Earlier this year two different research reports came out describing the overall cloud computing market and Amazon’s role in it. Synergy Research Group saw Amazon as by far the biggest player (bigger in fact than the next four companies combined) with about 30 percent market share. But Gartner, taking perhaps a more focused view of just the public cloud, claimed Amazon holds 82 percent of the market with cloud capacity that’s 10 times greater than all the other public cloud providers combined. I wonder how these disparate views can be possible describing the same company? And I wonder, further, whether this means Amazon actually has a cloud monopoly?
Yup, it’s a monopoly.
A reader pointed out to me today that Yahoo, minus its Alibaba and Yahoo Japan stakes plus cash, is now worth less than nothing according to Wall Street. This says a lot about Yahoo but even more about Wall Street, since the core company is still profitable if in decline. If I were a trader (I’m not) that would argue Yahoo is a buy since there’s likely to be a future point at which the company will be free of those other riches and even Wall Street will be forced to give the carcass a positive value.
But when I heard about the negative value story the first thing that came to mind was something my old friend Joe Adler said long ago about one of my startups. "Your company is starting to have a stench of death about it", Joe said. And Joe was right.
In my last column I wrote that Dell buying EMC is a great idea (for Dell) and left it to this column to more fully explain why that is so. It takes two columns because there is so much going on here in terms of both business models and technologies. As the title suggests it comes down to Michael Dell against the world and in this case I predict Dell will win, Cisco, HP and IBM will lose, Apple will be relatively unaffected and I don’t really know what it will mean for Microsoft but I think the advantage still lies with Dell.
One thing that is key is every one of these companies except Dell is publicly traded and answerable to Wall Street while Dell is for now answerable only to the gods of Texas bidness who must at this point be giddy with greed. So all of these companies except Dell have essentially the same playbook -- cutting costs, laying-off workers and outsourcing like crazy all to pay for the dividends and stock buybacks Wall Street defines these days as prudent corporate behavior. In contrast to this defensive game Dell can use its free cash flow to transform the company and dominate the market -- what 20 years ago we would have thought of as the right way to build a company. How quaint.
The Wall $treet Journal carried a story last week about Dell Computer possibly buying EMC, the big storage vendor, and this morning Dell confirmed it, pinning a price of $67 billion on the deal. There’s a lot to wonder about in this combination, which I think is pretty brilliant on Dell’s part even if I’m not generally in favor of mega-mergers. But it seems to me most of the experts commenting on the deal have it ass-backwards as Wall Street once again proves it doesn’t really understand technology business.
EMC has this large but aging storage division and a valuable subsidiary in VMware, of which EMC owns 80 percent. Activist investors have been rumbling that EMC should spin-off VMware to EMC shareholders because that’s the best way to realize the value of the asset and share it tax-free. Michael Dell appears as something of a white knight except he is expected, too, to get rid of VMware to finance the deal. The only thing wrong with this picture is that all the people who want to spin-off or sell VMware don’t seem to realize that’s where the value of this EMC deal lies for Dell.
A longtime reader and good friend of mine sent me a link this week to a CNBC story about the loss of fingerprint records in the Office of Personnel Management hack I have written about before. It’s just one more nail in the coffin of a doltish bureaucracy that -- you know I’m speaking the truth here -- will probably result in those doltish bureaucrats getting even more power, even more data, and ultimately losing those data, too.
So the story says they lost the fingerprint records of 5.6 million people! Game over.
Alex Gibney’s Steve Jobs documentary is available now in some theaters, on Amazon Instant Video and, ironically, on iTunes. It’s a film that purports to figure out what made Steve Jobs tick. And it does a lot, just not that.
I’m not a dispassionate reviewer here. More than a year before Jobs died I tried to hire Alex Gibney to make a Steve Jobs film with me. At that point he suggested I be the director, that he’d coach me ("It’s not that hard", the Oscar-winner claimed.) We talked and met but didn’t come to a deal. Later Gibney decided to do a Jobs film on his own -- this film -- and he came to me for help. We talked and met but again didn’t come to a deal. Nothing is unusual about any of this, but it made me eager to see what kind of movie he would make and how it would compare to the one I originally had in mind.
I’ve been quiet lately, I know. My sons’ Kickstarter campaign has taken a toll on their Venture Capitalist… me. I never before appreciated the physical effort that goes into managing what is, for me, a significant investment. They do the work but I pay for a lot of it and that brings with it the need to oversee -- something I’ve never been very good at doing. You’ll see the result, hopefully, next week.
While I’ve been so preoccupied a lot has happened in the technology world. Apple introduced a slew of new products and Alex Gibney released his Steve Jobs documentary. I’ll comment on both of these shortly. Yahoo was denied its tax-free Alibaba spinoff and so has to go to Plan B. I have such a Plan B (or C or D) for Yahoo, myself and will explain it soon. There are some new technologies you ought to know about, too. There are always those.
Starting in 1977 I bought a new personal computer every three years. This changed after 2010 when I was 33 years and eleven computers into the trend. That’s when I bought my current machine, a mid-2010 13-inch MacBook Pro. Five years later I have no immediate plans to replace the MacBook Pro and I think that goes a long way to explain why the PC industry is having sales problems.
