We’re starting off what will likely (but you never know these days!) be a quiet week in the markets. Top of the news is the announcement by Oracle that it will be supporting at least some of its PeopleSoft and JD Edwards applications on Amazon’s EC2. This seems a reversal for the company, who had initially seemed to reject the cloud model, and I think it’s worth looking at it for some hidden truths.
First, the revenue impact of the decision isn’t significant on the face because Oracle will treat EC2 virtual machines just like customer virtual machines; same license terms and rules apply. So what we’re seeing here is a model to accept infrastructure as a cloud service rather than to promote public cloud-based enterprise apps in SaaS form. But why even do that? I think that Oracle is realizing that the hybrid cloud is its path to enterprise prominence, and in particular a path leading past HP in a competitive sense.
Another factor is that Oracle’s database appliances are selling strongly. These appliances provide DBMS-as-a-service, and thus could make it much more practical to have a cloud application access an on-premises database with reasonable performance. Thus you could argue that the hybrid cloud model is perfect to socialize Oracle’s appliances in a market that already seems to be catching on to their value.
The FCC will be releasing its net neutrality order tomorrow, though it’s not fully baked at this point and might still be pulled from the agenda. The order appears to be a curious mixture of logical application of neutrality and illogical legal foundation. I’ve reviewed the Court of Appeals ruling in the Comcast case and it’s hard for me to see how this dodges the legal issues the court has already raised. The only avenue forward would be for the FCC to now assert (and justify) the view that Section 706 of the Telecom act gave the FCC “new” powers to encourage broadband and not just a specific justification to exercise the powers it already had. The FCC has taken the opposite position consistently.
Republicans in Congress are rattling their sabers, threatening to pass a bill that offers no funding for the FCC’s neutrality rules. Apart from whether this is even legal, it’s pretty obvious that in the divisive political world of Washington it could never pass. Similarly, it’s clear that neutrality legislation more aggressive than the FCC proposes (mandating no traffic management, no premium handling except for free, and full wireless regulation) wouldn’t pass either. So whether either extreme is the right answer doesn’t matter. What does is having a set of rules that will pass legal muster, and that’s where I’m concerned here. The FCC’s “third way” was the right answer; it was clearly legal and it would have offered exactly what the situation needed. Some of the Democratic Commissioners want it, and frankly I’d rather they held out. I disagree that this order is better than no order—if it’s not enforceable then it is “no order”.
Economically, the EU sovereign debt problem is continuing to cloud things a bit, but even European stocks are up this morning and so are US futures. I think that the only real question on the table has been whether Europe would let the EU sink rather than have the stronger countries guarantee the weaker ones. That question appears to have been answered to the point where speculators aren’t quite as willing to play chicken. The good news is that if the debt problem were to be put solidly at rest, Europe would likely start recovering faster. That would be important because the bad news is that the austerity programs that would be demanded as a condition for loan guarantees to the weaker nations would certainly create social unrest, and possibly weaken the ties that bind them to the EU. Would that hurt? Truth be told, not much. It’s doubtful that any of these nations could go it alone, and I think the voters there would draw back from the brink. No question, though; better times would help a lot to ease tensions.
Alcatel-Lucent continues to showcase the developer side of its Application Enablement approach, including its Open API program that federates application services across multiple developers. There is no question that the company has started to gain some traction in the market with this, but there is still a question in our mind regarding how quickly the program can adapt to market conditions. The thing that made OTT players successful in the service layer is that they’ve dodged inertia. They don’t worry about standards beyond blowing a casual kiss here and there, and thus they can expose features via APIs very quickly. If you want for industry consensus on APIs, you’re putting yourself at the tail end of a multi-year process and then saying you’re running at market speed. I’d like to see Alcatel-Lucent open up more regarding how it will create features in Application Enablement and how quickly it can expose them using RESTful APIs.
NSN’s CEO has recently suggested that the telecom sector will consolidate with only three major players remaining; Ericsson, Huawei, and NSN. I think that vision of the future is a tad self-serving in terms of the players, but I think that it is very clear that somewhere around three players is what we could expect if the industry can’t find better feature differentiation. If Alcatel-Lucent wants to make the cut here, they definitely need to make Application Enablement work, and it’s frustrating to me how close they are to that, and yet how far. But it’s not atypical with service-layer strategies in the big vendor space. Nobody has it right there.
One might ask where this consolidation would leave Cisco and Juniper, the other big players in the IP layer at least. I think that’s another area where the NSN comments oversimplify. We’re seeing, in operator trends toward “procurement zones” for buying, an attempt to create a market where a single giant with a full product line can’t dominate everything. The operators would like innovation, particularly with respect to the service layer, and they can’t get it by having everything collapse into a single giant commoditized space. But if the specialty guys like Cisco and Juniper can’t make a case in the service layer, then they can’t defend their narrower position in a commoditizing market. Thus, we could see the NSN “vision of three” being right, even if the three turn out to be different from what NSN expects.