New Year, New Opportunities

Thirty-eight published blog articles, nine delivered speeches, numerous learning engagements later, TriStrategist has concluded the year of 2014, a year of big changes, unsatisfied questioning, insatiable curiosity and rapid learning. In the year, we met hard obstacles, we had deep disappointments, but we also turned many unexpected into opportunities, especially the opportunities to be more open, curious and daring. This year, we have learned to value our talents and our time more.

Because our interest has always been broad, in global business, in leadership and management, and in many technologies, the subjects of our blogs have been wide. We published TriStrategy’s 3T Framework on Innovation in Service Business and studied disruptive innovations in greater depth. We studied several biographies of the well-known CEOs of the current society and their key leadership approaches. We also summarized our thoughts and suggestions on several present-day leadership and management issues per our observations. We strived to cover the new topics and concepts related to today’s fast-growing technologies in the most concise manner (Yes, we counted words for each blog article!), including cloud computing, Big Data, distributed computing, AI, nanotechnologies, and IoT. We shared our learning and our visions of the coming years. It was definitely an exciting year to learn and keep a pulse on the new trends in various technology landscapes. Many of these trends will continue manifesting themselves in the years to come.

In the new year of 2015, we’ll continue our learning, our questioning, our sharing of the knowledge, and our weekly blogs as a vehicle of thoughts and exchanges. We hope to connect with our readers more. We want to put more of our ideas, thoughts, plans and creativities into actions and realizations, to help others’ businesses and help ourselves grow. May the New Year of 2015 promise us and everyone else more opportunities.

Nearables, Farables and, Escapables?

Following the smart wearables on the market, now come the term “nearables technologies” to describe the technologies that allow smart objects to communicate with the receiving devices within a few meters’ distance via Bluetooth Smart protocol. The release of low-energy example of such technologies, iBeacon (as an indoor positioning system) from Apple in 2013 has further promoted the conceptualization and realization of the Internet of Things (IoT), where almost everything, including humans, can be positioned as smart objects in the near future carrying wireless beacons.

With the near comes the far. If “Near” means a few meters’ range, by the sense of a beacon, “Far” will be a distance of more than 10 meters away. TriStrategist believes that very soon, new developments will enable “farables technologies” to fill in the picture of ubiquitous computing and IoT of the future.

Imagine a future world, with or without one’s knowledge, everyone becomes a smart object emitting signals constantly about their location and other personal profile information. Even with the modern encryption technologies or proprietary communication protocols, no matter how advanced, if any of these signals is captured by some ill-intentioned party, all information about this person can be potentially exposed and misused. It’ll be a grave privacy and security concern. Many today’s hacking stories have already demonstrated that no advanced technology setup can be truly hack-proof.

Could anyone escape this scenario? Not easy. In the near future, the clothes you dress, the shoes and socks you wear, the jewelry you pick, any piece of personal item you carry, of course your cell phone or any gadget with you, could all have sensors built in. The legal Opt-Out checkbox only fools the unsuspicious. TriStrategist thinks that our society will soon be in real and imminent need for “Escapable Technologies” – complex technologies that can allow the signal shielding or effective signal interference from the individual carrier so that a private person can choose to become “invisible” from any electronic signal receiver or monitoring screen.

A stealth plane carries special coating and is designed in carefully measured optical geometry to become nearly invisible to the radar. An “invisible man” on stage, performed by a magician, usually takes advantage of the lighting of the surroundings and wears special reflective clothing. Similarly, TriStrategist believes that future “escapables” from the electronic or optical signal receivers, may need a combination of different advanced technologies. Complete sensor signal shielding would be ideal, but may be hard to design and may not apply to all situations. Interference may be another approach. The signals or data captured, mixed with the interferences from the “escapables”, would become unreadable or undecipherable by majority of the receivers. These “escapables technologies”, once on the market and mature, could become far more valuable than any of the sensor technologies in the near future.

