What do you do when a product launch is so horrendous that it's not only completely rejected by the consumer, it also drives down the sales of other companies' hardware that would potentially use that product? Well, if you're Microsoft (Nasdaq: MSFT) you repeat the error on an even bigger scale.
Windows 8, a complete makeover of Microsoft's operating system, was a complete failure in the PC market. (Windows XP and Windows 7 were highly successful. To capitalize on that success, Microsoft threw the entire OS out and redesigned it into something the consumer loathed. You'd think they'd have learned from Windows/ME, wouldn't you?) While it had some success in the company's tiny portions of the phone and tablet worlds, PC users rejected the entire concept in droves. Even in the laptop space, where you could argue that there was some chance of success, I continue to be stunned by the number of people that ask me how they could replace the Windows 8 that came with the box with Windows 7. The message was loud and clear, or at least it should have been. Not, apparently, for Microsoft.
Enter Windows 10. Yet another new look for the OS, Windows 10 seeks to continue down the same path as Windows 8 by providing a single interface between the phone, the tablet, the laptop, and the PC. At some point, we can only hope that someone in Redmond realizes that the demands of a user looking at a 5 inch screen are dramatically different from the user looking at two 29 inch screens. Interaction with a screen 8 inches from my nose is dramatically different from my interaction with a screen 2 feet away. On a phone, I'm looking for a simple interface with lettering large enough to read with rapidly aging eyes. On a PC, I'm looking to maximize real estate on screens larger than the TV set I had in my living room as a kid. The needs are different, the user behavior is different, the way you interact with the devices is different. The concept of a one-sized-fits-all operating system is, and always will be, a failure.
Next we have the one component virtually every user touches almost constantly: the web browser. Now, everyone has their favorite browser, for a variety of reasons, and the defense of their favorite browser frequently turns into a Holy War. At present, there are really only four choices in the browser world - Internet Explorer, Firefox, Chrome, and Safari. None of them are perfect, but with the exception of IE, the others are at least stable, and offer a bit of backward compatibility. I'd be doing cartwheels over Firefox, in fact, if they'd only fix the memory issue that's plagued that browser for close to a decade.
Enter Cortana. This is yet another attempt by Microsoft to prove they cannot distinguish between a phone and a desktop. Basically, Microsoft is attempting to bring Apple's Siri to the desktop. There's only one problem. I don't need Siri on my desktop. I don't need a hands-free desktop experience; in fact, I don't want a hands-free desktop experience. There's nothing I've seen in any of the Cortana demos to date that leads me to conclude that this is the browser solution of the future. Certainly, it's not about to make me run out and install Windows 10 - an operating system I intend to avoid with even more gusto than I avoided Windows 8. A point Microsoft seems to be forgetting is that there is no revenue generated just from the browser. Certainly, there's potential revenue from Bing - their search engine - however the competition with Google is fierce, and given the amount of data Google collects, they have the distinct advantage (except in China.) Cortana isn't about to increase revenue for Microsoft, and after the Windows 8 and now Windows 10 fiascoes, that's precisely what Microsoft needs.
Finally, have you looked at the bundles attached to new laptops, lately? Office 365, complete with a "free" one-year subscription, now seems to be the standard offering. Office 365 is a subscription based software service, forcing users to make extensive use of Microsoft's cloud offering just to use basic functions like word processing, spreadsheets, etc. While connectivity isn't necessarily an issue in the desktop space (although it's a bit presumptuous to assume that everyone using a spreadsheet has Internet connectivity all the time) it's definitely an issue in the laptop space. The concept of a laptop is portability, and there are plenty of times I find myself with my laptop outside of a WiFi zone. Not, mind you, that I'm willing to use a public WiFi for anything confidential, anyway.
