Mad Dog 21/21: Aiming for the Clouds
August 3, 2009 Hesh Wiener
Penelope realized it was the long absent Odysseus when the grizzled stranger shot an arrow through a dozen ax handles. The legendary William Tell split the apple on his son’s noggin with a crossbow bolt. American Revolutionary Daniel Morgan trained and led the riflemen that beat the Brits at Saratoga and Cowpen. And now Erich Clementi and his boss, Sam Palmisano, are taking belated aim at cloud computing, with particular focus on a market long in the sights of GoDaddy‘s maniac-in-chief Bob Parsons. IBM is battling in the boardroom with buzzwords. Parsons is nabbing the NOCs with knockers. What a contest!
IBM is right when it says that there’s opportunity in cloud computing. Lots of companies in the IT universe would agree with IBM’s words. Google, Yahoo, and Microsoft, for instance, offer cloud services to the general public that center on the creation and dissemination of documents (including images). These services include technologies that enable people to coordinate and collaborate on creative activities over the Internet. The services are free in their most basic form, which is not at all barebones. For commercial applications involving more elaborate methods of managing workflow, many of these cloud services may be upgraded for very modest fees. The free stuff has 10 to 15 millions of users, the fee-based version possibly as few as 1 percent of that range.
IBM seems to want a piece of these markets, but so far it has been unwilling to reach down to the startup masses as its rivals have. IBM doesn’t seem inclined to give anything away except for trial versions of some application development tools, versions that are timebombware: They turn into pay-or-die products after a few months. IBM also seems far more interested in selling whole real or virtual servers than selling services that can be metered based on usage. This stands in contrast to the other companies in the cloud business that already have price lists telling customers how much they will pay for processing, storage capacity, Internet bandwidth, and such.
Unlike the cloud computing companies that believe they must aim their offerings at every possible opportunity, IBM seems to have a different target in mind. Amazon, Google, and their ilk believe that the next generation of hot Web companies, the firms that could turn out to be their successors at the head of the Internet revenue parade, might be among their startup cloud users. By getting these advent companies access to their cloud technology, today’s Internet leaders hope to earn a stake in the future of computing.
IBM, on the other hand, seems to be thinking of cloud opportunities from the top down, pitching its offerings at the kinds of companies that buy its mainframes and largest Power platforms. A lot of what IBM is calling cloud computing today is the same stuff it called grid computing yesterday; even today the section of IBM’s Web site that covers cloud computing is at the address http://www.ibm.com/grid/ not http://www.ibm.com/cloud/. IBM is sticking with the substance of its established marketing approach.
IBM has shown that its plan is working well during the current economic downturn and its executives say that its power at large accounts, its skill at managing costs, and vast economic and intellectual resources are going to help it return to growth just as soon as general business conditions improve.
IBM believes, as did Odysseus, that its large enterprise and midrange customers will remain faithful, like Penelope. In IBM’s key relationships, the motivation is not the true love of classical mythology, but rather users’ vast investments in mainframe or midrange technology and other IBM offerings. This relationship has held up very well for a long time but a lot of people seem to think IBM’s hegemony could be curtailed by cultural change.
The last time IBM looked like it might miss out on a big cultural change in information technology, the change was called the dot-com boom. Computing did in fact change and some enterprises arose that quickly became very rich and powerful. Amazon, Google, and eBay are examples. There were, of course, many more examples that didn’t make it and most of them have been pretty easy to forget. The dot-com era also elevated some of IBM’s rivals into the ranks of major suppliers. Sun Microsystems was the key example, but its power has since ebbed. The dot-com bubble also helped some software companies, notably Oracle, which has not given back its gains the way Sun has and which, in fact, is in the process of eating Sun.
Today, nobody is saying dot-com is back. Instead, the computing industry talks about cloud computing, but it’s pretty much the same thing, except that it has not yet the dramatic rise and fall of dot-com. This time, the Internet rush has been saved by an economic depression from the pump and dump cycle that shaped the dot-com era and subsequently the housing market. But there is at least one player in the Internet business that is anything but shy, even in tough times: GoDaddy.
