There are signs that the networking industry is doing a bit more weaving and bobbing as it looks for a position that sustains revenue and profit growth. One big item is the story that Sony is going to buy Ericsson out of their longstanding handset partnership. The deal here, as the story goes, is that Sony wants to spread its technology across its whole line of appliances, from phones to game systems, and get considerably more aggressive in the market. I’m told that Ericsson has not been excited about either of these points; conservatism has always been Ericsson’s weakness, in my view.
Sony is right in this case. Apple has demonstrated that the notion of a separate smartphone/tablet/game system market is unlikely to prevail in the real world. What’s really happening is that there’s an appliance market that shows (at the moment) three distinct faces. Some users will accept them all, and others will gravitate to one of the group, depending on how they balance the various applications and issues. The point is that it’s likely that all of these appliances will have a feature base in common, and that symbiosis among the devices will be important for players who want to keep multifaceted buyers in the vendor’s product domain.
This is also reflective of what Apple needs to deal with now, in the world it created. Things like televisions are clearly going to join the appliance ecosystem, and other stuff probably will, too. But what’s going to matter more is the experience that can be delivered through all this stuff, not the exact boundaries of the “stuff space.” Apple TV isn’t important except as a member of the Apple Ecosystem, and fleshing out that ecosystem is a job for cloud-hosted features, something that Apple is yet to demonstrate it grasps.
But then, Google hasn’t demonstrated that, either. Only Amazon so far has any cloud reality — and even there it’s not completely clear that they have a strategy or whether they just stumbled into a couple of gold coins from a pirate horde. Can they find the rest of the loot? We’ll see.
Another indication of market turmoil is today’s UBS decision to lower their earnings forecasts for Alcatel-Lucent. There is nothing in particular about the company’s products or strategy behind the move; it’s rooted in Alcatel-Lucent’s large exposure to the EU market and the debt crisis there, as well as cost reduction issues that the company still confronts.
I’ve noted many times over the years that Alcatel-Lucent has a position of unique opportunity and risk, both derived from the common cause of its broad product line. The company is in everything everywhere, so it has unparalleled influence. In the last year or so, though, Alcatel-Lucent has fallen victim to the common network equipment vendor problem of weak articulation. We’ve seen many examples of the company being unable to control an engagement that it is objectively the only player capable of supporting. Why? Because Alcatel-Lucent has no clear marketing position, particularly on its website, and because you can’t expect a sales force to be a strategic marketing tool; they’re compensated to close deals. In some cases, the sales team in carrier accounts can’t even recognize a service-layer opportunity.
Oracle is making its cloud strategy a bit clearer, but there are still plenty of places where the connection between offering and goal are a bit fuzzy. Perhaps the most revealing is its announcement of Oracle Public Cloud (OPC), a social-network front-end to a cloud service bazaar that will eventually include all of Oracle’s Fusion applications.
The idea is that companies can use this front-end to provide teams and individuals a point of access that offers them cloud capabilities based on their identity, and thus allows both line departments and IT to buy elastic capacity. The focus of the OPC is Software as a Service (SaaS), yet another example of the fact that anyone really looking at profit in the cloud has to be looking at the place where the largest amount of user cost can be displaced. SaaS also simplifies the notion of work backup and overflow, and since Oracle has championed the database appliance that can simplify data mobility and has embraced a Hadoop-friendly model for data distribution, you can argue that they’ve got the best cloud position in the market. In fact, I expect to see IBM working to refine their own strategy to ensure they can fill the same role.
