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

 

Valerie Morse: Key And NZ Police At G20: What A Contribution

While 200 New Zealand police officers are helping to repress protests outside of the G20 in Brisbane this week, John Key has been inside pushing the interests of giant multinational corporations to fast track the World Trade Organization (WTO) ... More>>

ALSO:

Gabriela Coutiño: Ayotzinapa Caravan Meets With EZLN In Oventic

In their visit to Zapatista Territory, parents of the 43 students disappeared from Ayotzinapa Guerrero, agreed with the Zapatista National Liberation Army (EZLN), to articulate a national grassroots movement that would question forced disappearances ... More>>

Ramzy Baroud: Talk Of A Third Intifada: Where To From Here, Palestine?

When a journalist tries to do a historian’s job, the outcome can be quite interesting. Using history as a side note in a brief news report or political analysis oftentimes does more harm than good. More>>

ALSO:

David Swanson: Who Says Ferguson Can't End Well

Just as a police officer in a heightened state of panic surrounded by the comfort of impunity will shoot an innocent person, the Governor of Missouri has declared a state of emergency preemptively, thus justifying violence in response to something ... More>>

Melanie Duval-Smith: Homeless Is Where The Heart Is

So, you are not allowed to feed the homeless on the streets of Florida. Last week, a 90 year old man and two Christian ministers were arrested for doing just that. I can hear the cries of the right wingers from here. “Not in our back yard”, ... More>>

John Chuckman: What We Truly Learned From the Great War and the Absurdity of Remembrance Day

No matter what high-blown claims the politicians make each year on Remembrance Day, The Great War was essentially a fight between two branches of a single royal family over the balance of power on the continent of Europe, British foreign policy holding ... More>>

Redress Information: A European Call To Suspend EU-Israel Association Agreement

More than 300 political parties, trade unions and campaign groups have called on the European Union to suspend its “association agreement” with Israel. The agreement, which came into force in 2000, facilitates largely unrestricted trade with Israel ... More>>

Ramzy Baroud: The Age Of TV Jokers: Arab Media On The Brink

As I was finalizing my research for this article, I found myself browsing through a heap of hilarious videos by mostly Egyptian TV show hosts Tawfiq Okasha and Amr Adeeb. More>>

Get More From Scoop

 
 
 
 
 
 
 
Top Scoops
Search Scoop  
 
 
Powered by Vodafone
NZ independent news