The Pervasive Data Center

As human beings we like analogies. Admittedly, we sometimes overextend them and end up obfuscating rather than clarifying. Such is arguably the case with cloud computing and the electric grid. However, a good analogy can not only make the new and unfamiliar more comprehensible but can even bring fresh insights based on history and past patterns.

Shipping containers in Clyde.

(Credit: photohome_uk CC flickr)

Many of you are probably familiar with the computing-in-shipping-containers theme that Sun most popularized but that a variety of vendors has picked up on in various forms. The idea is that a shipping container is the largest thing that can be easily transported around the world and therefore it's the largest unit of computing that can be practically prebuilt at the factory.

Thus, in this storyline, the shipping container represents the new increment for large-scale computing infrastructures.

At one level, this shouldn't be taken too literally. Even if an increasing number of high performance computing and high-scale Web sites add servers in this kind of quantity, most aren't buying them actually installed in shipping containers; they're putting them in data centers a rack at a time. And vendors are designing new server form factors to reflect this shift.

However, a discussion with HP in the context of their ProLiant SL launch got me to thinking: Literal shipping containers aside, the evolution of containerization has a lot of interesting lessons for how technologies evolve more broadly.

Existing infrastructure matters. The size of container ships is largely constrained by the width and depth of the Panama and Suez Canals. A "Panamax" container ship is the maximum size that can go through the Panama Canal; a "Suezmax" the largest that can go through the Suez Canal. "Malaccamax" ships have the maximum draught that can traverse the Strait of Malacca. (Currently, there are bulk carriers and supertankers this large but not container ships.) In a totally different context, there's a good argument that the Segway failed, not so much because of price or poor design, but because it wasn't a good fit with either existing sidewalks or roads.

Standards matter. Containers have been around in various forms since at least the 1800s, beginning with the railroads. In the U.S., the container shipping industry's genesis is usually dated to Malcom McLean in 1956. However, for about the next twenty years, many shipping companies used incompatible container sizes and corner fittings. This in turn required different equipment to load and unload and otherwise made it hard for a complete logistics system to develop. This changed around 1970 when standard size and fittings and reinforcement norms were developed (with all the political jostling between the incumbents that you'd expect).

Process matters. At least as important as standards was changes to the labor agreements at major ports. When containers were first introduced, existing labor contracts negated much of their economic benefit by requiring excess dockworkers or otherwise requiring processes that involved more handling than was actually necessary. (For reason of both labor negotiations and infrastructure, containerization allowed the Port Newark-Elizabeth Marine Terminal to largely eclipse the New York and Brooklyn commercial port.)

Marc Levinson's "The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger" has lots of detail on the labor and other aspects of shipping containers. 

Cloud computing is one area where the story of the shipping container has particular relevance. Like the container, the basic concepts aren't new but they are being made more relevant to a wider audience by things like network infrastructure.

Standards will matter--at least to get to the point of interoperable clouds (which admittedly may not be as pressing a need as in the case of the electrical grid and the world's logistics system).

And the business processes are, as always, highly relevant to the computing resources that are ultimately there simply to support them. Processes that are rooted in manual approaches that have lots of human back and forth won't see much benefit from new technology no matter how virtualized, service-oriented, or self-service.

I'll leave speculation about the back story behind Steve Jobs bailing on the upcoming Macworld--and Apple bailing on future ones entirely--to others.

Rather, I'd like to poke a bit further at what this says about the trade show business. ZDNet's Sam Diaz writes:

I hadn't really thought too much about it, but it only makes sense that the Internet's next victim would be the trade show. Think about the outreach tools that companies have at their disposal these days.

Webcasts have become online events where people from around the globe can attend without booking a flight, hotel room, or restaurant reservations. Viral videos are being produced by companies to showcase their products and technologies in real-world environments. Brand names are creating loyal followings via "fan memberships" on social-networking sites such as Facebook. And, increasingly, there are smaller, intimate shows that cater to crowds with specific interests--conferences dealing with social networking, cloud computing, open source, and more.

