Wintel: beginning of the end or end of the beginning?

Scottish politician John Boyd Orr is credited with saying: "Empires won by conquest have always fallen either by revolt within or by defeat by a rival." The modern, if anonymously sourced equivalent might be: 'all empires fall.' As a high school student of the rise and fall of the British Empire, I came to understand something of the dynamics involved in both the rise and fall of empires. The parallels with the IT industry sometimes appear eerily uncanny. In technology, you can always trace the fall of once great companies to a point in time when they seemed unassailable and/or were at a clear inflection point but missed the opportunity.

Kodak, which has just filed for bankruptcy protection missed the shift to digital photography, despite inventing key technology that we take for granted today. i2, once the master of demand planning faltered badly just at the point when it looked like it would break through the iron grip SAP had on customers needing demand planning solutions. i2 over-reached and believed too much in its own omnipotence. RIM, once the absolute master of enterprise smartphones is looking increasingly precarious having failed to make developer life easy and refusing to bend to hardware/software trends in mobile. Whether it survive and thrives is still very much an open question. No-one is immune.

SAP and Oracle

I have consistently said that neither Oracle nor SAP are exempt from the ravages of history. My view is that Oracle is the more vulnerable because its insistence on gouging customers - or at least giving that strong impression - will drive customers away at precisely the moment when it believes it is invincible. Fusion doesn't help in its current iteration because the market assumed options for cloud delivery are not there. Hardware? Sounds like the right play but the market is not convinced. And in 2012, its database supremacy is going to start coming under real threat as business intelligence solutions built in the cloud eschew Oracle for open source alternatives. More prosaically, Oracle's cosy deal with Salesforce.com is up for review within the next two years. Just at the time when Salesforce.com should be thinking seriously about refactoring what by then will be ancient (by modern standards) technology.

SAP's 'not invented here' attitude continues to plague its ability to break away from the past. Its moves towards cloud with the SuccessFactors acquisition leave far too many imponderables for me to be sure they can transition. They've tried before and failed. HANA/mobile are the big unknowns. There is so much as yet untapped potential yet SAP's track record for capitalising in good time sets it up perfectly to fail. History can be a great teacher, but it can also be a harsh mistress.

Both companies could learn from IBM's near death experience and avoid the fate that history mercilessly doles out. But will they? Which brings us to Microsoft and Intel.

The iPad Factor

Earlier in the day, the UK BBC News talked about the challenges each of these giants face as they transition away from the desktop hegemony to systems and devices that are better aligned to a post-PC era. Twenty years of dominance, billions of dollars held in the bank and a global army of developers is one heck of an asset store. Who would bet against that? The problem for both Microsoft and Intel is the market has changed at a pace both are struggling to match. It doesn't help that 'conservative' estimates put iPad sales for 2012 at a stratospheric 48 million. The emphasis in the commentary might be consumer but evidence is growing that business is prepared to pony up for large numbers of these devices. Oliver Bussman, CIO SAP has overseen the deployment of 11,000 iPads. Last July, Larry Dignan provided pointers as to Apple iPad in the enterprise market.

Microsoft

Today's earnings announcement was a mixed bag. Much attention will be focused on the soft PC and PC related sales and it is hard to avoid the fact that Microsoft disappointed more than expected. Even so, shipping 200 million Office licenses in 18 months is hardly shabby. The problem is that Microsoft doesn't get anything like the equivalent revenue Apple enjoys. Nor does it see the same margins when taking into account Apple's cut from third party AppStore sales. And when you see the master cash cow slip to number three status then there is something not quite right.

Adrian Kingsley-Hughes asks the right questions about Microsoft's transition strategy.

It’s seeing the 30-year-old reign of the x86 ‘Wintel’ architecture is coming to a close and it is preparing for this. One such step is in making Windows 8 run on the ARM architecture. It’s not the first time that Microsoft has ported its operating system to run on different platforms (remember MIPS, PowerPC and DEC Alpha). Microsoft has always had an eye on the future.

But this shift to ‘post-PC’ is dangerous for Microsoft. It’s dangerous because it’s a big transition. Windows is very much a PC product, and much of what makes Windows what it is simply won’t carry forward to ‘post-PC’ devices.

Server sales were solid but how long can this last? In order to make growth in that segment a defensible argument, you have to assume that both sales of Microsoft business solutions will see a serious uptick and that swathes of cloud developers will prefer Microsoft to other, Amazon inspired architectures. Neither of those are done deals when you realise that Microsoft's cloud ambitions have - to date - seemed muddled and confused.

Microsoft has plenty of other assets in its store but none of them have the earnings power of the Windows/Office franchise. It's odd for instance that while Xbox might seem to carry more or less the same or similar market presence as other gaming machines and systems, Xbox LIVE 'only' has 40 million subscribers. While Bing performed well, it is Google the noun and verb, which continue to dominate. And that's despite Google's own disappointing results.

My colleague Oliver Marks might well point to Sharepoint as the Trojan that keeps the enterprise wedded to the desktop. The last few years, Microsoft has worked this solution line into as many enterprise deals as it could muster while morphing what was once a back of bits into a solution that you can at least get your head around fairly easily. But there are too many competitors out there offering more inventive ways of collaboration.

And then there's Skype. Nothing much is happening right now but if Microsoft decided to bundle up with OfficeLive AND solve some of its customer issues then who knows what might happen?

A company the size of Microsoft is not going to suddenly become irrelevant as some might think but there are plenty of threats and challenges that contribute to a sense of urgency. How it sets about re-invigorating and positioning itself for the next 20 years will provide the clues as to just how resilient this giant really is.

Intel

Intel surprised the market by beating expectations. Given what Microsoft reported a little earlier in the day, this should be good news. Or put another way by AllThingsD:

Yet as has been the case for the last several quarters, Intel knows the demand for its global markets, specifically Brazil, Russia, India, and China, far better than any industry analyst, and its executives, especially CEO Paul Otellini, have seemed to enjoy bursting the bubbles of the IDCs and Gartners of the world who continue to preach a catechism of PC doom.

So everything's all right then? Not quite. During the analyst Q&A, the company talked up the market for the forthcoming Ultrabooks but it is far from certain these will be the smash hit that Intel believes. From Larry Dignan:

Intel’s 2012 roadmap may not pay off. Otellini said that the chip giant has a “tremendous product and technology pipeline.” That’s true, but there are significant wild cards to consider. First, Intel’s ultrabook efforts may not resonate with consumers and businesses. Meanwhile, Intel’s smartphone and tablet chips need to show they can push out ARM-based devices. The only sure bet for Intel is that it’ll continue to dominate the data center.

Other analysts fear that Qualcomm/ARM are indicating a better future. If, as many believe, the world moves towards mobile devices where Qualcomm/ARM play best, then that could knock a very big dent in Intel's ability to please The Street.

But is Intel's data center story as bullet proof as Larry D believes? You have to say 'yes' in the short term. But with the accelerating demand for processing massive amounts of data outstripping the availability of reasonably priced kit, you have to wonder whether Intel will be prepared to sacrifice short term high margins for volume uplift. Commoditisation and creative destruction have already made life difficult in the PC world. It is an open question whether the same will happen in the much more lucrative data center world.

Like Microsoft, a world where Intel's influence is significantly diminished is hard to conceive. But the pressure is on the Wintel twins. The answers so far have hardly been inspiring, seemingly limited to 'cheaper than Apple' but with little real innovation to match what some think is a very tired play.

Whatever your position remember the history of IT and how 'all empires fail' seems to ring especially true in this fast moving industry.