What else? Welcome to the new world where we will be experiencing numerous new technology innovations, new cultures and new vocabularies along with the explosive changes around us.

Consumer or Enterprise?

In traditional PC-dominated world, the distinction of enterprise vs. consumer business was fairly clear. However mobile devices are for today’s market just as desktop PCs were for the PC Age in the past. The line between enterprise vs. consumer market has become increasingly blurry as we see the proliferation of mobile devices adopted at workplace in place of desktops and mobile devices become more of the productivity tools than just the communication and social tools.

Today’s competitions in consumer device market are extremely fierce. New devices, new features, new global players are coming out every day. Domination in any global consumer market becomes increasingly short-lived and difficult. Companies are forced to constantly seek new markets and new ideas to hold onto market shares which may promise new service revenues in the near future. One such strategy is the push to cross of the protected boundary of enterprise vs. consumer market.

Google, with free Android mobile platform and rich assortments of its different price-point models from many manufacturers, has been gaining steady shares from cost-sensitive consumers and school buyers. Today Google has a strong push in cloud-based enterprise productivity software online and on devices with “Google for Work” solutions including Gmail, Google docs, etc. Microsoft, with the year-over-year decline of global PC shipment endangering its once-a-stronghold enterprise software space, on the other hand, is trying hard to gain more shares of the consumer market with its Windows Phone and Surface tablets.

Thanks to Steve Jobs’ visionary leadership, Apple has been very successful in high-end consumer market with its popular iPhone and iPad. However Apple also started observing a slower growth with iPad and more competitions in global smartphone market for iPhone. Of course they turned their attentions to the enterprise space. Apple devices have been flowing nicely into the corporate world in recent years. iPhone has long replaced Blackberry as the mobile choice for enterprises. With the new reality that enterprise solution providers and internal IT departments nowadays must offer applications both online and on mobile, Apple devices are riding on the lucky wave of the corporate changes. iOS is usually the No.1 targeted mobile platform for these developments. For example, Salesforce.com and SAP are observing increased traffic from Apple devices for their mobile versions of the CRM/ERP applications. Apple is also consciously deepening its corporate customer pursuits by allowing its devices to easily connect to enterprise emails and shipping new security features in its newer models such as the Touch ID fingerprint readers and anti-reflective screen coating in Apple Air 2 and Mini 3. This year Apple formed a joint venture with IBM to leverage Big Blue’s enterprise service reach to push more mobile apps running on its devices in enterprise environment. It has already borne fruits after a few months with the first set of mobile apps targeting key industries such as airlines, banking, financial services, insurance, etc. With more apps to come to ease enterprise pain points, they also hope that Apple’s strength in product design and user experience will appease to more enterprise users.

It looks like the merging of the enterprise and consumer markets in the future may be inevitable. A new reality appears fast approaching that all major enterprise applications will be running in cloud and all users can connect, do the needed work and run their daily life activities via mobile devices. Ease-of-use concepts and design innovations in consumer experience will surely be carried into business world as well. Wouldn’t it be cool that in the future work and play can merge?

The Stellar Rise of the Open Source Technologies

For more than 20 years in the past, Open Source was like a crying baby – loud but not loved. Many open source companies including Red Hat, a pioneer, had only made marginal revenues compared with other concurrent big software companies. Players around the world who genuinely loved open source concept, were competing against dominating windows-based software in guerrilla warfare fashions. The randomness came with the volunteering contributions, the shortage of funding, the lack of general organizations and development roadmaps had made open source software painful to use, especially for large enterprise environments where robustness and ease of maintenance are often the core requirements.

