Fumbling the Future: Virtual Reality Edition?

The Sports Illustrated cover jinx pales in comparison to the curse of the barefoot young techie on the cover of Time

TL;DR Facebook’s Oculus virtual reality play is far from a sure thing.

Fumbling the Future is a great book that plausibly explains why Xerox merely copies and prints, despite having pioneered foundational elements of computing at PARC, including bitmapped displays, local area networking, WYSIWYG document editing, object-oriented programming and built the first GUI computers. More broadly, the authors ask:

“Why do corporations find it so difficult to replicate earlier successes in new and unrelated fields?”

With all their talent, resources, mountains of cash and often dead-on insights into the next big thing, why do leading technology companies almost inevitably fail to translate dominance from one era/area into the next?

There is no shortage of management theories which abstractly analyze such moves, but case studies can be much more edifying. It is too early to assess Hooli’s Google’s Alphabet adventure, which looks to be the mother of all corporate experiments in leaping into multiple new and unrelated fields, all at once, as they seek to build the world’s first advertising/life sciences/automotive/ fashion/space elevator conglomerate. But we have another example unfolding now with virtual reality where the early returns are deviating from the master plan laid out in a Fortune 500 boardroom.

The Next Major Platform

Social networking supremo Facebook decided virtual reality was the next big thing and has made it the company’s first major foray beyond its core. Mark Zuckerberg put the world on notice, repeatedly saying virtual reality is the “next major computing and communication platform.” One assumes the unspoken addendum to this is “…and we intend to dominate it”.

Facebook bought Oculus for $2 billion in March of 2014, and supposedly has committed another $5 billion of additional investment. Oculus gets (and deserves) credit for reviving virtual reality (henceforth VR, to save a few characters) from a long hibernation with its breakthrough 2012 Oculus Rift Kickstarter campaign. With the exception of some embarrassing contemporaneous Hollywood movies, VR’s initial ‘90s incarnation had been forgotten. Less heralded is the assistance Oculus received from Moore’s Law, the vast economies of the smartphone manufacturing complex and a few others who were quietly keeping the VR dream alive.

Oculus arrived at Facebook right at the closing of the “move fast and break things” frontier era. They were going to do VR “right”, as befits a major technology corporation, and set out systematically on multiple fronts. They vacuumed up talent, including luminaries like Michael Abrash from Valve and gaming legend John Carmack. They opened more offices than I can count (three in the Seattle area alone), plus established a research group as well as game and movie studios.

Part of doing VR “right” was to set an incredibly high quality bar, not only for themselves, but for the entire industry. They feared inferior VR could ruin the opportunity for everyone, and so became the industry’s self-appointed quality sheriff. Competitors like Sony were patronizingly chided for perhaps insufficient attention to quality.

Consistent with this high quality bar, the Oculus talking points shifted from the previous North Star of inexorable progress towards shipping the consumer version of the Rift to more philosophical discussions of all the difficult challenges they were so generously working to overcome on behalf of the entire industry. Oculus statements like “input is hard” were offered up so frequently as to become a meme with its own shorthand of “IIH”.

When Platformonomics last looked at VR back in December 2014, some cracks were already visible in the strategy (if I may quote myself):

Oculus, the uncontested leader in VR just a few months ago, backed by billions of Facebook’s dollars, is already in a bit of a strategic quandary.

After years of selling the dream of the “consumer Rift”, Oculus has gotten very vague about when if ever we will see that oft-promised device.

Big Company Games

As they arrived at Facebook, Oculus got entangled with Samsung, playing the kind of reindeer games that BigCos are obligated to play. Samsung, the world’s foremost practitioners of “ship first, people only care about hardware specs and worry about software later”, decided to do their own VR headset, which crudely speaking, bolted an Android smartphone to your face for a minimalist VR experience, and would be differentiated primarily by its ship date (like the dog who catches the car, it gets tricky for fast followers who find themselves out ahead of their role models).

Oculus was skeptical about VR on a mobile platform. The combination of underpowered hardware vis-a-vis Oculus’s PC-centric approach and Samsung’s software track record set off all of Oculus’ quality alarm bells. They worried Samsung would do their usual crap software job and ruin the pool party for everyone. There is also a question of to what degree Samsung held display panels for Oculus headsets hostage, but whatever the case, Oculus chose to take one for the industry team and partner with Samsung to make sure what became known as the Gear VR would not rely solely on Samsung software.

