Nick has a long post about Tim O'Reilly not getting the cloud. He questions Tim's assumptions on Web 2.0, network effects, power laws, and cloud computing. Both of them have good points.
O'Reilly comments on the cloud in the context of network effects:
"Cloud computing, at least in the sense that Hugh seems to be using the term, as a synonym for the infrastructure level of the cloud as best exemplified by Amazon S3 and EC2, doesn't have this kind of dynamic."
Nick argues:
"The network effect is indeed an important force shaping business online, and O'Reilly is right to remind us of that fact. But he's wrong to suggest that the network effect is the only or the most powerful means of achieving superior market share or profitability online or that it will be the defining formative factor for cloud computing."
Both of them also argue about applying power laws to the cloud computing. I am with Nick on the power laws but strongly disagree with him on his view of cloud computing and network effects. The cloud at the infrastructure level will still follow the power laws due to the inherent capital intensive requirements of a data center and the tools on the cloud would help create network effects. Let's make sure we all understand what the powers laws are:
"In systems where many people are free to choose between many options, a small subset of the whole will get a disproportionate amount of traffic (or attention, or income), even if no members of the system actively work towards such an outcome. This has nothing to do with moral weakness, selling out, or any other psychological explanation. The very act of choosing, spread widely enough and freely enough, creates a power law distribution."
Any network effect starts with a small set of something and it eventually grows bigger and bigger - users, content etc. The cloud makes it a great platform for such systems that demand this kind of growth. The adoption barrier is close to zero for the companies whose business model actually depends upon creating these effects. They can provision their users, applications, and content on the cloud and be up and running in minutes and can grow as the user base and the content grows. This actually shifts the power to the smaller players and help them compete with the big cloud players and yet allow them to create network effects.
The big cloud players, that are currently on the supply side of this utility mode, have few options on the table. They either can keep themselves to the infrastructure business and I would wear my skeptic hat and agree with a lot of people on the poor viability of this capital intensive business model that has very high operational cost. This option alone does not make sense and the big companies have to have a strategic intent behind such large investment.
The strategic intent could be to SaaS up their tools and applications on the cloud. The investment and control over the infrastructure would provide a head start. They can also bring in partner ecosystem and crowdsource large user community to create a network effect of social innovation that is based on collective intelligence which in turn would make the tools better. One of the challenges with the recommendation systems that uses collaborative filtering is to be able to mine massive information that includes users' data and behavior and compute the correlation by linking it with massive information from other sources. The cloud makes a good platform for such requirements due to its inherent ability to store vast amount of information and perform massive parallel processing across heterogeneous sources. There are obvious privacy and security issues with this kind of approach but they are not impossible to resolve.
Google, Amazon, and Microsoft are the supply side cloud infrastructure players that are already moving in the demand side of the tools business though I would not call them the equal players exploring all the opportunities.
And last but not the least, there is a sustainability angle around the cloud providers. They can help consolidate thousands of data centers into few hundreds based on the geographical coverage, availability of water, energy, and dark fiber etc. This is similar to consolidating hundreds of dirty coal plants into few non-coal green power plants that can produce clean energy with efficient transmission and distribution system.
Monday, December 1, 2008
Monday, November 17, 2008
Microsoft Cloud Computing Blogger Roundtable
Today Microsoft announced the cloud offering for Exchange and SharePoint. I was invited to participate into the Microsoft Blogger round table that took place after the announcement as an initiative by Microsoft to establish relationship with the bloggers and thought leaders in the cloud computing area.
The launch event, attended by select customers, partners, bloggers, and the press, included a demo that articulated the seamless ubiquity of the solution – from the cloud to on-premise and vice versa reiterating the client-server-service strategy. Microsoft also iterated their commitment to continue investing massively into the data centers and also emphasized commitment to sustainability.
When asked about the SLA the answer was that the SLA is based on availability, security and privacy, and recovery time in the event of a disaster based on the geography. The SLA is three 9.
