The Cloud rains on a brittle market

Market trends gain strength from the correctness of their promises. Is it cheaper, faster, more secure? Dilute the promises and a forceful market becomes brittle. Crack a brittle market and revenue disappears.

By the way, what ever happened to Netbooks? Four years ago Netbooks were going to save the PC industry. Now they are gone, victims of the brittle market. IT departments loved Netbooks as their convenient answer to popular tablets. In a brittle market Netbooks were swamped by BYOD.

The market for enterprise computing equipment versus cloud services is in the brittle stage. The promises of the cloud gain strength while counter forces are losing at the flanks. This post is not about the cloud. This is about the market. Promises of lower cost, ease of use, scalable power are strengthening. The opposition is brittle and when it breaks the flow of dollars will shift dramatically.

The dollars in question are those spent by corporations on servers, storage and networking – the data center. Corporations buy name brand equipment. Cloud providers develop their own equipment and save money and by doing so. They also change the dynamic of revenue growth and profit generation in the IT market. A shift from corporate computing to the cloud means more than a redirection of dollars. It means a fundamental shift as cloud service providers challenge OEM equipment vendors in the development of new technology.

The cloud does to IT management what robots did to manufacturing so, naturally, there is internal management resistance. Management’s main and plausible objection has been security.  They also point to the increased cost of data connections. While conceding that these are crucial, and without in any way diminishing their importance, realize that one day security will be solved and the cost of data transport will continue to decline.  As this happens the brittle market will crack.

What happens then? Well, consider that Google, like all of the large scale cloud providers, does not use state of the art high end servers of the type you see at Interop. They optimize their cost, power consumption and space utilization with a vast array of commodity systems. On top of that, the Google file system competes directly with the value delivered by classic storage system vendors, demonstrating that cloud providers dilute the need for major manufacturers.

Imagine a world where pick up/ drop off laundry service was incredibly cheap and effective. Would you own a washer and dryer?

iOS or Android? The key option for your new car

Carmakers offer plenty of choices, but not the one we need – Android, or iOS. Look on the sticker of your new car and you’ll find a $1,000 to $2,000 option for an entertainment or navigation system that has less capability than your typical smart phone.

Nokia, Blackberry and Motorola have all learned the hard way that apps drive the device and the operating system drives the apps. On the other hand, new vehicles come with closed operating systems and a set of confusing and inconsistent manufacturer supplied apps.

I made two round trips from Florida to New Jersey in the last 60 days. My 2012 RAM 1500 pulled another car on a trailer without slowing down. The truck gets an A for acceleration, braking, comfort and sound system. Garmin navigation is excellent. The entertainment options all work, but the interface is quirky. Turn the knob? Or look for the button on the touch-screen? Big icons let you know you are listening to radio while a tiny font tells you what song is playing. Soon, they will make it illegal to read that tiny font while driving. Get a phone call and you have to wait until the system finishes telling you that you have an inbound call before it will answer.

Driving a Mustang convertible with a 5.0 and 6 speed manual transmission down the Blue Ridge Parkway is so wonderful that even the trooper who pulls you over has to smile. Maybe if I offer him a chance at the wheel I can avoid a ticket.

Of course, he might get a little peeved when the radio tells him his iPhone has too many songs to sync.  Everyone gets a chuckle at the ‘Send” and “End” prompts for phone calls. Wasn’t that how cell phones worked in the 90’s? The 5 gig hard drive is there for you to load a personal jukebox. But you can’t load mp3’s or iTunes, you can only rip CD’s. You still buy CD’s, right? Are these cars meant for old people?

Bloomberg Businessweek had a commentary suggesting a startup wizard for new cars. Meanwhile a new iPhone comes with tiny pages containing government required safety messages like, “Don’t hold the power cord in your mouth while you plug it in.” Android and iOS  phones and tablets compete on how intuitive they are and how you don’t need a manual. Ford’s Mustang Sync manual is 100 pages. We don’t need a startup wizard. We need auto manufacturers to join this century.

Tonight, I will look through the manual again and see if I can figure out why my phone starts to play music automatically when the car starts. Step on the clutch, start the engine…take out the phone and stop iTunes…release the brake and drive away.

Tablets for the Execs

I have an iPad.  I love it for home use.  And I think it has some significant value in business today.  But the one thing that I don’t understand is the value of an iPad for senior executives. 

