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Any Hardware Company Not Investing Big in Cloud is Nuts

Posted by Bob Warfield on April 7, 2011

If the Cloud is here to stay, and the trend to move apps into the Cloud is only going to get stronger, then any hardware or infrastructure company that doesn’t invest big in the Cloud is nuts.

The problem these vendors face is “Cloud as disintermediator”.  Companies that buy into the Cloud are letting the Cloud purveyor make the datacenter decisions.  And Clouds aggregate a lot of those decisions under one roof to gain their economies of scale.  It’s like waking up one morning as a hardware vendor and discovering your best customers had switched to another hardware vendor.  The difference, is you can see it coming and you have a chance to do something about it.

In fact, hardware and infrastructure vendors have quite a lot they can do about it:

– Make it a point not to lose Cloud deals.  When Cloud vendors come knocking, lock them up.  There can’t be as many Clouds as there are traditional vendors, and each one will have a lot of inertia to stay with their original infrastructure choices.  Make sure they choose you.

– Start your own Cloud.  This one may be pretty risky if it locks you out of being the basic nuts and bolts of other popular Clouds, but you have to at least consider it.  At the same time, Cloud vendors will need to decide how they feel about using say IBM hardware with IBM pushing their own Cloud.  It muddies the waters.

– Invest in building products that are uniquely suited to the Cloud.  There’ve been some fascinating glimpses of what large scale Cloud data centers need.  There is a ton of intellectual property opportunity in the world of the Cloud.  Now is the time to start staking your claims to it.  Get out your blank sheets of paper, sign up with some big Clouds to work on their needs, and you will wind up with some good ideas.  That’s only the start.  In the commodity world of the Cloud, execution will be everything.

– While we’re on the subject of execution, think what the razor thin margins demanded by the Cloud mean to your business model of today.  Think what they mean to the needs of the Cloud vendors.  Skate as fast as you can to where that puck is going to be.

I liken the Cloud a bit to what CNC machinery did to the manufacturing world.  We went from a situation where each and every machine required a skilled manual machinist to run it, to a world where computer-controlled machine tools can be run 4 or 5 to an operator and the operator can be far less skilled than a master machinist.  The same could be said for servers.  We’re moving from a world where every app had its own servers and lots of wasted capacity, to a world where we share that capacity internally via virtualization, and then finally to a world where we’re sharing capacity that is time sliced across many customers in huge data centers to wring every last drop of utilization.  Yes, there are drivers like Big Data that offset some of that, but it is hard to escape the possibility that in the long run, the world may not need as many servers as it once did.

(This article motivated by a Tweet by Jeff Kaplan about Dell investing $1B to expand its Cloud solutions.)

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To get an idea just how different hardware purpose-built for the Cloud can be, check out Facebook’s servers.  They’ve just open-sourced the designs for their server hardware, which is quite a bit more energy-efficient that their leased data center hardware.  The difference in efficiency shows how much of an advantage can be had by specifically targeting the Cloud.  Facebook was smart to open source, if only because it makes it more likely the design will be commoditized and hence easier for them to buy even more cheaply.

3 Responses to “Any Hardware Company Not Investing Big in Cloud is Nuts”

  1. Bob,

    I agree with the idea that hardware companies that are not focused on the cloud are truly nuts. But I am not sure that “the world may not need as many servers as it once did”. There are so many new ideas that cloud computing will bring us that once those concepts flourish, we will probably see an increase in “servers” to meet the demands of new products/services.

    I put “servers” in quotes because while we will get to a point of true “computing cycle” presence (like electricity), the machines that power the cloud may not look like servers in the way we define them today. Case in point: we all know that the power in our mobile phones trumps anything that was around in the 1960s and who knows what machines will replace our current server concept.

    Thanks for a thoughtful blog post, as always!


    • It’s a race then–will the increase in cpu power and the greater utilization of the Cloud outstrip the new demands created?

      While it is always dangerous to predict supply can outstrip demand (e.g. the famous Bill Gates 640K memory is enough prediction), yet we have somewhat outstripped demand already when it comes to the desktop. People don’t upgrade computers as often as they used to, not by a long shot.

      I think there is reason to believe the same may be coming for servers. Even if it isn’t, it is prudent for Hardware makers to consider what they will do if it does as it only ups the stakes of the Cloud game further.



      • Very valid points. It is so hard to tell with the consolidation of more power into smaller devices. Thanks for keeping us thinking about it.


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