Stephen Elop, president of the Microsoft Business Division at Microsoft dismissed the possibility of slow online adoption due to the continued investment into the on-premise products commenting that the customers will still need an on-premise client - some kind of “local processing” - citing Google Chrome (without naming it)
The event was followed by a blogger round table that I participated into. This was an effort by Microsoft to establish relationship with the bloggers and thought leaders in the cloud computing, Enterprise 2.0, and social innovation area. It was an interesting conversation on the topics such as Microsoft embracing the cloud computing culture as an organization, better ways to engage with the bloggers, cloud computing adoption concerns, messaging issues around Microsoft products, SharePoint as a platform on Azure etc.
The discussion was quite open and well moderated by David Spark. Microsoft expressed the desire to better connect with the thought leaders and bloggers in the cloud computing area. Following is a list of some of the bloggers that were at the table:
Jeff Nolan – Enterprise 2.0
Ben Metcalfe – Co-founder of the Data Portability group
Salim Ismael – Headed Yahoo Brickhouse in his previous career
Phil Wainwright – from ZDNet
Geva Perry
Tom Foremski
Adrian Chan
Deb Schultz
Ohad Eder
The launch event, attended by select customers, partners, bloggers, and the press, included a demo that articulated the seamless ubiquity of the solution – from the cloud to on-premise and vice versa reiterating the client-server-service strategy. Microsoft also iterated their commitment to continue investing massively into the data centers and also emphasized commitment to sustainability.
When asked about the SLA the answer was that the SLA is based on availability, security and privacy, and recovery time in the event of a disaster based on the geography. The SLA is three 9.
Stephen Elop, president of the Microsoft Business Division at Microsoft dismissed the possibility of slow online adoption due to the continued investment into the on-premise products commenting that the customers will still need an on-premise client - some kind of “local processing” - citing Google Chrome (without naming it)
The event was followed by a blogger round table that I participated into. This was an effort by Microsoft to establish relationship with the bloggers and thought leaders in the cloud computing, Enterprise 2.0, and social innovation area. It was an interesting conversation on the topics such as Microsoft embracing the cloud computing culture as an organization, better ways to engage with the bloggers, cloud computing adoption concerns, messaging issues around Microsoft products, SharePoint as a platform on Azure etc.
The discussion was quite open and well moderated by David Spark. Microsoft expressed the desire to better connect with the thought leaders and bloggers in the cloud computing area. Following is a list of some of the bloggers that were at the table:
Jeff Nolan – Enterprise 2.0
Ben Metcalfe – Co-founder of the Data Portability group
Salim Ismael – Headed Yahoo Brickhouse in his previous career
Phil Wainwright – from ZDNet
Geva Perry
Tom Foremski
Adrian Chan
Deb Schultz
Ohad Eder
Thursday, November 13, 2008
Continuous Passive Branding During Economic Downturn To Change Customers' Opinions
The current economic downturn has forced many CIOs to significantly reduce the external IT spending. Many projects are being postponed or canceled. This situation poses some serious challenges to the sales and marketing people of companies selling enterprise software. Many argue that there is nothing much these people can do. I would disagree.
Marketing campaigns tend to rely a lot on selling a product using active aggressive marketing that may not be effective under these circumstances since many purchase decisions are being placed on hold. However these circumstances and poor economic climate are ideal to build a brand and paddle concepts with continuous passive branding exercise. The branding exercise, if designed well, could change buyers’ experience around a concept or a product and evoke emotions that could be helpful when a product is actively being sold. Guy Kawasaki points us to an experiment that studied the art of persuasion to change people's attitudes. People should always be selling since the best way to change someone's mind is to sell them when they are not invested into an active purchase decision, emotionally or otherwise.
GE’s green initiative, branded as ecomagination, is an example of one of these passive branding exercise. Last year Climate Brand Index rated GE No. 1 on green brands. GE published a page long ad in a leading national magazine introducing their new green aviation engine. Instead Jeff could have picked up the phone and called Boing and Airbus and said "hey we have a new engine". Instead GE paddled their green brand to eventually support their other products such as green light bulbs. Climate change is a topic that many people are not necessarily emotionally attached to and have a neutral position on but such continuous passive marketing campaigns could potentially change people's opinions.