GoDaddy began as a company that registered domain names for a fraction of the price charged by the outfits that were the leading registrars when Bob Parsons, its founder and top executive, got into the business. Today, GoDaddy is the volume leader in registrations and a major player in related services. GoDaddy is a major provider of the kind of computer services that IBM includes in its concept of cloud computing, but GoDaddy calls what it does by its more traditional name, hosting. GoDaddy’s hosting is all tied to X86 and X64 servers, generally configured with the help of virtualization technologies to provide complete operating environments. Like many other hosting companies, GoDaddy offers both Linux and Windows servers, and it has rich software stacks for each environment. Users seem to think that GoDaddy’s servers do a better job with blogs if they run Linux, but that they might be a little better with ColdFusion application workloads if they run Windows, the environment in which ColdFusion was born. Both flavors offer PHP, Java, Perl and MySQL. GoDaddy also lets users load up storefronts, put in certified secure pages, and acquire about as much storage as anyone using a hosting service might want. These days it is possible for a user to rope multiple physical servers together inside GoDaddy’s engine farm. GoDaddy calls this possibility grid hosting, which is the same term that used to be used more prominently by IBM.
GoDaddy isn’t unique in the set of services it offers, but it is quite different from its rivals when it comes to a brash marketing style. Parsons doesn’t seem to care how others sell the services he offers. GoDaddy sells by getting a lot of attention and then pointing out it offers just about everything it takes to get an Internet business on the air for very little money. It’s impossible to accurately compare the computing bundles offered by different hosting companies, and Parsons, well aware of this, steers clear of price comparisons. What he does do is prominently post his asking prices, run special offers and sales all the time, and provide quite a bit of free support to customers who get confused by GoDaddy’s shape shifting Web-based set of services offerings.
Some of the original registrars, companies that now all offer a range of services to rival those of GoDaddy, went after what had long ago been a cozy, high-margin club. But that’s ancient history, and these days Parsons must be credited for starting what amounted to a revolution in the domain registration business, much the way the legendary William Tell is credited, at least in folklore, with inspiring the rise of an independent Switzerland.
According to the ancient tale, crossbow marksman William Tell aroused the ire of his region’s Austrian boss, Herrmann Gessler, when he refused to bow to Gessler’s hat, which had been put on display in the middle of a market town Tell visited. The upshot was that Gessler grabbed Tell’s son and made Tell try to shoot an arrow off the kid’s head; the alternative was death to the child. Tell succeeded, but then told Gessler he was packing a second bolt to use on the politician if the first bolt had not hit the apple. Gessler packed Tell on a boat headed for what was supposed to be Tell’s last stop but the boat was caught in a storm that allowed Tell to escape. Later, Tell caught up to Gessler and shot him dead, after which Tell disappeared.
Parsons has been pretty good at hitting his marketing targets. He has also been pretty dangerous to the established companies in segments he finds attractive. But so far he hasn’t bumped off any of his rivals, in part because domain registration services and related hosting activities have been booming. Every player that wants to compete with Parsons has had to adjust but they all have stayed alive, not without some close calls.
IBM may now be stepping into territory that abuts GoDaddy’s realm and the way things seem to be developing in the computing business, the two companies could well collide if there’s no change of course on either firm’s part. This is because IBM is beginning to think about moving into a part of the market that involves relatively modest amounts of server power. While IBM isn’t after the startup companies, at least not yet, it is offering enterprises services that in size and capability are a lot closer to the hosting mainstream than anything Big Blue ever tried to offer before. IBM is offering its services to enterprise clients under the Websphere brand, but it looks like what IBM is about to sell will be marketed to young and restless innovators inside the companies that are IBM’s top corporate clients. These are the same kinds of people GoDaddy tries to reach with its brash television ads (featured on the Superbowl) and the childish but funny video clips is serves up via its Web site. Once users look around the GoDaddy site, they quickly discover that GoDaddy’s hosting environment makes it pretty easy for customers to add or reduce capacity, applications and even complete real or virtual servers.