Often, senior executives are traveling on planes.  The iPad’s form factor is ideal for this.  And, most senior exec’s live in their email.  They get so much of it.  What confuses me is that if your email platform is Exchange (and I believe the same holds true for Notes) you cannot delete email or move email into folders if you are using an iPad on a plane without wifi.  I am guessing Apple will fix that some day, if they actually think it is a flaw.  But it is really important for senior execs to be aware of this gap in functionality. And, for the exec to understand that it isn’t up to IT to “fix it” – we can’t.

For a CIO, one of the toughest challenges is helping senior executives keep their email managed properly.  Their inboxes can get huge fast, and even with the proper policies and archiving capabilities, senior execs must still aggressively manage their emails almost every minute of the day.  Ideally, being on a plane is a perfect time to tidy up their inbox.  The iPad’s form factor is perfect for that.  Just be aware that if your execs ask for an iPad that they understand the limitations.  It won’t help you help them.

PS – although not an advertisement for Android – my Xoom does allow me to manage emails completely on a non-wifi plane.

CIO Empathy

Last week I attended a small, informal breakfast for CIO’s, mostly located in the New York City area.  The event was well run, with no hidden agenda, and was genuinely about getting CIO’s to talk about their challenges and foster stronger relationships.  We talked about business alignment, challenges with mobile technology (Apple, Android, and enterpise access), security, social networking, fostering innovation, the concept of IT as a profit center, and the day to day joys and misery of being a CIO.  It was about 2 hours.

After the session, I went back to my office and later that afternoon met with my boss for a weekly one on one.  He mentioned in the meeting I seemed more upbeat than I have in a while.  We have been in the midst of some very, very complex projects, and there have been some extremely high highs, and extremely low lows, and I tend to be more impacted by the lows than the highs.  So I have been pretty worn out.  But, I have to say, after that breakfast with the other CIO’s, I have been feeling better.  And, I guess it was noticeable to my boss.  I was more positive in my thinking, comfortable with talking about some good news, and looking at some of the challenges in a more positive light.  I joked with him that I had just come from this CIO breakfast and realized that there are others out there who have just as many problems, or worse, and that the breakfast was a bit like therapy.

The day after that, I read this article from one of the bloggers at HBR and it really hit home.  The blog is on empathy, and how a leader can utilize empathy to be a better leader.  It is a great article.  But it also got me thinking about the CIO breakfast, and that once in a while you just need to talk to some peers who aren’t trying to sell you anything, aren’t trying to “fix it for you”, but have the look in their eye that says, “yeah, I know what you mean”.

The point of this post isn’t so much to talk about a great breakfast meeting or a great article on leadership and empathy.  The point is, that for the channel, there is a great opportunity for you to create this type of environment for your customers – getting them together informally, in small groups of similar backgrounds – to discuss their issues in a non-sales/non-solve-it-now, kind of environment.  The company that ran the breakfast was relatively new to me, but I am now a loyal friend or partner.  They didn’t sell me anything, but they helped me out alot more than they realized.  These types of sessions can be relatively cost effective for you to have with your customers.  You won’t see a dime in the immediate term, but you should expect (if you pick the right mix of participants) to see a stronger, longer, deeper relationship over the long-term.

Approaching the CIO

I recently spent a few days in a conference run by one of our most valuable customers.  I was honored that they let me participate.  I was there to present key IT trends that we are seeing and how they may be impacting the reseller market overall.  But, many of the conversations ultimately ended up discussing how best to approach the CIO.  Everyone had some great success stories, so by no means is this post the only way to do it.  But, as CIO for a relatively normal $3.5 billion firm, I am happy to be a proxy in helping any of our customers understand how IT people think.

Once again, this is a sample of one, but I thought it might be of value to share with you.

LEAP

If you are a regular reader of this blog you know that Westcon is a distributor of Networking, UC, Security, and Data Center technologies.  We do about $3.0 billion in revenue per year and distribute solutions to over 70 countries.  We conduct business under two brand names – Westcon and Comstor.  As CTO I am responsible for both the technology that runs the enterprise and also setting the overarching strategic direction of the firm from a technology perspective.  So, I get to work with the stuff we distribute.

There have been a number of posts on our Data Center Consolidation project and our migration to virtualization.  Our journey towards selecting the right platform for us was important on a number of levels.  Obviously we wanted to make the best selection for our enterprise from an ROI perspective.  But we also planned ahead and utilized the decision making process as a framework that we would share with our customers (Resellers, SI’s, Service Providers) to help them in understanding the decision making process of the average mid-size enterprise end-user/buyer. 

