HP Tries Management Shifts

HP is in the throes of another reorg, this one apparently aimed more at the administrative side than the functional side of the business.  The big change, for example, was a replacement of the company’s chief admin officer and chief information officer.  Neither of these positions are in a direct P&L role, obviously.  One executive formerly heading up Enterprise Services is moving to the board, to be replaced by an outsider according to speculation.

You have to wonder whether this is another of those “we’re really great but somehow we’re executing badly” stories that’s reminiscent of Cisco’s tale after its blown quarter.  In this case I wonder too, because HP had experienced very good gains in strategic influence in our spring survey of enterprises.  CEO Apotheker may be purging some of Hurd’s old hires, but he may also be working to realign the company to execute better in general and eventually to support cloud services more directly, something that would explain the new Enterprise Services exec.

Given that strategic influence is a leading indicator, HP may have some time to do the realignment before deals in the planning phase today actually get to execution.  We noted in the survey that enterprises were rethinking some of their trusted paradigms for data center modernization under the pressure of new insights into the cloud and even virtualization.  That the enterprises expect HP to solve these problems, and even believe they CAN solve them, is consistent with HP’s role as a kingpin IT player.  Since HP is also an increasingly credible provider of enterprise networking gear, it’s also logical to believe that they would be a strong candidate for building a cloud from its constituent parts—a data center and a network.  Lack of actual execution might then be an issue for the future, when enterprises have had a chance to rethink their plans based on their new insights.

That Cisco lost so much ground (to HP and to the field, in effect) in the same survey suggests that its foray into the server space was an initial cause for hope but that the company then failed to deliver what was expected.  Some of the survey comments fit that view; buyers said that Cisco had not offered any compelling strategic vision for the cloud.  Given that HP’s failure in the cloud was a cited source of its current problems, it’s ironic that they had a better cloud credibility rating than Cisco did.


Alcatel-Lucent’s New Content Story

Alcatel-Lucent has finally integrated its video story with a partnership with thePlatform to create a broad, multi-screen and multi-service, streaming video system.  The move is likely in response to the rapid development of video project determination we’ve seen in our surveys of network operators.

The “trial marriage” is logical for both parties.  Alcatel-Lucent has a CDN (Velocix) but lacks the streaming ecosystem thePlatform can provide, and thePlatform lacks a CDN and a strong link to the network.  A complete strategy seems critical given the expected trial timing; it’s going to be hard to put together a cohesive story without all the pieces, and an effective linkage between Velocix and thePlatform could really help Alcatel-Lucent with its positioning.  Since virtually every content project we’ve seen is rooted in the CDN simply because that’s where most of the critical components lie, thePlatform gets a big boost too.

One concern I have about the story is its seeming laser focus on the “TV Everywhere” story, which is only a part of the picture.  Most network operators worldwide don’t have multi-channel video offerings today and thus have little or no drive to extend them.  It’s likely that the focus arises from the timing of the announcement with a cable show and the fact that (obviously) cable TV players have a major desire to support multi-screen extensions to their traditional business.

It’s not yet clear just how this whole thing is going to go together, but if we eventually get enough detail on the structure we’ll try to harmonize it with our own benchmark content monetization framework, which we’re publishing for the first time in Netwatcher later this month.

Content monetization is the operators’ top new revenue priority, but two others are also close in their support and actually a bit ahead in terms of timing.  One is mobile/behavioral optimization of services and the other is cloud computing.  Interestingly, all three of these are to a degree converging—or forcing a convergence—in the service layer.  Operators in major market areas are looking at cloud hosting as a framework for creating SaaS partnerships to offer services to consumers, SMBs, and enterprises.  They’re also realizing that multi-screen means mobile screen in most cases, and that supporting mobile LBS and behavior-linked services is likely to require infrastructure that’s more like web hosting than like SDPs and IMS.  Alcatel-Lucent’s content announcement had a little cloud flavor to it and not surprisingly some mobile flavor as well, and this reflects the truth that operators aren’t going to build siloed service layers to support converged networks.

Welcome to Hype-Week Hell

It’s been a week of events and activities, and the only common thread I can find is that they were all pretty much over-hyped.  Apple’s big announcement, the one they trotted Steve Jobs out to keynote, was really nothing more than a locker service with a few tweaks.  Cisco’s event was a capacity upgrade.  IPv6 Day came and went with the world largely unaware, and uncaring.  So is there a message here?  Maybe, and in fact maybe several messages.

