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

 

Syed Atiq ul Hassan: Eye-Opener For Islamic Community

An event of siege, terror and killing carried out by Haron Monis in the heart of Sydney business district has been an eye-opener for the Islamic Community in Australia. Haron was shot down before he killed two innocent people, a lawyer and a manager ... More>>

Jonathan Cook: US Feels The Heat On Palestine Vote At UN

The floodgates have begun to open across Europe on recognition of Palestinian statehood. On 12 December the Portuguese parliament became the latest European legislature to call on its government to back statehood, joining Sweden, Britain, Ireland, France ... More>>

ALSO:


Fightback: MANA Movement Regroups, Call For Mana Wahine Policy

In the wake of this years’ electoral defeat, the MANA Movement is regrouping. On November 29th, Fightback members attended a Members’ Hui in Tāmaki/Auckland, with around 70 attending from around the country. More>>

Ramzy Baroud: The Mockingjay Of Palestine: “If We Burn, You Burn With Us”

Raed Mu’anis was my best friend. The small scar on top of his left eyebrow was my doing at the age of five. I urged him to quit hanging on a rope where my mother was drying our laundry. He wouldn’t listen, so I threw a rock at him. More>>

ALSO:

Don Franks: Future Of Work Commission: Labour's Shrewd Move

Lunging boldly towards John Key, shouting 'Cut the crap!' - Andrew Little was great, wasn't he? Labour's new leader spoke for many people fed up with Key's flippant arrogant deceit. Andrew Little nailing the Prime minister on lying about contacting a rightwing ... More>>

Asia-Pacific Journal: MSG Headache, West Papuan Heartache? Indonesia’s Melanesian Foray

Asia and the Pacific--these two geographic, political and cultural regions encompass entire life-worlds, cosmologies and cultures. Yet Indonesia’s recent enthusiastic outreach to Melanesia indicates an attempt to bridge both the constructed and actual ... More>>

Valerie Morse: The Security State: We Should Not Be Surprised, But We Should Be Worried

On the very day that the Inspector-General of Intelligence and Security released her report into the actions of people the Prime Minister’s office in leaking classified Security Intelligence Service (NZSIS) documents to right-wing smearmonger Cameron ... More>>

Ramzy Baroud: PFLP Soul-Searching: Rise And Fall Of Palestine’s Socialists

When news reports alleged that the two cousins behind the Jerusalem synagogue attack on 18 November were affiliated with the Popular Front for the Liberation of Palestine, a level of confusion reigned. Why the PFLP? Why now? More>>

Get More From Scoop

 
 
 
 
 
 
 
Top Scoops
Search Scoop  
 
 
Powered by Vodafone
NZ independent news