Clouds Ahead!

Cloud: Terrifying…For Some!

A colleague of mine, @StuOzer, sent me this link:

http://telecom.economictimes.indiatimes.com/news/industry/why-the-story-ofyamaha-should-terrify-hp-dell-cisco-others-in-hardware-biz/47946788

Having spent a few years at HP… It was like seeing written confirmation of the problem that plagued the sales teams in the Servers, Storage and Networking division. The sales and compensation model at HP did NOT address the lurking threat of Cloud Computing and its potential impact on customers.

HP believed it had magic sauce at the time. A portfolio that offered an EASIER platform to manage (more on that) – Top of the Line Servers, A Solid Storage Offering (3Par), and a lower cost solution to Cisco Networking and the dreaded SMARTNET – as well as a sexy SDN Marketing Play. It was called Converged Infrastructure: Wrapped all up in a Services package, delivered through THOUSANDS of Channel Partners…pretty snappy message. Problems? You bet.

  1. Channel Model: Too complex, and too dependent on Server sales…the most commoditized component of the entire offering. Completely relied on forcing hardware refresh…which is a problem when you consider that each server iteration is cheaper to manufacture, and usually…more powerful. Customers end up consolidating on new servers, and you sell less to them each refresh…creates a problem with your sales team, and your partners. In fact…any time you heard of a channel partner GROWING business, it was at the expense of another partner – Share Shift. The actual server business just slid.
  2. Converged Infrastructure actually SOUNDED like a great idea, but there was a negative connotation with buying infrastructure technology from ONE provider. I don’t agree with most of the reasons…but marketing-wise…competitors had a field day picking off pieces of Converged Infrastructure to break apart the deal. Account owners simply didn’t have enough depth to combat attacks from Server, Storage and Networking competition…and the sales compensation model further exacerbated the issue.
  3. Focus was on TODAY: The visible fire drills…patchwork solution sales to the current on-premise hardware management issues, and little focus on the future, which was, and IS…Cloud. Why? Because it didn’t pay off quick enough…it took too long to recognize revenue in a monthly model, when Wall Street required massive end of quarter and end of year license deals.

Truly…my intent isn’t to list the myriad of issues that HP continues to deal with…they are the SAME at Dell and Cisco. I am only interested in calling out the shift. Cloud is creating a major problem for on premise sales models. Right now…Yamaha is making waves because it is a large enough and recognizable enough brand to make enterprise business leaders (think…CFO’s, CEO’s, CMO’s…the folks you wish your sales team had relationships with) to actually consider moving MORE of their business to the cloud – regardless of what the resident IT Staff would PREFER to do.

Hardware Manufacturers are in a pickle. Their sales cycle over the last MANY years centered around huge refresh cycles…and eating market share of their competitors. But the market really isn’t growing…in fact, SHIPMENTS may be growing in single digits (but for how long?) while REVENUE declines. It is REVENUE that matters. IBM is gone from this space…Lenovo stands to start eating into the Server share by simply showing up and offering a low cost alternative, at the expense of Cisco, Dell and HP.  Ouch.  It isn’t pretty, and the Channel is really feeling the pinch.

What is going to happen when customers realize that it makes more sense to pay for what you use, and offload management of assets and monitoring of infrastructure to cloud based specialists? What company has enough invested in IT to manage the ever increasing RISK associated with security? Who can afford it? What company has enough eyeballs to monitor all the assets that are being MONITORED?

There is a shift that is happening – we are living in it right now. Hybrid solutions with cloud management and on prem combinations are being developed to satisfy the need of the mid market and SMB customer. It is only a matter of time before larger enterprises see the economies of scale a service like AWS and others will offer.

Hardware sales reps and manufacturers who continue to whale hunt will just…go away. Cloud is terrifying to them. Server sales may actually GROW, but it won’t be by selling to millions of customers…it will be sold to thousands of providers, instead. How many reps will it take to call on the much FEWER number of Service Providers that will own and operate the huge data center farms that will be the backbone of cloud? Not as many as there are today…period.  Same goes for Storage and to a lesser extent, Networking (although there is more of a shift happening here…and the looming increase of devices dropping onto the network…still plenty of room for growth).  Idea for another post!

While IT departments shift into the new model, manufacturers better think about including a STANDARD management and monitoring solution that offloads management risk from a stressed out IT staff as a service. It will keep them on their commoditized hardware, and position them to add the real value of the future…the apps that will be running the show.

Minimize the lumpiness of a refresh cycle and replace it with a much stickier, and predictable monthly revenue stream that allows sales teams to actually SERVICE customers and consult with them on leveraging new technologies and solutions to help them improve THEIR CUSTOMERS business.  Lot’s of bad things happen when you only call or deliver a maintenance renewal contract once a year.  There are lots of services customers can choose from…make them choose yours, and show up every month to fine tune.

In my opinion, the growing strength of the Cloud centers around helping customers leverage the DATA they are generating, collecting, creating in order to be more efficient at managing their business. Business Intelligence will lead to Predictive Analytics, and the companies that offer the ability guide their customers in this path…and leverage cloud computing to do so…will explode. I have more thoughts on that for another day!

Ok – enough for now…just some thoughts and where I am focusing my energy. Shift your view and run right at those clouds on the horizon.

m-

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