Part of the issue here is the need for hype, both on the part of vendors and on the part of the media.  If you’re a tech rag these days (well, “virtual rag” since most aren’t in print any more) you live and die on clicks on stories that can be turned into ad impressions.  Even reporters are often compensated on or at least judged on the clicks their stories get.  Given that, you’d really like people to say something incredibly insightful and interesting so you can start ringing your cash register, and you reward those who do by talking about them.  If you’re a vendor or carrier, you want your stuff in the public eye because that generates leads and also helps grease the skids for sales initiatives.  But if you’re in the PR space you want visibility because you’re judged on it too, just like reporters are.

The problem with this gets us to our second issue.  If the goal is a click, then any click will do.  The old saw about news headlines like “Man Bites Dog” comes to mind.  Why run that story?  Because nobody would think “Dog Bites Man” was unusual and interesting.  But there’s likely more substance to it, so our flight from the pedestrian message shows that substance isn’t what this is about.  That tends to create superficial stories created from superficial messages, simply because superficiality when it’s well-headlined gets more clicks than truth.  And that tends to lead to markets that are under-supplied with value.

Fifteen years ago, the media was the number one source for strategic insight.  Today, it’s the vendors.  In some ways that could be a good thing for sellers; they have the opportunity to create the buyers’ strategic vision and purchase framework.  If they knew how, which is the rub.  The same process that’s shallowed up the press has shallowed up the vendors.

In the June issue of Netwatcher, we’ll publish our survey of enterprise and service provider strategies, priorities, and vendor influences and the results show that in general everyone is losing a bit of influence.  To understand why, we also include a section on how network operators really see content monetization in the projects and surveys we’ve done, and also what’s really happening with data center traffic as we restructure for virtualization and the cloud.  According to the buyers, they’ve communicated all of this to the sellers.  According to the buyers, the sellers are simply not responding, or they’re responding with a suggestion that the buyer simply surrender the whole process to the seller in the form of a fat and profitable professional services contract.  And oh, by the way, nobody really knows what the objectives of the project would be, the milestones or the goal realizations.  Trust us.

And if we want to talk about trust betrayed, let’s look at Net Neutrality.  The FCC, as I’ve often noted, is a Federal Commission and thus effectively a lower court, and its rulings are appealed through the US judiciary.  When the FCC issued its Neutrality Order, it was immediately challenged by players like MetroPCS and Verizon, but the FCC had not yet published its order in the Registry and the courts ruled the challenges were premature.  Well guess what; the FCC STILL hasn’t published the orders!  I don’t remember a single situation in my FCC-watching where an order this important hung fire for so long.  It’s been six months since it was issued, after all.  While the FCC claims it’s not stalling to avoid appeal, I frankly think that’s crap.  That’s exactly what’s happening.  The FCC is desperately trying to figure out a way to make its order pass statutory muster when they know darn well that’s not likely to happen with the document in its current form.  So can they fix it without so much effort and change that it invalidates the vote?  Are they hoping that Congress will act and moot the issue?  There’s little chance that they’d do either, I think, so all of this is just political games.  What a way to deal with a critical public issue!

Maybe they should just create a Neutrality URL to click on.



The Market Sands: Shifting or Hiding Ostriches?

We have an interesting counterpoint today in the evolution of technology.  HP’s user conference has been a not-unexpected cloud love-fest, with the company pushing itself as a leading cloud architect and even provider.  And Wall Street is trashing Ciena because they’re not holding onto revenue and profit growth.  At one level, this stuff seems pretty disconnected but it’s not.

HP sells computers and network gear, right?  Cloud computing, if you believe the classic hype, is designed to eliminate private IT in favor of public hosting because it’s cheaper, right?  OK then, how can something be cheaper to buyers without requiring less cost to produce it, especially since the cloud provider would have to earn some profit margin?  Thus, cloud computing in its universal form would create a smaller market for computers.  So is HP presenting a vision of the future where its own revenues fall?

Ciena makes network equipment, primarily deep-layer optical transport.  According to the Street, the company isn’t making enough progress on its next-generation products, products that are designed to offer ever-cheaper bits.  But if video is making the Internet traffic load explode, then why aren’t ever-cheaper bits really important to operators—important enough to be driving up their revenues and profits?  Is it just that somebody else is doing a better job, or is it that even cheap bits are getting too expensive?

