Archive for the 'Business Models / Strategy' Category

Why there should be a little bit of Pivotal in everyone

May 2, 2013
88 Miles Per Hour - Azaghal Gabilzaramul

When Paul Maritz and the team finally unveiled Pivotal last week, like Doc Emmett Brown uncovering the DeLorean, not only did they reveal EMC’s new escape vehicle from the inertia of past success, but also a brilliantly droll marketing tag line to go with it.

The idea of EMC and VMware’s “consumer grade” spinout to serve enterprises – delivered with a knowing wink – comes with a delightful and complex irony, but behind the humour is a much more serious lesson for anyone still with their head in the sand.

Pivotal represents a refreshingly positive and constructive response to being at the sharp end of disruption. It shows a company taking a careful and dispassionate look at its assets, how its value chain and those of its customers are changing, and then understanding where it should be next in order to remain relevant.

The notion on which Pivotal is founded is more than a clever joke; it turns the entire semantics of enterprise tech marketing on its head. It paints a picture showing where new business value is now being created, how these applications are being built and where they are being deployed. All this should prompt some interesting questions amidst the hubris of old school IT.

For example, perhaps it’s time to take a fresh look at the competitive landscape. Are those hyperscale brethren Google, Amazon and Facebook sworn enemies to be renounced at all costs or actually pioneers to be understood and emulated? Before jumping to conclusions on how to play these games, do we actually understand the basis of competition in this new world of cloud ecosystems? Is it best to respond with a knee jerk flurry of FUD, or by adopting the same philosophies, co-opting the winning ecosystems, and building on these to create new value?

The world of has a habit of changing around us and often the changes only make sense once it’s too late. Commoditsation and democratisation of technology roll on, familiar value chains evolve, trusted business models get unpicked and the once essential quickly becomes irrelevant. Pivotal should be a wake up call to everyone trying to push water uphill in the infrastructure product business: the future is here now and it demands an appropriate response.


Thoughts on trust

July 3, 2012

I was remembering a moment of customer insight during a meeting earlier this year. It was one of those perfect spring days in Britain when everything aligns and you’re lucky enough to find yourself in a pub garden.

I was out on a lunch meeting with a customer, discussing current projects with their Head of Infrastructure and we got round to talking about storage. He was an AWS S3 user and was clearly compelled to use the service for all reasons that you might expect. However, it seemed like something was missing from the picture.

“So of course I like Amazon’s services”, he said with a smile, “But, I can’t go for lunch with Amazon”.

I know for a fact this isn’t true – of course AWS folks do directly engage with some customers – but I understood the sentiment behind the comment.  To a certain extent this is probably normal for any business delivering homogeneous, auto-magic services at global scale.

What’s interesting is that Amazon are incredibly customer focused, but this focus is on building services that are so convenient that you cannot help but use them. This is a different thing to building long-term customer relationships based on trust and shared values.

In one of my favourite posts from last year Venkatesh Rao makes a good observation about Amazon’s realpolitik approach to their market, to which all AWS outages are a testament:
Where other companies might respond with overwrought displays of contrition and dramatic conciliatory gestures, Amazon will likely do the minimum necessary, wait out the storm, and move on.

So where does this leave Service Providers?

Well it would seem, given that cloud is confusing the hell out of enterprises, one of the most obvious things carriers and SPs can do is fill this human gap by becoming more consultative. There really needs to be less selling and more teaching going on. Customers respond well to a bit of honesty and clarity when it comes to making informed buying decisions.

With Cloud, as with all journeys, a path needs to be created and stepping stones are needed along the way to help transformation of people, process and technology.
Service Providers, as a trusted partner for IT, often hold a privileged position from which to approach this. The brilliant thing about trust is that it can’t be copied, or stolen or bought. It can only be earned.

Service Providers are comfortable dealing with the IT dept, but we also know the customer is changing. Providers can use existing customer relationships with IT as a beachhead from which to launch new conversations with a new type of IT buyer, who have been said to hold the purse strings for two thirds of the time.

The gulf between IT and Development is definitely a challenge, but from what I’ve seen many enterprise developers are still isolated from the public cloud revolution, especially in Europe, leaving plenty of mind share up for grabs if SPs can get their act together.

The three stages of acceptance for carriers in the cloud

April 17, 2012

casa de la cultura

Carriers have some major issues when it comes to mental inertia.

They always put themselves at the centre of the universe and, especially in enterprise markets, they tend to be fixated on infrastructure rather than the applications i.e. the things that actually matter. This is a trait they share with their target customers, product-minded IT departments.