Now, there may be plenty of people willing to enter into a subscription contract for software. Adobe's had a bit of success with that in the photo editing space, but that's more of a function of the outrageous price of Photoshop, for anyone other than a student. I'm not one of those people. There may also be plenty of people willing to store their documents "in the cloud" - meaning, on servers in a data center over which you have zero control. Sure, I'll let you store my grocery list in the cloud. Financial and personal data? Not a chance. Google "Identity Theft" if you're curious as to why.
Microsoft has clearly lost their vision with regards to consumer requirements. The only reason I now have to run a Windows based PC is for online gaming. Everything else I do on a PC can be done for far less cost running a Linux OS, and using open source solutions like Open Office to do everything Microsoft Office can do without the high cost or a subscription charge for the latter. (In fact, I have Ubuntu on a laptop that dates to 2004, is a single core processor running 1 GB of memory, and it outperforms this quad-core desktop with 6 GB of memory running Windows 7.) With the exception of playing an online MMO, there's nothing I do today on a Windows box that cannot be done under Linux for a fraction of the cost and a fraction of the CPU and Memory requirements.
Microsoft's stock was absolutely crushed following their latest earnings announcement and their conference call. Their earnings were in-line with expectations, and their revenue beat by $140 million. So why were they crushed? (They're down over 10% from their pre-announcement price.) They were - and still are - getting crushed because they have lost sight of what the consumer wants. The products they are delivering in 2015 are not products in demand by the consumer. In fact, it's fair to say that the consumer is demanding the exact opposite of what's being delivered. This is a company in turmoil, and until there are fundamental changes at the top of the house, it will be a stock to avoid.
Showing posts with label computers. Show all posts
Showing posts with label computers. Show all posts
Wednesday, January 28, 2015
Friday, January 23, 2015
IBM - a Once and Future Giant or Is It a Has Been?
For a company founded in 1911, you would think that 2015 would be a bit late for a mid-life crisis. That, however, is what appears to be happening with IBM (NYSE: IBM) since they no longer appear to know what they want to be when they grow up. That's assuming, of course, that IBM is able to recover from some extremely poor strategic decisions, coupled with an inability to deliver what the market truly requires.
Consider that, since the 1960s, IBM was the computer hardware company, driving the business technology world through the information revolution and into a world where computing technology is a given in our everyday lives. The phrase, "Nobody ever got fired for buying IBM" was inevitably heard in any management discussion regarding a decision on acquiring new technologies. Computer hardware and software was IBM's domain, and it was IBM's to lose. And lose it, they did.
After driving their competition out of business, IBM emerged as the sole provider of Mainframe hardware (including the current z/12 mainframe family and the just-announced z13 mainframe family.) They are also the sole provider of the mainframe operating systems as well as the only mainframe transaction processors (CICS, IMS, or Websphere for z/OS.) There's only one problem. IBM is not increasing their mainframe footprint, and existing mainframe customers are gradually migrating new applications into the non-mainframe space. The mainframe market is shrinking rapidly, and you can thank IBM's own internal marketing competition for that shrinkage.
IBM managed, though the early part of the 21st century, to undercut and cannibalize their own advantage. They introduced the P/Series hardware technology as a direct competitor, encouraging mainframe customers to migrate to the faster (at the time) mid-range technologies running their AIX operating system. The amount of Level 2 cache on the the P/Series boxes was a fraction of what was on the mainframe, though, so multi-tasking was not a forte in the mid-range space. Websphere Application Server (WAS) is the transaction processor of choice off the mainframe, however it's a major resource hog and can't compete with CICS when it comes to scalability, performance, or stability. (Ask any WAS specialist how often they hear "A JVM is looping." Stability and WAS are mutually exclusive.) Yet, the number of WAS licenses dwarfs the number of CICS licenses, thanks to IBM's efforts to increase P/Series and x86 based sales.
The industry trend now, is to migrate off the mid-range P/Series that IBM sold by the bushels a decade ago. AIX as an operating system was deemed too expensive and is rapidly losing to Linux as the Unix-based operating system of choice. Linux can run on all platforms - including the mainframe - and the application code running under Linux is highly portable. This is where scalability is factoring into the demise of IBM.