What’s unifying these stories is the fact that HP is targeting network operators who want to get into cloud computing.  HP reasons that the build-out created by such a move would drive up their profits at least in the near term.  They also probably believe that the whole cloud-eats-everything story is hype and that it will in fact have little impact on enterprise system sales.  The operators are interested in the cloud because those cheap bits everyone wants them to produce aren’t profitable enough to grow their own revenue and profit and satisfy their shareholders.

But why the sudden push to get network operators into the cloud computing business?  The total potential global revenue stream for cloud computing services according to my model is about $250 billion per year, and that’s about one fourteenth the total service provider revenues.  But it’s at least six times the global online adspend.  What makes cloud computing unique from an operator perspective is that people pay for it; it’s not ad sponsored.  With the sum total of all online adspend far less than the annual capex of operators, they can’t see advertising as replacing pay-for services.  What’s valuable about the cloud is that it taps the direct-payment revenue model, something that online services and OTT players have been largely unable to tap.

We can also see, if we look closely at the HP announcement and also at the announcements of network operators (one of which, Verizon, is a kind of flagship HP cloud account) we can see that operators aren’t trying to make money selling the cloud as much as by selling services of the cloud.  Nearly all the operators who have made cloud announcements are making it clear that their longer-term focus is SaaS, and that they’ll be buying software companies or partnering with them to get services to sell.  That makes sense because if the cloud is a cost-savings strategy, higher-level services like SaaS displace more cost and thus can look more attractive to the buyer.  Enterprises told me in our spring survey that a pure IaaS or virtual-hosting cloud service with enterprise-grade reliability cost them on the average 75% more than it would cost for them to acquire and sustain the services on their own.  In contrast, there are SaaS applications that even for the largest enterprises reduce costs by over 60%.  For SMBs and consumers, some services offer them things they couldn’t possibly produce and sustain internally, for lack of skills.

So what we’re seeing here is another transformation of the notion of what we once called a “service provider” and then a “network operator”.  The shift in terminology came because the OTT players were increasingly the “service providers” and the traditional carriers were simply operating the transport/connection network.  Now they want to be service providers too.

Things are sort-of-happening down at the network level, of course.  Yesterday was “IPv6 day” and like pretty much everything these days it proved to be over-hyped.  The company doing the monitoring for the testing admits that there was only a modest uptick in IPv6 traffic, and most users reported that their ISPs did not apparently offer them IPv6 connectivity for the test (an even greater number probably couldn’t have figured out whether they had it or not).  So is IPv6 another pure hype event?  At one level, yes, but it didn’t have to be.

All the network vendors are obsessed, like HP is, with growing their market.  An enormous network refresh accompanying an explosion in pent-up M2M demand or something, created by the sudden adoption of IPv6, would sure sound good to them.  Next to saying that traffic is exploding, saying that “IPv6 is coming” is a sure path to media attention, or it was.  The problem is that IPv6 is largely a conversion project, and any project manager knows that the best you can hope for in a conversion project is that nobody knows you did it.  The media is hoping for a nice collapse, with hundreds of millions of people crying out in pain.  Nobody wants to oblige, so they’ll stop covering it.

Where the “it didn’t have to be” comes in is that there are potential benefits to IPv6 in security, stability, and performance.  To harness these, we’ll need some changes in the Internet business model and in how ISPs are regulated, to be sure.  We’ll need some of that “put-law-and-order-into-the-online-world” message that we heard from France this month.  But all that stuff just takes sooooooo long to accomplish, and everyone wants instant sales gratification so we won’t go there, and we’ll lose the support of the users of the Internet in the migration of the Internet to the next level.  Doesn’t sound too smart to me.

It seems to me we’re reaching a critical point in sticking our heads in the sand where the whole body sinks out of sight, or maybe where we come through on the other side and see clearly again.


Wrong Ball, Wrong Game, Cisco

Well, Cisco made it’s “big announcement” and it was the second one in two days that fell flat, at least with respect to Wall Street.  It’s my view that it also missed from a market opportunity and requirements perspective.  Cisco moved the ball only a little bit, and it moved the wrong one.