The Framework

Substantial technology decisions must always be premised on rational business justification.  The bigger the purchase, the more demand for a coherent, articulate business justification (ie not tech-talk).  The learning process involved in acquiring new technology has to be at two levels – what is the technological benefit and what is the business benefit.  In addition to learning about the technology and the business rationale, there is the need to actually experience the technology in action.  Especially if the technology is on the leading edge, such as Virtualization or Cloud.  And, no technology purchase happens in a vacuum.  Understanding how the new technology can be architected into a heterogeneous environment needs to be part of the process.  Lastly, the larger the decision, the greater the need for a clear plan, with specific milestones, in order to ensure business and technology decisions are synchronized for success.

LEAP – Learn, Experience, Architect, Plan

This high level decision making process became a framework that the channel can use in conversations with their customers.  In order to deliver on this framework, Westcon recognized that an environment was needed to step through the four steps of the process – learn, experience, architect and plan.  To achieve that goal, Westcon will begin launching LEAP Centers around the globe in the coming months.  The first center opens in Brussels, Belgium this week (September 29, 2010) followed by the opening of the Denver, Colorado LEAP Center on October 20, 2010.  Additional sites in Australia, Brazil, Singapore, and South Africa will come online in the future.

Each LEAP center is designed to help the channel (with end-users when desired) learn about new technologies, the business value of the technology, and how the technology actually performs in live, heterogeneous technology environments.  The goal is for Westcon’s customers (Reseller, SI or Service Provider) to truly understand these new technologies and what the proper architectures are for solutions that include these new technologies.  Ultimately the goal of the LEAP center is to create a more informed channel partner who can successfully sell the solutions efficiently and effectively.

Our experiences as an average IT organization showed that our engineer’s “new technology skepticism” was eradicated when they had the chance to work with the equipment real-time.  As an example, in the case of our data center consolidation, the original selling points for our technology configurations were superseded with more important benefits once the team got their hands on the equipment. Appreciation for these new capabilities would not have been accomplished without working with the equipment.  That is a key objective of the LEAP Center.

Your LEAP Center

Each LEAP Center is a fully configured data center, running hardware and software from multiple manufacturers in order to create a more realistic IT environment.  The center contains equipment from vendors that, in some cases, Westcon does not even distribute.  Westcon has full-time engineers dedicated to the running of each LEAP Center.   But make no mistake about it, the LEAP Center is a center for our customers.  We built it for our channel customers.  Our goal is for our customers to be successful in deepening relationships with, and ultimately selling to, their end-users by creating greater value to their customers through the knowledge gained in a LEAP experience.   We want our customers to consider the LEAP center as an important component of their portfolio of sales strategies, tactics and tools.  LEAP Centers will help our customers Learn and Experience the technology, but also be an environment wherein they can bring in their customers to work on specific Architectures and Plans.  In order to do that, Westcon has committed millions of dollars in the development of the LEAP Center.  Ultimately, Westcon believes that this investment for our Resellers, Systems Integrators, and Service Providers will generate profitable success for our customers, their customers, our vendor partners and the channel as a whole.

We look forward to seeing you at one of the LEAP Centers soon!

Downturn V2.0?

Gartner recently released analysis advising CIO’s on how to manage and prepare for a second downturn in the economy.  It seems like there have been genuine concerns for a while, but now seeing Gartner’s analysis AND seeing firms already starting to advertise their value in the context of Gartner’s just released analysis indicates that there is a lot of genuine concern and we are heading down again for the second time.

It doesn’t matter if it is a formal recession (2 consecutive quarters of negative growth in the United States).  We  have to assume the worst and start planning for it.  Again, it comes down to the same issues as before – how are you (the channel) meeting the needs of your customer and what are you doing to deepen existing relationships?

As CTO, in addition to the Gartner analysis, we are seeing Intel and Cisco resetting Wall Street’s expectations – downward.  And we are seeing PC forecasts being brought down for the next few quarters.  Signs that tend to assume 1.5% GDP as opposed to 5.0% in the coming 6-9 months.  Companies such as Intel and VMWare making acquisitions to round out their solution sets, or to expand into new market adjacencies, could be rationalized as a slow-growth indicator since these firms might, in better times, look for organically developed solutions rather than taking on the additional risks associated with acquisitions.