Unlike the monopoly IBM was able to develop in the mainframe space, the non-mainframe server space is highly competitive. HP is emerging as the market leader in that space. IBM was #2, but in a move that still mystifies me, IBM sold that advantage to Lenovo. The x86 server space is growing rapidly, and IBM gave it away. Dell is also in the top 3 in that space, giving customers plenty of options for the lower cost but highly scalable non-mainframe servers. When you look at the hardware filling all of those expanding data centers, you'll find endless racks of x86 based servers. Why would a major hardware company even think of abandoning that huge growth market?
In the database space, there are two main competitors and a bunch of also-rans. You're looking at either Oracle or DB2. On the mainframe, running under z/OS, DB2 is the only option (although there are still plenty of mainframe shops storing data primarily in VSAM, which comes with the operating system.) In the non-mainframe space, however, Oracle is a huge factor. In 2014, the two were neck-and-neck for market share with a very slight edge to IBM's DB2. Oracle, however, is gaining rapidly. With some of the acquisitions Oracle - the company, not the database - made over the past few years, they are now a force to be reckoned with in both the hardware and software spaces.
So what are IBM's plans for the future? Well, we know they've abandoned the chip market and they've abandoned the x86 market. They are hanging their hat on remaking themselves as a "Cloud Services" provider, a Software company, and, of course, they are touting the just-announced z13. It's not enough.
To be a viable cloud provider, they should never have abandoned their x86 business. The competition in that space is huge, and by selling the x86 to Lenovo, they have relinquished a huge cost advantage in that space. Let an HP or a Dell partner with either Oracle or EMC, and you'll have a stake driven through IBM's cloud-based heart. IBM's Global Services division - their technology outsourcing business - is hemorrhaging market share to the India based outsourcers. Let an Infosys, or a Wipro, or a TCS partner with one of those combinations I mention above and IBM's cloud dreams are down for the count.
On the z13 front, IBM mentioned all of the major buzz-words that make senior executives salivate. They mentioned "Cloud" and "Mobile" in the same breath, and that always makes the non-technical executives swoon. Under the covers, though, you merely have the next release in their standard mainframe offering with some improved performance, improved throughput in their FICON channels and their zIIP specialty engines. They've made some nice improvements in the zBX blade-bolt on to the mainframe. But, at the end of the day, it's still a mainframe, and you're not going to see anyone flock to the z13 to satisfy a cloud or mobile requirement. For existing mainframe customers, it may delay a migration to the distributed world, but it's not likely to attract new mainframe customers, and as companies world-wide continue to squeeze their expense budgets, new customers is precisely what IBM requires. They're not able to squeeze more revenue from their existing customer base.
The direction IBM is taking at the moment does not lead me to believe they are on the right course. Rather, I see them heading in the exact opposite direction from where they need to go. For now, the only thing IBM has going for it is its name. Of course, there was a time when one might have said the same for Sperry Rand.
Consider that, since the 1960s, IBM was the computer hardware company, driving the business technology world through the information revolution and into a world where computing technology is a given in our everyday lives. The phrase, "Nobody ever got fired for buying IBM" was inevitably heard in any management discussion regarding a decision on acquiring new technologies. Computer hardware and software was IBM's domain, and it was IBM's to lose. And lose it, they did.
After driving their competition out of business, IBM emerged as the sole provider of Mainframe hardware (including the current z/12 mainframe family and the just-announced z13 mainframe family.) They are also the sole provider of the mainframe operating systems as well as the only mainframe transaction processors (CICS, IMS, or Websphere for z/OS.) There's only one problem. IBM is not increasing their mainframe footprint, and existing mainframe customers are gradually migrating new applications into the non-mainframe space. The mainframe market is shrinking rapidly, and you can thank IBM's own internal marketing competition for that shrinkage.