Apple’s cognitive dissonance is also a well known branding strategy to passively convince consumers that a Mac, in general, is better than a Windows. Many people simply didn’t have a stand on a laptop but now given a choice many do believe that they like a Mac.
The art of persuasion goes well beyond the marketing campaigns. Keeping customers engaged onto the topics and drive the thought leadership is something even more important during this economic downturn. The sales conversation is not limited to selling a product but also includes selling a concept or a need. The marketing is even more important considering the customers are not actively buying anything. The leaders should not fixate themselves on measuring the campaign to lead metrics. Staying with the customers in this downturn and help them extract the maximum value out of their current investment would go a long way since customers don't see their opinions being changed by a seemingly neutral vendor. When the economic climate improves and the customers initiates a purchase that sales cycle is not going to be that long and dry.
The leaders should carefully evaluate their investment strategy during this economic downturn. The economy will bounce back, the question is will they be ready to leap frog the competition and be a market leader when that happens. Cisco's recently announced their 2009 Q1 results. John Chambers made Cisco's strategy in the downturn very clear - invest aggressively in two geographies: the U.S. and selective emerging countries since emerging countries will be a steady state of growth as the countries grow and be prepared to sell in the western countries since they are likely the first ones to come out of this downturn.
“In our opinion, the U.S. will be the first major country to recover. The strategy on emerging countries is simple. Over time we expect the majority of the world’s GDP growth will come from the emerging countries. In expanding these relationships during tough times, our goal is to be uniquely positioned as the market turn-around occurs. This is identical to what we did during Asia's 1997 financial crisis.”
Marketing campaigns tend to rely a lot on selling a product using active aggressive marketing that may not be effective under these circumstances since many purchase decisions are being placed on hold. However these circumstances and poor economic climate are ideal to build a brand and paddle concepts with continuous passive branding exercise. The branding exercise, if designed well, could change buyers’ experience around a concept or a product and evoke emotions that could be helpful when a product is actively being sold. Guy Kawasaki points us to an experiment that studied the art of persuasion to change people's attitudes. People should always be selling since the best way to change someone's mind is to sell them when they are not invested into an active purchase decision, emotionally or otherwise.
GE’s green initiative, branded as ecomagination, is an example of one of these passive branding exercise. Last year Climate Brand Index rated GE No. 1 on green brands. GE published a page long ad in a leading national magazine introducing their new green aviation engine. Instead Jeff could have picked up the phone and called Boing and Airbus and said "hey we have a new engine". Instead GE paddled their green brand to eventually support their other products such as green light bulbs. Climate change is a topic that many people are not necessarily emotionally attached to and have a neutral position on but such continuous passive marketing campaigns could potentially change people's opinions.
Apple’s cognitive dissonance is also a well known branding strategy to passively convince consumers that a Mac, in general, is better than a Windows. Many people simply didn’t have a stand on a laptop but now given a choice many do believe that they like a Mac.
The art of persuasion goes well beyond the marketing campaigns. Keeping customers engaged onto the topics and drive the thought leadership is something even more important during this economic downturn. The sales conversation is not limited to selling a product but also includes selling a concept or a need. The marketing is even more important considering the customers are not actively buying anything. The leaders should not fixate themselves on measuring the campaign to lead metrics. Staying with the customers in this downturn and help them extract the maximum value out of their current investment would go a long way since customers don't see their opinions being changed by a seemingly neutral vendor. When the economic climate improves and the customers initiates a purchase that sales cycle is not going to be that long and dry.
The leaders should carefully evaluate their investment strategy during this economic downturn. The economy will bounce back, the question is will they be ready to leap frog the competition and be a market leader when that happens. Cisco's recently announced their 2009 Q1 results. John Chambers made Cisco's strategy in the downturn very clear - invest aggressively in two geographies: the U.S. and selective emerging countries since emerging countries will be a steady state of growth as the countries grow and be prepared to sell in the western countries since they are likely the first ones to come out of this downturn.
“In our opinion, the U.S. will be the first major country to recover. The strategy on emerging countries is simple. Over time we expect the majority of the world’s GDP growth will come from the emerging countries. In expanding these relationships during tough times, our goal is to be uniquely positioned as the market turn-around occurs. This is identical to what we did during Asia's 1997 financial crisis.”
