Mandatory data breach reporting has been on the agenda in New Zealand for some time. While they may have some ground to make up on the rugby field, it is one area where our trans-Tasman cousins have stolen a march on New Zealand.
New Zealand is falling behind best practice when it comes to data breach reporting. Where other countries have laws, we have guidelines. There are no formal penalties for failing to report a breach although failure to report may be held against an organisation if there are legal consequences.
Privacy is important and is being eroded all the time. Let’s put a stop to that. It’s time to step up efforts to put a mandatory system in place with fines for non-compliance.
At heart, Dell and EMC are hardware companies. They face a serious problem: customers have lost interest in hardware.
On October 12 Dell said it will pay US$67 billion for EMC. It’s the biggest technology deal ever and the latest in a never-ending wave of mergers.
Dell may pay too much for EMC’s business. The offer is more than twice the total equity and about 50 percent higher than the value of EMC’s assets. Acquiring companies often overbid to see off rivals.
Most observers expect Dell to sell unwanted parts of EMC when the deal completes. This will lower the final cost of the acquisition.
The elusive benefits of tech consolidation
Big technology company mergers rarely succeed. I can’t think of any that have been a resounding success.
Expect managers to prattle on about synergy as if they know what they are talking about. They rarely do. In most cases the movers behind takeovers are lucky if the new organisation is worth as much as the sum of the parts. Often big tech mergers destroy value.
There is a long list of disappointments. Oracle’s Sun Microsystems acquisition saw a huge destruction of value. At the time there was a lot of talk of synergy.
Then there is HP. It binged on Compaq, EDS and Autonomy — all, allegedly, bringing synergy. There’s little evidence of that.
Dell faces another risk. It needs to take on a huge debt for the acquisition. The good news is Dell has a track record of paying-down debt. It has already paid back the cost of its 2013 buy-out.
EMC’s shareholders get a profitable exit just as the future starts to look uncertain.
Its operating income last year was US$4 billion, net income was US$2.7 billion. Although debt is cheap at the moment, paying the interest will still be a challenge.
Cisco shareholders must be praying someone else with deep pockets is thinking of a similar move.
Dell’s EMC buy underlines how cloud computing has hurt enterprise technology companies.
Cloud is the biggest change since networks of small computers replaced mainframes in the early 1990s. Unlike the earlier waves of creative destruction this isn’t about replacing a hardware generation. It’s about the move from hardware to services.
EMC has a toehold in the data centre business. It sells storage hardware and virtualisation software to help spread loads between servers. This is a company that until recently had double-digit growth. Today EMC is growing at a slower pace.
Dell diversifies with EMC
Dell has moved into corporate computing. It has made big strides with storage and servers. Yet it still depends on PCs for most of its income. That market is in free-fall.
The server business is no better. Only IBM and SAP have much in the way of mainframe business. Players like Unisys are now consigned to mainframe niches. And that sector is unlikely to grow.
The smaller servers that have dominated business computing for the last twenty years are also on the way out.
While the shift to cloud computing threatens Dell and EMC, it also threatens all the other business technology giants of the last 25 years.
Microsoft is an exception. It got into the cloud ahead of the trend and is now the main competitor to AWS which came from nowhere to dominate enterprise computing.
Away from the cloud, hardware makers are now churning out basic, commodity computers which can be programmed to act as servers, routers or storage devices. Hence Software-defined networking, software-defined storage and even software-defined data centres.
This trend also reduces the once valuable integration revenue — everything plays together better now.
Dell’s strength lies in building low-cost, undifferentiated hardware. But even its commodity computers are too expensive for the big cloud companies who build their own kit or outsource the job to white-box contractors.
Now Dell is banking on selling low-cost hardware to enterprises so they can build thier own private clouds. It may also hope to juggle the economics of building commodity hardware to win back business from the cloud companies.
Many commentators view the deal as a sign of the triumph of new cloud players over old enterprise technology companies.
There is something in this, but it’s not straightforward. All the old companies have made huge investments in cloud technology. They just haven’t moved fast enough, or confidently enough towards the new way of running technology.
Unlike AWS, they face a problem, if they race too fast to the cloud they’ll replace their existing high margin business with a low margin alternative. Only Microsoft has avoided this fate.
Which brings us back to Dell buying EMC. It isn’t a triumph or a new beginning, the deal is a step in the death throes of an era. What we are seeing is the twilight of the technology gods.
Once a takeover is in play, it can often be just as important, maybe more important, to keep the target out of rival’s hands. Much of this is just something that goes on inside manager’s heads. I can’t remember many large scale acquisitions which ended up causing serious damage to rivals. ↩
Latency is a good reason to build a data centre closer to customers.
Spark Digital has just spent NZ$60 million building a data centre in Takanini, South Auckland. That puts it within spitting distance of New Zealand’s biggest market. According to Spark the Takanini data centre is part of a NZ$200 million investment in New Zealand cloud services.
Rivals Datacom and Catalyst IT have both invested in New Zealand data centres. So have multinationals. In 2011 IBM opened an NZ$80 million facility in Auckland. Earlier this year IBM spent a further NZ$10 million bringing new managed cloud services to New Zealand.
Latency isn’t the only reason to build data centres in New Zealand. Data sovereignty is also important. Some data must be stored in New Zealand by law. There are companies who prefer to keep their data where predictable, manageable New Zealand privacy laws apply. And fears that foreign governments often have the rights to snoop on data stored in their territory also drives some companies to keep data where it is relatively safe.
