In the battle for supremacy among the software industry's Big Four, Cisco may be placing the biggest bets and angling for the biggest returns. Some still think of Cisco as a networking hardware vendor, but hardware is simply Cisco's beachhead into others' turf, similar to how Microsoft (desktop), Oracle (database), and IBM (everything) are using core strengths to move into adjacent markets.
If anyone needed further confirmation of Cisco's software aspirations, its forays into Linux offer a strong hint.
In what might have looked like a publicity stunt around a $100,000 prize for Linux developers, Cisco's Linux development contest was actually a major clue as to just how serious it is about becoming a leading server vendor with a global development community--and soon.
Today, Cisco announced the winners of its "Think Inside the Box" contest. The three winning applications are very interesting, but the bigger story here is what Cisco's contest just demonstrated:
Most of Cisco's 7 million installed Integrated Services Routers (ISRs) are now servers, for all intents and purposes.
The contest proved that server-side Linux developers who know C/C++, Java, or Python can now write applications to Cisco routers with little or no knowledge of routers. (Remember: the finalists only had 90 days to write their applications).
That's a development community of millions, folks. Overnight.
Still think Cisco is a hardware company? By fostering a developer ecosystem around its core router family of products, Cisco just made its hardware solutions much more valuable to its customers (and increased the stickiness of its customer relationships), and turned its routers into a big target development platform for developers.
I wrote about Cisco's contest last June as Cisco's way of paying developers to stick a finger in the Microsoft eye with a $100,000 bounty for writing Linux-based applications for its AXP (Application Extension Platform).
I clearly underestimated Cisco's ambitions.
This is doubly clear when correlated with another Cisco announcement this week about its new and expanded Cisco Developer Network, which SearchNetworking covered.
Cisco is serious about software and fostering a global developer community. As I argued in my "Software's Big Four" blog, each of these companies is entering new markets from incumbent positions of strength, unlike HP and SAP (which both have big software businesses), which are largely sticking to existing businesses.
Millions of Cisco routers already sit in data centers and branch offices around the world. They consume less power than servers. They have a smaller footprint. They're more secure. And they enable a class of applications that Cisco calls "network-aware." Just slot in an AXP blade hosting an application.
Basically routers are much smarter now, and with the right applications can be used to take control of your phones at night to monitor for burglars; manage HVAC, water, and power in your office; deliver advertising in your retail store; and much, much more.
There are two things Cisco still lacks, however, in order to make an unimpeachable bid for developers. First, it needs to move off Broadcom chips for its ISRs and add x86 chips to the mix, something that I'm hearing rumblings may well be on the way.
Second, as impressive as Cisco's outreach to Linux developers has been, the company also needs to support Microsoft's .Net/Windows developers. It's too big a market to ignore.
If Cisco can deliver on x86 and to Microsoft developers--and I think it just might--Cisco will have opened its router (server) family to an even larger development community than the already large Linux market, further blurring the distinction between routers and general-purpose servers.
The result? A formidable software company that sprouted out of a dominant hardware company. How would Oracle, Microsoft, and IBM react?
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I've suggested before that Index Ventures could well be the "best venture firm in Europe." Index has one of the most interesting investment portfolios of any venture firm on the planet, having invested in companies like Skype, Openads, Oanda, DimDim, and others.
Mike Volpi, Index Ventures new Partner
Today, Index became even more interesting, adding Michelangelo ("Mike") Volpi to its investment team as a partner based in London. Volpi was most recently the CEO of online video company Joost, but made his name as the mergers and acquisitions maestro at Cisco, where he oversaw 75 acquisitions.
Given Volpi's background as a deal-maker, the question is whether he's going to be investing for Index or selling for Index.
The answer is "both," of course, and Volpi's recent failure with Joost should prove useful instruction for his future Index investments, as suggested in an interview with D: All Things Digital. Look for Volpi to take a hard-headed view on Internet business models: less advertising, and more transactional business models.
Index was already a leading light in the global venture investment constellation. Adding Volpi should make it even better.
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Cisco Systems CEO John Chambers calls video "the killer app," but apparently, he hasn't been paying attention to trends on the Web, or even to his company's own emerging-collaboration story.
Video, while great, takes too long. We e-mail, instant-message, and tweet for a reason: it's short and to the point. Who has time to watch a video each them they want to communicate?
Perhaps even more critically, as Hampus Jakobsson pointed out to me (over Twitter, no less), video "requires full attention--the scarcest of all resources."
Cisco gets this. At least, groups within Cisco get this. That's why Cisco Senior Vice President Doug Dennerline's WebEx team has been adding presence and instant messaging through Jabber, e-mail through PostPath, and more to its Web-conferencing suite.
