Reading Tea Leaves

During periods of disruptive technology growth, it becomes harder to read tea leaves. In fact, this is the period when incumbents find more convincing evidence that the disruptive technology is just a fad and while it may take off in a decade, it does not pose immediate threat. For ex: if you are an executive selling on-premises hardware and/or software, you look at the following signals:

1. AWS is willing to build private cloud for CIA. AWS is increasingly adopting a private infrastructure friendly attitude.
2. SFDC has discontinued its ‘No Software’ logo and is now starting to endorse on-premises software and also announced dedicated infrastructure based on HP hardware ( SuperPod )
3. Microsoft made several enhancements in both Windows 2012 R2 and Azure to make interoperability between on-premises infrastructure and Azure Cloud
4. Significant investment from many technology vendors into OpenStack and CloudFoundry, which more often than not will end up as an on-premises deployment in a SaaS or enterprise company.

So, you look at these signals and would think these are speed breakers to public cloud and the reality is that there is still lot of life left in on-premises infrastructure. As you start entertaining the idea of lot of life being left in on-premises solution, you start seeing more data points from your existing customers validating your thinking. This leads you into a self-feeding premise that your strategy of being cautious with Cloud is the right one, and you are the wiser one, not the disruptors. You may even think of shorting few Cloud company stocks.

This my friends is what makes disruption so much shocking to incumbents, they ask how could this be – we had all the right signals that our strategy is the right one. They painfully conclude that the tech buyers are irrational, and sane people can’t win.

While this is happening, there are other signs that are coming at you. But, because you are in this self-feeding premise of being right, you ignore them. For ex: this report  from Barclays that predicts the decrease in IT spending as early as 2014 due to adoption of public Cloud.

This report apparently say:

“Our research indicates that traditional revenue streams in hardware, software and services could face even more pressures in 2014, but (the cloud) still creates opportunities for the next wave of tech companies.”
Incumbents  also ignore other signs, for ex: loss of an enterprise customer to a Cloud vendor as an exception or an unusual blip. They also would be ignorant of the Cloud adoption that is happening elsewhere, because these buyers do not view the incumbent vendor as a Cloud player.

I don’t have any recommendations here for you on how to avoid this for your company – you can try reading Innovator’s Solution, but it has been my experience that following the advice in that book is not for the faint of the heart – it takes a man of steel and majority of execs are not that.

However, this upcoming disruption is not bad – its actually good for our industry – while it will be painful to see few of the traditional IT jobs reduce, it will benefit the overall economy through cost savings and efficiency. Also, it makes for lot of fun – expect 2014 to be filled with earnings warnings from traditional vendors and blame game in full swing at these companies. My guess is they will say its because of lazy salesmen.




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