First off I want to say how much I enjoy EMC Global Marketing CTO Chuck Hollis’s blog. Crazy job title, really smart guy, its one of the few tech blogs I keep up with these days [kudos to EMC comms professional Matthew Buckley – his weekly email roundup of blogs always catches my attention].
Chuck says insightful things like:
“Internal cloud is just a user revolt saying to IT ‘can you just stop playing with knobs and give me what I need now”
Right On. But I felt I had to call him out on the notion that telcos and traditional service providers have “structural advantages” in cloud provisioning. In a post from EMCWorld this week entitled EMC Takes Atmos Storage OnLine he argued:
Any successful storage as a service offering has to meet two criteria; (1) it has to be cheaper or easier than doing it yourself, and (2) it has to offer certain well-defined and pre-agreed standards for performance, availability and security.
Unless you can do #1, you don’t have a market.
And unless you are pretty clear about #2, no one will trust you with their information.
The Service Provider Advantage?
Everyone points to Amazon’s S3 as the leading example of storage as a service. I’d agree that they do a decent job of #1 above, but as far as #2 — well, let’s just say that not everyone is convinced yet.
Now, consider for a moment the economic advantages that a service provider — such as AT&T — brings to the table. They have plenty of data center space in all sorts of useful locations. Those facilities are already built and already paid for. They have big pipes — wired and wireless — that can deliver information when and where it’s needed. Those pipes are largely already built and paid for.
They already have business relationships and trusted provider status with enterprises large and small. Those relationships are already built and paid for.
And they have sophisticated infrastructure and process in place to manage things like service delivery, security, provisioning, billing and so on. Most of that is already in place.
So, when people ask me about newer-style storage cloud providers (Amazon as an example) being viable in the marketplace long term, I just have to point to all the inherent structural advantages favoring the telcos and service providers in this market.
“Inherent structural advantages” has a really nice ring to it, but I think you could use the argument to drain the water off pasta. Lets consider some history.
We have been expecting telcos to make a substantive and successful play for the IT market since long before I came into the business 15 years ago. Remember “convergence”? The idea was that telecoms companies would use their inherent structural advantages to wipe out IT suppliers. Didn’t happen did it?
In fact if we look at the numbers- the latest telecoms company to make The Big Play has certainly suffered for it. Under Ben Verwaayen, ex-CEO, BT “went big” on Global Services. New CEO Ian Livingstone is now cleaning house. Costs were out of control, and the “synergies” and “structural advantages” weren’t realised. As Computer Weekly reported a couple of weeks ago:
BT is restructuring its struggling Global Services business to focus on three separate areas after its “unacceptable performance” led to the group losing more than £1.3bn.
My question for Chuck is basically- can you name a single example of a major telecoms company that is a successful IT service providers Now try and name some that have failed in that ambition…
Inherent structural advantages. Like the music business perhaps in the face of digital music? Or the mobile communications business perhaps?
What did Apple and the iPhone do to existing players with their “structural advantages”? Apple doesn’t rely on telco billing relationships – it uses them to subsidise the hardware for customers, then builds its own billing engine and relationships through the AppStore. Who would argue its wireless network partners got the better end of the deal?
My colleague Michael Coté talks of the “shackles of success” – and telcos have those in spades.
Lets consider AT&T, which Chuck says has “plenty of data center space in all sorts of useful locations”. Perhaps – but how modern are these resources? According to IBM
70% of data centers were built before 1985, and will need rebuilding (via @merv).
Now I don’t play tennis, but I would not be too quick to call “advantage AT&T”. Not when the competition will come from companies like Amazon, Microsoft and Google. Who builds the most efficient data centers- Google or AT&T? I’d be interested to know what you think Chuck?
Does EMC really want to bet against Amazon CTO Werner Vogels? Have you seen the progress they are making rolling out new functions? This week came Monitoring, Auto Scaling and Elastic Load Balancing for Amazon EC2. I am pretty sure IBM wouldn’t be encouraging customers to deploy production workloads to Amazon if the environment couldn’t be trusted.
Lets think about security for a minute – the commonplace anti web company canard.
How many serious breaches has salesforce.com suffered from since the company was formed 10 years ago? As far as I know the answer is… zero. How many banks, with vast security budgets, can claim that track record? How many customer identities have we seen lost by public sector and financial services incumbents in that time? Oops I lost my disk. Oops I left my laptop on the train. Oops who was looking after that tape again? Many of the organisations that have lost these customer details are major EMC customers. That didn’t protect them. Poor security is poor security whichever side of the firewall its on. There are no inherent security advantages in being an existing telco or service provider.
In the 1970s the FUD was that computing bureaus were insecure. Plus ca change.
Nick Carr has already said all this stuff far more eloquently than I ever could. One of my top Cloud thinkers is Simon Wardley from Canonical, the commercial arm of Ubuntu. I credit him with the photo I used to illustrate this post. Who is it? Joseph Schumpeter – the guy that coined the term “creative destruction”.
EMC is a really strong data management company. No doubt about it. It has an awesome arsenal of “enterprise-class” products. EMC also deserves great credit for realising the threat Amazon storage services face earlier than most – but I would advise the firm to be very cautious about an assumption that your channels to market have inherent structural advantages.
disclosure: IBM is a client. Not so Amazon or EMC.