The ICT Optimist

Its amazing that even when you take some time off for vacation, the macro level industry changes continue … you would hope that the industry would take time off and enjoy the nice spring weather …. just kidding <grin>

One of the most interesting events this week was the announcement at Interop of a broad alliance between Microsoft and HP to better compete with (or react to) Cisco. On GigaOM.com there is a pretty good comment stream summarizing the announcement and dialog at the keynote. The punch line is that as Cisco continues to move up the IT stack and focus on compute and collaboration technologies and solutions, the rest of the industry is reacting by forming alliances to better match the Cisco offerings.

Now we have the following alliances and large scale transactions just in the last few weeks….

IBM and Brocade

HP and Microsoft

Oracle buying Sun

Any one of these is big, but all of these huge companies shifting relationships and creating new industry structure means that there will be huge disruption and opportunity. The disruption is seen in the fact that almost every one of these big industry changes is at the expense of other prior relationships or even competitive positions. Additionally, whenever a new set of partnerships emerge they inevitably expect their customers to change with them even if the existing or prior offerings are working fine (note to customers -  be ready for a new round of sales calls).

The opportunity is that whenever a new ecosystem forms the large players inevitably overstate their capabilities and once they realize that they have gaps, they begin a process of finding the critical technology and solutions to complete their new image of the IT/Telecom converged space. It remains to be seen what gaps will be most critical in these new ecosystems but I can assure you that there will be lots. As an optimist I am excited by this as the best time for companies to emerge and new technologies to become valuable is when a macro level vision is incomplete without them.

Lets see if we have even more industry composition changes in the coming months. I would guess there will be and from that and the existing changes we should see repercussions throughout the vendor, channel and customer base. That will be exciting in any event.

Recently there has been a bit more dialog about the fact that Wireless networks (802.11 based Wifi specifically) are moving to a position of prominence in the enterprise market. I follow this with great interest because in my career dealing with Enterprise CIOs two of the most often asked questions are “when will I be able to rely fully on wireless access?” and “when will I no longer invest in broad cabling of my buildings?” The reason CIOs have been asking me this for the past 10 years is that when you take a hard look at user patterns on the edge of an enterprise (home, small office, hotel, airport, or even campus LAN) it is clear that with every year the use of Wifi as the primary access technology has increased. What is interesting is that this was not be design. In fact most enterprises offered Wifi as an overlay network that was optionally available but as soon as the workforce adopted laptops as their primary compute hardware the WiFi network became the primary network of the user base.  Additionally the workforce has become accustomed to WiFi in their home and when they travel and since most people conduct their work in more places than the fixed office, the users figured out,well before the IT groups did,  that you can indeed use wireless for business.

In a recent Network World article titled “Is it time to cut the Ethernet access cable?”, the topic was discussed and what was interesting was that the vast majority of end customers acknowledged that wireless is playing a much more primary role in their networks. Not surprisingly, the vendors where split. The wireless switching vendors suggested a wireless only experience while Cisco, the largest provider of wired LANs, asserted that you actually need wired, wireless and a cellular overlay. It was fairly interesting to note in this article that many of the customers interviewed wanted to remain anonymous when asked about wireless use, as if there was a shame or career risk to acknowledging that their business used wireless technology.

So when will we be able to unwire our enterprises? Well that is still a hard thing to predict. Clearly with advanced such as 802.11N, WiFi is a much more robust technology. There are still challenges in relying on Wifi that are not present in wired LANs. Specifically since WiFi operates in unlicensed frequency bands, the possibility of interference or jamming is a real risk. The reality though is that given the 2.4 and 5Ghz bands and the significant enhancements most Wireless systems have today, interference is a far less likely issue. Consider, if you rely on WiFi at home, how often the wireless network failed versus how often the broadband connection (DSL, Cable…) failed. In giving it some though I cant remember when a wireless issue stopped me from connecting but disruptions on the broadband link are a common event. In your experience in the office, consider how often your WiFi service stopped? Probably not very often and clearly more resilient than many of your business applications.

