Who trapped VMWare in the innovators dilemma …and how do they get out

A great post on techcrunch by Ben Kepes highlighted just how trapped by their business model incumbents can become.

Who trapped VMWare? To me the answer is 3 fold.

  • Bad buyers

IT departments within large organization – are, generally speaking, paying little more than lip-service to the growing calls of a new generation of technology

Buyers, traditionally the IT department are rewarded to maintain the status quo, particularly with Cloud computing – a form of outsourcing.  This response is due to cludge of drivers….Reliability demands – any change pretty much leads to outages, having kit means having a job, arrogance – we know better than you, and fear or comfort with a current technology set, there is also some pretty nefarious stuff that goes on.  People with specific technology skills have made a lifelong career in being the only person who can make an app work…

The problem with lagard IT, is it reinforces to vendors not to change, and in some instances they will actively come out and sell against the new paradigm (Oracle anyone?). HT to Simon Wardley on the above adoption cycle

Unfortunately this leaves gaps in the market for new entrants…and this leads to disruption.

  • Bad management

Listening blindly to your customer, using dated strategy or financial models to new situations or simply telling your bosses what they want to hear, not what they need to hear all lead to reinforcing the incumbent business model.  Listening to the customer, particularly the ones above creates a false sense of security.  Eventually even the IT dept will adopt the new, with cloud its because they will eventually end up at a financial disadvantage, and then you are stuffed… and in the mean time, your mid-level managers have been vetting out any ‘radical’ new business idea, so by the time you need them, well its too late.  If you look at your bench-strength and its full of MBA’s…you are screwed. They are indoctrinated with the same playbook as everyone else (there is no differentiation when its the same)…. instead you should look for outliers, rogue elements because they are the ones who will create something truely new

Senior management is also guilty of not being true stewards of their companies.

“CEO’s are doing the best they can under the circumstances, but there are units in their organization that need to be protected, prices that need to be supported, sacred cows that can’t be touched …….Which is great, unless your competition doesn’t agree. …. When you are competing against someone who doesn’t have to worry about an existing business, they will almost always defeat you.” Seth Godin

Taking a short term view, protecting the old… taking the overt or covert approach of ‘walking back slowly’ you are ceding the future market and opening yourself to disruption…. true leaders stand up, make hard calls and do the right thing for the company long term….

Apple CEO, Tablets will canabalise PC‘s

SAP has said the same, Amazon has done it.    Get the point, great companies bite the bullet

  • The sharemarket

The incessant demands of the sharemarket to protect or grow existing revenues is idiotic.  The analysts community can’t deal with new business lines … “hard to value that new thing, not used to it”.  Shares slide on news that companies are investing in non-core business.  You guys need to take a look at yourself,  the GFC (which I hold shareholders at least partially culpable) proved the point that incessant demands for more drives bad behavior… and then if you don’t like what the CEO is doing, you agitate to reinforce the status quo… numpties.

  • How can they get out?
  1. Start planning for the future – look for the areas that are commoditising and build an ecosystem on top of it.  Get a lot of developers to innovate on top of that (cos you DO NOT have the skills to build the new thing) and watch for the winners. Cloudfoundry looks like a winner to me
  2. Stop listening to your customers…. start WATCHING your non-customers. They are likely already using precursor’s of the thing that will be your death nell
  3. Get an innovation program in place – agree to the incremental risk and potentially spend (not always), and distribute your effort across core, adjacent and transformational innovations
  4. Get different people with different skills working on this different initiatives. Your rogue elements are probably already leading the way, just give them direction and focus
  5. Capture ideas from the source, and get them unvetted.  This is normally the front line helpdesk.
  6. Allocate resources to innovation, stay the course – its a long game,  and don’t compromise. If it is annoying people you are on the right track
  7. Get to grips with canabalisation, internally and externally. The alternative is extinction.
  8. Be prepared to fail, don’t encourage it but do not penalize it either.  When you do, get another group of smart folks to look at the remnants, dollars to doughnuts there is something there, maybe they can make it work



Has NZ missed the cloud computing opportunity??

In the first ever Cloudcamp that I attended, I made the statement that unless New Zealand got to grips with cloud computing, the 34 000 ICT professionals were in significant trouble.

I also put out the challenge, that Cloud computing represented a huge opportunity for NZ Inc . Cloud computing made our geographic isolation irrelevant, it also represented an opportunity to break our dependence on the primary sector…

Fast forward two years (that Cloudcamp was August 2009), and I couldn’t help but notice three internet articles pointing to the same thing. All from very different sources.

