Mother nature is simply awesome.  When you watch the relentless force of the ocean, it makes you realize that you are absolutely powerless to change things that big.  All you can do is watch and try to survive.  Makes me realize that what we are really meant to do is focus on the small things that we can affect–because aiming too high is a fool’s errand.

In our business, it’s the same thing: if we focus on issues too large to effect real change, we’re wasting time.  If we focus too myopically without understanding how our actions fit (or don’t) into the bigger picture, we’re wasting time.  If your job is to rake the beach, but you do it as the tide is coming in, you wasted time.  If your job is to keep the tide from rising, you are really wasting time.  IT admins can be beach-rakers.  Senior executives like to focus on altering tides.

In IT, we spend way too much time on both ends of the spectrum.  We either spend all our time on myopic efforts that have little bearing on the overall mission at hand or too much time trying to change the way our entire business operates in order to fit some neat IT process.  Neither works.

Instead, it seems to me that it would be better for all concerned if we occasionally re-evaluated our situation and adjusted to current realities.  It sure would be better for your mental health, if nothing else.

The easiest way to evaluate your situation, regardless of what that situation is, is to ask yourself “WHY?”  Ask it over and over, like a two-year-old. Why are you doing what you are doing?  Is what you are doing relevant to the overall mission?  Is the overall mission reasonable and attainable?  If, at any time, your answers are at odds with your intent, it’s time to stop.  The key, of course, is honesty.  You can convince yourself that you simply must find a solution for interplanetary replication, but you aren’t being honest.  If you are, you’ll discover that you are wasting time.

There are 1,000 problems to be solved in your data center.  Half of them don’t matter, but which half?  Try to focus on ones that matter–that lead to a positive outcome.  Stop keeping yourself away from the beach with the family because you can’t figure out lunar snapshotting.  Ask yourself this: “What problem am I trying to solve? Why?  If I don’t solve it, what is the real implication? If I do solve it, what are the real benefits?”  If the answers are shaky, move on to another of the thousand problems to be solved. There will always be another problem, as sure as there will always be another tide.

What you should be asking yourself are things such as, “Is this task making me a better person, spouse, parent, friend–not just a better employee?  Should I have a dark ‘n stormy or a margarita?  If I look hard enough, can I see my kid grow right in front of me?”

As people we let our myopic lives get in the way of the big picture–mostly for the right reasons, but often to our overall detriment. We work because we need to support our families.  We work more because we need to support our egos.  We work even more because along the way we convinced ourselves that somehow that is how we measure ourselves.  We need to solve solar deduplication problems.  We just forgot why.

In reality, what businesses should learn is that the most productive, most valuable employees we have are those most grounded in what really matters.  If you aren’t solid at home, you simply can’t be solid at work.  If your kid is sick, who cares about how solar flare ups are causing reboots?  Companies don’t succeed because the networking guru reconfigured a router perfectly.  They succeed because the guy who did it still made it to  his kid’s soccer game.

Work to live, my friends, don’t live to work.  It’s easy to find yourself on the wrong side of that equation.  I’ve done it many times myself.  Summer is a good time to re-evaluate.  Surf’s up.

I mentioned Greenplum and Vertica specifically as key ingredients to stem the threat–because they can eliminate the need for the heart of Oracle’s attack–the database.

Greenplum builds a database designed from the ground up for massive scale–the kind required by data warehouses and BI systems.  They do it far more effectively and a billion times cheaper than systems using the Oracle RDB to keep track of, and provide analysis on everything.

With that in the arsenal, EMC now has a shot to at least stem the tide of Oracle Exadata defections–and even more, can offer a more compelling overall solution to the problems of massive data sets.  The issue will be simple–Oracle knows how to sell this stuff, EMC (traditional) doesn’t.  Oracle DW/BI people speak that language–to the right buyer–who is NOT THE INFRASTRUCTURE BUYER!!!!

The BI/DW buyer is a business apps person–not someone who cares in the least about spinning disk or cache or whatever.  EMC will either need to teach their high-end force a new language and the ways of a new customer set, or figure out how to keep that separate from the mainstream as they have done with their other successful software acquisitions.  My guess is they will do the latter, but I don’t know yet.

Unlike VMware or Documentum, for example, this play DIRECTLY affects EMC’s bread and butter hardware offerings.  When Oracle sweeps the floor with an Exadata deal, they sweep out Symmetrix, HP boxes, IBM, etc., and there really isn’t a heck of a lot to be done about it.  This is perhaps why EMC did what they did–and I give them credit for seeing it for what it is and doing something about it.  Why let Oracle dictate the game?  With VMware, Springsource, and Greenplum, one can make some pretty compelling software arguments as to why this combination is the face of massive data set management in the future.

I love the play.  Kudos for a ballsy move.  After Data Domain, I’m not going to challenge their ability to pull off the execution again.  I’m just dying to see this play out.  It’s like a heavyweight fight in the making.

Interesting final note – Oracle owns Sun, Greenplum was founded by some Sun folk, Scott McNeally is on the Greenplum advisory board…….

The list of presenters included:

Mr. Scott Charney
Corporate Vice President, Trustworthy Computing
Microsoft Corporation

Mr. Daniel Burton
Senior Vice President, Global Public Policy
Salesforce.com

Mr. Mike Bradshaw
Director, Google Federal
Google Inc.

Mr. Nick Combs
Chief Technology Officer
EMC Federal

Mr. Gregory Ganger
Professor, Electrical and Computer Engineering
Director, Parallel Data Lab
Carnegie Mellon University

I read some of the transcripts.  Here’s what I found interesting.

1.  EMC’s Combs defined the cloud for the politicos using the National Institute of Standards and Technologies (NIST) definitions – which are:

• Private Cloud is infrastructure deployed and operated exclusively for an organization or enterprise.  It may be managed by the organization or by a third party, either on or off premise.
• Community Cloud is infrastructure shared by multiple organizations with similar missions, requirements, security concerns, etc.  It also may be managed by the organizations or by a third party on or off premise.
• Public cloud is infrastructure made available to the general public.  It is owned and operated by an organization selling cloud services.
• Hybrid cloud is infrastructure consisting of two or more clouds (private, community, or public) that remain unique entities but that are tied together by standardized or proprietary technology that enables data and application portability.

Huh.  These seem like reasonable definitions.  What have we been arguing for?

Second, no real surprise, security was the big thing.  Rightfully so.  The U.S. government lacks the process and competency that most private enterprises leverage, and the panel was telling them to get their act together.  Duh.

In Combs’ closing remarks, he said: (I italicize the things I found compelling).

“I again thank the Committee for allowing EMC and I to contribute to this very important effort.  IT is on the verge of dramatic change; cloud computing has the potential to have the most significant impact on IT since the development of the microprocessor. We have to remain focused to ensure we get it right.  This will be a journey and we will realize benefits at many points along the way and it will provide organizations with much greater flexibility to meet the demanding needs of our federal government.  Admittedly, security is a top concern, but the technology and best practices exist to address that risk.  A critical part of the solution lies in engineering security into the cloud, not bolting it on as an afterthought. Ultimately, cloud computing offers great potential for federal information technology, and federal departments and agencies should be encouraged to embrace that potential.”

We, however, are a society (IT) of bolt-ons.  I’m sure Combs’ commentary was meant to be self-serving–he’s an EMC guy after all–but the point is still valid.  If you buy into the “build it in” mentality, and it’s hard not to, then who are those capable of really doing so?  If the cloud truly does become the next great long-term technology (IT) trend, and if bolt-on approaches to core functionality such as security are NOT the way of the future – then what happens to that big giant market as we know it?  Those who secure our end-points will not be those securing our clouds.

Interesting.

Quantum is up about 500% or so.  Isilon around 300% I think.

No, I didn’t buy.  It’s not because I can’t by law, but by decree (my own).  Our folks don’t buy stock in any public company we “know” things about, even though we don’t know things we shouldn’t.

Isilon was up 48% y/y, I believe making them the fastest growing public storage company on the planet.  Last quarter they had 62% gross margins–which is NetApp‘esque.  Quantum had their best run in many years.

Why, you ask?  Because fundamentally they both have good businesses–and are being run soundly.  They serve good markets where people have real problems and spend real money–and they are run responsibly.  There are lessons to be learned from these two.  Both have faced the brink, and both have come away better companies.

Plus, they are both loaded with really nice folk.  I’m starting to put more credence into that as a metric as I get older.

IBM–has been too quiet during the downturn economically but now seems intent on changing that.  They are diligently working to develop messaging that works–to tell the world what they are and what they want to be.  They do great at high-end esoteric junk like “Smart Planet” but have been terrible at arming their soldiers and partners and customers with product and solution rationalization.  Granted, it’s a hard problem when you have a billion products, but they haven’t been able to do it at the macro level (between storage, networking, servers, services)–or micro level (when do I sell/buy XIV vs. DS5000 vs. DS8000?).  Until this is fixed, IBM garners no efficiency in the selling motion, and will continue to sub-optimize.  The good news is they are massive and entrenched, and if/when they do fix this, they will see immediate benefit.  IBM’s biggest battle near term will be fought amongst itself.

Oracle–the biggest threat to the majority of the big players is Oracle now that they have a whole stack approach.  We’re watching it in the “level 2 big iron” world–those app environments that use the same stuff as the level 1 transaction systems–but in much greater quantity.  Exadata is just the first instantiation of this for the big O.  What happens is companies run big iron mainframes or mega-huge Unix boxes, Cisco, Symm/HDS/DS8000s and Oracle in as their transaction systems–at a huge cost.  They then build data warehouses, BI systems, decision support systems, etc., by replicating those same transaction systems–only much bigger (10X is normal).  This level 2 business is HUGE for those who sell stuff into it.  Now Oracle is screwing up a cash cow by coming into your company, finding you out of compliance on your Oracle Dbase licensing, and making the whole problem go away by ripping out what you have and replacing it with a $7m all Oracle stack–hardware and software.  And, it’s working.  If you are EMC or NetApp or even IBM, this is bad news.  IBM can play the game as they have the pieces, but I’m not sure they have the sales muscle or focus.  HP is in the same boat.  There are BILLIONS at stake just in the level 2 big iron world.  Look for those under threat to be forced to partner or buy in order to negate the threat–namely the Dbase function itself.  You won’t beat Oracle as long as they control the rules–and the Dbase controls the rules.  You’ll need to find a better/cheaper way – Vertica, Greenplum, etc. are suddenly looking very appealing.  This is not lost on VMware either, as Oracle will try to do their own virtualization thing and keep VMware out.  SpringSource looks like a brilliant buy suddenly.  The BI/Analytics guys are going to have to find HW partners to play as well.  Oracle can wipe out an entire ecosystem worth 30B clams if they aren’t challenged.

Make no mistake about it – Oracle has the potential to be the most disruptive force in this IT universe, bar none.

HP v. Cisco.  This one is going to be awesome.  It boils down to this:  Cisco walked into HP’s bread and butter by hopping into the server space.  I’m not sure they really thought this through all the way.

HP countered by buying 3Com–wanting to become #2 (for now anyway) in the enterprise networking space.

HP is going to win this battle.  Here’s why:

It’s all about the margin structure.  Cisco has enjoyed roughly 70% margins in core networking forever, because they have had no real competition for the last 15 years.  They have not pushed the commodity envelope and passed on savings to the market–because they didn’t have to.  Now, they are addicted to that contribution margin–it funds everything else they do.

IF (note the big IF) they become successful in servers, they will only do so by changing their margin profile.  They will not ultimately be able to sustain margins in excess of HP or IBM or Dell–because they simply can’t buy at anywhere near the levels of the big server guys. Nifty packaging is just that–packaging.  It’s not a sustainable value proposition that justifies a huge margin profile.  Cisco has sold about 1,000 UCS systems over the last year, I think.  HP ships 8,500 servers a DAY.

To get to scale, Cisco is going to have to buy someone.  Dell?  That would be awesome and give them scale–but awfully expensively.  Who else?  They can’t buy IBM or HP, or Intel, so who else is there?  That means they have to do it organically–which will cost a fortune and drag down earnings in my estimation–let alone the distraction it will cause.

Best guess is Cisco tries for another year then suddenly gets very quiet.  They will package up bigger and bigger packages for fewer and fewer customers, and eventually be out of the business in any real sense.  VCE (VMware, EMC, Cisco) packages at the top of the pyramid could be a sustainable ecosystem, but not at volume scale.  I can’t see a continual R&D investment at a high level if it’s only going to be a boutique business.

Now for HP and networking, the opposite is true.  Networking margins for HP will be GREAT! They will be closer to 50%–twice that of servers–even if they price at 50% of Cisco.  HP already has 5,000 people trained on the products and is aggressively hiring salespeople.  HP will find no real trouble convincing shops to let them start as a legitimate number 2–their brand value alone pretty much guarantees it.  Once they are in, who knows?  No matter what, Cisco will be forced to either A: lower their pricing and eat margin or B: cede market share.  I suspect they will be forced to cede share, as once they drop pricing their whole model breaks–and the street will slaughter them.

1. HP only has to show minor, consistent share gains to win.
2. HP has a much deeper overall portfolio versus Cisco.  Cisco has networking and telepresence.  HP has everything and the kitchen sink.
3. Cisco can be outsold.  Their dominance has allowed them to move from hunters to farmers over the years, to the point where they are a salesforce of order takers/account managers versus deal assassins.  They can rectify this, but it will be costly.
4. If Cisco is committed to the server space long-term, they almost are forced to pick up the last big piece–storage.

Final thought here–HP has always pushed the commodity envelope.  They always push cost reductions all the way to the buyer.  They never really have been the ones who “gouge” the market when they are seated.  Their servers, storage, and networking have a long history of this–whereas Cisco (and many others addicted to the margin crack simply don’t operate that way).  The only way to avoid this is to augment that margin structure–similar to what EMC did when HDS came on strong and forced pricing corrections in the high-end storage market.  EMC reacted by being forced to price lower but made up for it with CLARiiON and ultimately lots of other things.  What does Cisco add to their mix?  It will be bad enough that HP gets a foothold in core networking and forces a one time price correction–but they won’t stop there.  They will keep on forcing it year over year.  At least that is what history tells me.  Even after they dominated the printer market, they didn’t try to artificially float margins–they forced costs to the buyer down.  Hard to do if it’s not part of your DNA. Maybe Telepresence becomes so huge it can offset those margin hits, but that’s a pretty big gamble.

Bring on the battles!

There are big guys like EMC using “Journey to the private cloud….” as their moniker.  They can say nothing, because they are big.  The problem, as I explained it to Mr. Tucci (at which point he might have wanted to hit me), is that it says nothing.  No one wakes up in the morning and thinks, “Gee, I need to journey to the private cloud today…”  Might as well be “Follow the yellow brick road.”  That’s the issue.  People don’t buy slogans.  They buy fire hoses when they are on fire.

Until the market BELIEVES that it A: has a problem that needs to be solved and B: requires the cloud to be the answer to that problem, there will be no real business.  The good news, is I believe that reality is coming, and there will be legit business opportunities here.

For the big dogs, like EMC, they (smartly) want the cloud to be private, because the private cloud is really “IT”–and they do well when IT is buying stuff.  They want to arm the public cloud providers, who are essentially the IT departments of service providers, where (stunningly), EMC does well.

For the small guys, the problem is the same, but they can’t really afford to wait around for the market to figure out their relevance.  Thus, as is my nature, I’ll try to help.

Nasuni, Cirtas, TwinStrata, and StorSimple I know.  Gladinet and CTERA are in the space, but I’m less familiar with them. You will hear from more larger players shortly.  All of these guys want to be the “gateway” to the cloud.  All of them sound cool in my opinion.  Not all of them will make it.  What each will need to do is to tell you, very specifically, what problem they solve that you are willing to part ways with your money to do so.  Until then, they will be cool, and no one will use them.

Each needs to realize that “cloud” isn’t a solution to a problem.  It’s a means–or an enabler–to a solution. What each needs to focus on is the actual problem.  When I read through StorSimple’s site, I see reference to Microsoft apps, like Sharepoint.  They should spend time on that space and identifying that problem.  There are lots of Sharepoint users, and lots of problems.  Show me how your gizmo/cloud combo solves those problems.

I love the Nasuni play–they effectively give you an endless Filer.  They (as do most) cache locally on premise, present a file system, and then age files out to the cloud(s) all de-duped and economical.  If you think about it, it’s the perfect tiering model.  Why would you ever put any more file data on your SAN (which people do) at 10X the price?

The block equivalents, like TwinStrata, do the same thing–but the interface is iSCSI.  Backup seems to be a nice app for them to focus on.

So the first “problem” I see here is economics and management.  The economics are easy to understand–they let you pick a cloud provider to put your stuff on (and importantly–take it off!) with a known cost basis for exactly the capacity you require–it doesn’t get any better than that.  Then they take the management burden of tiering away from you, since you set it and forget it.  They do the heavy lifting on optimizing what goes where, when, and how.  You get optimized economics, automated tiering, and perhaps the best of all–control.  You get to decide to pull data back, move it to another provider, or both.  Can’t see Amazon letting you do that.

The big guys will need the little guys.  They let a big guy get into the cloud provider space, without actually doing anything.  They can use Amazon if they want, and no one will know.  Controlling the knobs and the billing is all they should care about.

The trick is to find the applications that are causing pain, and explaining how these solutions ease that pain.  If there is no pain, it won’t matter if it’s cheaper, better, or faster.  The boss doesn’t care about the fact that a Sys Admin spends 87 hours a day migrating data–that’s what we pay him for!  We need real pain–real problems–that require a ‘different’ solution (people will never change just because it’s right–only because they have to).

If you have a SAN or File environment and can’t afford (economics) or can’t sustain (management) it, those are problems.  If you need/want to back up to a dedupe target but aren’t going to pay for Data Domain, that’s a problem with a solution.

Focus on the problem, not on the solution.  A solution without a problem is like when people advertise Pampers diapers to me.  I’ve had chemo, radiation, and a vasectomy.  If I need diapers, it will be Depends, not Pampers.

I’ve made most of the mistakes I talk about in this blog (soon to be a book), some of them multiple times.  That doesn’t make me better than you, just more experienced.  What follows is my shortened version of perhaps my most valuable, and most painful, experience in startup land: ITC.

Dave Hitz, co-founder of Network Appliance (now NetApp), one of the greatest success stories in American business history (and all around good human), wrote his book, “How To Castrate A Bull” last year.  I highly recommend it as it has great value for those who want to succeed in business.  My story is the direct antithesis of Dave’s.  Mine is also more valuable– no offense.  Any billionaire can write a book about how they became a billionaire and it sure isn’t going to make you one.  Teaching you lessons learned the hard way and how to avoid the same fate, now that’s valuable!

The Beginning:

My storied career can be boiled down to this:

1983-1987(ish): I smoked a lot of pot and played in a punk band while (occasionally) attending Babson College, a fantastic school for entrepreneurial wannabes and really, really rich kids from foreign countries.

1986: I stumbled into a job in a little startup called EMC as a telemarketer for a guy named Billy Scannell, who for the last 10 years or so has been big VP at EMC and made approximately $2 trillion.  At the time, he was a shithead like the rest of us, I swear.

1987: I somehow graduated (a negotiated settlement) and went to work full-time at EMC as a sales punk.  The senior experienced people at the company were then all of 25 years old with enormous egos, attitudes, and wallets.  Perfect.

By 1989, I knew the company wasn’t going anywhere so I quit to go work for a little used computer equipment broker in Boston.  All the smart people left EMC and only the dummies stayed. By 1991 EMC was on the road to becoming the highest returning stock of the decade on the NYSE.  All the dummies were rich.

By 1990ish, I decided enough was enough and was ready to start my own gig.  Hell, I was 25 and knew all I needed to know.  So I thought.  I tossed out a shingle and decided I was going to become the first third party storage company to leverage industry standards and ship the same device across multiple platforms.  That hadn’t been done at that point.  Great idea, but I sort of forgot that you need money to buy stuff. Suppliers might like you, but they don’t just ship you a million bucks worth of stuff because you seem smart.  My first stab at glory was short-lived and ended up rolled into a $50M memory manufacturer called Clearpoint Research as a division.

In the early 90’s, I was left to start and run my own little division inside of a company that at the time had gone from zip to over $50M in revenue, of which the company had to net about $25M in profit.  It was owned by one guy: one very rich, very weird guy.  Over the next three years, the memory business commoditized and suddenly, I found my little division was the ONLY one actually making money.  That was an educational time for me.  Biggest lesson learned: when you are rocking, everyone looks smart.  When you are dying, you quickly find the talent you really have.  At Clearpoint, the morons came out of the woodwork.

When it became apparent that Clearpoint could not survive, myself and a small pack of co-conspirators in our division decided that our business was smart, we were smart, and we should continue on doing what we were doing.  Someone had to fill the void our success at Clearpoint Storage created with some heavyweight mass distributors like Avnet, Wyle, and Pioneer.  Why not us?  So we made a few calls, laid out our plan, and put up another shingle.

Our effort was called Invincible Technologies Corp., or ITC.  Originally, it wasn’t out of arrogance, it was because the guy who ran/owned Clearpoint was named Vince.  Crafty, eh?  We grew into the name, at least for a while.

ITC:

At Clearpoint, my then mentor Tony Prigmore (who now really runs ESG) and I were one of the first groups on the planet to have offered a RAID storage system.  The marketing geniuses named it the Freedom Array.  You can imagine the conversation.  The point is, we were storage guys and we were early in a market that had all the right things going for it–it was a long term secular trend we were riding.  No one was going to ever need less storage, only more.

In 1993-1994, the “enterprise” storage business was just really starting.  Up until that point, people bought storage from the server company.  Storage was really just a “peripheral,” a component of a system.  Dick Egan, the E of EMC, taught the world that storage should be a separate and distinct decision.  Dick created a $25+ billion annual market.  Bless the man.

Dick and EMC focused on the mainframe.  Dick didn’t like competitors in volume, so he picked the biggest one on the planet knowing that if he could beat them, there would be no others.  He was right.