An additional concern that has haunted Wireless is that it is a “shared network”. Because the bandwidth is shared between all users on the access point, it is possible that an active user might occupy enough bandwidth to starve other users. One could deploy complex QoS in the wireless domain to try to solve this but the reality is that with 802.11N the amount of capacity on the “shared” wireless network is probably far greater than the capacity of the “shared” WAN link that 99% of your traffic is traversing. I just looked at my home network and my .11N networks are providing about 144Meg of capacity and my Cable link is 15meg downstream and 1 Meg upstream using a test suite on DSLReports.com . The bigger challenge today is to assure fairness on the broadband up-link (I sit on the board of company that does this called Smart Share Systems) as that is the actual congestion point in most cases.

In any event enterprises are still suspect of a fully unwired experience. They may not have specific examples of wireless failure but they do know that there is uncertainty when you move data over a shared wireless medium leveraging unlicensed spectrum. Another Network World article this week titled “Wireless Netowrks must overcome Interfearence , Latency and Security Challenges” lists the current concerns but on a closer read, it shows how broadly Wifi is currently used and in almost all of the examples used successfully today.  The reality though is that we have enough data to know that if you model your existing user patterns almost all enterprises will see that there has been significant shift towards using wireless and a dramatic reduction in the use of the wire-line LAN. A realistic approach would be to redistribute resources and focus to the new usage distribution and spend more time engineering, improving and enhancing the network people are moving to (Wireless) and looking for ways to decommission or reduce the footprint of the network they are moving away from (Wired access). How much you wish to shift is up to you but a good exercise would be to audit the current usage and ask if you are spending your capital and time on where your users are going towards or if you are simply perpetuating a network that is dramatically under utilized. If every year you ask and answer the usage distribution question and map your IT spend and resources to that trend, you will be aligned to the reality of your user communities true dependencies. As an added bonus you IT bill for access will most likely drop as you leverage more Wireless as it is common knowledge that the cost of a wireless network is far lower than wired and enables far better economics in terms of user productivity and Moves Adds Changes cost to IT.

Its been a busy week for the convergence of IT and telecoms. Specifically two interesting changes have occurred that seem to validate the view that the IT companies are getting much more serious about absorbing or at least offering more telecoms capability within their portfolios.

The first event was IBM announcing that it is going to OEM the Foundry NetIron and Fastiron switches as IBM products. This is significant since IBM  exited the market of privately labeled networking gear quiet a long time ago by selling that division to Cisco. This exit was driven by their belief that they needed to go up market and focus on IT software and services. They did that pretty well but with Cisco, their former partner,  now moving into the IBM core markets with their Unified Computing offerings, it seems that the IBM reaction is now to need an internal IBM networking offering. Foundry is as good as any option short of an acquisition although one could see IBM making an acquisition of networking gear as the markets consolidate over the next few years.

The second event was less visible but equally interesting. HP announced that they had hired a senior EMC executive to run their newly combined storage, compute and networking division. EMC has now apparently sued the executive over this. Regardless, this new focus by HP on a vision where  “the future of computing moves toward converged platforms of servers, storage and networking” sounds very IT/Telecoms convergence affirming.  Clearly HP is also seeing the need to consolidate the vertical elements of IT and telecoms rather than simply partner for the horizontal layers. This could be driven by Cisco’s recent moves or by a reaction to IBM or even Microsoft activity but in any case it is yet another example of the profound changes in industry composition that are happening now.

Both of these events add to the other recent events from the big IT players that continue to show they are aligning to compete as vertically integrated “super IT/Telecoms” companies. The pace is picking up and it will be interesting to see how long it takes before one of these companies declares themselves the “one stop shop” for all things IT and Telecoms.