But things are dramatically changed with the new waves of cloud services and Big Data today. Now it becomes everyone’s favorite baby almost overnight. For example, Docker, a small San Francisco startup who just barely released its v1.0 software container solution for cloud about 1.5 years ago [See our August blog on Containers and Cloud], is instantly pursued by all major cloud providers. Google is using container templates directly for its cloud deployment features including autoscaling and load-balancing. Microsoft rushed to sign a new deal with Docker in October in order to allow generic Docker containers to be supported on windows servers and Azure platform in the near future. Today Amazon and Google’s popular cloud platforms have promoted a major chunk of Big Data solutions from open source communities, by either insulating the complexity of management tasks or delivering automation packages to the market. At the meantime, big old telecommunication companies are spending billions to develop open-source-based software-defined network infrastructure. Late for the party but with its own flair, Microsoft started to open its developer source code a few years ago to join the community. This week Microsoft disclosed its intention to open source its re-architected .NET Core as a foundation for both open-source application development and for cross-platform cloud services and application deployment.

On global mobile market, many OEMs and ODMs in emerging markets have been developing and packaging customized mobile applications using open source technologies on their devices, mostly on top of free Android mobile OS. This strategy has proved both fast and effective for many of them. The rocket rise of Chinese local smartphone maker Xiaomi, now #2 in market share in smartphone delivery in China, is a great example. [See October blog on The Fast Shifting Market of Mobile].

What are the reasons for the rebirth and stellar rise of an old baby? First, through time when a disruptive innovation has accumulated enough momentum, reached critical adoption mass and refined enough its solutions to form a sustainable ecosystem, it transforms itself from a smaller player in marginal markets to a powerful player that can compete head-to-head with incumbent dominating technologies in main markets. Second, other disruptive forces of present, triggered by the Second Machine Age innovations, demand new thinking, new ideas, new solutions to brand new problems which incumbents are not prepared to deal with. The disruptive technology thus becomes a more attractive, creative and cost-effective alternative for the experiments of seeking new solutions. Third, once worldwide great minds start gathering around on the subject, everything is possible. To sum up, the current condition is ripe for a broader penetration of a once insignificant disruptive technology to the mainstream market.

Some recent comments on Wall Street Journal explained the current appeals of open source software to big businesses. Companies think that it’s less expensive and easier to customize than proprietary software. They believe that open source options can help them develop new services faster. Obviously speed and cost are the top decision factors and signatures of today’s technology market.

From Software-defined Virtualization to Future Distributed Computing

Abstraction and encapsulation are among the most important concepts in software programming. Similar thought process is also applied to the data center design and management for cloud computing, especially in so-called software-defined data center (SDDC).

Currently, to support broad hybrid-cloud computing suited for most of the enterprise environments, at least two distinct approaches in data center design are competing in the market. One is the hyper-convergence hardware-based cloud appliance approach and the other one is the SDDC approach. Offerings in the first camp include Microsoft’s Dell-based Azure-on-board Cloud Platform System (CPS), VCE Vblock, HP CS700, IBM PureFlex, etc. This approach packages integrated compute, storage and virtual networks together in hardware containers with software management tools. It can also be preloaded with certain platforms or applications. The system can be switched on and linked to enterprise’s existing network to build hybrid cloud on premises almost instantly. The performance and future scalability will be limited by the capacity and numbers of these containers. Companies need to invest on these new appliances, but may save on many of the design, deployment and operation tasks.

On the other side, Google is the pioneer in SDDC camp. From the beginning of their online search business, Google used cheaply collected machines and storage units, bundled them together and programmed software to control everything. From shared compute, storage to virtual networking, all Google global data centers can be managed remotely. Failures from any of the hardware are monitored and switched off instantly without any interruption to the application tier or users. Amazon’s AWS also adopts SDDC with self-designed homogeneous servers.

The SDDC is gaining more steam in cloud industry. The concept has been clarified as distributed virtualization for all elements of the infrastructure – compute, storage, networking and security. It targets on the total abstraction of the application layer from the underlying hardware layers and thus allows service SLAs and automation of the management tasks for each element of the cloud computing. SDDC can promise unlimited scalability, performance and the important self-service to customers. The cheaper hardware scenarios usually attract more attentions, but there are often hidden costs associated with software resources and testing, especially with many of the open-source solutions.

