Business Model Change
Today’s word is hybrid. Actually, it’s been the word of the last decade and it is one of the hottest words of this decade so far, along with social and cloud. You know what a hybrid is. It’s often a mid-point in a change regime in which we know the point of departure but might not know the destination.
A hybrid is what you get when there is a big need for change and a relatively small pathway for making change happen. Often hybrids have great value in the transition state but once the change is effected the hybrid is seen as clunky and maladapted for the times. That’s when you know a change has happened.
Take cars as an example. With fuel prices spiking again, many of us know that alternatives to gasoline powered cars — and possibly alternatives to cars need — to be explored. We already see gasoline-electric hybrids on the road and these nifty crossbreeds solve the problem of mileage and lack of infrastructure for other fueling options. There are no charging stations, no battery swapping locations in most of the world so these hybrids are largely self-contained. But how will we view them when infrastructure and products become available?
Closer to home, the hybrid of greatest importance is the model that bridges the conventional enterprise data center and the cloud. So far there have been as many versions of cloud computing as there are alternatives to the gasoline powered car. The hybrid situation in question offers some amount of access to managed IT (cloud computing) for organizations that have significant investments in legacy data centers.
Ten years ago it looked like on-demand computing would take over the world and it got off to a fast start. But eventually we all came to realize that world domination was a big job and even if everyone was on board — a big if — that the capacity and the desire were not there. The capacity has been building out to the point that we now have many vendors selling everything from infrastructure to platforms as services. Capacity built up faster than desire to the point that today we have a maturing industry that understands the difficult dynamics of moving the IT world en mass to the cloud. Hence the importance of hybrid models.
This week new HP CEO, Léo Apotheker announced that HP would build its own cloud product. But at this point saying you will deliver a cloud product is about as vague as you can get. Since the definition of cloud computing can encompass so much and because HP is such a big company with so many products we’re left wondering. In his speech, Apotheker said,
“HP’s scalable, converged infrastructure forms the backbone of today’s cloud computing, and we expect our leadership in software, services, PCs and Web-connected printers, as well as the strengths we’ve built and the investments we’ve made, to give us a huge advantage as we help define, deliver, and run the truly connected world that spans cloud and connectivity, from the consumer through the enterprise.”
That sounds like an infrastructure play to me and it puts me in mind of the great fiber optic build-out of the late twentieth century. In that one telcos raced against each other to build a fiber optic backbone for telephony and Internet service that could propel the next generation of business innovation. You might recall that the telcos hyper-extended themselves and we ended the century with too much capacity, called dark fiber at the time because it transmitted no light.
Dark fiber was a symptom of the times and mirrors what happened at the end of the nineteenth century when competing railroad companies laid ridiculous amounts of tracks whose routes were not sustainable. Back in that day, the rail barons shrewdly used different gauges of track to prevent competition from accessing the lines. It was crude and effective and millions of dollars were squandered.
Now that HP is officially in the cloud business joining the likes of Oracle, Microsoft and the CRM companies that got it started like RightNow and Salesforce, it might be time to begin thinking about a new word. If dark fiber is what happened with the telcos, what term might we invent to describe the over capacity in cloud computing that we may be building?
In that over capacity you’ll see all sorts of hybrid models that enable on-premise and cloud computing. Nonetheless, while choice is the prerogative of any market, it can also delay standards from forming and cause waste. For the vendors who guessed right and early, cloud computing is a major new opportunity. But for companies like HP that are admittedly late to the party, the opportunities may not be as abundant as hoped.
Cloud computing is disrupting the conventional model that companies like HP have sold billions of dollars worth of gear into. As disruptions go, this will be a big one as more powerful hardware makes it possible to host more users thus reducing demand. In this context, HP’s ascension to the cloud is a tactic for hybridizing its business as well as for helping its customers do the same.