Parallax : Calculating Technology's Future

Less May Be More

When it comes to Web 2.0, provinding less features to a broader audience may actually be more valuable...

Why the Most Important Battle in IT is for Fifth Place

Just the other day I was talking with a tier-1 industry analyst about the next generation of IT infrastructure and who he thought the significant players would be. I was not surprised to hear his top 4 (in no particular order):

SAP
Oracle
IBM
Microsoft

What I was surprised to hear however, was who he thought was a viable candidate for 5th place. I would have assumed BEA would easily have taken that spot but surprisingly, he put them at maybe 7th or 8th on the candidate list. His opinion was firmly that the most viable candidates for #3 would be (in no particular order):

Amazon
Ebay
Google
Salesforce.com

SFdC is pretty easy one to swallow. The meme-ometer around SFdC after the Web 2.0 conference is off the charts this week. I swear if Benioff put out a solo album right now he'd rack up more first week sales than K-Fed. But when you dig deeper into the possibility of Amazon, Ebay or Google to take the 5^th position, it gets a bit harder to see how a company such as Citigroup would rely on one of these players to run any significant portion of their IT infrastructure.

As I was pondering all of this, I noticed a recent announcement from Amazon hinting they were heading further in this direction. After taking a deeper look I must admit that I am starting to see how Amazon may actually be more of a significant player than I first expected. My jury is still out on Ebay and Google, although it would not be hard for them to replicate some of the moves that Amazon is playing now.

Let’s step back a second and understand why Amazon’s maneuvers are more than just mashup-mania. To some extent, all the infrastructure players of the future are really just web services platforms with some prebuilt applications on top to lure the customers to one platform or another. Oracle’s Fusion, SAP’s NetWeaver, the ever imminent Microsoft Dynamics, and IBM’s WebSphere (sans the applications) - it's all basically the same stuff. If you look at what Amazon has built, it’s not much of a stretch to place them in that club. And to some extent, with the available web services on Amazon’s Web Services hub, one could actually argue they are better positioned than WebSphere who has huge customer penetration but exists primarily as a “we want to build it all from scratch” option. Remember, IBM has no applications of their own to offer. They rely on SAP or PeopleSoft (et al) customers to use WebSphere as an alternative to the ISVs proprietary application server. If you don’t believe Amazon is serious about services or a services platform, read through this fantastic ACM Interview with Amazon's CTO, Werner Vogels. I have said before that Werner articulates more clearly in this article the value of an SOA approach to applications than all the commentary I have seen in the space combined.

But let’s be realistic: a services platform does not make a winner in the market. What Amazon is doing in addition is making a compelling argument to move a piece of the IT infrastructure puzzle to the cloud. Just like Salesforce.com articulated enough of a value proposition to move a piece of IT (CRM applications) to the cloud, Amazon is attempting to do that with their Elastic Cloud initiative. Essentially Amazon is arguing to move the basic stack from the hardware up to the application server over to Amazon’s data center. Baris Karadogan wrote a compelling piece in Venture Beat about why this is not complete folly for Amazon and how this move is heralding the inevitable abstraction of the data center. He recants a similar history in the semiconductor fab industry as a pretty solid analogy.

Also, it should be noted that I have some familiarity with this issue. I sold my last company, Service Metrics, to Exodus. Exodus, who is no longer in business, was at the time the world’s largest hosting company. We served over ¼ of the bits flowing on the internet and had the most global data centers (I seem to remember over 50 at one point in time). My position was VP of Research and I was responsible for the future of services strategy in the data center (e.g. storage networking, streaming media, content distribution, etc..). I remember there was always a lurking feeling that we were an over inflated real-estate play waiting for a market crash (which came around March of 2001). No matter how hard we tried to change things (especially in my group), the reps were most comfortable selling ping, power, and pipe. And this was inevitably our demise. The cost of building out class-A data centers resulted in us selling 1 Mbps of bandwidth for $1200/mo (market price) and having it cost us $1500/mo fully loaded with utilities, headcount, and debt service for the billions we spent on building out nice facilities. 

And now, out of the ashes of Exodus and good datacenter design is emerging a completely new model for actually monetizing these expensive data centers. And not surprisingly (hindsight is 20/20) its coming from applications companies (Yahoo, Google, Microsoft, Amazon) and not from infrastructure companies. Whether SAP, Oracle or IBM want to admit it, as they try to sell into the middle market, they will inevitably find a set of competitors they did not expect competing with a value proposition they may find it hard to compete with. Just like many companies have been comfortable relinquishing on-premise rights to customer data to SFdC to buy the application one user at a time, some companies will be comfortable getting the complete stack from storage up to application server if they can pay for usage in a similarly incremental way. I am looking forward to seeing this unfold.