Into the breach went Oculus CTO John Carmack, who spent months working with Samsung on the Gear VR, noting bluntly along the way that Android development “really does suck”. In the end, the Gear VR, powered by Oculus software, didn’t outright suck, benefiting from Carmack the Magnificent’s efforts (and perhaps the low expectations Samsung brings to anything involving software).

At the same time, Google, congenitally unable to resist toying with their mortal enemy Facebook, kicked off their own big company reindeer game and introduced Cardboard, an eponymously constructed and priced VR headset for Android phones. No doubt their pride hurt by Carmack’s disparaging comments about Android’s graphics architecture, Google soon began to see VR as another front in the battle to retain control over the Android ecosystem. Cardboard added still further impetus to mobile-centric VR even as it risked to lower the quality bar even further, which in turn probably motivated Oculus’ mobile efforts even more.

Surprise Surprise

Ultimately, Oculus made their peace with mobile VR and began to talk about a platform spanning both mobile and PC experiences (even if they were papering over two incompatible efforts). But the Oculus dream of the consumer Rift headset was deferred by the attention required on Samsung and mobile VR.

Oculus went into the Game Developers Conference in March 2015 downplaying the prospect of any news, content to demo the “Crescent Bay” prototypes it had been showing for at least six months. Like everyone else, they were surprised by the bombshell announcement of the Vive headset from HTC, powered by Valve’s VR technology. The industry assumption was Valve’s long time VR efforts had been abandoned after Oculus hired away some key employees post Facebook hookup.

HTC and Valve did a great job of keeping the Vive under wraps – it appears to have been a complete surprise. The Vive product has several attributes important to our discussion. First, it delivers an exceptional VR experience, So good that Valve was willing to make an absolute statement that “zero percent of people get motion sick”, a claim that certainly could not be made about the Oculus. Even when I tried to induce motion sickness with the Vive by jerking my head around wildly, I couldn’t do it. Second, input may be hard, but the Vive comes with a pair of controllers that offer very precise control over objects in VR. The Longbow demo where you shoot a bow and arrow illustrates how capable these controllers are, and makes it easy to imagine manipulating all kinds of sophisticated implements in VR.. Third, the Lighthouse system uses “frickin” lasers (versus Oculus’ optical approach) for exceptionally accurate positional tracking within a roughly 12 x 12 foot space, which means VR no longer has to be a seated activity (though you are still tethered by the headset). And fourth, and maybe most importantly, they promised to ship in 2015.

Simply put, the Vive is great and enables amazing VR experiences. And it beat the prototypes Oculus had been showing with a smoother experience, better positional tracking, better input and an actual ship date. People who have tried both Vive and Oculus invariably give the nod to the Vive.

The Empire Strikes Back, Sort Of

My guess is Oculus convened their first meeting about actually shipping the consumer Rift on March 2, the day after the Vive announcement. Their first decision appears to have been to give themselves the corporate handbook standard of 90 days to pull together a plan and a year to ship their answer to the Vive.

On June 11th (just over 90 days later), Oculus announced the long-awaited consumer Rift would ship in Q1 2016, a hopefully insignificant interval after the Vive’s promised Q4 2015 date. But they had to really scramble to make this announcement and the compromises show.

Input seemingly remains hard for Oculus, as evidenced by their introduction of not one but two controllers. First, they announced the consumer Rift would ship with — wait for it — an Xbox controller. Second, they announced the Oculus Touch, their own controller which appears similar in function to the Vive controllers but with what seems to be more refined ergonomic design.

The Touch is clearly a work in progress, and the mockup plastic may still have been warm at the June announcement. Even in late August, the Touch is still clearly labeled a prototype: “What we’ve shown today in the Touch Half Moon prototypes is not necessarily representative of what the final product will be…” Access to the controllers remains tightly controlled, the first SDK has just shipped and the company continues to do input-related acquisitions.

But the most telling thing about the Touch is it is supposed to ship a quarter after the consumer Rift, a strategy that has been likened to Apple shipping the mouse for the original Macintosh a quarter after the computer.

Meanwhile, despite having at least one and maybe two orders of magnitude more people working on VR than Valve, Oculus has been jettisoning other deliverables left and right. They cut Mac and Linux support and despite the relationship with Microsoft for Xbox controllers, Oculus did not have Windows 10 support when it shipped and were in an awkward position of asking developers to hold off upgrading.