Most of the SDDC solutions today are based on homogenous commodity hardware, but the real needs and challenges from today’s enterprises call for utilizing the existing heterogeneous hardware and network situations. Several companies are trying to come up with more answers, through distributed virtualization by abstraction and encapsulation. For example, VMware NSX extends software-defined network (SDN) concept with vSwitches built in VMware hypervisors to creates virtual networks and encapsulates existing network topology and security configurations, but it still yet to fully support hybrid cloud scenarios.

These are simply different stages in the development towards modern computing. Today’s continued breakthroughs in the research and development of super-fast computer chips along with the realization of nano and quantum technologies may start challenging all traditional hardware someday. The future definitely looks forward to the true distributed computing where the compute power will not be limited to a few data centers or any enterprise environment alone. Better designed software, especially smart algorithms, will still be the key to capture all future possibilities.

Moral Dilemma in Decision-making for International Business

“One man’s meal is another man’s poison.” Perhaps there is no better way to describe the dilemmas in dealing with diverse issues in international business. Increasingly in technology sector, along with the unprecedented speed of progress, modern technology innovations can reach beyond one country’s border instantly. Inevitably they become the disruptive forces that are marching into many uncharted territories including international and domestic laws, social norms and conventions, cultural and moral realms. Adding to the challenges, complex government and business relationships with globally entwined economic and political situations are real and present. Decisions, especially those touching on the “right or wrong” moral issues of public concerns, yet without adequate or accepted international laws or practices, are increasingly difficult for today’s business leaders.

Absolute moral compass in business does not exist. Without a workable compass or guiding principles, how can we claim that we are making sound business decisions with the right conscience?

Quoting moral sense in critical business decision-making is common. Google’s 2010 pulling its search business out of China was a well-known case of a decision by the sense of moral justice. It was made at the time Google still touted “Don’t be evil” as its corporate slogan. With the maturity of its profit-making business, the slogan is less mentioned as Google realized that it can be a huge liability to the company. The pursuit of profits itself can be viewed as evil by many world religions on moral grounds. The pervasive storing, tracking and mining user usage data on search and advertisements can also be said a questionable practice against uninformed individual’s privacy rights. It’s simply lopsided to justify as righteous or evil. In fact years later, when the number of internet users has grown from 30 million in 2000 to 2.75 billion in 2014 with half of that from China, it’s hard to imagine that Google never pondered back their past decision regarding the issue. As they expand globally and strive to push their internet services to every corner of the world, Google, the promoter of the ‘free internet’, unfortunately is increasingly frustrated with more governments’ controls and restrictions to its services. For example, they are facing even worse censorship in Russia today and just recently UK government delivered a ruling that UK citizens can demand the results of their name search be removed from Google’s search result list.

At the meantime, Microsoft is risking the “contempt of court” by refusing to surrender its user data stored in its Dublin Data Center to the Fed. The case is on its path to higher court after Microsoft’s initial appeal was turned down. From international users’ point of view, this is the right action to call for a better protection of user privacy in international business. Clearly if they did follow US government’s ruling, they could potentially lose all their valuable international cloud-service customers in the near future. Today there is definitely a tug of war going on for the technology industry on several related issues of significant importance and yet extreme trickiness, with not only international countries, but the US government as well.

There are universal moral values (honesty, fairness, respect of individual life, etc., to name a few) but no superior judgment on moral justice in international affairs. In practice, a little more humility and respect in international business has always been a more effective approach. That does not mean that we need comprise our long-held business ethics on professionalism and accountability, nor our key principles of enduring values. Today as a business leader, when facing a tough decision that one has to call out moral conscience for some guidance, perhaps we can start playing out the potential decision impacts on an enlarged space and time scale: not only for today’s limited users, but for the greater good of tomorrow’s extended audiences; not just for one region or country, but treat the world as a whole on this very much flattened globe; not just for the profits of a few earning seasons or tenure years, but consider the broader implications for many years to come; not through fixed lenses to view the present situations, but detect the positive changing trends to the future … The decision may be inevitably hard, but this frame and scale shifting may be one way to help mitigate some potential short-sightedness, narrow-mindedness, oversimplification or arrogance in our decision-making process to build a lasting global business presence.