What’s frustrating to me about the announcement, which is a combination of a capacity upgrade to the ASR9000 line and a virtual-device-for-management story, is that it seems to reprise a theme that I’d really resent were I a network operator.  Traffic is exploding, your revenue may not be, but we’d sure like you to support the former trend by buying our boxes and don’t worry about the latter trend.  After all, you’re the guy in the market who’s supposed to supply capacity to meet demand growth.  We’ve shown you demand is growing, so get with it.  Yet Cisco has clear assets to help operators monetize contents, and assets that could be linked to the edge and potentially to this announcement.  They did no such linkage, and thus did a major ballyhoo for a minor advance at best.

All of this came along on the very day a Wall Street report said that Cisco was trapped in an increasingly competitive and commoditizing market.  Well, the ASR9000 stuff sure played into that theme!  More bits, not better bits, is the solution.  But what’s done is done, and now the question is whether Alcatel-Lucent and Juniper will follow Cisco into the hype abyss or be bold and say that the San Jose networking giant is drinking too much of its own Kool-aid.  The challenge, of course, is that for both (but for Juniper in particular) their own Kool-aid is the same flavor.

Virtualization was another news hook for Cisco, the notion of creating a big virtual router to manage, thus reducing the total management tasks to a fraction of those needed to manage boxes individually.  But in truth all virtual-box strategies are little more than embedded approaches to hierarchical management, which goes back to the days of OSI and which is supported by pretty much all Cisco’s competitors in some form.  In any case, the improvement in management complexity is largely proportional not to the number of boxes inside the virtual one but to the ratio between the “exterior” ports and the trunk ports within the virtual box.  A hundred routers inside a virtual envelope is managed as one router to be sure, but managed as one router with the aggregate ports of the hundred.  It’s typically port configuration that’s a management issue, according to operators.

So where does this leave Cisco?  Their assets remain, but I’ve got to be more worried about their will, their leadership.  This, following their Visual Networking Index release, seems to be playing “Chicken Little” with the operators.  If Cisco has the answers they seek (and I believe that the little Cisco may not have could be solved with a wave of their massive checkbook), why rely on thinly disguised scare tactics?  If this is what getting back to basics means, they’d have been better off to stay with adjacencies.  The Street seemed to agree; Cisco shares were off and both Alcatel-Lucent and Juniper were up.

Perhaps they should be up, but as I pointed out earlier in this blog, the response of Alcatel-Lucent and Juniper to the Cisco move isn’t yet out.  UBS pointed out in its note today that Cisco announcements had not led historically to market-share gains, which means that tactical expansion of product lines doesn’t help a company’s sales.  In fact, since the ASR line came out, Alcatel-Lucent has gained share on Cisco and arguably because its own edge products are better-linked to service and monetization initiatives.  Mobile and IPTV success, in short, are driving edge success.  That says that you need a service revenue story to sell boxes these days, and that shouldn’t be a surprise to anyone.


Apple’s WWDC Doesn’t Shine

Well, Apple had its WWDC and Steve Jobs was there, and for the Apple aficionados it was pure love.  For those less indoctrinated, it was a bit of a yawn.  The iCloud does offer some new things, the most notable of which is an optional system to match on-system music to the cloud’s (better-quality) copy and let users then play the good stuff.  Some are touting this as a way of getting people to pay for pirated material, though twenty-five bucks a year per person won’t exactly stir the heart of the recording industry.  Some think it rewards piracy by giving somebody a good set of songs instead of amateur-ripped copies for a low annual rate.  And functionally, iCloud is still more of a locker; it’s not designed to stream stuff as much as to store it.  While it will make songs available to all a user’s devices, it downloads them on demand rather than streaming them.

The most interesting thing announced wasn’t really even iCloud, it was the addition of iMessage to the new version of iOS.  This will let all Apple device users message each other in encrypted format, with receipts and so forth.  There’s also improved technology to find others that are online, and if anything in the announcement could directly lead to a new service-layer threat, it would likely come from here.

Leaving the song-matching capability aside, iCloud isn’t much different from what Google or Microsoft might offer, and what a host of third-party products also have.  Syncing devices with the cloud isn’t exactly big news; anyone with multiple e-readers does it all the time for books, too.  So we’re left wondering whether Apple trotted out the Big Gun for nothing, or whether the current iCloud is a kind of lightweight shape of heavyweight things to come.

Probably the most interesting stuff was what wasn’t in the announcement.  For example, the regular syncing of devices with iCloud will happen only when you’re WiFi-linked and off the mobile network.  Obviously that relieves what might be considerable user angst over the charges, but it also alleviates operator concerns about the gratuitous traffic.  Operators are also likely to be relieved that video won’t be streamed/synced with Apple TV.  In fact, it appears that Apple may have made a deliberate effort not to push operators too hard.  Might they be waiting until they have something to leverage in such an operator battle?

