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The Cloud Winners and Losers?

October 15, 2014 Leave a comment

The cloud is revolutionising IT. However there are two sides to every story: the winners and the losers. Who are they going to be and why? If you can’t wait here are the losers: HP, Oracle, Dell, SAP, RedHat, Infosys, VMWare, EMC, Cisco, etc. Survivors: IBM, Accenture, Intel, Apple, etc. Winners: Amazon, Salesforce, Google, CSC, Workday, Canonical, Metaswitch, Microsoft, ARM, ODMs.

Now the question is why and is this list written in stone?

What has cloud changed?
If you are working in a hardware business (storage, networking, etc. is also included) then cloud computing is a value destroyer. You have an organisation that is assuming small, medium and large enterprises have and always will run their own data centre. As such you have been blown out of the water by the fact that cloud has changed this fundamental rule. All of a sudden Amazon, Google and Facebook go and buy specialised webscale hardware from your suppliers, the ODMs. Facebook all of a sudden open sources hardware, networking, rack and data centre designs and makes it that anybody can compete with you. Cloud is all about scale out and open source hence commodity storage, software defined networks and network virtualisation functions are converting your portfolio in commodity products. If you are an enterprise software vendor then you always assumed that companies will buy an instance of your product, customise it and manage it themselves. You did not expect that software can be offered as a service and that one platform can offer individual solutions to millions of enterprises. You also did not expect that software can be sold by the hour instead of licensed forever. If you are an outsourcing company then you assume that companies that have invested in customising Siebel will want you to run this forever and not move to Salesforce.

Reviewing the losers
HP’s Cloud Strategy
HP has been living from printers and hardware. Meg rightfully has taken the decision to separate the cashcow, stop subsidising other less profitable divisions and let it be milked till it dies. The other group will focus on Cloud, Big Data, etc. However HP Cloud is more expensive and slower moving than any of the big three so economies of scale will push it into niche areas or make it die. HP’s OpenStack is a product that came 2-3 years late to the market. A market as we will see later that is about to be commoditised. HP’s Big Data strategy? Overpay for Vertica and Autonomy and focus your marketing around the lawsuits with former owners, not any unique selling proposition. Also Big Data can only be sold if you have an open source solution that people can test. Big Data customers are small startups that quickly have become large dotcoms. Most enterprises would not know what to do with Hadoop even if they could download it for free [YES you can actually download it for free!!!].
Oracle’s Cloud Strategy
Oracle has been denying Cloud existed until their most laggard customer started asking questions. Until very recently you could only buy Oracle databases by the hour from Amazon. Oracle has been milking the enterprise software market for years and paying surprise visits to audit your usage of their database and send you an unexpected bill. Recently they have started to cloud-wash [and Big Data wash] their software portfolio but Salesforce and Workday already are too far ahead to catch them. A good Christmas book Larry could buy from Amazon would be “The Innovator’s Dilemma“.
Dell’s Cloud Strategy
Go to the main Dell page and you will not find the word Big Data or Cloud. I rest my case.
SAP’s Cloud Strategy
Workday is working hard on making SAP irrelevant. Salesforce overtook Siebel. Workday is likely to do the same with SAP. People don’t want to manage their ERP themselves.
RedHat’s Cloud Strategy
[I work for their biggest competitor] RedHat salesperson to its customers: There are three versions. Fedora if you need innovation but don’t want support. CentOS if you want free but no security updates. RHEL is expensive and old but with support. Compare this to Canonical. There is only one Ubuntu, it is innovative, free to use and if you want support you can buy it extra.
For Cloud the story is that RedHat is three times cheaper than VMWare and your old stuff can be made to work as long as you want it according to a prescribed recipe. Compare this with an innovator that wants to completely commoditise OpenStack [ten times cheaper] and bring the most innovative and flexible solution [any SDN, any storage, any hypervisor, etc.] that instantly solves your problems [deploy different flavours of OpenStack in minutes without needing any help].
Infosys or any outsourcing company
If the data centre is going away then the first thing that will go away is that CRM solution we bought in the 90’s from a company that no longer exists.
VMWare
For the company that brought virtualisation into the enterprise it is hard to admit that by putting a rest API in front of it, you don’t need their solution in each enterprise any more.
EMC
Commodity storage means that scale out storage can be offered at a fraction of the price of a regular EMC SAN solution. However the big killer is Amazon’s S3 that can give you unlimited storage in minutes without worries.
Cisco
A Cisco router is an extremely expensive device that is hard to manage and build on top of proprietary hardware, a proprietary OS and proprietary software. What do you think will happen in a world where cheap ASIC + commodity CPU, general purpose OS and many thousands of network apps from an app store become available? Or worse, a network will no longer need many physical boxes because most of it is virtualised.
What does a cloud loser mean?
A cloud loser means that their existing cash cows will be crunched by disruptive innovations. Does this mean that losers will disappear or can not recuperate? Some might disappear. However if smart executives in these losing companies would be given the freedom to bring to market new solutions that build on top of the new reality then they might come out stronger. IBM has shown they were able to do so many times.