Unfortunately on many tough issues, we may have to choose side despite the dilemmas and trickiness. In 1960s book of “Business Adventures” by John Brooks, considered a favorite business and management classics by Warren Buffett and Bill Gates, which was re-printed this year, it documented that Joseph C. Wilson, the then CEO of Xerox, said in a 1964 speech, “The corporation cannot refuse to take a stand on public issues of major concern.” Apparently history can also provide some wise guidance.

Roles and Responsibilities

Complaints about confusing roles and responsibilities in corporate environments are typically one type of clear indicators on the ineffectiveness of an organization or the disarray of its management. It always comes from more roles but fewer responsibilities for individuals, and not the other way around. They are usually late indicators as well.

Space triggers creativity. Mental space, a period of mental emptiness, rest and meditation, clarifies the mind and enhances the subconscious awareness. Personal physical space elevates the sense of freedom, independence and individuality. Temporal space changes perspectives. In life and work, we gain more from space and certain lacking than the total fills and crowdedness. Less is more.

The same principle works for corporate management. The Rule of Thumb for an effective management on roles and responsibilities should always be “Fewer roles, more responsibilities”. More than ever, we live in a world of sweeping changes triggered by technology innovations. The pace of competitions and changes today is demanding more flexibilities and responsiveness for organizations and people. Downsizing, reorganizations and re-training of people are all reactive afterthoughts. They are more costly and less effective. A smartly managed organization will see the natural migration of talents following forward-looking and ever-changing business needs. To achieve the best flexibility and market-driven growth, along with innovations and creativities to stay ahead of the game, an organization needs to consciously leave space to allow the natural flow and adaptation of its people inside. It’s human nature to stretch and explore. With space, talents will define their own roles in new challenges, grow into new skills and carry on needed responsibilities to their best abilities. We rarely hear people become unhappy when they are given more responsibilities of their liking.

Nowadays “Revenue per Employee” is likely a useful number to measure the effectiveness of an organization, small or large. All people inside a corporation need to be reminded that true leaders can lead everywhere and need not be a manager. The roles of the leaders and the success of each individual’s career are measured by their impacts to the business, not by the number of layers they can build or the number of reports they can accumulate. The file-and-rank system is a thing of the past in today’s business environment.

For individuals, leave some space in life with no fear, and let the universe magically fill it with wonders.

The Fast Shifting Market of Mobile

Samsung, the world’s No.1 smartphone maker by shipment, just reported a shocking decline of its global net profit, profit margin and market share for its mobile division in Q3 2014, compared with just a quarter ago. Per the WSJ report, Samsung shipped about 79 million smartphones in Q3 and saw its market share fall to 24.7% from 35% a year earlier. The upstart Chinese mobile device maker Xiaomi Inc. (the name in Chinese “Little Rice” is from an indigenous idiom of WWII) , which was founded only about 3.5 years ago, tripled its global handset shipment and rose from 2.1% to 5.6% global market share, now the No. 3. Apple remained No. 2, with a 12.3% share, falling from 13.4%. Samsung also lost its No.1 smartphone seller position in China.

The speed of changes in worldwide mobile market, both in handsets and mobile apps can surely cause dizziness. This is an industry that tolerates no mistakes. Competitions are hard-charging on talents, innovations, strategies, speed of executions and boldness.

Xiaomi hired Google Android executive Hugo Barra last year to help expand its global markets and it is moving fast. Xiaomi understands the Chinese buyers of mobile phones very well. It often uses ARM-based fast gaming processors from partners such as Nvidia or Qualcomm, and adopted Google’s free Android platform for quick development. Its newer models got great reviews and sold out online (their low-cost selling channel) within minutes. Their price is often less than half of those sold by Samsung or Apple.