Price is the downside of buying cloud services in New Zealand. One local start-up told me it would cost almost ten times the going international rate to use local cloud servers. That would put their business at a significant disadvantage.
Yet, latency can mean the higher cost of local cloud services is worth every penny.
The submarine cables connecting New Zealand to the rest of the world are fast — data travels though those pipes at the speed of light. However, over long distances — and from New Zealand that means most places — even light-speed travel times are a problem.
There’s nothing we can do about latency. As they say in Star Trek: “You cannae change the laws of physics”.
Here is a list of round trip ping times to overseas destinations. The numbers come from Verizon statistics and are for direct trips. Think of these numbers as the best case. Some traffic travels over roundabout routes, it is not unknown for NZ-Singapore traffic to go via the USA and routes through the public internet can get held up for all kinds of reasons.
I’m told latency becomes noticeable on desktop interactive apps when round trip ping times go over 50ms. You may have a different experience. Moving a mouse around a spreadsheet or typing more than a few words into a form is frustrating when there’s a long lag between action and effect.
Ping times to Australia are on a par with domestic times. Reannz (Research and Education Advanced Network New Zealand Ltd) reports domestic latency between the two furthest points of presence on its network, North Shore and Invermay is 22ms. While traffic from New Zealand’s South Island has to travel to Auckland before making the trans-Tasman hop, for New Zealand companies in Auckland, Eastern Australia has domestic-like latency.
What does this mean for New Zealand cloud providers? Putting aside data sovereignty, the issue is how important is latency to your application. You can farm out low priority jobs to the cheapest cloud providers anywhere in the world — the size of the US economy means that’s where there are economies of scale. It makes sense to keep the highest priority workloads, where speed is essential, in New Zealand. Everything else can go to Australia.
New Zealand tech companies don’t come much bigger than Datacom. The company is also old by industry standards. It started in the 1960s. For years Datacom deliberately stayed out of the public eye. It prefers to keep its own counsel and communicate directly with customers.
Despite that, there’s nothing staid or complacent about Datacom.
He says the company deliberately fosters an internal innovation culture. In effect he said there are virtual start-up teams and there are competitive events where Datacom developers work start-up style.
Big technology companies often claim they support internal entrepreneurial activity. Often it’s a matter of paying lip-service to the idea. Partly it is a way of keeping developer teams happy.
Datacom workers innovate outside work hours
Davidson made it clear Datacom’s entrepreneurial culture is more than skin deep. He told me the events often take place outside normal work hours. They are popular and well attended. Although he didn’t say so, it was also clear the company’s senior management stands squarely behind these activities.
Tech feature writing works best when you focus on one or two big ideas, throw everything in and it gets hard to follow. So I left this material out and made a note that it could be worth a follow-up later.
Then I spoke to Mohit Singh for a story about Garden Genie. The team won top prize at the Auckland Startup Weekend in November. That’s an achievement. But it went on to win the global ecommerce prize. Team members are now in Austin, Texas working in an incubator to get their idea ready for market.
Singh works as a developer for Datacom. Moreover, he works on phone apps. You’d think that might mean a conflict: a motivated, smart entrepreneur delving away in a tech giant. Singh told me he has nothing but encouragement from his managers – presumably including time off work to take up the prize. Nothing serves as a better illustration that Davidson means it when he talks about fostering an internal innovation culture.
A new 60 rack facility opened in Albany, north of Auckland, earlier brings Vocus Communications New Zealand data capacity to a total of 260 racks with space for a further 110.
Previously the company operated the 200 rack data centre it picked up as part of the June 2012 Maxnet acquisition.
The Albany site is directly connected to the Auckland fibre ring. From there it can link to Vocus’s own network which can give users private connections to Australia, New Zealand, the United States and Asia without touching the public internet.
Chairman David Spence told me the Albany facility is part of a network across Australia and New Zealand which now stretches to 11 data centres in eight locations. He says the company’s data centres are all highly connected allowing customers to have a high degree of redundancy.
Spence says he is confident the new capacity will fill quickly. He says: “We already have five customers in the data centre and there are another seven committed customers in the sales pipeline. Our prices are keen and there’s certainly no lack of demand for capacity in New Zealand.”
He says Vocus may need to add further capacity in New Zealand; “We’re demand driven, the world is moving to the cloud and New Zealanders are ahead of others.”
Last month Vocus launched an end-to-end service linking New Zealand companies to Amazon’s cloud servers in Sydney. Is there a conflict between this business and operating a data centre? Spence doesn’t think so, he says there is a demand for both types of service and Vocus’ business is about meeting those demands.
From reselling international bandwidth
Vocus Communications is a relatively new name in the New Zealand infrastructure business. Until five years ago the Australian-based company was mainly reselling international data capacity on the Southern Cross Cable Network.
The price structure for international bandwidth favours larger customers, Vocus would get a volume discount buying a fat pipe then divide up the bandwidth among its customers charging each less than they would pay if they purchased direct. Pocketing the difference proved lucrative and a win for all concerned. It’s a business Spence describes as “being an ISP for the ISPs”.
Three years ago Vocus listed in Australia. That process raised A$6 million, valuing the company at around $25 million. Spence says today Vocus is worth north of $200 million and the company has become a significant infrastructure player.