Revenge of the Nerds

I am always reminded how much America is fascinated by charts when I find myself reading weekend box office receipts religiously. Its odd, because I never see half those movies nor do I ever make a decisions on which movie to see based on box office tallys. I just find it interesting to track. A sort of pop culture barometer, in the vein of our mysterious but consistent compulsion to watch the weather channel. In the same way as movies, I watch record charts on a daily basis. I get (perhaps slightly skewed) through Rhapsody, which I use as a music player in juke box mode. One of the features of Rhapsody's home page is that it lists relatively real-time statistics on what is being listened to the most. Almost always you see the obvious acts - whomever has just released an album as well as some standards like Jack Johnson which seem to never go away no matter what else is going on in the world.

Well, to my shock yesterday I fired up Rhapsody and guess who was #1? Justin Timberlake, sorry, but he ain't bringing #1 back any time soon. John Mayer, nope, he'll be waiting on the charts to change. Okay, okay - that was horrible, I know. But, the winner was... Weird Al Yankovic. Yes, you read that right. The most listened to artist in the US according to Rhapsody users (which may or may not be a statistically significant sample) on Oct 2, 2006 was Weird Al Yankovic. Wow, and here is proof:

Okay - so other than the nerd's-rule factor, what is relevant about this? Well, the question I asked myself is, "How did that happen?" What I realized is that for the first time (and this is anecdote, not pure research), something that was popular on YouTube actually drove statistically relevant change in the Long Tail on a commercial site such as Rhapsody. Everyone I talked to found out about Weird Al's latest album one way - by seeing his YouTube video for "White and Nerdy". It came in email, it bubbled up on the YouTube most popular site, it was embedded in MySpace pages, etc.. Interestingly, other than being an embed in MySpace, it actually was not pushed by MySpace (Weird Al does not have a MySpace music page). And it wasn't marketed on Rhapsody. So what is this phenomenon? Well, it's Web 2.0 crossover. Popular on YouTube for free, popular on Rhapsody making money for the artist and label.

Someone Else Gets It

I just read a great article in CIO magazine entitled "ERP Systems on Steroids". Finally, someone else is starting to get it. I disagree with one comment though, it actually IS a change management problem until someone comes up with a better architecture. And from everything I have seen, Fusion and NetWeaver are not going to be any architecturally different than what we have now.

Airing Your Strategic Laundry

In the United States there has always been a healthy race between government funded research and corporate innovation. Today I noticed two similar corporate announcements that I found to be tips of the hat to some recent academic and non-profit successes.

The first comes from NetFlix who is offering $1,000,000 to anyone who can devise a movie recommendation engine at least 10% better than their own. How one accurately calculates "10% better" will probably be the subject of their next public purse, but we'll see how it unfolds. One of the most amazing things about this experiment is that they are giving a scrubbed version of their user recommendation database to any team (apparently) who signs up. That's sort of like Google giving away a database of 100 million search results to fund anyone who can come up a better search algorithm than PageRank. The downside is that the competition runs for 5 years, so no quick wins here.

The second announcement today comes from Intel who is offering $1,000,000 to anyone who can design a better looking PC or multimedia device. An interestingly technology-light contest from such a deep techology company. While it may not seem core, its probably more relevant to their battle over market expansion and dominance against AMD than one would consider at first blush. It also seems like a lot cheaper way to get good design ideas than to buy a company like HP did today with its acquisition of Voodoo.

I found both of these strikingly reminiscent of two previous prizes announced to the public with much fanfare. First was the Ansari X-Prize, who's title sponsor just recently returned from space herself (not because of the X-Prize). The first X-Prize was a $10,000,000 purse to anyone who could reach a high-earth altitude, return to earth and then do it again in a short amount of time (to simulate continous commercial travel operations). There are now two additional X-Prizes in automotives and genomics with more on the way.

The other notable public prize is Darpa's ongoing Grand Challenge, a million dollar purse awarded to any autonomous vehicle that can navigate a treacherous 60 mile driving course. While no one has yet collected, the challenge has attracted significant attention both from media and sponsored partipants.

What is interesting about the X-Prize and Grand Challenge is that the total amount of sponsorship money invested to win the prize is an order of magnitude greater than the prize itself. A pretty smart move if your real goal is dirving innovation.