Samsung may have made a strategic error in China as they failed to shift their position. For an expensive smartphone offering similar features and speed, fewer people are willing to pay double, especially with an average replacement rate only around 2 years. On the other hand, Chinese typically buy unlocked phones at full handset prices instead of locking into a long contract with a designated carrier, unlike the practice in the US market. Thus Xiaomi’s pricing strategy certainly gained an upper hand.

Apple at the moment is still enjoying its first entry advantage on many smartphone innovations and its premium brand recognition built up during Steve Jobs’ time. Apple owns its popular technology platform, a significant advantage that Samsung is lacking. It also tries to keep up with constant innovations and strategies. For example, its latest Apple Pay is trying to compete on another value chain – making an iPhone an indispensable daily tool instead of just a high-tech toy or communication device.

On the mobile app side, the number of new mobile apps created every day is staggering. The Finnish company Rovio Entertainment Ltd, once made the stellar mobile game Angry Bird, is now facing the trouble of coming up with another killer app to maintain the revenue growth. This year it had to trim its staff and change a CEO. No single company is likely to dominate the mobile app market because the next killer-app developer or startup could pop up from almost any open garage in the world. In addition, majority of the mobile apps are free today (or have to) despite the development cost. In fact the total app revenue only occupies a small share of the total mobile market capital. Sustained growth for a mobile app company is hard as it constantly requires new striking apps and ingenious money-making ideas.

This is definitely not a market for the faint of heart. The pace of the market may be breathless, but it’s a global vast and open field that favors amazing plays by amazing players, those who can gather brilliant minds, move fast, hold bold visions and execute right-on-target strategies.

Corporate Financial Reporting

Corporate finance data are the most critical indicators of the health of the business. Outside investors rely heavily on earnings reports and corporate finance data published. Believe it or not, financial reporting could be one of the most time-and-resource-intensive activities inside a large multi-national corporation with multiple lines of products and services. With October earnings season in sight, the rewards and punishments emotionally and theatrically played out by the investors on Wall Street after the disclosures put corporate financial reports and reporting process nearly under microscopic focus.

Although General Accepted Accounting Principles(GAPP), currently the most commonly used set of accounting rules in the US, has been adopted for years and numerous regulations well govern the details of financial reporting, surprisingly things are not always clear-cut and in fact very complicated. Even the most straightforward P&L Statement (or Income Statement) can often times be misleading. Investors often want to see the breakdowns of the revenues and costs by various business units, countries or regions, product/service lines, which could offer the most telling information on the growth trends of the company, the effectiveness of the management and their strategies, especially for new investments or specific competitive markets. However these information are often left vague, missing or poorly calculated. Companies can choose to enhance or hide any of these information. Revenues and various costs can be mixed or distributed differently among business units or product/service lines, or just simply put in some obscure bucket. For example, Amazon’s cloud services AWS, which holds the No.1 market share among all global Public Cloud Service providers and considered their fastest growing business sector today(although less than 10% of total revenue), is only listed in “North America, Other” category on their quarterly reports combined with several other smaller lines of investments or services. This may not be intentional and Amazon is definitely not the only large company having this issue for undisclosed reasons. Some may result directly from the challenges of corporate finance governance and reporting process. The calculations of various costs on P&L reports could be even more interesting, especially when it comes to services where both new and traditional product-line activities are linked or unlinked based on internal decisions.

More confusions exist for a corporation reporting from operations in multiple countries. Since International Financial Reporting Standards (IFRS) and US GAAP are inconsistent in many ways, companies have to convert themselves, not just on currency fluctuations, to make into one roll-up report. IFRS is broadly adopted by 100+ countries today, especially in European countries. China and Japan are also trying to convert their accounting rules into it. Thankfully in recent years, increasing calls for actions have raised the urgency of this issue and internationally organized efforts for the convergence of the international accounting standards are under way.

