Monday, May 27, 2024

How Intel, IBM, and Microsoft Could Change the Cloud Forever

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Three companies were critical to creating the PC of today, well, four if you include Apple.  But Apple only set a direction. The work of IBM coupled with Intel and Microsoft created the IBM PC, which founded what over 90% of us currently use as our desktop solution today.

Apple isn’t leading in anything but margins and revenue anymore, as that capability was lost mainly when Steve Jobs passed. Still, Pat Gelsinger is the closest thing Intel has had to Andy Grove since Andy Grove left the company, and I think Pat has proven to be one of the most well-rounded CEOs the tech market has ever had.

Now it is interesting that both Microsoft and IBM also have what may be perfect storm CEOs. Both are cloud experts, which is where most of the near-term revenue opportunity resides.  As part of Pat Gelsinger’s Vision talk this week, both IBM’s CEO Arvind Krishna and Microsoft’s Satya Nadella were on stage to support Intel’s vision. I think this opens the door for what could become a significant cloud pivot driven by the same three companies that created the PC revolution.

Let me explain.

Intel, IBM, and Microsoft A Potentially Game-Changing Partnership

While these companies have had trouble working together in the past, their current leadership had embraced open architectures, collaboration, and interoperability in sharp contrast to positions they took when they fought with each other.  This CEO alignment not only made this announced partnership likely, but it also made it sustainable because the firms are less likely to disagree to the degree that would cause them to break up again.

In short, they are even more able to come up with and execute a collaborative vision than when they loosely partnered to create the IBM PC. Interestingly, Microsoft’s and IBM’s cloud strategies are in direct conflict. Microsoft is trying to be the best volume cloud provider with Azure. At the same time, IBM is more focused on multi-cloud tools. Their cloud is positioned as a premium offering for buyers who need substantially more security (government, healthcare, and finance).

Intel is, of course, focused on the hardware side of this, and Gelsinger articulated a Microprocessor roadmap that implied a huge future focus on the kinds of loads that both Microsoft and IBM’s cloud solutions could embrace.

The New More Powerful Cloud

We do a lot of work in the cloud today, but the projected future is to shift almost every load, including desktop loads, to the Cloud over time. Also, due to latency and internet traffic concerns, those Cloud instances will increasingly be distributed to bring them closer to the systems and users that make use of them.

These new smaller distributed data centers should aggressively address latency issues making cloud computing more viable. The pandemic and Microsoft Teams created reduction in travel and should reduce desktop hardware’s need to perform disconnected.

I expect cloud server hardware to continue to evolve along specialty lines, with different loads being routed to the specific resources optimized to carry them. This increased flexibility should open the door for far more varied cloud hardware, resulting in the replacement of existing servers and the creation of never seen before server classes.

Clean power needs will likely help fuel Geothermal and Nuclear energy generation’s interest at an ever-smaller scale. By the end of the decade, I expect many of these remote cloud data centers will primarily be self-powered, using more sustainable energy sources.

Automobiles, appliances, security systems, a new generation of fixed and mobile terminals (in PC and Smartphone form factors) will emerge mainly using the maturing 5G standard with ever-growing capabilities and greater flexibility to have redundant suppliers.

The most dramatic change will likely be with AIs, which will significantly benefit Intel, IBM, and Microsoft’s collaborative research. Ease of use should advance significantly, and the “as-a-service” trend should also significantly accelerate through this decade.

In the end, computing power is likely to become more like a utility that you pay monthly with partially subsidized hardware. As a service, the need to churn on-premise hardware should drop sharply, with much of the advancement shifting to the Cloud.

In short, computing costs will be increasingly charged according to use with competition, assuring technical advancement and low prices (if the market doesn’t consolidate, which remains a risk).

Wrapping Up

Intel, IBM, and Microsoft created the PC revolution showcasing they are collectively capable of great things. All three companies are now led by CEOs who are less combative and far more collaborative than their predecessors. All three companies clearly understand what can happen if they miss a market pivot.

And the best way to not miss a market pivot is to execute it yourself. Alone none of these companies (though Microsoft comes close) can do this, but little they can not do together.

There is incredible potential in this partnership. The cloud market is poised for a massive change; I think it likely that these three companies are setting up to drive that change and another disruptive revolution.

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