Developers also complain about the poor quality and architectural churn of Oculus’ SDK: some on the record, more off the record. And they report developer support is noxious brew of ambivalence and entitlement, as if Oculus are unaware that they are no longer the only game in town.

Beyond product and schedule, Oculus also has a communications problem. Their strategy seems to be very visible and loud to compensate for their market position, but are talking too much (e.g. the much ridiculed Time magazine cover above), are tripping over themselves with conflicting messages and often come across as tone deaf.

Here are Oculus’ top two people a week apart in the same publication:

Oculus VR CEO Brendan Iribe still thinks that the technology – and the company’s Oculus Rift PC-based HMD – is set to ‘take off very quickly’.

Oculus Rift creator Palmer Luckey doesn’t think that the tech will break into mainstream overnight, recently stating that it’s something that will take ‘a long time’.

Sometimes they seem to be trying to lower expectations for their first product by stressing just how far out their roadmap extends; other times they’re cheerleading version one. A serendipitous juxtaposition in my feed reader gives us this credibility-sapping combination:


But most of all, their June 11th announcement ranks as one of the most awkward product announcements ever. This video clip brutally highlights the vast disconnect between Oculus’ expected reaction and the non-virtual reality (what do you do when the teleprompter says “wait for applause” and there is none?).

Stay Tuned

It is way too early to call this market. The cliché would be we’re not even in the first inning, as neither Oculus nor Vive have shipped, while Sony lurks in the background with the forthcoming Project Morpheus headset for Playstation 4.

But Oculus is far from romping to victory here, as many expected a year ago (including presumably Facebook when they wrote that enormous check). They had and lost the pole position and find themselves behind on both capabilities and schedule. Valve and HTC are deep inside Oculus’ proverbial OODA loop, and by virtue of being forced to react, Oculus has made suboptimal decisions. And more consequences of being back-footed are likely to surface.

For example, Oculus’ business model is unclear. Are they going to make money on headset hardware or sell it at close to cost to create sockets for other businesses? If hardware is an enabler, where is the software revenue? Can they make money from an app store vig when they have made a pretty strong statement that they will allow sideloading and face a deeply established competitor in Valve’s Steam with its over 125 million users? Will they drive material app revenue? Or do they incur mass disdain and end up defaulting to Facebook’s ad-based model? When you’re behind, the desire/pressure to sacrifice margins and/or piggyback on the mothership increase because you just don’t have as many levers at your disposal. Or perhaps they sacrifice further time to transition the hardware to a partner?

The Vive isn’t a sure thing either. I am sure they’re also on a very tight schedule. HTC is financially precarious (although the fact they seem to be betting the company on Vive is good in terms of focus). The Vive lags Oculus in some areas like audio and maybe wirelessly connected controllers (I am not clear on whether they ship wireless controllers with the initial product). And the challenge of scaling manufacturing is already showing up with the statement that while the Vive will ship this year as planned, volumes will be limited, which was no doubt joyous news in Oculus’ many offices.

But returning to our Xerox lede, the expected VR coronation for Facebook/Oculus foretold on magazine covers is in question. Oculus has lost the clear leadership position they had a year ago and. if you are wearing a rose-colored headset, the best you can say is it now is a horse race. But they’re not unique. These kind of “unexpected” underdog outcomes seem to happen with remarkable regularity, much to the frustration of the technology titans and their megalomaniacal machinations. It is part of what makes tech so interesting to watch.

As with any BigCo initiative, Oculus’ execution to date has been impacted by some combination of a lack of strategic clarity, distractions, an inability to completely conceptualize the entire new value chain (vs. just building technology), an abundance of people, a lack of urgency combined with a utopian quality bar and who knows what other factors that always create drift from the strategy slides.

There is one other possible explanation, which is that Facebook’s VR dream suffers not so much from the usual imperfections in BigCo execution, but rather a strategic mistake. Maybe Facebook made a mistake buying a company whose capabilities were not what they seemed. One of the biggest unanswered questions in the history of VR is to what degree Oculus raised venture money and then sold themselves to Facebook based on demonstrations of Valve’s technology rather than their own. Oculus received a lot of help from Valve in its early days and even had their own “Valve room” installation in their offices in Irvine. Why are there pictures of Mark Zuckerberg trying out the Valve headset at Oculus as opposed to the Oculus headset he ponied up billions for?

