So, everyone has had a bit of time to digest yesterday's news.
And -- as expected -- there are those that are recognizing that the lines in our industry have been redrawn in a subtle but important way.
And -- as expected -- there are those that are recognizing that the lines in our industry have been redrawn in a subtle but important way.
Put differently: there's a new "stack" to consider.
Need To Catch Up?
Plenty to go read up on between news sources, blog posts and the Twitterati. I tried to keep up with all the commentary, and simply gave up towards the end of the day -- there was just too much to go read.
If you'd like my summary take on it, please see here.
Customers, partners, and analysts were generally favorable: there's an entirely new offering to go consider. And new choices are generally a good thing.
But, let's step back a moment, and consider the implications at a broader level, now that most of the important details are out in the open.
IT Industry Transition Is Causing Consolidation
That's a weighty statement, isn't it?
Our happy little IT industry is in the midst of a gut-wrenching transition. Going forward, IT will be primarily delivered as service. Whether that service is provided internally or externally will matter less and less over time.
Fueled by fast processors, capacious memory and storage, converged networks -- wrapped in virtualization -- we're now entering an era where IT infrastructure services can start to be thought of the same way as other forms of economic infrastructure -- lots of choices, pay for what you use.
Call it "cloud" if you like.
This trend is impossible to ignore whether you're building the technology, implementing the technology, or consuming the technology. It affects all of us to various degrees.
As a result, the industry is redrawing the lines of who does what.
In one corner, we have the integrated technology providers -- the "stack" vendors.
In the other corner, we have the new go-to-market ecosystem: partners, integrators, service providers, etc.
If you're in the IT business, better decide where you want to play, and fast.
The Stack Perspective
Right now, there are three credible infrastructure stacks forming, with a potential of a fourth.
We have our traditional friends HP and IBM, the new VCE entrant, and -- potentially -- something may come from the Oracle/Sun combination over time.
The amount of R+D required to build these next-generation fully virtualized stacks is mind-bending. Combine the targeted R+D from VMware, Cisco and EMC, and you've got literally billions of IT infrastructure R+D dollars to go invest.
Now, the downside to this whole argument is that -- yes -- we're still very independent companies, especially when it comes to VMware. Our collective challenge will be to figure out ways that we can act as one company when customers and partners need us to, while preserving our independence and customer freedom of choice when that's necessary as well.
Yesterday's announcement shared the progress we've made so far on that goal, but there's certainly more work to do.
Outside A Stack? Life May Get Rough ...
There's considerable value to customers and partners by having advanced technology work together in a seamless way.
If IT is transitioning to a service delivery model, there's likely going to be a decreasing appetite for the build-it-yourself IT infrastructure assembly and integration efforts we've seen in the past.
No different than other forms of infrastructure, if you think about it. When's the last time you built your own phone network? Power grid? Logistics network?
This brings into serious focus the long term prospects of a long list of IT vendors that are outside of one of the big stacks that are now forming.
For one thing, you'll have to expend extra effort to convince customers and partner to "break the stack", and incur extra integration and support costs. Rising sales and marketing costs. Rising expenses for integration and support. And more.
From a business model perspective, if you plan to make a living outside a stack, it can look a little grim. Sure, some vendors may be able to carve out a profitable niche or two, but for the product categories where things are rapidly getting commoditized, it's going to be an uphill battle.
And we're going to see continued acquisitions of the smaller players by the bigger ones -- up to a point. At some point, all the stack players have all their bases covered, and the appetite for M+A will decrease, especially for some of the more established brand names out there.
Note: I've readjusted my stock portfolio as a result of this thinking :-)
The Importance Of Ecosystem
It amazes me how the bigger players (i.e. HP and IBM) try to approach the ecosystem of partners. Sure, they've got their crowds of loyal Value-Added Authorized Resellers who simply take the underlying offer, and sell it to customers that both of them can't reach using a direct sales force.
But there's so much more missing in the approach -- especially going forward.
Many of us believe that the action will move to professional services, system integration, consultants and service providers of every stripe.
And there's a big, honkin' structural problem for both HP (namely HP Enterprise Serivces, formerly EDS) and the formidable IBM Global Services. Sure, a "one stop shop" approach sounds nice as a sound bite, but -- if you think about it -- that's got some hair on it.
If you're an independent reseller, system integrator, professional services firm, consultant or service provider, than can spell "competition" in a way that's almost impossible for HP and IBM to market around.
VMware, Cisco and EMC recognize this. Yes, we'll each have some of our own capabilities to take care of our own needs in the service domain, but all the investment is around partner enablement, and not partner competition.
We're all product and technology companies at our core. And we haven't built vast, sprawling services business that need to be continually fed with new revenue opportunities, and see the independents as competitors.