  • Firstly Bernard Hickey looked at the economy and said ‘stop borrowing and start retaining our assets’.  He shows quite clearly that our Gross Net Income (GNI) is falling.
  • Secondly Lance Wiggs wrote up his take on the Nethui.  There are 10 points here which i’m going to summarise as ‘things have improved, we have lots of potential to build a knowledge economy, but we have a long ways to go”
  • Finally Sir Paul Callaghan spoke at about building sustainable economic growth in New Zealand, in an outstanding presentation he summarily dismissed some long entrenched myths, and challenged NZ build another 100 technology companies (17mins) …and have them STAY New Zealand owned (which circles back to Bernard’s post)…

So my question is…what is going on out there in NZ relating to cloud computing? How are we either planning or actively taking advantage of this opportunity? What more can be done??

PaaS moves on with Cloud Foundry

Yesterday, VMware announced the launch of Cloud Foundry. This is a big step in the evolution of Platform as a Service.

What is profound, is that this allows you to build applications in a private (your data centre), public (Amazon’s or Rackspace’s cloud) or hybrid environment (a combination of both). It scales from your laptop, to the hundreds of servers in the data centre.

Finally Cloud foundry is Open source. This is important to you guys out there because this should in theory allow you federate (or connect) clouds together. The theory being that as you have a known code base and API set, you can readily do this task.

In the cloud space, this is big news. PaaS is going to be the most critical enabler of Cloud applications going forward, but todate the execution on this vision by potential leaders like Microsoft (Azure) and Salesforce.com (force.com) has not quite been there…

For some more coverage of this move check out

Krishnan at Cloudave.com http://www.cloudave.com/11714/vmware-disrupts-paas-space-with-cloud-foundry/

The Wikileaks Amazon saga spotlights clouds Achilles heal, data sovereignty

Disclaimer : This is not a post on the right or wrong of Wikileaks, this is about the implications on public cloud computing.

Last weeks events around Wikileaks and Amazon are a startling reminder of just how different the public cloud computing model is when it comes to data law and responsibilities.

As i’ve highlighted in the title, to me this clearly shows one of the Achilles heals of cloud computing. Some don’t agree, but those some are mainly based in the USA. See some quotes below

“It’s USA-centric because it’s analyzing a USA-centric issue: U.S. govt cables, a US data host, and US law jurisdiction over that co”

My perspective is international.  Here’s how I see it (and this is high level).

  • An international organisation chose a US ’tied’ cloud provider to be their IaaS service provider
  • Some folks in the government took a disliking to their activities (in this case the content) and reportedly leant on the cloud provider
  • The cloud provider stopped providing service.

Now I acknowledge that this is an extreme case, but at its most basic level the same could be true of any international organisation. For example

  • I create a company that has a product that attacks a core US industry that has millions or workers and lots of revenue and tax income (Finance, automotive, pharmaceutical, IT, whatever), I choose a US based IaaS provider (because its large and costs the least)
  • The industry feels the pinch and lobbies the hell out of the senate (or the house) to do something about it because lots of jobs are on the line etc etc
  • The government intervenes, protecting its national interest (and that happens all the time) and has my company terminated from the cloud provider
  • It is also possible that they might go after the data (which incidentally violates my national data protection rules ). What then happens to my IP?

I’m not trying to scare monger here. What I am trying to do is point out a few salient facts about the international dimension of cloud computing. Specifically:

1)      Cloud computing is an international phenomenon, so many users will take services from a cloud provider who is governed by different laws, politics and sentiment.

2)      These users of cloud services operate under different data rules, and what may be legal or commercial or private in their nation could collide with the cloud providers  national laws

3)      The political machinations of the hosts government whims can have major impacts on the user, industry and trade

4)      The concerns voiced over data sovereignty over the last few years are actually valid

To me the Wikileaks case is a clear pointer to greater concerns about data sovereignty within the cloud community and a continued drive towards regionalisation of cloud.

How can a nation take advantage of cloud computing.

I spoke at Cloudcamp Auckland last week.  In this unfconference, the awkward but real question came up

“ what does cloud computing mean for New Zealand business”.

This question is directly applicable to every nation with an ICT industry. 

