Dell’s decision to buy itself out of being a public company into a private one (with private equity help) generated a gratuitous slap from HP, but it’s clear that there ARE really questions about Dell’s future. The thing is, the same questions can be asked about HP’s future too, and maybe the future of tech as we know it.
I’ve been in tech a long time, and one thing that’s been pretty constant and obvious is that computers are faster every year, and that unit cost of computer performance has been falling sharply and continuously. Even in the software space, there’s a continuing need to find new stuff that can be added to a program to justify a buyer’s getting a new version. LAN pioneer Novell, for example, fell into the business abyss because once you’d done file and printer sharing, there wasn’t much users were willing to continue to pay upgrade fees in order to get.
PCs have the same issue. Somebody in a chip company told me that since the 1990s, over 85% of the increased power of desktop/laptop processors has gone into the GUI. How much processing does somebody’s Word or Excel job take, after all? The Internet was a boon to PCs because it created a new application to drive PC sales, but when tablets and smartphones came along, they sucked the Internet opportunity right out of the PC space.
Then we have the cloud. Smartphones and mobile devices encourage a “thin-client” application framework whatever we call the server side. And the more you pull out of a device and host somewhere else, the fewer features differentiate that device. A browser-in-a-box may be the future. HP is making Chromebooks, after all.
And pushing that value into servers? Not hardly. A server today is something you run software on, and differentiation there is getting more difficult every day even without the cloud. Include in concepts like virtualization and cloud stacks and you see that applications don’t even run on “servers” any more, they run in virtual partitions software creates. And if you think something virtual is invisible, think of how invisible the thing that hosts that virtual something is!
The challenge for the computer space is that value and differentiation are fleeing hardware, period. The successful players in the IT space are those who have found something else to sell, a combination of software, integration, professional services, market expertise, industry expertise…how many people would say that an IBM box is better than someone else’s box? But lots say that IBM is better as a company, and the financials show they’re right. Cisco’s success in servers is obviously not due to the feature-for-feature excellence of their servers, but to the ability of Cisco to make sense of hosted network-related activities that buyers are looking to support.
Do you see some network-industry similarities here? We have SOFTWARE-defined networking. We have network functions VIRTUALIZATION. There is the same declining unit cost of the “product” (bits, in this case) driven by a diminishing ability to differentiate that product. Are we seeing network vendors in the early stage of the same commoditizing decline in hardware, the same push toward software? I think we are. I think Oracle believes that’s their opportunity with Acme Packet—to grab a piece of the future by grabbing the hardware segment that’s best able to leverage software…the service layer. I think Cisco believes that they have to become an IT company for the best of all reasons; they can’t stay a network company and grow like they need to.
Nothing matters in computing now but software. Within five years, nothing will matter in networking but software. Every single network company today has to be measured not by its incumbency (remember what HP’s and Dell’s incumbencies were?) but by its software agility. And by that measure we’re not seeing a lot of super-giants.
Remember Novell? Eventually you have to get even software to go beyond the basics. Network software used to mean network management software, but no more. Benefits drive growth; cost control manages diminution. What’s needed in both networking and IT isn’t software that makes stuff cheaper, it’s software that makes stuff HAPPEN. Who gets that? Maybe Oracle will gel software and service-layer hardware. Maybe Cisco will gel network and IT hosting software/hardware. Maybe some other player will find that magic formula that propels them into the lead.
One decision arguably made IBM king of computing. It could happen again in networking.