Friday, October 31, 2008
First Click Free - Opportunity For The Publishers To Promote Previously Undiscoverable Content
Nick has posted his analysis on Google's First Click Free . This free service allows the content providers to participate into it and promote their content by making the first click free when users discover the content via Google and subsequently enforce registration or subscription for the rest of the content.
I think this is a great idea! I am personally against the walled garden approach and do not believe in registrations and subscriptions just because content providers haven't managed to convince me so far to register or subscribe to for their content. This is a great opportunity for the publishers to showcase their content by making the first link free, demonstrate the value proposition, and drive traffic towards the paid content.
The discussion on the service has so far centered around:
I also do not buy into the argument that users can trick the content providers by faking the request as if it is coming from a Google bot. Google can very easily solve this technological challenge to ensure that only the Google bot and no one else gets access to all the free content.
As much as I appreciate and value this service I suspect that the many publishers won't get it. I hope publishers don't ask Google to pay for the traffic instead of being happy that Google is sending them the traffic. I also see a challenge and an opportunity for the publishers to redesign their website to convert the first free click into a registration, subscription, or a future visit.
I think this is a great idea! I am personally against the walled garden approach and do not believe in registrations and subscriptions just because content providers haven't managed to convince me so far to register or subscribe to for their content. This is a great opportunity for the publishers to showcase their content by making the first link free, demonstrate the value proposition, and drive traffic towards the paid content.
The discussion on the service has so far centered around:
- Google making other search engine's users second-class citizens and not sticking to an unmediated role.
- Users' ability to trick the content providers to get access to all the pages by acting as if the request is coming from a Google bot
I also do not buy into the argument that users can trick the content providers by faking the request as if it is coming from a Google bot. Google can very easily solve this technological challenge to ensure that only the Google bot and no one else gets access to all the free content.
As much as I appreciate and value this service I suspect that the many publishers won't get it. I hope publishers don't ask Google to pay for the traffic instead of being happy that Google is sending them the traffic. I also see a challenge and an opportunity for the publishers to redesign their website to convert the first free click into a registration, subscription, or a future visit.
Thursday, October 16, 2008
Greening The Data Centers
Recently Google published the Power Usage Efficiency (PUE) numbers of their data centers. PUE is defined as a ratio of the total power consumed by a data center to the power consumed by the IT equipments of the facility. Google's data centers' PUE ranges from 1.1 to 1.3 which is quite impressive. Though it is unclear why all the data centers have slightly different PUE. Are they designed differently or are they all not tuned to improve for the energy efficiency? In any case I am glad to see that Google is committed to the Green Grid initiative and is making the measurement data and method publicly available. This should encourage other organizations to improve the energy performance of their data centers.
The energy efficiency of a data center can be classified into three main categories:
1. Efficiency of the facility: The PUE is designed to measure this kind of efficiency that is based on how a facility that hosts a data center is designed such as its physical location, layout, sizing, cooling systems etc. Some organizations have gotten quite creative to improve this kind of efficiency by setting up an underground data center to achieve consistent temperature or setting up data centers near a power generation facility or even setting up their own captive power plant to reduce the distribution loss from the grid and meet the peak load demand.
2. Efficiency of the servers: This efficiency is based on the efficiency of the hardware components of the servers such as CPU, cooling fans, drive motors etc. HP's green business technology initiative has made significant progress in this area to provide energy-efficient solutions. Sun has backed up the organization OpenEco that helps participants assess, track, and compare energy performance. Sun has also published their carbon footprint.
3. Efficiency of the software architecture: To achieve this kind of efficiency the software architecture is optimized to consume less energy to provide the same functionality. The optimization techniques have by far focused on the performance, storage, and manageability ignoring the software architecture tuning that brings in energy efficiency.
Round Robbin is a popular load balancing algorithm to optimize the load on servers but this algorithm is proven to be energy in-efficient. Another example is about the compression. If data is compressed on a disk it would require CPU cycles to uncompress it versus requiring more I/O calls if it is stored uncompressed. Given everything else being the same, which approach would require less power? These are not trivial questions.