I didn’t like the mainframe.  I liked the new, cool stuff happening in the world: Open Systems (Unix, PCs, etc.).  Storage was run by grownups on the mainframe.  Storage was run by geeks and developers in open systems.

I was right about one thing at ITC: I knew that the distributed computing paradigm taking place had legs.  It was a long term secular trend in and of itself.  I certainly didn’t know how big it would get (it got pretty darned big), but I knew it was only going up and to the right.

Dave Hitz and I, unbeknownst to me–and certainly unbeknownst to NetApp–apparently came to the same conclusion around the same time: that decentralized computing was a good idea, but decentralized storage wasn’t (this is one of the very few times I was as smart as Dave, so I feel compelled to point it out).  If distributed computing was going to continue to evolve and grow, someone would have to solve the storage problem.  Why not us? I’m pretty sure Dave thought the same thing.

I started to hear rumblings about this Silicon Valley company that was building a “Toaster” (literally what they called it)–a purpose-built storage appliance that could centralize file storage and feed any Unix system that spoke NFS (which is all of them).  At the time, ITC was focused on the “block” storage world (what machines speak–humans speak “files”) in the new and exciting area of Storage Area Networks (SANs).

In what can only be described as classic east coast/west coast moronic ideological differences, here is how early NetApp compared to early ITC:

We both knew that the opportunity was to provide distributed computing environments with centralized, networked storage services.

NetApp was left coast: hippie, liberal, code-heads who couldn’t sell or market their way out of a paper bag.  They wore flip flops.  They called their product a “Toaster.”  What company in their right mind would put their most valuable assets on a toaster?  What happens when the toaster breaks?

ITC was east coast: tie-wearing serious business people.  Our systems were called the Ultimate series (block) and the Lifeline series (file).  Serious names.  Our stuff was fault-tolerant, mission critical–for serious data from serious companies.

NetApp built stuff for engineers.  ITC built stuff for IT departments.

NetApp stuff wasn’t sold so much as it was bought.  ITC stuff was sold.  ITC had sexy marketing and excellent sales people.  ITC was professional.

NetApp stuff worked.  ITC stuff didn’t.

NetApp went on to become one of the most successful companies in history.  ITC ran its course until 1999 and sold for peanuts to a hack company in southern California.  Within months, a team of 120 or so that took many years to assemble dissipated.

There are a hundred examples of mistakes I made during this ride, most of which have all been covered in this blog already.  At the end of the day, whether you do everything right or wrong, luck has a huge role in your outcome.  I don’t think NetApp could have been as successful today as it was then.  I don’t think the market would allow for even a perfect product to succeed without killer sales and marketing.  I think Dave would agree.

I can tell you that sooner or later, when all the glitz and glitter is lifted, your stuff has to actually work.  You can outsell your competitor in many cases on an individual basis, but you can’t ever reach scale if your stuff doesn’t work.

Having stuff that works AND sales/marketing excellence is now mandatory for true long-term success in the tech market today.  A lack of any one can kill you.

I have highlighted many of the mistakes companies make when on the journey to nirvana.  I should point out that NetApp didn’t make many of them.  Some of it was luck and some was skill, but all of it was because at their very core, they believed in sound principles.  They were and are a moraled, centered entity.  They believe their own bullshit where it matters most: their core principles. They made hard decisions–perhaps not all right, but always based on their principles.  They didn’t change their beliefs to suit the situation.  Too many companies do just that.

I had never met any of the NetApp people until I lost at ITC and founded ESG–which, to begin, was a “if you can’t beat em, talk about em” kind of company.  Since meeting that team over 10 years ago, I can honestly say that while I’m jealous, I’m a huge fan.  They deserved what they got; they are truly amazing people who took advantage of a truly amazing opportunity.  They are some of the smartest folks I’ve ever had the pleasure to know and I consider many of them actual friends (not just business pals).  I’m amazed at their humility and their decency.  I’m stunned at Dave’s insatiable quest for new insight and knowledge.

It doesn’t always happen, but in this case, the best man won, so to speak.

I’m always ranting about putting yourself into a position where there is a clear problem to be solved.  NetApp did that. They were engineers, they spoke geek, and they knew the problems of coders when it came to storage in a distributed environment.  I knew that IT would eventually have to deal with the problems that would eventually arise from this effort, but until then, I had to constantly point out a problem that was going to happen–not one that was happening currently.  NetApp focused on a real, definable, recognizable, and acknowledged problem.  NetApp won.  The fact that I was right–eventually–didn’t matter. I sent my troops on a mission that would have been brutal to win even if our stuff worked.  The best solution to a problem that isn’t yet really felt is hard.  A mediocre solution to a problem happening right now is perfect.  First guy with a fire hose wins the deal if the house is on fire–doesn’t matter if it’s the best fire hose.  And nobody cares whose hose is better when they aren’t on fire.

The moral? Intersect the long term secular trend with a legitimate solution to a legitimate problem that is only going to get worse–and tell EVERYONE exactly what you do.  If they have the problem, you’ve got the hose.  Don’t waste your time trying to talk people into buying your hose, just go find the next guy who is on fire.

Launching too soon for improper reasons is a symptom more often than a disease, but I think it’s important to grasp.  If you fix what causes the symptoms, perhaps you can avoid the disease.

The Issue:  Three wanna-be competitors have already launched, and your board is losing its mind telling you that you are late and life will end if you don’t get your launch out the door NOW!!!!

The Reality:  Saying nothing is almost always better than saying anything in a nascent, ill-defined market.  Being first, second, or ninth doesn’t matter in the long run.  Being right matters.  People who rush to launch tend to emphasize (or significantly overemphasize) the wonderment that they bring to the world–and rarely actually talk about the problem they solve.

“We are proud to be the first ever interplanetary replication solution!” is sure to be followed by company 2 saying, “Our replication technology is based on plutonium extract, by far the best way to replicate over lunar distances.  Unlike others in this market, we don’t skimp on quality” to be followed two months later by company C saying, “We are pleased to announce that Dell has OEM’ed our interplanetary replication solution.”

Who won the launch war? No one.  Why?  Because interplanetary replication is not a solution to a problem anyone actually has.

Remember StorageNetworks? They were first.  They even got public–but they couldn’t possibly sustain because they didn’t solve a legitimate problem.  The 87 others that came after them?  They died too–only with a fizzle instead of a bang.

It matters when big players in big markets announce things–they can create buzz, freeze a competitive buying cycle, and change the landscape.  Startups in new markets can’t.  Fact.

When a startup announces themselves or their great new stuff into a market that IS NOT READY FOR PRIME TIME (which means a market where the problem is not widely understood and accepted as such, and where that market is seeking solutions to that problem), all the startup is really doing is educating competitors and would-be competitors to their play–enabling said competitors to know how the company will position and thus enable them to build a story around why that company is flawed.

This is why I LOVE misdirection launches – a skill used by established companies often, but rarely with little guys.

We think we are launching because somehow if we are first, we win.  We don’t.  We think we launch because if we are fourth, we somehow lost.  We didn’t.  How do you win or lose in a market that doesn’t exist yet?

There are very valid reasons to “launch”–it’s just that few actually consider them.  For example, if you need to hire serious talent, it helps if you are creating company buzz in an exciting new market.  Note I didn’t say that you should tell the world what you are actually doing, only that you want to create some electricity about the company and the space such that hot shots will want to play with you.  You may need to raise money already, and in order to help your B round valuation, you want to create some of that buzz. I’m all for it.

These are VERY different reasons from why most launch.  Most launch because they think their press release and web site will stand on their own and customers by the thousands will make a pilgrimage to them to flood their bank accounts with dough. Users will beat down the doors to try to grasp the robe of the CEO who is there to save them from their plight.  Yeah, right.

If you are good, and first, the best you can hope for is that the media and VCs will take notice.  Some customers will come to you, and look around, but normally most will leave in short order because (again, if you are good) they will A: understand what you do and B: think “that’s cool” but not necessarily have a pressing need to solve whatever problem it is that you solve.  That’s if you are good.  Most are not good–most will talk about a problem that isn’t “real” yet, or a solution to a problem that few actually are deriving pain from (enough to act to stop that pain anyway).  Worse yet, most will make me scrub their site only to leave frustrated because I can’t tell what the hell the company actually does.

Many launches themselves will fail because the story they tell is based on what the market should do.  You should stop doing backup so stupidly.  You should stop buying 8X more expensive gear than you need.  You should have security.  People never actually do what they should do–they do what they know. They will hit themselves in the head with a hammer every day even though they know they shouldn’t–because, well, that’s the way we do things here.

You can’t talk about the “Cloud” and expect any success.  The market doesn’t know what it means, or what problem it solves.  The cloud is a negative, nebulous term.  Talk about the problem you solve and how you gain economic/geographic benefit by LEVERAGING the cloud.  Don’t talk about the cloud like it is somehow yours.  People don’t buy clouds.  They buy backup.  They buy Salesforce.com CRM.  They buy S3 from Amazon.  They don’t buy ANY of them because they are cloud.  They buy them because they suck at backup and don’t want to do it themselves.  They buy it because they want CRM but not the headaches or cost that goes with operating it themselves.  They buy it because Amazon charges them for exactly what they use, when they use it, and can spin it up in 30 seconds–and IT can’t.  That’s why they buy stuff–to solve actual problems.  No one buys it because it’s got a cool term.

When there is a LOT of buzz and noise about various plays in a nascent market, it’s actually worse to launch.  It’s most important that you spend your time figuring out what you really do–what problems you really solve–in HYPER-GRANULAR fashion, before you say anything.  Otherwise, you get associated with all the other noise, and collectively tend to stall the entire market–because no one cares about more noise, they care about less.

We launch to feel good about ourselves, not to help customers solve problems.  Don’t listen to your VCs when they yell at you for being late.  How can you be late to a non-existent party?

Spend all the money you were going to spend on your launch finding more betas and/or customers.  Listen to them.  Learn everything you can from them.  Then, and only then, should you launch.  Only when you have something to say that is worth the world hearing should you launch.  Nail the details, then launch.  Do that, and you can win.  Don’t and you are setting yourself up to be roadkill.

In summary – know exactly why you want to launch, what you want to gain, and ask yourself if the effort is worth it, or is it just to make you check a box.  My guess is once you figure out that all you are doing is educating your competition, you’ll see the light.

There are two monumental pitfalls that can kill a perfectly good company like no others: hiring the wrong person… and taking too long to do something about it.

As I’ve discussed in the past, hiring (not just the CEO) is probably the most important thing an entrepreneur or entire company can do.  It’s the one thing that can maximize your chance for success–or almost guarantee your failure.  Do it well and you develop the ability to weather many storms.  Do it poorly and you create storms where there needn’t be any.

Dan Warmenhoven, until recently the CEO of NetApp, told me that by far the most important management hire he made was his HR person.  He hired an HR person when the whole company only had a handful of people.  Most would think that crazy, but to paraphrase his logic, he felt like NetApp was going to grow and if that was true, they would have to hire a lot of people.  Hiring people isn’t hard; hiring people who fit and propagate your culture while growing is.

A company, over the long term,  is nothing but a collection of people with a common goal.  How that collection of people operates during good times and bad is what separates the killer companies from the hacks.

Think of it this way: Bill Belichick’s coaching philosophy is that management can’t win a game.  It can only assemble the right players and put them into the best position where they can win.  Management can look at all the contingencies, formulate strategies, try to anticipate competitive moves, etc., but sooner or later, the players have to play.

You can have the best game plan ever, but if your quarterback sucks, it won’t matter.  You can have a mediocre game plan and if Drew Brees is your quarterback, you can still kick ass.

Staying on sports metaphors for a moment, how many teams that are great on paper end up stinking up the joint because of “personalities”?  Happens all the time.  It’s hard to combine talent and ego and come out with a winner.

Most companies hire when they “need” a function fulfilled.  They then end up spending most of the time “selling” once they think they have the right person.  Companies that are really good at hiring people do the opposite: they expose themselves.

If I am selling my company, myself, my open position, etc., to you, then the odds are I’m leaving myself open to failure.  Selling isn’t real.  Telling is real.  What I mean is that it is in your best interest to expose your beliefs, philosophies, and requirements to those you want to hire.  Sometimes, that seems hard or too candid.  You might be afraid that you will scare away a fantastic prospect.

The reality is that if you scare them away after exposing your belief systems, you won.  If you were honest about those beliefs, it would have become a problem sooner or later, so you are always best off getting it over with without the collateral damage.

You can’t tell people what to believe.  They believe what they believe.  You can tell people what you believe. You can tell–and show–people how you will act, what expectations you will have, how you will behave.  You can let them know what is important to you and what is not. By doing so, people that work with you know–and that is far more important than those in the hiring phase tend to realize.  Surprises are the problem–on both sides.

Start by actually understanding your own corporate belief systems; they should be few and simple.  At ESG, we won’t work with people we don’t like or respect.  We just won’t.  We fire customers (thankfully, not too many!)–because we can.  You might believe that everyone should work 90 hours per week.  It would be disingenuous, if not stupid, to omit telling a prospective employee that.  They might be the greatest whatever in history, but they will disappoint if they only work 55 hours.  I tell people that the single biggest disappointment they could ever cause is if they made a family decision secondary to a work decision.  Screw up a deal and you can fix it.  Miss a little league game and you’ll never get it back.  Granted, my life is not “normal” in business or otherwise, but you get the point.  You need to share what is important to you.  I have people that work 90 hours a week not because that is important to me, but because it is important to them. As long as it is their belief system at play, and as long as they are not working that hard in lieu of their family, all is o.k.  They know that they will never get on my bad side for overworking–only for underperforming where it really matters.

By exposing what you think or believe in strongly, you are allowing the prospective employee into your world so that THEY can decide if YOU are the kind of company or person they want to work for.  Given enough information, people will almost always make the right choice–presuming they have no dark, ulterior motive.

I can tell you that, from in my limited personal experience, the more open you are early, the less you have to apologize for later.  Every company will go through trying times eventually.  Best to have people who already know what to expect from you when it happens.

Hiring is like getting married; you really want to do all you can to get it right because the breakup can be a nightmare.

I’m old enough to remember when the SysAdmin was king of the hill–the ultimate decision maker on all things IT.  I’m not yet senile enough to have forgotten that it was only a few years ago when the SysAdmin was relegated to semi-second class citizen behind the mega-focused whiz kids who became storage gods or network gurus or (gasp) DBAs.  For a while there, it looked like the SysAdmin would have to grin and take all the shit that came at them, lest they get tossed to the curb.

But now everything is changing again and it’s coming right back to where it was.  By becoming the Virtual Administrator–those in control of the mighty virtualization knowledge and skills–the SysAdmins have put themselves right back into the catbird seat (no idea what that means, but I’ve always wanted to use it in a sentence).

As VMware goes, so goes the Virtual Administrator!  As VMware sucks up control points from all over the data center, it consolidates those controls back to the Virtual Administrator.

The VA shall all be called “Dave” in deference to “2001: A Space Odyssey.”  Dave is the VA.  King of the hill.  Dave has all the sex appeal (well, whatever sex appeal exists at the top of the IT food chain) and juice in the organization.  You storage guys still think you are hot stuff?  Think again.  If VMware has its way, you will be marginalized like that guy in Office Space–until you are just a geek in the supply closet.  Think you are stuff because you know networking?  VMware wants to eat that function and spit it out–through Dave.

I’m not saying it’s right, but whew, you can see it coming, can’t you?

Cisco developed its own customer base by creating the CCNE.  CCNEs were the coolest–and Cisco made them so.  Why?  Because once they were created and trained in the Cisco army, whose arms did they chose to fight with?  Cisco’s!!  VMware is doing the exact same thing:  being the Virtual Admin right now is being at the top of the free agent market.  Your stock will never be higher.  Who ultimately benefits?  VMware.  Brilliant, really.

There will be another wave with VDI and it might not be VMware (or it might, too soon to call)–and that will offer the same sort of value proposition to SysAdmins. But for now, VMware is king.

If you aren’t on the Virtual Admin wave, get on it. All the cool kids are doing it.

Plus, you can give yourself a good looking avatar.  Chicks dig avatars, I’m told …

Not knowing who they are is a fatal mistake–and one that happens far too often.

You want to get an OEM deal, a reseller agreement, or a strategic investment done?  If you don’t know who the silent killers are, you are setting yourself up for pain.

Every  major company has them.  It’s up to you to find out who they are.  People spend too much time on the people who can say “yes” instead of finding the ones who can say “no.”  “Yes people” are easy to spot; they are important and outspoken and “do deals.”  “No people” can be harder to find.

Silent killers can be enormously valuable inside a company–and enormously problematic for you.  They can be the keepers of the corporate code or total psychotic demons.  They have power and that power can be used for good or evil.  Under-appreciating that power is a mistake.

At EMC, I spent years in meetings with the NAS team talking about all sorts of things, many times arguing about others that I felt did things better.  Nothing ever happened.  Why?  Because, I finally figured out, the silent killer in that group was keeping it from happening.  Percy is not a name one might normally associate with an assassin, but he was lethal just the same.

Dell has Steve Luning, a super nice, unassuming, hyper-bright guy.  You would definitely invite Steve to your weekend cookout. He could, however, kill a deal between bites of a burger.

I believe that if a company empowers too many, or too evil, silent killers, it says something: namely, that the company is going to have to make radical changes or it will die.

DEC had TONS of not-invented-here silent killers.  So did Prime and Wang.  Data General had too many as well.  Even the brilliant CLARiiON team was stacked with them.  I wouldn’t be in business today if it weren’t for the opportunity afforded me long ago to take on these killers.

HP has a thousand of them.  More than can be identified.  Too many, in my opinion.  I’d like to see that become more balanced.

An imbalance of killers to creative deal doers is bad for a company in the same way that too many creative deal doers vs. killers will lead to an ADD infested organization. Yin and Yang.  Too much Yin is bad.  Need a little Yang.

All companies have killers–even yours.  Most of the time, a good silent killer will keep the company honest by making sure it is keeping IP in the family where it can be trusted.  Sometimes, the silent killer is too self-focused and kills just to make themselves feel important.  Either way, you end up dead.

M&A folks and product/tech folks in the big companies are hit on constantly.  They have every Tom, Dick, and Mary with a gizmo or a line of code trying to convince them that without Spaz, Inc.’s stuff, they will go out of business.  Without some of these killers, OEMs would die.  Killers keep focus.

The key is to discover these people and make sure you uncover their agenda upfront. If you wait, you’ll end up surprised and not the kind of surprise you like.  Yin and Yang.  You need to pay attention to both.

UPDATE: To be clear – I think the role as the silent killer is necessary and beneficial to the OEM/Big Dude, less they lose control of themselves.  Percy and Steve are the necessary voice of reason, less every crazy idea tossed at the company be engaged.  This issue I’m trying to stress is that wanna-be players tend to focus only on satisfying/selling to the “yes” folk, and not enough time understanding the “no” folk.  EMC and Dell are examples where there is balance.  DEC was an example where there was not.

Plus, I don’t want Percy nor Steve mad at me.  They are killers, after all.

Jacques is not going to be of any help anymore.  In fact, he is going to be a nightmare for all concerned from now on.  The best case here is that Big VC buys out Le Douche for pennies on the dollar–which is good for Big VC, but bad for you.  Your valuation just plummeted and Big VC just bought a ton of you for nothing.  He now owns you lock stock and barrel.  Your well-laid plan is in the crapper.

Moral:  Don’t do deals with Jacques Le Douche.  If you are going to take professional money, take professional money. Amateurs may seem “cheaper,” but they aren’t.  Saving 10% equity up front is meaningless in the prior example.  You are going to end up giving a huge percentage of your company away eventually if you take the traditional VC route–assume at LEAST 75%–so unless you feel you will only truly need an A round, don’t screw around.  A real VC will tell you right to your face that their goal is to A: help you become successful, and B: make sure they own as much of you as they can when that happens.

There is a little known, seldom discussed “code” amongst many VCs that you need to know about because it can be lethal.  It won’t show up on any presentations or web sites. It is one of those unwritten rules in life that will come up at exactly the wrong time and bite you right in the backside.

The rule, in short, is that a VC will walk away from an investment (letting you die) rather than wash out (or cram down) a co-VC investor who can’t make the vig. (Mafia terminology used intentionally–this “thing” of ours… )

Know this: it is ENORMOUSLY important that you take money from as few, and as deep pocketed, VCs as you can.  One crappy VC can wreck your whole day.  The fewer VCs you have to deal with, the better.  You are better off with ONE marginal VC than one marginal and one great.

Many startups make the mistake of thinking that getting a consortium of VCs early is somehow a good idea–perhaps a larger validation of their brilliant idea.  It isn’t.  Bringing a VC into the fold is like getting married in Massachusetts: even when you are divorced and no longer getting any pleasure from the relationship, it still goes on.  Once you are married, you are married forever.  Your B round wedding makes you feel young again–the new girl digs you and talks dirty.  The A wife is a pain in the ass by now and hates you.  Mostly, you ignore each other.  The B round love dissipates eventually and now you have two wives who have much more important things to do than deal with your petty issues.  If you are doing well, you’ll find a midlife crisis trophy wife in your C round.  You’ll follow her around like a lapdog.  But if you suddenly find yourself doing less than stellar, and in need of money, bad things can (and normally will) happen.

For some reason, same as the ex-wife theory, VCs will do things that defy all logic and reason when one of them gets in trouble.  If wife A finds herself in hot water and can’t keep up her part of the funding exercise, wives B & C may very well walk away from you altogether–even though they have piles of money left in their funds.  Why?  Because for some inane reason, they feel that while your deal may go away, there will be other possible deals between wives A, B, & C.  They would rather write off the $12M clams they gave you than “insult” wife A.  It’s beyond stupid, but it happens.

Because wife A became a raging boozehound and lost all her money, wives B & C feel it’s best to walk away rather add to wife A’s problems by washing her out of the deal–which they could do easily, with little money, and take more of the company.  As a limited partner, you would shoot people for making those decisions, but alas, they are made daily.  It doesn’t even matter that wife A is the former partner of Jacques Le Douche and may never make another investment outside of a bar room in Nice.

