Tech Sales Surge, But Low Pricing Cuts Into Profits – WSJ.com

I read this yesterday, Tech Sales Surge, But Low Pricing Cuts Into Profits – WSJ.com, and this quote really struck me:

Bill Watkins, chief executive officer of Seagate Technology, the biggest maker of disk drives, says the rush to the Internet and the demand for products such as personal computers, iPods and digital-video recorders has for the first time pushed the total capacity of disk drives in homes beyond that of businesses. “Consumers are just gobbling it up,” he says.

Home disk drive capacity exceeding that of business?!?  Holy cow.  I’m going to post this without adding in a bunch of info on how many petabytes of data, blah, blah, blah, but I will look that stuff up.  In the meantime, I think this quote is very interesting, and I want to express what’s going on, why is it interesting, and what does it mean?

I think what’s going on is that the power of web and software development tools, broadband proliferation, and easy brain-dead connectivity of devices  have come together to deliver powerful simple consumer solutions.  This simplicity and usefulness drives customer usage.  Customer usage drives capacity increases. 

Why this is interesting is not that consumer scenarios are getting simple enough for consumers to enjoy.  In fact, my view is that most of these scenarios are still not simple enough.   Photos are easier to share than ever before, but they’re still not easy to share.  Video still has a long way to go.  Ipod with the music scenario is quite good, as is XBOX Live.  

To me, the first thing that’s interesting is that there is going to be even more growth in consumer-driven storage demand, as more apps come online and as more broadband capacity is taken on.  This good news for the high tech industry over the long-term, as it means more stuff to back-up, more stuff to manage, more stuff to share, etc.  Good for entrepreneurs, good for big vendors, and great for consumers.

The more important thing though to me is the statement that this is the first time ever that more capacity exists in homes versus businesses.  The interesting thing here is why this would be so.

By my way of thinking, businesses are always starved for storage.  It’s kind of crazy to read that consumers could ever have more storage capacity than businesses.  Think about it–in a world of increasing GDP, continuing globalization, digitization of commerce, Sarbox, etc.  Basically there are tons of drivers in business that can and will continue to drive storage capacity  in the business space.  Surely, storage consolidation with things like SAN/NAS etc. will help businesses manage and get more efficient, but the core drivers for storage proliferation in business are there, and they’re understood.

So sure, consumers have Ipods, a digital camera, a broadband connection, and Flickr, but how does this translate into more storage capacity in consumer than in business? 

The answer is simple.  Or rather, simplicity.  Specifically, the simplicity of the consumer offerings and solutions that are available relative to the simplicity of the solutions and offerings available to business users, or information workers.  Put bluntly: consumers have simpler, better stuff to work with right now for what they want to do than information workers do for the stuff they want (have) to get done.  As I said above, simplicity drives usage and usage drives capacity.  Consumers are on the winning side of this right now; information workers are looking to catch up. 

Businesses are struggling with IT–have been for decades.  There’s a quote in the IT industry that 70% of an IT Departments budget is generally used to just keep the stuff that’s already running functioning.  Only 30% gets to go to new capacity, new solutions, etc.  Well, if only 30% gets to go to new stuff, then the cool new things that business people will get to do with technology gets watered down a lot.  Further, because the stuff that they do get that’s ‘new’ has a Frankenstein-like feel to it (cobbled together based on existing legacy stuff), the new stuff has that old stuff scent.  Not simple, not easy, not great to use.  The result?

Not simple drives minimal usage drives slower capacity drivers.  This is what’s happening in business relative to consumer storage capacity.

What to do?  Well, my view is that this is a temporary inverse.  The driver in the next 5 years that will flip it back to business storage capacity outstripping consumer will be Business Intelligence (BI) and continuing CRM progress.  Both categories — BI and CRM — are poised for breakthroughs in the simplicity and scale to which they’re available to business people or information workers.  When these powerful tools hit in scale, business people won’t know what hit them–it will be like being a college kid and getting your first Ipod. 

BI and CRM tools are poised for that kind of simplicity for Information Workers.  With the simplicity comes usage.  With the usage comes capacity.  This is great news for businesses, the high tech industry, and information workers themselves.

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