Those shows reach the audiences they want to reach, and the bank doesn't have to be broken to participate. But what a devastating blow to local economies.

I don't disagree with any of this. Webcasts, viral marketing, and so forth do indeed offer additional, and much lower-cost, ways of reaching out to customers, partners, and developers. And, in Apple's specific case, it doesn't especially strain credulity to at least accept that Macworld is no longer as good a marketing fit as it once was. However, if one takes the broader perspective, I'm not at all sure that this says all that much about the trade show business in general.

That's because the trade show business has always been a bit of a racket. A former boss regularly complained about the money he wasted on trade shows in which he had to participate. And that was more than 10 years ago.

Companies often effectively have to exhibit because it's expected. (Hmm. ACME isn't at the show this year; it must be in trouble.) Participation might also be seen as a cost of doing business with an important partner. (Want Oracle to work with you? Better exhibit at OracleWorld.) There isn't necessarily a quantifiable return on the investment.

Inertia and general politics are other factors. Lots of groups both inside and outside of companies have a strong vested interest in keeping the trade show gravy train going. And that includes, as much as anything, attendees, for whom shows can be as much about getting out of the office for a week as they are genuine business value.

That's not to say that the real-life interaction that happens at these events has no value. Anything but. For me, one of the greatest values of shows is that they offer a convenient focal point for lots of face-to-face discussions, both formal and less so.

In fact, I have this pleasant fantasy that the IT industry could replace its most lumbering shows with get-togethers in nice locales. No need for all the big exhibits at the expensive, antiseptic convention centers. Throw in some unconferencing. (One example somewhat along these lines in Sun Microsystems' CommunityOne. It will be interesting to see how CommunityOne East fares, given that it marks the first time one of these events has been run independently of JavaOne.)

But the reality is that there's a natural tendency toward structure in such things. I'm sure that we'll all have plenty more opportunities to partake of bad convention center food.

I've been attending Fujitsu's North American analyst day that it's been holding annually in Boston for quite a while. This year was no exception. Fujitsu executives spent the day of October 23 in the Intercontinental on Boston's rapidly morphing waterfront providing an update on company products, services, and, especially, strategy.

If I had to sum up my overall takeaway from most past meetings, it would probably be something along the lines of "incremental advance" or "slow and steady." In 2006, I even wrote that:

...strikingly little has changed with Fujitsu (specifically Fujitsu Computer Systems of North America) over the past year. We noted after last year's conference that "slow and steady" was their meme. To be sure, that implies progress, if not enough of it. But, with a few tweaks here and there, I could cut and paste the report we published after that conference, change a few customer names and other specific details, and reuse it today.

This year felt different. The change hasn't so far been much reflected in products or revenues, but in Fujitsu's organization and its strategy. The net is that Fujitsu appears to be more serious about being an integrated worldwide business--rather than a Japanese company that opportunistically also sells elsewhere--than I've seen them to date.

Fujitsu Limited was founded in 1935 as Fuji Telecommunications Equipment Manufacturing. Today it has about 500 subsidiaries around the world, including Fujitsu Computer Systems, the Sunnyvale, Calif.-based operation that sells enterprise hardware, software, and services in North America. Fujitsu Limited had 2007 revenues of about $53 billion; 63.9 percent came from Japan and 9.8 percent came from the Americas.

In history, products, and structure, Fujitsu has much in common with NEC--another large Japanese electronics supplier whose sales efforts elsewhere in the world have been patchy. In the case of both companies, it's often seemed as if they aligned themselves almost exclusively to the needs of the Japanese--or at least the Asia-Pacific (APAC) market and left the rest of their worldwide operations to do the best they could with that same set of products. It's often even been unclear whether certain products could actually be purchased and supported in a particular geography.

However, earlier this year, Fujitsu significantly reorganized its operations. Such reorganizations aren't especially uncommon. The worldwide web of subsidiaries that make up a company like Fujitsu always seem to be getting rearranged. But this latest reorganization seems more structural.