First lets get clear on what cloud computing is. It is an industry wide disruption.   That means that the old business model of ICT is under attack. In this instance of disruption, there is an attack on both the technical delivery and commercial model. Anyway, this means there is going to be a re distribution of wealth within the ICT (a fancy way of saying there will be losers).

But most importantly a disruption is an event when new entrants can rise up. Where before the entrenched organisations could out compete due to superior resources, now the more agile start ups can win.

Now what is most interesting about this phenomenon is that it can also be applied to nations and their individual ICT industries. 

You will see this on blogs, ICT workers know that as cloud centralises whole functions, roles simply disappear.  But if one nation is loosing, another nation is winning.  Circle of life.

So back to the topic, how can a nation take advantage of it?

  • Firstly develop a product and become a global powerhouse. There is no reason why Salesforce.com couldn’t have been developed and launched from another nation. 
  • With enough government support, you could set yourself up as a cloud computing ‘node’. Utilising climatic, political and economic factors to your advantage. For instance cold climate for cooling economics, being known for being not being corrupt, or being located close to big markets but not carrying their wage overhead.
  • You could take a deliberate strategy of targeting an incumbent with a disruptive play.  Take on Microsoft office, or SAP or McAfee. Get national fervour to gain a bit of scale then take on the world.
  • You can use time differences, for instance New Zealand is time is 12 hours different from the UK. Why not do the coding overnight and make cash during the day?
  • Look for the second wave of innovation. For instance collaboration is the next big thing in CRM. Don’t take on Seibel or Salesforce.com, instead “skate to the where the puck will be”.
  • You could carve out a role as independent arbitrator or even create and manage compliance. ITIL for cloud.  

There are a number of ways you take advantage of the opportunity as a company and a nation. If you take anything away from this post, I hope that its something like Nations have an opportunity to make serious inroads into the global ICT market because of cloud computing and that now is the time to act.

Any thoughts on others? Am I alone in thinking this is a huge opportunity for whole nations?



The proprietary debates comes back to life

There seems to be a constant debate in cloud computing and media as a service circles about proprietary systems. Sinclair Schuller today asks if the future is cloud is proprietary silos, while Bob Warfield and others wade into the Apple Adobe dabate.

This whole phenomenon is a balance between controlling the user experience and operating a free market to deliver choice.  It’s a question of timing…

Here is an anology based on an observation…. Societies that don’t know when their next meal is coming don’t worry about animal welfare or organic food. That’s a luxury, something you can only do when all your basic needs are being met.

Technology is the same.  When you are building disruptive services that are in the early phase of their adoption (which cloud still is), the user experience across all facets of the value chain is normally below the good enough line for the majority. That is they are still worrying about the basics.  The only way to bring that ‘good enough” experience to the majority is for the developers to control most aspects of the delivery. 

To do that you vertically integrate and write proprietary code to ensure that you can control the experience. 

This is why Apply closely tied the proprietary iTunes to the proprietary hardware (iPhone).  DRM wasn’t working, so they took a different approach and locked down and integrated the hardware with the content platform. Philosophical reservations aside, the iTunes to hardware experience as a consumer is great….Again, the only people griping about that proprietary ecosystem are those who are more technically savvy, past the “good enough” , line and demanding greater choice.

Cloud will be the same. Private clouds are becoming vertically integrated. WAN’s, compute, storage and management are all being delivered by one proprietary stack (take VBlock). The providers can control the every aspect and deliver on the user experience…

But this will change,  but only when technology matures enough and the ‘good enough experience is delivered to the majority…. When that happens users will demand choice, far greater choice than a single vendor with a proprietary vertically integrated stack can deliver. The kind of choice that only comes from open standards…

This pattern has happened time after time in every industry, shipping, electricity, Telecommunications, it will happen for Cloud.

Why Microsoft wants to move to Cloud Computing


Over the last couple of years, there has been a fair bit of commentary on Microsoft’s lack luster performance in the cloud computing space. And generally speaking it’s a fairly accurate assessment at this point in time. Critical in this statement is “point in time”.  I believe that MS views the move to cloud computing as a major opportunity.  I’ve heard that Ron Markezich, CVP MS online, is telling his troops that they are going to “Creatively Disrupt” themselves.  Which is a great internal line, something you would absolutely use when trying to convince your staff that everything they have worked towards is now going to be thrown out the window.  We’ve got Ballmer talking about the need for channel partners, which is true…now. Again, if you are MS you have to do this because your old business 100% depends on channel partners and you don’t want to alienate them.