So, here's the question -- are HP and IBM technology companies, or services companies? I'm arguing that -- during the next industry transition -- it's going to be awfully hard to do both well.
Bringing It Full Circle
Change is good.
It got the most recent US president elected, and it might just be enough to change the traditional balance of power in the IT industry.
We've seen what the legacy players can do -- HP and IBM. Now it's up to the VCE coalition to offer new options, without repeating the mistakes of the past.
Now we'll watch how the other players react -- large and small alike.
And that should be interesting, to say the least.
Plenty to go read up on between news sources, blog posts and the Twitterati. I tried to keep up with all the commentary, and simply gave up towards the end of the day -- there was just too much to go read.
If you'd like my summary take on it, please see here.
Customers, partners, and analysts were generally favorable: there's an entirely new offering to go consider. And new choices are generally a good thing.
Competitors and a few snarky commentators focused on accentuating the negative. Plenty of aggressive dissing to go read about, if you're interested.
Some of them are pretty touchy about all of this, so be careful when you interact with them.
Lots of healthy curiousity and skepticism around Vblock (good) and the new professional services joint venture, Acadia (also good). We said what we could at the time of announcement, with more being added to the story over the next few weeks and months.But, let's step back a moment, and consider the implications at a broader level, now that most of the important details are out in the open.
IT Industry Transition Is Causing Consolidation
That's a weighty statement, isn't it?
Our happy little IT industry is in the midst of a gut-wrenching transition. Going forward, IT will be primarily delivered as service. Whether that service is provided internally or externally will matter less and less over time.
Fueled by fast processors, capacious memory and storage, converged networks -- wrapped in virtualization -- we're now entering an era where IT infrastructure services can start to be thought of the same way as other forms of economic infrastructure -- lots of choices, pay for what you use.
Call it "cloud" if you like.
This trend is impossible to ignore whether you're building the technology, implementing the technology, or consuming the technology. It affects all of us to various degrees.
As a result, the industry is redrawing the lines of who does what.
In one corner, we have the integrated technology providers -- the "stack" vendors.
In the other corner, we have the new go-to-market ecosystem: partners, integrators, service providers, etc.
If you're in the IT business, better decide where you want to play, and fast.
The Stack Perspective
Right now, there are three credible infrastructure stacks forming, with a potential of a fourth.
We have our traditional friends HP and IBM, the new VCE entrant, and -- potentially -- something may come from the Oracle/Sun combination over time.
The amount of R+D required to build these next-generation fully virtualized stacks is mind-bending. Combine the targeted R+D from VMware, Cisco and EMC, and you've got literally billions of IT infrastructure R+D dollars to go invest.
More importantly, that money can be spent efficiently. ll three VCE companies are relatively legacy-free in their approach. All three are really, really good at what they do. It's a clean picture - all about Intel, VMware and supporting technologies.
No multiple processor architectures tojustify and position. No multiple operating environments to rationalize. Very little baggage, if you think about it.
We've got a single, consistent view of where we're collectively going -- private cloud. As a result, we can collectively spend the vast majority of collective R+D on the new, cool stuff -- a luxury that HP and IBM don't have.Now, the downside to this whole argument is that -- yes -- we're still very independent companies, especially when it comes to VMware. Our collective challenge will be to figure out ways that we can act as one company when customers and partners need us to, while preserving our independence and customer freedom of choice when that's necessary as well.
Yesterday's announcement shared the progress we've made so far on that goal, but there's certainly more work to do.
Outside A Stack? Life May Get Rough ...
There's considerable value to customers and partners by having advanced technology work together in a seamless way.
If IT is transitioning to a service delivery model, there's likely going to be a decreasing appetite for the build-it-yourself IT infrastructure assembly and integration efforts we've seen in the past.
No different than other forms of infrastructure, if you think about it. When's the last time you built your own phone network? Power grid? Logistics network?
This brings into serious focus the long term prospects of a long list of IT vendors that are outside of one of the big stacks that are now forming.
For one thing, you'll have to expend extra effort to convince customers and partner to "break the stack", and incur extra integration and support costs. Rising sales and marketing costs. Rising expenses for integration and support. And more.
From a business model perspective, if you plan to make a living outside a stack, it can look a little grim. Sure, some vendors may be able to carve out a profitable niche or two, but for the product categories where things are rapidly getting commoditized, it's going to be an uphill battle.
And we're going to see continued acquisitions of the smaller players by the bigger ones -- up to a point. At some point, all the stack players have all their bases covered, and the appetite for M+A will decrease, especially for some of the more established brand names out there.