The four major regions--Americas, EMEA, China, and APAC--now report into a Global Business Group headed by Richard Christou (who originally joined Fujitsu when it purchased U.K.-based computer maker ICL). The regions will still "act locally" (to use Christou's term) but the idea is that there will now be a global strategy framework and a consistent set of practices and products whereas previously each region implemented its own strategy.

As is the case with any organization, sales volumes will doubtless continue to drive resources allocations and product decisions. In the case of Fujitsu, that means the needs of APAC will weigh heavily when trade-offs have to be made. However, the fact that Fujitsu is now at least organized around and talking in global terms has to count as a big change.

In his post, "What Tim O'Reilly gets wrong about the cloud," Nick Carr takes Tim to task for describing Google as an example of a business that has grown to dominance because of network effects. The basic idea behind network effects is that something gets more valuable as more people use it. The canonical example is the telephone system. With one telephone it would be pretty uninteresting. With limited penetration, only mildly interesting. With near-universal connectivity, extremely powerful. There's a lot of debate about the details, but few dispute the basic concept.

But Nick argues that network effects don't underpin Google's success. Google determines the best search results using algorithms, not the "wisdom of the crowd." If I were the only person using Google, it might be hard for Google to continue making hardware and software investments. But, money aside, it doesn't inherently depend on having lots of users to deliver quality results. By contrast, social networks or a many-to-many selling site like eBay (especially in its earlier days) are network effect businesses. (In fairness, the myriad creators of Web content make Google's PageRank possible but I see this as a weak form of network effect compared to the other examples.)

However, network effects aren't the only reason why a given industry may end up with just a few--or even one--large players. Nick lists a few that may well be relevant to Google and other "cloud computing" suppliers:

1. Capital intensity. Building a large utility computing system requires lots of capital, which itself presents a big barrier to entry.

2. Scale advantages. As O'Reilly himself notes, big players reap important scale economies in equipment, labor, real estate, electricity, and other inputs.

3. Diversity factor. One of the big advantages that accrue to utilities is their ability to make demand flatter and more predictable (by serving a diverse group of customers with varying demand patterns), which in turn allows them to use their capital more efficiently. As your customer base expands, so does your diversity factor and hence your efficiency advantage and your ability to undercut your less-efficient competitors' prices.

4. Expertise advantages. Brilliant computer scientists and engineers are scarce.

5. Brand and marketing advantages. They still matter - a lot - and they probably matter most of all when it comes to the purchasing decisions of large, conservative companies.

6. Proprietary systems that create some form of lock-in. Don't assume that "open" systems are attractive to mainstream buyers simply because of their openness. In fact, proprietary systems often better fulfill buyer requirements, particularly in the early stages of a market's development. As IT analyst James Governor writes in a comment on Macleod's post, "customers always vote with their feet, and they tend vote for something somewhat proprietary - see Salesforce APEX and iPhone apps for example. Experience always comes before open. Even supposed open standards dorks these days are rushing headlong into the walled garden of gorgeousness we like to call Apple Computers."

The reason this question is of more than academic "nature of the firm"-type interest is that the question of scale in a world where more and more computing happens out in the network has implications that go beyond the cloud computing suppliers themselves. (For our purposes here, cloud computing refers to Internet-based computing generally, whether Software as a Service,SaaS, or some more direct use of computing resources over the network.)

A world with many different cloud computing suppliers, operating at different levels of abstraction--SaaS, Amazon Web Services-style virtual machines, Google Apps-style developer platform, and so forth--looks very different from the world hyperbolically described by Sun CTO Greg Papadopolous as having five "computers." (Computers in the sense of cloud computing providers with distributed worldwide datacenters.)

The computer industry in the first world would look much like today's. Independent Software Vendors (ISV) might deliver applications in the form of Web services rather than programs to be locally installed.  But they'd still be ISVs. And systems vendors would be selling more to those ISVs and other cloud computing suppliers than they would be the ultimate end users. But the sales model wouldn't be all that different from current enterprise sales.