It's also why Cisco will almost certainly add some form of office productivity suite to WebEx, despite protestations to the contrary from Alex Hadden-Boyd, director of marketing for the collaboration software group at Cisco. (Apparently, Hadden-Boyd didn't see the memo from his boss, Dennerline.)
Zoho, anyone?
Zoho is a leading competitor to Google Apps and, in many areas, actually surpasses Google Apps. While some of Zoho's applications directly overlap with Cisco's current products, the sheer breadth (and, in some cases, depth) of its office productivity and collaboration story must be intriguing to acquisition-hungry Cisco.
Some suggest that Google will struggle to make it in the enterprise due to security concerns with Google Apps. Cisco doesn't have that problem. Its brand oozes "enterprise." As such, it may well be Cisco that changes the face of enterprise computing...by initially changing the way we communicate and collaborate within the enterprise.
Just don't hold your breath for video to part the waters. Video has its place, but it's a highly verbose form of communication, and the Web's most popular technologies increasingly teach us to speak sparingly.
Indeed, I think that we'll see Cisco acquire Control Yourself, the company behind open-source Twitter lookalike Identi.ca, before it changes the world through video.
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In December 2008, Cisco decided to pay developers to stick a finger in the Microsoft eye with a $100,000 bounty for writing Linux-based applications for its AXP (Application Extension Platform) and Integrated Services Routers (ISRs). Nine hundred registrations and 75 countries later, Cisco has announced its 10 finalists.
What's intriguing about the contest is the diversity of the participants, most of whom are individuals, though there are a few two- or three-person teams. The finalists hail from North (three) and South (two) America, Europe (three), and Asia (two).
Perhaps this diversity lends itself to explaining why the applications developed and ultimately selected represent a disparate mix, especially when one considers that the applications were each designed for a router blade.
With all due respect to Cisco, how exciting can a blade be?
Apparently pretty interesting. The applications include everything from a call processing gateway, live video streaming service, HVAC monitoring for buildings, IP telephony, network fault discovery, rich media advertising, security breach detection, and so on. Pretty impressive.
Now, during the second phase of the contest, which will run from May 15, 2009, until August 15, 2009, the top-10 finalists will work with Cisco to bring the applications to maturity using Cisco resources on Cisco virtual AXP blades. After a final judging period, a winner will be announced in October 2009.
You can follow the contest's Twitter feed, as well as keep abreast on of updates on the contest Web site.
However you choose to follow it, something is brewing at Cisco. It involves open source, and it's aimed at Microsoft. The fun is just beginning.
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Stephen Fry, British author and host of a book/BBC series on his travels in the United States, offers up a paean to America in the May 9 edition of The Spectator. At times lightly scabrous, often hilarious, Fry gives a depiction of America that sounds much like Silicon Valley today:
[With some not insignificant exceptions]...America is comprised of the descendants of men and women who at some point over the last 300 years or so wanted to improve their lives. They left their miserable shtetls and peasant hovels and urban slums and blighted potato fields and sailed the Atlantic. 'We can do better,' they said as one. '___ Europe.' They were animated by a restless desire to move on and make something of their lives...A belief in improvability is written into the gene pool of their descendants, today's Americans....
We Europeans, on the other hand, we are descended from those who said, 'Oh, well, could be worse, I suppose. Not getting into one of those nasty ships and going to a new world. Typical of uppity cousin Frank to think he can just march off and start again. Who does he think he is?'
Regardless of whether you buy into Fry's depiction of Europeans, I think the first paragraph describes very well Silicon Valley's gene pool and, indeed, the gene pool of the wider technology community. It's no longer about becoming American, per se: it's about becoming a techie.
This is why it's so critical to open that gene pool further to immigrants, as Microsoft's Bill Gates has been arguing since 2005. It's also why we, as the technology industry, need to "___ Europe," as it were, by discarding a too plodding and careful approach to innovation.
Cisco is a good example here for the wider industry. Despite its massive heft, the company is using its cash hoard to attack 30 different markets, as BusinessWeek reports. Cisco could content itself with simply incrementally improving its network equipment business, but instead it's dramatically challenging the industry's status quo well beyond its core business.
We need more of this. We need to continue to push the envelope on innovation. We need to continue to import those modern-day pilgrims that leave China, India, Europe, and elsewhere and ensure that they want to stay.
That's what Silicon Valley and the technology industry have long been about. It's in our gene pool. Especially now, downturn be damned, we must do more.
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Katherine Egbert has predicted (again) that Red Hat will be bought, this time by IBM. While I have indulged my own Red Hat acquisition fantasies in the past, I just can't see a near-term acquisition of Red Hat by IBM.
Unless....
