Peter Christy

Yes the Cloud Will Cost IT Jobs

One of the topics that was gracefully skirted at Structure 2011 was the question of whether Cloud computing would cost jobs in IT.

The honest answer is of course jobs will be lost:

• Remember that IT is a cost center and cost savings is always good.
• Remember that Cloud technology (public or private) brings automation that replaces manual activity.
• Remember that the use of public Cloud offerings enable a trade between fixed and variable expenses that includes the use of permanent staff.

So it should come as no surprise that the increased use of Cloud technology and architecture will diminish the ranks of some the traditional admins in a data center. The story is by no means bleak for those who work in enterprise IT. The Cloud impact also includes a general up-leveling of people in the data center (e.g., a need for system admins who can understand, for example, application performance in a more complex and shared environment). And, as Randy Mott tells the HP story (Randy Mott's Secret Sauce), he was able to diminish overall IT spending considerably while at the same time increasing the amount spent on innovation and forward-looking activity. So less can actually be quite a bit more.....

 

Randy Mott's Special Sauce

I finally had a chance to hear Randy Mott speak about his tenure as HP's CIO. It's a really interesting story. The rumor is that Randy's deal with Mark Hurd was that he was paid no salary but instead got a small part of the savings to HP (and by doing so made a not so small fortune). His plan is as interesting. He claims that if you look within any industry segment, the company thought to be the "IT leader" spends a lot less for IT (as a percentage of revenue) than the average in that segment. What he says he did at HP was to ask for significant incremental one-time investment in IT (an additional 2% of revenues spent over three years) for which he roughly halved the amount spent on IT (as a % of revenue) while at the same time increasing the amount spent on innovation. We hear regularly that over 70% of a CIO's budget goes for the care and feeding of what already exists. Randy's observation is that there is a lot of redundancy and historical artifact in that (he said that some vestige of the original IT from each of the 50 companies that HP had acquired was still running when he started the process) and the incremental one-time investment serves to clean up the stables, so to speak. For example HP went from7,500 applications to 1,700 and down to a single corporate data warehouse. None of that comes easily because existing business processes have to change and lots of people retrained, but in the end the results can be impressive. He says that the ROI on the incremental investment was 55% and that the timeframe is important because if the same change had occurred over 5 years instead of 3 the return would have been 20%.instead of 55%. It's a fascinating story. I would guess that many CIO's would nod about the mess in their stables, but say that within the constraints of more or less fixed funding they can only fix a little at a time. The really new idea was to do the cleanup as an incremental, one-time project (with excellent return).

More Virtualization Alliances

Microsoft and HP greeted the New Year by announcing an expanded cooperative relationship to accelerate the virtualization of key Microsoft Applications (e.g., Exchange and SQL Server) on HP servers (and increasing the attach rate for HP switches and routers too). Like the Cisco/EMC alliance, the basic intent is to make it easier to deploy and use virtualized systems. Whereas EMC and Cisco intend to incorporate applications into their consortium in the future, HP and Microsoft focus on the broadly used Microsoft applications Exchange and SQL Server right from the beginning. Microsoft's simple selfish goal is to accelerate the use of Hyper-V instead of VMware; HP's simple selfish goal is the grab more of the Exchange and SQL server share. As a relationship this is clearly in the "it's complicated" category. There is great value in Microsoft and HP jointly developing virtualized systems given HP's strong role in the server market, not to mention their EDS operations (a fertile field of interesting customers and potentially virtualized applications one might assume). On the other hands, HP and Microsoft both have many other partners bounding the value of exclusivity. And historically HP and Microsoft have been direct competitors in systems management, so we'll have to see how they sort out those pieces. In a discussion about UCS, a Cisco VP observed that you can think of modern virtualized systems as "mainframes" made from standard components (ultimately X86 processors, Ethernet connectivity and commodity disk drives). When IBM introduced the System/360 back in 1964 IBM made essentially everything that went in including the transistors, the disks and the software. Then we saw the "Cambrian Explosion" in computer diversity when companies like Sun emerged that didn't build any of the core technology other than the software, instead buying CPU's from Motorola, and disks and memory from other technology suppliers. Over time that diversity has thinned out by a process analogous to Darwinian "survival of the fittest" and we're now down to just three basic components in a standardized virtual fabric. Maybe now we're watching the early stages of the consolidation back to mainframe companies where the differentiation now comes at the virtualization layer and in systems management approach. Maybe these alliances are the reemergence of systems focus like in the age of mainframes. — pchristy@irg-intl.com

