Joseph Landman has politely but firmly taken me to task for my earlier post, “The New Data Center Leading-Edge”. In spirit of friendly and constructive conversation, I’d like to post my reply.
I made two points in my post. The first was that the “current leading-edge in data centers will produce its own hot startups and segments. It will also push many existing segments and startups off the [hot] list.” My second point was that HPC won’t be a “hot” segment anymore because “today’s leading-edge players – eBay, Google and Amazon - are not relying on commercial HPC at all”.
Joe hasn’t commented on my first point although that provides the key context. To avoid more confusion let me clarify my position here. Essentially what I am saying is that a leading edge of any innovation wave is tilted in favor of startups. At this stage of the market development nobody has the incumbency advantage and time-to-market is crucial. This favors the young and the small. Once the market matures a little, incumbency develops and these established firms end up having the upper hand over startups. Now a startup needs something disruptive, perhaps some leapfrog technology, to beat the incumbents and get a material market share. Clayton Christensen is even more specific. He suggests that startups need either a “low-end disruption which targets customers who do not need the full performance … or a new-market disruption which targets customers who could previously not be served profitably by the incumbent”.
It’s also important to point out that falling off the “hot” list doesn’t imply that the segment isn’t growing anymore. Data warehousing which was part of the data center leading-edge in early-90s is no longer “hot” but is still growing nicely. IDC sized the total data warehouse market at $8.8 billion in software revenue in 2004, and expects it to grow at a 9% compound annual growth rate through 2009. But it’s unlikely you’ll see a new startup emerge in the segment that will give fright to the incumbents.
I hold no brief for VCs and feel that many of them just follow the herd. Yet there is sound business logic in their approach of not funding many startups in segments that are no longer in the leading-edge wave. They need to see a good disruptive game to have any chance of recouping their investment.
Let me now move on to my second point. I asserted that HPC won’t be a “hot” segment anymore because “today’s leading-edge players – eBay, Google and Amazon - are not relying on commercial HPC at all”.
I don’t think there is much disagreement that HPC isn’t a “hot” segment anymore despite the growth that it’s seeing. In my original post, I had stated that “Joseph Landman laments that commercial HPC has gone “out of style” and is “just not sexy” any more”. As he again points out in his response post, he is concerned about “the lack of investment capital in HPC”.
The real issue that Joe has with my post is with my characterization of his wrap-up of SC06. Here is what I said:
He [Joe] doesn’t say why that’s the case but his subsequent wrap-up of SC06 (Conference on High-Performance Computing, Storage, Networking and Analysis) points to an answer. He found that real applications and use cases for high-end HPC were missing this time. The truth is that today’s leading-edge players – eBay, Google and Amazon - are not relying on commercial HPC at all. They are building their own.
I have underlined the portion that Joe strongly objects to. His objection has merit. My quote implies that there are few real applications and use cases for HPC while all that Joe was merely commenting about the show floor. As he points out in his response, “HPC has great use cases. It has a large and growing market”.
This brings us back a full circle. Having a growing market doesn’t make a segment “hot”. What would make HPC hot is if it was part of the current data center leading-edge. Alternatively, a “hot” startup can still happen if there is a disruptive game plan that the investors can put their arms around.
P.S. I am mystified by Joe’s SaaS bashing in his response. He seems to regard my blog as a “SaaS blog”. Hmm… I haven’t written about SaaS that often. Only two posts are devoted to that topic and both talk of the need to “rethink” SaaS.
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