As Microsoft begins to embrace cloud computing one cannot help but to see parallels between the challenges Microsoft and Oracle face today and those faced by IBM decades ago.
As you might recall, IBM was as influential (perhaps more so) in the mainframe era as Microsoft is today in the client/server era and Oracle is in the database computing era. As the center of the IT universe shifted from mainframes to client/server computing IBM skillfully reinvented itself. Most of IBMs competitors became irrelevant as the market shifted.
IBM Joined the 80s Service Economy Trend
IBM evolved at a critical time. When the core of the US economic base shifted from factories to services, IBM similarly shifted its emphasis from hardware to services. IBM’s competitors, however, merely attacked IBM’s position with smaller, cheaper mini-computers. Few of them remain today:
Digital Equipment, Data General, Hewlett Packard, Sun Microsystems, and others attacked IBM from the low end with Mini-computers and Workstations. They didn’t try to build a better mainframe. They moved the market to lower end, cheaper, faster, computing models. I worked at Digital Equipment in the late 80’s when they had over 130,000 employees and billions in revenue. However, when the platform shift to PCs happened none of these industry leaders made the leap fast enough. None of these companies exist today. (Update) Actually, Hewlett Packard does exist today as HP, and is better known for printers…and PCs.
From Don Dodge (blog) on The Next Big Thing, March 2010
The Cloud and the New Service Economy
It is very likely that we’re about to see another transformation taking place in the tech service economy, from one driven primarily by (in person or on premise) expertise and manual labor, to one shaped by offsite automation and new tech operating efficiencies. This transition isn’t just a threat to large companies who have successfully monetized software, services, specialization and complexity; it will have a substantial impact on the shape of IT careers. It will likely drive powerful new efficiencies, applications and business cases.
Cloud appears to be the next phase of the service economy (which was accelerated in the 80s with the help of basic computing tools which replaced dedicated business hardware and once expensive processes). Last week at the FiReGlobal Conference in Seattle, our cloud computing panel stressed unprecedented levels of access to applications and computing power, unprecedented dynamism and rising power requirements.
The New Data Center and the New Network
Within this scenario the data center (and not the hard drive) becomes a critical piece of economic power, as mentioned to in: “Who Will Ride the Clouds?” The ability to generate low cost power for those data centers becomes equally important to a region’s economic health. Regions will rise and fall based on their ability to attract and retain tech investment and employment and to innovate and remain competitive.
Cloud providers also face massive incentives to automate their networks and enable new levels of scale, elasticity and efficiency. Prepare for continued network equipment vendor emphasis on network automation (infrastructure 2.0).
Regions who offer competitive advantage win. Vendors who deliver on the promise of automation win. Entirely new populations of businesses beyond the reach of the power of the first service economy are boosted by the power of the cloud. They win big.
Oracle and Microsoft: Will They Monetize the Cloud?
Earlier in the conference, Oracle’s Hurd chided cloud as a kind of “catch-all”; Oracle is in a similar position as Microsoft (and 80s IBM) in that it is brilliantly positioned to monetize a status quo that is transforming itself away from complex stacks and dedicated hardware and into the cloud.
As PCs get replaced by increasing populations of devices (see The Three Horsemen blog from Feb 2009) powered by a diverse array of operating systems -and specialized servers are consolidated into commodity hypervisors- Microsoft and Oracle find themselves in the awkward position that once threatened IBM. The question is whether or not they can adapt to the new dynamics and build effective cloud business cases that leverage their strengths and minimize their weaknesses. Or they -like IBMs now unknown former competitors- try to extend the life of a dying status quo for as long as possible.
Hurd was at a minimum tactfully dismissive about the threat of cloud at FireGlobal. Ironically, Larry Ellison was one of those who predicted the rise of the network computer… more than ten years ago.
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