Thanks to all the developers who shared their VR perspectives – you know who you are even if you don’t want to be named Winking smile

So will Oculus get it together and recapture the lead? Or will someone write a Fumbling the Future-esque book about how they didn’t? Or is this just narrative fallacy run amok?

Tweetstorm Digest: June 17, 2015

Some @charlesfitz thoughts on Fitbit right before their IPO:

1/ Fitbit IPOs tomorrow and this profitable company has a surprising number of skeptics.

2/ They have dominant market share (85%) and their brand is almost synonymous a la Kleenex/Xerox with the fitness tracker category.

3/ 2014 revenue was $745M with $337M in the first quarter of this year. 2014 profits were $132M.

4/ 2014 performance was despite a recall of its high-end Fitbit Force product due to allergic reactions to nickel metal components.

5/ Even with 50+ competitors introduced at CES, they are holding their own. Nike has exited and Jawbone is in its death throes.

6/ The glib takedown is the company is the next Blackberry – http://www.businessinsider.com/fitbit-risks-to-business-before-ipo-2015-6

7/ Apple Watch is touted as a Fitbit killer but it is somewhere between “meh” and an outright flop (heresy I know).

8/ Apple Watch provides a huge price umbrella for Fitbit, whose most expensive product is only $249. Big battery life umbrella too.

9/ Apple Watch is overly complex, inconsistent, slow and, in my view, a Pavlovian notification nightmare.

10/ Apple execs in their chauffeur-driven Bentleys have lost sight of “the rest of us” with Apple Watch.

11/ Apple’s fashion fixation and need for material revenue contribution at Apple scale have perverted the design point.

12/ Fitbit looks good for foreseeable future. Hopefully will be long $FIT tomorrow.

Top Ten Reactions to Latest IBM “Billion Dollar” Inanity

Here it is, as irresistible as a prime time car chase that ends with a celebrity stuck in a well is to CNN:

Last year, it [IBM] invested nearly $1 billion to leverage the Cloud Foundry platform to develop the Bluemix platform-as-a-service as an implementation of its Open Cloud Architecture.”

As a farewell (with apologies) to David Letterman, listicle popularizer [1]:

Top Ten Reactions to Latest IBM “Billion Dollar” Inanity

10. They must not be very serious if this project doesn’t merit a full billion dollars.
9. Sheer inefficiency isn’t a particularly strong value proposition.
8. How does one spend “nearly” a billion to stand up software someone else built? [2]
7. Maybe they really do have as many lawyers and standards people as I joke about.
6. In seven plus years, Pivotal/VMware haven’t spent that much on Cloud Foundry.
5. That is a lot of money to spend and still have no customers to show for it.
4. A bottle of champagne to the reporter who calls them on this clichéd playbook.
3. Could aspiring Apple reseller IBM tie their shoes for less than a billion dollars?
2. Needless to say, there is a drinking game here.
1. IBM: “It’s a Billion Mister – what was the question?”


[1] For the record, my favorite Top Ten List was Top Ten Pravda Headlines After Chernobyl, including such gems as “Lead Hats: Sturdy and Sensible” and “Ukrainians Get Free Truck Rides”.

[2] Is the sheer scale of the investment a SoftLayer problem? An IBM Global Services problem? If the number isn’t the result of hopelessly uncompetitive IBM dependencies, how could you possibly spend this much?

Tweetstorm Digest: May 19, 2015

Lest you missed a bit of a @charlesfitz victory lap for Cloud City (Seattle) on Twitter:

1/ A geographic look at the Gartner Magic Quadrant for Cloud is revealing:


2/ The Leader quadrant for cloud computing shall henceforth be known as the Seattle quadrant.

3/ Seattle has also annexed the best real estate in the visionaries quadrant.

4/ Yes, Google does their cloud infrastructure work in Seattle.

5/ The MQ has more companies from south of the Mason-Dixon line than from Silicon Valley.

6/ VMware (wedged in there like Oklahoma) is Silicon Valley’s champion, almost by default.

7/ The Cloud BS Brigade of Silicon Valley BigCos (Cisco, HP, Oracle) only appear in their own press releases.

Bonus: a fun timelapse of how this Magic Quadrant has evolved over the last five years.

