OEM Dinosaurs

Curtis Franklin Jr., Executive Editor | 2/16/2013 | 18 comments

Curtis Franklin Jr.
When the Cretaceous climate changed, whole families of dinosaurs went extinct. Cloud computing could have the same effect on OEMs unwilling to shift their thinking.

Scores of OEMs, ranging from rather small to quite large, have lived quite comfortably supplying components, sub-systems, and complete white boxes to vendors with well-known names -- vendors that then sold finished systems with software to the final customer. When cloud computing came along, bringing with it a voracious cloud-provider appetite for new systems, things changed dramatically. Suddenly, large customers were writing detailed specs for their own servers and going directly to previously anonymous OEM suppliers for their hardware fix. Think of it as a market meteor.

Now, it would be a mistake of brontosaurean proportions to think that the large, established vendors would take this sort of change lying down. Major vendors have moved aggressively to launch cloud-hardware offerings as well as cloud services of their own. Still, many traditional OEMs find themselves in an interesting dilemma: refer interested customers to their vendor partners and risk turning away valuable business, or accept what amounts to retail sales orders and take on the integration and support responsibilities those sales bring.

This is the sort of question and decision pair that has an impact on much more than the quarterly sales numbers. To an extraordinary extent, this strikes at a company's understanding of what it is. In recent weeks, I've spoken with several companies faced with the decision, and I've seen answers that fell across a broad spectrum.

On one hand, there are companies forced to offer their products to a general market because of market immaturity -- companies now eagerly awaiting the day when they can revert to selling their technology through nothing but traditional OEM channels once again. On the other hand are companies that have decided to accept the broader sales that can come with a broader market, even though they know that their business model becomes intrinsically more complex because of the shift. The thing that binds both types of companies is that their management has made a decision about their preferred type of customer and market strategy: They have decided not to sit passively and allow a market to happen to them.

It's the companies taking the passive approach that we're likely to find fossilized in the annals of failed OEM organizations. As a CIO with a seat at the executive table, you should bring an understanding of what this kind of decision will do to your systems, and how current systems can be modified or expanded to cope with the new challenges. Have you seriously thought about what it would take to change your sales model? Have you rehearsed a response if asked for an opinion by the CEO? If not, perhaps it's you and your career who will be joining the triceratops in the list of those who didn't respond when the climate changed.

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WaqasAltaf   OEM Dinosaurs   3/4/2013 10:09:01 AM
Re: Why only the CIO
@ Lufu
"Risks occur when the CIO is the lone technology guru in decision making, planning, and implementation. In that case CIO better truly earn the "Chief" part of their title."

You have a point. However, that is the most likely scenario that CIO is the only well-informed person about technology on the executive management team unless you are technology company.
batye   OEM Dinosaurs   3/3/2013 9:45:10 PM
Re: Why only the CIO
I think it should be this way but not always in real life... as a lot of the time CIO did play the game follow the wind... and only see what he/she want to see... also the other factors could be in play... as example HP and fire-sale of touchpad...destroying channel sales... What was CEO/CIO thinking...???
LuFu   OEM Dinosaurs   2/24/2013 12:52:16 PM
Re: Why only the CIO
@ WaqasAltaf - Uh-huh, should be. The executive management team will logically turn to the CIO for technology questions and issues. Risks occur when the CIO is the lone technology guru in decision making, planning, and implementation. In that case CIO better truly earn the "Chief" part of their title.
WaqasAltaf   OEM Dinosaurs   2/24/2013 11:10:47 AM
Re: Why only the CIO
@ lufu

Yeah. It can be argued that for technology trend shifts, the CIO can be and should be the most informed person in the executive management team.
WaqasAltaf   OEM Dinosaurs   2/21/2013 9:50:33 AM
Re: Change management
@ Curt

True. 

In my opinion, Apple is the company that can be stated as an example when it comes to taking that tough middle path. Not only its personal computers (the old business) are liked by users but also it is doing satisfactory in the cloud business (the new business).
CurtisFranklin   OEM Dinosaurs   2/19/2013 12:36:29 PM
Re: Why only the CIO
@LuFu, that's precisely the sort of scenario I had in mind. We've seen a push by CIOs to have a "seat at the table" in the executive suite, and I believe we're seeing a much greater willingness from the board to have them there -- as long as they can prove that they understand the business issues as well as they understand the technology.
CurtisFranklin   OEM Dinosaurs   2/19/2013 12:25:45 PM
Re: Change management
@Waqas, I think your idea of the company being customer-focused is exactly right. Once again, it has to be tempered just a bit by the company's better understanding of what their technology and strategies can do for the customer, but an organization that fears what customers want and need will have a very limited future.
CurtisFranklin   OEM Dinosaurs   2/19/2013 12:20:42 PM
Re: Change management
That's really the critical point, isn't it, @Waqas: To be able to draw upon the strengths you've developed as an organization without being so tied to the past that you can't adapt to changing circumstances.

I think we've all seen organizations that swung to either extreme -- either following every fad that comes along, or being so stuck in the past that they never change. Figuring out the middle path is the tough part, and yet the strategy that gives the best chance for long-term survival.
sohaibmasood   OEM Dinosaurs   2/19/2013 12:02:45 AM
Re: Change management
Zaius, change is difficult to manage but since it is bound to happen we must prepare ourselves for it. The IT has to step up to the challenge and embrace it with open arms. 
Zaius   OEM Dinosaurs   2/18/2013 9:10:42 PM
Re: Change management
Anytime when any transitions takes place, is a vulnerable time. And, at any given time, at least, there are more than one changes go on. There is time to rest and take a deep breathe in IT.
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