What’s Up, What’s Down

Some’s up, some’s down, I guess.  That seems to be true with regard to tech signals this morning, anyway.  Oracle is buying a CRM cloud player, RightNow, and the Street is reporting issues with hardware sales, both in the service provider and enterprise spaces.

The RightNow buy is interesting in a couple of dimensions.  First, it shows that Oracle really wants a presence, a major retail-level presence, in the cloud.  The company has been a provider of all sorts of interesting cloud tools and it made a recent push for the cloud in OpenWorld, but this deal is a here-and-now move with a big investment behind it.  Second, the move shows that CRM may be a very critical app for the evolution of cloud relationships with users.

We’re kind of past the early hype days of the cloud, and Oracle likely now realizes that players like Microsoft and IBM have a more established position in the PaaS and SaaS models of the cloud, where I think all the indicators say the real action will be.  Part of the problem with being a tool player only is that you have no play in potential service revenues, but the real problem is that you have no tools to transition users or operators into installing your tools.  You need to be a cloud player if you’re a cloud infrastructure player.

Salesforce may be the target of the second motive, or just “collateral damage”.  CRM is an application that lends itself to SaaS because it’s largely contained; it doesn’t impact the big mission-critical core apps.  That makes it easy to consume, and that means that Salesforce gets a lot of early adopter opportunity.  You could see that in their numbers this quarter.  So this early lead could be a long-term problem for Oracle if Salesforce starts branching out into more and more stuff—which it has.  I don’t think Oracle thinks that cloud CRM in itself will keep the lights on, but they do likely think that it’s a camel’s nose that they don’t want someone else sticking under an Oracle customer’s tent.

On the hardware front, we have news that floods in Thailand might impact HDD production, which might have an impact on availability of drives for both consumers and enterprises.  That could increase prices and reduce sales.  I’m not yet convinced we have a problem here because we don’t know the scope or duration of the production problems, nor how other manufacturing areas might step in to respond.  It looks like Western Digital may be the most impacted at this point.  Will this possibly hit enterprise IT spending systemically?  I don’t think so; those systems are the higher-margin deals and they’ll get prioritized in manufacturing.  Higher consumer prices are more likely, but I don’t think that will impact the market until early 2012, if it ever does.

The other hardware comment is that the Street is now saying that both AT&T and Verizon will be under-spending in Q4, with (no surprise) wireless less a problem than wireline.  Operators have to show a profit like every other public corporation, and there is increased pressure on ROI for infrastructure, particularly with wireline.  The quarterly reports from both AT&T and Verizon suggested that you can’t make wireline work unless you can deliver multi-channel TV because people won’t pay for premium broadband even if you can deliver it.  I think it’s pretty clear that operators are looking to shift more capex out of network equipment and into IT equipment, both to host “cloud services” and to host service features.  This is what network equipment vendors should have been working to avoid for the last four years, but they didn’t really start picking up on the shift until this year.  I’ve seen a LOT of progress among the equipment vendors in positioning their service-layer offerings, targeting not only content and mobile but also the cloud in general.  But “a lot” isn’t enough, because the momentum away from thinking of network vendors as service partners has become pretty strong.



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