Let’s look at the cloud survivors.
IBM
IBM has shown over and over again that it can reinvent itself. It sold its x86 servers in order to show its employees and the world that the future is no longer there. In the past it bought PWC’s consultancy which will keep on reinventing new service offerings for customers that are lost in the cloud.
Accenture
Just like PWC’s consultancy arm within IBM, Accenture will have consultants that help people make the transition from data centre to the cloud. Accenture will not be leading the revolution but will be a “me-to” player that can put more people faster than others.
Intel
X86 is not going to die soon. The cloud just means others will be buying it. Intel will keep on trying to innovate in software and go nowhere [e.g. Intel's Hadoop was going to eat the world] but at least its processors will keep it above the water.
Apple
Apple knows what consumers want but they still need to prove they understand enterprises. Having a locked-in world is fine for consumers but enterprises don’t like it. Either they come up with a creative solution or the billions will not keep on growing.
What does a cloud survivor mean?
A cloud survivor means that the key cash cows will not be killed by the cloud. It does not give a guarantee that the company will grow. It just means that in this revolution, the eye of the tornado rushed over your neighbours house, not yours. You can still have lots of collateral damage…

Amazon
IaaS = Amazon. No further words needed. Amazon will extend Gov Cloud into Health Cloud, Bank Cloud, Energy Cloud, etc. and remove the main laggard’s argument: “for legal & security reasons I can’t move to the cloud”. Amazon currently has 40-50 Anything-as-a-Service offerings in 36 months they will have 500.
Salesforce
PaaS & SaaS = Salesforce. Salesforce will become more than a CRM on steroids, it will be the world’s business solutions platform. If there is no business solution for it on Salesforce then it is not a business problem worth solving. They are likely to buy competitors like Workday.
Google
Google is the king of the consumer cloud. Google Apps has taken the SME market by storm. Enterprise cloud is not going anywhere soon however. Google was too late with IaaS and is not solving on-premise transitional problems unlike its competitors. With Kubernetes Google will re-educate the current star programmers and over time will revolutionise the way software is written and managed and might win in the long run. Google’s cloud future will be decided in 5-10 years. They invented most of it and showed the world 5 years later in a paper.
CSC
CSC has moved away from being a bodyshop to having several strategic important products for cloud orchestration and big data. They have a long-term future focus, employing cloud visionaries like Simon Wardley, that few others match. You don’t win a cloud war in the next quarter. It took Simon 4 years to take Ubuntu from 0% to 70% on public clouds.
Workday
What Salesforce did to Oracle’s Siebel, Workday is doing to SAP. Companies that have bought into Salesforce will easily switch to Workday in phase 2.
Canonical
Since RedHat is probably reading this blog post, I can’t be explicit. But a company of 600 people that controls up to 70% of the operating systems on public clouds, more than 50% of OpenStack, brings out a new server OS every 6 months, a phone OS in the next months, a desktop every 6 months, a complete cloud solution every 6 months, can convert bare-metal into virtual-like cloud resources in minutes, enables anybody to deploy/integrate/scale any software on any cloud or bare-metal server [Intel, IBM Power 8, ARM 64] and is on a mission to completely commoditise cloud infrastructure via open source solutions in 2015 deserves to make it to the list.
Metaswitch
Metaswitch has been developing network software for the big network guys for years. These big network guys would put it in a box and sell it extremely expensive. In a world of commodity hardware, open source and scale out, Clearwater and Calico have catapulted Metaswitch to the list of most innovative telecom supplier. Telecom providers will be like cloud providers, they will go to the ODM that really knows how things work and will ignore the OEM that just puts a brand on the box. The Cloud still needs WAN networks. Google Fibre will not rule the world in one day. Telecom operators will have to spend their billions with somebody.
Microsoft
If you are into Windows you will be on Azure and it will be business as usual for Microsoft.
ARM
In an ODM dominated world, ARM processors are likely to move from smart phones into network and into cloud.
ODM
Nobody knows them but they are the ones designing everybody’s hardware. Over time Amazon, Google and Microsoft might make their own hardware but for the foreseeable future they will keep on buying it “en masse” from ODMs.
What does a cloud winner mean?
Billions and fame for some, large take-overs or IPOs for others. But the cloud war is not over yet. It is not because the first battles were won that enemies can’t invent new weapons or join forces. So the war is not over, it is just beginning. History is written today…