For the past few years it has been clear that the next phase of our industry would be a period of consolidation into larger and more vertically integrated companies. This is not a new phenomena in that if one looks back about 20 years ago the industry was composed of several huge vertically integrated IT/Telecoms companies. Wang, DEC, IBM, etc dominated the industry and their goal was to provide everything from networks to business applications and services. For the past 20 years though we have seen those huge companies disappear or transform and the industry morphed into a set of layered markets (data networking, voice networking, compute, applications and services) each with its own vendor community and leaders and innovators. Today we are beginning to see a shift that is somewhat “back to the future” as we see major IT and Telecoms companies attempt to re-converge the market and become similar to the large vertically integrated tech companies of the past. We have seen Cisco Systems acquire up market and move up the stack into compute and applications. We have seen HP purchase EDS, consolidating the services space, and assert the value of their procurve networking division, moving down the stack.  Today we see with the Oracle acquisition of Sun, a software and applications company extend down the stack into additional middle ware, operating systems and even compute hardware.

Some might describe this as a combination of two similar companies but if one looks at where they each play, its is clear that they are not at the same layer. Sun is about compute and foundational technology where Oracle is about middle ware and applications. They clearly have some overlap but their combination creates a significant expansion of the layers of the combined entity and affirms the theory that industry consolidation today is about vertical aggregation and expansion rather then simply horizontal market share consolidation.

So whats next? It is my belief that this consolidation will continue for years and the outcome will be an industry that resembles the ICT industry of  20 years ago much more than it resembles the industry in 2000. We will mostly likely end up with a number of very large companies that want to reach up and down the stack and offer complete ICT solutions to their customers rather than having to rely on large complex partnerships. As these companies emerge and grow, their former partnerships will become complex and difficult to maintain as they become more competitive with each other. As they compete, they will fight to “out scale” and “out-solution” one another. We will see more of the “one stop shopping” mantra emerge and end customers will generally have the choice of picking one strategic partner or investing in their own integration between hostile ecosystems. This evolution will not be good for innovation or the industry as when the market moves to consolidation as a focus, it rarely spawns the innovation that naturally disrupts the status quo and creates that huge paradigm shift we thrive on in this industry (mainframe to desktop to internet as an example).

So is that the end state? Not at all. As we saw in the late 1980s and early 1990′s, inevitably as the complexity of IT and Telecoms technology expands and as the ultra large companies become to complex to maneuver, the industry shifts back to innovation. Generally speaking the dominate companies become terrific targets for new companies to attack and either improve on or disrupt with innovative alternative approaches to their mainstream technology. If you remember in the late 1980′s most networking start ups operated under the premise that they would develop technology that would improve on the systems that DEC and IBM had built. But because they where start ups they could do radical things that the established companies could not react to for fear of disruption. In once classic example, a company called Cabletron Systems, came up with a novel idea of putting LED diagnostics on the outside of networking hardware. They called it LANView, patented it, and offered products that competed functionally with products from places like DEC but with this LED enhancement. They went from a few guys in a garage to a $1.4B company in a very short period of time.  We have also seen companies like Netscape and Google disrupt the software market by being willing to deliver a better web interface or Internet model where the incumbent software companies defended their legacy.

My point in this blog is that our industry is cyclical but the cycles are long. If you look back 20-30 years you see striking similarity in the consolidation and positioning of companies today and if you believe that cycles repeat, it means that we have a few years of consolidation followed by a next phase of disruption of that consolidation via innovation. It should be interesting to see how that plays out and if the cycle does repeat but for now, more large vertical consolidation mergers like Sun and Oracle just affirm this theory.