The Best of Times or Worst of Times for Tech Gurus

Along with Robert Wahbe's ascendency to head of Microsoft STB marketing, our old friend Russ Daniels increased his HP CTO scope from the ethereal "Cloud" to include the very real EDS. This has Russ (long time ponytail, and at Structure 09 a trendy and expensive t-shirt, eye-catching red loafers and an exotic leather jacket) now hanging with ex-military Texans with big watches and pilot sunglasses (we think he'll do fine!), but as recompense gives him some influence over the substantial existing EDS data center assets rather than having to go to Mark Hurd and ask him to write a $500M check for a new HP Cloud asset (guess how much fun that is). Russ has great insight into what the Cloud can and should be and now a lot more than just the customer briefing bully pulpit with which to influence the world. As with Wahbe, it is either a brilliant move on Shane Robison's part or will lead to the unintended destruction of an insightful technical leader.

Rising Clouds

Cloud announcements don't seem to have been slowed much by the economy. It is still a very complicated and murky topic but there is no doubt that there is something important underneath. Recently VMware introduced the fourth generation of server virtualization infrastructure (now V-Sphere) as a Cloud operating system. At MMS, Microsoft spent a lot of time talking about Cloud as well. We think that Microsoft does the best job positioning Cloud within the spectrum of IT technology and architecture (although it's of course self serving since MS would have the most to lose if the world were to migrate rapidly to primarily Cloud models) and between Windows Server , System Center, Azure, Office 14 and Live, Microsoft is investing heavily in Cloud solutions. VMware still has a clear lead in exploitation of virtualization although there seems to be growing agreement that virtualization is in fact just one pillar of the solution. HP and IBM both are strong players for sure. It will be interesting to see what Google says at their upcoming developer meeting.

Cisco Data Center Competitors

It's interesting times in the data center. Cisco is brewing "California" -- a data center offering that is rumored to include servers, and not surprisingly the competitors are showing signs of friskiness as well ("the best defense is a good offense!"). First HP held a somewhat cryptic introduction of ProCurve partners. Grotesquely oversimplified, HP believes they can build on their large server business and provide switches that are price competitive and integrate well with HP servers. Further, HP believes that because they are a minority vendor (the #2 market share leader but with a miniscule share compared to Cisco) they have to do better at compatibility and partnership (that part must be true) but by meeting those obligations they produce a product with clear TCO advantages over Cisco (the more intriguing claim). Following soon thereafter Juniper held its Analyst Meeting featuring the new team, and as part of that previewed tiny bits of what they call Project Stratus being done in cooperation (of some form) with IBM. Juniper argues they can build switches that are as fast as Cisco (because of their very large system SP business), and at the root of Stratus is a large and flat switch, probably somewhat like what Google is building internally (pure speculation) and maybe like what Andy Bechtolsheim did at Sun (the new Juniper advanced technology leader, David Yen, comes from a long career at Sun). Like HP, Juniper says that it will partner better than Cisco and that will bring TCO value to their customers. They also believe that their cleaner JUNOS software base (one O/S shared by all products; quarterly releases) gives them advantage, specifically the ability to manage the data center fabric as if it were one big switch, again with TCO advantages for the customer. One key argument from both HP and Juniper is that Cisco's complexity and inconclusive progress in network management yields a cost-of-ownership liability competitors can exploit, especially in the "more for less" recessionary time. Cisco's big California shoe is of course yet to drop (although it is starting to block the sun J ).

The Pen Is Mightier than the Sword

Here's your Crisis Management 101 Quiz: What was the really stupid mistake that HP made in the pretexting fiasco? Ethics? Questionable legal interpretation? Nope. The really stupid mistake was going after a journalist. Most journalists don't get paid much (Bob Woodward excepted) but they certainly don't like to be thought of as the servants of big business wealth. As HP is now painfully learning the press has unique capabilities to keep the ball in the air just when you hope it can be quietly deflated and buried in the backyard.  Don't screw with the press.

HP Software Bulks Up

HP announced its intent to acquire Mercury Interactive. On face value it looks like a pretty good marriage.  As Mark Hurd sorts out the HP businesses we bet that software looks like a relatively important part of the portfolio. The addition of MERQ roughly doubles software revenues in a way that organic growth or small acquisitions couldn't do.  The MERQ product offerings fit into HP's existing business pretty well by the standards of acquisitions (a lot more naturally than Veritas and Symantec or RSA and EMC). Mercury of course has been struggling to get out of a serious stock option and restatement mess so why not take a quiet retreat out of public scrutiny with a big bump over the market stock price (which they never would have been able to achieve while the feds were dogging them).