VCs are pack animals in general.  When one smells blood, the others will come running.  When one market or company gets hot, you can watch the deals go down.  VCs don’t want to miss anything, so they would rather invest in a PowerPoint slide than have to tell their partners they had no play in the online dog food market.  Makes me nuts.

Now, while it appears that I am trashing all VCs, I am not.  Tier 1 VCs didn’t ALL get there by being lucky or going to Yale–although if your VC has a blue blazer and $4,000 Italian leather shoes, run.  Truly successful VCs that stand the test of time are legitimately smart and, of course, lucky.  I believe that you make your own luck to some degree–you have to be in the right games at least.  Good VCs almost never miss a legitimate trend.  They make plays in the right spaces most of the time and bet on companies that at least have SOMETHING.  Crappy VCs are true lemmings and are dangerous.

The best VCs hit some small percentage of the time and will be the first to tell you that no matter what, it is a numbers game.  Good VCs know that numbers game–but not your business.  They know business–but not your technology.  They are generalists who try not to be specialists outside of their domain; they let you do that.  Bad VCs panic and tell you how to run your company even though they got their degree before they started (Dad’s checkbook) and haven’t ever held an actual job.

The final moral to the story is pick your wives well: you’ll be with them forever, like it or not.

VCs avoid risk by volume.  They throw so much shit against the wall that statistically (at least pre-2000), they will come out ahead.  A serious study would most likely find that once you remove the top 10% of all VC firms, the remaining 90% would fare no better than if decisions were based on a monkey picking names out of a hat.  It’s a numbers game.

The point to this specific chapter is simple: very few startups really understand the way business finance works until it is too late – and that can be a killer.

I took financial accounting at least 3 times in college, and finance at least a few more.  I had zero interest, smoked too much pot, played the guitar and chased girls.  Accounting and finance were on the list well below frisbee golf.  As a grown up, I had to learn the hard way.

• Fact 1:  No matter how brilliant, creative, and blessed with talent you are, all meaningful transactions that occur in the life of your business will be most affected by the decisions you have made regarding how you have financed the business.
• Fact 2:  No matter how much you think you know about business finance, you are woefully uneducated.
• Fact 3: You will regret at least one major financing decision even if you hit a mongo home run.
• Fact 4:  Most of the mistakes you will make will happen earlier on in your business’ lifecycle.

The first thing a fledgling entrepreneur needs to learn is how the game is played.  You think you know, but you don’t.  First you go to friends and family (angels), then you go to VCs, then you go to investment bankers (IPO or Sale).  Simple.

The devil is in the details, my friends.  You need to master your knowledge of how the game is played (vs. how it should be played) at each level.  You need to understand that each player has very distinct motivations – that are not the same.  ”Making money on my investment” is a given motivation – it’s the subtext that will run you over.

You need to know that once someone gives you money, no matter how much they love you, it just became a business.  Your grandmother will sue your ass as fast as she’ll whip up a bundt cake once it becomes business.  VCs love you during courtship, but some other stupid bet that ruins their portfolio can and will have a huge set of ramifications for you potentially.  Don’t even get me started on investment banks.  Too soon for that.

Important Tip #1: Treat angels as a class – not as individuals.  Trust me on this – you will lose your mind having to herd up 17 little investors later on.  You’ll thank me when you aren’t sweating over closing a $12M round that you can’t do because no one can find Uncle Harold in Boca Raton, or your wife’s brother-in-law Chuck has just a few more questions he wants answered first since he invested $1,000 three years ago.

Understand how a VC “system” operates.  I’ll give you the highlights:

1. A VC has piles of money that it gets from other investment vehicles (retirement/pension funds, college endowment funds, etc.).  Because it has piles of money, it thinks it is smart.  This is not necessarily true.  Do NOT equate piles of money with intelligence or the ability to help.
2. VC funding happens in “series” format.  Series A is your first “professional” round of funding.  Normally one VC would do the series A, although the “lemming runs” of the 90′s have created many dual-VC partnerships, so we see a lot of dual VC A rounds now.  I HIGHLY advise against having more than one A VC, and I strongly advise getting the biggest VC you can for your A round.  More on little VCs later.  The A round sets your valuation – what the VC has agreed you are worth.  This is important.  It will decide how much of your company you will own now – and that ownership percentage can only go one way from now on – down.
3. VCs like some other VC to “lead” the subsequent rounds.  It makes little sense financially to do this, but that’s what they do.  They want someone else to agree that you are worthwhile investing in, probably to make them feel better about themselves.  A new lead will come in and determine the value of the company for the B round.  The initial VC will maintain their right to buy in “pro rata” – i.e., to hold the same percentage ownership.

This is an important concept – because the B round now trumps the A round.

Example: Let’s say you held 50% of the ownership of the company after the A closed (a.k.a. “post money”) and the VC owned the other 50%, based on a post money valuation of $10M.  That means the VC gave you $5M in the A round for 50% of your baby.

In the B round, VC2 leads a $12.5M round with a $25M post money valuation.  That means the B now owns 50% of the company – and the previous ownership has been reduced by 1/2.  You now own 25% of the company, VC1 owns 25% of the company, and VC2 owns 50%. (VC1 would have kept their pro rata investment up, so in reality you would own less than 25% and they would own more).

In the C round, the same thing happens.  VC3 leads a $50M round with a $100M valuation – so they now own 50%, and the previous structure gets compressed 50%.  You now own 12.5%, VC1 owns 12.5%, VC2 owns 25%, and VC3 owns 50%.

The numbers are nicely rounded off here to make it easier to follow, but hopefully you get the drift.

Things get very bad when you need to “cram down” – when you need to raise money and your valuation is flat or negative.  Let’s say the world ends, and you need to raise a series D at a negative valuation.  You aren’t generating incremental value, you are only diluting the previous shareholders (including yourself).  Messy and ugly.  Uncle Harold will be calling when he finds out that his 10% ownership is now zip.

Then there are lots of other little details to worry about, like preferences.  You own common stock.  VCs own preferred stock. They prefer to have all the control and none of the risk. They take their money out before anyone else.  Last one in has the highest preference.

This is why, in great billion dollar successful exits, you hear how the VCs took 85% of the dough, the CEO took 5%, the Founders took 5% and the rest of the 387 employees split 5%.

This is why in low exits the VCs get their money back, and you get the satisfaction of knowing you were “this close” to hitting it big.

Valuation matters.  A lot.

When you dance with a VC, you are picking a mail order bride.  They may look good on the website, but you don’t really know what kind of crazy you are getting.  Do your homework.  VCs tend to operate in one of three ways:

1. Money only – they don’t think they are smarter than you, only more experienced.  They will try to help if asked but won’t inflict themselves on you where inappropriate.  This is the best, and rarest, of all VCs.  They also don’t “need” other VCs per se.
2. BFFs – these VCs love you, they tell their friends how great you are, they introduce you to people at VC parties.  Then you or one of their other high profile bets craps out in a quarter and they panic and start pressuring you to react wildly.  They will be the first to “suggest” that you become CTO and bring in an outside CEO (who will mostly likely be far worse than you).
3. “Active” – these like to “monday morning quarterback” all week long.  You’ll spend way too much time dealing with their inane ideas rather than managing your business.  These are the most dangerous of all VCs.

There is a price to pay for everything – it’s worth all the time you spend doing your homework and making yourself smart about areas you don’t understand as well.  Go have lunch with a VC that you AREN’T pitching – and try to understand why they do what they do.

In the world of the “analyst,” reality often takes a back seat.  Even the best theoretical mind can get wrapped around the axle over something that ends up having little or no bearing on the real problems of the real world of IT.  Mr. O’Donnell never let me forget that.

When Steve joined ESG a bit over a year ago, I was thrilled.  I always want our team grounded with that innate sense of reality that comes with the ability to check yourself in the mirror, as it were.  Steve brings that real world CIO perspective better than anyone I’ve ever known because he’s lived in that world–where big money and big decisions lead to big problems and (hopefully) big successes.  Steve can smell a rat.  He walks the walk.

Over the course of the last year, Steve helped little old ESG build up a substantial, meaningful presence in EMEA and, perhaps most importantly, helped us build relationships with a stable of very senior, very smart IT professionals.  We count on those relationships every day to sanity check our work and thoughts.  It’s invaluable, it turns out, to be able to bounce ideas off players in the market you serve.  How crazy.

Our vendor clients who have been fortunate enough to spend any time with Steve know how valuable that real business perspective from a real senior IT pro is.  Thankfully, we’ve been able to capture and compartmentalize a lot of his brain.

Steve is going to undertake an enormous role with the Qatar Foundation, heading the buildout and management of the largest cloud services operation in the Middle East and North Africa.  He’ll be responsible for bazillions of dollars of IT investment and strategy. Since that will most likely require his full time attention, I’m afraid to say he won’t be available to ESG clients for a bit (unless you’d like to fork up a billion or two–then we can talk).

The good news for all you real IT types is that we’re going to be creating the first ever IT reality show.  We’ll develop a video diary, ideally to air weekly, where Steve will discuss various stages of the project, what nightmares he encountered, what challenges he faces, and we can track his progress along the way.  Done right, this can be an enormous learning experience for all in our industry.  This is an inside view of the trials and tribulations of a massive cloud IT project and, while I don’t know what is to come of it, I’m sure it’s going to be interesting.

Steve will continue to post on The Hot Aisle and will pop up here and there with his ESG hat on–and when he does, you should pay attention.  It’s proven to be a bad idea not to!

More to follow.

It is, in essence, the company that mastered logistics so that manufacturers didn’t have to.  Avnet has been great at it.  I remember dealing with them early in my career at a little memory company called Clearpoint.  They sold a lot of DEC memory for us.  I remember a lot of cocktails in Tempe, AZ (home of the Gin Blossoms) at various Avnet events.

When I started my next gig, ITC, Avnet was effectively our funding source.  I had started up a storage gig inside Clearpoint that was going gangbusters and Avnet was hooked.  When Clearpoint crapped out, Avnet agreed to give ITC credit to buy the components necessary to fulfill the orders its VARs were placing. Then we’d ship them product and hand over our orders right back to them–with us keeping the profit.  It worked great, except since our sales continuously grew, the profit never found its way back to us and instead stayed in the form of an increased line of credit on the materials we bought.  It all worked out.  It was quite creative, actually, and helped us avoid having to raise outside money for a while.

Anyhow, there used to be a ton of big distributors, but they don’t seem to be around anymore–besides Avnet.  Bell was a $3B giant, but just agreed to get purchased by Avnet for only $250M or so (net of debt).  That’s one small multiple, which tells me you probably don’t want to be in the distribution business.  Any business that requires outrageous capital, offers huge risk, and only has a shot of giving back fractions of a penny on revenue ain’t a business for me.  If I’m gonna swim with the sharks, I at least want a chance to come out fabulously rich for my efforts.

EqualLogic had $70M in revenue and sold for $1.3B.  That’s the kind of multiple we like.  The reverse sort of sucks.

In many ways, the distribution game has changed such that it seems impossible for anyone to get in at this point. It takes so much money and expertise to build up logistics and inventory management systems–who could possibly enter and make a run at it?

This begs the question, what happens when there is only one left?  I guess it’s not really a threat economically–the manufacturers really control the pricing, so I’m not sure if there really is any harm unless the distributor doesn’t stock enough stuff, but that issue exists anyway.  Will anyone care if Avnet is the only guy standing?  Anyone?

First, realize that 99.9% of the people in the organization you are trying solicit money from do not care in the slightest that your gizmo has 11 nanospazzes versus the competition’s 8 nanospazzes.  Second, realize that anyone in the client organization that actually does care about your nanospaz advantage is most likely NOT a true power broker in the overall context of the business.

Side Joke:  Q: What’s the difference between an introverted geek and an extroverted geek?  A:  The extroverted geek stares at your shoes when he speaks.

I know that we like to get all fired up around infrastructure issues like disk arrays and servers, but we need to remember that by the time we’re engaged in those dog fights, the real money decisions have already been made.

If you want to affect the outcome of those decisions, you need to intersect the process at a higher (sooner) level of the value chain process.  If you wait until all the good decisions have been made, you end up in the basement arguing fitzer valve specifications with someone who can’t talk to women without getting hives.  Bad place to be.

The real cost hierarchy for any business application over its life is as follows:

1. Licensing – this is why Oracle is king of the world.
2. People – developing, implementing, and supporting – opex.
3. Energy – the cost of powering and cooling the crap that runs the app.
4. The crap – capex.

Crap is a big business, no doubt – but it’s the lowest overall cost in the life of the app, and rightfully gets the lowest amount of attention from the business.

It costs more to power and cool the crap than to buy the crap.  Therefore, instead of arguing “my nanospaz is bigger than yours” or “my nanospaz is 16% cheaper than yours”,  you should be saying “my nanospaz technology will consume 43% less energy over its lifetime, which will equate to a savings of one billion dollars.”

Why?  Because the higher you go on the true cost hierarchy the more senior business people (read: the more people who can actually speak to women without emitting random squeaks) are likely to be involved – and the business is more likely to be affected by the decisions.

“Business people” does NOT necessarily mean Sr. IT people.  Might mean the people that actually are the true decision makers – the Marketing dude buys CRM and Business Intelligence stuff, not IT.  The Facilities dude cares about power and energy, not necessarily the IT folk. Legal buys e-discovery stuff, not IT normally.  IT makes it work – often after the higher level decisions are made.  I not saying it’s right, only that it’s true.

Further, the higher up the stack my IT friends can learn to intersect these discussions internally, the better for all concerned. Since IT will inherit the “make it work” aspect of the decisions anyway, you might as well try to prevent the outrageously silly aspects of those decisions from happening early rather than later.  In this way, you won’t get the mandate sent down that one of the core requirements of this new application is “interplanetary replication.”  Nipping that one in the bud early will benefit all concerned.

Discuss.

To this day, I still impart the lessons learned from the Trojan Horse Strategy perfected by Veritas with its volume manager: get yourself embedded in a customer, become their “knob of choice” for some function, and you’ll sit pretty as long as that function is necessary.  NetBackup might have made the big money at Veritas, but the VM made it all possible.

Yesterday, Symantec canned 600 or so VxFS (file system,which rode on the coattails of the volume manager and was how the company first made piles of dough), VxVM, and VCS (Cluster Server) developers and engineers.  This is a signal that those markets, now 20 plus years old, are finally in maintenance mode and those services are to most likely be off-shored so the company can milk whatever profits are left from the dwindling install base.  While acts like this are always sad, it was inevitable.  You had a run for the ages my friends, hold your heads high.  You were part of some of the most successful–nay, most important–products ever to grace this business.  Everything has to end sooner or later.

I don’t think the cuts were directly around Netbackup or Backup Exec–both remain continuous cash cows for Symantec. While both will also run their courses eventually, they still are dominant forces and people still spend lots of dough on them every year, so this part of the Veritas legacy will continue for the forseeable future.

The file system got most of the techno savvy accolades coming out of Veritas, but the Volume Manager was the total package–technology, brilliant business execution, and the perfect seed strategy for all else to come.  It was the perfect sticky knob that customers learned to know and love in all of their operating environments.

You young wannabes should go to school on the Veritas story and specifically on VxVM.  It is absolutely valid from a business planning/GTM perceptive today–and will be in the future.

—UPDATE:

Seems I’ve caused a shi#storm over this, which for a change, wasn’t my intent.  While I don’t know the real number, SYMC says no way is it 600 and no way are they even remotely all from those groups.  There are definetely swelling ranks amongst the Veritas Alumni clubs (yahoo, for example) which lends credence to the fact that folks are getting cut – but who knows if this is anything more than normal business.  EMC trims the bottom off every quarter, and has for decades, this could be nothing more than normal grooming.

Having said that, there have been quite a few folks who have been canned that came out of these groups, but until we hear something official from SYMC it’s just speculation as to what the real deal, if any, there is.  I am not attempting to create a story where none exists.  I was just reminiscing about a set of products that meant a lot to my career, and to a lot of others, possibly coming to an end – and making me feel old.

I’ll post more commentary as I find things noteworthy.

UPDATE AGAIN: Seems the number is closer to 140-150 as far as I can tell.  Like most things in this market, it was 75% bullshit.  Not that I’m happy that 150 people got shot, but if you look at the number as a percentage of the SYMC workforce, this isn’t out of the ordinary.  In contrast to IBM last quarter, this is a rounding error.  HP loses more people to retirement than this. EMC fires this many people for sport. (kidding, mostly).

So, the emotions ran high, and while even if it were 600 my position would remain the same, unless there is something else coming, this issue seems to be closed.  Next up……

Worse, many companies believe that because they are on “Select,”  EMC sales reps and partners are going to go wild selling their products.

Alas, it is not so, my friends.  The myth is significantly greater than the reality, which is:

• EMC reps and partners are not going to beat down the doors to tell the world about your magical product.  They aren’t going to tell anyone actually.  What they are going to do is allow you to generate demand for your own products, and not get in the way (as much), and if you can get the deal, they will be happy to take it from you (and the associated margin that goes along with it).
• Select allows EMC customers to buy from EMC – even when it’s not EMC products.  That’s where you come in.  It’s a convenience to EMC customers, and you are the ones who pay (via margin) for that convenience.  It’s good for you, don’t get me wrong, because many customers don’t want to buy from you, but they will buy from EMC.

As long as you know what is real when heading into a Select agreement, then you’ll be fine.  If you have delusions of grandeur (at least 80% of the time this is the case), you will be vastly disappointed.  Yes, your gear will be on the Select price book.  Yes the EMC sales machine will have access to it, but no, they will not go out of their way to stimulate demand.  It’s naive to think so.  They sell EMC stuff, not yours.  They have huge numbers, so don’t believe for a minute that they will get all frothy about the prospect of selling your $7,000 gizmo.   If your stuff is required for them to sell EMC stuff, good for you.  They will do the right thing most of the time, but these deals -like life in general – are done via individual relationships in the street – not by corporate blessing.

QLogic announced a Select deal today, which got me thinking about this.  Q got its switches put on Select.  Q is a big player. Q now has such deals with EMC and HP.  Is this good for Q?  Of course it is.  There is no downside.  Does it mean EMC and HP will drop everything to push Q switches?  Of course not.  But it lets Q get into the game and drops barriers.  Ideally, for all involved, Select deals will lead to OEM deals – those have more teeth and and much higher levels of commitment.  EMC (or HP or IBM, etc.) have to spend real time and money to do OEM deals, and are much more likely to “push” the result to the market. Thus, companies should view Select as one barrier dropped along the path to bigger and better things – but not nirvana by itself.

The link is a Cisco person’s argument as to why the test plan was flawed and thus the results questionable.  He is 100% correct – not necessarily that the plan is flawed (although his argument seems valid to me), but regardless, the results are questionable.  I’m not bashing Tolly, I’m bashing head to head testing in general.

This is exactly why unless an IT pro is going to do their own evaluations/comparisons in their own environment with their own workloads, head to head “3rd party” testing is at best a starting point and unfortunately, at worst, deceptive.

Disclaimer: I am 100% biased.  ESG Lab does testing better than anyone on the planet – but we don’t do head to head.

The reason head to head testing is crap is simple;  unless you get both vendors to agree 100% to the test plan, and more importantly, the interpretation of the results and the analysis of the meaning, you always get the same responses:  The test plan is flawed, the configuration is wrong, the doohickey was set too low, this is not real world……..

And those responses are correct.

Commercial:  ESG Lab doesn’t do head to head comparisons.  Why?  Because we are practical (read: not idiots).  It’s fairly easy to find fault in ANY product or technology somehow.  As soon as you find the 100% perfect product, let me know.  It’s fairly hard to find out exactly what DOES WORK exactly as advertised – and then to provide analysis on where that functionality will be most applicable in a real environment.  As a matter of fact, it’s brutally difficult sometimes.

We know that independent testing is not the end, it’s the beginning of a process for an IT pro.  Our goal is to provide inarguable data on what a gizmo really does or does not do – and help apply that to the real world.  We don’t expect anyone to read an ESG Lab report and immediately go buy whatever the product is, but we know empirically that ESG Lab reports shorten decision cycles for those who read them.  They are not designed to be vendor collateral, yet some of the biggest brands in the biz find they are often the most downloaded pieces they have.  Why?  Because IT folk prefer fact to crap (that’s just a guess).

When you don’t do head to head comparisons, you don’t need to lie, cheat, or steal.  You need to make sure that what you print is 100% accurate and completely factual.  If an ESG Lab report says something, you can take it to the bank.

In the early days of ESG Lab, whenever we would test a product, the competing engineering squads from other companies would call up ESG VP Brian Garrett and challenge every finding.  Brian is so good (15 patents and perhaps the best testing brain in the business, IMHO), that after a few months, no one called anymore.  If it says it, it is fact.  It’s not to say it is perfect, but it’s about as close to gospel as you can get.  If it turns out we were ever wrong – we correct it.  Thankfully I think that’s happened twice in over 150 reports, and those were many years ago.  Now the most read things ESG produces are Lab reports.  Do you think anyone gets acquired in this space without one?  Does an OEM deal happen without the CTO and Engineering leads reading up on the company product in a Lab report?  I doubt it.

The problem with head to head comparisons is that you always leave room for the “loser” or the reader to question the realities, which at the end of the day, defeats the whole purpose, in my opinion.  What’s that, you ask?  Do we take money to test stuff?  You bet we do.  A lot actually.  I think we’re still the most expensive in the industry (but as my grandmother used to say, tough teats, you want the best, you pay for the best, you want crap, buy crap).  We get paid to find and prove validity within a product/technology – and tell you why it matters.  We don’t tell you product A is better than product B – we give you the information you need to make that comparison yourself.  We give you facts.  You can buy a b.s. report from any clown with a logo and Iometer, but I challenge you to find a legitimate return on that investment, even if it were a buck.  Crap reports devalue brands.  It tells a buyer that you actually believe they are morons.  Buyers don’t like that normally (unless, of course, they are morons).

