It’s still earnings season and so we’re getting fewer product announcements and more financial ones. You can still learn a lot from the numbers, obviously, so we’ll look today at the latest revelations and what they might mean.
Facebook surprised the Street with a loss, due to employee stock compensation costs. Revenue and profit ex that issue were slightly better than expected. The problem was that the company offered no guidance. I said about all I think is useful on Facebook yesterday; social networking is a double-barreled not-proven as a business model for a public company. I don’t think the Street necessarily gets the details here, but they’re right to be uneasy.
Amazon suffered a significant drop in profits as higher cost eroded their overall margin. The move initially sent its stock lower, but the shares have recovered. Some still think that Amazon is trying too hard to be more than it is—the premier online retailer. Some think that some of the businesses it’s pushing now, including the cloud, are just massive capital-eating cesspools. Some think that Bezos is “the new Steve Jobs”. Take your pick.
My pick is that Amazon is treading a thin wire over a deep abyss. The online retail business is a thin-profit play that has its own set of risks, and competition from suppliers themselves isn’t the least of it. If you have thin margins already but you generate enough cash, you can probably fund building cloud infrastructure as well as a service provider can. That means that the cloud business isn’t necessarily a bad one for Amazon. You can argue, I think, that Amazon is being aggressive there, but that’s what got them to their premier status in online retail.
That doesn’t mean that Amazon is doing everything right. I think their major problem is that they’ve let themselves be caught up in the cloud myth. OK, I understand that you don’t want to rain on any parade that’s taking your stock where you want it to be. The problem is that if everyone assumes that the cloud model means all IT migrates to Amazon, they’re doubly wrong. It doesn’t assume all IT migrates anywhere, and Amazon isn’t the likely recipient of most of what migrating does occur. At some point, the market reality will collide with the myth and Amazon will suffer. Needlessly, because it would probably be better able to face the future if it fessed up.
Amazon has taken a giant step by creating a kind of distributable browser function for Fire. They’re a short step away from creating a tablet supercloud. But wouldn’t have that have been a compelling story to tell? It would take them to the front of the line in collecting cloud dollars. If they then said that they would be offering a mobile-empowered distributable-intelligence service ecosystem, they’d be in line all by themselves. And they could say this now, with complete truth to back them up. Nobody else can say it. Steve Jobs would have sung this to the stars, and that’s why Bezos isn’t Steve Jobs. You explode on the market scene in a burst of dazzling light, not come in via the stage door.
In a bit of recapitulation, I had a chance to talk with Juniper on their SDN strategy, this time to get some on-the-record positioning instead of an NDA briefing. I was very interested in their responses to three questions.
My first question was whether the implementation of OpenFlow by Juniper would allow devices that are not currently connected via “standard” interfaces for control protocol compatibility reasons could be connected by OpenFlow pipes with proper forwarding table control on both sides of a compatible interface. The answer was “Yes”, that Juniper believed that the OpenFlow implementation should avoid proprietary extensions that might compromise this sort of connectivity. This is important to me because it means that Juniper’s PTX fiber line could be connected to QFabric to create a distributed cloud data center. I’d sure like to see them say that outright, but OK, we know now that it can be done.
My second question was whether Juniper intended to play or partner in the layers of the process that correspond to my “Cloudifier”, “SDN Central” and “Topologizer”. Juniper does recognize this loose framework for an SDN stack, and it intends to play extensively in the Topologizer and at least somewhat in SDN Central; the details of the latter aren’t public yet. That means that Juniper will frame service features from the network upward for creation of SDN services, expose control and status interfaces, and likely create operational abstractions (like the classic “Line”, “LAN”, and “Tree” connection topologies) at the Topologizer level to make it easier to map network services to cloud applications. Will they orchestrate stuff? They’re not saying yet. Will they play in my “Cloudifier” layer? Unlikely; that’s pretty high on the stack for somebody who doesn’t field servers, OSs, or middleware.
My third question was whether Juniper saw the same three models of OpenFlow application that enterprises in the know now see. They are the “on-top-of-network” tunnel and virtualization application, the “under-the-network” virtual fiber application, and the “alongside/inside” network zone model. They said that they saw these same models and they were prepared to support them, in fact having that support in place for any of the OpenFlow-compatible devices they have.
Juniper is the first of the big vendors to go “on-the-record” on this topic, and their capabilities demonstrate that they do have SDN credentials. I’m not sure that they’ve fully committed to a path of SDN promotion, meaning that they don’t play their cards with as much breadth and finesse as I think their technology justifies. I do think that they are fully committed to SDN, though, and with some work I think they could support the complete SDN model that I’ve talked about in Netwatcher already and that I’ll be describing in tutorial videos early next month.