AWS and the Bonfire of Amazon’s Vanities

The Bonfire of the Vanities

TL;DR – It is time for Amazon Web Services to get out of Amazon

A recent interview with Amazon Web Services’ chieftain Andy Jassy repeatedly touts the “trillion dollar opportunity” associated with the inexorable transition of enterprise IT to the cloud. Perhaps because his interlocutor was so busy inserting himself into the interview, Jassy isn’t actually quoted uttering the T-word (although he does manage to land “TAM”). But he certainly isn’t refuting the notion there are thirteen orders of magnitude associated with the Enterprise Cloud Jackpot (and I use Jackpot in a thoroughly non-Gibsonian way, though legacy vendors may see it apocalyptically). As the cloud computing leader today, AWS is in the pole position for this tectonic shift. The question is whether being part of Amazon going forward is on balance more help or hindrance to AWS winning their fair share of the Jackpot.

Amazon obviously was able to conceive, nurture and build a heretical idea into AWS today. It is inconceivable any traditional IT vendor could have done this and hard to imagine other candidates with comparable wherewithal and “willingness to be misunderstood”. But we’re past the point of being misunderstood. Pretty much everyone now accepts that vast chunks of IT are shifting to the cloud (with the notable exception, admittedly, of legions of enterprise IT people clinging to their servers in a desperate bid to preserve the status quo). Even the biggest technology dinosaurs now recognize that the incoming cloud meteor is a potential extinction event.

AWS continues to innovate and execute well. Their near and medium-term success is not in doubt. But being part of Amazon raises questions about their ability to fully capture the big prize. Can they achieve generational dominance a la IBM or Microsoft in their primes? Will they be one major player among several? Or does their early lead whither away? Being part of Amazon brings benefits, but also significant baggage, specifically difficulty concentrating, having sufficient cash to compete and adverse cultural factors.


Big as it is in its own right, AWS is a relatively small part of Amazon and gets lumped into their glamorous “Other” segment, which did $5.6B in 2014 (about 6% of Amazon’s overall $89B in revenue). Notably, “Other” was the fastest growing segment at 42% vs. 20% for the company overall. The Amazon-branded credit card gets cited as another occupant of “Other”, but our grasp of the AWS business remains tenuous.

Beyond the trillion dollar Enterprise Cloud Jackpot, Amazon’s core e-commerce business still has tremendous upside. E-commerce in the US last year was over $300 billion and but only 6.5% of overall retail sales. Amazon takes an expansive view of the ecommerce business, investing in drone and local delivery, a broad line of consumer hardware for direct distribution of digital goods, a robot army and private label brands for everything from diapers to TV shows.

In contrast to Apple who says “no” by default, when confronted by new opportunities Amazon seemingly leaps up on the table and screams “Yes! Yes! Yes!” Their bonfire of initiatives has resulted in some notable and expensive misfires of late, including the disappearing Kindle Fire, the disastrous Fire Phone and the under-heralded Fire Diaper blowout And the jury is still out on Fire TV, the not-exactly-setting-the-world-on-fire Echo Fire, The Man on Fire in the High Castle, WorkMail Fire, and “hair on fire” one hour delivery amongst other efforts. And, for completeness, this is an AWS Fire.

It can be argued the company has poor impulse control, is fighting too many battles on too many fronts and must allocate cash, talent and attention across a very wide range. Amazon’s historical “willingness to be misunderstood” and success in defying past criticism (to which I hereby add my name to a long list) don’t do anything to suggest new restraint is imminent. This scattershot approach may make sense before product-market fit, but AWS is beyond that point. Many of these other activities are a distraction given AWS is chasing a plausibly trillion dollar market.


Cloud computing is not for the light of wallet, requiring many billions of dollars to build cavernous datacenters scattered around the planet, stuffed with millions of servers. GigaOm breaks down last year’s capex spending by the big players:


Now these numbers aren’t pure apples to apples comparisons. Amazon’s capex also goes to erect even more cavernous e-commerce distribution centers with “more than 15,000 robots in 10 fulfillment centers across the U.S.” Google and Microsoft both spend big on search infrastructure, and Google’s numbers include YouTube, flotillas of automotive, sea-going, aerial and space-faring vehicles, and based on the sheer magnitude, maybe the odd space elevator.