How Google wants to change networking.

Quagga might remind a little majority of people of an extint African zebra. However Quagga is also the name of an open source project that focuses on the future of networking. It is one of the projects that is being boosted by Google push for Open Source Networking. Google has joined hands with the Internet Systems Consortium to found Open Source Routing. Open Source Routing focuses on bringing Open Source solutions for Openflow, Software-defined networking and other technologies that are needed in today’s Webscale networking. Google also is pushing the ALTO protocol in order to improve quality of service for P2P and more importantly content delivery networks.

Google’s dream is to do the same with networking at it did with servers. Buy cheap commodity hardware and make resilient systems via software solutions. This strategy is directly in conflict with companies like Cisco or Juniper that focus on expensive proprietary hardware solutions. Google is trying to find cheap hardware in order to install Open vSwitch and other similar software on it.

Telecom operators and solution providers are wise to evaluate participating in the Open Source Routing effort. Verizon is one of the pioneers in trying out Openflow and the benefits it can have for carriers. Expect a lot of innovation from companies without a big brand to come in the coming months, examples could be bigswitch, fastly, pica8, etc.

Why is Europe no longer innovating?

A little test. Name a European dotcom that has changed people’s life in the last years? No clue? With only a minor change, substituting European for American and the list would be long: Google, Facebook, Twitter, LinkedIn, Zynga, etc.

Even when innovations make it over the ocean, Europe is limited to doing business development, sales and some limited support. Look at the job pages of the big dotcoms and you will see the VP of Engineering in California and the business development manager in Europe. So the future is defined in California and Europe is just a market to sell the innovations that have been tried and certified in the USA.

Most people would not care less if Zynga would come from the USA or Tongo [No harm meant to anybody from Tongo]. However Europe is missing out on some major innovations that can boost the productivity of any small or medium enterprise. Think about Square, Quickbooks, Dwolla, etc. as examples.

Europe some years ago was leading the mobile and telecom industry with Ericsson, Vodafone, Telefonica, Orange, Deutsche Telekom and Nokia being clear examples. Nowadays it is Apple, Google, Facebook, etc. that lead the mobile and telecom revolution. Many might not realize it but Google has not only disrupted the mobile operating system market. Google has the first global software-defined network in the world. Google is writing history and being a major driver behind Openflow. Also the USA is leading together with Britain in White Spaces and other future wireless innovations.

What needs to change in Europe?

The European Union and local governments have always had a preference to over-protect the communication industry. Many laws protect former state-monopolies from getting real competition. The European Union should really look at White Spaces as a way to bring much-needed innovation back into the industry. Instead of selling the licenses to White Spaces to the usual suspects, the European Union should declare White Spaces as a “free” WiFi on Steroids alternative to LTE. White Spaces can be the solution for rural areas that want to get 21st century broadband connectivity.

Also the laws that oblige telecom companies to give national service are outdated. We do not have gigabit fiber-to-the-home in big cities because competitors are obliged to give universal service. Why not let 10 competitors fight without obligation to connect everybody? The free markets will connect those people and companies that are economically viable. By obliging universal connectivity, everybody is connected to a slow network. Leading to European broadband mediocrity.