In the second case, things would be much different, however. As I discussed in "The New Systems Companies," if computing were to become something largely consumed by a relative handful of mega-scale service providers, that would fundamentally alter the dynamic between system supplier and system customer that exists today. In the extreme case, the biggest service providers could become the new systems companies, as Google has already done to at least a partial degree.

Understanding to what degree size matters in a cloud computing world is therefore a very important question.

Most of the time, changes in the technology landscape happen gradually. Sometimes we can look back and pick out some inflection point--though, in my experience, such are more about storytelling convenience than anything more concrete. However, at least as often, things just evolve until one day we've clearly arrived in a different place.

Such is the case with open source.

It's gone from being an outsider movement to an integral component of the computer industry mainstream. However, more specifically, it's clearly entered a phase in which pragmatism, rather than idealism, is the reigning ethos.

Matthew Aslett touches on several aspects of this shift in his post: "Open source is not a business model." (His alternative title: "freedom of speech won't feed my children.") His conclusions (from a recent 451 Group report) include the following:

• The majority of open source vendors utilize some form of commercial licensing to distribute, or generate revenue from, open source software.
• Ad hoc support services are used by nearly 70% of the vendors assessed, but represent the primary revenue stream for fewer than 8% of open-source-related vendors.
• Most vendors generating revenue from open source software are reliant on direct sales staff to bring in the largest proportion of revenue.
• There is very little money being made out of open source software that doesn't involve proprietary software and services.
• ...the fact is there are few vendors generating revenue from open source software that are following a pure open source approach when it comes to developing all of their code in the open and licensing all of their software under open source licenses.

In short, as Matthew puts it: "Open source is a software development and/or distribution model that is enabled by a licensing tactic." That's a far cry from open source as social movement or belief system as predominated early on and still has its adherents today. That's not to say that open-source proponents ever fit neatly into a single mold; Linus Torvalds, the creator of Linux, was always more the pragmatist than the Free Software Foundation's Richard Stallman, for example. However, in the main, we've clearly shifted to a locale where even those who are predisposed to "Software Freedom" as a concept are more willing than in the past to treat open source as just one mechanism among several to develop and distribute software.

In my view, there are a variety of reasons for this change including the following:

Open source has, in a sense, won. By which I mean that it's entered the mainstream and has, to no small degree, heavily influenced how companies do development, engage with user and developer communities, and provide access to their products. Furthermore, the well-established success of many open-source projects (Linux, Apache, Samba... the list is long) makes many of the long-ago barbs thrown at open source (insecure, risky, unsupported, etc.) risible in today's world. Open-source advocates no longer need to jumpstart a software revolution. They can afford to be pragmatic.

And open source has "won" because it's proven to be a good model for development and collaboration in many cases. A lot of the fervor around open-source licensing debates was effectively predicated on a belief that open source had to be protected from those who would strip mine it for commercial ends and kill it in the process. However, today there are plenty of examples of open-source projects that use BSD-ish, anything goes licenses--yet are hugely successful. There remain a variety of implications to using different license types, but we're once again talking more about practical matters than philosophical ones. Few major software companies (including Microsoft) don't intersect with open source to at least some degree.

Business models have had time to play out. At the same time, it's also proven to be the case that, building a sustainable and scalable business around a pure open-source play tends not to work. Many open-source companies have gone down the sell-support-for-the-open-source-bits path. The problem is that not enough customers buy up to the pay version. Thus, companies whose product is built around an open-source project have increasingly moved towards offering proprietary plug-in modules, hosted services, and things of that nature. (MySQL, now part of Sun, being just one example.)

Finally, two words: cloud computing--a term I use to refer generally to running software in the network, rather than locally. Cloud computing is shaping up to be a huge consumer of open-source software.  The ease of licensing, the ability to customize, the ability to try things out quickly, and--yes--costs that tend to be lower than proprietary software, all make open source and the cloud a good fit. And cloud computing, beginning with its early consumer-oriented Web 2.0 guises, is where a lot of computing is headed over the coming years.