You don’t hear EMC saying we were wrong in a report on HDS, or NetApp, or IBM – and vice versa.  ESG Lab is the gold standard for most in this business – and the reason is specifically that we don’t do head to head comparisons.  We’d make way more money if we did, but then we’d be guilty of the same things.  We get asked all the time, and our answer is simple:  as long as the other vendor is an active participant and we can all agree on the test plan, bring it on.  Surprisingly, that has yet to happen.

Now, throw your darts.

Startups are started for a reason – they have a mission.  (At least normally, anyway.  Wildly successful Riverbed had some thoughts, but no substantive idea initially.  They didn’t know what problem they were going to solve, only that they knew they wanted to solve one.)  They get funded based on that mission, and start the ball rolling towards executing on that mission.

There are two things that tend to happen to almost every company on a “mission”:

First, the company develops a planned “solution” necessary to fulfill the mission.  They more often than not spend far too little time validating that the mission deserves to be executed at all, instead taking what they “know” as gospel and moving full steam ahead. They don’t bother spending the time nor money to truly investigate the legitimacy of the PROBLEM that their mission intends on solving, and instead move right to step 2: building the solution.  In many cases, the next 18 months of the company’s chaotic life will be in support of creating and marketing a solution to a problem that turns out to have never existed, or no longer exists as it once did.

Then secondly, the company goes looking for a problem that fits their solution.

It’s really hard to create a problem.  It’s even harder to create a problem that fits nicely with a solution you happen to have.

Here is how a proper market looks:

A:  There is a “legitimate” problem.  I define legitimate as a problem that people/companies will be willing to pay money to solve – or to alter their behavior patterns in order to solve it.  In other words, a legitimate problem is one that causes the market enough pain to make them do something differently.  You must remember, markets will almost never move en masse to a solution willingly – or because it’s the “right” thing to do.  They will only do so when they have no other choice.  Nice to have versus need to have.  People are lazy creatures of habit.  The devil we know is better than the one we don’t.  I estimate that less than 5% of any industrial/technology market buyers act within the same 24 months as the “hype” peak of that market.  In IT, most of the world does things the same way it did 20 years ago.

B: The problem is ubiquitous.  It is not limited to a small niche.

C:  The problem is going to get worse naturally.  You don’t have to create or exacerbate the problem, you just need to intersect it. For example, in IT there are a ton of problems that are exacerbated by data growth.  If you can’t fit your data on what you have today, you need to do something differently.  If you know that there will be more data to contend with tomorrow, then whatever problem you were dealing with yesterday will only get worse.  You don’t have to be the one who creates the data growth problem, you need to intersect that problem with your solution to that worsening problem.

This is what we refer to as a long term secular trend.  Problems that can only get worse over time create opportunities for “hyper-markets.”  VMware intersected a hyper-market.  Data Domain intersected a hyper-market.  Microsoft intersected a hyper-market.  Cisco intersected a hyper-market.  NetApp intersected a hyper-market.

Apple created a hyper-market.  Much rarer, much harder.  Same result.

Hyper-markets are startup nirvana.  Why?  Because he who is in position and intersects a long term secular problematic trend that turns into a hyper-market first – wins.  The first guy – not necessarily the best guy – takes home the prizes – and no one, no matter how much better they are, will ever take away those prizes until the market itself has dried up or marginalized/commoditized itself.

Companies spend too much time focusing on the solution without fully vetting out the problem.  Is it legitimate?  Does it have the opportunity to become a hyper-market?  What would have to happen in order for it to become one?

Without the advent and adoption of the PC/Workstation way back when, there was nothing to network, and thus if it never happened, Cisco would have dominated the router market of approximately 12.  Because it did happen, without their involvement, they were in the right place at the right time with the right solution – and intersected that market as it exploded. They have never looked back.  Microsoft was an enabler for Cisco, not that Microsoft cared about networking at the time. Networking’s success created/exposed a new long-term secular trend in backup/recovery.  No one had ever thought about backing up a million little machines connected to a network because there was no such thing.  Since networking and PC/Workstation (distributed computing) markets appeared to not be a fad, then clearly the network backup market wasn’t going to be a fad either.

We never know how big a hyper-market can be, but we should be able to spot the genesis of one, and we should be able to prove/disprove the legitimacy of the market opportunity created by one.

Environmental shifts can be enormously important to pay attention to, and yet most startups don’t.  If they had a solution to a legitimate problem, and the environment altered in such a way that it no longer was going to be a legitimate problem, you would think the company would recognize this and alter their strategy.  Most don’t.  Most act like the black knight in Monty Python’s Holy Grail and presume that the problem (and thus their mission) is invincible.  For the last 50 years in the IT business, storage capacity has been a big, expensive, legitimate problem that has created opportunities for hundreds of companies and created billions of dollars in value.  Today, I would argue, capacity is no longer a legitimate problem.  Storage capacity is effectively free. Thus, if you continue to build a business based on solving this problem, you will inevitably die.  You have to acknowledge this fact, and hope you can find a legitimate problem that merits your solution in order to sustain you.  Most will realize this too late. They will die because they react in the following stages:

A:  denial – they refuse to acknowledge the realities of the situation.  They are the ones who turn “hope” into their strategy.

B:  panic – they change their business plan quarterly or worse, desperate to force their agenda.  They often can be successful in short bursts, simply because they can sell better to individual weaker “opponents.”  This is not sustainable, of course.  This is where mercenaries rule.

C: collapse – often the slowest and most painful.  By the time they acknowledge that the landscape has changed, it’s often too late to logically determine what parts of their solution might be applicable to other problem areas.

For many, these end up being fire sales of IP or just wind down.  Most of those deserve their fate – as they truly don’t have anything to offer to a legitimate problem area and as such, the natural order works.  Some really do have great things but will never get any significant value for it, simply because they waited too long to come to grips with reality.

It is very rare to succeed in business long term.  It is much rarer to succeed with a model based on hope or luck when you are playing in an illegitimate market.  It simply can’t happen.  So, knowing this, why is it smart people will bury the facts into the deepest recesses of their minds and instead push forward in a no-win effort?  I think it’s the human factors.  As people, we don’t ever want to be wrong.  We want to be right, and will go to great lengths to prove it even when the factors that make us wrong are entirely outside of our control.  It is hard for a human, who believed in something so strongly only yesterday, to come to grips intellectually (and emotionally) with the fact that those beliefs are now wrong.  It makes us feel like less of a person, perhaps.

Spock would never have this issue.  If only logic and reason were ever applied, 95% of the companies who fail for these reasons would not do so.  They may fail for other reasons, but not because they ignored the realities of the problem/market.  How many would successfully be able to adapt to those new realities?  I don’t know.  I do know that any company that has sustained itself and prospered over many years cannot do so without that ability.  It is why many juggernauts are now dead – they couldn’t adapt to the environmental realities they faced.  Thus, this issue is not only faced by startups, but goliaths alike.  Startups just flame out faster because of them, but goliaths who perish in this way do so far more spectacularly.

In summary, my advice is to focus far more on the problem than you do on the solution.  You can always adapt a solution, but you can’t control a problem.  Companies that succeed long term have people who think about the problems full time.  Everyone has people who think about solutions, but not everyone thinks about the problems – constantly.  As soon as you stop focusing on the problem and move to focusing on the solution, the problem has a tendency to shift, change, or alter – usually subtly at first.  Then one day you wake up with your solution complete only to find that the problem isn’t where it was when we started.

There is money in problems.  Solutions are a dime a dozen.

Have you seen what Nasuni has done with its cloudbench utility?  Tells users exactly what levels of availability and performance they get out of their cloud storage provider on the back end.  This is exactly the kind of visibility and control that customers of the cloud are ultimately going to demand.  That, combined with the ability to allow users to control the movement of their stuff between cloud providers, are going to be mandatory attributes for “business” cloud usage long term.  Guys like Nasuni and TwinStrata are smart in considering these things up front.  Tells me there is hope yet.

I’m curious as to what GE’s play in the cloud is going to end up really being.  Lots of speculation, not a lot of details.  Big, bad consumer company however, that clearly can change the landscape if it decides to.

I was in Vegas at IBM’s Pulse event this week.  5000 PAYING end-users showed up from around the world.  When my session was polled on how many were new attendees, half the hands went up.  That tells me people are now spending money on travel and education again – something they definitely did not do last year – and therefore I view it as another positive sign.

IBM storage has been screwed up for a while – not on technology or products, but in how they do things.  While I can’t say it’s fixed yet, I’m encouraged.  The new new regime is headed by long time CTO super genius Brian Truskowski – who although he’s a vector head, has always also been a business person.  They have new (to the job, not to IBM) folk running the disk business and (gulp) even have someone that looks capable of taking on what I feel is IBM Storage’s biggest challenge – marketing and messaging.  IBM has had great technologies forever – but no one knows about them because they are scattered everywhere and are almost never in context.  IBM gets no cross leverage when XIV wins a deal or when TSM does.  Sales people and partners have no idea what to sell when because there is no rationalization between lines.  It’s complicated for sure, but it can be fixed, and when it is, IBM will get an instant boost in output.  Or, they can continue to ignore it and it will be more of the same.

I think we’ll start to see that primary storage data reduction is going to be an in vogue conversation by the end of this year.  It’s simply too stupid to keep dealing only with the result of too much data and not with the cause.

I was stunned by some data our squad came up with that shows situations where tape is really NOT the cheapest means of performing DR, contrary to all popular wisdom.  Yes, it’s a tease, but more will come.

You wanna know why the backup software market is still the best place in the world?  $4b+ spend annually, very mature, and yet it still represents a great place for startups and innovators.  Why?  Because every year we estimate that at least 10-15% of people will flush their current solution and seek another – that’s a lot of money to be grabbed.  Why?  Because data growth breaks all existing systems/processes sooner or later, or server virtualization efforts create new opportunities to re-do backup – and that gives a new player with a new way of doing things a new shot at fame.  Natural factors will accelerate this trend, by the way.

Steve O’Donnell has been teaching folks in industry how to talk to CIOs – or more accurately, translating the language of the CIO.  Fascinating stuff.  I stole a bunch of his theories for my presentation at Pulse.  By the way, kudos to IBM for letting me talk about this stuff and not talking at ALL about storage or boxes or servers or anything!  I hope the crowd enjoyed it – it was good stuff regardless of the presenter.  I think IBM made the preso available but if not, we’ll be happy to send it along if you’d like it.

I like the Viridity story.  It’s amazing how little insight we really have in our own data centers as to what boxes are sucking what power and cooling and what is really available.  They aim to help folk to find actual information out about this – which will save companies gazillions.

Ciao

The motivation, at least initially, was sound.  Let’s find a professional CEO who’s been there and done that– in theory, to increase the likelihood of us making a big pile of dough.  Sign me up.

The reality, however, has proven to be just the opposite.  It is worth spending time thinking about the reasons why.

There are a million ways things can go wrong in any business, but the presumption that you have to have an experienced outside CEO to have a shot is fatally flawed.  Overall, statistics will bear out the fact that if anything, the likelihood  of screwing up happens at a higher rate with an outside CEO than a founding one.  That’s an easy statement to make as it’s just numbers: most companies have outside CEOs and most companies fail, therefore, companies with outside CEOs fail more often than those with internal CEOs.

I am not suggesting that all founding entrepreneurs are quality CEOs–far from it–but those that aren’t tend to know they aren’t early on and are an active, vibrant participant in the process of finding the right CEO for the company.  That alone can be the most significant difference between success and failure as it relates to the CEO’s ability to create a positive outcome. If the founder is a believer to the very core, they are more likely to help find the right CEO.  If the founder is treated like a necessary evil by the VCs and is not vested in the emotional or cultural outcome of the hire, the odds of a company getting that hire right go down 80% in my estimation.

If you look at success stories, they almost always are ones where the founding team is actively participating in the process of finding “professional” management–not doing so with a gun to their heads.  James Lau and Dave Hitz at NetApp lobbied their board to find a professional CEO–for over a year!  When Dan Warmenhoven came aboard, it wasn’t because the VCs jammed him down their throats, in fact it was the opposite.

Nothing can kill a company faster than the wrong outside CEO.  Sometimes the only fix, if there is time, after the outside CEO ruins everything is to bring back the founder.  Steve Jobs got fired at Apple.  Closer to home, Sujal Patel watched as Isilon’s outside CEO took the company public and got trashed. Now, with Sujal coming back as CEO, Isilon is slowly rising back to prominence–and doing so the hard way–with honesty and integrity, and perhaps most important of all, with purpose.  Sujal has a way to go before he can stand on the same podium with Steve Jobs, but what they both have in common that you simply cannot hire, is belief.  Down to their very cores, they believe in the spirit and righteousness of their companies.  You can’t hire that.  It is or it isn’t. Whether Diane Greene of VMware or Michael Dell (who hit a grand slam, let the reins go to others, and came back), history tells us that the first level rocketship ride to glory is more often than not going to happen when the CEO is in early and is entirely vested in the whole enchilada–not someone that’s forced in along the way.

Outsiders fail for many reasons, but there are some common factors that you should pay attention too.

1. Past success: This is perhaps the best indicator of future failure.  Think about it: you know how hard it is to hit a home run in this world?  It’s hard.  It’s a statistical anomaly.  You know how hard it is to get hit by lightening twice?  It’s ridiculous.  Just from an odds perspective, you start out behind the eight ball by bringing in someone who’s already hit a home run.

   There is a big difference between bringing someone in because they have real world business experience–ideally successful and unsuccessful–and bringing in a “rainmaker.”  I am all for bringing in experience at every level, I’m never for bringing in a rainmaker.

   The “experienced” CEO is, to whatever degree possible, a person without ego (at least an outrageous one).  They are practical and pragmatic, and their experience can keep a company from making dumb mistakes (because he or she has probably already made them) and can course correct incrementally to keep the entity moving down the right path.  They don’t need to be the hero, at least in the eyes of the company itself.  They need to be the wise person who actually cares and supports all the great things that make up the company, without having to change those things to make themselves feel more in control.  Dan Warmenhoven was that person. Lend grown up, practical business counsel without destroying the culture and value systems (presuming they are legitimate, of course) by injecting your own forced agenda into those matters.  As simple as that sounds, it’s amazing how infrequently it happens.

   What happens most of the time is the new CEO comes in, looks for the biggest potential problem in the schoolyard, and challenges them to a fight:  “I’m the new king of the block people, make no mistake about it.”  Assinine bravado 99% of the time, perfect thing to do 1% of the time.  Joe Tucci had to get rid of Moshe Yanai at EMC (granted, not a startup situation, but the metaphor applies) because he had become poison.  He didn’t do it to assert his alpha male position, he did it to remove a cancer that prohibited the company from taking the next step.  People didn’t see it (eventually) as a power play as much as the removal of a gate to progress.

   If the new CEO has feelings of inadequacy, you are doomed.  They will immediately fire as many as they can and replace them with known quantities (read, “yes men”).  Don’t get me wrong, if there is a legitimate upgrade to be made at any position, you make it–but the way you do it speaks volumes.  Doing it first and trying to piece it together after is a sure sign of death.  Being smart and assessing the situation from every angle first and giving people the opportunity to come to the right conclusion on their own will pay off in spades.  No one wants to be told how good looking you are, how smart you are, and how ugly and dumb they are–even if they are.

   The biggest reason past success is often a guarantee for future failure is that the world is not static.  Things change.  What made company A successful in the past might be valuable to company B, but will it really be exactly the same?  Of course not. Yet many post successful CEOs act like their formula is the only formula–regardless of current market/business/economic/people conditions.  You are almost better off taking a formally successful CEO from a totally different industry than you are from the same one.  If it’s the same industry, they are more likely to be inflexible to the possibility that their strategy that once shined is now flawed.  It’s hard for humans to accept things like that, and thus they will cling to their “glory days” strategy even as the boat sinks.  In a new industry, they are forced to learn the idiocynracies as they go and, as such, can’t be so rigid in their thinking–which can only be good.

2. Good versus lucky:  A good CEO will always admit they were lucky.  Sure, you have to have the experience to act properly and recognize opportunity and potential disaster, but above all, you were successful because you were lucky.  If you don’t believe that, you shouldn’t get hired.  If you are smart enough to know that you were lucky last time, you won’t assume you will be lucky this time.  You’ll use your experience more than your bravado and ego.  No one hits a home run without being lucky.  No one.  There is not a single case, ever, that can be made that states a company executed brilliantly in such a way that it required zero luck. Yet many of our successful CEOs of yesterday actually believe their own bullshit so much that they can’t see reality.  This will kill your company.  Look at Bob Nardelli: came up a superstar at GE, but almost completely destroyed Home Depot.  Carly Fiorina did the same at HP.  Success is not a birthright.
3. Irrational moronity: While this should be the simplest to see, it continues to happen every day.  Companies get so caught up in having to find the next CEO that eventually once they figure they can’t get Ross Perot or Mark Hurd, they settle on a total, unadulterated shithead.  This is normally someone who did succeed at some level in a big home run–but not as the CEO.  They were “lucky sperm” as Roger Marino (the “M” of EMC) used to say.  They come in and not only bring all their “boys” with them, they immediately adopt the only playbook they know, which typically was from a far gone era.  Let’s hire 800 expensive direct sales people and attack the enterprise even though our product sells for $100 through the web.  This breed tends to appear where the VCs and existing management team are weakest–they get bullied into believing the bullshit.  They hope and, as some wise person once said, hope is not a strategy.  They also tend to be the ones who get bullied into investing outrageous amounts of money into the company–to support the absurd strategy from 1984. I continue to find this class most astounding, yet I get a call a week from someone asking about some clown I wouldn’t hire to wash my car who made $2M selling for (fill in the blank: Oracle, SAP, IBM, EMC, NetApp, Sun, etc.) back in the day as the next great CEO hope.  The fact that a monkey with a basketball could have also ridden that wave gets lost on would-be hiring managers. Success begets success, right?

History is littered with companies killed by CEOs who were formerly wildly successful.  Sometimes, the market kicks you in the head and even Superman would end up bleeding, but most of the time, if you do forensics, you’ll find a CEO who is ego and belief system fundamentally doomed the company.

In short, a CEO, no matter when they join a company, has to have:

• Absolute belief in their abilities along with an absolute knowledge that they can and will be wrong.
• The absolute knowledge that luck matters more than skill.
• An absolute desire to embrace and perpetuate the positive elements of the company’s culture.
• A desire to assimilate, not overtake.
• The experience to recognize and ac–and the ability to bring in smarter, more experienced people in areas where they lack that experience.
• Confidence without ego.  Empathy without attitude.
• A truckload of luck.

I see a few angles to pay attention to.  First, I don’t think Dell’s plan is to build a mega internally developed set of IP based on Exanet, but you never know.  I think Ibrix was a better play, and told Dell so, but who listens?  HP is, in fact, rebuilding their entire array of NAS offerings around Ibrix, so perhaps Dell is thinking the same way.  Or it could just be that they have some interesting patents or IP.

The Exanet stuff was always geared toward mega throughput apps such as rich media.  Ibrix is much more mainstream in that it supported random access, smaller I/O such that it can be used in the “real” world.  I’m not sure if Exanet can be tweaked to be a mainstream NAS file system, but history tells me probably not.  That’s why I’d be surprised if Exanet became the basis of a high-volume NAS play.

Dell does need a real scale-out  NAS play, in my opinion.  They are doing well in the market with their efficiency story and have made great strides to “sell the portfolio” to customers.  They have a great story with EqualLogic, EMC, and their own lower-end block gear, but a Windows NAS offering is sooooo 1980′s.  They need to have a scale-out file play the way they have a scale-out block play.  Perhaps Exanet gets them in the conversation.  If HP has LeftHand and Ibrix, IBM has SONAS and XIV, then Dell needs to add something to EqualLogic for balance.

I’m not sure what the grand plan is, or even if there was one.  It didn’t cost them anything really, so I’m fine with the buy if for no other reason than it’s yet another small step toward internalizing some IP.  Everyone knows what they did with EqualLogic, but the smaller steps have been just as important.  The stuff they did on server management (embedding a ton of functionality) is awesome, for example.  In a world where Intel is the maker of the commodity, little things like that can have a huge impact on a company’s success.  Maybe they can rip something smart out of Exanet that gives them that type of nondescript advantage in other areas.

Or, maybe Michael wanted a good salted fish recipe.

In short, popular wisdom in the world of the tech startup dictates a cadence and pattern for a company to follow that is 100% ass-backwards – thus almost single handedly assuring either ultimate failure, or forcing a “re-start” that inevitably will cost the company significant time and money.

These are the acceptable stages of business as we know it:

1. Develop an idea.
2. Sell the idea to a VC/Angel.
3. Develop the product.
4. Ask some people along the way what they think about the idea/product.
5. Change the development schedule/priorities based on answers or non-answers to 4.
6. Change the development schedule/priorities based on shit being much harder in certain areas then you expected.
7. Hire your sales god.
8. Send out a press release telling the world much too much about much too little.
9. Line up the beta sites.  Actually believe that because you got 4 sweet betas, you are really ready to rock & roll.
10. Set moronic expectations with the board.
11. Do a half-assed launch, normally too early, with no benefit except to inform the competition of what your plan is.
12. Figure out that 75% of what you put into the product is entirely wrong.  Ignore that fact and try to force the market to “see things your way.”
13. Re-work product again.
14. Get revenue.  Sell, sell, sell.
15. Set even more asinine expectations with the board.
16. Find new VP of Engineering after firing the first for being 9 months late with a product no one wants because no one bothered to ask, and for adding new features/priorities every other day.
17. Find new VP of sales because they didn’t sell anything.
18. Completely ignore any actual marketing whatsoever.
19. Do a “B” round at a crappy valuation.
20. Find or fabricate data to support your product (but ignore data that actually looks for a problem/market opportunity).  Insist that this is a justification for your being.  Don’t bother with data that tells you otherwise.
21. Find new CEO.
22. New CEO has 6 months of grace where all blame can be tossed backwards.
23. Awful VP of Marketing is left intact because CEO doesn’t know anything about marketing other than its only job is lead generation, and hell, a monkey can figure that out.  CEO demands more leads for sales god.  Leads, dammit.  Leads.
24. Re-do business plan for 8th time.  Fire up the troops.  This time we’ve got it!
25. Realize you have 87 sales people with 87 stories – none of which your company or product actually do.  Create customer support/satisfaction issues that even Mother Theresa couldn’t soothe.
26. Figure out that maybe you should do some actual market research to figure out if you have a technology/product that is looking for a problem to solve, or has a legit market opportunity and how to attack it.
27. Try to raise money to stay alive at an obscenely poor valuation.  Feel the life being sucked out of the entire organization as the slow march of death starts in earnest.
28. Quit and try elsewhere.

