January 13, 2016
In the last few years there has been more fundamental change on more dimensions of IT than in any similar period over the last thirty years that I have worked in the industry. So, as we close out 2015 it is fun to speculate on some of the changes we will see in 2016.
Before I start, I want to use a quote from Microsoft’s Bill Gates to frame the discussion of how IT changes. According to Gates1, "We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten." One concept that I take from Gates’ quote is that major changes do occur in IT, it just takes longer than you might like. A related concept is that next year will look different than this year, but 2016 is more likely to build on that happened in 2015 than it is to be fundamentally different.
So, what kind of changes did we see in 2015 that might carry over to 2016? Some of the biggest changes occurred to the vendor base. For example, in late July Citrix announced that its CEO Mark Templeton planned to retire, but would stay in place until a new CEO was found. In September and early October there were rumors that Citrix was putting itself up for sale2. These rumors were followed later in October by the announcement that Templeton would move into an advisory role until the end of the year while executive chairman Robert Calderoni would take on the role of acting CEO. The current rumors are that Citrix will spin off or sell business units such as its GoToMeeting online collaboration and conferencing software unit. As was demonstrated by Cisco when Chuck Robbins replaced John chambers, the arrival of a new CEO often leads to an exodus of senior managers. My take is that in 2016 Citrix will be a somewhat smaller company with at least some new senior leadership. These changes at Citrix were driven by a number of factors, including competition from VMware and pressure from one of their investors – the Elliott Management Corp.
Another vendor that underwent major change in 2015 was HP. On November 1st, HP split into two publicly traded companies, Hewlett Packard Enterprise (HPE) and HP Inc., each of which will be Fortune 50 companies with annual revenues of approximately US $60 billion. HPE will sell servers, software, storage, and networking and associated services. HP Inc. will sell printers and PCs.
Even before the split occurred, HP announced plans to cut about 33,000 jobs over three years3 which are in addition to the 55,000 layoffs that were previously announced4. It’s possible to be an optimist and state that the split was driven to enable both HPE and HP Inc. to be more nimble than HP was. However, a less optimistic view is that HP’s splitting into two companies was the result of a series of bad management decisions5, including HP’s acquisitions of companies such as Compaq Computer, EDS and Autonomy.
While HP was taking a huge company and splitting it into two really large companies, Dell announced that it will acquire EMC in a deal valued at US $67 billion. One common view of this deal is that it is a huge step in Dell’s transition away from just supplying PCs to the consumer and small to mid-sized business markets and towards being able to better compete in markets such as enterprise IT alongside giants such as Cisco.
Making this deal successful will require very sophisticated management. One example of the management challenges associated with this deal is how Dell treats VMware. Many have argued that one of the reasons why VMware has been so successful is because EMC, which owns over 80% of the company, has largely let it run independently. I am sure that at least initially that Dell will do the same. However, over time Dell will undoubtedly be tempted to tightly link its hardware products with VMware’s software products. The upside of this approach is that it may play well to some segments of the market and hence it could possibly drive revenue and make it harder for other vendors to penetrate these accounts. The downside is that this approach will likely not be embraced by other segments of the market and it could alienate some of VMware’s existing partners.
The above are just three examples of how vendors changed in 2015. I think it would be extremely naïve to assume that there won’t be additional changes to the vendor base in 2016. This situation reminds me of the well-known phrase “May you live in interesting times.” Whether you look at that phrase as a prophecy or a curse, those of us who work in IT will certainly be working in interesting times in 2016.
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