Some providers have tried buying clouds, some building, some just investing, and amongst the analysts there’s been plenty of talk about the broker model. However, the jury is still out on whether carriers can indeed find a suitable and profitable role in the new cloud world order.

I believe that if carriers can find enduring success it will depend on the acceptance of three basic, related truths.

1) Accept the commoditisation of IT

Throughout history all infrastructural technologies, from railways, to electricity, to telephony, have undergone the same process of transition from initial innovation, to product, through to commodity and utility provision.

Cloud computing is the latest phase in the relentless commoditisation of IT infrastructure. This is not news, but unfortunately the message is still not getting through to a telco industry steeped in dogma.

It’s important to keep in mind that as infrastructure becomes an inexpensive commodity utility service, all value shifts from hardware to software.

“Enterprise grade” is no longer synonymous with “the best”. From now on, whenever you read this in the context of hardware, simply replace it with “Suitable for Legacy/Unreliable Software“. That will help you to keep things in perspective.

If you’re actually trying to build cloud infrastructure, remember this: Using expensive purpose-built enterprise hardware ignores the trend of commoditisation and creates only a competitive disadvantage. When infrastructure becomes a commodity utility, you need to shift your focus onto software.

2) Accept that every conversation has to start with software.

It amazes me how almost every IT sales conversations starts with infrastructure, considering it has no inherent value. The applications that serve the business might get considered as an afterthought, if they’re lucky.

Developers who are clued-up are writing cloud applications today that surpasses the resilience and scalability that was previously achieved in hardware. Your enterprise grade infrastructure has no meaning here. Carriers will need to work out where the customer is on the application journey and make sure they understand it.

Ultimately success in cloud will depend on acquiring something that has so far eluded carriers; an ability to operate with a software-oriented mindset.

3) Accept that the customer is changing

Business Internet access is now fit for purpose in most mainstream applications. Meanwhile public commodity cloud has demolished barriers to entry for greenfield software development.

This has created an entirely new service-centric value network that is beginning to dismantle the product-centric world of Enterprise IT departments and the IT incumbents that serve them.

It’s common knowledge that developers everywhere are bypassing IT to get the resources they need from public cloud. Meanwhile the business users can now access better and faster applications and services outside the organisation, than from their internal IT dept.

Most productivity gains are coming from outside the business and this is not sustainable for Enterprise IT.  A strategy which targets only the traditional value chain or “stack” of Enterprise IT is akin to moving into a house that is scheduled for demolition.

Service providers still regard the IT dept as their sole customer. When the IT dept’s own customers (i.e the business) starts to look elsewhere, changing procurement patterns, carriers need to think about what the implications are for them.

From product to service: a tale of two value networks

December 16, 2011

A Tale of Two Value Networks

If you care to step outside of your startup, look beyond your #clouderati twitfeed, or take a break from your achingly futuristic unconference, to have a stroll in the workaday realm of Enterprise IT (for now, still the ruler of global business technology) you may be shocked and appalled to encounter the steadfast opinion that cloud is “nothing new”.

“We’ve been doing this for years”, enterprise people say. “It’s just another form of outsourcing”

Normal people, eh? Don’t they ever go to Cloudcamp?

On occasions, if I’m able to summon the strength to open this can of worms, I pause for a moment and then ask,

“Do you know why you can’t understand cloud computing?”

Enterprise person: <Shrug>

“It’s because nobody wants you to”.

What on earth do I mean by this?

Well in fairness I should clarify here; when I say “nobody” what I actually mean is, “nobody in your value network”.

If you haven’t heard of value networks then you should check them out, because they provide some wonderful business analysis perspective; I’m referring to them here in the way that Clayton Christensen explains them in The Innovator’s Dilemma.

Have a closer look at my picture above.

I drew this to help me make sense of  things, and help me explain my view to others (you could call it a cluebat). It might be an over-simplification for some folk, but it works for me.

So this is how it works: you’re in a value network right now. It might even be one of the ones I’ve drawn. For most normal people just trying to get their work done, their value network largely tends to define their world view.

We have the Enterprise IT incumbents on the left of the picture and the new kids on the block sit on the right. Broadly speaking we also see a product-centric on the left and a service-centric view on the right.

The two value networks have fundamentally different costs structures and value perceptions, which is why none of the companies on the left have been able to compete with Amazon. Not even the largest IT companies on earth have managed to compete because they are prisoners of their value network.