Whereas, what should happen, is simply this:

1. Come up with the idea.
2. Spend ALL of your time/money/effort A: validating/disproving the PROBLEM (not the idea), then B: presuming it’s validated, finding out exactly why, what, when, where, and how someone would part with money to solve the problem, then C: validating if your idea meets the requirements necessary to solve the problem, and then D: validating as to whether it is feasible to develop the product/technology necessary to solve the problem in the way the market wants it solved.

This seems so simple that it astounds me how infrequently it is done.  We carry so many pre-conceived notions because of our past experiences that we just “know” already, so we bypass this basic step.  I contend that by going through this exercise honestly and impartially (you can’t do your own market research – as you will always get the answer you want, not the one you need), over 80% of faulty companies (those who build it, and hope they will come) would never get off the ground to fail. Further, what’s perhaps most asinine are the VCs who dump $9M bucks into an A round betting that the entrepreneur with a track record “knows”.  No one “knows”.  If VCs spent $100,000 doing this exercise on any deal they were about to do, their portfolio success rate would climb by 20-50%.  There are plenty of other things that can kill a company down the road, but to spend money on one that is stillborn seems unfathomable – especially when you really don’t have to.

What VCs, and most entrepreneurs, do to make themselves feel better about their decision, is call a few people.  They call me.  I’m good, I can tell them what I think about the market and opportunity, challengers and the landscape.  But I don’t “know.”  I could find out if they really want to know, but they never do.  They then call their buddy at Goldman Sachs IT (probably the worst possible person to assess a viable widespread market opportunity) to ask them what they think of the idea.  Who cares what they think of the idea? (Remember the “market of one” phenomenon).  They do some background checks to make sure the entrepreneur isn’t a level-3 sex offender (which they will completely ignore if the entrepreneur hit a massive home run previously, of course), and stroke the check.  Fascinating really.

3.  Get money – based on what you KNOW, not what you THINK.

4.  Spend all your time and money developing the business plan:  what product (what features, what priority based on what the market research is actually telling you), what are the go to market assumptions, and what is the foundation marketing plan?  These things always happen too late normally.

People build it first, sell it second, and market it last.  Dumb.

5.  Manage the 3 efforts in parallel.  Development, Sales, and Marketing – way before you have a product.  Spend as much time – if not money – on each.  Imbalance will cost you.

6.  This is the most important thing you can take away from this rant: Understand your REAL objective – to maximize the valuation of the B round.

Let me say it again – your goal, once you do your A round, is not revenue, it’s not customers, it’s not product – it is to put yourself in the best possible position to attain the highest possible valuation for your B round.  Nothing else matters.  From your B forward you need to execute perfectly operationally – but before that, the game is all about the B.  Maximizing B round value has very, very different requirements than managing to show revenue or customer traction.  Maximizing the B round value is the difference between having financial room to make a lot of people rich, or making the VCs alone rich.  A crappy B valuation can handcuff all the parties involved down the road.  It is imperative that you focus on the B.  I’m amazed at how many entrepreneurs screw this up.

Don’t get me wrong, you should ALWAYS be looking to maximize your valuation – but never more so than between the A and the B.  Doing that, I contend, has little or nothing to do with revenue (although I like revenue, don’t misunderstand me), or product/engineering.  It has everything to do with marketing, messaging, and positioning.  Everything.  Will your valuation change substantially at your B round if you do $1.2M in revenue vs. $1.7M or $500k?  No (however, I suggest you don’t set asinine expectations with the board regardless).  There is no meaningful way to justify valuation on meaningless (in the bigger picture) metrics like $500k or $1M bucks.  No one is going to give you a $50M pre-money valuation versus a $13M valuation because you did twice your revenue number, if that number is only $1.8M.  So stop chasing the wrong goals if they aren’t helping you get to where you want to be.

7.  Build a “company” plan that is based on the “marketing” plan – that’s how you attain maximum value for B.  All other things being equal, nothing will have a higher return than an effective internal and external marketing/messaging/positioning effort.  Alignment is the critical factor.  Proper messaging not only keeps the VCs and outside world fascinated with you, but it keeps engineers and sales efforts aligned to the mission.  1 message, not 87.  Laser focus wins (ask NetApp, Data Domain, etc.), scattergram attack strategies don’t.

Easier said than done, I agree, but shifting priorities and perception up front from a business perspective can save you a ton of pain, money, and hair down the road.  Do it right up front, and your chance of success can grow by orders of magnitude.

The reason the SSP market never was is fairly simple to understand – the premise was fundamentally flawed.  The SSP wanted to solve a problem that didn’t really exist.  Companies were not interested in pushing their critical data assets out the door to be handled by a third party – unless the cost advantage was so stunningly compelling to merit them doing so.  Well, turns out it wasn’t cheaper – if anything it was more expensive.  Multi-tenancy wasn’t real nor trusted and as such there was almost zero economic benefit delivered – which destroyed any hope of this market ever becoming legitimate.

When the “buzz” of the SSP was at its height, VCs couldn’t throw enough money at enough wanna-be entities fast enough.  There were dozens of SSPs, but not one had a legitimate business model, because there wasn’t a legitimate market opportunity.  They all died.  Money flushed down the can.  A lot of disillusionment.

What survived that horrible time – and in turn prospered – was not “capacity” based services.  What survived were solutions to legitimate problems experienced by a legitimate market.  How strange.  Backup service providers have thrived while capacity providers died. Why?  Because solving a backup problem is a real market opportunity.  It’s not a nice to have – it’s a need to have.  The arms dealers in that market have made a fantastic living selling the means to the end.  The service providers themselves have built solid businesses – and don’t call themselves SSPs.  Delivering actual value has a way of driving sustainability.  This sub-industry did what all successful companies/markets do – intersected a long term secular trend.  Data growth isn’t going to abate and backup/recovery isn’t going to become easier.  Those two truths make up a wonderful long term secular trend.  Long term secular trends are waves you want to ride – go ask VMware or Data Domain.  Trying to create a trend is almost impossible.  Intersect one instead.

I see the same thing happening again with Cloud.  There are a zillion wanna-be providers of “capacity” services.  VCs are pouring money into anything that says Cloud.  They will die.  You can’t build a sustainable business selling capacity unless you have a distinct advantage – like you build disk drives or you have a model so vastly superior to everyone else that you dictate the terms (Amazon, for example).  It’s going to be hard for even an outrageously well funded startup to beat EMC, or IBM, or AT&T or Seagate at this game.  I’ll go so far as to say it will be impossible.

Someone will fail soon.  Then it will be a snowball effect.  VCs will swing to the other end of the pendulum and run and hide from all things Cloud.  Companies that have branded themselves Cloud will panic and try to remove the stigma from themselves.  Valuations will plummet.

Side Note: There is no such thing as a private cloud.  A private cloud is called IT.  We don’t need more terms for the same stuff.

Remember Arsenal Digital?  They were an SSP.  When the ship started sinking they rapidly switched gears and became a backup service provider.  IBM then bought them.  You see where this is heading?

It is inevitable that this happens again.  My advice to those who want to survive the coming collapse is to quickly find a legitimate valuable service to offer the market – something they actually need.  It’s fine to use “Cloud” as an enabling component to that service – economically or technically – but if you believe that simply being “cloud” is going to provide you sustained value, you are screwed.

You need to change your messaging, and change it quickly.  Plus, I hate to tell you this, but it wasn’t working anyway.  People don’t buy “clouds” just like they don’t buy “ILM.”  They are constructs.  They use the constructs, but they don’t buy them as a “product.”  They buy solutions to problems they have.  Sell them that and you’ll be fine.  Message to the solution and the problem, not to the enabler, especially when it’s apparent to me that the enabler is going to have negative value in the coming year.

Companies that provide arms and means to leverage the cloud will do fine.  99% of companies that are cloud will not.  You got a great A round valuation by being cloud yesterday, but your B round will be a death march if you are still clinging to that moniker in six months.  Use the cloud – don’t be the cloud.  Use the cloud to deliver your high value services that everyone needs and you’ll do fine.  Sell “cloud” capacity and you’ll be gone within a year.

In the past I’ve warned those who thrive about much bigger, much more established entities that seemingly would persist forever, but suddenly found themselves fossils – unable to adapt to a shifting environment.  Martha Coakley is Digital Equipment Corporation.

Martha ran a milquetoast campaign in a state that ALWAYS votes Democrat (when sending someone to Washington or electing local officials), looking for a seat that has been Democrat since there was such a thing, that was owned by a Kennedy.  She was endorsed (albeit tepidly) by the widow of the legend.  Thirty days ago, the challenger – Republican Scott Brown, had as much of a chance of winning this seat as I do of becoming 6’4″ tall, attractive, and a nobel laureate – none.  She couldn’t lose.

DEC owned the mini-computer market – at least $11B of it.  They had the best stuff, bar none.  They couldn‘t lose.

Ken Olson said, “why would anyone ever want a computer in their house?”

Martha said, “Curt Schilling is a Yankees fan.”

Boom.  In a flash – they lost.  Did what couldn’t even be fathomed by most with any logic or common sense – they actually lost.

Both lost for some similar reasons:

Arrogance – they each believed that they couldn’t lose, regardless of their decision making.

Ignorance – they each had enormous environmental factors occurring all around them that they chose to ignore – or hoped would just go away, instead of taking them on and adapting.  DEC had the PC (Intel/MS) and Client/Server movement (enabled by the standardization of IP networking) pulling at their entire value proposition.  They chose to act as though those things were for peasants, and didn’t represent any real threat to “business computing”.  Martha felt standing outside Fenway park pressing the flesh was beneath her.  She didn’t pay attention to the fact that the country was universally concerned with the President’s health care bill Congress was trying to jam through.  She was planning on jamming.  She didn’t listen to those who questioned.  Scott Brown did.  Microsoft did.  Intel did.

Dementia – Both simply couldn’t get their brains to acknowledge that the threat was legitimate, therefore they couldn’t act rationally towards that threat.  Instead, they acted crazy.  In the end, they both looked like Monty Python’s black knight – unable to comprehend what was really happening.

The Soviet Union couldn’t fail.  AT&T couldn’t fail.  The Roman Empire couldn’t fail.  The Titanic can’t sink.  You think that just because your business is $500B and 100 years old, it can’t fail?  Think again.

The keys to not failing in times like this are self-evident – good companies use them all the time.  Healthy paranoia – never actually believe their own real bullshit, and always believe that the hoards are at the wall.  The best companies force the environmental changes that they then adapt to – they don’t wait around.  When those changes do take them by surprise, they act – they don’t hope.  Whoever said “hope is not a strategy” was brilliant.  Seems obvious, but damn if half the companies (or more) who fail aren’t clinging to some half-assed hope that the bogey man will go away and leave them to their riches.

Because you won once, or twice, or for a century, does not make it a birthright.  Success is a privilege – but no outcome is guaranteed.   Once a company (or person, I suppose) reaches this level of presumption, the wheels are almost guaranteed to fall off.  This is when companies start spending like morons, stop caring about listening to their customers’ complaints, hire egotistical boneheads that won’t listen to anyone, etc.  This can also be the start of the “invincibility factor”, where CEOs feel so untouchable they do outrageous, immoral, unethical, and illegal things.

Look at Henry Nichols formerly of Broadcom.  How drunk on invincibility are you when you not only build an underground sex dungeon, but you use it (mostly by drugging) on your own employees and customers in order to drive business – or just to get  your rocks off?  CEOs who have a healthy bit of paranoia don’t do that, I’m pretty sure.  CEOs who think they simply cannot be bothered with the pedestrian thoughts, laws, and mores of mere mortals can.

Summary:  If you are considering building a corporate/personal sex dungeon, you are probably going to fail eventually.

I’m told I’ll have 3 cases Friday.

Ask your local liquor store, or drop an email.

This might be a bigger development than MA sending a Republican to Washington.  Who’d have thunk?

Just goes to show you – never get complacent, never assume a privilege is a right, and never piss off Red Sox fans.

Xiotech has been successful, floundered, been given new life, floundered, and now looks like it’s got a legitimate shot again. They were a successful startup, acquired by Seagate for piles of money, left to flounder inside of Seagate, successfully spun back out of Seagate (which, in all fairness, was at least partially my fault – I loved them and told Ed Glassmeyer of Oak Investements he should use his connections and pull it out of Seagate – and hell if he didn’t), they floundered around for five years (with very, very, crappy marketing), only to have a new lease on life.  (Sorry for the run on sentence.  That was bad, even for me.)

The new regime, consisting of Alan Atkinson (Wysdm, Storage Networks, Goldman) at the top, is loaded up with fresh, intelligent talent – which gives me hope that, combined with what looks like really good stuff architecturally, we’ll have another contender from the great state of Minnesota on our hands.

As someone who speaks at tons of annual company events in the space (Emulex this week – at least it will be warm!), I can honestly tell you that the buzz factor was impressive.  Sometimes it just takes a new person to stir things up – something Alan has absolutely been doing in his short tenure, to breath new life into a company.  Plus, I dare say, they will impress with a new commitment to correct past marketing sins and make sure they are in the right fights saying the right things to the right markets – and that alone seemed enough to get the sales force fired up.

Good luck my frozen friends, I’ll be watching!

P.S. stayed at Caesars and yes, found every single thing from “The Hangover”, and yes, had a hangover for a while, and yes, was glad to leave.

The survey is of North American and Western European IT managers (over 500) responsible for evaluating, purchasing, and/or operating corporate IT in “medium” (500-999 employees) and “enterprise” (1000+ employees) companies.

There is good news, bad news, and interesting news to discuss.

The good:

1. The majority of organizations say spending will increase year over year.
2. Cautious optimism reigns – people have moved themselves out of cost “reduction” mode and placed themselves in cost “containment” mode.  Without boring you with the details – this means spending “strategically” is going up – sometimes WAY up.
3. Security, Compliance, and Business Intelligence initiatives are all seeing increased spending.  These areas are also being used to justify additional IT spending.  They are levers for other initiatives.
4. There will be big increases in spending in Virtualization, Security, and get this…….Storage!  Swear to god.

The bad:

Cloud is nowhere still.  It ranks near the bottom of the list of priorities for 2010.  The much hyped amorphous topic will remain a niche play and mostly a marketing mantra in 2010.  This doesn’t mean I’m not all for the cloud – but I gotta tell you what the people are saying.  No need to panic – it took Virtualization a while to get going too!

The interesting:

When given a list of 25 IT priorities to order, the top four “most important” are:

1. Increase usage of server virtualization.  No real surprise here, as it is widely deployed but not “deeply” deployed.  Looks like that will change in 2010.  Probably good for VMware’s stock.
2. Information security initiatives.  What’s surprising here is that after all the “duh, I told you so” stuff we’ve seen over the last five years, it appears people are finally afraid enough of sending your information to bad people to do something about it.  This industry has been the wild wild west for a long time, and maybe now we’ll see some shape start to form in this big money market.
3. Improve data backup and recovery!  Awesome.  After 87 years this STILL makes the top three!  $5B spent every year, year after year, on this stuff and we still can’t get it right!!!  This is my kind of market.  What’s it mean for industry?  It means there is a new breeze a blowin’ – the same old crappy, expensive, awfully licensed software you’ve been selling is under siege – and those who have a better way to skin the cat are going to get their 15 minutes.  Lot’s of money at stake in 2010 in the data protection world.
4. Upgrade network infrastructure.  This hits the top 4 with a bullet.  10GbE, converged networking (FCoE), etc. mean IP will squeeze the daylights out of fibre channel (or at least start to in earnest) this year – as well as create tons of new catalyst events for Cisco wanna-bes.  If server virtualization was a rallying cry for infrastructure changes in the data center in 08/09 – look at the network to light it on fire.

In the down times where everyone is looking to cut everything, SaaS offerings were high on the spending intention list – but this year, as things seems to have stabilized, SaaS is down at the very bottom.  To me that’s crazy, but it shows the ways of the human psyche – if people are  worrying less about opex/capex, they go right back to their old habits – crazy as that is.

You’ll see a big resurgence in strategic IT spending.  In the words of Steve O’Donnell, things that reduce IT “cycle time” will get far more attention – and funding – from the business than things that just “cut costs” in 2010.

Not from our research, but fascinating just the same:  Men’s underwear sales are an indicative of the overall economy.  Men don’t buy underwear (since we keep them for decades anyhow) unless they feel good about spending.  It’s true.  Underwear sales are at an 18 month high, I’m told.

There will be more to follow.  Data, that is.

Within enterprise technology, society has been built based on misguided perceptions of success, which died the way the Soviet Union did, but are perpetuated in the current climate despite being an almost sure way to death.

VCs have long viewed Wall Street as the bellwether indicator for the success of their portfolio companies.  Wall Street IT has long been considered the best of the best, so if you can sell there, you can sell anywhere.  Wrong.  Stupidly, arrogantly, and ignorantly wrong.

As a result of this continuing fallacy being shoved down the throats of entrepreneurs, companies spend all their time, money, and effort attempting to satisfy a prospect who does not represent the real market.  Instead, they are almost always the exact opposite of the real market.  They are, by their very nature, what we call “corner cases.”

The real market does not have the “best” IT department known to man.  It doesn’t pay top dollar and invest an astronomical proportion of its revenues back into IT technology.  The real market has real IT people – with real problems.  Lehman Brothers had huge pockets and huge egos.  Lehman Brothers, like the Soviet Union, was thought to be invincible.  Oops.

The real market wants a real problem solved – not cold fusion.  It doesn’t care about how you spent all of your last round of financing sleeping in Morgan Stanley’s data center completely re-architecting your solution to meet  specific needs for interplanetary replication.  It wants idiot-proof solutions to the problems smacking it in the face every day, not some pipe dream that will never matter.  The real market doesn’t buy a titanium jaw replacement when it needs a root canal.  Worse, it will suffer the pain until it can’t take it anymore.  The goofy market will have you develop the jaw.  Then just when you think it is going to actually pay you for it, it will instead make you chew for it.

The real market can’t afford science projects.

The real market does not act like a puppeteer to a vendor simply for sadistic sport – to see just how far it can make you jump or how loud it can make you bark.  The real market has no time for that.  The goofy market has plenty.

The goofy market has people, in very senior positions, whose entire role in life is to make you perform unnatural acts just to screw with you.  I swear it’s true.  In the same way psychotic experimentation has occurred throughout history, the modern manifestation have appeared as IT executives in some of these prestigious institutions.  And they don’t just abuse startups – they are horrific abusers of even mainstream vendors.  Power corrupts people.  Power and sociopathic tendencies are a brutal dynamic – so welcome to Big Bank IT.

The false market will wrap you up so tightly in designing a custom thing for its own use, that even if you are successful in taking its money (after two years of never ending abuse), the mass market will not value what you have done.  It will have either already solved the real problems it had by buying from someone else, or decided the problem wasn’t real enough to merit solving.

All your tales of how great it was that you sold $2,000,000 worth of your product to Goldman are as valuable as the reference you get – that’s it.  Even then, it’s fleeting value, as, like the mob, you owe them a favor.

Assuming you can get your VCs to take their heads out of their backsides for a few minutes, you will find that the only way to ever really be successful selling to corner case elephants is to violently limit the amount of investment you are willing to make.  If you truly have something they want and need – fantastic.  They can come to you.  If you are trying to force your way into their world because you were told A: their name is critical for your success or B: they have all the money, so if we can sell to Goldman, then Morgan will buy a billion from us, I can assure you that statistically, you are screwed.

Companies blow up after spending zillions of dollars and years because it takes that to get A DEAL in one of these goofy, pre-internet economy establishments.  They either bleed out or  end up with a product with a market of exactly one. You don’t have much leverage in either case.

Whether from an engineering, sales, or marketing perspective, you are always better off focusing on solving the most myopic problem with the most ubiquitous demand.  Solve the problem 80% of the world is willing to pay to solve, and you have a hyper-market opportunity – even if it’s an “easy” problem.  Solve a wicked hard problem that only a handful of elephants really care about and you will not succeed.

If you are lucky enough to have some magic elixir that Wall Street truly needs, good for you.  Then you can become Sybase, make a pile of money for a while, and then manage yourself to the grave.  Remember Stratus?  Tandem?  If you aren’t broad market, you aren’t going to live forever.  Oracle or Cisco sell tons to Wall  Street – but they aren’t developing their products for Wall Street.  Au contraire, they are so mainstream successful that Wall Street has to buy from them, lest it put itself into a support nightmare.

So the lesson today, kids, is while there is absolute appeal in the glamor and glory of the fantasy of hooking up with Giselle, you have much better odds of succeeding in your true quest if you set your sights on a more attainable target.  You might be a great looking guy, but you are going to be spending a lot of time on self “introspection” while the mainstream masses are frolicking all over the place.  Go forth and frolic.

Happy New Year!

Engineering is critical – lest we have nothing to sell or market.  Most technology companies start as engineering exercises and treat sales as secondary – and often treat marketing as evil.  Engineering-dominant companies often have the problem of building a solution to a problem that doesn’t necessarily exist.   More on this later.

Sales is critical – but startups often overinflate the value of revenue.  Don’t mistake my comment – I love revenue.  What I mean is that it is far more important early on to gain knowledge about the market versus revenue from it.  Knowing why the customer buys or doesn’t has much more meaningful leverage points for the business in the future.  Boards and VCs will shoot you for thinking like this, but they are part of the problem (more on this later as well).  If the board isn’t loaded with idiots, they would rather have you figure out what happened last quarter so you can accelerate REAL revenue acquisition.  No one will care that you missed your $1M target last quarter if you can hit $10M two quarters from now.  Getting it right faster is much more valuable in the long run than hitting flawed numbers.

