To win the cloud, remember George Westinghouse

To win the cloud, remember George Westinghouse

Summary: Is the cloud the final computing architecture, as NetSuite CEO Zach Nelson claims? Even if it's not, the winners will be the transaction and infrastructure providers.

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TOPICS: Cloud
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"LinkedIn is the recruiting system of the future, right? I mean, talent management system," said Zach Nelson, chief executive officer of NetSuite. "So how you link in anywhere with those guys is super important, I think."

Nelson was speaking to journalists at SuiteWorld, the cloud enterprise resource planning (ERP) company's annual conference, held in San Jose earlier this month. His bold claim about LinkedIn was one of two comments that made me sit up and listen.

NetSuite already partners with TribeHR for managing the people side of a business. Human capital management (HCM) is the current jargon that's used to avoid referring to people as people. Indeed, the TribeHR partnership was one of the big announcements at SuiteWorld 2013.

NetSuite isn't talking about partnering, as such, with LinkedIn, but better linking with them is on the agenda.

Now LinkedIn is currently one of the monsters of the internet. Its logo is seen clustered on websites with those of Facebook, Twitter, Instagram, Google+ and the also-rans. But is it really THE system of the future?

I challenged Nelson on that point.

"They've got all the data, you know. It's all about data. Certainly from a recruiting standpoint, and we actually use it for marketing," he said.

"I want to find wholesalers and distributors in Australia from 50 to 1000 employees, and I want to find the CFO and the CIO. There's only one database I can go to find that, and it's called LinkedIn."

So is that it? Have we reached the end of the evolutionary line? After a Cambrian explosion of social networks, have we now settled on the final few, with Facebook for our personal lives, LinkedIn for work, Twitter for real-time communication, Instagram for pictures, and Google+ for whatever it is that Google+ is for?

That's when Nelson hit us with his second, even bigger claim.

"I think the cloud in general is the last computing architecture. What is there after access from any machine to any data, any time, anywhere in the world? There is nothing," he said.

"So the question then becomes, if this is the last computing architecture, and I really believe it is, the interesting thing is what are people going to do on top? What applications are going to be built on top of that 'any time anywhere all your data' sort of world?"

But no, that doesn't mean that LinkedIn is the last solution.

"If you look at something like a Facebook, they certainly have a big footprint, but that doesn't mean they haven't been threatened in the past by new emerging applications like, I guess, Instagram — which they fixed by buying it," Nelson said.

"So there are new paradigms that will pop up, but they will all be this cloud-based sharing thing."

Let's step back a century and a half...

The mid to late 19th century saw the great railway booms that in many ways foreshadowed the dotcom booms. In Britain, the first public steam railway, the Stockton and Darlington Railway, was opened in 1825. But just 25 years later, there were 11,000 kilometres of railway in Britain alone. Similar surges took place across Europe and the United States.

The railway booms foreshadowed the dotcom booms in other ways too. Many of the railways were highly speculative, built before there was any guarantee of income — and in the US, sometimes before there were even any towns to service. Fortunes were there to be made and lost, and there was a similar disregard for pesky regulation.

In the US in particular, this led to the Gilded Age, when industrial and technological advances made some people fabulously wealthy. It also brought unmatched disparity in wealth between the richest and poorest in American society, at least until right now.

Now as the railways expanded and trains ran faster, fatal crashes became more frequent. It became clear that safety issues needed more attention.

It just so happened that in 1867, a 22-year-old engineer from New York state invented a fail-safe compressed air braking system for trains. Air pressure released the brakes, so if the compressor failed or the air lines that ran down the length of the train ruptured, the brakes would come on and the train would be brought to a halt. The system was patented in 1873, and soon became standard equipment worldwide.

The engineer's name?

George Westinghouse.

Yes, that Westinghouse, the one whose company's name is now on everything from washing machines to nuclear reactors, gas turbines to military radars.

Westinghouse made his fortune not by getting into the high-risk but only potentially high-reward business of railway speculation, but by making things that every railway needed, successful or not — not just braking systems, but signalling and track switching systems as well.

Which brings me back to NetSuite.

Nelson is saying that while consumer-facing applications like LinkedIn and Facebook may come and go, there will always be the cloud. So in the long term, that surely means that the real winners will be the companies that provide the cloud infrastructure, and those that provide the business infrastructure needed by cloud-based businesses.

NetSuite's acquisition strategy, the criteria by which they decide whether to buy a company or just partner with it, seems to support that idea.

"Our whole thing is about owning transactions, not in a click sense but in a business logic sense. If there's a transaction in the middle of a workflow that we don't own — so lead-to-cash or pick-pack-and-ship or whatever you have in that world — that what we try to own," Nelson said.

A transaction, he explained, is something that's ultimately connected with an entry in a ledger somewhere. Something that's directly related to the movement of money — whether that's a customer changing the colour of a barbecue leading to a change in the item cost at the checkout, or an employee's dinner expenses being charged back to the client they were working for at the time.

"That's why we never really tried to own social. There's no transaction in the middle of that thing. It's a lot of unstructured data. We never tried to own file storage, because it's not really transactional."

NetSuite may be the world's fastest-growing financials software company for now — it plans to add 1000 employees this year — but of course that doesn't guarantee its success. This is not investment advice. All manner of things could still go wrong, from bad decision-making to being trumped by a new player, or even another dotcom collapse.

The company is still only 16 years old, a mere blip in historical terms, and has yet to hit the half-billion mark in revenue.

And on Thursday last week, influential TheStreet Ratings downgraded their stock from "hold" to "sell". "The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share," they wrote.

Nevertheless, companies that concentrate on business infrastructure have history on their side.

Disclosure: Stilgherrian travelled to SuiteWorld as a guest of NetSuite.

Topic: Cloud

About

Stilgherrian is a freelance journalist, commentator and podcaster interested in big-picture internet issues, especially security, cybercrime and hoovering up bulldust.

He studied computing science and linguistics before a wide-ranging media career and a stint at running an IT business. He can write iptables firewall rules, set a rabbit trap, clear a jam in an IBM model 026 card punch and mix a mean whiskey sour.

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2 comments
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  • Google+

    "...and Google+ for whatever it is that Google+ is for"

    Love it. My feelings exactly.
    Ian Sargent
  • To win the clonus

    I am sorry but we the people do not like the cloud see you all tell us not to download stuff but you want us to trust your service but we the people know hardware does mess up and then we lose our stuff like our data and pic's and you don't care you have prove that and your is what the hackers call hacker heaven we will backup our data to our hard drives not your crap
    dvd59