Amazon and Microsoft moves indicate that hardware OEMs may become obsolete

Qualcomm has an interesting take on the new Microsoft Surface X that, coupled with the Amazon announcement of the AWS Outposts, may indicate the market is moving back to an IBM model. That doesn’t bode well for the PC or server OEMs.

chairs stupendous
Vinoth Chandar (CC BY 2.0)

[Disclosure: Qualcomm and Microsoft are clients of the author.]

I’m at the Qualcomm 5G Summit this week and according to both them and Cisco, next year we should reach critical mass on 5G. I didn’t really think about how big a change this would be until I listened to what Qualcomm said about Microsoft’s new Surface X (upon which I’m writing this very column) and the announcement from Amazon on their new AWS Outpost initiative.

Separately these announcements are certainly interesting. Together they may mean a massive change back to something far more like the old IBM mainframe model than most of us realize. In that model, the vendor owned the entire technology stack and the user experience. In this new case, the vendors in question are cloud vendors not OEMs.

The old IBM model

The IBM model still prevailed when I took Computer Science in college. For the most part, IBM was the technology market back then. As the adage went, “no one lost their job buying from IBM.” Margins were good, employees got pensions, and for decades IBM and excellent customer service were so synonymous that it was nearly impossible to get an IBM shop to even try another vendor’s solution…outside of the mid-market where vendors like HP and DEC seemed to be able to acquire and hold small segments.

People trusted IBM and for good reason: IBM had their back…until the old guard retired out, new executives moved up, and the focus shifted from customer satisfaction to increasing profit. Then the wheels came off the IBM wagon and the firm went from dominant to nearly out of business. I was working at IBM when that happened. It wasn’t fun.

But, while it worked, it was amazing.

It does, however, suggest that the companies trying to bring this model back need to put in place a powerful process to assure similar mistakes don’t recur.

Microsoft Surface X

At the Qualcomm event they praised the Surface X, not just because it uses Qualcomm technology but because it’s a very different approach to a product: more like a terminal than a PC in terms of providing vendor control.

A typical PC generally comes from an OEM, but is defined by several vendors, including Intel or AMD and Microsoft. In fact, the user experience is mostly from Microsoft. If any of these vendors screw up – like Microsoft did with Windows ME, Vista, and 8 or Intel did with the security problems from two years ago – the OEM is screwed because they can’t mitigate the problem. In effect, none of these vendors owns the complete stack or the user experience and thus none of them can assure that experience.

Surface X, on the other hand, is all Microsoft: they co-designed the processor, they provide a custom version of Windows on the system, they even own the 4G wireless experience that connects the system. In effect, much like IBM owned the client experience on their mainframes, Microsoft owns the client experience on the Surface X.

And I can attest the result is a pretty amazing little system. It anticipates a future where the cloud provider provides a complete solution from client, through networking, to data resources. And when you own a thing completely, you can assure the user experience far better than if you don’t.

AWS Outposts

Amazon Outposts come at this differently. AWS has been overmatched when it comes to hybrid cloud deployments and instead of providing just a local instance like Microsoft and Google do, their Outpost effort includes hardware. Much like it is with the Surface X on the client Amazon in the cloud is assuring the stack above the client under a highbred model. In a way it’s taking what EMC did with their old VCE effort and moving it into the cloud world.

Having covered VCE as long as it existed, I know it enjoyed some of the highest customer satisfaction and loyalty of any product short of that old mainframe I’ve ever seen. So, they provide the entire IT backend experience and in a hybrid form with a solution that has been optimized for the AWS hybrid environment.

The power of the blend

Amazon and Microsoft both watch each other closely. If Microsoft copied Amazon Outposts and Amazon copied the Surface X but turned it into a line, you’d have an end-to-end blended solution both cost- and user experience-optimized from a single vendor.

And, if only to complete with each other, that outcome is almost certain now.

Google – who already has Pixel Chromebooks that emulate the Surface X and likes to build their own hardware – could easily follow.

The result would be three mega cloud vendors (Amazon, Google and Microsoft) specifying their own custom client, premise, and cloud offerings and showcasing the benefit of a true single throat to choke with solutions tuned top to bottom for the lowest cost and highest customer experience.

Then, seemingly suddenly, the existing hardware OEMs become redundant.

To avoid this the OEMs will need to drive innovation deeper into the technology stack, increase their investments in their own cloud efforts, and take another look at that old VCE model. Because in a new mainframe-like world based around the cloud, if you don’t have one, you’ll be like the guy without a chair when the music stops. Out of the game.

Copyright © 2019 IDG Communications, Inc.

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