Book Reviews | Gordon Campbell | News Flashes | Scoop Features | Scoop Video | Strange & Bizarre | Search

 


Can cloud computing revive IT dinosaurs?

What do IBM, Dell, HP, Oracle and SAP have in common?

All are mature technology companies - the youngest is Dell formed in 1984 - and they all banking on cloud computing getting them out of the doldrums.

There are a few things wrong with that idea.

First, it was cloud computing that got them into trouble in the first place. Hardware sales, particularly servers, fell as companies switched applications and processing to the cloud.

Cloud hosted applications disrupt high-end software. It challenges high-margins, undermines the need for infrastructure and support than allows software giants to get away with huge costs.

Oracle, originally a software company but since buying Sun Microsystems with a large hardware business, is in a more nuanced position. It lost server sales to cloud computing while its software business is challenged by nimble, commoditised cloud-based apps. SAP faces just the app challenge.

Second, the old school companies have enjoyed relatively high margins in at least parts of their businesses. Even Dell's commodity hardware margins were higher than the wafer thin margins Amazon squeezes from its IaaS - infrastructure as a service - business.

Amazon makes money because of scale. Huge scale. According to Gartner, the company has five times the IaaS capacity of the next 14 competitors added together.

The economics of scale mean each additional customer is cheaper to serve and sheer market size cuts the cost of acquiring customers.

Amazon's scale means it sits bestride the cloud market like a colossus.

Third, Amazon has a huge first-mover advantage. That's always a problem when any new technology comes along. It's a bigger problem than usual with the cloud where being first means being ready to meet demand while others are still building capacity.

It means learning how to make savings - Amazon has dropped cloud prices 40-odd times in eight years of operation.  Do IBM, Oracle and SAP really want to follow Amazon down that path?

It also scores because it doesn't have any legacy. There's no existing business or customer contracts to protect. Apart from anything else, this means Amazon is quick to innovate, there's nothing to lose from moving fast. And that's scary for competitors.

None of the would-be cloud giants can move without pain. In many cases the pain involves converting high-value, high-margin products and services into commodities. There's no path around this, but it will make it harder for them to bite the bullet.

Fourth, Cloud computing leaves little room for differentiation.  IBM, Oracle, HP and SAP all think they can add value, perhaps they can do a little around the edges, but on the whole,  customers aren't willing to pay for it when the alternatives are almost as sophisticated, but an order of magnitude cheaper.

To sum up: The big IT companies have little alternative to head to the cloud, their customers are going there with or without them.

Whether they can maintain customer relationships, add value and continue to prosper is far from given. You'd have to pick that one or more of the brands, IBM, Dell, Oracle, HP and SAP, isn't going to make the transition.

[digitl 2014]

digitl on Google+

© Scoop Media

 
 
 
 
 
Top Scoops Headlines

 

Faisal Al-Asaad: Gaza: McCully’s Calls For Restraint On Both Sides Is Side-Taking Itself

Since June 12th, the world’s attention has been squarely focused on the events unfolding in the West Bank, Gaza and the occupied territories. The disappearance of three Israeli youths who were later found dead prompted a flurry of condemnations ... More>>

ALSO:

Tania Billingsley: Demand For Accountability On Sexual Assault

Since my assault I feel that people have been assuming that my idea of justice is to have Rizalman found guilty in a New Zealand court. While it is an important part of justice being done, my main reason for wanting this is not for my own sense of ... More>>

Leslie Bravery: Hold The Perpetrator To Account, Not The Victim!

In a 4 July 2014 statement to Scoop Independent News, on the violent deaths of four young people in the Israeli Occupied West Bank and East Jerusalem, New Zealand's Foreign Minister Murray McCully made the following comments: 'The recent killing ... More>>

ALSO:

Santon Tekege: Investigative Report Into Oil Palm In Nabire Regency, Papua

Several companies’ plans to invest in the oil palm sector in Nabire have met with local opposition. People from the Yerisiam and Wate ethnic groups have staged several peaceful actions in Nabire against one of these companies, PT Nabire Baru1. More>>

ALSO:

Redress Information: Putting The Death Of The Israeli Squatter Teens In Context

The Western media are awash with correspondents’ reports on the grief Israelis are experiencing over the death of three teenagers. The teenagers, the sons of Jewish squatters living on stolen Palestinian land in the occupied West Bank, who disappeared ... More>>

ALSO:

Liran Antebi: United States: Prepared For Military Intervention In Iraq?

Following the seizure of Iraq’s main cities by the Islamic State of Iraq and Syria (ISIS), there has been much discussion about possible US military intervention in Iraq. Since the ISIS campaign began, a small American force of 275 soldiers has been ... More>>

John Chuckman: Iraq, ISIS, And Intervention: Just What Is Going On?

As so often is the case in foreign affairs, we will never know with precision what is happening in Iraq. The governments involved have reasons to disguise what they are doing, and a number of governments are indeed at work there. More>>

Joel Cosgrove: MANA and Industrial Relations: “Between equal rights, force decides”

Fightback participates in the MANA Movement, whose stated mission is to bring “rangatiratanga to the poor, the powerless and the dispossessed.” Capitalism was imposed in Aotearoa through colonisation, and the fight for indigenous self-determination is intimately ... More>>

Get More From Scoop

 
 
TEDxAuckland
 
 
 
 
Top Scoops
Search Scoop  
 
 
Powered by Vodafone
NZ independent news