Had Vizzini of "The Princess Bride" lived to relate a third "classic blunder" beyond land wars in Asia and competing with Sicilians, he might have urged start-ups to avoid hardware-dependent strategies. Hardware, after all, can be expensive to build and can't match software for ease (and cost) of distribution.
So, is hardware a bad idea for start-ups? Or are we just thinking about hardware in the wrong way?
Open me up, find software/services inside.
Gadi Amit of NewDealDesign suggests that the hardware business, long shunned by Silicon Valley VCs for its costs and complexities, may be getting easier due to ready-made manufacturing capacity in China, which is driving down the cost of building hardware.
Open-source hardware could drop the price of development even further, as Om Malik recently wrote. Give away the designs for your hardware and let would-be customers build it themselves.
This is a particularly appealing strategy for companies that depend upon hardware to drive what are essentially software businesses. Apple builds its own hardware because it wants to control the complete consumer experience, but it could also enable third parties to build hardware that is optimized to run iTunes, OS X, and other Apple software.
Yet hardware could prove the undoing of Apple in smartphones, just as it did in the personal computer industry, when the pioneer Mac gave way to the relentless, ubiquitous Windows.
Sure, Apple's iPhone is currently blowing the competition out of the water. Google Android, however, poses a serious threat, given its ability to embrace multiple hardware vendors with a common platform. Were Google to extend this strategy with open-source hardware, too, the strategy could prove even more disruptive to Apple's current dominance.
Android's momentum is a sobering reminder to Apple that community can trump control.
This same strategy applies to others, too. What about TiVo? Or Sling Media? These are all companies that have built and distribute their own hardware, but really what they're providing is software or services. The hardware is simply there to enable consumer access to software-driven data or entertainment businesses.
So why not open source the hardware and, hopefully, accelerate adoption by lowering the cost of manufacture and distribution?
This is exactly what we're seeing happen in software, as companies race to open source complements to their core businesses. Intel with Linux, Google with Android, IBM with Linux/Apache/more, etc.
Can it work for hardware, too? I think so. But we're still waiting on someone to prove it.
Follow me on Twitter @mjasay.
Back in the early days of computing, there was no such thing as a "software vendor." Companies like IBM sold hardware/software integrated solutions and, really, software was developed simply to sell the value of the hardware.
With Monday's announcement that Oracle is acquiring Sun for $7.4 billion, however, Oracle is signaling its own "iPod moment," seeking to compete with Hewlett-Packard, IBM, and others in integrated hardware/software systems.
It's a bold move, and not for the faint of heart. But then, no one would ever accuse Oracle of being faint-hearted.
"I believe this is the first step down a different path," Sun CEO Jonathan Schwartz said in an e-mail to Sun employees, except that it's not, as Gordon Haff points out in a post on CNET.
What is new in the deal is that Oracle finally gets its wish to own MySQL. In 2007 Oracle offered as much as $850 million for MySQL, the third of its offers for the open-source database company.
This time, Oracle effectively got MySQL for free, as the valuation for Sun almost certainly wasn't raised much by its MySQL asset, acquired in 2008 by Sun for $1 billion.
What Oracle will not want, however, is for its customers to get MySQL for free.
Importantly, Oracle's new "systems" approach gives it the ability to digest a host of open-source projects like MySQL that might otherwise struggle to make money, and monetize them heavily by burying them in hardware "systems." It's a smart move driven by a company that knows that open source as a religion faded, and that open source as a key driver of innovative IT is just beginning.
It does, however, potentially give Oracle an antitrust problem in MySQL, as ZDNet's Dana Blankenhorn posits. MySQL's market share in the enterprise database market is negligible, but its share of the exploding Web database market is dominant and exploding.
While I don't expect the U.S. Justice Department or Federal Trade Commission to launch an antitrust action against Oracle relative to MySQL, it's important to note that this acquisition makes Oracle the clear behemoth in databases, past (enterprise) and future (Web).
Ultimately, however, this acquisition is not about MySQL. At least, not yet.
It's about hardware/software systems, primarily, and to the extent that software is involved, it's about Java, as called out by Oracle CEO Larry Ellison. Over time, the MySQL component will become increasingly important, but for now this Sun acquisition gives Oracle exceptional control over integrated solutions for its customers, as well as a software portfolio with massive potential.
The industry just changed. Oracle raised the stakes of the game. The new ante to get into the game is integrated hardware/software systems, and as IBM, Microsoft, and Oracle increasingly demonstrate, open-source software plays an increasingly important role in feeding these systems.
Updated at 10:48 AM PDT with links to interesting commentary:
- Larry Augustin runs the numbers on the acquisition and comes up with Java + MySQL for $0.00. Good analysis.
- The VAR Guy works through whether this could really be about hardware.
- Glyn Moody rightly points out that the acquisition turns Oracle into an open-source company...albeit a somewhat ambiguous one.
- Larry Dignan at ZDNet takes a different slant, arguing "MySQL is toast" since Oracle won't let MySQL mess with its database margins.
Follow me on Twitter @mjasay.
The bad news is that in its November report on IT spending, Goldman Sachs is projecting a 5 percent decline in 2009 in developed economies (the United States, Western Europe, and Japan), or 65 percent of IT spending, compared with 4 percent expected growth in 2008 and 7 percent growth in 2007. The slowdown will span all vertical markets (financial services, communications, and so on).
The good news? Goldman Sachs expects IT spending in developing economies, which accounts for 35 percent of IT spending, to hit 7 percent growth in 2009. The net? A 1 percent decline in IT spending in 2009.
The other good news? Most IT budgets are weighted toward operating expenditures, with OpEx consuming 75 percent of budgets, leaving just 25 percent for capital expenditures. Why is this good news? Well, that depends on how you make money. If you're an open-source or SaaS company, you fall into the OpEx spending category, where most of the money will be in 2009. If you're trying to peddle proprietary licenses (CapEx), well, good luck with that.
Of course, it's not all bad news for proprietary software vendors, as "operating budgets, which comprise staffing and recurring elements such as maintenance, typically have more resilience associated with them, even in downturns," according to Goldman Sachs. Given that an increasing percentage of revenue for software giants like Oracle comes from maintenance, they should be able to at least tread water on existing deployments.
Hardware vendors, however, should expect a gloomy 2009, but not everyone will be hurt equally.
... Read the full post at CNET's CES 2010 blogBy all accounts, including its own, Sun Microsystems has a growth problem. Savio at IBM thinks it's best solved by selling more hardware (servers and storage). I've argued that software offers an answer.
Larry Singer, former vice president of Global Information Systems Strategy at Sun, suggested that an overemphasis on open source is not the right answer:
"The hard part is we were spending all of our time and attention inside [Sun] on things that were important from an intellectual standpoint, important from an innovative standpoint [but it was] hard to understand how they were going to drive revenue for the company," said Singer.
... Read the full post at CNET's CES 2010 blog
In the beginning was the Chumby. And on the second day the community created the BUG, the latest entrant in the open-source hardware market.
Open-source hardware hasn't really taken off...yet. But Dave Rosenberg today alerted me to a new player in the space from BugLabs, which hopes to develop in much the same way that open-source software does. Here's BUG's premise:
BUG is a collection of easy-to-use, open source hardware modules, each capable of producing one or more Web services. These modules snap together physically and the services connect together logically to enable users to easily build, program and share innovative devices and applications. With BUG, we don't define the final products - you do.
Silicon Alley Insider took a look and likes what it saw. But the most interesting thing from its report was how small the (initial) market is:
... Read the full post at CNET's CES 2010 blog
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