I do not favor an approach where the majority of the programmers are required to change their behavior and learn new way of writing code. One of the ways to optimize the energy performance of the software architecture is to adopt an 80/20 rule. The 80% of the applications use 20% of the code and in most of the cases it is an infrastructure or middleware code. It is relatively easy to educate and train these small subset of the programmers to optimize the code and the architecture for energy-efficiency. Virtualization could also help a lot in this area since the execution layers can be abstracted into something that can be rapidly changed and tuned without affecting the underlying code to provide consistent functionality and behavior.
The energy efficiency cannot be achieved by tuning things in separation. It requires a holistic approach. PUE ratios identify the energy loss prior to it reaches a server, the energy-efficient server requires less power to execute the same software compared to other servers, and the energy-efficient software architecture actually lowers the consumption of energy for the same functionality that the software is providing. We need to invest into all the three categories.
Power consumption is just one aspect of being green. There are many other factors such as how a data center handles the e-waste, the building material used, the green house gases out of the captive power plant (if any) and the cooling plants etc. However tackling energy efficiency is a great first step in greening the data centers.
The energy efficiency of a data center can be classified into three main categories:
1. Efficiency of the facility: The PUE is designed to measure this kind of efficiency that is based on how a facility that hosts a data center is designed such as its physical location, layout, sizing, cooling systems etc. Some organizations have gotten quite creative to improve this kind of efficiency by setting up an underground data center to achieve consistent temperature or setting up data centers near a power generation facility or even setting up their own captive power plant to reduce the distribution loss from the grid and meet the peak load demand.
2. Efficiency of the servers: This efficiency is based on the efficiency of the hardware components of the servers such as CPU, cooling fans, drive motors etc. HP's green business technology initiative has made significant progress in this area to provide energy-efficient solutions. Sun has backed up the organization OpenEco that helps participants assess, track, and compare energy performance. Sun has also published their carbon footprint.
3. Efficiency of the software architecture: To achieve this kind of efficiency the software architecture is optimized to consume less energy to provide the same functionality. The optimization techniques have by far focused on the performance, storage, and manageability ignoring the software architecture tuning that brings in energy efficiency.
Round Robbin is a popular load balancing algorithm to optimize the load on servers but this algorithm is proven to be energy in-efficient. Another example is about the compression. If data is compressed on a disk it would require CPU cycles to uncompress it versus requiring more I/O calls if it is stored uncompressed. Given everything else being the same, which approach would require less power? These are not trivial questions.
I do not favor an approach where the majority of the programmers are required to change their behavior and learn new way of writing code. One of the ways to optimize the energy performance of the software architecture is to adopt an 80/20 rule. The 80% of the applications use 20% of the code and in most of the cases it is an infrastructure or middleware code. It is relatively easy to educate and train these small subset of the programmers to optimize the code and the architecture for energy-efficiency. Virtualization could also help a lot in this area since the execution layers can be abstracted into something that can be rapidly changed and tuned without affecting the underlying code to provide consistent functionality and behavior.
The energy efficiency cannot be achieved by tuning things in separation. It requires a holistic approach. PUE ratios identify the energy loss prior to it reaches a server, the energy-efficient server requires less power to execute the same software compared to other servers, and the energy-efficient software architecture actually lowers the consumption of energy for the same functionality that the software is providing. We need to invest into all the three categories.
Power consumption is just one aspect of being green. There are many other factors such as how a data center handles the e-waste, the building material used, the green house gases out of the captive power plant (if any) and the cooling plants etc. However tackling energy efficiency is a great first step in greening the data centers.
Friday, September 12, 2008
Google Chrome Design Principles
Many of you would have read the Google Chrome comic-strip and also would have test driven the browser. I have been following few blog posts that have been discussing the technical and business impact but let's take a moment and look at some of the fundamental architectural design principles behind this browser and its impact on the ecosystem of web developers.
- Embrace uncertainty and chaos: Google does not expect people to play nice. There are billions of pages with unique code and rendering all of them perfectly is not what Google is after. Instead Chrome puts people in charge of shutting down pages (applications) that do not behave. Empowering people to pick what they want and allow them to filter out the bad experience is a great design approach.