Telecom companies that have started to set-up venture capitalist offerings are going the right way. Unfortunately too little money is poured into new ventures. Telefonica’s Wayra is offering $30-70K during a 6 months incubation. That means €46K to €109K on an annual basis as seed capital. What can you buy for this kind of money? Virtually nothing. Only one or two people teams at most. Great people would earn more money in their day job so they are unlikely to jump on Wayra. More realistic numbers would be €150-200K, which would allow teams of 3-10 people plus potential for hardware and other types of innovation. The chances that a 2 people team on a small budget makes a world-changing impact are very slim because you need multiple skills to really innovate.

Crowdfunding  should also be high on the list of the European Union. Let people participate in ventures as very small minority stakeholders via collective seed investment. Give Europe some chance of building a European Kickstarter on steroids. Cross-European laws would need to be put in place for this.

We need European Entrepreneur Heroes as well. Europe needs a European version of Steve JobsJeff Bezos, Larry Page, Mark Zuckerberg and Marc Benioff. People that can convert a vision into a multi-billion industry. People that will be role models for future generations.

If Europe wants to leave the current recession behind, it needs to think about moving away from farming subsidies into investing in innovation. We need modern digital laws and a general legal simplification to allow more entrepreneurs to start innovative companies. European corporations should set-up more venture capitalist funding and crowd funding should be high on everybody’s agenda.

NextGen Hadoop, beyond MapReduce

Hadoop has run into architectural limitations and the community has started working on the Next Generation Hadoop [NGN Hadoop]. NGN Hadoop has some new management features of which multi-tenant application management is the major one. However the key change is that MapReduce no longer is entangled inside the rest of Hadoop. This will allow Hadoop to be used for MPI, Machine Learning, Master-Worker, Iterative Processing, Graph Processing, etc. New tools to better manage Hadoop are also being incubated, e.g. Ambari and HCatalog.

Why is this important for telecom?
Having one platform that allows massive data storage, peta-byte data analytics, complex parallel computations, large-scale machine learning, big data map reduce processing, etc. all in one multi-tenant set-up means that telecom operators could see massive reductions in their architecture costs together with faster go-to-market, better data intelligence, etc.

Telecom applications, that are redesigned around this new paradigm, can all use one shared back-office architecture. Having data centralized into one large Hadoop cluster instead of tens or hundreds of application-specific databases, will enable unseen data analytics possibilities and bring much-needed efficiencies.

Is this shared-architecture paradigm new? Not at all. Google has been using it since 2004 at least when they published Map Reduce and BigTable.

What is needed is that several large operators define this approach as their standard architecture hence telecom solution providers will start incorporating it into their solutions. Commercial support can be easily acquired from companies like Hortonworks, Cloudera, etc.

Having one shared data architecture and multi-tenant application virtualization in the form of a Telco PaaS would allow third-parties to launch new services quickly and cheaply, think days in stead of years…

Disruptive Innovations that can Kill the Telecom Industry

February 14, 2012 1 comment

Killing the mobile broadband oligopoly

For years operators have paid billions for spectrum. Millions of man-years have been spent on building standards like GSM, GPRS, CDMA, 3G, LTE, etc. Can disruptive innovation kill this in a few years?

Yes, it can. The FCC is finding out that large parts of the USA are still not covered by mobile broadband. After years of lobbying by groups like the New American Foundation, the FCC has finally decided to start with White Spaces. White Spaces are also being rolled out in the UK.  White Spaces allows spectrum to be opened for public usage, which was previously used by analog television or to separate different adjacent channels. White Spaces have been referred to as “WiFi on Steroids”.

Another disruptive technology is software-radio networks in which mobile devices use software-driven radio technology instead of hardware-driven radio technology. This allows a mobile device to be compatible with different standards and to switch and evolve quickly. Putting software-radio in a mobile phone will make it possible to use dynamic white spaces, in-door networks, etc.

A final disruptive technology is Openflow. Openflow, is part of software-driven networks, in which routers, bridges, firewalls, loadbalancers, etc. are implemented on software-level. Networks can be virtualized and used with different QoS and configurations at the same time.

Google and Microsoft are major backers of the White Spaces initiative. They also control two important mobile operating systems. Google is also running pilots with fiber-to-the-home. Google has its own routers and other network technology.

Google could easily be the first White Space operator and use a Fon-like way to roll out their network.

Killing ARPU

SMS is already death, and it will be just a matter of months before operators will see deep dives in revenue. Apple could make the iMessage protocol public and Android could come with a standard iMessage-enabled solution and people would no longer send SMSes but would not even realize it.

