The Trouble With Technology Disruption

The choices are growing over whether to own IT equipment or rent it, what to virtualize and what to run on a general-purpose operating system, and which form factors are best--notebooks or tablets or smartphones. But as the choices grow, the equipment and services markets are beginning to reverse direction. Rather than consolidating as most mature industries do, the market is splintering.

While this will provide a brief financial respite for chief information officers, the majority of whose equipment budgets are either frozen or shrinking, it's a short-term win. In markets where there is little direction about what business models or technology ultimately will prevail, price always becomes one of the primary competitive weapons. That will end once Darwinism weeds out the losers from the winners, but the effects will be costly in every direction for years to come.

As far as turf battles go, this one is a doozy. It's the most blatant cross-boundary warfare in the history of IT. With companies like Cisco selling servers, HP selling networking equipment, Oracle selling hardware and software bundles and VMware selling what can reasonably be construed as a threat to operating systems, it's hard to tell who is in what business. It's also hard to extract from this mess where the real value ultimately will reside--will it be in the hardware, the software, the services, the networking, or a new application of a number of different markets?

In the past it was pretty much a head-to-head battle between makers of servers against makers of servers, PCs against PCs, and so on with networking hardware and service providers. They were either on-shore or off-shore, vertically integrated or specialized. They either led with price or performance. Now they lead with everything from power consumption to flexible capacity and service bundles, and they offer everything from private clouds to public clouds in all combinations and flavors--secure, non-secure, permanent, temporary, all with flexible terms and commitments.

Moreover, the deals are coming from all over the globe. In a market where strong services players are emerging in places like India and China, sales could well go to a nimbler and more focused player with less legacy baggage. That doesn't mean a major corporation in the United States will necessarily buy its equipment or services from an Asian provider, but it does mean that future sales in Asia could well go to Asian companies. With more and more companies extending the refresh cycle on technology, that's a big deal. Technology is no longer a monopoly of the Western hemisphere and Japan. Until recently companies counted on those sales when times were tough.

From the CIO standpoint it's far harder to place bets on a technology road map and be reasonably certain it will last for five years or more. Betting on a software or services architecture is a sizeable commitment. No matter how portable the underlying operating system or virtualization layer, or how big the company providing the service, there is no guarantee they will continue to provide it.

This became painfully obvious to companies that bought computer technology back in the 1970s, when IBM faced off against Amdahl, Hitachi , Hewlett-Packard , Unisys (the rather disjointed combination of Sperry and Burroughs) and even Texas Instruments . All of those companies fought for a piece of the multibillion-dollar market for office equipment. When the dust settled all but a couple abandoned their customers after years of promises and heavy discounts.

Disruption is an opportunity for the ultimate winners, but it's an unpleasant experience for the losers--and for those who bet on the losers.

Ed Sperling is the editor of several technology trade publications and has covered technology for more than 20 years. Contact him at esperlin@yahoo.com.

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The Trouble With Technology Disruption