IBM managed, though the early part of the 21st century, to undercut and cannibalize their own advantage. They introduced the P/Series hardware technology as a direct competitor, encouraging mainframe customers to migrate to the faster (at the time) mid-range technologies running their AIX operating system. The amount of Level 2 cache on the the P/Series boxes was a fraction of what was on the mainframe, though, so multi-tasking was not a forte in the mid-range space. Websphere Application Server (WAS) is the transaction processor of choice off the mainframe, however it's a major resource hog and can't compete with CICS when it comes to scalability, performance, or stability. (Ask any WAS specialist how often they hear "A JVM is looping." Stability and WAS are mutually exclusive.) Yet, the number of WAS licenses dwarfs the number of CICS licenses, thanks to IBM's efforts to increase P/Series and x86 based sales.
The industry trend now, is to migrate off the mid-range P/Series that IBM sold by the bushels a decade ago. AIX as an operating system was deemed too expensive and is rapidly losing to Linux as the Unix-based operating system of choice. Linux can run on all platforms - including the mainframe - and the application code running under Linux is highly portable. This is where scalability is factoring into the demise of IBM.
Unlike the monopoly IBM was able to develop in the mainframe space, the non-mainframe server space is highly competitive. HP is emerging as the market leader in that space. IBM was #2, but in a move that still mystifies me, IBM sold that advantage to Lenovo. The x86 server space is growing rapidly, and IBM gave it away. Dell is also in the top 3 in that space, giving customers plenty of options for the lower cost but highly scalable non-mainframe servers. When you look at the hardware filling all of those expanding data centers, you'll find endless racks of x86 based servers. Why would a major hardware company even think of abandoning that huge growth market?
In the database space, there are two main competitors and a bunch of also-rans. You're looking at either Oracle or DB2. On the mainframe, running under z/OS, DB2 is the only option (although there are still plenty of mainframe shops storing data primarily in VSAM, which comes with the operating system.) In the non-mainframe space, however, Oracle is a huge factor. In 2014, the two were neck-and-neck for market share with a very slight edge to IBM's DB2. Oracle, however, is gaining rapidly. With some of the acquisitions Oracle - the company, not the database - made over the past few years, they are now a force to be reckoned with in both the hardware and software spaces.
So what are IBM's plans for the future? Well, we know they've abandoned the chip market and they've abandoned the x86 market. They are hanging their hat on remaking themselves as a "Cloud Services" provider, a Software company, and, of course, they are touting the just-announced z13. It's not enough.
To be a viable cloud provider, they should never have abandoned their x86 business. The competition in that space is huge, and by selling the x86 to Lenovo, they have relinquished a huge cost advantage in that space. Let an HP or a Dell partner with either Oracle or EMC, and you'll have a stake driven through IBM's cloud-based heart. IBM's Global Services division - their technology outsourcing business - is hemorrhaging market share to the India based outsourcers. Let an Infosys, or a Wipro, or a TCS partner with one of those combinations I mention above and IBM's cloud dreams are down for the count.
On the z13 front, IBM mentioned all of the major buzz-words that make senior executives salivate. They mentioned "Cloud" and "Mobile" in the same breath, and that always makes the non-technical executives swoon. Under the covers, though, you merely have the next release in their standard mainframe offering with some improved performance, improved throughput in their FICON channels and their zIIP specialty engines. They've made some nice improvements in the zBX blade-bolt on to the mainframe. But, at the end of the day, it's still a mainframe, and you're not going to see anyone flock to the z13 to satisfy a cloud or mobile requirement. For existing mainframe customers, it may delay a migration to the distributed world, but it's not likely to attract new mainframe customers, and as companies world-wide continue to squeeze their expense budgets, new customers is precisely what IBM requires. They're not able to squeeze more revenue from their existing customer base.
The direction IBM is taking at the moment does not lead me to believe they are on the right course. Rather, I see them heading in the exact opposite direction from where they need to go. For now, the only thing IBM has going for it is its name. Of course, there was a time when one might have said the same for Sperry Rand.
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