Richard Stallman, among other open-source purists, has decried this shift because he sees it as a move back to proprietary, centralized computing.  There are some legitimate concerns about data portability, privacy, and other user rights in a cloud context. However, to narrowly and uncompromisingly focus on open source's historical roots and structure in a cloud-based world is to both tilt at windmills and re-fight a different war with the weapons and tactics of the last one. Pragmatism isn't necessarily compromise; it's adapting to the world as it is, not as you wish it would be.

Guy Kawasaki recently interviewed Chunka Mui to discuss Mui and Paul Carroll's new book, Billion-Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years. All the problems that Mui lists make lots of sense and I could offer plenty of my own examples from high tech and elsewhere.

• Companies overestimate the power that comes with additional size.

• Companies underestimate the complexity that comes with additional size.

• Companies overestimate their hold on customers.

• Companies don't consider all their options.

• People routinely overpay for acquisitions. But you already knew that.

However, I think it's worth highlighting one in particular:

Companies play semantic games to convince themselves that they have something that matters in a new market. Avon decided in the 1980s that its "culture of caring" equipped it to operate retirement homes. Not even close. We blame this phenomenon partly on all the talk that the railroads fell by the wayside way back when because they thought of themselves as being in the railroad business, that the railroads could have captured the nascent automobile industry if they'd thought of themselves more broadly as being in the "transportation" business. We think the railroads would have lost their shirts if they'd gotten into cars. Railroads and cars had nothing at all in common.

I think it worth highlighting because there's considerable Marketing 101 logic to defining yourself by markets rather than technology. There's a reason for that. This admonition often is Marketing 101, given that it comes directly Theodore Levitt's famous 1960 Harvard Business Review article, "Marketing Myopia." This article popularized the idea that companies should define themselves in terms of markets and customer needs, rather than products--such as the aforementioned "transportation" market rather than the "railroad" product. The idea is that companies doing so would have been much better able to transition to new products and services as underlying and technologies and environments changed.

I've argued previously that the "Marketing Myopia" dictum often doesn't make a lot of sense. Past skill sets and ecosystem don't necessarily travel well from one generation to another.

Consider that Kodak once owned a chemical company to supply its film making needs. Consider that a slide rule manufacturer like Keuffel & Esser specialized in precision manufacture of mechanical devices. It's not an overstatement to say that these capabilities have next to nothing to do with success in a world of integrated circuits.

It shouldn't come as a particular surprise that it was manufacturers of electronic equipment, most notably Hewlett-Packard and Texas Instruments, that pioneered electric calculators--not K&E, nor indeed the various makers of mechanical calculators such as Marchant.

Are there counterexamples? Sure, you don't get to be a marketing dictum without at least some supporting evidence. But "Marketing Myopia" truly seems like one of those rules that sometimes works and sometimes doesn't. And, therefore, it isn't especially useful as general advice.

"Real world" examples of some trend or business model are great. Theory is fine up to a point but eventually it's awfully nice to connect up with a concrete example that gives the theory some real cred.

At the same time, examples can mislead us. Often they turn out to be anomalies. Maybe a company is some sort of historical quirk, a product of a very specific time and place. Or maybe some technology approach is valid enough--but only for a very narrow set of needs. One warning sign is seeing the same tired examples trotted out for every discussion, every news article, and every conference.

I see some of that in all the following cases. I certainly won't go so far as to say that the underlying trends or business models are illusory. But I do think they're more limited or further away than their most overenthusiastic proponents suggest.

The Long Tail, as popularized by Wired's Chris Anderson is a hot meme of the blogging and Web 2.0 crowd. Simply put, the Long Tail states that bestsellers aren't in the majority when you tally up the sales at Amazon or Netflix. Rather it's the total of the far more numerous other 80 or 90 percent of content. From a business perspective, the significance is that there's money to be made selling what's in the long tail.

However, the number of true long tail businesses gets thin outside of aggregators of digital media--the companies who have minimal costs to acquire, inventory, and sell incremental low-volume products. Amazon, in particular, is a highly atypical, if not unique, retailer in terms of scale. In fact, we're starting to see a body of evidence that suggests that the long tail is, if not necessarily wrongheaded exactly, more limited in applicability and degree than some of its proponents have suggested.

