David Scott on cloud dynamics in the IT industry

Forbes.com recently published a video interview with our CEO, David Scott on their Intelligent Technology channel.  David who talks about the shift from privately run data centers to utility, public cloud computing services.  Here are some of the key points from it.

• The move to industry consolidation represents the inability of large systems vendors to grow organically and they have had enter multiple product segments with a patchwork or products and services.
• The evolution of enterprise IT as a utility computing service represents a threat to incumbent vendors' revenue streams because they are not always the leading vendors selling to public cloud service providers. The development of full stack products is an attempt to maintain their incumbency. 
• In the shift towards public cloud for enterprise IT services, service providers are looking for best of breed solutions, as opposed to integrated stacks.

Comments

[Tom Cook]

Mark, good piece by David Scott. Did you see Chris Mellor's, Register article http://www.theregister.co.uk/2010/07/07/enterprise_storage_buyer_views_on_his_supplier/
In many ways the power of incumbancy has never been higher for storage vendors with enterprises. If anything, cloud represents a new channel and a temporary market disruption. Long term it may concentrate buying power from many to a few. That will wring margin out of storage and favor the largest and most cost efficient suppliers, won't it?

[marc farley]

Its interesting Tom, there are three schools of thought about incumbents and Chris' article captures only one of them - that the customer "can't go wrong buying from the incumbent" For many it's the safest play and the storage market tends to be conservative. This is what Chris's article echoes.

The second line of thought is forced by economic pressures: "We can't afford to continue doing things the old way because it costs too much". The cost of owning incumbent storage continues to be very high compared to many other IT costs and companies looking to cut costs will eventually discover the money pit of incumbent storage.

The third approach is what David talks about, which is that service providers need best of breed products which give them key advantages over the incumbents.

3PAR has not only survived but grown nicely over the last 10 years - against incumbent competition and the "odds". Why? Superior technology - pure and simple. Our pricing is not lower than anybody else's - in fact it's often higher, but our growing customer base recognizes the huge cost of ownership advantages. The person Chris interviewed believes that new vendors need to drop their drawers to compete. It never works that way for us - the incumbents drop theirs when the deals go down to the wire.

If you ignore the technology, the numbers game favors the incumbents as you point out, but there is still an awful lot of room to improve the state of the art in storage - a statement that almost everybody would agree with - except incumbent vendors who always say they have the state of the art today.