Going back to my initial point, this picture also explains why if you work in Enterprise IT, and never stick your head above the parapet, your experience and understanding is dominated by the FUD and cloud-washing efforts of traditional vendors selling yesterday’s products packaged as a high cost “enterprise grade” services.

According to Christensen, the only really successful way for a business to enter the new value network is a spinout strategy where you start a new business entity that is independent of the normal resource allocation process . This is what VMware have apparently done with their CloudFoundry PaaS. This is what Quantum hard disks did in the 90s, and what HP Deskjet printers did. It is how IBM survived the move from Mainframe/minicomputer to desktop PCs.

Now I should point out that what I’m using to position these companies are their traditional core values as I perceive them. I’m aware that some companies on the left have made strategic acquisitions or have divisions in the right of the picture, but fundamentally their core business is based on the sales of high margin products. This is how they have created shareholder value and it’s what shareholders expect to be reflected in the financial results.

When thinking about various companies strategic moves I am reminded of JP Rangaswami’s comments at this years Business Cloud Summit: We are seeing a radical changes in the IT industry. Are acquisitions at the edge, without radical changes at the core, enough to cope with this?

I have tried to reflect movement in the diagram. You will notice that I’ve shown Dell moving mostly to the right because of their historic focus on relentless commoditisation of hardware. Microsoft also seem to be trying quite hard to find a place in the new world order, but we shall see if they manage to break across.

Finally, right at the top of picture, you have the person who actually matters – the business user. This is the sharp end of the Consumerisation of IT or, as I think more aptly describes it, the Democratisation of IT.

In a future post I want to examine a specific topic that relates to these two value networks – the concept of Carrier Cloud – and how I see the conflict between the two networks shaping the developments that are coming from the likes of Cisco and Alcatel Lucent.

Pay per drink pricing: an enterprise perspective

December 14, 2010
10,100,1000? Why?

10,100,1000? Why?

This weekend Joe Weinman posted a two part article on GigOM, as a follow up to his earlier Market for Melons paper, in which he claims that usage based charging for consumer broadband is inevitable. According to Joe this change to metered broadband will be driven not by operators, but by rational consumer behaviour:

Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest—light users, by deciding not to subsidize the heavy ones, foster the vitality of the pay-per-use model.

Understandably this suggestion had many GigOM readers choking on their potato salad. Some “spirited debate” then ensued; he was preaching to the All You Can Eat crowd here after all, not the Weight Watchers.

What I found interesting was that this rational purchasing decision – the desire not to overpay – is actually something that I would attribute much more heavily to the business customers I speak to.

There is a certain amount of symbiosis between the consumer and enterprise wireline access market, especially from my viewpoint in the UK, given the wholesale market backdrop of the Openreach monopoly. However, the customer behaviour and attitude to cost is different. Whereas consumers have unpredictable binges on media content, enterprises have IT policies, with more tightly controlled, monitored and therefore predictable traffic patterns. So, in a tough economic climate, pay per drink should be attractive to the enterprise.

Here are my relevant observations from the field:

  • It is getting messy out there. Fierce price competition is not going away; enterprise customers have become extremely picky, sales cycles have become longer, and operators are desperately trying to reduce install and recurring costs to close deals.
  • Price sensitivity means there is much more activity at the point where “business” broadband (copper access) meet fiber access services. Less attention is being paid to the SLA and business-grade suitability of services.
  • There is clearly strong demand for more flexible pricing structures in enterprise services. The price gap between 10Mb and 100Mb fiber access is a major sticking point. Why must we pick from the set menu of 10/100/1000Mb fibre access?

It seems clear that any kind of pricing innovation in enterprise wireline would be very gladly received right now. I would say most IT Directors do not make the same irrational decisions that consumers might. This is a numbers game. Overpaying for a collection of underutilised 100Mb fiber access circuits at £2-3k install and up to £5-20k annually is a totally different matter to free install and £300 per year for home broadband.

I can’t say that metered fiber access is inevitable any time soon – too much is dependant on the wholesale pricing – but I’d say that the customer motivation to drive this is much stronger in the high bandwidth market.

Are any UK operators up to the challenge of being the first to offer usage based charging for enterprise, without waiting for Ofcom and Openreach to change the game?


Joe sent me a message to reinforce the point out that he was referring to wireline *and* wireless broadband, where tiered pricing is already taking hold. Point noted!

particularly at the point where business broadband and fiber access services intersect.