A provocative title for sure when everyone thinks we just started the era of cloud computing. I recently listened to a talk by Peter Levine, general partner at Andreessen Horowitz on this topic which makes a ton of sense. The proliferation of intelligent devices and the rise of IoT (Internet of Things) lead us to a new world beyond what we see today in cloud computing (in terms of scale).
I have said many times that the onset of cloud computing was like back to the future of centralized computing. We had IBM mainframes, dominating the centralized computing era during the 1960s and 1970s. The introduction of PCs created the world of client-server computing (remember the wintel duopoly?) from 1980s till 2000. Then the popularity of the mobile devices started the cloud era in 2005, thus taking us back to centralized computing again. The text message I send you does not go from my device to your device directly, but gets to a server somewhere in the cloud first and then to your phone. The trillions of smart devices forecasted to appear as sensors in automobiles, home appliances, airplanes, drones, engines, and almost any thing you can imagine (like in your shoe) will drastically change the computing paradigm again. Each of these “edge intelligent devices” can not go back and forth to the cloud for every interaction. Rather they would want to process data at the edge to cut down latency. This brings us back to a new form of “distributed computing” model – kind of back to a vastly expanded version of the “PC era”.
Peter emphasized that the cloud will continue to exist, but its role will change from being the central hub to a “learning center” where curated data from the edge (only relevant data) resides in the cloud. The learning gets pushed back to the edge for getting better at its job. The edge of the cloud does three things – sense, infer, and act. The sense level handles massive amount of data like in a self-driving car (10GB per mile), thus making it like a “data center on wheels”. The sheer volume of data is too much to push back to the cloud. The infer piece is all machine learning and deep learning to detect patterns, improve accuracy and automation. Finally, the act phase is all about taking actions in real-time. Once again, the cloud plays the central role as a “learning center” and the custodian of important data for the enterprise.
Given the sheer volume of data created, peer-to-peer networks will be utilized to lessen load on core network and share data locally. The challenge is huge in terms of network management and security. Programming becomes more data-centric, meaning less code and more math. As the processing power of the edge devices increases, the cost will come down drastically. I like his last statement that the entire world becomes the domain of IT meaning we will have consumer-oriented applications with enterprise-scale manageability.
This is exciting and scary. But whoever could have imagined the internet in the 1980s or the smartphone during the 1990s, let alone self-driving cars?
Clearly Satya Nadella has made a huge difference at Microsoft since taking office in 2014. The stock in 2016 hit an all time high since 1999. So investors are happy. Here are the key changes he has made since taking the role as CEO:
- Skipped Windows 9 and went straight from Windows 8 to Windows 10, a great release. However revenues from Window is declining with the reduction of PC sales.
- Released Microsoft Office for iPad. Also releasing the Outlook product on iPhone & Android.
- Embraced Linux by joining the Linux Foundation, previously anathema to Microsoft’s window-centric culture.
- Spent $2.5B to buy Mojang, the studio behind hit game Minecraft.
- Introduced Microsoft’s first laptop, The Surface Book.
- Revealed Microsoft HoloLens, the super-futuristic holographic goggles.
- Created the new partner program to provide Microsoft products on non-Windows platforms. Hired ex-Qualcomm exec Peggy Johnson to head the bus-dev group.
- Enhanced company morale and employee excitement.
- The biggest gamble was the purchase of Linked-In last June for a whopping $26.2B.
It’s important to understand the significance of the Linked-In purchase. Adam Rifkin (I worked with him twelve years back at KnowNow, a smart guy) recently wrote an article on this topic. I like his comment that in a world of machine learning, uniquely valuable data is the new network effect. The right kind of data is now the force multiplier that can catapult organizations past any competitors who lack equivalent data. So data is the new barrier to entry. Adam also makes a statement that the most valuable data is perishable and not static. Software is eating the world and AI is eating software meaning AI is eating data and popping out software.
Now let’s map what this means to the Linked-In purchase by Microsoft which sees the network effects of Linked-In’s data. What Google gets from search, Facebook gets from likes, and Amazon gets from shopping carts, Microsoft will get such insights from Linked-In’s data for its CRM services. Adam makes a point that the global CRM market in 2015 was worth $26.3B – almost exactly what Microsoft paid. It is the fastest growing area of enterprise software. Hence Marc Benioff of SalesForce was not very happy with this acquisition.
The new Microsoft is ready to fight the enterprise software battle with incumbents like SalesForce, Oracle, SAP and Workday.
So finally it was Verizon paying $4.8B to acquire Yahoo’s core business. Business Insider said, “Yahoo, which was founded in 1994, was one of the world’s leading internet businesses but has gone through tough times in the past several years. Yahoo’s peak value was $125 billion in 2000, and even in 2008, Microsoft wanted to pay $45 billion for the company, so a $4.8 billion sale price pales in comparison.
This deal is also more or less the logical extension of Verizon’s $4 billion deal last year to acquire AOL, which is still run by Tim Armstrong, whom Yahoo CEO Marissa Mayer worked with at Google back in the day. Yahoo and AOL, after all, are fairly similar old-school content-and-advertising internet businesses. Here is the reaction from a competitor Sprint – CEO Marcelo Claure said Monday that Verizon’s purchase of Yahoo is just the latest in a long history of deals by telecom firms trying to get into the content business, none of which have panned out.
Although this deal sounds like a sad end to Yahoo, an icon of the early Internet players, Marissa Mayer tried to paint it as a success. Why not? She will walk out with almost $50m if fired from her job. It is a big let-down for her, specially after the high expectations when she was hired in 2012. She was supposed to turn this company around with big revenue growth. None of that happened. Rather she spent a ton of money for very little return. Take the case of Tumblr, which was mostly a waste (after paying $1.1B). As they say, you ruin the company and then walk out with a huge amount of money. Sad but true.
As of today, the business that will stay behind post-acquisition by Verizon includes Yahoo’s cash, its shares in Alibaba and Yahoo Japan, Yahoo’s convertible notes, certain minority investments, and Yahoo’s non-core patents (called the Excalibur portfolio). These remaining businesses will be rebranded after the completion of the acquisition in early 2017.
It will be interesting to see how Verizon brings some synergy across its 3 similar, but overlapping offerings – AOL, Yahoo and its own go90.
This is big news this morning – Microsoft buying LinkedIn at $26.2B cash. LinkedIn’s stock is soaring by 47% as we write while Microsoft stock is falling! This is one of the biggest acquisitions since Dell’s acquiring EMC few months back. So how does this work?
Well, Satya Nadella explains the importance of a professional network in their scheme of cloud offerings, from Office360 to Dynamics. Imagine walking to a meeting and viewing all the attendees info from their LinkedIn profiles. He said, “It helps us differentiate our CRM product with social selling. It helps us take Dynamics [Microsoft’s suite of business management software] into new spaces like human capital management with recruiting, and learning, and talent management.”
LinkedIn had a bad quarter and the stock was going south by as much as 40%. So there was some anxiety on where the company was heading in future. They saw this opportunity to be part of a larger company and the board quickly jumped into this offer, as it seems. As far as the synergy is concerned, time will tell how they integrate and make it look like a seamless cloud offering. Reid Hoffman, chairman of LinkedIn will stay as an advisor, but his new role is yet to be defined. Jeff Weiner will continue to stay as CEO reporting to Nadella.
This certainly strengthens Microsoft’s cloud presence and adds value to the Dynamics business more than the Office360 side. But use of Office360 suite in creating and managing documents/profiles may add to the growth of that business. If they can make it a success, Satya Nedella’s leadership will have a new feather in his cap.