So adding up the points, you could speculate that the iPhone 5 might be that un-SIM-ed phone we and others have talked about.  You could speculate that when Apple has the tools to cut the cord it will then expand iCloud and take the gloves off.  If so, it would seem likely that the new iPhone and the new independence aren’t too far away.  Why spend Jobs collateral on something that’s not even close to being explosive?  Why alert Microsoft (who sort-of-announced an Xbox TV premium subscription service on the same day) and Google?

The Apple announcement gave both operators and vendors some breathing room; Apple hasn’t made that killer move in the space…for now.  The problem is that the ongoing battle between Apple and Google in the mobile space, and the attempts by Microsoft to elbow in for itself, will surely drive more radical changes, and put more pressure on operators to make the moves their vendors are reluctant to support.  For someone wanting to increase their market share in the router space, this is what to look at.  New models are just new boxes, not new strategies.


And on WWDC-Eve…

This is the week of Apple’s WWDC, and everyone is watching to see what Steve Jobs will say about “iCloud”, Apple’s next-gen network service that might be anything from a simple music streaming strategy to an enveloping cloud concept for the consumer.  While iCloud is critical to the future of network services in general and mobile services in particular, it’s not the only issue that’s exploding in the face of the operators.  Disney, for example, is going to start streaming content, and more cable MSOs are lining up to endorse the inevitability of usage pricing for wireline broadband.  We’re at the beginning of what one of our survey operators (quoting Churchill) said was “the end of the beginning” of the golden age of online content.

End?  Aren’t we just getting started?  No according to most operators and interestingly to some of the OTT players we’ve talked to.  Pretty much everyone will acknowledge (in private, of course) that streaming media in any form is a play on the artificial pricing plan for consumer broadband.  It makes no sense to charge zero for incremental usage of something that’s not incrementally free.

Players like Netflix and Hulu and Amazon (and likely soon Apple) are showing us that consumers will pay a hundred bucks a year or so to be able to stream video when nothing’s on TV or when they can’t get to their favorite programs for travel or other reasons.  It’s likely that continued erosion in programming quality will generate some longer-term cut-the-cord trend too, though it’s also clear that you can’t keep streaming old stuff to the same consumers; new content will be required.

The near-term consequences of this is a consolidation game.  Comcast/NBCU is an example of how a company with a lock on distribution branches out to get a position in adjacent market areas.  So’s the interest of access ISPs in CDN services.  CDNs are a natural adjacency for access players, after all.  But in neither of these cases is the move being made today sufficient for the indefinite future, and the players know that.  Apple knows it.

For operators, it’s about getting a piece of this higher-layer pie that matters.  Most operators are now of the view that their role in consumer services beyond voice and chat is very likely to be a wholesale one.  They’re a platform for success, a way of driving service growth by having players with inherently better marginal-ROI tolerance capitalize the knotty parts of the service infrastructure.  If operators can do that, and can do it with the most efficient capital and operations practices in the market, then they can reduce the need for usage pricing and the chilling impact that would have on online services for all.


Groupon Rushes IPO, Appliance Vendors Prepare for MVNO

Groupon filed with the SEC for an IPO, a move that suggests the company wants to quickly execute on the potential social-networking Wall Street Love Wave that LinkedIn showed us.  There’s always a question of whether the bullish view on social will sustain itself, though.  One might even argue that Groupon thinks it won’t, and thus is in a hurry to make its move.

Groupon is an interesting “social” company because it’s probably the least social of all the players who are tagged with that label.  In many ways, in fact, it’s much closer in terms of its paradigm to search because it’s value is driven by the buyer getting to the execute phase.  Social networking is good at building buzz but it’s far from clear that it is as influential in actually driving a buy.

This issue came out in a personal way when Google’s Schmidt reminisced about his tenure and offered the comment that he’d perhaps waited too long to try to grab Facebook and that Google didn’t “get social”.  It’s always harder for a company to jump outside its core competence, in no small part because VCs consider it a loss of focus and the Street thinks it’s an admission the company’s core market won’t sustain its growth expectations.  Schmidt might regret his move, but in the long term he might be right.

