2016 Prediction #1 -- Beginning of the end for engineering workstations
First a look at my predictions from one year ago and how they appear in the light of today:
Prediction #1 -- Everyone gets the crap scared out of them by data security problems. Go to the original column (link just above) to read the details of this and all the other 2015 predictions but the gist of it was that 2015 would be terrible for data security and the bad guys would find at least a couple new ways to make money from their hobby. I say I got this one right -- one for one.
Prediction #2 -- Google starts stealing lunch money. The title is 100 percent smart-ass but my point (again, read the details) is that reality was finally intruding on Google and they’d have to find more and better ways to make money. And they did through a variety of Internet taxes as well and cutting whole businesses, reorganizing the company and laying-off thousands of people. I got this one right, too -- two for two.
Prediction #3 -- Google buys Twitter. It didn’t happen, though it still might. I got this one wrong -- two for three.
Prediction #4 -- Amazon finally faces reality but that has no effect on the cloud price war. This one is kind of subtle, the point being that Amazon would have to cut some costs to appease Wall Street but that the cloud price way (and Amazon’s dominance in that area) would continue. I think I got this one right -- three for four.
Prediction #5 -- Immigration reform will finally make it through Congress and the White House and tech workers will be screwed. This certainly hasn’t happened yet and the situation looks marginally less horrible than it was a year ago. A true resolution will depend on who is the next President. I got this one wrong -- three for five.
Prediction #6 -- Yahoo is decimated by activist investors. The fat lady has yet to finish singing but I’ll declare victory on this one anyway -- four for six.
Prediction #7 -- Wearables go terminal. Wearables were big in 2015 but I was way too optimistic about the technical roadmap. Maybe 2016 or -- better still -- 2017. I got this one wrong -- four for seven.
Prediction #8 -- IBM’s further decline. I got this one dead-on -- five for eight.
Prediction #9 -- Where IBM leads, IBM competitors are following. Just look at HP or almost any direct competitor to IBM, especially in services -- six for nine.
Prediction #10 -- Still no HDTV from Apple, but it won’t matter. I was right -- seven for 10.
Seventy percent right is my historic average, which I appear to have maintained. Hopefully I’ll do better in 2016.
Now to my first prediction for 2016 -- the beginning of the end for engineering workstations. These high-end desktop computers used for computer-aided design, gene sequencing, desktop publishing, video editing and similar processor-intensive operations have been one of the few bright spots in a generally declining desktop computer market. HP is number one in the segment followed by Dell and Lenovo and while the segment only represents $25-30 billion in annual sales, for HP and Dell especially it represents some very reliable profits that are, alas, about to start going away, killed by the cloud.
A year ago the cloud (pick a cloud, any cloud) was all CPUs and no GPUs. And since engineering workstations have come to be highly dependent on GPUs, that meant the cloud was no threat. But that’s all changed. Amazon already claims to be able to support three million GPU workstation seats in its cloud and I suspect that next week at CES we’ll see AWS competitors like Microsoft and others announce significant cloud GPU investments for which they’ll want to find customers.
This change is going to happen because it helps the business interests of nearly all parties involved -- workstation operators, software vendors, and cloud service providers. Even the workstation makers can find a way to squint and justify it since they all sell cloud hardware, too.
Say you run a business that uses engineering workstations. These expensive assets are generally used about 40 hours out of a 168 hour week. They depreciate, require maintenance, and generally need to be replaced completely every 2-3 years just to keep up with Moore’s Law. If you do the numbers for acquisition cost, utilization rates, upkeep, software, software upgrades, and ultimate replacement, you’ll find that’s a pretty significant cost of ownership.
Now imagine applying that same cost number to effectively renting a similar workstation in the cloud. You still use the resource 40 hours per week but when you aren’t using it someone else can, which can only push prices lower. Installing a new workstation takes at most minutes and the cost of starting service is very low. Upgrading an existing workstation takes only seconds. Dynamically increasing and decreasing workstation performance as needed becomes possible. Hardware maintenance and a physical hardware inventory pretty much goes away. Most data security becomes the responsibility of the software vendor who is now selling their code as a service. Only intelligent displays will remain -- a new growth area for the very vendors who will no longer be selling us boxes.
This will happen because corporate bean-counters will demand it.
From the software vendor’s perspective moving to software as a service (SAAS) has many benefits. It cuts out middlemen, reduces theft and piracy, allows true rolling upgrades, lowers support costs and raises revenue overall.
Now add-in for all parties the cross-platform capabilities of running your full workstation applications occasionally from a notebook, tablet, or even a mobile phone and you can see how compelling this can be. And remember that when that big compile or rendering job has to be done it’s a simple matter to turn up the dial to 11 and make your workstation into a supercomputer. Yes it costs more to do that but then you are paying by the minute.
Let’s extend this concept a bit further to the only other really robust PC hardware sector -- gaming. There are 15 million engineering workstations but at least 10 times that many gaming PCs and the gamers face precisely the same needs and concerns as corporate workstation owners.
My son Cole just built a 90 percent Windows gaming PC. I refer to it as a 90 percent computer because it probably represents 90 percent of the gaming power of a top-end machine. Cole’s new PC cost about $1800 to build including display while a true top-of the-line gamer would cost maybe $6,000. If Cole’s PC was a piece of business equipment, what would it cost to lease it -- $20-30 per month? If he could get the same performance for, say, $40 per month from a cloud gaming PC, wouldn’t he do it? I asked him and he said “Heck yes!” The benefits are the same -- low startup costs, no maintenance, better data security, easy upgradability, and cross-platform capability.
This makes every gaming PC vendor vulnerable.
If you think this won’t happen or won’t happen soon you are wrong. AWS can right now support 4K displays. Moving the game into the cloud is a leveler, too, as gamers vie not over their puny Internet connections but rather over the memory bus of the server that hosts them. Just as Wall Street robo-traders move closer to the market servers to gain advantage so too will gamers. And the networks will only get better.
This is going to be big.