I attended Trend Forum 2012 last week in Bonn, effectively an analyst day where Deutsche Telekom presented its innovation strategy. There was no focus on overall group strategy. Still, innovation matters greatly as part of the repositioning efforts of telcos. As the role of telcos in the value chain is weakening, largely due to increasing competition by over-the-top providers (OTTPs), telcos need to differentiate themselves increasingly via service provision and their ability to innovate quickly and prolifically. Failure to do so will cement their status as transport utilities for OTTPs.
Deutsche Telekom’s Core Beliefs focus on: a) building its platform business by partnering with software firms; b) leveraging the cloud by providing high QoS and secure connectivity; and c) leverage differentiating terminals through device management and customer experience provision. These Core Beliefs form the basis for pursuing its focus growth segments in digital media distribution, cloud storage, cross-device digital advertising, classified marketplaces, and mobile payment in addition to the core telco business. These targets match up well against our evaluation of best cloud markets for telcos.
A defining characteristic of next-generation network (NGN) infrastructure and the move towards cloud-based business models is openness. As a consequence, OTTPs increasingly deal directly with end customers across the network. Relationships between telcos and other members of value chain become more complex. Emerging cloud services by telcos need to become network agnostic to deliver cross-network solutions and ensure cloud interoperability. Deutsche Telekom has made significant progress in the recent past to adapt its strategy to these new telco realities.
OK, it’s time to stretch the 2012 writing muscles, and what better way to do it than with the time honored “retrospective” format. But rather than try and itemize all the news and come up with a list of maybe a dozen or more interesting things, I decided instead to pick the best and the worst – events and developments that show the amazing range of the technology business, its potentials and its daily frustrations. So, drum roll, please. My personal nomination for the best and worst of the year (along with a special extra bonus category) are:
The Best – IBM Watson stomps the world’s best human players in Jeopardy. In early 2011, IBM put its latest deep computing project, Watson, up against some of the best players in the world in a game of Jeopardy. Watson, consisting of hundreds of IBM Power CPUs, gazillions of bytes of memory and storage, and arguably the most sophisticated rules engine and natural language recognition capability ever developed, won hands down. If you haven’t seen the videos of this event, you should – seeing the IBM system fluidly answer very tricky questions is amazing. There is no sense that it is parsing the question and then sorting through 200 – 300 million pages of data per second in the background as it assembles its answers. This is truly the computer industry at its best. IBM lived up to its brand image as the oldest and strongest technology company and showed us a potential for integrating computers into untapped new potential solutions. Since the Jeopardy event, IBM has been working on commercializing Watson with an eye toward delivering domain-specific expert advisors. I recently listened to a presentation by a doctor participating in the trials of a Watson medical assistant, and the results were startling in terms of the potential to assist medical professionals in diagnostic procedures.
We have just published Forrester's current forecast for the global market for information technology goods and services purchased by businesses and governments (see January 6, 2011, "Global Tech Market Outlook For 2012 And 2013"), and it shows growth of 5.4% in 2012 in US dollars and 5.3% in local currency terms. Those growth rates are a bit lower than our prior forecast in September 2011 (see September 16, 2011, “Global Tech Market Outlook For 2011 And 2012 — Economic And Financial Turmoil Dims 2012 Prospects"), where we projected 2012 growth of 5.5% in US dollars and 6.5% in local currency terms. I would note that these numbers include business and government purchases of computer and communications equipment, software, and IT consulting and outsourcing services equal to $2.1 trillion in 2012, but do not include telecommunications services.
Based on the very high interest in this blog and its cloud predictions we are planning to host a Forrester Teleconference entiteled "2012 — The Year The Cloud Matures: A Deeper Dive Into 10 Cloud Predictions For The Upcoming Year" on February 28th, 1-2pm EST/6-7pm UK time, where we will highlight and go through the 10 below predictions one by one. For more details and registration please follow the link to the: teleconference web page.