As CIO, my sense of the situation is as follows – internally Westcon went through a serious set of cost reduction activities in the fall of 2008.  Those actions positioned us to sustain our business and be ready to move quickly once an upturn appeared.  During this down period, we were able to really dissect the skeletal structure of many of our planned projects, and really get underneath the potential ROI calculations to clear away any noise in the analysis.  When the upturn began to appear we moved quickly to execute on those projects that we had analyzed and kicked off a number of capital and expense initiatives that would drive down costs and/or improve relationships (and thus revenue and profitability) as the economy grew.  With the next downturn staring us in the face, and with everyone coming back from summer vacation, one can assume that CIO’s will start putting new projects on hold in September, with an eye towards revisiting them in January/February 2011.  Although this looks more like a US downturn than anything else, any US downturn has global implications.

So, in general, projects kicked off in late 2009/early 2010 probably have the budgets in place to continue through the remainder of the year, and although they will be the second place that the CIO goes for costs reductions, these projects have already been analyzed to death in the first downturn and probably are deemed most important to the long term success of the firm and will likely not be stopped.

If you agree with everything said so far, then there are considerable opportunities for the channel during this 2nd downturn.  The opportunities will most likely be with the customers you were working with most closely towards the end of the first downturn and the beginning of the uptick in the economy.  These customers would have engaged you in projects in the Fall of ‘09 and early 2010.  The message here is that your customers probably do not want to focus too much on new initiatives, but want to work with you on previously approved projects to make sure that those projects successfully hit or surpass any upcoming project milestones.  Again, having that deep understanding of your customer’s strategy and priorities will help you and your customer through this impending downturn.  Lastly, I doubt there will be any of those last minute “gotta spend it before the end of the year” opportunities at the end of 2010.

Certainly, I hope Gartner and the other indicators are wrong, and that the economy snaps back to 5.0% growth.  But, just in case they are right, you may want to consider revisiting your most valuable US customers after the US/Canada Labor-Day holidays, and ask them how you can start working most effectively with them to prepare for the next downturn.

Innovation Without Structure is Anarchy

I recently had a conversation with a friend who is in the high-tech distribution industry who was grappling with a problem.

He had been having a rather heated argument with one of the most potentially innovative people he had ever met in his company.  Her argument was that he was wrapping too much structure around the company and that this would stifle innovation.  His counter-argument was that they really could not innovate if they could not agree on what the standard,  most efficient ways to do things were from a baseline perspective.  He believed (as do I) that innovation is born out of those standard structures – producing new approaches to current problems or new products/services that extend the company’s value proposition.  He knew he had a sympathetic ear since I totally agree with this philosphy.

My friend and I were having this conversation in the hotel bar, and I subconsciously noticed that Charlie Parker was playing in the background.  So I started down this path – “John, what kind of music does Jane listen to?”  He said that she actually had a similar background to John and I which was the Grateful Dead and Jazz.  (Most folks probably do not realize how close the Dead and Jazz are.  Phil Lesh and Bob Weir of the Dead consider John Coltrane one of their biggest influences.  For the more modern rocker, Dave Mathews claims Charlie Parker as one of his biggest influences.)  Jazz musicians like Parker, Coltrane & Monk are some of the greatest improvisational (read “innovative”) musicians in the world.  But they innovate off of structure.  For Parker there was, in general, a beginning to the song where he set (or allowed to be set) the structure off of which he would innovate.  Bebop players changed the rules a bit by flattening the fifths inside the chord structure, but that was in itself an innovation that then became a standard to build upon.  The point here is that the song had structure at the start, and then came back around at the end many times to replay that structure.  In the middle was a clear structural foundation of chords and harmonies that the artist could innovate off of.  Without that contextual foundation, all you really have is noise or anarchy.

The Dead were the same way.  Bob Weir once remarked that the Dead started a song with a specific structure, and then literally “leapt off the building”.  The difference here was that they relied on the fact that one member in the band would re-introduce structure (structure meaning baseline chord progressions that they all were intimately familiar with) to the song before they “crashed to the ground”.  Anyone who followed the Dead from that perspective knows that the band grew stronger and stronger with each leap.  They learned from the improvisational experiences, and would re-introduce those improvisational elements as new structures in future iterations of the song. 

Innovation (read improvisation) without structure will lead to anarchy.  Employees who must execute against the new innovative idea need to contextually understand how you got to the new innovative solution, and their roadmap is made up of structure where the beginning is where they are today.  You can innovate all you want, but if you cannot get your employees to execute inside the innovation, all you have done is created a song with no sound.

Technology has the greatest opportunity to be both the driver of the foundational elements of every business process, and at the same time be the true spark for innovation.  But in order to create that spark there must be standards (process with structure).  My point to John is that Jane can not only innovate with greater value, but also help others to innovate, once she recognizes that the innovation is really an improvisation off of an existing chord structure (ie business process).