Euphonic, huh? Well, earnings season is about to take off, which means we’ll likely have more financial results to review than tech bombshells. Some companies are working to get their stuff out before they go quiet in their pre-earnings period, though, and one of them is HP. After seeming to ignore the cloud, they now appear to be playing catch-up in earnest. Why might that be?
HP’s announcement of its cloud strategy, on the whole, positions the company better for the future. It may also help to gel the issues of all forms of cloud computing, from public through hybrid to private. The question is whether the company is really up to selling something this ambitious, and whether the story itself risks creating a perceived complexity barrier. The “Converged Cloud” sounds like as close to Apple Pie and Mom as you get in tech these days; it’s like “How many buzzwords can you get into a slogan?” But the fact is that there’s more here than cloud- and convergence-washing. HP really is trying to create a cloud unity, more as a defense against the widespread cloudwashing than a contributor to it. If it succeeds even a little, it could be a threat to arch-rivals Cisco and IBM…and perhaps even more a threat to others in the network space.
If you take HP’s announcement this week, Dell’s earlier one, and the Red Hat Storage 2.0 thing in combination, I think you may be looking at the start of something interesting. Pushing cloud stack technology and cloud/big data isn’t a public cloud promotion, but one that pushes the private cloud and the value of the public cloud as a satellite. That’s a big shift from the old model of “everything goes to the cloud”. Yes, I know that I said that was crazy all along, but since when has the market done something rational? Why start now?
Because, perhaps, the public cloud is already falling short. Part of the problem there is that IaaS services are just not saving enough for buyers to adopt them broadly. Yes, there are special apps and missions that work, but the broad economics never will, and never could. I’ve always favored PaaS, and I think that all we’re seeing is going to promote the notion of PaaS by promoting the migration of and cooperative behavior of apps across the cloud boundary. Amazon may be in for trouble from HP, but not for the one-to-one competition the media thinks will be the problem. For HP’s driving of a new cloud paradigm.
Speaking of Dell, they’ve decided to get into the service provider space with a CDN offering, created out of a partnership with EdgeCast, whose licensed CDN has been popular with network operators. It would seem on the surface that Dell is picking a rather odd space in which to go out and promote itself as a supplier to network operators. Might Dell, like others, see content delivery as a function of the service layer, and the service layer as being hosted in the cloud? The problem for Dell here is that jumping into the service layer is a big step, particularly now when operators are so concerned about integrating it across monetization projects and vertically into networks and OSS/BSS.
One of the things that I’ll be watching (along with most on the Street) this earnings season is how the network equipment vendors do. The Street expectation is that “the Internet” will float all boats and that capex will rise to the gain of all. Not likely. Verizon just announced that it would be dropping its DSL-only product in favor of a bundle of voice and DSL. If broadband Internet based on existing loop isn’t profitable enough for a former common carrier to support the offering without a voice-line profit kicker, then broadband is in real trouble. That means wireline capex is in trouble immediately, and that in the longer term we’re likely to see more investment in mobile by far. That means less bandwidth for switching and routing because mobile network access is cell-capacity constrained relative to wireline. Then we have the news that everyone is into packet inspection, which is about limiting how much bandwidth people use. Are you getting the picture here? This isn’t the behavior of a buyer community who intends to push bits till they bleed from their ears.
Another interesting thing to watch this quarter is whether there’s any overhang of OpenFlow on enterprise network capex. As I’ve said before, it’s crazy to think that adding OpenFlow to current switches and routers makes any business sense except as a transition strategy, which means that enterprise networks based on OpenFlow are the end game. If that’s the case, then you’d expect to see enterprises stretch out their capital plans in switching and routing until they can buy native OpenFlow products at a lower cost. THEN you’d see migration investment. It may be too early to see much in Q1 numbers, but it’s worth watching for.