1. Multicloud becomes the norm
As companies quickly adopt a variety of cloud resources, they’ll increasingly have to address working with several different cloud solutions, often from different providers. By the end of 2012, cloud customers will already be using more than 10 different cloud apps on average. Cloud orchestration will become a big topic and an opportunity for service providers.
2. The Wild West of cloud procurement is over
While 2011 still witnessed different stakeholders within a company brokering (sometimes unsanctioned by IT) a lot of cloud deals, most companies will have established their formal cloud strategy by the end 2012, including the business models between IT and lines of business for their own, private cloud resources.
Cloud – people can’t agree on exactly what it is, but everyone can agree that they want some piece of it. I have not talked to a single client who isn’t doing something proactively to pursue cloud in some form or fashion. This cloud-obsession was really evident in our 2011 technology tweet jam as well, which is why this year’s business technology and technology trends reports cover cloud extensively. Our research further supports this – for example, 29% of infrastructure and operations executives surveyed stated that building a private cloud was a critical priority for 2011, while 28% plan to use public offerings, and these numbers are rising every year.
So what should EAs think about cloud? My suggestion is that you think about how your current IT strategy supports taking advantage of what cloud is offering (and what it’s not). Here are our cloud-related technology trends along with some food for thought:
The next phase of IT industrialization begins. This trend points out how unprepared our current IT delivery model is for the coming pace of technology change, which is why cloud is appealing. It offers potentially faster ways to acquire technology services. Ask yourself – is my firm’s current IT model and strategy good enough to meet technology demands of the future?
Today HP announced a new set of technology programs and future products designed to move x86 server technology for both Windows and Linux more fully into the realm of truly mission-critical computing. My interpretation of these moves is that it is both a combined defensive and pro-active offensive action on HP’s part that will both protect them as their Itanium/HP-UX portfolio slowly declines as well as offer attractive and potentially unique options for both current and future customers who want to deploy increasingly critical services on x86 platforms.
Bearing in mind that the earliest of these elements will not be in place until approximately mid-2012, the key elements that HP is currently disclosing are:
ServiceGuard for Linux – This is a big win for Linux users on HP, and removes a major operational and architectural hurdle for HP-UX migrations. ServiceGuard is a highly regarded clustering and HA facility on HP-UX, and includes many features for local and geographically distributed HA. The lack of ServiceGuard is often cited as a risk in HP-UX migrations. The availability of ServiceGuard by mid-2012 will remove yet another barrier to smooth migration from HP-UX to Linux, and will help make sure that HP retains the business as it migrates from HP-UX.
Analysis engine for x86 – Analysis engine is internal software that provides system diagnostics, predictive failure analysis and self-repair on HP-UX systems. With an uncommitted delivery date, HP will port this to selected x86 servers. My guess is that since the analysis engine probably requires some level of hardware assist, the analysis engine will be paired with the next item on the list…
This week AMD finally released their AMD 6200 and 4200 series CPUs. These are the long-awaited server-oriented Interlagos and Valencia CPUs, based on their new “Bulldozer” core, offering up to 16 x86 cores in a single socket. The announcement was targeted at (drum roll, one guess per customer only) … “The Cloud.” AMD appears to be positioning its new architectures as the platform of choice for cloud-oriented workloads, focusing on highly threaded throughput oriented benchmarks that take full advantage of its high core count and unique floating point architecture, along with what look like excellent throughput per Watt metrics.
At the same time it is pushing the now seemingly mandatory “cloud” message, AMD is not ignoring the meat-and-potatoes enterprise workloads that have been the mainstay of server CPUs sales –virtualization, database, and HPC, where the combination of many cores, excellent memory bandwidth and large memory configurations should yield excellent results. In its competitive comparisons, AMD targets Intel’s 5640 CPU, which it claims represents Intel’s most widely used Xeon CPU, and shows very favorable comparisons in regards to performance, price and power consumption. Among the features that AMD cites as contributing to these results are:
Advanced power and thermal management, including the ability to power off inactive cores contributing to an idle power of less than 4.4W per core. Interlagos offers a unique capability called TDP, which allows I&O groups to set the total power threshold of the CPU in 1W increments to allow fine-grained tailoring of power in the server racks.
