Bob Madaio

What Matters Next in IT

Blog Post created by Bob Madaio on Apr 17, 2017

Lately, there’s been a certain look that IT vendor employees give each other when someone nervously jokes about how profoundly and rapidly IT is changing. It’s a look that’s necessary, because we don’t have the time or words to quickly encapsulate the massive opportunities, challenges and change we are seeing around us.

 

This feeling is certainly magnified right now, but it's not new.

 

In fact, I recently stumbled upon some work from over a decade ago that really struck a chord about where many IT vendors find themselves today.

 

doesITmatter.jpegI recall the grim IT gut-check that the 2003 work by Nicholas Carr brought to the industry with his article in Harvard Business Review, bluntly titled, IT Doesn’t Matter. The title alone seemed blasphemous. IT’s value was near “sacred cow” territory… how dare he?!?

 

While, the argument Carr put forth certainly more complex than that title might lead you to believe, the central premise was that if everyone had access to great technology, there was no distinct advantage in spending vast sums of a company’s resources to acquire it.  You’re just investing and building what the next company can have too.

 

IT vendors and industry pundits from all corners jumped into the discussion, indeed many with very thoughtful responses about how technological advances were far faster and greater in magnitude than the comparative examples used in Carr’s work and thus couldn’t be rationalized on the same planes.  They talked about the power of a coming digital revolution and the unforeseen impacts it can drive for IT-led companies. The responses dulled the blow. And years of IT growth has shown the argument's impacts were not going to be immediate.

 

However, there was something that resonated in the core principle that Carr put forth that was undeniable and worth a revisit as we are on the precipice of another massive computing wave of IoT and a connected industrial world.

 

hitatchimain.jpgHe wrote, “What makes a resource truly strategic—what gives it the capacity to be the basis for a sustained competitive advantage—is not ubiquity but scarcity.”  And then went on to distinguish between “infrastructural” and “proprietary” technologies. Infrastructural technologies see their value increase as their network grows – think train tracks: the more cities, the more value.  Think: the internet.  As their adoption grows, however, the possibility for unique value to come from a single entity leveraging them are lessened. Proprietary technologies, on the other hand (and with a lot of caveats about protection of them) “…can be the foundations for long-term strategic advantages, enabling companies to reap higher profits than their rivals.”

 

The public cloud is a pretty compelling argument to this end, as it provides the most standardized spread of IT functionality available and has become the de facto home for many applications. CRM. Email. And more all the time.  Clearly, there’s already a realization that for some ubiquitous applications, scale is far more important than customization.

 

What I find most interesting, is how you can see elements of this work and this industry discussion in how current IT vendor strategies have played out. Many of the mergers, splits, mega-mergers and industry exits are testament to how companies are trying to figure out a path forward in an ever changing market.

 

One_Hit_Wonders_cartoon.jpgOne thing becomes increasingly clear: trying to be a hot-product company in such a market is a tough strategy. True differentiation is increasingly hard to find, and many companies are jumping to fame on - if we are honest - short-lived feature-set time to market advantages. Violin Memory's meteoric rise and subsequent fall is an easy example, and Pure Storage and Nutanix are trying not to rewrite that same story. We can argue the depths of the technical differentiation for each of these fast growing upstarts, but it remains unclear that there's a sustainable, meaningful and proprietary differentiation which will last the test of time against these industry forces.

 

Large vendors, too, also had to look themselves in the mirror and decide how they'd compete in the world that Carr described. Some clearly said, “We’re an infrastructure company at our heart, and we'll win via scale and efficiency.”  In Carr’s words: “The only meaningful advantage most companies can hope to gain from an infrastructural technology after its buildout is a cost advantage—and even that tends to be very hard to sustain.”

 

Crt2wcQWgAAibGp.jpg large.jpgThe amazingly prescient Harvard Business Review article had a callout that stated: “Dell has succeeded by exploiting the commoditization of the PC market and is now extending that strategy to servers, storage, and even services. (Michael Dell’s essential genius has always been his unsentimental trust in the commoditization of information technology.)”

 

This was well over a decade before Dell acquired EMC.

 

Unsentimental, indeed. DSSD, we'll miss your bravado. XtremIO, you had better behave. VCE, we’ve got our eye on you.  Does anyone believe this unsentimental trust in commoditization was the long term strategy EMC hoped up, or was selling to Dell the “best/last resort” after looking at itself hard in the mirror?

 

In the end, this is not to say that this strategy is a bad idea. Companies tend to do best when they are realistic about what they are at their core.  It would appear that DellEMC has decided it’s an IT infrastructure warehouse.  And there seems to be a space for that right now. However, with Dell, Huawei, a host of “ODM” type players, and *maybe* HPE (I can’t claim to fully understand their master plan quite yet), it seems like a brutal battle will ensue. This battle will be good for customers in the near term as they all grind down pricing from commodity products. But innovation will likely take a back seat, and if you think IT *can* still matter, that’s a shame.

 

One time industry talisman IBM clearly decided to ditch any real effort on hardware, other than it’s unassailable position in proprietary mainframes and associated technologies, since it understands that nobody is about to invest enough to realistically invest/copy in this legacy market.  Its move to cloud and software while clearly painful in product areas like storage, it is a logical attempt at the future where it doesn't want to be a warehouse.

