What a fun week for a technology watcher/analyst/would-be geek like me!
The IT world had gotten so boring over the past few years, that I have
been happy to turn my attention to customer-led business innovation and
customer experience (with IT enablement). This week’s news has taken me
back to my heyday as primarily an IT analyst and pundit (as opposed to
my current self-image as a customer-centric business/IT strategist).
First, Cisco threw down its gauntlet to IBM, Dell, HP, and Sun and
declared that it too is entering the market for blade servers to be
sold for IT data centers and virtualization. (Translation: there’s not
enough growth in telecommunications and Internet infrastructure, we’re
adding data centers and cloud computing to our remit).
Next, and in parallel, 1) Sun announces its eagerly anticipated “Sun
Cloud.” This is Sun’s cloud computing offering, which will compete with
Amazon’s cloud, Microsoft’s coming cloud, IBM’s Blue Cloud, and the
existing Google cloud (which oddly, no one talks about)—and 2) the
rumor leaks that IBM will acquire Sun for $7.5 to $8 billion in cash.
Sun’s stock soars; IBM’s stock falls. And the pundits start punditing.
What fun!
[UPDATE: First IBM Lowered the Price, then Sun Refused the Deal, but my take is that this will still happen.]
What made this little flurry of news and analysis more exciting was the
process I have used to come up with “my” analysis. Over the last 12
hours, I used a combination of social media (twitter search filters to
watch the pundits’ tweet their commentary and tweeples’ comments on
their punditry) and outreach to my own community of technology
architects: Patty’s Pioneers.
As their comments rolled in from Hong Kong, Sydney, California, Boston
and Chicago, it has been fun to debate and ruminate together (and the
discussion continues!).
Steve Siu, the chief
technologist at Orient Overseas Container Lines (OOCL) in Hong Kong,
summed it up best: “This deal potentially marks a milestone of a new
generation of computing economic model—a new chapter. Commoditize all
computing activities, back to business model innovation to create
value.”
Peter Horne from Blues Point Partners in Sydney, Australia, commented:
“Sun is a hardware company with a software community (Java) attached.
The hardware company has been dying for a while, and as a hardware
company they have proven that it's hard for a hardware Co to understand
and leverage a software community. IBM transformed themselves in to a
services company and has probably made more money out of Java than Sun
(Ditto Oracle). While a single brilliant Sun engineer created Java,
they were pedestrian at managing it. I'm not worried about who owns
Java now as it's owned by the community of Java developers and can't be
directed by any single commercial interest anymore. Linux also becomes
the final word in x86 OS alternatives as well. IBM is a Linux shop and
I can't see x86 Solaris continuing. IBM also gets MySql which gets them
some head space in open source databases. They also get Open Office
which may make things a bit more interesting for MS given IBM’s
incredible corporate sales ability. Summing up—inevitable outcome for
Sun, great outcome for IBM.”
The IBM/Sun deal makes so much sense to me that my first reaction on
seeing the news (on Twitter) was “of course.” I realize that Cisco or
Oracle may compete with IBM, turning the sale into an auction. But
frankly, I doubt it. I believe that Sun’s board and CEO, Jonathan
Schwartz, have already shopped the company around. IBM is ready to make
the best offer. Cash. Now. At a price that is not embarrassing. (2x
Tuesday’s market valuation). I also realize that the deal will probably
be slowed down by antitrust deliberations that are stimulated by HP,
Cisco, Dell, Microsoft and Oracle—all of whom have the most to lose.
Most of the other pundits are busy comparing the two companies’
hardware, software and services’ portfolios. There’s lots of
speculation about what the combined road map will look like.
Hardware: The
two firms will need to rationalize their hardware offerings—Sun moved
away from its own RISC chips to AMD some time ago. IBM remains a leader
in computing chip technology, but derives less of its revenues and
profits from hardware these days. Sun’s hardware engineers will
probably find a happy home in IBM’s labs.
Software: Both
firms have big investments in Java, Linux, and open source. They will
need to rationalize their Unix/Linux offerings. Both use Linux; both
have their own proprietary versions of Unix (AIX/Solaris). Both support
the open source Eclipse development environment. Sun’s software
engineers are already in bed with their IBM counterparts.
Steve Siu’s comments about the Linux/Unix variants: “In five years, the
Unix server will become legacy; the same way the mainframe did, if we
step back 5 years. In the future Linux / open source world, the
application execution platform will further commoditize through
virtualization. So, this potential deal will trigger corporate users to
think about their choices. In the current market environment, all IT
projects would require a more solid return. We will minimize special
technologies to be employed. We did shut down our mainframe before Y2K,
maybe we’ll do the same for our Unix server in 5 years.”
Services: IBM
derives the majority of its revenues and profits from its professional
services, SaaS, and outsourcing (including cloud computing) offerings.
Sun has been terrible at monetizing software and services.
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