For comparison (and in lieu of a much-delayed “So You Want to be a Cloud Wanna-be” post with etiquette and strategy tips for cloud also-rans), here are similar period capex numbers for some of the cloud wanna-bes and their growth (or lack thereof) over the preceding year as they try to play catch-up:



Growth over 2013
















(These are the budgets from which bonsai datacenters are built).

Meanwhile, returning from Lilliput, Amazon has the shortest stack at the grown-up table, with $17.4 billion in liquid assets to Google’s $64.4 billion and Microsoft’s $90.2 billion. Google in particular intends to push Amazon to the wall financially, though it was Bill Gates who said, “Never get into a price war with someone who has more money than you.” Amazon has notably lost its prior enthusiasm for price cuts and obliquely grouses about networking costs where Google and Microsoft have a huge advantage in terms of facilities.

It has always been a bit of a mystery how Amazon could serve more cloud computing customers, spend less than Google or Microsoft and support aggressive build-outs of both datacenters and distribution centers. The assumption was search required significantly more infrastructure and/or Amazon was just somehow more efficient. But we’ve recently learned that Amazon has used capital leases to keep billions in capital spending off their cash flow statement. So their capital spending is closer to double what has been reported. This means their free cash flow, the metric they have relentlessly told investors is the key lens onto the company, is actually negative and declining in recent years (remember this: we’ll revisit it below when we talk about employee recruiting and retention).

It is an easy quip as a low margin retailer to say “your margin is my opportunity” but you still have to pay for your datacenters. Every dollar spent on half-baked consumer hardware (or worse, doubling down on a failed consumer hardware brand) or random TV shows, or giant distribution centers and bright yellow robots to support the core e-commerce business, is a dollar that isn’t going to AWS. And Amazon must continue to invest significantly in its core e-commerce business, whether defined narrowly or broadly.


It is an open secret, at least in Seattle and amongst top tier technology firms, that not many people enjoy working at Amazon. Many companies have come north to open offices (e.g. DropBox, Facebook, Palantir, Salesforce, Twitter) and usually say they are there to lure talent from Microsoft. Yet with the notable exception of recent SoCal immigrants Oculus and SpaceX who are on Microsoft’s side of the lake, most choose to locate their offices a stone’s throw from Amazon’s campus.

Amazon relies heavily on its stock for both recruiting and retention. They pay below market salaries, offer signing bonuses that pay out over the first two years and after that rely on stock to both carry the compensation load and overcome the drawbacks of the work environment. Independent of stock performance, you see a lot of Amazon resumes on the street as soon as the signing bonuses are paid out.

Amazon’s stock price obviously reflects perceptions of the company broadly. It has been run as a profitless machine yet been richly valued for most of its history. Skepticism has emerged over the last year or two about whether the company will ever get out of “investment mode” and focus on financial returns. Amazon turned in a strong Q4 including an unexpected profit (they have conditioned Wall Street well…) which popped the stock by over 25%, but it still trades below its all-time high even as the rest of the market hits record highs.

Amazon has guided investors to focus on its free cash flow as opposed to profits. Yet they felt the need to more explicitly call out the significant use of capital leases in their most recent earning call, which had heretofore been buried and largely ignored amongst the footnotes. The free cash flow picture looks very different, in both magnitude and trend, when these leases are considered:


And note this debt is being incurred today at unprecedentedly low interest rates, a phenomenon that is unlikely to continue much longer.

AWS is growing fast and needs to continue to hire rapidly as it chases the Jackpot. Dependence on Amazon’s stock, and the company’s ability to sell Wall Street on anything-but-profit metrics, adds risk to their ability to recruit and retain. AWS also needs to build a culture that can meet enterprise customer expectations and that culture surely looks different than today’s Amazon.

For example, Amazon’s secrecy fetish and chronic inability to put numbers on the y-axis of charts is inconsistent with need to provide long-term roadmaps for customers contemplating taking enormous dependencies on AWS. The secretive culture alienates a whole range of useful hires for AWS. Further, Amazon the retailer gets confused about what it means to be a platform company. AWS has generally done a decent job walking this fine line (and platforms and their ecosystems are never static, which is a topic for another day) but a deft touch in nurturing the ecosystem is critical to AWS’s future success.

Set the Cloud Free

On balance, I think AWS would be better positioned to realize the opportunities in front of it as an independent company, away from the vanities and vicissitudes of Amazon.

