IBM recently announced its re-organization around its software and hardware business units. The previously separate business units were merged together as one – the Systems and Software Group led by the former software chief Steve Mills.
You may recall that IBM did not have a dedicated software group until Lou Gerstner created one 15 years ago to centralize all the software businesses into one business unit. This unit has been IBM’s most profitable business. Before that, IBM offered all the software as add-ons to the systems like 390 and AS/400.
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Now can we expect IBM to offer hardware systems as add-ons to their software solutions?
Although companies constantly re-organize to streamline their business execution, this reorganization did indicate a big trend is happening in the IT industry. Computer vendors are striving to own vertically-complete stacks: from hardware all the way up to business applications.
IBM is not alone in this trend. Oracle acquired Sun Microsystems for its SPARC servers, Solaris OS, Java, MySQL database, and even tape storage. Together with its database and business applications acquired from PeopleSoft, Seibel, and many other acquisitions, Oracle is now yet another “IBM” that controls vertically complete stacks. We can expect more IBM-like business model clones emerging in the coming years.
Is this trend good for customers?
Openness vs. User Experience
Openness means choice and flexibility and often lower initial cost. But it can also mean sleepless nights to put different IT components together. When there is an issue with your application/solution, whom do you call? Your hardware vendor, OS vendor, middleware vendors, application vendors, or systems integrator? It’s hard to pinpoint anyone on the list. This is a pain for the customers. Customers like having one throat to choke.
Looking back 30 years ago, we can mostly blame IBM because it sold customers most of their computer and software systems. IBM owned all the responsibility to fix any problem. At least until customers had a different pain: you don’t have choice therefore you have no power in negotiation with Big Blue.
Then customers began to move onto the client-server model of computing and open systems with open software. This strategy started to prosper in the 1990s. Openness has been the winning market strategy ever since.
With the openness problem solved, the solution that gave customers more negotiating leverage also shifted the pain back to them. Today we have so many systems, open or not, that the amount of effort to make them work together is a really big pain. This hurts user experiences.
In the end, users just need the applications to support the business. Again, the application is the end, and everything below is the means. Whatever can do the job better and more economically wins. This is the fundamental truth behind this trend for vertically complete systems.
Software Openness vs. Data Openness
With everyone in the game being vertically complete, how can vendors differentiate again? And for the customers, how should they choose vendors? For customers, the stakes in choosing the right vendor are even higher than before because they are standardizing their system with one vendor at a time. Switching costs are the biggest pain and expense.
Still customers would love to have the flexibility and choice to switch systems. How do they do this?
I think the key is the data. No matter how different systems are, they have to persist data and be able to restart from the point where they shut down. If two systems from two different vendors understand the same set of data, customers still switch easily from one system to the other.
With complicated systems, there may be many data persisted, including the output of data processing, customization settings, user preferences, and more. It takes time and effort to convert them all over from one system to another. Some of the data may never be carried over. For example, if one vendor’s algorithm is not replaced by the other, then the tuning parameters are lost.
Virtualized Vertically Complete Systems
With virtualization, the vertically complete systems can, and should, be re-defined. For one thing, hardware virtualization provides an abstraction for the hardware so that your vertically complete systems can be packed as a bunch of files. These are what I call virtualized vertically complete system.
The benefits are profound: you can move your vertically complete systems to wherever best for whatever reasons such as reliability, performance, saving, and etc. They are extremely important in cloud age where you cannot move around your physical servers but for sure your virtualized servers.
The data openness theme doesn’t change in the cloud environment. The bar may be even higher because you may want to change the system more frequently in the cloud than inside an enterprise.
The industry is experiencing a shift from openness to a vertically complete hardware/software appliance approach. Big vendors are re-aligning their operations for this trend.
For customers, it is mixed news. They may get a better user experience but pay the price in vendor lock-in. To best protect IT investments, customers should demand data openness to protect their ability to switch systems down the road. Data openness is the only solution to this problem.
In this cloud age, the virtualized vertically complete system inherits the benefits of vertically complete systems with additional flexibilities and portability that are crucial for cloud computing. It’s IT’s the next big trend.