For corporate finance departments, sometimes the difficulties to get a simple, clear and unbiased roll-up financial report on some simplest concepts of revenues and costs from a certain area of the business frustrate even themselves. The challenges often come from the complex corporate structure and the diverse systems used to store and track the business data. With numerous data entry points, multiple legacy source systems owned by different groups, interpretations and controls of scattered and inconsistent data by different reporting personnel, the cumbersome and often manual reporting processes, etc., it’s totally time-consuming, costly, exhausting and error-prone to produce either the near-real-time market reports or the final earnings.

TriStrategist believes that technically the progress of the Big Data technologies today could trigger a revolution in the near future on corporate accounting and finance reporting. Efficient Big Data analytics could almost immediately render many old systems obsolete as any financial or business data in any granularity from any market could be allowed in raw data formats and collected generically and instantly for all factors of the business. They will be saved in the simple, unlimited repository in the cloud, as one source system only. With some straightforward and intelligent rules built-in (the true meaning of the data will matter, regardless of different standards), these data can be processed instantly in parallel, analyzed in very little time, and passed down to various downstream channels to form reports or visual views, either for aggregated periods or real-time volatility.

By that stage, the total transparency of the business will be unstoppable. It will benefit both the investors and corporations at the same time. Investors always crave for transparency. Corporate leaders can definitely look at every corner of the business at any time with unbiased honesty. More market intelligence for smarter business decisions can be made possible with very little reporting time and effort as well.

The Geographic Advantage

When Google started its first fiber network offering in the US, it also came up with a clever idea of free colocation service in its nearby data centers to content providers such as YouTube, Netflix and Akamai. In this way, it can minimize the content buffering and network congestions from transferring large amount of contents from remote hosting locations by the providers and thus greatly improve the customer experience from Google Fiber Network.

Amazon surely has exploited the similar idea more broadly and globally. Amazon, with its conglomerate products and services, is interested in both content delivery by itself and offering public cloud services for customers with streaming contents on their web sites. To fast expand into a dominant global IaaS provider, besides its global data centers, it has designed and implemented “AWS Edge Locations” in its Global Infrastructure strategies. Now Amazon has 50+ of them. These Edge Locations serve as the “caching” locations for local contents and data that are more convenient to its customers but outside its existing data centers. These Edge Locations provided AWS more advantages for serving global customers with local contents and faster data access without the full investment cycles of building data centers at each global location needed.

Google’s colos and Amazon’s Edge implementations not only help themselves and their customers with content and data deliveries, they will also allow the companies to proactively mitigate the potential negative impacts from the coming Net Neutrality ruling which is pending in the US congress. More importantly, they can be extended to significant geographical advantage and flexibility in the cloud service offerings in the near future, both in the US and internationally.

Global geographic advantage will be critical to the success of a global public cloud provider, especially in IaaS space. The importance of this advantage has already been discussed in TriStrategist’s earlier blog on The Positioning of Public Cloud Services-Part III published on September 19, 2014.

This week in the news, SAP signed a pack with IBM on October 14 to leverage the full fleet of IBM global cloud data centers, in addition to SAP’s own 20 of them, to expand SAP services and store SAP data in local regions to better accommodate the new regulatory requirements from different countries. IBM invested $1.2 billion from the beginning of 2014 to expand its global footprint on cloud data centers to about 40, including 15 from the SoftLayer acquisition and 12 existing ones of its own. Although many are still in the plan, IBM’s strategy of pursuing global geographic advantage apparently has already gained itself some needed edge to catch up on the global cloud war. Data security and sovereignty have long been concerns for many countries and governments to adopt public cloud services by global providers, certainly including the US government. The breakout of the NSA PRISM scandal only worsened the situation. Now several European countries have passed regulations or compliance requirements to have their business or government data reside locally in the country or on the continent. Countries in other regions will surely follow suit. Very soon, the global strategic spread of the data centers will become a prerequisite for a public cloud provider to survive in the global space or be reduced to a niche provider in a few markets.

In the next few years, geographic advantage will likely become the most significant deciding factor in the competitions among global IaaS providers.

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