Next one on the list are calls. Roaming is already seriously being challenged for years by Skype and others. Operators are planning for VoLTE, or voice over LTE, only by 2013-2014. However most will start rolling out LTE in 2012. This is the ideal situation for Voxtrot, and others, to use the vacuum to get people accustomed to free calls. By the time VoLTE will be available there might just be one market price for it: FREE.

Other value-added services, are already being substituted. MMS is called Twitter & Facebook mobile app now. PBX are now on the Cloud. Call centers are now offered as a service.

Killing ROI

Operators are pushed by the market to invest in LTE roll-outs. However why would you need LTE? There is not a single operator service at this moment that will make people queue up in front of their stores to get an LTE subscription. There are a million and one reasons in the form of mobile apps, mobile video streaming, social networks, HD Video-calls, etc. that can push customers towards the over-the-top-players.

So network investment is only going to rise and revenues from the new technologies will be meager at best, if not cannibalizing high-ARPU services.

With Mega Upload and other sharing sites being disabled, illegal file-sharing is not going to go away. P2P is likely to come back with a vengeance. It is easy to shut down large sites. However what if special encrypted P2P apps are used to distribute the location of content and botnets for distribution. There are a lot of computers that are connected to the Internet but are badly secured. Instead of using them for spamming, Mega Upload 2.0 services can use them to store and distribute content. As long as these “hacked” computers use HTTP(S), it will be very hard for operators to distinguish regular do-it-your-self websites from illegal content hubs.

Killing the operator’s established business model

Operators have educated subscribers that everything that comes from them has to be paid for. Disruptive operators like Free.fr are undoing this education by giving a lot of services for free when you pay the monthly subscription fee.

The Freemium business model is likely to find its way into the telecom industry. The model in which 90-98% of the users get the service for free and 2-10% generate the revenue by purchasing premium services. Combined with advertisement, this is the model of big successes like Zynga, Linkedin, etc. Disruptive players that adopt Freemium are likely to start offering services outside of their country borders since the more people participate, the better. With a winner-takes-it-all business model expect roll-outs to be very aggressive.

What can the telecom industry do?

The first thing operators should do it to tell their providers that their top problem is the lack of new revenues that will sustain the industry. Not LTE roll-outs, not fiber-to-the-home, not customer experience management, etc.

Telling telecom providers that new revenue solutions will be a top priority for 2012 will shift R&D budgets into the right direction.

The second thing operators should do is to stop using their existing purchasing techniques to try to generate new revenues. Nobody will be able to invest 5 months into an innovative solution, spend 3 months doing business development, pass 3 months on filling out RFIs, pass another 4 months filling out RFPs, 2 months on contract negotiations and 6-8 months on delivery. The industry can not wait 2 years to launch the first solution. Especially the herding nature of operators is making any introduction of new innovative services difficult because everybody wants a market leading solution but nobody is willing to be the early adopter.

The response should be different. Joint innovation teams that are able to break the “established rules”; that are able to launch “beta-quality” services to early adopters; that are able to innovate with both technology, business model and go-to-market strategy, etc. Operators should be embracing innovation and learn from the IT industry and even better the dotcom industry on how innovation is done quickly, efficiently and successfully…

Next Buzz: Social Enterprise Apps

January 17, 2012 Leave a comment

Social Enterprise Apps are the next buzz. Companies like Salesforce with Chatter, Yammer, Jive, Google with Google+, etc. all want to change the way employees work in 2012 by adopting Facebook and Twitter-like solutions.

At the moment it is too early to tell who will be the winner. Most products however are still just offering only basic features like status messages, connect to colleagues, share documents, etc.

The real interesting features are still to come. Employee driven process creation and management should make it possible for plain humans (not über-programmers) to define and manage company processes and to transfer a world of Excel, Access and other homegrown solutions to the Web and mobile world.

Operators should jump on the social enterprise apps bandwagon because calls and SMS can still be incorporated into this new portfolio of products. However not in the traditional manner. Since everybody has access to a phone, it could be used for quick approvals either by calling in, getting called or sending an SMS. Even faxes could be incorporated. Traditional companies might be more willing to move from paper faxes to online faxes instead of moving from zero to Facebook speed right away.

The key will be the ability to people to define and manage things themselves without needing support from IT or five level of approvals…

 

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