By Cade Metz.
HP. CISCO. DELL. EMC. IBM. Oracle. Think of them as the walking dead.
Oh, sure, they’ll shuffle along for some time. They’ll sell some stuff. They’ll make some money. They’ll command some headlines. They may even do some new things. But as tech giants, they’re dead.
This was driven home in wonderfully complete fashion this past Wednesday, thanks to a trio of events. If you don’t follow the seemingly uninteresting, enormously lucrative, and, in fact, endlessly fascinating world of enterprise computing—computing that helps run big businesses—you may have missed them all. But they were big news in the enterprise world. And together, they show just how dead those giants really are.
First, Pure Storage, a Silicon Valley startup that sells a new kind of hardware for storing large amounts of digital data, made its Wall Street debut. Later in the day, The Wall Street Journal reported that big-name computer tech company Dell was in talks to buy EMC, a storage outfit that’s much older and much larger than Pure Storage (the deal was announced this morning). And during an event in Las Vegas, Amazon introduced a sweeping collection of new cloud computing services that let you juggle vast amounts of data without setting up your own hardware.
That may seem like a lot to wrap your head around, but the story is really quite simple. For decades, if you were building a business and you needed to store lots o’ data, EMC was your main option. You gave the company lots o’ money, and it gave you some hefty machines packed with hard disks and some software for storing data on those hard disks. The trick was that you could only get that software from EMC. So, anytime you wanted to store more data, you gave EMC more money. This made the company very rich.
But then little companies like Pure Storage came along and sold storage gear built around flash, a much faster alternative to hard drives, letting you juggle more data more quickly and, potentially, for less money. But more importantly, cloud computing companies like Amazon came along, letting you store data on their machines. These machines sat on the other side of the Internet, but you could access them from anywhere, at any time. That meant you didn’t have to buy hardware from EMC or anyone else.
That’s the subtext as EMC, once a giant of the tech world, merges with Dell, a company that isn’t exactly on the rise. Dell, in fact, suffers from the same conundrum as EMC—a conundrum that grew so onerous, Dell went private. This conundrum also plagues HP. And IBM. And Cisco. And Oracle. As Bloomberg Business feature writer, Elon Musk biographer, and unparalleled Silicon Valley hack Ashlee Vance puts it: “Why don’t IBM, HP, EMC, Dell and Cisco all merge and get this thing over with?”
What is this conundrum? Well, we’ll let Vance explain that too. When someone asked what we should call that IBM-HP-EMC-Dell-Cisco merger, his response was wonderfully descriptive. He suggested we call the company Fucked By The Cloud.
[Redacted] by the Cloud
The Cloud. The term has taken on so many meanings in recent years. But keep in mind: most of these meanings come from IBM, HP, EMC, Dell, Cisco, and other companies that don’t want to be fucked by it. The best way to think about The Cloud is this: It’s the way that the giants of the Internet—aka Amazon, Google, and Facebook—build their businesses.
These companies built Internet businesses so large—businesses that ran atop hundreds, thousands, even tens of thousands of computers—they eventually realized they couldn’t build them with hardware and software from established vendors. They couldn’t use traditional storage gear from EMC. They couldn’t use servers from Dell and HP and IBM. They couldn’t use networking gear from Cisco. They couldn’t use databases from Oracle. It was too expensive. And it couldn’t scale. That’s another buzzword. It means “helping an online operation achieve world domination.”
So, Amazon and Google and Facebook built a new breed of hardware and software that would scale quite nicely. They built their own servers, their own storage gear, their own networking gear, their own databases and other software for juggling information across all this hardware. They streamlined their hardware to make it less expensive, and in some cases, they sped it up, moving from hard disks to flash drives. They built databases that juggled data using the memory subsystems of dozens, hundreds, or even thousands of machines—subsystems that can operate even faster than flash.
The Sharing Game
But they didn’t keep this stuff to themselves. They shared it. Now, all the stuff that Amazon and Google and Facebook built is trickling down to the rest of the world. That’s important, because, as time goes on and the Internet expands, so many other businesses will scale like Amazon and Google and Facebook. Many already are.
Amazon is now offering up its own infrastructure to this world of businesses. Literally. That’s what a cloud computing service is. Google is doing the same. And Facebook, more than anyone, has released both its software and its hardware designs to the world at large, so that others can build their own operations in much the same way. This is called open source.
With help from these open source designs and the general example of the Internet giants, an army of up-and-coming enterprise vendors are offering hardware and software that operates a lot like the stuff Amazon and Google and Facebook have built. This includes not only storage vendors like Pure Storage, but server makers like Quanta and networking outfits like Cumulus Networks and Big Switch. Myriad software makers, such as MemSQL and MongoDB, sell databases based on designs from Facebook and Google and Amazon.
All this is why IBM, HP, EMC, Dell, and Cisco are fucked. Yes, they can offer their own cloud computing services. They can offer software and hardware that works like the stuff Facebook has open sourced. And to a certain extent, they have. But the competition now stretches far and wide. And if they go too far with new cloud services and products, they’ll cannibalize their existing businesses. This is called the innovator’s dilemma.
The Larry Ellison Effect
Yes, this conundrum plagues Oracle too. The Oracle empire is funded by expensive databases that don’t scale. The difference is that Oracle has built a sales team that can force businesses into buying anything—even if it makes no economic sense. This is called The Iron Fist of Larry Ellison.
Oh, and it plagues another venerable tech company: Microsoft. The difference here is that Microsoft has more quickly and adeptly moved into the world of cloud computing. Like Amazon and Google and Facebook, it runs its own massive Internet services, including Bing. That means it too has been forced to build its own data center hardware and software. And it has done an unusually good job of challenging Amazon with its own cloud computing services. This is called Microsoft Azure.
Of course, Microsoft suffers from other problems too. One of its biggest money makers is the Windows operating system, for instance, and a relatively small number of people use Windows on smartphones, tablets, and other devices of the future. This is called Fucked By Mobile.
Who’s Not [Redacted]?
Who’s not fucked? Well, Pure Storage is looking better than EMC. That said, its IPO wasn’t exactly a home run. And it still sells stuff that you have to install in your own data center. Gear like this will always have a place in the world. But the future of enterprise computing, it has become increasingly clear, lies with cloud computing services. And that means it lies with Amazon.
Amazon is by far the world’s largest cloud computing operation. Its cloud services are where so many businesses and coders go to run software and store data. And last week, the company continued its efforts to take this model still further—to offer up not just raw processing power and raw storage but also its own databases and data analytics tools and other software services. If you use Amazon, you don’t need servers and other hardware from Dell and HP and EMC and Cisco—and you don’t need databases from Oracle and IBM.
Luckily, Amazon has some competition in the cloud computing world. That would be Google and Microsoft. The others are also-rans. HP and Oracle and IBM and the rest will imitate Amazon. But they’re too far behind—and carry too much baggage—to catch up. Google and Microsoft can put some heat on Amazon. In fact, Microsoft is further along than Google. So, in short, we’re really pulling for Fucked By Mobile.
Update: This story has been updated with the news that Dell and EMC have indeed merged.