It’s always interesting to listen to or read about what’s happening in the tech market. You get the impression that the industry is a vast river that’s dragging everyone to a common destination. We have systemic this and technology-trend that and it’s all pretty much relentless. There are obviously systemic trends, and I’ve certainly talked a lot about them. There are also individual trends, things that by accident or design have been propelling companies into different orbits than the market overall. Fridays are a good time to talk about them.
Intel announced its numbers, and it had record revenues. The fact that yesterday was a bad day for tech drove down shares more than the results raised them, but from an industry perspective it’s pretty obvious that microprocessors are doing well. One reason is that there has not been the total shift away from PCs that’s been predicted since tablets came along.
I have an Android tablet, and just about a month ago I replaced it with an ultrabook that had the ability to fold into various configurations to make it more convenient to use. One reason was that for me, the tablet could not really replace a PC because of the business use. When I go on vacation, I have to presume that something might come up that would force me to do a bit of work. No, it’s not that people contact me and ask me to (I’d just say “No!”) but that I might want to extend the trip and push it into a period when I’d already agreed to deliver something. Anyway, I can use an ultrabook like a PC and also like a tablet so it makes more sense.
That’s what I think is happening in the PC world. We are learning that the exciting revolution of the tablet is exciting but not necessarily compelling. Many people, I think, are finding that a slightly different PC is really a better choice for them, and that’s making the tablet more a supplement to the PC than a replacement of it. I’ve noted before that many will still make the tablet transition because all they really do is go online, but more people need PCs than we think.
IBM is about to announce its numbers, and the Street is lining up on the bullish side of the room for Big Blue, where sadly they also find me. IBM has weathered more industry transitions than any other tech company and it would be sad to think it might now be in deep trouble, but all the indications are there. IBM has been slowly shifting out of the more competitive x86 space, first by selling off PCs and then all its x86 servers. This looked smart to many (including IBM, obviously) but it had an unexpected consequence.
Tech is commoditizing overall. Apple consigned itself to a second-class PC company for decades because it had no acceptance in the business market. Today, Apple is moving despite their consumer targets and IBM, king of business, is trying to ride their coat-tails. The hidden truth there is that you can’t be a computer/software success selling only to big companies. IBM killed its own brand by getting out of all the product areas that the masses could buy. Now they find it difficult to deal with competition in the Fortune 500 when the Everybody Ten Million is safely in someone else’s camp.
HP is in the opposite situation. The fact that PCs have outperformed has helped HP, who by some measures is gaining market share faster than anyone else. HP is also dealing with the industry revolution in a saner way, not by jumping on the tablet bandwagon like it’s the only savior of western culture but by creating a PC/server business polarization that lets the company play both sides of the opportunity, or the same side from two different directions.
The point here is that exaggerated measures are often induced in response to exaggerated trends, and we all know that there’s nothing that can happen in tech these days that’s not going to be blown way out of proportion. A company who avoids throwing themselves out a tenth-story window to avoid a puff of vapor, whether they’re smart enough to see it for what it was or just lucky enough not to notice it, has a better future than the one who jumps.
In networking, we are facing the same thing. Everything that’s happening in networking today, and everything that’s happening in business IT as well, is driven by one common truth, which is that we have largely used up the benefit case for more spending. We have empowered workers as well as current IT architectures can, we’ve connected people and information as well as anyone is willing to pay for. You want more cost, you need more benefits. This means that “jumping” as IBM has done is a bad idea, because there’s nowhere to land that’s any better.
What’s frustrating (to me, at least) is that there is no reason to believe that there are no other benefits out there. My models have shown that businesses could spend nearly $400 billion per year on network/IT services if mobile empowerment of workers were harnessed optimally to improve productivity. They say another $600 billion annually in consumer spending, this largely on services, could accrue if we were to give mobile users the kind of things that even current trends show they want.
Cisco is widely seen as having led us into the IP age, but that’s not the case. Cisco was blundering along in IP and IBM, who owned business networking, killed their own opportunity with an overweight vision of “SNA”. Buyers fell into Cisco’s arms. The key point, though, is that this seismic change came about first and foremost because we were having a revolution—one of connection cost. A lot of new things were empowered by that revolution, including IP and distributed computing and the Internet.
We’re still having a cost revolution. The cloud is a market response to the lifting of constraints on information delivery and process distribution that has arisen because of that same declining cost per bit that’s vexing the operators today. The problem the cloud faces, and IBM and HP and Cisco and even Intel all face, is that we’re not seeing this for what it is. If a resource becomes cheap, the best strategy is to exploit it more. OTTs arose because operators didn’t deal with their own market opportunity, but the OTT model isn’t perfect either. They’ve picked low apples, things like ad-sponsored services were barriers to entry were limited and ROI high. The real tech of the future is what PCs were in their heyday and what mobile devices are now—a mass market. What does a mass-market cloud-coupled IT world look like? What software does it depend on, what platforms does it make valuable, what services does it both drive and then facilitate?
Answer that question and you’re the next Cisco.