- Support the journey from pages to applications to the cloud: Google embraced the fact that the web is transitioning from pages to applications. Google took an application-centric approach to design the core architecture of Chrome and turned it into a gateway to the cloud and yet maintained the tab metaphor to help users transition through this journey.
- Scale through parallelism: Chrome's architecture makes each application a separate process. This architecture would allow Chrome to better tap into the multi-core architecture if it gets enough help from an underlying operating system. Not choosing a multi-threaded architecture reinforces the fact that parallelism on the multi-core is the only way to scale. I see an opportunity in designing a multi-core adaptation layer for Chrome to improve process-context switching since it still relies on a scheduler to get access to a CPU core.
- Don't change developers' behavior: JavaScript still dominates the web design. Instead of asking developers to code differently Google actually accelerated Javascript via their V8 virtual machine. One of the major adoption challenges of parallel computing is to compose applications to utilize the multi-core architecture. This composition requires developers to acquire and apply new skill set to write code differently.
- Practice traditional wisdom: Java introduced a really good garbage collector that was part of the core language from day one and did not require developers to explicitly manage memory. Java also had a sandbox model for the Applets (client-side runtime) that made Applets secured. Google recognized this traditional wisdom and applied the same concepts to Javascript to make Chrome secured and memory-efficient.
- Growing up as an organization: The Chrome team collaborated with Android to pick up webkit and did not build one on their own (actually this is not a common thing at Google). They used their existing search infrastructure to find the most relevant pages and tested Chrome against them. This makes it a good 80-20 browser (80% of the people always visit the same 20% of the pages). This approach demonstrates a high degree of cross-pollination. Google is growing up as an organization!
Monday, August 18, 2008
Cisco and Juniper eyeing the long tail of consumers for their second act
Very few companies have excelled in business beyond 25 years only with their first act, a product or a business model. Some companies recognize this early on and some don't. The networking giants Cisco and Juniper seem to get this and are looking for their second act. You don't wake up one day and drastically change your business model. It's a conscious decision based on long term strategy with very focused short term execution that is required to get to the second act.
Cisco started their "human network" efforts by acquiring Linksys and Susan Bostrom completely rebranded Cisco a couple of years back. Consumerization of the brand was a big leap from an enterprise-centric organization to get closer to non-enterprise consumers. Few days back Cisco announced the Q4 results and John Chambers emphasized that Cisco would invest into adjacencies.
"..and we will use this time as an opportunity to expand our share of customer spend and to aggressively move into market adjacencies."
On the other side of the networking world Juniper recently hired Kevin Johnson as their CEO who was the president of platform and services division at Microsoft. Competing with Cisco has been challenging and Juniper did have their own share of issues in the past but let's not forget this company started during the dot com era, had a spectacular performance, survived the burst, and kept growing. But now is probably the right time to look for the second act.
For Cisco, what could the second act be? Other than the obvious long tail of consumer-centric human network strategy I see a couple of possibilities:
1) Data Center Virtualization:
The virtualization is a fast-growing market segment that has not yet saturated. The real boundaries of data center virtualization are blurry since it is a conglomeration of server, network, and storage virtualization. Customers don't necessarily differentiate between managing servers versus backing up data across data centers.
This is an adjacency that Cisco can tap into with its current investments into data center virtualization switches such as Nexus 7000, strong ecosystem, and great service organization (The service revenue is 20% of the product revenue). In fact this was speculated when Cisco announced this switch.
This could indeed strain its relationship with vendors such as IBM and make it precarious who OEMs Cisco's switches in their data centers. Companies with large ecosystem would inevitably introduce "co-optition" when they decide to sell into the adjacencies that are currently served by their partners. They will have to learn walking on a thin rope.
Virtualization with scale can lead to rich business scenarios. Imagine a network virtualization switch that is not only capable of connecting data centers at high speed for real-time mirroring and backups but can also tap into the cloud for better network analysis. The routing protocols and network topology analysis require massive parallel processing that can be delivered from the cloud. This could lead to improvisation of many network and real-time voice and data management scenarios that otherwise wouldn't have been possible. Cisco's partnership with a cloud vendor could lead to some interesting offerings - think of it as network virtualization on steroids.