 

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So what then for a company like Hitachi?

 

What do we see in that proverbial mirror?

 

 

 

 

 

What we are doing: building unique IT differentiation where (and only where) it is highly valued, and then, even more importantly, embracing the “next.”

 

index03.jpgUnique heterogeneous IT automation and analytics, active/active capabilities enabling multi-data center productivity and resiliency, scalable object stores that form a foundation of hybrid cloud, advanced artificial intelligence, and the flash devices that underpin the hardest running financial applications in the world – to name a few - remain highly valued by customers and worthy of unique and specialized development. In many other parts of our customers' IT environments “industry standard” technologies are what are called for where differentiation provides little sustainable value.  Instead the focus moves to wrapping them with an automation layer and ensuring robust APIs make them easy to consume.

 

But then there’s the move to what’s next.  And many industry watchers believe – as do many at Hitachi – that the “next” is the combination of traditional IT and IoT.  Of course, what does this actually mean?  Does it mean building an IT infrastructure specifically suited for the demands of IoT workloads, data types and analysis?  Does it mean leveraging operational technology machine expertise to understand the best way to stream, analyze and manage data that is generated by them? Or does it mean leveraging IoT thinking into the actual solutions offered for traditional IT problems?

 

Hitachi-IoT.jpgThe answer is all of the above.

 

And even as far back as the original article, Carr leaves the door cracked open for companies with the wherewithal to be something more than a flash-in-the-pan product company or an IT cost-cutting warehouse. He writes: “A few companies may still be able to wrest advantages from highly specialized applications that don’t offer strong economic incentives for replication, but those firms will be the exceptions that prove the rule.”

 

Now, a decade plus of IT growth has taken the edge off some of Carr’s assumptions, but the growth of the cloud has proven he wasn’t totally off base either. So what is this space he’s carving out?  Highly specialized applications.  No strong economic incentives for replication.  Exceptions that prove the rule.  Those don't leave much room for any average company to walk through.

 

I believe that the combination of Information Technology and Operational Technology, or the adoption of IoT in general, have provided an area where the companies can, in fact, build unique differentiation. Build systems.  Build packaged value that is hard to recreate. Carr makes it clear that a limited economic incentive would exist for replicating such solutions, but I would argue that the lack of incentive is more about the investments required to build the DNA of a company to execute than in the potential revenue to be gained.

 

In the world I envision where solution completeness requires deep industry domain expertise OUTSIDE of IT as well as inside it, it’s not just a lack of solution repeatability that lessens economic incentives, but the fact that most vendors lack the inherent core competencies to build such solutions over the long term. While partnerships can get you there, the trusted partnerships which go deep enough to add strategic IT/OT connections that would bridge that essential gap are hard – especially when there’s no bridging language between the IT company and the OT company.

 

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“Hot product” companies lack the DNA, resources and portfolio to be considered players in this space, and will continue to hammer away at an IT niche until their differentiation is gone and an IT Warehouse buys them up and puts them on the shelf at a discount. IT warehouses can potentially have a full portfolio suite that can assist a variety of IoT workloads, but generally lack the industrial history in operational technology or the business structure to create the solutions of the emerging IoT world.  In other words, it’s not in their DNA either.

 

 

 

But what about “cloud” offerings or companies? Yes, 'cloud companies' will still capture many of the IoT workloads – it just makes sense for some data streams or analytics processing to sit there - those platforms will become the newest of the IT commodities. Though how they'll effectively support customers' massive edge analytics opportunities is less obvious. And unless business models are rethought, they rarely bring the expertise to guide the industrial connections required in such solutions.

 

This is why when Hitachi business and sales executives spent the week preparing for our new fiscal year last week there was a notable buzz in the air. We have hot products, but that’s not a strategy. We’re not an IT product warehouse, but we can be a one-stop-shop for enterprise IT, offering commodity solutions where applicable or more when beneficial.  We can build and offer “cloud” solutions and support/partner with the players in that space with customer relevance.

 

atm-edit.jpgBut, Hitachi also has a 100+ year history of providing value-added industrial equipment and electronic devices of all types. We build elevators, ATMs, MRIs, specialized security technology like finger-vein readers, cameras and car navigation – to name only a tiny subset.

 

To underpin the data streams from these machines we can provide massive scale-up in-memory workloads or virtualized scale-out environments required to build modern, scalable solutions. With Pentaho as a Hitachi family member we have an incredibly powerful frameowk to merge, blend, analyze and visualize the data from the world of things. And with the upcoming Lumada framework, we have a scalable IoT architecture that will unify and simply IoT insight generation.

 

hitachi_kp-f140f.jpgThose are some serious "things." That is some serious experience.  That is powerful insight creation.

 

Now, Carr and others would likely argue that the path for success here is narrow and not at all easy.  I wouldn’t disagree. It's going to take a special company to pull this off. I don’t see many in the industry able to recreate this special mix of capabilities.  Hitachi, however, is one such company.

 

And I, for one, much prefer helping execute a strategy determined by a company’s DNA than its having run out of other options.

 

With that as inspiration, let's get focused on what's next...

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