A full spinout of AWS from Amazon or even a partial IPO a la VMware would establish a focused entity that can single-mindedly pursue the Jackpot, with its own culture and compensation model. Amazon can stake the new company and the transparency associated with being a pure play chasing a $1 trillion TAM should give it the opportunity to raise all the money it needs to compete, especially while growth is still in the mid double digits. More distance from Amazon would also help AWS land more customers. Many large retailers consider AWS verboten and as Amazon’s sprawl continues, that competitive dynamic could impact AWS’s ability to sell to media, consumer products and other industries.

A spinout of AWS may already be in progress. Amazon announced it will start disclosing AWS numbers this year, which could be a first step. These numbers will be scrutinized every which way and will be fascinating to see. We could learn that it is AWS’s capex specifically that is being capitalized and thus intended to be portable. Rumors also suggest AWS gets far less attention from the chief product designer and octopus taster at Amazon.

Will AWS still be part of Amazon in two years?

Book Review: Whiskey Tango Foxtrot

The latest in digital technology and Big Data in particular are increasingly fodder for novelists. Whiskey Tango Foxtrot by David Shafer is a wry story of mostly earnest millennials who end up in “pitched battle with a fascist consortium of data miners”. The Google–esque bad guys are too nerdy and tone-deaf to achieve full-on Bond villain status, but Google is inexorably becoming the template for the next generation of thriller/movie villains (after The Interview, the only villains left seem to be evil corporations lest we offend even the most backward of movie-going audiences and/or their hereditary dictators, although they pale in comparison with classic villains in their menace, reach and ambition).

Shafer has some great turns of phrase in addition to exploring the dark side of Big Data:

They call it the cloud, but that’s wrong, isn’t it? Their cloud is heavy and metal and whirring.

But maybe that’s not how life works at all. Maybe you’re not supposed to put up so much resistance. Maybe a lot of that is pride and ego and pointless in the end. In which case she’d been misled by all that required reading and by the Die Hard movies.

Besides, there is the scrape of luck in everything, from the missed bus, to the dinged chromosome, to the hurtling asteroid.

“Why the hell would you be collecting shit like this?” Mark said, looking straight at Cole. “It’s public. It’s over our network. We call dibs on it.” Dibs? They were calling dibs? “But it’s illegal, to spy on people like this.” “Information is free. Storage is unlimited,” said Cole, totally unbothered. “Our privacy policy is reviewed regularly, and our mandate to collect is spelled out in the implied-consent decree of 2001. We’re just keeping this stuff safe, anyway. The other server giants have terrible vulnerabilities; they could be erased so easily.” Did he just smirk? “But that’s not really my department.”

“And what is the product, exactly?” asked Mark, a little desperately. “It’s a product and a service,” said Straw proudly. “It’s order. It’s the safeguarding of all of our clients’ personal information and assets. But it may be a while before our clients discover that they are our clients.”

“And yes, right now this part runs up against something called the ‘right to privacy’”—she made air quotes—“which is a notion that hasn’t really meant much in thirty years and means less every day. You may as well defend people’s right to own steamboats. Someone’s going to control access to all the data and all the knowledge. All of it. Everything that every government, every company, and every poor schmuck needs to get through the day. You want that to be the other guys? Once everyone’s on our network, the old, unwired world will be worthless.”

Tweetstorm Digest: January 26, 2015

Lest you missed an @charlesfitz Twitter excepting of a (paradigmatically paywalled) Goldman Sachs report “The Hardware Download” dated January 20, 2015:

1/ Missed a good Goldman Sachs report on cloud last week with focus on “the cloud’s impact on IBM”. Good CIO/VAR survey data.

2/ VAR survey “How has migration of your customer’s workloads to the public cloud impacted spending on infrastructure companies?”

3/ Positive responses minus negative responses: SAP +44, MSFT +40, RHT +35, VMW +6, CTXS -36, ORCL -50, IBM -74 (!)

4/ CIO survey shows $RAX a bigger player in the race for the enterprise public cloud jackpot than $GOOG

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5/ “many investors are focused on IBM’s ability to counter many of these secular pressures with its investments in cloud platforms”

6/ “the early read from our team’s surveys suggest much work is still needed in this respect”

7/ GS coyly concludes: “IBM’s infrastructure software sales could be seeing more pressure than peers with migration to public cloud.”