2) Network SaaS:
Network Managed Services has always been an interesting business with a variety of players such as IBM, Nortel, Lucent etc. This could be one of the adjacencies that Cisco might pursue and make it a true SaaS and not just a managed service. I won't be surprised if Cisco acquires a couple of key SaaS players in near future.
On-demand and SaaS have traditionally been considered a software and utility play. The networking companies already support the data centers that provision SaaS services but they could go well beyond that to provide Networking SaaS that provisions, monitors, and maintains the networks as true SaaS offering and not just as a managed service. This could include everything from network management, security, and related services. Traditionally SIs and partners have played this role but networking companies could see this as an adjacency and jump into it since it is a natural extension from hardware to data center to managed services to a SaaS delivery. Instead of selling to a service provider who sells services to customers an effective SaaS can turn the model upside down by partnering with service providers instead of selling to them and sell to an ever growing long tail of consumers.
Cisco started their "human network" efforts by acquiring Linksys and Susan Bostrom completely rebranded Cisco a couple of years back. Consumerization of the brand was a big leap from an enterprise-centric organization to get closer to non-enterprise consumers. Few days back Cisco announced the Q4 results and John Chambers emphasized that Cisco would invest into adjacencies.
"..and we will use this time as an opportunity to expand our share of customer spend and to aggressively move into market adjacencies."
On the other side of the networking world Juniper recently hired Kevin Johnson as their CEO who was the president of platform and services division at Microsoft. Competing with Cisco has been challenging and Juniper did have their own share of issues in the past but let's not forget this company started during the dot com era, had a spectacular performance, survived the burst, and kept growing. But now is probably the right time to look for the second act.
For Cisco, what could the second act be? Other than the obvious long tail of consumer-centric human network strategy I see a couple of possibilities:
1) Data Center Virtualization:
The virtualization is a fast-growing market segment that has not yet saturated. The real boundaries of data center virtualization are blurry since it is a conglomeration of server, network, and storage virtualization. Customers don't necessarily differentiate between managing servers versus backing up data across data centers.
This is an adjacency that Cisco can tap into with its current investments into data center virtualization switches such as Nexus 7000, strong ecosystem, and great service organization (The service revenue is 20% of the product revenue). In fact this was speculated when Cisco announced this switch.
This could indeed strain its relationship with vendors such as IBM and make it precarious who OEMs Cisco's switches in their data centers. Companies with large ecosystem would inevitably introduce "co-optition" when they decide to sell into the adjacencies that are currently served by their partners. They will have to learn walking on a thin rope.
Virtualization with scale can lead to rich business scenarios. Imagine a network virtualization switch that is not only capable of connecting data centers at high speed for real-time mirroring and backups but can also tap into the cloud for better network analysis. The routing protocols and network topology analysis require massive parallel processing that can be delivered from the cloud. This could lead to improvisation of many network and real-time voice and data management scenarios that otherwise wouldn't have been possible. Cisco's partnership with a cloud vendor could lead to some interesting offerings - think of it as network virtualization on steroids.
2) Network SaaS:
Network Managed Services has always been an interesting business with a variety of players such as IBM, Nortel, Lucent etc. This could be one of the adjacencies that Cisco might pursue and make it a true SaaS and not just a managed service. I won't be surprised if Cisco acquires a couple of key SaaS players in near future.
On-demand and SaaS have traditionally been considered a software and utility play. The networking companies already support the data centers that provision SaaS services but they could go well beyond that to provide Networking SaaS that provisions, monitors, and maintains the networks as true SaaS offering and not just as a managed service. This could include everything from network management, security, and related services. Traditionally SIs and partners have played this role but networking companies could see this as an adjacency and jump into it since it is a natural extension from hardware to data center to managed services to a SaaS delivery. Instead of selling to a service provider who sells services to customers an effective SaaS can turn the model upside down by partnering with service providers instead of selling to them and sell to an ever growing long tail of consumers.
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