Both great lines, but a bunch of baloney.  If you believe this and you are a channel partner or operate in a subsidiary supporting the channel, you are in big trouble. Heads up! In a cloud world, Redmond  doesn’t need you… In fact its worse than that, in a cloud world Redmond believes they can make more profit.  Forrester agrees with me..

Check out this picture to see how…



On the face of it, this profit increase is derived from cheaper operating model, no channel and no subsidary required. And to some extent it is, but its way more than that.  MS is moving into the adjacent market of its very own integrators by absorbing up the complexity it has traditionally created in the on premise world.  And if you are MS this is a huge new profit pool, I’ve heard ratio’s of 4-6 : 1 services to license spend are normal. This means that the potential profit pool is something like $200-300bn.

On top of this, I think that MS knows that with its on premise software its now ‘overshot’ to use disruptor language.  And in fact, there are large pools of users who are ‘non-customers’.  By offering up a simpler package, priced accordingly and that has much more wider appeal, MS can actually grow its market share.  Think about it, all over the world,  broadband and mobile networks are opening up computing to completely new users.  Netbooks, PDA’s and notebooks are becoming increasingly affordable to boot.  In affect MS’s addressable market is increasing massively too, but only if it meets this new markets needs. Something that a cloud solution will do nicely…

Make no mistakes, Microsoft  dearly wants to be a cloud computing company…..


Proprietary or open standards– where economics and philosophy collide

There has been a fair amount of commentary within the cloud community about standards.  The view is that for cloud to really take off we need vast interconnectedness, and the lack of standards, is somehow holding us back.  Possibly…

Thinking about cloud computing from a developers point of view, this absolutely resonates. But if you think about if from both a buyer and a provider view point…then I think that vertically integrated, proprietary systems are exactly what we need…in some cases.

Those cases being where the current cloud offering is not quite good enough in the customers eyes. That is, there is a functionality or reliability gap between the current offerings and what the majority of customers want (this changes by customer). 

You could argue (which I am) that recent outages like the ones at Sidekick and Google  create a perception in customers minds that the cloud isn’t quite there yet. Its "not good enough".

Because of this, I think cloud providers need to be using proprietary technology that is vertically integrated. By doing this the provider can control what happens along the whole system, which will address the reliability or functionality gap to some degree.  This is good for the provider because in the market you have an advantage against the competition and hence win customers. It also allows you to find the elements that are still causing the 'gap' and incrementally address those.  I think the poster child of this approach is Salesforce.com. In terms of cloud providers, they are top of mind (to me at least) for reliability and functionality.

Now before I get flamed as a heretic, there is absolutely a time and place for an open, standards based modular approach.  To me these traits become important when you stop being able to win the competitive game based on functionality or reliability.  When those things become table stakes and customers are demanding ever more customised offerings, then you need flexibility, creativity and speed. You can’t do this using proprietary vertically integrated systems. You can’t be nimble enough, creative enough, customised enough and of course relevant enough with a monolithic approach.  In this world, open standards are absolutely required.  Just look at the struggle Telco’s are going through as they try to remain relevant.

Because this is a question of timing, there is bound to be tension about this issue. Its exacerbated because ‘cloud’ is so broad, some parts of it are way more advanced and probably should be moving to a modular approach, others not so much.  To me, if you can step aside from the philosophical argument and instead focus on the customer requirement (make it good enough) and how you can compete (ie make money) from cloud the debate looses its heat.

Parallel thought in action

Should have patented my post "Not everything will go into the cloud, BUT everything will be affected by it"

Nick Carr is saying the exact thing "Not everything will move into the cloud, but the cloud will move into everything."


 PS i really like the comment by Charles on Nick's post  "There is no cloud. There is only a finger pointing at the cloud. To see the cloud, it is necessary to see beyond one's finger."  appeals to the martial artist in me..


Not everything will go into the cloud, BUT everything will be affected by it

I came up with that one liner for a presentation I had to do today, it resonated because of its accuracy. 

Cloud computing is disruptive, it causes transformation within businesses and whole industry sectors. It impact won't just be limited to  geeks and the IT department.

Think what telephony did for the world and how it changed.

What the internet did to us all

What mobility is doing.


Cloud computing will have that kind of profound impact.

You need to figure out how it will change your customers and suppliers, what you do as a company, your job.