We’re starting to learn the market interpretation of concepts like “overhang” and “risk”. Last quarter we had the looming iPhone upgrade and the looming Windows upgrade, and I think it’s likely that both of these things impacted purchasing of new technology. I also think that companies (and even some consumers) are looking at the Euromess and the fiscal cliff and wondering whether we’re not going to slip into an even worse recession in 2013. The IMF called this an “alarming” level of risk, in fact. So given this, prospects for tech companies in this coming earnings season are a bit dim.
I also think that we’re facing an internal problem in tech, one that we don’t want to acknowledge but one that is much more likely to change markets. That problem is the tactics-over-strategy shift that I’ve moaned about here before. Whether we like it or not, the whole of networking is revolutionizing under pressure from above, through what we all call “the cloud”. The cloud is going to transform a lot of things, in fact, and I think the tendency of company executives to hunker down on the next quarter’s forecasts and forget the future is setting them up for their own cliff, the kind lemmings purportedly blindly rush over.
The cloud has less impact on the existing business and consumer applications than on future worker and consumer behavior. This is where operators have their chance. Both these trends are naturally addressable by a big, credible, player with direct ties to mobility and with the resources to deliver a truly distributed and diverse set of capabilities in their vision of the cloud. It’s not about hosting virtual machines, it’s about hosting behavioral support. It’s a new market, with the potential for new winners.
The challenge for those network operators is in the technology to bring all this about. For five years now, operators have told me that they are dissatisfied with their network vendors’ support of their monetization goals, and in fact it’s gotten worse every single year. This year, with the cloud the focus of so much, every single operator who has reported so far in our fall survey has said their network vendor has no respectable cloud strategy at all, and two-thirds are already prepared to look elsewhere.
Why are all these vendors sticking their heads in the sands? To make the current quarter. Show buyers an onrushing revolution and you either have to be able to support that revolution RIGHT NOW or you risk either deferral of the buying decision until you can, or loss of the prospective buyer to a competitor who is further along. But that’s a little simplistic, because while it’s true that you might overhang your current sales with a grand vision of the future, there’s nothing to prevent you from preparing your products to meet that future and keeping your marketing mouth shut. When did we not have skunk-works projects? But while we’ve had those projects aplenty in the last five years, they’ve not delivered on the future, only on a kind of buffed-up version of the vision of the past.
So it’s time to clean house, say the operators. In fact, even the enterprises who really get the cloud have concerns about how much insight their vendors can offer them. The challenge is to find some new furniture, and startups and smaller players are the obvious choice. So look at the positioning of this group and what do you find? One-inch depth. I have yet to see a public presentation of a fully articulated cloud positioning that makes sense. Same with SDN, and both these sins of omission are as prevalent in the startup world as in the incumbent world. You can’t expect reporters to write an exciting story from a slide deck that would put a caffeine addict to sleep, so boring positioning creates insipid coverage and disgruntled buyers. That delays cloud fulfillment.
Delay is the operative word. The risk, for vendors, is not so much that the cloud won’t realize as that it will realize without them. Cloud computing is the inevitable result of the combination of a demand for point-of-interest support of behavior, lower communications cost, and the dominance of support and service costs in the equation of IT. We’ll have it from someone, perhaps a year or so later than optimal, but we’ll have it. The risk for you, dear vendor, is that we’ll have it and not you.
So we’re back to overhang and risk. If you jump out and embrace a revolutionary trend you overhang your current stuff. If you fail to address that trend promptly, you risk being disintermediated in the market forever. So far, everyone is accepting that second risk. I think that’s the wrong choice to make, and I think there’s going to be a lot of frantic repositioning when vendors figure that out.