Comment HPE’s decision to acquire Juniper is bad news for enterprise IT, as yet another example of consolidation in a field that already offers fewer, and less palatable, competitive choices in a shrinking market.
Networking is already a difficult area: Cisco’s $57 billion annual revenue vastly exceeded that earned by its main competitors Juniper and Arista. Software-defined networking and white-box hardware doesn’t seem to have disrupted the market, as hoped by some.
Cisco’s already a high margin business and a critical bottleneck when supply chains strain. Now it’s also marching customers towards subscriptions, a scheme that appeals to investors because it produces better cashflow for vendors, but may damage yours by making constant payments the only terms on which suppliers will do business.
Never mind that many businesses experience seasonal or cyclical revenue shifts, subscriptions mean your cash is always committed to tech when vendors want it and not when you can afford it. To quote Goodfellas,”F**k you, pay me.”
Cisco, of course, is in the process of buying Splunk, thereby adding analytics muscle to its portfolio, another example of a tech giant buying into adjacent markets in search of more of your simoleons. Just like HPE, Juniper, and – more recently -others.
Another consolidation saw VMware eaten by Broadcom, which quickly started selling all the vStack or none of it – a tactic that means many users will pay more, or face the prospect of a complex re-platforming project that won’t add value and is laden with risks. That plan’s going so well even the Wall Street Journal has noticed rumblings of discontent among CIOs.
Broadcom hasn’t blinked, so far. I doubt it will. Nor will Cloud Software Group, whose CEO Tom Krause helped define the Broadcom playbook of junking perpetual licenses. Krause recently outlined a plan to become a $20 billion biz. None of CSG’s businesses are growing at a rate that will make that a reality, so we can expect acquisitions and cost-cutting tactics like outsourcing even internal security functions.
Yes, the org that owns Citrix is outsourcing some of its security – while the software it sells remains somewhat shaky on that front.
In past eras, these sort of acquisitions and consolidations could work for tech buyers because innovators would try to cash in on corporate complacency by developing better tech. It’s arguable that Cisco only exists because IBM took its eye off the networking ball, that Nutanix exists because VMware groaned under the weight of its rapidly-developing stack, and that cloud took off because the combined hardware and services industries made elasticity a costly nightmare with restrictive outsourcing deals.
Investors liked the idea that startups could challenge one of a tech giant’s lines of business. Funds flowed freely and mighty businesses quickly grew and thrived.
But with on-prem enterprise IT now a shrinking market, investors and innovators alike will be wary.
In 2024, building a better router, server, or storage array is a fool’s errand: all the established players are entrenched, and the cost of taking them on is colossal.
I’m hearing of startups that instead decide to innovate for hyperscalers, taking advantage of cloud operators’ tendency to become too bloated and bureaucratic to productize their in-house R&D team’s efforts.
Such startups need only win a single client to build a business that can deliver a payoff for investors once a hyperscaler writes a cheque to turn them from a supplier to an internal team. All of which leaves those of you persisting with on-prem kit left with fewer choices.
Even the procurement strategy of buying from emerging vendors to both accelerate their development and keep dominant suppliers on their toes is now a difficult choice to exercise.
Juniper inside HPE won’t likely become that challenger. HPE is also hurrying its customers to subscriptions for services, and in the kind of bundle Big Green increasingly offers networking subtleties disappear because this becomes a service provider’s problem.
Big Tech wants you to think that’s in your best interests, because you no longer have to develop intimate understanding of tech.
But in this world of consolidated options and subscriptions, you can also lose the understanding of technology that helps you leverage it to solve your distinct challenges. And be told it’s for your own good even as your bills rise and choices narrow. ®