Marketing is perhaps the most misunderstood leg in the stool.  It’s the most underinvested and as such tends to be a place where the mediocre reside.  Marketers have done a poor job in enterprise technology by following instead of leading.

In order for the 3 legged stool to remain stable, all 3 legs have to be growing at the same relative rate.  If one leg grows too fast, the stool will tip over.  If one leg grows too slow, the result is the same.

Think about this:  Engineering is a cost center.  Sure,  you need a product to sell to garner revenue, but that revenue is indirect – or not directly associated with Engineering.  Sure, we praise the engineering team at our sales meeting for giving us great stuff to sell, but who are we kidding?  The sales folks get the credit, the money, and the glory 99% of the time.  No matter what you build, the way that you build it is treated as a cost center.  Cost centers are the first to get squeezed when anything negative happens.

Sales gets the glory because revenue is the easiest means of judging our success.  Rarely do we have brilliantly engineered products that sell themselves – outside of consumer markets, that is.  In “enterprise” technology companies, things have to be sold.  Only when you are a runaway success, or virtual monopoly, can you start “taking orders” instead of selling. Thus, like the president, sales gets too much credit for success and too much blame for failure.  Since $$ is easy to metric, boards and VCs will always push it.

Marketing is nebulous in enterprise technology markets.  It’s a cost center, but it doesn’t produce products.  It can’t normally metric against $$$.  All the problems, none of the glory.  That’s why it’s been easy for CEOs to overlook marketing as an afterthought or for the VP of sales to treat marketing like second class citizens who “can’t sell,” and thus are banished.  Those who can’t, teach, as it were.

The Facts of Business Life in Enterprise Technology:

1. Engineering is a mandatory investment.  We need something to sell.  It would be great if it’s the best thing ever, but it’s not that important.  What is important is that it solves a legitimate, ubiquitous problem that people will spend money to solve.
2. Revenue is NOT the most important metric.  Revenue matters a lot – but it’s not the most important.
3. Valuation is the most important metric.  Valuation is based on a set of enormously unscientific principles, emotion, and feeling.  Revenue, if you have it, plays a role as ONE metric to be applied against the VALUATION MULTIPLIER.

What functional “leg” represents the biggest impact to valuation?  Marketing.  This is a fact.

Until you are an established public company placed into a “bucket” (that you can often never get out of regardless of its applicability), you have the opportunity to enhance your valuation multiplier.  The way to do that is to increase the value of the multiplier. Duh.  Your revenue is your revenue – your earnings your earnings.  Those can go up or down, but neither will have the ability to dramatically increase valuation like the multiplier can.

$1M x a multiple of 10 = a value of $10M bucks.

$1M x a multiple of 100 = a value of $100M bucks.

Same revenue – much different valuations.

See where I’m going with this?  CEOs focus on revenue too heavily early on because it’s what the board (and themselves) uses as the metric for success or failure.  What they should focus on is valuation.  Valuation has a lot more, well, value than just revenue.

EqualLogic was running at about $70M in sales, almost break-even when Dell paid $1.3B clams for them.  Dell’s multiple on revenue is about .5.  That means Dell sells $60B of stuff, and is valued by Wall St. at around $30B.  For every dollar of revenue, Dell gets $.50 of valuation.  If you use earnings instead of revenue, they are valued at around 20x.  That means for every dollar of bottom line earnings, they get a multiplier of 20.

EqualLogic was valued at 200X revenue versus Dell at .5x revenue – or 400 X higher.  Since EqualLogic had no earnings, their multiplier on that metric is infinite.  Infinite versus 20.

At the end of the day, a dollar is a dollar and a Euro a Euro.  How can one be worth so much more than the other?  Marketing. Until you are captured and put into a box by the Wall St. analysts, you have limitless perception boundaries.  It’s not what you are – it’s what people think you represent.  It’s the opportunity for you to possibly do great things – not the things you actually do – that matters.  Why was EqualLogic’s dollar so much more valuable?  Marketing.

Data Domain sold to EMC for $2.4B for doing about $200M in revenue.  12X revenue was Data Domain’s value multiplier.  EMC’s revenue multiplier is about 2.2x (4x larger than Dell’s).  EMC’s earnings multiplier is 35x (2x Dell’s – a dollar really isn’t a dollar apparently).  Data Domain’s earnings multiplier was in the stratosphere, because they didn’t have much.

Why was Data Domain so much more valuable for each dollar it brought to the party?  Marketing.

Engineering is table stakes – it has to be there.  Sales, I would argue, are equally table stakes.  Marketing is the great variable.  Marketing can jack a valuation much faster – and much higher – than any revenue number.  Marketing can cover bad engineering.  Marketing can drive sales – sales rarely drives marketing.

If you want more proof simply look at the low value exits that have occurred over the last decade.  I contend that LeftHand had as good as, if not better, stuff than EqualLogic – but HP bought them for $350M or so.  Why 1/4 when all else were on par?  You guessed it – marketing.  LH could have, and should have, positioned itself as a software company.  They were addicted to REVENUE, however, and it cost them.  They were under the absolutely incorrect illusion that they couldn’t go public without a bigger revenue number, and as such stayed firmly planted in the hell hole that is hardware.  Do you think HP valued them higher for being in hardware?  Of course not.  They penalized them.  LeftHand listened to their board and bankers – who still believe in the 1978 mantra of revenue as the only metric.  They didn’t focus on optimizing valuation – even though it’s how they make a living – because that would have meant going against the common wisdom – and it cost them.

True low value exits tend to happen when there is perhaps great engineering, and absolutely no marketing.  I made this point in my Israeli rant recently and it holds true here.  Great products are meaningless unless the world values them. How many times do we need to see a company with $50M invested sell for $10M or less before we figure this out?  The buyer saw value in the IP – but didn’t see any multiplier factor – a direct result of improper or non-existent marketing.

Final point – value isn’t transferable.  As soon as Data Domain and EqualLogic were integrated, their value shrank down to the levels of their acquirer, making a dollar a dollar once again.  Too many people forget that.  The only acquisition that makes sense is done based on the valuation of the acquirer – not the acquiree.  EMC did NOT become worth $2.4B more by buying Data Domain on day one – they were worth less.  As Data Domain adds revenue and earnings to the EMC pile, that value is multiplied back.

Go to the App Store and search ESG.

—-Update:  Try not to be confused about the other ESG – rap group Everyday Street Gangsta.  I don’t think they know jack about IT.

Louis Gray recently blogged on the topic (quite brilliantly) and clarified some thoughts for me.

In short, the reason there is too much regurgitated crap out there is Google.  The pay per click advertising model, made so successful by the big G, is why there is such garf in the form of news or analysis.

The model is based on clicks, clicks are based on eyeballs, and eyeballs are based on popular topics.  So there are now companies out there that do NOTHING other than observe the most frequently searched terms, then find/write/hack up a piece of crap that contains all those terms so that you when  you click on that link, you’ll read said hunk of crap and hopefully click an ad for something else.

Advertisers want the eyeballs, so they don’t care if the content is garbage, stolen, or whatever.  They just want to make sure that if you surf Tiger/Porn Star/Nike you see a Reebok ad.  This is the game that we play.

The problem occurs in areas where the reader might be motivated by something other than a click to an advertiser – where they might actually want some news and/or analysis or god forbid, data.  The CCFs (content crap factories) don’t “do” analysis or data.  They regurgitate garf surfed from somewhere else.  One of the telling quotes for me mentioned in Louis’s blog was from Google’s DeWitt Clinton, who posted to Twitter, “Don’t worry. Save some time. Your story doesn’t need a shred of truth to it. It will be retweeted just the same.”  In which case, where does the responsibility lie?  There is none, so it lies nowhere.  More interesting perhaps is the thought about the inverse – instead of dumbing down to meet the masses, shouldn’t we really focus on smarting up to meet the right audience?

The current model is based on the lowest common denominator – getting as many of the unwashed to the site, with no regard nor care for who is clicking the ad.  Isn’t that ass backwards?  Wouldn’t Reebok pay MORE for me to click their ad than the crackhead down the road?  It seems to me, the advertising model should be flipped upside down.  We should focus on WHO the actual clicker is, not how many we get.  Charging the same for a click from a senior IT person as we do for a night student doing research is moronic – but that’s what we do.  So, until the motivation changes, we shouldn’t expect the crap factories to change what they are going – instead, it will accelerate.

So my question is:  In areas of non-TMZ hollywood stupidity – say, in IT, for example – is news, analysis, and data “worth” anything to the “individual” reader?

In order for the likes of ESG to monetize (a.k.a. stay in business) legitimate valuable content, we are forced to NOT put it all into the public domain.  We don’t support an advertising model.  So we live in a hybrid, where we attempt to put what we can into the public domain so that hopefully that public finds us credible and valuable, but respect the fact that commercial entities pay us for our content value – thus we’d be morons to bite the hand that feeds us and give it all away.

Should we consider a mass market advertising based approach?  Would that naturally force us to become a crap factory?  Should we go the other way and open up all our analysis and data to the individual for a fee?  Would anyone pay?

My fear is that as a society, we’ve again gone too far off intended course.  Unplanned use models for the net and social web have created a dumbed down society of content readers.  Do we need a tech version of TMZ?  Didn’t Byte & Switch prove that we don’t?  I’m all for entertainment, but is anyone really going to make a critical IT business decision based on the latest Lady Gaga goof up?  Lord, I hope not.

Everyone has a voice and an opinion.  The net makes the shy and meek into Superman.  People are brave in their online persona, but wouldn’t stand up and argue their point in a true public (i.e., actual) forum – mostly because they are totally full of shit.  They have no basis, no facts.  They spout crap because they can.  While I’m all for freedom of speech, I’d prefer to elect to walk into Hyde Park corner – not be fooled to listen because the speaker planted the proper keywords.  What if I went to listen only to find out that their dissertation is not actually on “why the war on drugs is an enormous mind control waste of time and money”, but instead that “the devil can be found in a Little Caesar’s pizza”.  I can’t get that time back.  Plus, I like that pizza.

Discuss.

There are interesting things at play here.

First, the disclosures:

- ESG, the company I founded, is a Research, Analysis, and Strategy firm.  As such, in some ways we theoretically compete with Gartner.  In practicality, we don’t.

- A more honest disclosure of the above is that ESG doesn’t compete with Gartner, as we serve very different purposes.  A truly honest disclosure is that I am wildly impressed and completely jealous of Gartner’s ability to drive revenue the same way the mafia does – by veiled threat.  The difference is that the threat of the mafia (in a protection scheme) is physical while the threat of Gartner is market muscle/economic.  I would love to be that powerful – although if I were I’d like to believe I would not abuse the power – which in my opinion is the true crux of this issue.

- I have never met, nor heard of ZL Technologies until this lawsuit – although our analysts have.  I am told, that the company has some cool stuff, but is run by a lunatic.  I do not know if CEO Kon Leong is actually insane, or brilliant, or acting, or something else.  But I love the fact that he’s spending a lot of money on this issue keeping me entertained.

Here are the realities of the situation – IN MY OPINION (for those of you in the legal profession):

The laws of the land protect the opinion of people.  You can’t legislate what people think.  This, in essence, is Gartner’s defense, and ultimately why it will most likely prevail in this matter.

What is more interesting is that in its defense, Gartner exposes what everyone in the industry already knows, but are incapable of doing anything about – the fact that Gartner’s opinions are largely unqualified.  They market expertise and data – i.e., fact, but defend with opinion.

I can only speak about the Gartner I know – the IT Gartner that plays in the industry where I play.  For all I know the Gartner analysts, research, etc. in their other markets might be absolutely brilliant, and the value they bring to their customers and society in general unparalleled. Judging by what I see in their IT practice, I find it doubtful, but one never knows.

What Gartner is, but can never say, is a market “influencer,” to an envious degree.  What the Magic Quadrant is is an absolutely unscientific – but awesomely powerful – “tool” with no rhyme or reason, no scientific merit, and no disclosure.  It’s a self-interpretive slide that leaves the reader to judge the meaning of seemingly random dot placement.  Gartner does not defend (or contends it need not defend) the placement of those dots, for that placement is the opinion of the placee – namely the analyst responsible for said market analysis.

The problem, as I see it, is one for a much different court than a civil court.  It’s really about the FTC – because opinion isn’t the issue here.  I’m all for being able to toss your opinion around as one wishes.  The problem is one of deceptive business practices.

If you net out the whole issue it comes down to this:  Gartner has created a massively powerful perception of what I’ll term “qualified expertise” in the eyes of the mass market IT buyer (the people who write checks to vendors for billions of dollars).  Note:  They are absolutely brilliant at being able to accomplish this – and my guess is that at one time, that perception was merited.  As such, they wield incredible influence on companies that do business (or attempt to do so) within those market segments.  They have the power of business life and death sometimes.  They are the emperor – they can actually affect who wins, who loses, who lives, and who dies.

No rational person would look at the effective equivalent of a rorshach test (the MQ) and make any substantive decision based upon it, because there is no valid meaning in it.  It is subjective.  It, for all intents and purposes, may be thought provoking but it is by itself meaningless.

Further, if you were to look at an industry segmented Magic Quadrant that showed 10 companies or technologies with some clear winners and clear losers in an area that you were responsible for, you would put SOME level of merit into what the results/placement of the dots held – ranging from none to total belief.  The level of merit you place on that would depend on your TRUST of the expertise of those who present it.  If you have a trust relationship with a brand or a person then by default, the (perceived or real) credibility of that “data” or “input” is higher than those who have no such relationship.

For example, if you were investigating a major server purchase, you might very well look to see what Gartner says about the players in that market.  You would probably take a look at their MQ.  If that MQ showed vendor A up and to the right and vendor B down and to the left, you might reasonably assume that the brilliant experts at Gartner feel vendor A is superior to vendor B.  You might place a significant amount of credence on that assumption and it might truly influence your decision making.  If, however, you were to KNOW for a fact that the dots were placed by chimpanzees as part of a scientific experiment, you might not hold that “data” in such high esteem.  Since you don’t know that, you might be making a decision based solely on the perceptive expertise of the provider, with no actual insight into whether that perception is merited.  You simply ASSUME that the expertise behind the decision is valid and merits the result.

This, in my opinion (saying that a lot, aren’t I?) is the whole enchilada.  Is perpetuating and even actively attempting to foster the perception of expertise where little or none actually exists tantamount to fraud – or at least deceptive business practices?  I don’t know the law, but I know what a skunk smells like.

Allow me to say what most cannot or won’t – there is virtually no one within the IT industry itself that believes Gartner has any value outside of its market influence.  No one that I know pays Gartner for their expertise in any aspect of business.  There are no CEOs who call on Gartner for advice as to how to run their business.  There are no people in R&D calling on Gartner to determine what they should build into their next set of offerings.  There are no marketing big wigs calling Gartner to get help with messaging and positioning.  There are no market researchers who call on Gartner to sift through data for analysis as to why something will or will not happen, only that it did.  They use Gartner data if it makes them look good, and don’t if it doesn’t.  They use a quote if it makes them look good, and don’t if it doesn’t.  End of story.

Further, people in industry generally do not like dealing with Gartner – they don’t pay them for help, they pay them because they feel they have to.  They get no value generally, but the potential of garnering negative value is too great a risk for them to ignore.  In short, you pay Gartner to hope to end up in the top right of the quadrant.

I know this first hand – I was a customer of Gartner.  Virtually every ESG practitioner was also a customer of Gartner.  The stories are fairly universal – and they are the same stories told privately by most every executive of every vendor in the IT space.

This came from one of our analysts – and I think it’s a fair representation of many in our industry:

“In a prior vendor-side role, I was in ZL’s position – my company/product was consistently placed in the niche quadrant for a few years running without an interview or review by Gartner (no facts to base their opinion on).   I was able to prove (with a Gartner ombudsman) Gartner’s complete incompetence in constructing his (the analyst’s) MQ year-over-year as I had red-lined documents and an e-mail trail pointing out incorrect information in the previous years’ reports that he regurgitated year after year verbatim.  His response was that we should be happy we made the MQ at all (Gartner was giving us ink).  I lost all respect for Gartner after that.  The analyst (a very long time, very entrenched “name”) was “let go” soon after … no idea if it was related.  Still, the company I worked for had little recourse.  The worst that we could do was to drop our Gartner subscription.”

No one wants to pay protection money, yet they do.  Given a choice, they wouldn’t.  No one stands up to the mob, out of fear.

Allow me, at this point, to reaffirm my absolute unabashed jealousy of Gartner.  Who wouldn’t want to wield such power?   There are not many companies I can think of where the customer hates them, gets no value, and yet still gives them piles of money.  The only ones I can think of are monopolies – or governments.  Hmmm.  That is power.  Of course not all power is used for good – much is used for evil.

My problem with Gartner is simple – they simply do not live up to their perceptive level of expertise – at least in the markets where I live.  Their people are not practitioners of the art normally, which is why they can’t really bring any legitimate value to industry.  Their people simply have not stood in the shoes of the people who give them money.  That is not to say they don’t have very smart people – they do.  They also have a lot of complete and utter idiots.  The problem is that it’s very hard to tell where the “intelligence” comes from – unqualified idiot or brilliantly qualified person.

So the real question is,  if Gartner’s influence is based on an invalid perception of expertise, and Gartner knows it, does that equate to a deceptive business practice?  Since the result of this ends up in the case ZL is bringing – that Gartner is using an unqualified invalid perception of expertise to negatively influence the ability of ZL (and everyone else in that position) to conduct commerce.

What is the recourse for those affected by this practice?  Nothing really.  You could sue the mafia for shaking you down for protection money, but you would lose.  It’s your choice to give them your money.  You decide the value.  ZL is suing the mafia.  The judge will most likely say, sorry – you don’t have to pay them if you don’t want.  That’s the only recourse industry has – they can stop doing business with Gartner.  The reason they won’t is obvious – fear.  It’s the same reason they do business with them to begin with.

The really bad part of all of this is that Gartner doesn’t have to be doing things like this.  They could refill their ranks with qualified experts.  They could add logic, reason, and disclosures to their MQ choices.  They could legitimize themselves – and then they would deserve the influence they command.

The reality is that they probably won’t – and the reason why is simple: money.  They are public.  Idiots are cheaper than experts.  Plus, they don’t have to.  They are protected as long as their influence on the buyers exists.  There is no incentive for them to do anything except propagate the myth of expertise.  People are going to pay them because they don’t want a “labor dispute.”  It’s a cost of doing business.  Why add value if it doesn’t matter?  The only way this “family” is broken up is either through a massive industrial backlash (i.e., all the big guys band together and publicly call Gartner out) or a government intervention.  Otherwise, I’m afraid ZL and all the rest are hosed.

The only way ZL wins is if someone with enormous pockets, who cares less about Gartner, and who themselves wield huge power and influence in the market decide to join the party.  I’m thinking Larry Ellison would be perfect for this role.  Oracle and ZL have a relationship currently.  That would make things really interesting.

I love the Israelis.  As a people, as a culture, and certainly as an engineering powerhouse.  I love their will.  I love their passion.  I love that they can be surrounded (literally) by the worst of human competitors, and continue to smile.  I’ve seen dozens, if not hundreds, of Israeli tech startups over the last ten years.  They tend to follow one of two paths.  The first is where they struggle to embrace the realities of the global markets (i.e. the U.S.) and go the way of Exanet.  The second, the “victorious” case, is where they embrace those realities to varying degrees and exit – with a small technology valuation selling themselves to a bigger fish – typically in the $40-150M range.  Path two is far better than path one, but rarely do you see these types of entities end up with home run kind of exits (not that I’m actually saying 40M bucks isn’t any good, but it’s all relative.  I’d shoot you for $40M, no question).

The problem in either outcome tends to emanate from the same place: the belief that a company in IT/Tech over the last 20 years can be truly run from Israel.  They can’t.  I am an unabashed fan of all things Israel – but I’m a realist as well.  You can make great things in Israel.  You can sell to your army buddies in Israel.  You can raise money in Israel.  You can hire loyalists who will work like dogs and build stellar products in Israel.  But you can’t grow a big IT/Tech company of relevance in Israel (with very few notable exceptions, of course).

If you want to be in the IT space, like it or not, you need to be a U.S. company.  That doesn’t mean you can’t start in other places.  It doesn’t mean you can’t ship your winnings back to other places. It doesn’t mean you can’t develop in other places or sell in other places – it means that if you want to be a integral part of the “game” you have to play it where the others do and unfortunately, that’s here in the good old U.S.A.

Non-US tech firms tend to be ignorant to the ways in which business in the U.S. is really done – much in the same way that U.S. companies are often moronic in the way they assume business will be done internationally.  The difference is that if you can conquer the U.S. market, you can screw up internationally and still make a giant pile of dough.  The reverse is simply not true.  (I’m not making value judgments here – I’m simply stating facts).

There are tons of companies that have had huge financial success in the U.S. – to the tune of billions of dollars – that are complete and utter idiots when it comes to their international operations – but who cares?  They already cashed the checks.  Big piles of dough help you get over your inadequacies or failures in “foreign” markets.  It’s easy for a U.S. CEO to think “those French, they don’t know anything about how to conduct business.”  The fact that it’s really the U.S. CEO that has no idea how to conduct business in France (or Asia, or New Zealand, etc.) is easily dismissed as the CEO steps off of his Learjet.  Unfortunately, the reverse is seldom true.

Companies that think too provincially tend to believe that what they need to do is:

1. build the best gizmo ever (regardless of whether or not any market demands such a gizmo)
2. go show the gizmo to the power brokers, namely the major US OEMs
3. wait for the bidding war to ensue

I can’t count how many pitches I’ve heard over the years that invariably include the statement, “and then we’ll get an OEM deal with Dell, unless HP grabs it first.”  When I explain to them that OEMs such as Dell are pitched about 1,000 deals a year, look more closely at 100, look very close at 10, and end up doing a deal with 1,they think I’m crazy.  ”We’ll be the one then, our stuff is great.”  Ugh.

