And The Enemy Is…The Mobile Us!

Anyone who thought PCs were healthy has probably had that knocked out of them by now.  Microsoft and AMD have added their voices to the chorus of “below seasonality” qualifiers as the companies reported lower numbers than expected.  AMD is clearly in trouble, with significant layoffs now on tap.  Google’s numbers, released by surprise in the middle of the trading day, were below expectations and the search giant took a big hit.  Alcatel-Lucent and Nokia are laying off; Juniper is rumored to be on the block.  IBM’s numbers missed.  “Great Caesar’s Bust is on the shelf, and I don’t feel so well myself”, to quote a whimsical poet.  What gives?  The answer is “mobile/behavioral symbiosis”.

Nobody believes that the growth in PC usage over the 2000s was due to millions deciding to write their memoirs on word processors.  PCs were sold as on-ramps to the Internet, and as many as a third were never used in a significant sense for anything else.  Why?  Because that’s all there was.  When smartphones and tablets came along, they started to cut into the “I want to be online” market, and that’s going to hit the PC space.  PC sales are off.  They are going to stay off.  If I’ve been hammering nails with a wrench because hammers weren’t invented, I’m not going to go back to wrenches in the hammer age just because somebody puts a claw and a head on one end of the handle.

Which is the issue for Microsoft and the PC chip companies.  Ultrabooks won’t compete with tablets, period.  Nothing that you do to Windows will capture a buyer segment that doesn’t want to run any OS at all, they just want to be online.  Even Google with Chromebooks can’t turn back the clock.  A third of the PC opportunity space is gone, most growth will be in that segment, and the PC space will never be the same.

Does that make Windows 8 a failure?  It depends.  If Microsoft thinks W8 is going to recapture the past, forget it.  That never works in any market.  If they think that W8 will leverage their current Windows franchise to create familiarity with a new model of GUI that is portable to phones and tablets, and thus help Microsoft cross over that gap, then they have a shot.  They are going to lose money in the near term as people resist the W8 look, and they risk having a flop like Vista if they’re not careful, but probably they can ride out the transition and emerge stronger in tablets and phones.  Not stronger overall, or even strong in an absolute sense in tablets and phones.  They’ll never be more than number three, but they can hope to be a viable number three.

How about Google?  They have Android, which is number one in phone OSs and at least a contender for tablets.  But they don’t really make money on it, and outside their Motorola unit there’s going to be less on the table for Google and not more.  Amazon’s Kindle Fire demonstrates the problem with Open Source; you can’t sell it and others can use it freely.  It will be very easy for strong players to build “shells” or “GUIs” on top of an Android kernel and run wild and free in some non-Google direction, which is what Amazon is doing.  But it doesn’t matter because for Google it’s search or nothing.

Big news; all online advertising is a zero-sum game at this point.  We’re seeing, in Google’s report, a lower price per click for advertising.  That’s a commodity market, which doesn’t happen when there’s dynamism, growth, and new TAM to address.  Yes, there are still areas where online advertising can grow, but those areas won’t make up for the increased competition overall.  And while search is still the “best” mechanism for online advertising, it’s got two fatal flaws.

Flaw number one is that you don’t search much when you’re mobile (remember, mobile/behavioral symbiosis?)  The mobile user has an instant gratification mindset because they don’t have much ponder time.  That’s why they bought apps by the millions to do what could have been done on the Web without spending a nickel.  Mobile users are not only limited consumers of search, they’re a training-ground for non-search behavior.

Which brings us to Flaw Two.  I do two kinds of searches; one for research, where I get some ad-linked or optimized results that really annoy me, and one for products, where all I get are ad-linked or optimized results that annoy me.  Thus, I’m perpetually annoyed.  How do I escape?  I reason that there are only two online sources likely to give me a good price and reliable service—Amazon and eBay.  If I simply go to my favorite, look up the product, read the reviews, and buy or not, I’ve eliminated all those annoyances and also eliminated my component of Google’s search ad revenue opportunity.

So does Google get into social networking?  They tried, of course, but that’s up there with Microsoft or Intel putting hammer-heads and claws on wrench handles anyway.  There’s no recovering lost market opportunity; you find new stuff instead.  That’s what everyone in the market, including Alcatel-Lucent and Juniper, need to be doing.  We will never go back to the past, but the mobile/behavioral changes in us all are creating a transformation of goal fulfillment that only the cloud can address.  We will have more for-pay services in the future.  We will have more voice activation, more convenience, and all of this simplification of our use of technology has to be made up by making technology more complicated in how it serves us.  That demands centralization; whatever you think about an iPad it’s not going to store the knowledge of the universe (nobody will pay usage rates to update it).  It doesn’t have to, if it can ask for it via super-Siri and the cloud.

The cloud is where “network value” has to go, because the cloud is the new generation of “online” that users continually chased since the dawn of the Internet.  It’s the architecture to create the “Universal Constant”, that number which multiplied by my answer yields the correct answer.  What I need and can’t provide myself, or even ask for in an organized way, the cloud giveth.  Thus, if you’re a network vendor THE ONLY THING THAT MATTERS IS YOUR CLOUD POSITION, and that doesn’t mean you say “I network the cloud” and instantly have one.  SDN is the path to creating a cloud mission for the network, so you don’t have a prayer of getting a cloud position without an SDN position.  Who, of the major network vendors, really can say they have one?  Not just an SDN billboard, an SDN position!  Thus, nobody (even Cisco) has a real cloud position.

Mobile broadband ties our information tools to us, so it ties us to our tools.  It’s changing how we live, and that changes whole markets—markets far removed seemingly from little square devices we call smartphones or tablets.  It changes how we buy, how we eat, how we learn and teach, how we find our way,  make friends.  This is a revolution, and we’re seeing the signs of major incumbents not getting the message.  Some will eventually, and perhaps even lead in the future, but some clearly are already too far gone.  Which are you, dear vendor?  Think about it.


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