Unless, as Egbert predicts, Oracle will throw its weight fully behind Sun's Solaris, to the detriment of its Linux business:
It seems inevitable Oracle will favor Solaris. While Oracle has said publicly they will continue support of RHEL, there is a sense within Red Hat that an increased focus on Open Solaris over RHEL is inevitable, as Oracle seeks to protect the declining Solaris maintenance stream. We estimate that 1/3 of Red Hat's new business comes from Unix-to-Linux migrations. The danger to Red Hat is that Oracle will offer customers attractive terms terms to stay on Solaris, potentially even paying them not to migrate.
Maybe. It's no secret that Oracle has been trying to undermine its dependence on Red Hat while satisfying its customers' preference for Linux. But this is the very reason that I can't see even Oracle, with all its market power, being able to stem the tide toward Linux and away from Unix.
Indeed, I can't even see why Oracle would bother. There's so much more money in its applications and databases. Why bother with trying to push Solaris boulders uphill when its primary concern should be ensuring prospective customers choose its applications and databases over IBM's and Microsoft's, a choice that is made easier by Linux and harder with Solaris?
Regardless, I don't see IBM buying Red Hat unless pushed to do so: Oracle promoting Solaris over Linux is unlikely to be that "push." Regardless, I personally think Cisco is the more likely suitor for Red Hat than either IBM or Oracle.
All of which means Red Hat remains an intriguing acquisition target for several big companies, due to its exceptional performance through the downturn, but it's unlikely to go to IBM soon.
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My post on Tuesday suggesting that Oracle, IBM, Cisco Systems, and Microsoft are the last remaining big (software) ecosystem vendors caused a stir. "But what about EMC, Hewlett-Packard, SAP, Adobe Systems, Symantec, and...X?" came the flustered responses.
HP's public-relations firm even took the time to send me this plug for HP's software business:
IT management software is critical for enterprises to keep up with the continuous pace of technology change and growing business requirements. As the leading IT management software vendor (according to Gartner, Forrester, and IDC), HP's software solutions helps customers manage IT like a supply chain that is aligned to the needs of the business, and makes sure they spend money on all the right things that will deliver the most value to the business.
Let's assume that's true. It still doesn't answer the underlying premise of my original post: identifying the most relevant, broad-based software vendors in the market, the ones with hefty ambitions and product portfolios to complement them.
HP has a strong IT management portfolio, as well as some content management software, among other software assets. But it doesn't come close to approximating the breadth and depth of what I deem the Big Four ecosystem players. Nor does EMC or Symantec.
Having $1 billion in software sales doesn't make you a Big Four, disruptive-software vendor. Vision and ambition also factor in.
With this in mind, the big software vendors that are dramatically changing the face of software include Oracle, IBM, Cisco, and Microsoft. Other software vendors may be relevant in their markets (who could discount SAP in the enterprise resource-planning market, even despite its earnings disappointment?), but they aren't changing the face of the software landscape.
Except, perhaps, Red Hat, which today lacks in the size, depth, and breadth categories but arguably makes up for these in the ambition department. Or, on that score, perhaps Google and Salesforce.com should make their way onto the list?
However you assemble the list, it's clear that it grows smaller by the day. Within a year, I think that we'll see SAP in the hands of one of the Big Four (Microsoft, perhaps?), and we may even see Red Hat factoring into an ecosystem vendor's product strategy, rather than crafting a go-it-alone open-source story.
Which vendors are most relevant to you? If you disagree with my list, please let me know why. Who should be on the list that isn't, and who should be off?
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Enterprise software is coming down to four big choices: Cisco Systems or IBM or Oracle or Microsoft.
Hewlett-Packard? HP is doing very well in hardware, but it lacks the overarching software strategy that fuels these other four.
Even as the industry consolidates into these big ecosystem vendors, it's becoming ripe for a new kind of hegemonic, all-out war.
It's a fun time to be in the industry. For one thing, it's fascinating to watch (and, in some cases, assist) each of the Big Four to use open source as a strategic club with which to pummel their neighbors. Open source, thy name is capitalism.
But open source is just one part of it. The bigger part is conflicting product-level competition. Microsoft dominates the desktop and uses it as a "home base" from which to compete in other markets. Cisco spreads the power of the network into a wide variety of complementary businesses. Oracle uses the database as the center of the enterprise-computing universe, but surrounds it with a host of exceptional software.
And IBM? Well, IBM enriches its massive software business with integrated hardware and services that no one has yet been able to match.
Each, of course, is starting to infiltrate the others' safety zone with new initiatives. IBM, as announced on Monday, is pairing up with Brocade to go after Cisco's core networking market. Cisco, for its part, is stepping on just about everybody's toes with collaboration initiatives that veer toward Microsoft's SharePoint, even while it adds a server line to compete with IBM.
Oracle announced the acquisition of Sun Microsystems to help give it a leg up on IBM and Microsoft through Java, Sun's hardware lines, and MySQL. Microsoft, for its part, is expanding into everyone else's markets with the ubiquitous SharePoint.