So what's the point of all of this and how will is transform the business landscape? I am not quite sure yet to be honest. It's hard to tell if this is more marketing than real innovation, but i think if the trend continues, we will look back at the 90's as the decade of co-opetition and the first decade of this millenium as the decade of open sourced competition.

Robert and Agassi

PodTech has been here at the SAP TechEd show with us  bloggers for a few days. They have released the first in a series of audio, picture, and eventually video clips. The kickoff is Scoble's interview with Shai. Take a look-see or hear-see when you have a chance:

PodCast:
Part 1, Part 2
SDN Flickr Stream
TechEd Flickr Stream

I believe they have a lot of attendee interviews that they are compiling as well.

The Irregulars – On Assignment

For the last two and a half days I have been in Las Vegas as SAP’s TechEd 2006 Conference. SAP was gracious enough to bring a number of bloggers here to the conference and once again give us access to executives, the show floor, the press conference, and the press room to spin our personal perspectives on what’s going on. Some of the original SAPPHIRE Irregulars were able to make it, Scoble and PodTech are here for the first time, and there are some new members of the SAP conference blogging tribe as well. The complete list of bloggers at the conference is:

Charlie Wood, Spanning Partners/Moonwatcher
Ismael Ghalimi, Intalio/ITRedux
Cote, Redmonk
Mark Crofton, SAP
Tim Marman, SlashStar
Mike Masnick, TechDirt

As with SAPPHIRE, it has ended up being harder than I expected to actually find time to write while I am here. Over the next few days and weeks you’ll see a host of postings coming out from the group. In terms of good content, there have been quite a lot of rowdy discussions. We have even had some controversy so far (one of the most interesting aspects of this show has been a series of discussions I have had about the place of bloggers in the world of press, analysts and conferences - I promise to write more about that as well.) Never a dull moment in the Irregular’s blogosphere!

Our Modern Salon Des Refuses

A lot has been written about the future of Wikipedia. Given some recent involvement I have had with the Wikipedia deletion process, it set me to thinking about who determines what is important and what is not on the Intenet. Read on for my conclusions...

Big Box Street Theater

And now for a brief diversion from technology... I found some videos this morning on YouTube of an improv troupe called ImprovEverywhere. I can only descibe it as "mob improv". I think its pretty phenomenol and well worth a watch. A simple example shows them invading a Best Buy dressed in the standard Best Buy Khaki pant/blue golf shirt uniform (very Thomas Crown affair of them):

http://www.youtube.com/watch?v=utkkXCF8ZVc

And a much more complex adventure with many more people at Home Depot (scroll down for video segments):

http://www.improveverywhere.com/mission_view.php?mission_id=59

Someone in Redmond Has Been Reading My Blog...

A while ago I wrote a spirited piece attempting to merge the best of Brian Arthur's Increasing Returns philosophy with some of Chris Anderson's ubiquitous Long Tail theory. To some extent the merger was also meant to sweep under the rug some weaknesses that I found in both approaches. If you are so inclined, you can read all 8000 words of it or simply let me sum it up for you here: in a platform war, the winner is always the one that delivers the killer app first and then does everything possible to give end users tools to develop and extend the value of their platform (the end of the tail). I called this the Increasing Tail strategy. Microsoft is, of course, the poster child for this. And Apple is the hat-trick contender (Mac, Newton, iPOD) for worst place in this game.

A few days after publishing this I got a great comment from Jim Plamondon which I ended up publishing. Turns out he had worked at Microsoft and was validating that they intentionally used (and funded) this strategy. Ahh 60MM funding or 20/20 hindsight - either one.

Well, the boys (and girls) in Redmond are up to it all over again with the XBox. Two announcements in a row should have Sony investors shaking in their boots. Not so much for what Microsoft can do, but what Sony has historically missed the boat on doing.

Announcement #1: Users can download games to the XBox across the net from a central store. New characters, weapons, demos, games, trailers, oh my! In case you blinked, the XBox in now a video game commerce platform!

Announcement #2: Any one and their first-person-shooting-grandmother can write their own games for the XBox and sell them online. The world of gaming box development, traditionally closed off to all but a few vendors, is now open to everyone.

Hold Increasing Tail batman! For anyone that can't see the correlation with their earlier dominance (Windows, Office, etc..) this is the exact same strategy. Build a platform (XBOX/Online Store), launch killer apps (Hello, Halo anyone) and then give away as many developer tools as possible so everyone can add to the end of the tail for you (XNA). If the folks at Sony and Nintendo miss the cluetrain this time, shame on them!