The earnings reports from F5 and EMC make it clear that tech in general, and networking in particular, and enterprise most particularly, has serious challenges to face. The largest one, I think, is that people have gotten used to the idea that networking was somewhat immune from macro conditions; clearly it isn’t. But macro conditions don’t tell the tale in my view. The biggest problem we have in networking is a case of the Fundamental Stupids.
Every project is a cost-benefits analysis, right? OK, then, if we want to improve cost-benefit at the project level and raise our company’s rate of return on invested capital, we either have to raise the return or lower the investment, right? Simple math. ROI equals R divided by I.
The Fundamental Stupids disease makes seller executives immune to this equation. They foresee increased I without any gains in R. They think that if you have infrastructure that costs you a million bucks, you can somehow toss it and put in new stuff because it’s “cheaper”. The truth is, and has always been, that you can’t improve investment in anything if you can’t increase the benefit case. The truth is, whatever you already have is nearly always cheaper than something you buy to replace it unless you wait until the end of the depreciation cycle.
That’s the underlying problem these days. It’s been a full decade now since we’ve presented buyers with any new benefit case for networking. The IT guys have done better with things like Big Data, but even there the best efforts haven’t really moved the ball much. This, despite the fact that there are many examples of companies making major gains in productivity by doing something innovative. In my spring survey, I found that 13% of enterprises reported having improved their tech ROI by 15% or more by increasing productivity. That means 15% more spending can be justified.
“The cloud” is the current chance to pull the industry out. No, not by making IaaS the alternative to server consolidation. Thinking EC2 will transform IT is another example of the Fundamental Stupids. What transforms IT is new stuff to do with it, valuable stuff. The cloud, by making IT elastic, makes it possible to empower people when and where they need it without wasting a lot of resources empowering them when they don’t. By combining the cloud with mobility, you give every worker what I’ve been calling their “jobspace” of information and process empowerment when and how they want. Even for existing processes that would be helpful, but just as we’ve re-learned communication at the consumer level based on smart mobile devices, we can re-learn how to conduct business. This is the pie we should be cutting up in earnings seasons, the market we should be addressing and reporting on. It isn’t, and that’s the fault of the industry and not of the “macro environment”.
Microsoft brings out its Windows 8 and tablet products officially today. If ever there was a company whose life depends on a radical rethinking of benefits, Microsoft is the one. Apple and Google have won the traditional appliance market, and Microsoft can’t reverse that unless they want to sell at a loss. So why not go after the non-traditional market? If Windows 8 on tablets and PCs can unlock some of that new cloud benefit, then it’s a winner. If not, no matter how neat the keyboard is or how “convenient” the GUI is, it loses and Microsoft loses along with it. Where, though, in all of Microsoft’s market hyping, is there a comment on anything “new” except in a technical sense? Novelty can be either a trinket or an expression of innovation, and what makes the difference isn’t how it’s accomplished but WHAT IT DOES. Utility is the key to novelty; something that’s useful and novel is revolutionary. Something that’s just novel is our generation’s pet rocks and hula hoops.
To circle back to networking at my close, I point you to Light Reading’s article on SDN today (http://www.lightreading.com/document.asp?doc_id=226325&site=lreurope&). The main points are comments like “possibly the biggest shift in telecoms in 30 years” and “this is serious stuff” and “expect things to happen fast”. The Network Functions Virtualization activity by operators is a badge of shame for network vendors. For FIVE YEARS those operators have tried to get their vendors off box-pushing and TCO babble, to no avail. Now they’re moving on their own. It’s not that operators intend to commoditize network equipment, but that the commoditization is the natural result of a football game if one team refuses to take the field. Imagine what would have happened this quarter had ONE VENDOR simply done what operators were asking. Would that vendor have been talking about “challenging macro conditions?” I doubt it.