They tend to open up U.S. operations as a sales and systems engineering (support) organization – usually with far too few qualified people and a grossly underestimated set of assumptions on how long, how hard, and how costly mercenary selling efforts are.  Therefore, they put a team in NY (even though the LAST people on the planet that are going to buy anything from a crazy Israeli startup are in NY usually), a team in San Francisco, and then wait for the orders to roll in.  Sometimes they hire a U.S. sales head, who more often than not is completely the wrong person, who then goes and hires a bunch of sales guys without a clue as to what they should be selling to whom, and end up creating nightmare support and engineering problems back in Israel.  The engineers think the Americans are morons and the Americans think the Israelis can’t build stuff that works.  It’s a no win situation – and both are at fault.

Eventually, after these efforts prove futile, those with the ability to raise more capital realize they can’t commute to the U.S. and expect to get anywhere.  They need to be here.  Worse yet, they need to open up their minds, wallets, and let down their guard.  They need to invite non-Israelis to the party.  Many times, the Israeli founder will relocate  to the U.S. – but that almost NEVER works.  You can take the business person out of Israel, but you can’t take the Israeli out of the business person.  Israelis are strong willed people who tend to attempt to inflict their will on the U.S. business community.  Many actually can do 90% of the jobs inside a company better than each of the individuals they hire – but they can’t do them at the same time.  Bad idea.  The best case is when that founder comes to the U.S. – not to set up Haifa west – but instead to help hire the right U.S. CEO, who needs to hire the right U.S. marketing chief (a more difficult and more important hire than the CEO most of the time, in my humble opinion) and the right sales head.  They need to bring in U.S. money most likely (although there are tons of quasi-Israeli/U.S. money companies).

Startups in general face a brutal maturity ritual, no matter where they are from – the transition from what they “were” to what they need to become.  Changes in people, culture, and process are hard enough in the same city and same building where you started – they are brutally hard when you add completely different cultures and 9,000 miles.

Israelis in general are a pragmatic people.  They believe that since their stuff is the best, that is enough.  I know differently.  One of the most hated things in the life of an Israeli cum U.S. tech company is marketing. Engineering is art and science.  Marketing is bullshit.  Alas, while truth and engineering creates value, bullshit jacks that value into the stratosphere.  Call me crazy, but I’d rather be full of bull if it means a billion versus a million.  If a company is not spending marketing dollars on par with engineering investments, they are never going to optimize their value. Sad perhaps, but true nonetheless.  I can prove of which I speak, lest you don’t believe me.

There are some fantastic success stories that have come out of Israel, and there will be more.  But history has taught us that life is not fair, and business even less so.  For every Checkpoint home run there are handful of doubles (XIV), a dozen small wins (Files-X, Diligent, Kashya), a hundred waiting and hoping (Mellanox, Voltaire), and a thousand left for dead.  The biggest home runs of all have come with the combination of Israeli skills and US based companies – including EMC, IBM, Microsoft, and others.

The odds improve dramatically the earlier the company faces reality, opens up (in earnest) in the U.S., and spends the right amount of effort truly understanding the market dynamics at play.

That got me thinking – if it’s true, and it sure seems logical that it is, then how long will it take portfolio managers to  start going right into IT to look for these long term indicators?  Bad IT = bad company most of the time, and bad companies tend to be good stocks to short.  The opposite is probably true as well.  If you can uncover an excellent IT organization, you most likely have stumbled upon an excellent organization in general.  If you compare that company with its competitors, and find the competition is weak in IT, you probably have a stock winner.

I’m going to think more about this – it’s a very interesting metric that could be of value to my friends in IT as a way to elevate their strategic value inside their organizations.

One of my many business books is about why startups fail.  Since I’ll probably never write that one either, I figured I’d start forcing myself to do it the lazy way – via this blog.

Here’s the poop:  Over the last 10+ years in this business, I’ve tracked (some much more closely than others) about 1,000 companies.  Most of those were startups.  Most of those are gone.  Prior to ESG, I spent the previous 12+ years in various companies as an employee and as a founder.  Some of the places I’ve worked have hit spectacular heights (EMC) while others have blandly moved along and even more have died.

There are 1000 books on how companies succeed and how they fail.  There are management books on every nook and cranny, but I haven’t found many that really help the entrepreneur.  I think Blue Ocean Strategy and Crossing the Chasm are fantastic – mostly because they are focused on some practical realities that, once you read, they make you say “duh, that makes sense.”  That’s useful.

I’m not that smart, but I am observant (in business, not in anything relevant to my wife – I’m blind and clueless in most things in that regard).  I’m also fortunate enough to have piles of data.  You don’t have to be an idiot savant to pattern match if you have the right data.

So, I’m going to start spitting out (in no specific order) things that, while obvious to some, cause stupendous problems for many.  I would love your commentary, thoughts, and, by all means – your ideas on other things that make perfectly well intended startups go the way of the dodo.

Fail Factor #1 – Zealotry

A zealot is someone who believes so strongly in what it is they are doing that it is all consuming for them, and it becomes contagious.  In a world dominated by followers, a zealot stands out.  Anyone who believes anything so strongly will stand apart from the wishy washy masses – be they religious, political, technological, or any other kind of  zealot.

When political or religious, society can easily dismiss the zealot as a radical or lunatic.  When the zealot lives in technology, they get funded.

Often, it takes the perserverence and unfettered self-belief of a zealot to get a startup off the ground and funded. Sometimes, the zealot can use their uncompromising belief in themselves or their purpose to lift their organizations to huge heights, but more often than not, it is that very same zealotry that kills them.

I’m a huge fan of the entrepreneur, inventor, developer, etc. having absolute belief in what they are doing.  It’s been rare in my experience where a true startup zealot goes unfunded. It happens, but usually because of extreme unforeseen environmental conditions (like when the global economy melts down and VC’s have lost 90% of ther portfolio value).  So the positive lesson here is that zealots get funded.  If you want money, best to rise above the unwashed masses, be noticed, and let your beliefs leak out of your pores in front of wishy-washy lemming VCs with piles of dough.

History is littered with companies with good ideas, perhaps even great ideas, and the ability to execute on those ideas – that don’t get funded.  Zealotry is the X-factor when it comes to getting a startup funded.  If you have it, your odds are much higher than if you don’t, simple as that.  Zealotry works when raising money – but not when growing and sustaining a company.

Entrepreneurs often confuse raising money from VCs with absolute validation that they are right.  That is a fatal mistake.  VCs are gamblers – if they knew you were right, they would join the company.  They don’t know if you are right, so they spread some dough around to cover the board.  Getting VC money means you excited them.  You excited them because you are a zealot.  It has NOTHING to do with being right.

A VC wants the return that happens when a company succeeds – but they make bets on zealots.  The zealot uses the funding success as proof that they are right – often closing whatever small crack existed for the zealot to accept external inputs and change.  Bad recipe.

For those who do get funded, the zealot can help motivate and carry a company early on.  They can inspire and motivate to impossible levels.  People believe in others who believe in something so strongly that they can’t conceive of any way that their thinking can possibly be wrong.

That’s what kills them.  By their very nature, the thing that for some period makes a zealot successful, ultimately leads to their demise.

Zealots don’t leave wiggle room.  Their way is the only way.  They firmly believe (and by default make everyone around them believe) that whatever thing they have in their brain is the only possible way to succeed.  While they may be right, they are blind.  They are blind to their surroundings – they are blind to change.  The zealot succeeds by never changing their approach or their mind – which is also why they fail.

The zealot is so immersed in the belief that they are right that they can’t adapt to situational change.  In a static world, the zealot would reign forever.  In a dynamic world, the zealot will implode – it’s only a matter of time.

You can start a business with zealotry, but you can’t sustain one.  Passion yes, zealotry no.  Passion leaves wiggle room to adapt – zealotry leaves none.  Even arrogance leaves cracks.  You can be an arrogant jerk, but that doesn’t mean you necessarily actually BELIEVE your own bullshit.  The zealot believes.  The zealot knows.

Have you noticed that many of the stupidly funded companies – the ones that raised $100M bucks or so – are the ones with truly excellent zealots?  You can’t raise that kind of money without having one.  Have you also noticed that they almost always are written off for IP table scraps?  Same reason.  Remember Cereva? Incipient? Scale-8? Nishan? Giant Loop?

Even in well oiled successful machines, the zealot will eventually crumble under the weight of their own beliefs.  Moshe Yanai, one of the most brilliant minds ever in the IT business, fathered the Symmetrix at EMC.  It was wildly successful for many years (still is).  He was so consumed with the Symm, that anything that wasn’t a Symm was somehow bad.  If Joe Tucci didn’t eliminate Moshe, EMC would never have sold any CLARiiON – now a huge piece of their business.  The zealot wants to change the world to sustain their beliefs.  The truly smart business person adapts their actions (and sometimes their beliefs) to sustain their world.

The moral?  Believe in yourself 99%.  Believe in your mission 99%.  Always leave yourself 1% open to change. The zealot is rarely, if ever, successful forever.  The passionate person able to adapt to new realities – even when they fly in the face of what they believe – is the sustainable mental model necessary for long-term success.

The same is true in the wild, wacky world of IT.

IT can be the most boring industry in the world for months on end and then out of nowhere, it gives us things that are stunningly shocking, interesting, and intellectually stimulating.  It gives moments of joy, confusion, and staggering stupidity.

I’m thankful for the HP vs. Cisco war that will keep us interested from every perspective for at least the next two years.  This is as big as it gets in terms of ramifications.  I don’t know how it will all end up two years from now, but I can guarantee it will leave carnage, blood money, and business violence.  It will be way cool.

I’m thankful for VCE, speaking of Cisco, for putting together the super band – and waking up all others to the power of giants coming together for the common good – their own common good, of course.

I’m thankful for HP hiring Dave Donatelli and causing a little excitement and a whole bunch of “wait and see” what’s next.

I’m thankful for really great companies that continue to evolve and remain really great companies.  You can hate EMC the way most non-New Englanders hate Tom Brady (or the way New Englanders hate Derek Jeter) – but you are an idiot if you don’t respect their abilities, results, and the way they play their games.  Same for NetApp and Oracle and HP.

I’m thankful that Alan Atkinson is shaking things up at Xiotech.  They were starting to get boring (again).

I’m disappointed in IBM and Pillar.  IBM, because they could be the ones kicking butt and dictating the game, but they are sitting on the sidelines and that bums me out.  Pillar because they have Larry, Larry’s outrageous dough, and they still seem stuck in neutral.  They should be much further along.  I’m not that smart, but if I had Larry’s dough, I’d own a market by now (or maybe a country).  I’m disappointed in Egenera too.  I think they had something but have waited too long.

I’m thankful and truly awe inspired by Data Domain – not just for what they were able to pull off, but the way that they have kept it going (accelerated, truth be told) inside of EMC.  I’m also tremendously impressed at how EMC has made it work.  I would not have put money on it, but I was wrong.  I’m thankful that this deal was able to shine a spotlight on the fact that we are morons – that we really shouldn’t keep 11 billion copies of the same video of Brittany Spears getting out of a limo.  I’m hopeful that 2010 will show us how to continue that thought – into primary capacity.  I’m thankful Ed Walsh is now running Storewize as he always ends up doing something interesting.  I’d be lying if I didn’t mention that I’m disappointed with Ocarina thus far.  It seems they have something, but are forcing me to figure out what it is – and I’m too lazy for that.

I’m thankful that Dell has decided to move out of the small company, big volume business and step up their game.  I like when there are more giants making things interesting globally.

I’m thankful that it now appears that our industry will continue on, and not die in the face of the global economic meltdown.  I’m also thankful that the meltdown has forced us to become better at what we do.  Sometimes you need a slap in the face or you keep on doing bad things – like wearing a mullet or keeping that ponytail that makes you look like the comic store guy in the Simpsons.

People should be uncomfortable sometimes.  Complacency sucks.  That’s why I overeat to such a reckless degree on Thanksgiving.  I don’t want to be complacent.  Plus, it gives me an excuse to nap.  My kids will shove forks in their eyes to avoid napping, but I’d pay money.  Kids are nuts.

I’m thankful for the truly wonderful people I’ve come to know in this business.  I’m also disappointed that there are still too many jackasses in the world.

I’m thankful that there still good, decent human beings around.  Specifically, I’m calling out my little sister, Kristen, who with two boys already (8, 6) is adopting my new niece, Samantha (14-20 months – no one really knows), from Ethiopia.  We hope she’s here by Christmas.

Have a nice weekend.

Eventually the prom king and queen end up old and lame, don’t they?  Isn’t that what happened in “Back to the Future”?

HP just picked a fight with the big jock Cisco, and now everyone is going to the parking lot to see what’s going to happen.  There is no romance involved, as HP doesn’t want Cisco’s girl (sorry EMC/VMware), it’s more about money, pride – and maybe a degree of monarchy toppling.

As in the movies, a lot of people who are used to the king being the king assume the challenger will get their butt kicked and that tomorrow the king will be back giving wedgies in the hallway.  Meanwhile, there are a ton of supporters for the challenger that have heretofore been too afraid to show that support – lest they become a wedgie recipient.

After HP gets their hands on the 3Com/H3C stuff in earnest, it will be fantastic to see if the silent lower castes step up to be heard.

Cisco is in a pickle, me thinks.  As magnificent a company as they are, they find themselves a bit boxed in by their own success.  They have the unfortunate disadvantage of being so wonderfully predictable, that Wall St. has built value models that aren’t very flexible.  Cisco makes 65% gross margins – which is both awe inspiring and terrifying.  It has been possible because Cisco is one of the greatest run companies in history.  It has been sustainable because as a brilliantly run company, they have effectively controlled the market.  You can charge what you want if you are the only game in town.  When the house is on fire, you don’t quibble on price with the guy who owns the water supply.  You might not like it, but what are you going to do?  There is only so much beer one can drink.

Up until now, Cisco has been able to effectively control their market, and thus been able to sustain 65% margins.  The margin knob is a violence inducing knob.  People kill to turn it up, and jump off buildings when it turns down.  Enter Wall St.

HP, through H3C, now has a set of core switching products equal to, or better than, Cisco’s stuff.  While I don’t expect people to start tossing  perfectly good Cisco gear out their windows, a company like HP is going to get the ear of the Cisco buyer.  Once they have that ear, HP is going to tell those buyers the following:

“Cisco is great (they won’t mean it).  We have these products that are better – and they are 40% less money.  We are HP – you might have heard of us.  All we want is to be your second supplier – just give us a taste, because if nothing else, it will help you keep Cisco honest.”

Customers will say, “OK”.  They will give HP a taste.  They will spend 5%, then 10%, then more on the HP stuff.  Then the fun will begin.

If the stuff works as I believe it does, the next deal will get ugly for Cisco.  Once HP proves its stuff is up to snuff, Cisco will have to justify why they have a 40% price premium – which they won’t be able to do.  Cisco doesn’t have the product portfolio breadth that HP has, so it’s not like they can bury margin in one place and make up for it elsewhere – like in servers!  That will leave Cisco with a bad decision – either drop price which means cut margin, or lose share.  If Cisco loses 10% margin, it will turn into BILLIONS of dollars in cap value losses.  If they lose 10% share, it will be a bloodbath.

HP, on the other hand, can pull this off because of the following:

1. They already have incurred the cost of sale – they are already there.  They have to add true core data center networking expertise, but they don’t have to build a “company.”  They have a trust brand to die for – they will get the benefit of the doubt.
2. HP makes 12-22% margins – so even selling at 40%+ less than Cisco, the HP margins realized on this kind of stuff will be 35-50% – 2-4X their average.  I’m no math wiz, but I see a distinct advantage here.

So will everyone drop their Cisco dance partner?  No, of course not, but there is a new kid in town and he doesn’t appear intimidated by the king.

See you after school.

After reading the official presentation, it does include H3C and as such, makes piles of sense.  Here is why:

1. Forget 3Com as you know them, they don’t bring jack to the table as far as I can see.  The key here is H3C.  H3C has AMAZING piles of fantastic technology and products – from core switching that rivals – and dare I say – surpasses Cisco in many ways, to video surveillance technologies, face recognition, closed circuit TV stuff, security products – and oh, by the way, how about an extra 1/2 billion dollars in STORAGE gear sold only in China – plus another $1B in network/security revenue.
2. 3Com was the public company entity that had exclusive rights to sell the H3C stuff in the Americas and Europe, while H3C maintained rights to sell in Asia Pacific.  3Com didn’t sell anything from H3C, except old crappy 3Com stuff.  That’s why this deal is so sweet – even though H3C sold nothing into the Americas or European markets (to speak of) – the company STILL sold over $1B!  Imagine what can happen when you take this stellar set of products and technologies and put it into the hands of HP’s global sales force.  3Com’s TippingPoint security stuff is good stuff – mostly because 3Com proper left them alone.

I’ve been to the H3C facility in Hangzhou (considered one of the nicest cities in all of China, FYI) – and it is nothing short of impressive.  Matter of fact, that’s where I was sitting at 6pm in a conference room in a meeting when music started playing through the loudspeakers.  It was most distracting.  After 5 minutes I asked my host why it was happening, and he told me that they needed to do this periodically to remind employees to EAT!!!  Apparently there is an issue with people dying at their desks getting work done while forgetting to eat.  It was both frightening and impressive.  It’s a culture of success – and HP just became the proud new parent of it.

The issues that H3C faced were all about being able to bring their products into foreign markets that they simply don’t understand.  3Com was supposed to do that, but they couldn’t/didn’t.  HP can and will – and it will be way cool to watch.

I always thought IBM would be the one who really started a war with Cisco, but it’s clear that HP has decided it is going to be the one.  Who said IT was boring??  Oh yeah, it was me……well, not anymore!

Having said that, it is what it is, and thus, here’s what will most likely now happen:

I have to believe that the EU – so violently in agreement with all things open source, will see that they screwed up and bless the deal.  Along the way, Sun will continue to bleed to death – and it won’t have a blessed thing to do with mySQL.

Assuming the deal eventually passes, (which in and of itself, I still find nuts – but not because of something as goofy as mySQL – more like, it’s losing a trillion dollars….), the EU has pissed off Larry.  Larry is one of the few people on the planet that it really isn’t good to piss off.  He has more money than France – and he holds a grudge longer.

mySQL will remain free to all that want it.  Some will want to pay Oracle for commercial support – the same way they do with Red Hat – and Oracle will actually make money on it (unlike Sun).  Larry, however, will punish the EU by figuring out how to jack core Oracle licensing prices through the roof – because he has an effective monopoly at that layer and can do whatever it is he wants.  Suddenly the dollar’s devaluation will cause a run up in transfer costs, and the good people of the EU will pay.  Second, he’ll fire everyone he can in Europe, just because.  I’m telling you, this is not a guy to piss off.

Why is this all happening?  SAP.  Mark my words.  SAP is behind the battle here – and I’m not sure how EU companies can end up coming out ahead by irritating Larry.  Seems a miscalculation to me.

1. The normal industry reaction to a “super band” announcement “lifecycle” goes like this: denial that it matters, statements that it eliminates choice and that is bad, FUD that they will play nice together and customers will get caught in the middle, comparisons of monopolistic past practices, and finally inevitably ending up in some kind of Orwellian/Nazi occupation/cold war Soviet Union analogy (among the more pessimistic types).  The empire is under siege!
2. The reality is that this is good – mostly for VC&E, but also good in general.  There is a market segment that wants these guys to dance together.  It’s at the very high-end and it’s a very enviable segment.  Saying it isn’t real is silly – it is, and it’s exactly why these three have become BFFs.  Do they want total world domination?  Of course.  Do they think this move will bring it to them in one fell swoop?  Of course not.  Love em or hate em, these are serious companies that are enormously well positioned and well run.
3. The world of IT works like this:  When big guys do something, smaller guys follow.  That’s why this is good for all.  VCE will get the big guys to adopt virtualization more ubiquitously sooner rather than later – which will trickle down to the rest of the market – all the way to the SOHO – sooner or later.  When that happens, transactions occur, and we all get a chance to sell stuff.  How can that be bad?
4. HP was first to respond – but they did it in typical HP fashion.  Here’s my example (marketing), with no disrespect to my pals at HP:
   1. VCE: “Announcing VCE – look at this incredibly attractive naked woman!!!”
   2. HP: “We have converged stuff too.  Notice the dress on the floor.  It was made from materials HP invented.  It was manufactured using HP’s patented technology that enables cloth fabrics to hermetically seal with polymers (coincidentally developed at HP Labs for NASA in 1974) able to withstand a drop from 87 meters…….You get my point.   I’d rather look at the naked lady.  VCE sold sex.  HP sold burn cream.  You don’t believe me?  Look at the Twittisphere during the VCE announcement, and watch the same community during HP’s:  zzzzzzzzzzzzz
5. The big guys will scramble to get their “unified” stories out – but they don’t need to.  99% of the stuff sold into this market will remain best of breed “piece parts.”    There is a reason VMware/Maritz were quiet – they have zero desire to poke their biggest channels in the eye (HP/IBM).
6. The formation of the evil axis will scramble partnership responses, however, and of course Brocade sits in the middle.  They just became even more attractive to the rest of the ecosystem.  I would way rather be lucky than good.  Others who look to gain from this?  Juniper and F5.
7. Emulex must be tickled pink.  They have been yapping about convergence for a while – and now they just got a huge boost in nomenclature association that can only help their cause.
8. If they are smart and can focus (they have more ADD than me), Verari has had a platform that has been custom built, best-of-breed for this movement.  The highest density, smartest server/storage packaging on the planet, IMHO.
9. Other blade guys are going to come to light – Fujitsu, HDS, etc. suddenly have Cisco to thank for making it more than a two-man game (HP and IBM).
10. Watch the next cool virtualization things start to appear – memory virtualization.  Being able to seamlessly use main memory in “other” physical machines will enable workloads to become truly virtual – and that has huge repercussions.  You won’t need 1TB of main memory in one box necessarily.
11. Having said that, look at what Fusion I/O and the crowd of next-gen SSD/Flash heads have – this VCE gig opens up a lot of possibilities.

So, in conclusion, lets give them credit where credit is due.  Every one of you would have done the same thing if you were allowed.  It was brilliant, and there isn’t anything we can do about it other than draft off of the momentum it drives – which could be huge.

