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]

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Desktop Android emerges as Windows rival

HP Slate 21 desktop Android

HP’s latest all-in-one business computer uses Android for its operating system instead of Microsoft Windows.  In another step away from the old Wintel approach that HP once championed, the new machine sports a quad-core Nvidia Tegra 4 processor instead of an Intel chip.

Acer, Asustek and Lenovo are also bringing desktop Android PCs and laptops to market.

There’s a clear need for HP to experiment with Windows alternatives. But is desktop Android the right choice for a business desktop?

Unhappy with Microsoft

Like many other PC makers, HP isn’t happy about Microsoft’s entry into the hardware market. The software giant’s Surface PC-style tablets are both a criticism of existing PC brands and a direct challenge to the companies that made Microsoft rich.

Another strike against Microsoft is customer resistance to Windows 8. It isn’t popular with individuals or with businesses. Retailers and PC makers report buyers prefer systems with an older version of Windows.

Apple isn’t willing to licence its OS X operating system. Straightforward desktop versions of Linux (Android is Linux-based) have failed to ignite sales, which leaves computer makers with little choice but to use a Google operating system.

Android, or Chrome?

Google offers two options: Android and Chrome. Chrome is effectively a browser that operates as a cloud-based OS. Android was built for mobile phones and can be found on tablets.

Is Android the right choice as a desktop OS?

I can’t answer that until I’ve tested an Android-based desktop. I spent time with Chrome and found it is a good choice for most, not all computing tasks.

HP says it chose desktop Android over Chrome because the phone OS is more flexible, cheaper and allows more customisation.

Inexpensive

The Slate 21 sells for US$400 in the United States – expect to pay around $600 plus when it hits New Zealand. HP says if it opted for Chrome it wouldn’t have been able to keep the price as low.

HP also says Android functions better offline than Chrome. That last point seems odd as few desktops spend much time not connected to the internet these days.

Another point is that Google has tighter control over Chrome than Android. Users have no choice but to upgrade at Google’s whim. Companies running Chrome-based systems have fewer options to customise software to their needs.

Chrome has the advantage of Google’s web-based apps while the Slate 21 comes with the Kingsoft Office Suite which works with Word, Excel and Powerpoint documents. Of course there’s nothing to stop Slate 21 owners from pointing their browsers at Google Apps.

Is desktop Android viable?

On one level Android doesn’t look like a great desktop OS. It was built for phones and few, other than enthusiasts, regard it as the best phone OS. On tablets it isn’t as enjoyable or productive as iOS or Windows. And yet…

The truth is that all most modern computer users need is a decent browser. Almost all important work can take place online and in the cloud. Android comes with a choice of decent browsers including Chrome.

There are also some OK-ish apps already available, none of them cost much. Developers can quickly tweak their existing products for bigger screens. With a million or so apps to choose from, a Slate 21 user can be productive from day one.

Will Android fly on the desktop? To be honest I’m not sure. I can’t see any obvious reason why not. You certainly can’t argue with the price. The only glaring problem I can see is with people who need to run heavy-duty applications like Photoshop and other media creation tools.

Desktop Android is unlikely to hurt Apple in  the near future – that company owns the high ground across desktops, tablets and smartphones. The real danger is to Microsoft.

[digitl 2013]

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