So here’s the thing.  If somebody erects a massive office building and sells ad space on a blank face, people will for a time buy space and plaster on their billboards because it might work.  The test for the endurance of the business model isn’t that initial success, it’s whether over time those who’ve tried the advertising mechanism find the return to be credible.  That’s often hard to prove (you can buy reports to show anything you like these days), so it can take some time for a model to prove itself, or to fail.  And Groupon, to circle back, is only marginally profitable even now.  Hurrying to an IPO might be a smart move.  Apart from everything else, the coupon model is way too easy for others to play with, including Google, Amazon, and even Apple.

In the mobile space, we’re heading for some dramatic changes, I believe.  Apple’s upcoming iCloud announcement and Microsoft’s emerging tablet strategy are combining to create the beginning of not only a new appliance war, but a new network services war and a new paradigm for the whole mobile ecosystem.  It seems pretty likely now that the LightSquared model of wholesale 4G is going to stand or fall not based on operators buying added capacity for areas they don’t serve directly, but by big players who decide to become MVNOs.

The MVNO model is at one level an accommodation to thinning margins.  Appliance players see it as a way of taking their installed base and monetizing the network services they consume—getting a piece of that pie in the long run.  But it’s also a possible way to create a service community for yourself.  It’s not impossible to build a cloud service success on a pure edge or OTT model, but it would be easier if you had the ability to offer hosted stuff to your base from within their wireless service.  Remember that wireless neutrality is far less restrictive than wireline (even assuming either one get past the court appeals now underway).

This model is probably why Microsoft sees Phone 7 and Windows 8 and tablet success to be so important.  They need an appliance success or they can’t be an MVNO success, which means they’d face the same kind of problem with mobile that the whole Windows Live thing was supposed to fix for them online.  Apple sees this opportunity, Google sees it, Microsoft sees it…it’s just a matter of who figures all the pieces out and gets there first.  I’d bet on Apple.



Lessons from Nokia

Nokia turned in some fairly abysmal numbers, putting itself in an admitted “zero-margin” space.  That shouldn’t come as a major surprise, but it does make it clear that there’s something fundamental going on in the communications space that’s overturning a lot of old thinking—or at least it should be overturning some.

The Nokia problem was created by the classical irresistible-force-versus-immovable-object phenomena.  The communications market has gone consumeristic, and with that change has come a radical acceleration in fads and changes and a radical devaluing of some of the more traditional assets like “quality”.  How long should your phone last, when within two years you’ll think it’s obsolete anyway?  The new consumerism hit hardest at the traditional Euro telco vendors, the guys who grew up selling products to their own and nearby national phone companies.  Nokia was one, and they’ve never accepted the changes in the market—probably because they couldn’t accept them culturally.

That raises, I think, one of the most significant questions of this age in networking.  Are we creating a new market simply because we have old players locked in place by culture, by “employee inertia” as one in our survey called it?  I’ve said, with some degree of “pith” that “large companies thrive on mediocrity because mediocrity is the only thing you can get enough of to build a large company.”  It’s starting to look like this semi-joke is all too true.  I’ve talked with executives in big network vendors and while they are individually aware of the challenges of the market and even of their special assets in meeting them, they seem powerless to mobilize anything to create positive results.  Are startups different because they’re small enough to create true entrepreneurship internally by being selective about hiring?  Or is it more complicated?

I return to my “flag-waver” theory.  A charismatic leader waving the Banner of Something Good can attract a band of followers.  But no matter how charismatic the leader is and how Good the Something may be, after the first couple dozen any new attractants are simply too far from the center to be moved by the fundamentals.  They’re following the crowd, and now it’s simply a mob.

Microsoft has a similar set of issues as it tries to trot out its answer to the Tablet Craze, Windows 8.  On the one hand, it wants to sell a new version of Windows to every human walking Planet Earth (and if other planets are inhabited, they’d be OK too).  That means that Windows 8 has to build on the Windows brand without creating angst because it won’t run on any current PCs or run any of the current (or past) Windows apps.  On the other hand, it has to compete with tablets based on iOS or Android, both of which have touch-specific GUIs and were designed to operate disk-less.  The more tablet-like Windows 8 is, the more likely it is that current apps won’t run effectively on a tablet-specific version, which means the more likely it is that there isn’t just one “Windows 8” but several, a rumor that Intel’s CEO spread earlier in May.

