It will come as no surprise to regular readers that I consider there to be a significant link between the Cloud and the power of the collective – the whole ending as more than the sum of the parts. That is why I find this week’s set of major company announcements are at the very least intriguing. And they are intriguing for what they say about how a couple of major businesses in and around the Cloud view the future.
First of all there is Google acquiring Motorola’s Mobility Division, giving it both the potential to be a major player in the handset market and control over a bunch of technical patents that most other handset makers use and pay royalties on.
Then there is HP’s announcements of the hopeful sale of its PC and mobile handsets operation, despite the fact that it is the biggest PC vendor in the business, and its acquisition of UK-based content management and search company vendor, Autonomy.
Google first
Taking them in order I end up feeling that Google is making a mistake buying a handset vendor. Yes, the patents will be very useful to own, and Google does seem to be developing something of a reputation concerning its `creative’ – some say `cavalier’ – attitude to the rights and uses of patents. But in the end I suspect the company feels this is pretty small beer stuff.
By aiming to get into the handset market it has a clear objective, I feel: a somewhat Napoleonic desire to control everything. It is, by definition, the 800 lb Gorilla in the Cloud resource provision business, and is one of the biggest in service provision. With Google Apps it probably also qualifies as the biggest SaaS provider in the world.
So why not own the delivery platform as well? Its arch-rival, Apple, is aiming to achieve exactly the same goal from the other direction with the announcement of iCloud, so I can understand why it feels it has to do the same thing in reverse. That is probably why it paid an extra 63% on the share price for Motorola Mobility – decerebralise the decision for current shareholders and get it done quickly.
I can see that owning a piece of the burgeoning smartphone handset market is attractive but, as with HP, the margins become increasingly, and inevitably, miniscule. And the design effort needed to stay in fashion – when falling out of fashion can happen in an instant – can easily become a millstone round the corporate neck.
There is a certain logic to the acquisition that will appeal to both the marketing and business management suits in the company. Owning everything, soup-to-nuts, is very attractive from a business point of view, If you own the handsets, the operating system, the delivery processes, many of the tools and applications, and the global infrastructure underpinning it all, you own just about everything except the apps. And if consumers are paying to access them via the system they are being `taxed’ as well.
About the only piece of this pie Google may find hard to acquire is the phone companies, but I guess we have to expect both it and Apple, to try. After all, Microsoft (itself a player here with its Nokia relationship) seriously considered buying BT just a handful of years ago.
Mistakes
But the mistake I see both Google and Apple making hinges exactly on that `own it, soup-to-nuts’ philosophy. The Cloud is about the collective, it is about users (be they John and Jill Doe consumers or CIOs in major enterprises) being able to access content and applications from a wide range of different sources, maybe mashup the content with the applications, and have it delivered to what they want it to appear on, the way they want it.
That freedom certainly depends on standards, but the standards have to stop somewhere. That somewhere is, I feel, at the edge of the infrastructure. Otherwise users will end up facing a soviet-style autocratic world where they can only have what the likes of Apple and Google say they can have. And it could be particularly Google, for if it chose to get cavalier with its new clutch of patents it might well be possible for it to effectively control what functionality appeared in what handsets.
And this is at the very beginning of a development where no-one can predict with any certainty what things will be like in a few year’s time. What handset functionality is yet to be developed that will transform the way we use the things? What applications, services, types of content or types of content format are still twinkles in the eyes of kids just entering university?
Arm wrestling over the ownership of it all right now, when no one has the foggiest idea what `it all’ might actually consist of is, I feel, a dumb move driven by short term money men. I guess they’ll have an exit strategy lined up already for when they come to sell it all off again in the future.
Google already has the important bit, the infrastructure and supporting services, and that is where it should be applying its expertise.
HP next
And that is, I feel, what HP is now after. Several analysts have commented on its sale of the PC operations and the acquisition of Autonomy as being `so last year’ as a business strategy, and just the work of recent CE implant, Leo Apotheker. Yes, it seems like only yesterday that the company bought handset maker Palm, so this can be seen as a significant back-track on that strategy.
But it is back-tracking from a strategy based around owning and developing a component of the business that is just a diversion – and a diversion that is both expensive to run and offers a future of continued large Capex outgoings which achieve margins that are already low and destined to decline towards zero.
That is why PC brand extraordinaire, Dell, is now racing to build a systems integration and services business.
HP is, arguably, behind the curve here as IBM blazed this trail some time ago with the sale of its PC business to Lenovo. Now it is concentrating hard on building a Cloud service provision business based around data centre resources, business and systems middleware expertise, hosting and support capabilities, and extensive consultancy services and skills (which includes a growing channel community to give market spread across SMEs as well as enterprises).