My rationale for changing computers over the years came down to Moore’s Law. I theorized that if computer performance was going to double every 18 months, I couldn’t afford to be more than one generation behind the state-of-the-art if I wanted to be taken seriously writing about this stuff. That meant buying a new PC every three years. And since you and I have a lot in common and there are millions of people like us, the PC industry thrived.
While the US Government has been remarkably opaque about the recently discovered security breach at the Office of Personnel Management (OPM), we know that personal information on at least 21.5 million present, former, and prospective federal employees was lost. The Feds claim Chinese hackers are at the bottom of it, which is disputed by the Chinese government. This, to me, raises a number of questions, especially about the possible role of IT outsourcing firms and implications for organizations beyond OPM. Does IT outsourcing make your data more vulnerable? Yes, I believe it does.
It’s easy to blame the Office of Personnel Management for its own troubles. Oversight was lax. The agency failed a security audit and didn’t seem to do much in response. When shit hit the fan and it became clear that the identity of almost every living person associated in any way with Federal employment had been compromised, the agency lamely offered 18 months of identity theft screening but then didn’t have the money to pay for it. Pathetic. Both the Obama Administration and Congress are to blame, the former for mismanagement and the latter for "starving the beast" by limiting the OPM budget, pushing the agency toward cost-saving decisions that at least to some extent led to the current crisis.
I’ve been working on a big column or two about the Office of Personnel Management hack while at the same time helping my boys with their Kickstarter campaign to be announced in another 10 days, but then IBM had to go yesterday and announce earnings and I just couldn’t help myself. I had to put that announcement in the context you’ll see in the headline above. IBM is so screwed.
Below you’ll see the news spelled-out in red annotations right on IBM’s own slides. The details are mainly there but before you read them I want to make three points.
Al Mandel used to say "the step after ubiquity is invisibility" and man was he right about that. Above you’ll see a chart from the Google Computers and Electronics Index, which shows the ranking of queries using words like "Windows, Apple, HP, Xbox, iPad" -- you get the picture. The actual terms have changed a bit since the index started in 2004 as products and companies have come and gone, but my point here is the general decline.
Just as Al predicted, as technology has become more vital to our lives we’ve paradoxically become less interested, or at least do less reaching out. Maybe this is because technologies become easier to use over time or we have more local knowledge (our kids and co-workers helping us do things we might have had to search on before).
This is my promised third column in a series about the effect of H-1B visa abuse on US technology workers and ultimately on the US economy. This time I want to take a very high-level view of the problem that may not even mention words like "H-1B" or even "immigration", replacing them with stronger Anglo-Saxon terms like "greed" and "indifference".
The truth is that much (but not all) of the American technology industry is being led by what my late mother would have called "assholes". And those assholes are needlessly destroying the very industry that made them rich. It started in the 1970s when a couple of obscure academics created a creaky logical structure for turning corporate executives from managers to rock stars, all in the name of "maximizing shareholder value".
This is the second of three columns relating to the recent story of Disney replacing 250 IT workers with foreign workers holding H-1B visas. Over the years I have written many columns about outsourcing (here) and the H-1B visa program in particular (here). Not wanting to just cover again that old material, this column looks at an important misconception that underlies the whole H-1B problem, then gives the unique view of a longtime reader of this column who has H-1B program experience.
First the misconception as laid out in a blog post shared with me by a reader. This blogger maintains that we wouldn’t be so bound to H-1Bs if we had better technical training programs in our schools. This is a popular theme with every recent Presidential administration and, while not explicitly incorrect, it isn’t implicitly correct, either. Schools can always be better but better schools aren’t necessarily limiting U.S. technical employment.
Disney has been in the news recently for firing its Orlando-based IT staff, replacing them with H-1B workers primarily from India, and making severance payments to those displaced workers dependent on the outgoing workers training their foreign replacements. I regret not jumping on this story earlier because I heard about it back in March, but an IT friend in Orlando (not from Disney) said it was old news so I didn’t follow-up. Well now I am following with what will eventually be three columns not just about this particular event but what it says about the US computer industry, which is not good.
First we need some context for this Disney event -- context that has not been provided in any of the accounts I have read so far. What we’re observing is a multi-step process.
One reader of this column in particular has been urging me to abandon for a moment my obsession with IBM and look, instead, at his employer -- Hewlett Packard. HP, he tells me, suffers from all the same problems as IBM while lacking IBM’s depth and resources. And he’s correct: HP is a shadow of its former self and probably doomed if it continues to follow its current course. I’ve explained some of this before in an earlier column, and another, and another you might want to re-read. More of HP’s problems are covered in a very fine presentation you can read here. Were I to follow a familiar path at this point I’d be laying out a long list of HP mistakes. And while I may well do exactly that later in the week, right here and now I am inspired to do what they call in the movies "cutting to the chase", which in this case means pushing through bad tactics to find a good strategy. I want to lay out in a structural sense what’s really happening at both HP and IBM (and at a lot of other companies, too) so we can understand how to fix them, if indeed they can be fixed at all.
So I’ll turn to the works of Autodesk founder John Walker, specifically his Final Days of Autodesk memo, also called Information Letter 14, written in 1991. You can find this 30-page memo and a whole lot more at Walker’s web site. He has for most of this century lived in Switzerland where the server resides in a fortress today. We may even hear from Walker, himself, if word gets back that I’ve too brazenly stolen his ideas. Having never met the man, I’d like that.