We've also seen pure Open Source much touted as a viable business model. By "pure," I mean a model that doesn't hold any software back for paying customers only. The hope is that enough users will elect to pay for support and other services to cover a company's cost and profit. Red Hat, a profitable and growing company, is the poster child here.

But Red Hat is exceptional really. It's emerged as the unquestioned leader among enterprise Linux distributions, one of the most visible and core elements of the entire Open Source world. And its financial success is helped, in no small part, because it's selling a value, ISV application certification against Red Hat Enterprise Linux, that doesn't have the equivalent in layered software products. Other pure Open Source plays have also been modestly successful, but we're certainly not talking Oracle or Microsoft levels of success--nor, indeed, Sybase or SAS levels. Even Red Hat pulls in well under $1 billion in annual revenues, and may also be starting to hit the limits of low-cost customer acquisition enabled by free downloads.

Other cases involve long-term trends that almost certainly will have an increasing impact over time. More software is moving out into the network "cloud," and--in an at least peripherally-connected shift--thin clients of various stripes are beginning to move beyond their historical ghettos in call centers and other narrow use cases.  However, the oft-cited Salesforce.com and many Citrix case studies aside, these shifts will be far more gradual and incremental than the enthusiasts would have us believe. Enterprises will be slow to adopt Software as a Service for anything they consider even vaguely core and the traditional fat client PC model may be flawed in a lot of ways, but it is familiar, well-understood, and has huge inertia.

I love examples. They help give me confidence that something has at least a patina of reality. But, in the singular, they constitute anecdotes and not data. And anecdotes don't really prove anything. In fact, they can mislead by giving the atypical more weight than it deserves.

Earlier this week, I noted that book publishers and authors had, so far, been largely protected from the mass copying that has helped to undermine the music recording industry's profits. The reason is simple. You can't copy dead-tree books for minimal effort and cost the way you can CDs or MP3s. But, with e-books finally seemingly establishing a bona fide foothold with Amazon's Kindle, that's going to start changing.

New York Times Op-Ed columnist Paul Krugman notes this trend in "Bits, Bands and Books" together with a corollary that Esther Dyson predicted in 1994:

”that the ease with which digital content can be copied and disseminated would eventually force businesses to sell the results of creative activity cheaply, or even give it away. Whatever the product--software, books, music, movies — the cost of creation would have to be recouped indirectly: businesses would have to--distribute intellectual property free in order to sell services and relationships.”

This, of course, is what a lot of folks--whether as a way to justify music piracy or otherwise--have been saying for years about the business model for music. It's (supposedly) OK if you can't sell a lot of CDs (or iTunes downloads) any longer. Krugman notes that, according to a recent Rolling Stone article: "Downloads are steadily undermining record sales--but today's rock bands, the magazine reports, are finding other sources of income. Even if record sales are modest, bands can convert airplay and YouTube views into financial success indirectly, making money through 'publishing, touring, merchandising and licensing'."

I'm a bit skeptical that selling tchotchkes, tickets, and "extras" in one form or another is really a practical substitute for selling the music itself in the general case. But let's leave that go for the time being. It's been endlessly debated and isn't going to be resolved here. What seems to me even more problematic is the suggestion that there has to be viable alternative models for creative content that becomes de facto free in the general case. For example, Krugman goes on to write:

Indeed, if e-books become the norm, the publishing industry as we know it may wither away. Books may end up serving mainly as promotional material for authors’ other activities, such as live readings with paid admission. Well, if it was good enough for Charles Dickens, I guess it’s good enough for me.

And here, I'm deeply, deeply skeptical. At least with music, there are a variety of revenue-generating activities that are a natural outgrowth of the primary creative product. Most musicians do live performances in any case. The only question is how much money they can make by doing so.

But writers? Sure, some well-known authors make engaging speakers. Geoffrey Moore (author of Crossing the Chasm and Dealing with Darwin) is one I've heard fairly recently. J.K. Rowling just spoke at Harvard's commencement. But just because someone is a writer--even a best-selling one--doesn't make them a good speaker. Indeed, some of the best writers are reclusive and would shudder at the thought of having to make a living by public speaking.

