem to validate this. The trick though is that the carriers must begin a process to change how they price and how they measure growth from the classic “Average Revenue Per User” to a diverse set of metrics dealing with device penetration, types of usage and cost of capacity. Its good to see that the industry is now seeing the potential and its great to see that the networks are becoming a reality even with the still needed business model changes to fully unlock the potential.

Today I have been watching many of the activities going on at VoiceCon in Orlando FL via the Internet. Using twitter I am getting updates, using streaming video from some vendors I could watch much of the keynote activity and seeing the news releases and editorials I honestly am getting a good feeling for the activity there. The bonus is that I did not have to fly to Florida and given that I am pretty busy at the moment that’s a great bonus.

Anyway, in the course of looking at the Voicecon activity I remembered that a few years ago I did a keynote on that stage talking about the future of our industry. Out of curiosity I wanted to see what I had said and if it was relevant to the dialog I had just heard some two years later by the industry. Well I just found the video in their archives (jump about 12 minutes forward as the begining is a company update from Mike Z, the CEO of Nortel) and it is pretty amazing how on target the comments there where. If you wish to compare and contrast, watch my keynote video from 2 years ago and watch the keynotes from today… interesting the similarity.  I leave it to you to determine how and if any of this matters but its always interesting to see what we were thinking a few years ago.

A few key observations I would make from this review is that while many of the aspects we talked about back then are now becoming real, there are many things left to do. Most prominent is that we have not fully involved the carrier network in the UC vision. We have not fully extended the enterprise experience outside of the enterprise boundary and we have not achieved clarity on how the IT and telecoms vendors will work together versus compete for the intersection. This means that while that vision laid out years ago is progressing nicely, there is still a huge amount of new technology and industry re-composition to occur before we reach that reality. That’s exciting and feeds my optimism for this industry.

Well today is the day that I added links to this blog on my Linkedin.com profile and the web site of my company. I guess that means we are official and the blog has been launched. I would consider this a soft launch as unlike a corporate blog that uses it as a PR vehicle, this is a blog about my views on the ICT industry and is less connected with other integrated marketing efforts. It must be relevant by itself and have its own identity. Hopefully we will achieve that.

Regardless, it has been a week of validation of the theory I have put forward for many years now… that the telecoms and IT industries are merging and the evolution for the next cycle of the industry will lack the clear delineation between telecoms and IT activities, products and companies. Two major events occurred that continued to support this theory.

First was the announced acquisition of Pure Digital by Cisco Systems. Why would a company like Cisco, whose identity has been on delivering plumbing rather than higher level user centric products, buy a maker of consumer video cameras? The answer is simple, the biggest players in this converged IT and Telecoms industry will need to drive both the supply side and demand side of the equation. Supply is the pipes that deliver the network capacity and the demand for that capacity is best seen in the broad adoption and use of video. By playing in both sides they are better able to influence the ramp of both halves of the system. Will they be successful? I have my doubts as there is more to being in the consumer electronics space than simply offering or owning a technology but regardless the formula is not new. If you remember back over the past 10 years or so, companies like Intel offered everything from load balancers (acquiring iPivot) to drive data center growth to even selling web cams so that video would become mainstream on laptops. I doubt they wanted these to be their new core businesses but the effect of making demand for faster CPUs more robust was a growth of the commodity they supplied, faster CPUs.  Cisco seems to be using this formula and I assure you they are not the only large player who will move up or down the ICT stack to better link supply and demand in their converging market.

The second event was again from our friends at Cisco. They announced that they where entering the “server” market though their Unified Computing strategy. This is both a market expansion play but also an attempt to capture more of the overall system. Again, I have my doubts about their ability to truly compete here at scale (servers are a pretty low margin market versus what they are used to) but the need to expand in this way is a clear indication of a blurring of IT (server) and Communications (networking) industries. The fun now begins as they have virtually declared war on a few of their biggest partners in the IT space (IBM and HP and possibly NEC) who will need to react. This is spawning possible industry consolidation activity such as the rumor that IBM is looking at Sun, and with that, fundamental changes in the ICT world are inevitable

The commonality in all of this is that the clean lines between telecoms and IT are falling apart and the nature of our industry is changing. That should spawn lots of opportunity but also lots of drama and excitement as the game of musical chairs has now begun in earnest.

“In industry there are two kinds of companies: ones that play chess and ones that play checkers. The chess players shape their destiny while the checkers players have it inflicted upon them.”                                                                                                                                                                            –John Roese  

This is one of my favorite sayings and in today’s environment is clearly true. Companies that have a well-thought-out strategy (the chess players) and that have considered the implications of their actions and the possible counter moves of their competitors, the economy, and their customers are usually able to control their fate and behave much more predictably in complex situations. Alternatively, companies that either lack a strategy or don’t actually guide their actions based on that strategy (the checkers players) usually find that the complexity of their environment keeps surprising them with unintended and usually negative consequences.

I am sure you can think of companies that fall into either category. What is interesting though is that a company can, at different times, be either type of organization. The key, however,  is that a company that understands the value of vision, planning and strategy and is clear about its direction, its goals and the possible events it may have to react around, is usually a stronger company and a survivor.

In the ICT market today, companies have far more events to deal with than ever before (collapsing economies, fear, technology shifts, competitive changes, customer caution…). As an interesting test, consider any company in ICT and ask if they are clear about what they are, what they are moving to become and most importantly if they are proactively positioning themselves to deal with the inevitable obstacles they will face.

As an interesting example of this, in an analyst meeting for Juniper Networks this week, when CEO Kevin Johnson presented their strategy, it was obvious that he had considered in depth the environment and the challenges they will face. You may debate their strategy but the link between it and their long-term activity and execution is pretty obvious. I was particularly impressed when about 45 min into the presentation he made the statement that they “are a pure play in high-performance networking”. Clarity in a vision and identity is key but they also seem to be well-aligned to that strategy from an execution perspective and are taking proactive steps (pay cuts, cost control, increased R&D investment…) to navigate the complex ICT environment we are in today. I won’t predict if they will succeed but clearly they are playing chess not checkers.