However Microsoft might fare in this space in the long run, and whether rumors Microsoft might buy ailing Nokia to grab a handset and tablet business for itself—or at least a nascent business—are true, there’s surely going to be a major competitive dust-off in the tablet market.  That will focus all eyes there, most of the money there, and further complicate the fortunes of the network vendors who have to support a service and usage evolution for their carrier customers when neither the vendors nor the customers can swing the marketing banner up to the vertical on their own.


Virtualization, Social Collaboration, and Operator CDNs

VMware is buying enterprise social/collaboration player Socialcast, and the move is demonstrating a lot of interesting things about the future—of collaboration, virtualization, and of course VMware.  We may be on the cusp of some interesting changes.

“Collaboration” is the term we apply to communication between workers aimed at reaching some collective decision or combined work product.  Most collaboration today is still done face to face because the dynamic of real presence is the most effective in sharing information and reaching collective conclusions.  However, the combination of improved communications technology (at lower cost) and increased dispersal of team members has been driving interest in virtual forms of collaboration.  These have been further promoted by the rapid growth of smartphones and tablets that offer a wherever-you-are kind of link-up for workers.

It may also change if the basic notion of collaboration changes.  We interact with each other based on cultural habits, and when we try to make collaboration work remotely it’s logical to try to extend the communications interactions via telecom rather than to examine whether some different form of interaction would be smarter and more effectively extended over a network connection.  Social networking introduced a different model for casual human interplay, and from the first it looked like there might be some value in making that model work for business collaboration as well, which is what Socialcast does and what VMware wants.  My own work on this, which has been written up in ourNetwatcher journal several times, would tend to back up the social-network value proposition, though larger-scale experience is likely needed to be sure.

One might well ask what this has to do with virtualization, though.  VMware has been on an M&A tear, in fact, and much of what it’s grabbing has little to do with the core business.  It doesn’t take a rocket scientist to recognize that this likely means they see virtualization as running out of steam.  Our just-completed enterprise survey shows exactly that; the first signs of weakness for virtualization at the strategic level.  It’s not that it’s a bad idea, but that it’s not the Universal Constant.  Once you run out of places where it’s valuable, you’re less strategically interested in it.  That means you’re less interested in professional services to install and sustain it, and in companies that offer them.

Another limitation to virtualization is that it’s an accommodation and not a strategy.  We virtualize machines because we have apps written for single servers that don’t utilize those servers fully.  As I noted in some chip comments a week ago or so, the power of the CPU is outrunning the needs of a single application.  Where that happens, virtual machines make sense.  But remember that many systems are inherently multi-tasking and that many applications are written for those environments.

In the maybe-collaboration space, Apple has officially admitted that it’s going to announce what the media has been calling “iCloud”, and in fact Steve Jobs will carry the water for the new concept.  We still don’t know exactly what iCloud is, though.  Some are speculating it’s essentially a streaming music service that would compete with other offers in the space from Amazon and Google.  Others think it’s a successor to MobileMe, and others something in between.  I tend to fall into that middle group.  It would be unlike Apple to me-too a competitive offering, even if they sweetened it by adding in more record labels in support of the move.  We already have a lot of streaming music services.  Similarly it would be unlike them to make a big Jobs event about a re-launch of a service that’s generally seen as one of Apple’s big missteps.  So this has to be more.  If I had to guess, I’d say that Apple may be planning to blend social, media, and personal organizational aids into a single package built around some sort of social framework.

In the media space, Alcatel-Lucent has announced a tool that’s designed to help operators tune their delivery infrastructure to video needs.  AppGlide is a combination of analytic tools and a pair of probe options, one of which is on the client device as a player plugin and the other at the server end.  Operators may or may not be able or willing to use the player plugin, but if they do they can get specific information on how the video stream performed right to the point of consumption.  The goal is to track video performance and fix problems that might impact video viewing quality and abandonment rates, both of which could be very important to commercial OTT content providers like Netflix or Hulu or to advertisers.

The way that AppGlide is positioned seems to make it clear that Alcatel-Lucent is working hard to present its CDN strategy to operators and to help them differentiate operator-owned CDNs from the big commercial players.  The former step is very logical; operators in our survey have made it clear that they believe that an internal CDN is an essential part of their content monetization strategy.  I’m of the view that differentiating versus commercial CDNs is less an issue based on the same survey; operators think CDN operators have their own monetization goals that are competitive with those of the operators.  In any event, what I’m seeing in the operator world is an increased determination to deploy CDNs on their own, and that makes a vendor CDN strategy potentially important, even critical, if they hope to support operator content trends.