This is only the beginning. The question is, "The beginning of what?" In some ways, this dramatic industry consolidation reduces customer choice. But in other ways, it enhances it.
Given the centrality of software to this enterprise cage match, it also begs the question, "When will SAP join the fray?" Last week, I spent time at the Open Forum Europe conference, where I repeatedly heard the question raised, "When will Europe produce a dominant software company?"
SAP's strength in enterprise resource planning, or ERP, software could serve as a nice complement to one of the Big Four's product lines--or as a beachhead for the assembly and deployment of an additional, independent software ecosystem.
Red Hat could do the same, fostering an open-source ecosystem to rival that of the Big Four, mostly proprietary software vendors. While the company has shown little ambition beyond infrastructure software, there are hints of a growing interest to sell (and build?) solutions. Red Hat's recent channel expansion through Synnex suggests that it may be toe-dipping its way toward a larger vision of being the hub of the open-source "wheel."
Given this waxing and waning of competition in enterprise software, I suppose that the real question is, "On which ecosystem are you betting your business?" Enterprise IT is a study in heterogeneity, but for how long?
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Cisco has been on a software acquisition spree this past year, acquiring Jabber, PostPath, and now Tidal Software, among others. But as Cisco goes after the data center with its new Unified Computing push, one open-source company should be on Cisco's radar screen: Reductive Labs, creators of the Puppet project, a framework for automating system administration.
(Credit:
Reductive Labs)
Tidal is a performance-monitoring solution for data centers. It's a nice start, and a definite upgrade over Cisco's baseline Unified Computing management tools. But as Forrester senior analyst Glenn O'Donnell suggests, "Cisco is the new kid in town in the data center and will need a solid software strategy to go against HP and IBM."
In other words, Cisco needs a more holistic data-center management strategy, and Puppet could play a key role. Puppet gives Cisco the ability to semantically encode "why" instead of just "what" or "how" into data center solutions, making data center deployments more manageable over time:
I was only seeing the static state of the working system. What if you want to change things? If you have working images, you have to reconstruct "What" by discovery, good luck with "Why." If you are lucky, it was you that set up the systems and it wasn't over six months ago. The "What" and "Why" were apparent to someone, potentially you, when the systems were first set up, but now you just have this bucket of bootable bits that ostensibly does something. If it isn't working, or there is a need to change something significant, the choice is poking around the bucket of bits until the new "What" is in place or starting over with a new "Why" that is lost as soon as the new image is finished.
If Puppet is building your services, "What" and "Why" can be recorded, clarified, recovered, and manipulated. Version control becomes straight forward, manageable, and transparent. Services can have clear definitions and relationships. So obvious...can't believe it took me this long to "get it"...
In other words, describing services in Puppet provides both the ability to configure machines but also the ability to ensure they are configured properly over time. An enterprise data center isn't static. Understanding and configuring its dynamics is what makes Puppet so interesting, and what should make it intriguing to Cisco.
Even virtualization doesn't make this any easier. If anything, it compounds the problem of management. Puppet, however, can facilitate management of virtual servers.
Cisco is entering an established market with strong incumbents like IBM and HP. To win, it needs to innovate in its data center strategy. Puppet, used by Stanford, Google, Sony, and other leading-edge companies, could offer it a way to disrupt the incumbents with an innovative approach to IT management: a way to manage data-center resources over time, and not merely at deployment.
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ZDNet's Jason Hiner suggests "Seven big tech acquisitions to watch for in 2009," and each of them looks highly plausible (Oracle to buy Salesforce.com? You bet), though I think a few are mismatched.
First off, Hiner points to a tie-up between EMC and Dell. That feels about right, except that I have heard that ink is still being spilled over a Cisco acquisition of EMC.
Of course, with how active Cisco has been lately on the acquisition front, it's now far too easy to assume Cisco will buy just about everyone. Even so, I think Cisco is a more likely suitor for Red Hat's hand than IBM, which is Hiner's guess. As part of Cisco's grand design to do...just about everything, it's going to want more expertise in the underlying operating system powering it all: Linux.
Such a move would arguably make a big impact on the enterprise computing space, whereas Hiner's assumption that "Microsoft needs to make a bold move in the mobile space" (true) and hence will buy Palm, almost made me break into uncontrollable laughter. Palm? A bold move? Sure, a decade ago.
Hiner calls out some cogent arguments for Microsoft acquiring Palm's technology, but neither Palm nor Microsoft really has a mobile technology problem: they have marketing problems, and a marriage of equal (duds) isn't going to change that.
The merger on Hiner's list I'd like to see most? Apple buying Adobe. Both companies make beautiful products. It would be awesome to see what they could build together.
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