The ICT Optimist

For as long as I have been in the ICT industry, there always seems to be a technology buzzword that dominates the dialog but no one really agrees on the actual definition of the term, the details behind it or the way to measure the market.

In some cases these issues become resolved and the technology becomes mainstream and understandable. An example of this is the term “switch” when used to describe a network device that passes packets over multiple ports. If you remember when the term showed up over a decade ago, some companies praised the value of switching as a cut-through device versus a store and forward device (meaning the packets spent less time inside the devices buffers and ultimately had lower latency). The issue was that then every multi-port bridge as defined by IEEE 802.1 standards was renamed a “switch”. Soon anything with more than one port on it was a “switch” including things formerly known as routers, bridges, gateways,…  Over time the technical purists gave up and the industry just started calling multi-port bridges, routers and other devices layer 2, 3,or 4-7 switches. All that posturing and debate resulted in nothing more than a new name that honestly didn’t matter at all.

In other situations it just fades away as the next big buzzword appears and distracts the industry from the prior dialog. A good but forgotten example of this was the short lived infatuation of Asynchronous Transfer Mode (ATM) technology and other deterministic LAN technologies. The hype was around the idea that if we could make networks predictable, voice, video, and data could all work in a converged way over the same network. Obviously if you look at the fact that today, these types of traffic do work over the same network but not because we achieved deterministic networking but rather because we threw huge amounts of bandwidth at low cost at the problem and then layered on top a “good enough” class of service model. The hype of perfectly engineered networking was lost by the availability of cheap, pervasive capacity with some band aid type control mechanisms.

So here we are with another new buzzword generating a huge amount of hype… cloud computing. Also with cloud computing is a host of new acronyms describing “everything as a service”, XaaS, IaaS, DaaS, SaaS, PaaS…. These are buzzwords because we don’t have a clear definition of them. On sites like Wikipedia, there is a pretty detailed summary of all the possible elements and models that could be considered cloud computing, for example,  but all one has to do is read the literature from a few players in this area to see that the language and architecture of this space is far from uniform. For a pretty good dialog on this set of new “thing” and how vague they are, the register.co.uk hosted a pretty long webcast. Its done pretty well but the ambiguity this space has is obvious from the dialog. The question though is if cloud computing is in fact a sustainable and real paradigm shift or just simply a better marketing term for a set of different approaches to IT and compute architectures.

In terms of new and unique properties, I find that the basic elements are not new. Most definitions of cloud computing boil down to using :

1. A distributed computing environment – meaning many CPUs are used as a system with a network as the interconnect. The issue is that sometimes this is a classic grid computing model and in other cases it is a much more ad hock collection of interconnected computing resources.
2. A level of virtualization – meaning that the processes have little knowledge of the actual compute hardware they run on. Technology such as VMWare is often used for this but by no means is there a uniform architecture for virtualization yet and the degree of virtualization varies widely from one definition and system to the next
3. A set of services that can be accessed by software running in the cloud – meaning that many of the functions that one would normally have to implement in a discrete system are offered as “services” to any code running in the cloud. For example real time communications and conferencing could be offered to apps in a cloud as a function. Other traditional discrete services such as identity management or even complex functions such as location functions and tracking of client devices could make up some of that broad services suite. The issue here is that what services a cloud delivers is left to the particular specific cloud so an application implemented in cloud A might not have access to the same “services” on cloud B.
4. A web services or other IT friendly programming interface -  meaning that instead of low level compute centric interfaces, functions in this type of system are presented as programming interfaces that are native to the IT applications using the cloud. For example instead of making multiple low level calls to invoke a conference call, a programmer in this type of environment would simply execute a basic function such as “invokecall(phone number)” and the call would happen. All the complexity buried in the cloud on the system that specialized in real time communication.

The problem is that in all 4 of these elements, they may or may not be implemented in a system called a cloud.They may also be implemented in radically different ways and at different levels of sophistication. And in many cases they may not even be present. Yet in all of these permutations the system is called a “cloud computing” system or solution. Sounds like hype and buzzwords to me.

Does this mean cloud computing is hype and irrelevant? Not at all, the idea of pulling a distributed network based compute infrastructure together with good vitalization, embedded services and an IT friendly interface to applications is in fact pretty new. It is also very useful. I have spoken to dozens of small companies in the last six months that are able to achieve more rapid development of solutions and greater functionality because they can host their solutions fully or partially in one of many cloud computing systems out there. They also are able to focus on their core value as the cloud computing systems provide them a set of embedded services that if they had to create and implement internally would be far to costly and complex. All of that means that this idea of cloud based computing is of value, the issue is if it is a singular thing or simply a progression of a number of IT systems that happen to provide good synergy today. I am not sure that cloud based computing as a “new thing” is sustainable or even relevant but the sub elements and the ability to use them together are a good step in the right direction. What inevitably will happen is that more of the elements of the IT ecosystem will evolve and become available to a larger base of customers and additional improvements on other portions of the total IT framework will emerge to provide incremental value beyond the four elements mentioned in cloud computing today. Will that continue to be known as cloud computing or will it simply become part of the way we do IT in the 21st century. I am betting on the latter and with that betting that the term and hype over cloud computing will simply disappear under the broad evolution of all parts of the ICT ecosystem. In any event it will be interesting to see the evolution and how disruptive it is to our industry.

If you want to read a recent article on the pros and cons of cloud computing, Forbes.com just published a decent article that I think sums up many of the issues often overlooked and the reality of this hype not being something new.

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.

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.

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.