Mad Dog 21/21: I Think We’re All Bezos On This Bus
September 30, 2013 Hesh Wiener
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During the next two years, IBM hopes to boost its cloud computing revenues to $7 billion. About $4 billion would come from existing operations, in part a consequence of reclassifying activities. The remaining $3 billion would be new, mainly from acquisitions. IBM’s key cloud rivals, Microsoft, Google and notably Amazon, provide everything from client devices to apps to platforms. IBM falls short; its cloud has vast gaps. Consequently, whenever IBM’s customers or IBM’s own personnel, even CEO Ginni Rometty, go mobile, they are obliged to use other vendors’ equipment and services. When it comes to gappy cloud offerings, IBM has some distinguished company. It shares its failings with the other last two still standing players born in the computer hardware business: Hewlett-Packard and Dell. (We can raise that count by a half if we include Oracle.)
Take a look at those old timers and their cloud fantasies. HP and Dell each have tablet clients, yet they are still struggling to get into cloud in a meaningful way and, more generally, to adjust to dislocations in the computer hardware business. HP and Dell are having a hard time even though they both have apps that tie mobile clients to their printers via WiFi or the Internet. In addition, HP has a more sophisticated offering that locates eligible public hard copy print services, such as the ones at UPS stores, and helps people set up printing jobs at these places using an app on their mobile clients. The HP app also provides similar functions that work via private clouds within enterprises that have networks of suitable HP printers. But neither Dell nor HP nor IBM (nor Oracle-Sun for that matter) has mobile apps that set up and manage equipment service calls. Amazon provides better support for a ten dollar mail order purchase than the computer vendors do for customers’ big ticket, glass house systems. And users who get a new Kindle Fire HD or HDX get the kind of support IBM, Dell, and HP users pine for: a free live person video help line called Mayday is a feature of Amazon’s Fire OS 3.0 Android variant. Amazon’s cloud device and services bundle includes special features for kids such as an alternate look and feel plus access to children’s content; for parents, including elaborate but friendly controls over kids’ usage; and productivity apps so business users can view Office documents, work with various email systems including Microsoft Exchange, and, down the road, a wireless printing app that will be more generic than printer vendor-supplied apps. Amazon’s pricing is deadly. Fire tablets start at $139 and the high-horsepower HDX models start at $229, the same price as Google charges for a less powerful but more versatile “pure Android” Nexus 7. Amazon is not alone. A British supermarket chain, Tesco, has a tablet computer for £119 (about $190) that more or less matches the technical capability of the Amazon Kindle Fire HD. The Tesco Hudl is a 7-inch tablet that can do anything any standard Android tablet can do plus access Tesco’s Blinkbox video and ebook delivery store, run shopping apps and perform other services. Tesco hopes a quarter of the households in the UK will get a Hudl and become happier customers, particularly if the new Kindle Fire tables get to the UK late for Christmas. The Hudl apps hook into Tesco’s web-based market-to-home goods delivery services, its loyalty points offerings and other consumer attractions. Like Amazon, Tesco aims to provide an end-to-end cloud experience including a compellingly priced client device that does more for a user who wants a dozen eggs sent to her doorstep than Big Blue will do for a customer with a thousand-seat IT complex. The same comparison can be made with the support provided, or more accurately not provided by HP, Dell, and the-Oracle-formerly-known-as-Sun.