In the infinite wisdom of corrupt politicians, all cell phone numbers are about to become public record.  So, if you didn’t like it when telemarketing dirtbags got around the “do not call” rules by having machines randomly generate calls to your phone (to tell you how your auto warranty is about to expire, a complete and total lie, for example), you’ll love this:  in 30 days your cell number will be available for all to see!!  Isn’t that great?

For U.S. Cell users, call (from your cell phone) 888-382-1222 and input your cell into the “do not call” database.  Then hang up and say, “f&%&Wng political a#4&$es”.

Shouldn’t we be allowed to know which politicians voted to let the dirtbags exist?  Shouldn’t we be able to get their phone numbers???????

On Thursday, I boarded an 8am flight from Boston to London – a very civilized time to travel abroad in my opinion. Much better than a god awful red eye. My CFO and his wife joined my lovely wife and I for a few days in London. We had some legal and banking stuff to do, and the fact that the Patriots were in town playing a game made the whole trip seem downright perfect.

We stayed at the Metropolitan London, a swank upscale boutique hotel that was quite nice. I met the bartenders promptly, as they are clearly my most important locals. A lot of love goes into the cocktails at the Met bar, I can attest.

My first observation was just how awful the value of a dollar really is these days. I’m not hopeful that it will improve any time soon, either. The U.S. government has done a lovely job of halting the economic free fall by printing new cash at a record rate, devaluing it as they go. It isn’t paying down any of the debt along the way, so it seems things are sure to get worse before they can get better. I think China may own us now, the way the bank really owns your house.

My 9am meeting came far too early, as it was really 4am in my mind. I sat with a few nice folk from Storage Fusion who have built a storage SRM SaaS service that seems pretty cool. It amazes me that others haven’t taken this approach yet – the barriers to success in the SRM space (or any new resource/management area) are fairly straight forward – cost and implementation. SaaS eliminates any operational/emotional commitment that a customer has to buy into. Making it so cheap anyone can afford it eliminates the “nice to have versus need to have” barrier. I might have been a bit fuzzy in the head, but hearing that these guys developed their model directly aimed at these issues was refreshing.

Walter and I went off to meet the lawyers and bankers and tax accountants while the ladies slept. Lucky ladies. We met up later at Harrod’s – which really is the most ridiculous store on the planet. They have everything – literally. The place should have its own zip code. My wife was in heaven. I needed collar stays (the things that go into your shirt collar to keep it from rolling up and flapping like one of those flying nun hats). “Bone or Sterling?” was asked of me. I didn’t know if the guy was making me a lewd offer or asking me how I was planning on paying. Apparently at Harrod’s you can buy collar stays made from bone – not sure whose bone, or what bone, but bone. Or, sterling silver because, well, you never can spend enough money on small inanimate objects no one will ever be able to see if they are used properly. Apparently you can buy a solid gold bar at Harrod’s for approximately $140,000. I didn’t.

Walter, Steve O’Donnell, and I went to the bar while the ladies went nutty. It was like catnip to a cat.  Their eyes changed, I swear.

Cab drivers in London have to have “the knowledge” in order to drive. “The knowledge” is effectively knowing exactly the most effective route to get anywhere from anywhere, at any time. It takes a cab driver 3 years to earn the right to take the test to see if they merit the knowledge. I have doctors that are half as smart as many of these guys.

We connected with big Vince Wilfork and his wife for a proper “tea” in the afternoon. It was magical to watch little British ladies eating little British cookies having little British tea while an 857 lb. giant tried to squeeze through the little British restaurant to eat some food. Vince is a human solar eclipse.  He took up several spots.  No one told him not to.

I saw more outrageously expensive cars in London than anywhere I’ve ever been – and that includes Miami and Beverly Hills.  Everyone in London must be filthy rich, because the low rent cars were all Bentley Flying Spurs.  I saw at least a dozen Rolls Royce Phantoms and Ferraris were a dime a dozen it seemed.  Astin Martin was well represented as the home team.

Sunday morning I slept in, after countless unnecessarily yet delicious cocktails, while others went to breakfast, apparently joined by one Harry Connick, Jr. They talked football. Harry is a Louisiana boy and big Saints fan. Saints are good this year, we play them in a month. Could be a problem.  I like when celebrities are normal and nice, and he was.  If I were a celebrity, I would be the kind people hate I think.  We packed up and headed to our next hotel, the Wembley Plaza (Hilton), which is a total dump, but it was 100 yards from the stadium.

The streets were mobbed with people wearing every conceivable NFL jersey, from Jim Brown to Don Mackowski. Apparently, the good people of England bought anything and everything related in any way to the NFL. It was excellent. It was hard to tell who was actually playing, the clothing was so random. I felt a cold coming on.

Tip: don’t call Bobby Moore Bobby Brown by mistake or otherwise when at Wembley. A cop almost beat me to death for making that mistake. I’m still not sure who Bobby Moore is, but there is a large statue of him there so he must have had a big goal in a big game I guess. You should also not refer to him as Roger Moore, although I thought that was funny. Apparently Roger Moore isn’t very good at soccer.

The stadium is enormous, but very comfortable. The weather was perfect. I ate fish and chips instead of hot dogs (they were delicious) and enjoyed the spectacle. The Brits did a first rate job. Fortunately the Bucs didn’t, and we crushed them. Lots of bewildered English trying to keep track of what was going on – most wondering why things kept stopping.

I went to sleep with a full on cold. Woke up with the sun blazing in my non-blinded Hilton window early, packed up and set off to Heathrow. I said goodbye to the wife (she headed back home), ate a cheeseburger that didn’t appear to be made from meat, and boarded the plane for Frankfurt to attend SNW.

Every German cab driver thinks they are Formula-1 racers and drive like lunatics.

I arrived at the Marriott Frankfurt at approximately 2pm. I felt awful and went to bed. By 2am I was destroyed. I ate some medicine and passed back out. I woke at 7:30 as I was to present at an Emulex press event – but knew I was in rough shape so I sent Steve O’Donnell my slide deck in case. I showered, dressed and went up for some tea. 30 minutes later, white as a ghost, I had sweated through my suit. Gross, I agree, but I’m trying to get across the level of horror here. I went back to my room, shredded my clothes, and got back into bed, not to arise for another 22 hours, at which point I rose, bathed, dressed, did my keynote, and headed home.

Jack himself is a very bright guy.  If he has a fault, it’s that he likes to get into the weeds technically – which in my opinion is the trouble with HDS – they love the weeds.  It was good to hear Jack talking about bigger global issues – something we don’t see enough of.

ESG’s survey of 480 North American and Western European IT professionals on the topic of desktop virtualization— technology in which a user’s entire desktop environment, including the operating system, applications, data, and user preferences, is hosted and managed in a central data center and accessed remotely by users—revealed significant early use of, as well as interest in, these solutions. In fact, almost 30% of respondents said their organization either already deployed a desktop virtualization solution or planned to do so within the next 12 months, while an additional 31%  had no imminent plans to roll out virtual desktops, but would consider it. Similarly, in two additional surveys, 23% of medium-size businesses (i.e., 100 to 999 employees) and 24% of enterprise-class businesses (i.e., 1,000 or more employees) cited “desktop virtualization/thin client initiative” as one of the top IT initiatives that would shape infrastructure purchasing decisions over the next 12-24 months.

So what is the appeal of desktop virtualization? By consolidating desktop images in a secure location and streaming them to end-point devices, these solutions allow IT staffs to improve service levels and satisfy regulatory compliance and information security requirements—all while maintaining a seamless end-user computing experience. However, the most appealing attribute of virtual desktops to a majority of organizations is the potential reduction of desktop operational costs. This is not surprising in light of the global economic climate over the last year, which has subjected IT budgets to unprecedented levels of belt-tightening.  Indeed, according to ESG’s 2009 Data Center Spending Intentions Survey, 62% of respondents believe that a reduction in operational costs will be one of the key considerations in justifying IT investments to business management teams over the next two years.

How can this data be interpreted? Clearly, organizations with larger, more complex, and more labor-intensive PC environments—as measured by the number of FTEs responsible for managing PCs and other various end-point devices— displayed a greater willingness to off-load either some or all of their virtual desktops, and the subsequent responsibilities associated with managing them, to a third-party provider. This has obvious capital and operational expense reduction implications: in addition to minimizing the amount of onsite equipment necessary to support virtual desktops, at least some of the dedicated PC FTEs could be redeployed to more strategic endeavors. On the other hand, the hours consumed managing end-point devices are more indicative of the sophistication of an organization’s PC environment in terms of applications, operating systems, and device types. The fact that the majority of respondents (65%) that spend at least 13 hours per client access device for annual maintenance would consider hosted virtual desktops in some form could signify that organizations recognize that there are user groups whose needs exceed the current skill sets of the support staff. The takeaway from these data points is that both the size and complexity of PC environments are key drivers of interest levels in hosted virtual desktops.

Perhaps one of the most interesting nuggets for those who plan to make their fortunes in the cloud is that among the early, planned, and potential adopters of desktop virtualization in ESG’s survey, more than half of these respondents indicated they would be amenable to a hosted virtual desktop solution.  Wow.

It makes sense according to my previous theories on apps in the cloud – the bandwidth isn’t as much an issue as it’s only shipping an image normally, and the universal connectivity it provides makes laptop explosions a non-issue.  The other obvious value is that IT can manage it – which by default means help desk supporting us from helping ourselves to stupid things will benefit.

Interesting stuff.

Off to London to do a little biz and then watch the Pats squish the Bucs, then I’ll see you in Frankfurt for a strudel and some nice apple wine.

As an avid observer of all things business model, as well as alternative dynamics to the status quo in general, and a fat guy, this fascinates me. On the face of it, this has absolutely nothing to do with ESG or the IT analyst world, but read the excerpt below from a NY Times op-ed piece on the demise of Gourmet. It sure seems this is relevant to our business along with many others.

“Holidays are getting close – anyone got a good broccoli casserole recipe?

The shuttering of Gourmet reminds us that in a click-or-die advertising marketplace, one ruled by a million instant pundits, where an anonymous Twitter comment might be seen to pack more resonance and useful content than an article that reflects a lifetime of experience, experts are not created from the top down but from the bottom up. They can no longer be coronated; their voices have to be deemed essential to the lives of their customers. That leaves, I think, little room for the thoughtful, considered editorial with which Gourmet delighted its readers for almost seven decades.

To survive, those of us who believe that inexperience rarely leads to wisdom need to swim against the tide, better define our brands, prove our worth, ask to be paid for what we do, and refuse to climb aboard this ship of fools, the one where everyone has an equal voice. Google “broccoli casserole” and make the first recipe you find. I guarantee it will be disappointing. The world needs fewer opinions and more thoughtful expertise — the kind that comes from real experience, the hard-won blood-on-the-floor kind. I like my reporters, my pilots, my pundits, my doctors, my teachers and my cooking instructors to have graduated from the school of hard knocks.”

ESG VP of Research John McKnight has been pushing this theory for some time.  Sure, he contends, we have to be open-minded and use new social media tools for our advantage, but, in a world where anyone and everyone can voice an opinion, real experience, real data, real insight, and real guidance will become increasingly harder to find and will be viewed as increasingly valuable by those who seek legitimate wisdom – the wisdom of practical experience.

In many ways, as a knowledge working industry, we’ve adopted the methods of the universally despised political media to extend our individual voices.  Whether on the far left or the far right, it’s become almost accepted that each proponent will flagrantly ignore the facts (often fabricating them), legitimate data and research, and conventional wisdom and simply belt out their opinion to the masses.  The outlets are everywhere today – from Twitter to the blogosphere – but where are the filters?  Who calls bullshit other than the opposing side?  Who is the arbiter of logic?

Traditional reporting, based with some semblance of integrity and fact, gave way to laziness – on the behalf of those “creating” reality and those of us absorbing it.  We are lazy because we let it happen – because it was cheap, dynamic, and “new”.

John’s point is that in a knowledge based society – or economy – it becomes inevitable that opinion based solely on an agenda and not based in fact or experience is beyond useless – it creates a vacuum of idiocy.  Every vendor has the right to voice their opinions as they see fit – but at least we know they represent the views (whether they admit it or not) of their employer, normally to put their company in the best possible light.  We accept that and understand it.  But where does the line get crossed from those who spout their beliefs when there is no science on which to base those opinions?  That sounds like creationism to me.  You can’t argue beliefs or opinion, but you can argue facts.

I’m all for alternative opinions and interpretation, and clearly I love a good argument – but only when we’re arguing from a basis of experience or a common set of factual conditions.  Otherwise, it’s like me arguing with my teenager.  He only ever wins if he lies, or simply wears me down.  He rarely, if ever, has fact or logic on his side.

There is such a thing as too much.  Since anyone and everyone can spout their logic, argument, or opinion without restriction, the good gets mixed up with the crap – and thus creates an over-abundance of “information”.  When that happens, the people who most need the experience and fact-based opinion are often shut out – as it’s impossible to weed through the junk to get to the gold.  In that case, apathy reigns – just as it has in the political world.  Just as it has done in the world of search.

Who wins when the ultimate consumer becomes apathetic?  The incumbent.  It’s true in politics and in business.  Apathy is the best friend of the incumbent by its very nature.  If it’s too hard to find the “real” truth, you settle for the truth you know.  That thwarts innovation and new ideas, and generally is bad for society.  It creates business monopolies just like it creates political monopolies.

So it begets an interesting question – will we eventually come full circle?  Will we pay to support those who base their wisdom on experience and data versus volume?  Did the newspaper industry have it right after all?  In some ways, the answer has to be yes, but where they screwed up was to ignore the dynamic shifts in the means in which people wanted to consume information.

The model needs to change – from every angle.

In my world, I’ve held the position that “content” is the least valuable thing we do – that our advice, based on our experiences, research, and knowledge – is what is valuable.  Mr. McKnight argues that by making our content free or close to it, we diminish our overall value.  I’m starting to think he could be right.

The fact is that in our little world, no one publishes better forward looking research on the markets we cover.  Our stuff is what companies should bet their businesses on – fact-based research with deep experience-based analysis – but the reality is that even those who pay for it, normally don’t.  It’s crazy, but it’s reality.  If people who already pay for deep fact-based content don’t aggressively consume it, how can we hope to attract those who don’t?  It’s an interesting dilemma.  If you make it freely accessible does it diminish the value or create more?  It’s a chicken and egg kind of thing.

I welcome your free, voluminous opinions on the subject.

When on the island, or off, I like to embibe occassionally in a nice Dark’n'Stormy – a fabulous Bermuda concoction of Gosling’s Black Rum and Ginger Beer.

Ginger Beer (which tastes like hell without a pile of Gosling’s) contains approximately 6 billion calories, so I have been hunting for a diet version.

I found a version in Jamaica that is good, but it cost me a ton to ship it (which I did).  I’m running low on supply.

The original cocktail was invented in Bermuda, and the original ginger beer was made by Barritt’s.  Barritt’s makes a diet ginger beer readily available in Bermuda, but I haven’t been able to find it in the U.S.

This weekend, feeling particulary bloated after several of the love bombs, I sent an email to the company asking where I might be able to find some diet.

I sent my query Friday evening at 7:58pm EST.  At 8:04pm I received a reply from Bruce Barritt.  Bruce and brother Fred are the 5th generation Barritt’s to run the company.  They are wealthy, they live in Bermuda (wonderful place), and by all rights should have been knee deep in their own concoction by then – but Bruce wasn’t.  He was working.  He was answering email from a singular fan with no possibility of adding any signficant revenue to the Barritt’s family coffers – at 8pm on a Friday night.

He wasn’t doing it because he had to.  He did it because he wanted to.  And this, kids, is the lesson of the day.  Bruce clearly loves what he does.  When someone loves what they do, it shows in many ways.  I am now a huge Barritt’s fan – not only because the Dark’n'Crusty is the best drink ever, but because of Bruce.  I love the fact that took the time, and I love the fact that he did it for all the right reasons.

Attitude is contagious – in sports, in business, and in life.

Now I just need to get someone to order up a few cases so I can get my hands on it.  Apparently Americans (at least in MA) aren’t smart enough to know Diet Barritt’s exists.  I suggest you ask for it specifically at  your local haunt.  Any bar or package store can order it, they just need to do it.  Let’s support the guy with the cocktails and the great attitude.

On a side note – I ran across a good post by Beth Zimmerman regarding the need for “Failure.”  In short, I personally believe that those who have not failed have nothing further to offer -that you must have at least small failures to learn from, or you (perhaps rightfully) will only believe  your own bullshit.  At ESG, I’m fortunate enough to work with some of the best brains in the industry – people who have run billion dollar companies, have bought and sold companies, have founded companies, have taken companies public – but all of them have failed.  Failure, ideally non-catastrophic, grounds people.  It helps people realize that there is not only one way, and that “my” way is not necessarily the right way.  Time and gravity are forces beyond all of us – so adaptation to current realities is always critical.  Anyhow, good post.

The way I figure it, these are two basic attributes the market MUST require in order for external cloud providers to ultimately find success:

1.  The want/desire to push infrastructure operations to an external provider.

2.  An application, or use case, that “fits” with the extended latency and bandwidth limitations that the cloud creates.

Note that I am not talking about cost here (for now).  Note that I am not talking about hybrid or private clouds either, although the application requirement would remain the same regardless.

Let’s take number 1 as a given – those who could get rid of internal IT services to support this type of use case/application, will.  I’ll assume the costs make sense and the stars line up.

That gets us to the heart of the issue: the use case.  By default, the cloud adds latency to transaction times.  Thus, that should be the central consideration when choosing the applications that make sense to deliver via that means.  Second, the bandwidth/throughput capabilities of the cloud are also at their weakest versus locally attached infrastructure, and therefore understanding those requirements become paramount.

So a perfect application for the cloud will have limited bandwidth/throughput requirements – in either direction - and be able to tolerate higher levels of latency.

What Works:  Apps like SalesForce.  Why?  Because the data involved in a CRM record is small – both going out to the cloud and retrieving it back.  Latency isn’t an issue because individual users are fine dealing with the web.  CRM records are the web equivalent of small, random access IOs – perfect for the cloud.  Online banking has proven a wildly successful cloud application for the exact same reasons.  The only time you really wait is to view images and even then, it’s inconsequential as you tend to only view one or two.

I wrote recently that BI is my call for a killer cloud app because it works in this model.  Data leaves corporate systems and asynchronously populates a big fat store in the ether – in perpetuity.  Every day, new data is created and used for whatever case is required locally and then replicated to the uber-store in the cloud.  It’s only moves ONE WAY (out).  Once it’s out in the cloud, it never has to come back (the primary data sets have either served their purpose and been disposed of or are still in use by internal IT), so bandwidth isn’t ever a concern.  What happens is your BI application(s) execute against that uber-store however you want (in this example leveraging both compute resources and storage resources), and return a set of results – which is a small chunk of data.

Tomorrow, the data set is different, as it now includes today’s data, and the query we run against it might also be totally different (who can predict what we’ll want to ask?) – but the use case remains valid.  People have no trouble stuffing giant fat data warehouses externally and letting someone else keep it up and running.  BI is a perfect storm for cloud usage.

What Doesn’t Work:  Backup – or to be more specific, recovery.  This has been an enigma, as clearly the one app that keeps showing up as a cloud example is backup.  The problem is that you can’t recover, thus the model breaks.  You can ship off your data incrementally, but you really can’t recover it due to the problems of latency and bandwidth.  Thus, server recovery needs to include Fed-Ex.  If it needs to include Fed-Ex, why bother?  That isn’t backup/recovery – that is DR.  I hope SalesForce doesn’t use a cloud model to back up your stuff.  You might check on that.

Disaster recovery is an excellent cloud application – for the aforementioned reasons.  Just like the BI example, getting your data asynchronously offsite to an uber-store in the cloud is doable.  Add the ability to create virtual computing instances at the place where the data rests and voila, you have the ability to get back to whole without Fed-Ex.  You have eliminated the bandwidth element from contention.

I understand why many individuals use the cloud for backup – at least the working set is smaller than what sits on a server – but even there it is an issue unless you are retrieving a single small file.  A real recovery operation on a substantial disk crash remains impossible even for an individual (over the wire).  In that case, backup providers have (smartly) begun to offer enhanced services – i.e., “we’ll burn a disk for you and Fed-Ex it.”  Better than nothing, but is it really good enough for a commercial world?

Perhaps a smarter way will eventually be when we virtualize users themselves – where their personal information and data never really resides on their local machine, such that they never have to perform a “recovery” in the classic sense – instead they just log in to their personality and everything they know and love is there.  This is the kind of thing that Viewfinity and UniDesk are trying to do, and it makes piles of sense to me.

Others still will try to tackle the problem differently – by killing  latency or bandwidth constraints.  How I can’t say, but there are several efforts underway.  That would also be really interesting – imagine what you might be able to do if you had no latency encumbrances or if bandwidth were effectively unlimited?  If CDP were utilized, you wouldn’t ever have to “recover” as is traditional.  You could simply keep a copy of  your life in the cloud and point to it when you needed it.  Instant gratification.  My kind of stuff.

If someone can figure that out, you could do two seemingly conflicted things: you could move everything to the cloud (public or private) and you could simultaneously centralize everything (or at least your data).  If there were no latency, you could have every single bit of your corporate data in once central uber-store (and perhaps another copy 8,000 miles away for DR).  What might that enable?  Wow.

So, I dig the cloud and what it can be.  I’m not jumping up and down about trying to force it to be everything for everyone, the way that industry tends to do with the new shiny object du jour.  If there is an application/use case where pushing the operating burden to a provider makes sense, I’m a huge fan – as long as the application meets the criteria and is cloud capable.  SLAs from providers around uptime are nice, but what if they (the provider) aren’t the problem?  What if the telco is the issue or the network becomes a problem?  What if the Pepsi syndrome happens on your premise?  That SLA is worthless when a backhoe cuts through your T3.  We need to make sure we’re using the cloud for the right things, and not for what it (as of yet) isn’t designed for.  There are plenty of smart use cases – so much so that it’s ok to stop talking about the dumb ones.