I have been “officially” on twitter as theICTOptimist for a while now but over the past few months I, after installing a decent client (Twirl), I have started to actually use it and find some value. The funny thing is that I still don’t see a lot of value in posting my minute by minute thoughts or activities on it but have found that as a follower of a number of organizations and people, its has great value for me. A few early experienced that make it real for me:

• I did not physically attend voicecon a few weeks ago but in addition to the voicecon web site and various online news stories, following a few folks who where there using twitter really filled in the blanks. Specifically abnerg (Abner Germanow, an analyst who I have known on and off for a decade), kenkamp (Ken Camp, a digital media consultant who I don’t think I have ever met), DaveMichels (dave Michels, an “telecoms and VOIP enthusiast” who I also don’t think I have ever met), and the official Voicecon twitter feed, all filled in the blanks on what was really going on. While I probably could have gathered a lot of what was twittered over time, the complement to the real time video or news was great and made for a more complete experience.
• I added the twitter feeds from a few of my favorite blogs and news sites. Specifically GigaOM and theRegister. What I found was that not only do I get the updates in real time but for the first time I am following some of the commentary. I traditionally did not bother to look at the comments of these or many sites as they require additional clicks and for the most part are a waste of effort given some of the silly comments that people make. When comments flow via twitter, the zero effort part of viewing them means I am much more likely to see them and occasionally the commentary is interesting.
• My colleague April Dunford, attended a conference on social media in Toronto called MESH. I didn’t really know about it until last week and by then could not attend. By following her twitter feeds I got a good level of insight into that event  and since I trust here opinions when she tweeted that a session was interesting or some element connected to the event worth looking at I could click on the link and see what was going on.
• I have added the BBC to twitter now and while they generate a lot of posts, the ability to scan them as they happen makes reading news a lot simpler and real time.

All the above examples show that there seems to be value in Twitter, not as the primary medium but as a complement to information streams, sources or events. That may be it’s real value as opposed to trying to find unique stand alone value of the tool.

On the down side, a few things seem to be happening with twitter that are not positive. At MESH, there was an observation that when they allowed the audience (mostly a bunch of serious social media folks) to use twitter to submit questions, the in person interaction was seriously degraded. The speaker got a question over twitter and unlike when someone in the audience asks the question and you can see and judge their reaction (did they get it or do you need to elaborate), the speaker might as well have been responding to a email from the other side of the world. Face to face interaction is always a better medium than other options and using twitter to interact when you are ten feet from the other party creates a sub-par experience over what could have happened. A second negative is that using twitter is like learning to use  a UNIX machine. Everything is abbreviated and since the messages are 140 characters long some crazy twitter specific language is present that has a pretty steep learning curve. Once you figure it out its OK, but there is no way twitter vernacular is going main stream.

The punch line is that as a twitter skeptic, I am now much more favorable to using it as one of many tools and I have enough data to show that even if you don’t want to post your minute by minute activity, the act of following events, topics and even some people is pretty useful in filling the gaps of information. I would not recommend following me yet (but feel free to if you want) but if you have not tried it out, download twirl or some decent client (the web version stinks) and pick a few topics or people and just casually watch. You will find that you learn something and get a more enhanced feeling of the event because of the added twitter elements and the effort is pretty minimal.

Whats particularly interesting is that if a esoteric interface like twitter can be useful by providing personal feeds on topics, what will come next using a similar model with better interfaces, richer experience and similar simplicity. That could be very exciting.

Its interesting to watch the industry and see how leadership seems to be hard to find. In thinking about this I remember a great set of quotes from Warren Bennis on the difference between leaders and managers…

Warren Bennis (1989) on leaders versus managers

Manager versus Leader

The manager administers; the leader innovates.

The manager is a copy; the leader is an original.

The manager maintains; the leader develops.

The manager focuses on systems and structure; the leader focuses on people.

The manager relies on control; the leader inspires trust.

The manager has a short-range view; the leader has a long-range perspective.

The managers asks how and when; the leader asks what and why.

Managers have their eyes on the bottom line; leaders have their eyes on the horizon.

The manager imitates; the leader originates.

The manager accepts the status quo; the leader challenges it.

The manager is the classic good soldier; the leader is his own person.

The manager does things right; the leader does the right thing.

Warren Bennis

Consider the difference and look for examples of leadership and its pretty certain that where you find real leadership, those organizations will lead the recovery of both the economy and the ICT industry into a next era.

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.