Chances are good that Microsoft will belatedly figure out what it takes to provide a complete cloud experience customers will want, the way it arrived late at the browser and web party but made up for lost time. It also has a gaming group with lots of opportunities for expansion into cloud computing, although it is not clear that the Redmond regime will take a fresh look at all its possibilities. Microsoft’s most recent tablet announcements got lukewarm reviews in the press. HP is led by Meg Whitman, a chief executive who helped build eBay into a powerhouse and who seems too smart to be written off as a one-trick pony. If Whitman could expand her printing group’s user outreach and extend it across the HP line, imitating Amazon’s Mayday, she might be able to stage a real turnaround and cheer up her demoralized shareholders and give her board of directors much more than they deserve. It’s hard to guess how Dell might fare as it goes private. It will probably be able to sell plenty of hardware into enterprise accounts but its knack doesn’t appear to extend beyond legacy products. Dell really needs a winning tablet, and that requires not just a device but also an attractive ecosystem. The company’s boss, Michael Dell, is a sharp marketing guy and a great imitator. He will probably spot the aspects of Amazon’s customer service practices and Google’s inventiveness that his company could mimic. Yet he may lack the kind of creativity and insight it will take to put his company in the top tier of cloud vendors. After all, he built Dell not Apple. Oracle? Nope. Turning back to companies with first tier opportunities, it seems prudent to credit IBM’s management team with the skill and flexibility to adapt. At the very least, Big Blue has a fighting chance. It has managed to preserve what was once Lotus, including its Notes client software, as part of the IBM Collaboration Solutions group and add quite a bit of additional technology. IBM’s leaders might appreciate that they probably have to build up their client offering or lose what it has.
End users will inevitably be drawn toward a single mobile and cloud ecosystem. That is what Apple believes, and it is the mindshare leader in phones, tablets and their cloudy ecosystem of services and apps. Google, whose Android operating system is even more popular than Apple’s iOS, offers a comparably rich alternative. Amazon, though, looks to be the most powerful contender. It has its own products and services. It has apps for its own and others’ ecosystems that drive its Kindle media business and its non-ecosystem-specific website shopping universe. Amazon remains predominantly a seller to consumers, but it is a growing powerhouse as a source of goods used by business. Staples, for example, sees Amazon as a retail rival much the way it sees Office Depot as one. In one critical way Amazon has outflanked Apple and Google, and Microsoft, too. Amazon is a very competitive cloud services company, likely to sell more than $2 billion worth of virtual server and storage capacity this year. More than any IT company and more than any company of any type, Amazon is happy to share the computing technology that powers its empire. If Amazon ever moves into business apps or banking or some other application of its obviously effective information technology, it will give every player in its target area quite a lot of competition. So far, however, Amazon has preferred to sell and deliver media content rather than application-level business services. If it holds to that course, new opportunities in cloud based commercial computing will go to other existing players or to fresh start-ups. That opportunity, the possibility that some other company, such as IBM, could still become the kind of superpower in business services computing that Amazon is in retail computing makes the outcome of the Blackberry saga relevant to Ginni Romety and her colleagues. Before Blackberry fades away or gets swallowed by some other company, the technology that once made Blackberry the dominant provider of smartphone services for business could open a path to the future for IBM or another company that wants to become what IBM once was, the name end users in business wanted on their desks. For a while, for several years actually, having a Blackberry was evidence an end user had achieved a measure of success and importance in law, government, banking, or business. The Blackberry messaging system provided secure, reliable, user-friendly service not merely in North America and post-industrial Europe but also across the Middle East, Africa, Latin America, and South Asia. No company, not even IBM, could revive Blackberry by merely propping up its servers and making its client side apps universally cross-platform. Any entity that wants to make a success of Blackberry would have to acquire its intellectual property assets and customer base on the cheap and then create or acquire a surrounding constellation of top notch business services coded to the same high standards as the best of Blackberry’s messaging apps. IBM could do this, but it would have to change in a major way. Big Blue would have to be willing to get its hands dirty working with end users and not just ones at large organizations. The future of Blackberry–and there might not be much of one–like the present and future of information technology will be about individual business users, whether solo practitioners or corporate employees. These customers, the ones every IT company, including IBM, needs to prosper are a lot like Amazon’s target consumers. In fact they are pretty much the same kinds of people doing the same kinds of things only with a slightly different attitude and maybe in a different setting. Most of these people would be perfectly happy to never see a PC again. They would prefer doing their work on a tablet or even a smartphone running friendly, effective apps. That gadget could say Amazon on it, or Google, or Microsoft or Apple or Samsung or Lenovo for that matter. It could say Tesco Hudl. It could even say IBM, but there’s probably no need for that . . . except on the splash screen of the Blueberry app.
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