Turbo CORE, which allows boosting the clock speed of cores by up to 1 GHz for half the cores or 500 MHz for all the cores, depending on workload.
Emerging ARM server Calxeda has been hinting for some time that they had a significant partnership announcement in the works, and while we didn’t necessarily not believe them, we hear a lot of claims from startups telling us to “stay tuned” for something big. Sometimes they pan out, sometimes they simply go away. But this morning Calxeda surpassed our expectations by unveiling just one major systems partner – but it just happens to be Hewlett Packard, which dominates the WW market for x86 servers.
At its core (unintended but not bad pun), the HP Hyperscale business unit Project Moonshot and Calxeda’s server technology are about improving the efficiency of web and cloud workloads, and promises improvements in excess of 90% in power efficiency and similar improvements in physical density compared with current x86 solutions. As I noted in my first post on ARM servers and other documents, even if these estimates turn out to be exaggerated, there is still a generous window within which to do much, much, better than current technologies. And workloads (such as memcache, Hadoop, static web servers) will be selected for their fit to this new platform, so the workloads that run on these new platforms will potentially come close to the cases quoted by HP and Calxeda.
It’s easy to bash incumbent telcos, to count them as being among the losers in the digital revolution. Cloud services players are taking business from telcos in the storage and server capacity space. Over-the-top providers are free-riding on the telco infrastructure. Software firms are eating into the communication business. Regulators are pressing for further price reductions. And to top this scenario, telcos are continuing to undercut each other in price wars.
During a round of executive discussions with Forrester, Orange Business Services (OBS) has shown that against these odds, it keeps a pretty even keel regarding the most hyped topics in ICT, most notably cloud and mobility. OBS is selective in its cloud offerings, focusing on UCaaS and IaaS. UCaaS is a natural extension of its communication business and thus falls into OBS’ home turf. All telcos should see communication services from the cloud as a natural extension of what they have always done.
OBS’ drive into IaaS, meanwhile, looks like a less convincing pitch. Its IaaS offering essentially comprises a virtual data centre offering with virtual firewalls and load balancing. The question is: How OBS can compete against the dominant cloud players in the storage and server space? In the short term, such an approach is conceivable. However, OBS will need to provide a much broader range of virtual infrastructure choices to avoid slipping into a low-margin market segment.
In a surprising move, HP and Cisco announced that HP will be reselling a custom-developed Cisco Nexus switch, the “Cisco Nexus B22 Fabric Extender for HP,” commonly called a FEX in Cisco speak. What is surprising about this is that the FEX is a key component of Cisco’s Nexus switch technology as well as an integral component of Cisco’s UCS server product, the introduction of which has pitted the two companies in direct and bitter competition in the heart of HP’s previously sacrosanct server segment. Combined with HP’s increasing focus on networking, the companies have not been the best of buds for the past couple of years. Accordingly, this announcement really makes us sit up and take notice.
So what drove this seeming rapprochement? The coined word “coopetition” lacks the flavor of the German “Realpolitik,” but the essence is the same – both sides profit from accommodating a real demand from customers for Cisco network technology in HP BladeSystem servers. And like the best of deals, both sides walk away thinking that they got the best of the other. HP answers the demands of what is probably a sizable fraction of their customer base for better interoperability with Cisco Nexus-based networks, and in doing so expects to head off customer defections to Cisco UCS servers. Cisco gets both money (the B22 starts at around $10,000 per module and most HP BladeSystem customers who use it will probably buy at least two per enclosure, so making a rough guess at OEM pricing, Cisco is going to make as much as $8,000 to $10,000 per chassis from HP BladeSystems that use the B22) from the sale of the Cisco-branded modules as well as exposure of Cisco technology to HP customers, with the hope that they will consider UCS for future requirements.