Yes, business models are changing. And all of us will have to adapt in various ways. But let's not kid ourselves that advertising, live performances, or magic money trees are going to automagically pay the bills for creative content that we want to consume but don't want to pay for.

Over the weekend, I enjoyed reading a New York Times article by Randall Stross titled "The Computer Industry Comes With Built-in Term Limits." It focuses on Microsoft and Google and how:

two successive Microsoft chief executives have long tried, and failed, to refute what we might call the Single-Era Conjecture, the invisible law that makes it impossible for a company in the computer business to enjoy pre-eminence that spans two technological eras. Good luck to Steven A. Ballmer, the company's chief executive since 2000, as he tries to sustain in the Internet era what his company had attained in the personal computing era.

This observation that companies dominant in one phase of a market rarely enjoy the same success through major transitions is hardly unique to the computer industry.

One common explanation is offered by Theodore Levitt's famous 1960 Harvard Business Review article, "Marketing Myopia," which popularized the idea that companies should define themselves in terms of markets and customer needs, rather than products. A common marketing class illustration is how the railroads thought of themselves as running trains rather than providing transportation--with the result that they were marginalized in many respects as transportation technology changed.

There's doubtless a lot of truth to this contention, but, as I discussed in the context of the photo business previously, shifting an entire product foundation is enormously challenging and past skill sets and ecosystem don't necessarily travel well from one generation to another. In the earlier transportation example, what particular expertise or competitive example would Penn Central have brought to running an airline? Very little.

In the case of Microsoft, the technology gap is perhaps less yawning between the type of software on which it made its fortune and that which is widely consumed over the network today. (That said, there are many differences in development model, adoption process, community building, and so forth.)

However, I don't see the issues faced by Microsoft as so much about marketing myopia. As the article notes:

In a 1995 internal memo, "The Internet Tidal Wave," Mr. Gates alerted company employees to the Internet’s potential to be a disruptive force. This was two years before Clayton M. Christensen, the Harvard Business School professor, published "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" (1997). The professor presented what would become a widely noted framework to explain how seemingly well-managed companies could do most everything to prepare for the arrival of disruptive new technology but still lose market leadership.

Thus, the meme that Microsoft is "dead" (in theory) is based less on an argument that Microsoft is blind to what's going on with network computing than on the observation that it hasn't really effected any major changes in response.

There's a reason for this. It's easy, if only relatively so, to spot major transitions. (Although, to be sure, harder to spot them before they're obvious to everyone and harder still to discern their precise impact and timing.)

But it tends to be really, really hard for cultural and organizational reasons to do what needs to be done about them. And, perhaps even harder and at times impossible, to make the necessary business changes.

I call it the "tyranny of the installed base." I saw plenty of it when I worked at minicomputer Data General in the 1990s. Customers want bug fixes and enhancements to their existing products--even if it's some legacy database that fewer and fewer people used with each passing year. The result is that lots of resources get sucked into supporting the "old stuff," leaving that much less energy, money, etc. for the "new stuff."

But the real issue here is more insidious. A company, especially a public company, can't really "Just Say No" to that installed base and tell them to take their business elsewhere. Imagine if you would this scenario: Ballmer wakes up next Monday morning after having an epiphany over the weekend. He walks into Redmond, tosses a few chairs for emphasis, and announces that Microsoft is going to immediately discontinue selling and developing its Windows operating system and Office products because they're mired in the past and have become too much a distraction from what's really important--its online services business.

I think we know what comes next. Microsoft's stock price falls through the floor and Microsoft's board of directors send the men in the white coats to take Mr. Ballmer somewhere he can get some extended rest. While such a scenario would doubtless cause considerable delight in some quarters, I think most of us can agree it's neither practical nor a particularly good idea.

It's hugely challenging to jump from one wave to the next even when you see it coming with perfect clarity. The next wave may even be bigger in terms of customers, revenues, and everything else. But there's a trough in between.