IBM could never promote its services the way Parsons promotes GoDaddy, but that’s not the point. IBM simply cannot keep the hotshots inside enterprise IT departments from knowing what GoDaddy is up to and once they find out these corporate employees pretty soon get an idea how little GoDaddy charges for hosting services. GoDaddy may be only one of many hosting companies delivering superior value to users who want X64 environments, but it is one of the price leaders among the hosting firms that are big enough to get into serious conversations with the large enterprises to which IBM wants to sell hosting under the rubric cloud services.
IBM doesn’t seem to appreciate how much it needs to become more visible to the general public if it wants to go up against the services offered by the search companies and Amazon or compete with the self-service hosting technology that GoDaddy and its direct rivals offer. IBM also has not come around to understanding that it might have to offer free consumer services to get attention from a public that includes people whose other hat is a business hat. These people will never give IBM a chance to sell its brand of cloud computing once they get used to the free and cheap services of other cloud companies.
IBM believes it has something special to offer, technology unique to its Lotus Domino server software and the related Notes client. IBM’s Lotus offerings may be unique in some ways, but there isn’t much in the way of actual functionality that IBM alone can provide. This is unfortunate for IBM, but very good for customers who find that competitive markets make for better value.
It might turn out that the cloud opportunities IBM sees are not the ones that others have spotted. Maybe IBM is influential enough to define or redefine the cloud idea, much the way it redefined the personal computer when it offered its MS-DOS machines to a world that in 1981 was made almost entirely of CP/M boxes and Apple machines. IBM took the PC market by storm. But it did not take long for PC market to retake IBM by storm. Cloud computing doesn’t look like enterprise bookkeeping, where the mainframe is a force to be reckoned with.
One aspect of IBM’s plan that has not yet been fully revealed is the nature of its deal with Amazon. IBM says it plans to offer some of its services via Amazon, a company that is already a leader in providing cloud software components, particularly information storage and management components, to companies that want to join Amazon in the world of Web-based commerce. IBM thinks it is going to bring something to the table that would keep its enterprise customers loyal or possibly get new clients into the IBM fold. But IBM will have to do a pretty good job if it wants to persuade Amazon’s web services customers to invest in technologies that, because they involve at least two services vendors, are bound to be more complicated than offerings that come entirely from Amazon or from IBM. It’s not that there won’t be some cloud customers who love the IBM-Amazon combination; it’s that there might not be enough of them to provide a significant market to either or both of the newlyweds.
One way for IBM to increase its opportunities in cloud computing is for it to work with others who can remarket IBM services, adding value in the form of industry expertise, client relationships or just plain imagination. The problem is that IBM does not enjoy a reputation of being kind to its resellers. Any company that has remarketing IBM servers or storage knows just how tough it can be to achieve a balanced relationship.
IBM does not have a Daniel Morgan to help it build the teams it will need to aim at the variety of opportunities cloud computing is likely to create. Morgan was an American revolutionary and highly regarded military commander who was very well known for his training of marksmen known as Morgan’s Rifles. Morgan and his soldiers are credited with some significant contributions to the success of the American Revolution and the suppression of post-revolution bootleggers who had attempted what was called the Whiskey Rebellion.
Morgan’s point of view, were he to rise from the dead to serve as a marketing executive in IBM’s cloud computing team, would be that it is not enough for IBM’s bosses to spot potential areas of opportunity. IBM needs personnel who can hit those targets and do so with considerable efficiency. IBM didn’t fail in the PC business because of a lack of targets. IBM failed because it could not hit the targets as quickly and as cheaply as its competitors. The same challenge is likely arise in cloud computing because cloud services can be based anywhere and reach everywhere, thanks to the Internet. Entrepreneurs inside or outside large enterprises can dream up an idea, rent services or entire infrastructures from dozens if not hundred of suppliers, cobble together teams of technicians scattered across the globe and sell their results from anyplace to any other place in any language. Some combinations will face fewer constraints than others, but there are no barriers in cloud computing that can protect an IBM, a Google, an Amazon, or a GoDaddy, to say nothing of the young and fragile startups they must support if they want to exploit emerging opportunities.
It’s not clear just who will succeed, nor how. Nobody, not even IBM, can see clearly in the cloud.