Note: I've readjusted my stock portfolio as a result of this thinking :-)
The Importance Of Ecosystem
It amazes me how the bigger players (i.e. HP and IBM) try to approach the ecosystem of partners. Sure, they've got their crowds of loyal Value-Added Authorized Resellers who simply take the underlying offer, and sell it to customers that both of them can't reach using a direct sales force.
But there's so much more missing in the approach -- especially going forward.
Many of us believe that the action will move to professional services, system integration, consultants and service providers of every stripe.
And there's a big, honkin' structural problem for both HP (namely HP Enterprise Serivces, formerly EDS) and the formidable IBM Global Services. Sure, a "one stop shop" approach sounds nice as a sound bite, but -- if you think about it -- that's got some hair on it.
If you're an independent reseller, system integrator, professional services firm, consultant or service provider, than can spell "competition" in a way that's almost impossible for HP and IBM to market around.
VMware, Cisco and EMC recognize this. Yes, we'll each have some of our own capabilities to take care of our own needs in the service domain, but all the investment is around partner enablement, and not partner competition.
We're all product and technology companies at our core. And we haven't built vast, sprawling services business that need to be continually fed with new revenue opportunities, and see the independents as competitors.
So, here's the question -- are HP and IBM technology companies, or services companies? I'm arguing that -- during the next industry transition -- it's going to be awfully hard to do both well.
Bringing It Full Circle
Change is good.
It got the most recent US president elected, and it might just be enough to change the traditional balance of power in the IT industry.
We've seen what the legacy players can do -- HP and IBM. Now it's up to the VCE coalition to offer new options, without repeating the mistakes of the past.
Now we'll watch how the other players react -- large and small alike.
And that should be interesting, to say the least.
"Chuck has been with EMC for 13 years, most of them pretty good."
Chuck,
So you are old enough to know what ECOstructure was :-)
EMC, CISCO and Oracle replacing VMware. And the story was very much alike.
I was there, and a true believer, since I was working for a company (Bull) having partnerships with all 3 stakeholders. Unfortunately, it failed badly.
Could you tell us whay you (at least EMC and CISCO) learnt from this failure,
and so why CVE will not go the ECOstructure way?
I imagine you have the answer already scripted ;-)
Thanks in advance
Posted by: Jacques Talbot | November 05, 2009 at 09:40 AM
Hi Jacques
We learned a lot about that experience -- good and bad.
The good: customers and partners love it when key vendors collaborate in a deep and meaningful way.
The bad: getting key vendors to collaborate in a deep and meaningful way is a rare event in our industry.
Keys to success:
(a) alignment on strategic and tactical goals -- the win-win. Very true in this case, not as much before.
(b) end-to-end investment pattern: engineering, integration, marketing, services, support and ecosystem. True in this case, not as much previously.
(c) capitalizing on a major industry transition: last time it was the dot-com (#fail), this time it's virtualization (#win)
There's more to it than that, but -- having been close to both -- this time is very, very different.
However, that being said, there are no guarantees about the future, are there?
Thanks for writing!
-- Chuck
Posted by: Chuck Hollis | November 05, 2009 at 12:08 PM
Mr. Hollis,
Nice speech this morning at the Stadium!
Would you let us know when/if the presentation will be available to us audiences, or even great public?
Thanks!
Posted by: Jun Wu | November 05, 2009 at 08:54 PM
Hi Jun Wu
Thanks for the kind words. It'll be posted on the official site before long, but if you'd like a copy sooner, here's the link.
http://chucksblog.emc.com/content/EMC_Forum_Boston_CHollis.pptx (note, there are underscores in the file name, not spaces)
-- Chuck
Posted by: Chuck Hollis | November 06, 2009 at 09:52 AM
Nice slide presentation. Now I get what is to be realised by VCE/vBlock. I was thinking it was purely "here is a solution where you can provision a virtual machine and get on with it" ala ESX / VirtualBox etc. However the scope is much greater than that and looks really awesome!
I espically like the part about virtual desktops - How awesome would it be to add a user to the organisation and not have to stuff around with a physical desktop...
Be nice if such a solution was accessible to small business of 10-30 people. There is one organisation that did this that I've come across however it was economical to have full windows pc's on every desktop and use a simple local file/fax server and GAFYD. Of course the other major concern was the fact that internet is not 100% reliable and business would stop as long as internet was off - at least with full windows pc's able to do some stuff.
I have a solution for the small business use case and hopefully it will be realised within the next 6 months. Basically build a browser based (wan/lan accessible) app that does all the tasks the organisation needs to complete. Example; email is not done in outlook to contact the client, you simply click on the client and and type a message and an email is sent.
I guess one could get a group of small buisness together and provide a vBlock backed solution - which is probably what that company I mentioned before might do...
Posted by: Nicholas Orr | November 07, 2009 at 05:18 AM