Open architectures for IT have a profound impact on the sales process. In the old days, when a vendor sold a complete proprietary IT ecosystem, you pitched your benefits holistically and when you won you won it all. When things shifted to an open framework, with COTS servers and Linux operating systems, the “sale” was for a component not an ecosystem, and when you won you had to get back out there the next day and win again elsewhere.
There have been a lot of changes driven by this evolution to open IT, but one stands out even today. No sales organization can both drive “component-of-infrastructure” sales on one hand and validate infrastructure-wide differentiation on the other. I’ve surveyed enterprises on how they buy things since 1982, and the surveys show this dilemma clearly. In the early surveys, IBM had a strategic influence on buyers so great that they could almost totally control the direction of IT evolution. Today, no vendor has even half the influence IBM had.
IBM has fallen far, fallen because they’ve focused on sales and neglected marketing. Even Cisco, who now leads the pack in terms of strategic influence on enterprise buyers, has been unable to make an ecosystemic case for its wares, and so has been forced to fight for every deal. The whole industry has gone tactical because nobody has learned strategy.
HP just reported, and it’s an example of the pressure of openness. At one time they were the number-two in influence, and they’ve now fallen to a near-tie with Oracle for slots four/five. The company is on the verge of a historic separation of its personal and enterprise businesses, a move that could help it address the issues it’s been facing—some because of that historic openness point, and some of its own making. HP’s portfolio in NFV is part of that shift, and the success of their path forward with NFV may depend on how well HP addresses that whole openness thing there.
Meg Whitman’s quote de jure is “…we’re seeing the benefits of the work we’ve done over the past several years to strengthen the product strategy and go-to-market execution for the Enterprise Group” but that’s a bit of an overstatement. HP’s enterprise revenues were narrowly higher, which is good, and their servers and network products sold well. This says that HP has core strength that can help it exert influence, because generally buyers listen more to the vendors who make up the largest piece of their budget.
Whitman touted NFV in the earnings call, something that’s rare in today’s market climate, but I think it reflects an important truth. NFV is two things for HP. First, it’s the on-ramp to an enormous increase in total addressable market (TAM) because it could be the largest single driver for data center and server deployment growth over the next five years. Second, it’s a perfect place for HP to try out an ecosystemic marketing/positioning initiative. On the call, Whitman talked about the NEC partnership in NFV and the ConteXtream acquisition, and I think that’s fitting because these two things are critical in both these NFV mileposts.
The NEC deal’s touted benefit is “to create more open environments for customers”. Openness isn’t exactly a benefit—it’s an objection management point for the sales process. The thing is, we’re really not selling NFV right now, we’re testing it. There is a place where openness has great influence, though, and that is as a companion to a compelling business case that you’re pretty much the only vendor who can make. HP is one of only three (at the most) vendors who can actually make a broad NFV business case, and in my view they’re on top of that list.
So this raises that issue of marketing versus sales in an open world. To win in such a world, to exploit technology leadership, you have to accelerate the decision. Every day that passes with NFV in the hands of lab dabblers is a day when HP isn’t earning revenue from it and a day when other vendors can whittle away at their lead. Strategic account control, the thing IBM used to be able to exercise, gave a vendor a way of driving a decision first, and driving it in a favorable direction second. You can’t win at a game that doesn’t get started no matter how good your stats are.
And there’s more. There is no question that NFV will, over time, become a commodity space. That’s been the goal of the operators driving NFV from the very first. The question is what will happen leading up to that point, and I submit that is the same question that’s facing IT in general. When you move to an open world, you move to a world where summing the parts to the glorious whole is somewhat in the hands of buyers. The contradiction is that there is no commodity technology on earth that’s not dependent on underqualified buyers—you can’t get enough of anything else to commoditize something. This kind of market cannot be sales-driven because sales people can’t be there to influence every step. We need to socialize a vision, even for NFV, that will carry it to benefits first and second set our own role in the process.
What separates Cisco, who has gained influence over the last five years, and IBM and HP who have lost it, is a natural mission focus. Everyone identifies Cisco with the union of networking and IT, and Cisco’s products and concepts are fairly well known. IBM and HP have more generalized missions so nobody can say exactly what it is that would put their label on a project. IBM and HP also lack concept brands and issue ownership; they aren’t linked in a strategic sense with the key concepts that drive their markets.
ConteXtream may be the litmus test here, not because it’s SDN and a foot in another revolutionary door, but because SDN and NFV are pieces of the same puzzle. HP is a leader in preparing the NFV specifications for SDN integration, but while their technology leadership and strong product capabilities could make this combination a killer one, it’s not really given much emphasis in their positioning. The critical website graphic on NFV has SDN represented as a label on a signpost, and the five specific areas that HP says NFV has to address don’t include SDN. They also don’t include operations integration or even a mention of specific NFV benefits.
What you’re left with here is a sense that HP lags Cisco in strategic leadership because Cisco has a natural area of focus and HP has to provide one. In the cloud, SDN, and NFV areas, HP has objectively stronger assets than Cisco has. HP has less aging turf to defend, more experience at competing effectively in a commoditizing market. Where Cisco has the advantage is that the network is a natural ecosystem and they know how to compete within one. SDN and NFV could create natural ecosystems for HP, and their union could be the thing that turns HP’s earnings calls from tactical and pedestrian to strategic and compelling.