Much has been written on the so-called "unicorns" in the start-up community - private companies with valuations north of one billion dollars. Although the shine has started to come off what some are calling a bubble, we need to focus on how tech companies add value to end-users and enterprises. To that end, I want to present my view on how to structure the stages of how technology infrastructure affects companies. I hope it has relevance to the IT buyer, as well as to the technology provider.
Although unicorns are mostly celebrated in consumer or social media companies, some enterprise infrastructure companies also seek to become one. But rather than focusing on being a unicorn, it’s better to figure out how to add value to customers, which in turn can lead to being highly valued. It’s a way of being market-focused, as opposed to technology-focused. Let’s take a view of how infrastructure can evolve, using networking as an example:
- Cost Center – The infrastructure is viewed as an expense and networks are simply plumbing: in other words, one pays money to run a network and one strives to reduce that cost. One can implement a solution can help reduce costs, but you can only save so much money (no more than 100%). Perhaps the new product consolidates multiple devices or services into one - this is a way to be a hero to the CFO, who is keeping an eagle eye on expenses.
- Process Augmentation – The technology improves productivity of workers (whether it’s IT staff, or end-users). If a technology helps business agility, that’s a plus. The equation swings from saving money to making people more productive. It’s more than simple OpEx reduction, since we’re not talking about cutting labor costs, but making people perform their jobs more effectively. I use the term augmentation, in light of my earlier blog. This may make the line managers and, perhaps, the COO happy. There is no obvious upper bound to the benefits, but there will be some diminishing return.
- Revenue Enabler – The technology is used to generate more revenue. For example, if you can launch new business initiatives that bring in more revenue. This may make the CEO (and the rest of the company) happy. This view can transform the business and generate growth.
I’m not the only one saying this. Here’s an excerpt from Cisco’s recent annual report on page 2:
"Market transitions relating to the network are becoming, in our view, more significant as intelligent networks have moved from being a cost center issue—where the focus is on reducing network operating costs and increasing network-related productivity—to becoming a platform for revenue generation, business agility, and competitive advantage."
Some examples from SD-WAN, a topic I wrote previously on: There are many companies who provide this solution, including emerging firms such as Aryaka, CloudGenix, Cradlepoint, Glue Networks, Pertino, Talari Networks, VeloCloud and Viptela. Established vendors with WAN products include Cisco (with iWAN), Citrix, FatPipe, Ipanema (part of InfoVista), Riverbed and Silver Peak Systems.
Let’s see how each stage maps into the use of this product category:
- Cost Center – If you use SD-WAN to replace several MPLS ciruits with less, augmented by broadband cable, you have accomplished reducing the cost of the network. This is a great start, but the benefits reach only so far.
- Process Augmentation – If you use SD-WAN products to simplify the management of the WAN by reducing truck-rolls to deploy or troubleshoot remote sites, then you’ve improved the process of the firm. Capabilities such as zero-touch deployment or QoS enables IT staff to be more effective. This improves the return on investment significantly.
- Revenue Enabler – If you have enabled the creation of mobile health clinics or pop-up stores by bonding mobile LTE links with broadband, you’ve enabled revenue. (Let’s assume they both need to be network connected to do their jobs). Pop-up stores enables a business to be more agile – one can open a store quickly if you don’t need to wait for a telco to provision a network, and therefore enables revenue. The mobile health clinic goes one step further, where you can provide a service that may not be possible before. If your competitor cannot provide the same service, then it’s a competitive advantage.
As for my picture, yes, it’s a unicorn eraser. There was a gift shop in San Francisco called Clark’s Unicorn Emporium that specialized in selling items related to unicorns, rainbows & clouds such as erasers, art work and other small gifts. The photo is from their Yelp page. Despite being in San Francisco, it had nothing to do with tech but was run by commercial artist who ran a store at the side of her studio. I don’t know why she closed the store, but perhaps the store was too much of cost center, was a distraction from her core job and ultimately didn’t enable generation of revenue.