Contributed article by Michael Thompson, Principal, Product Marketing at SolarWinds

Commoditization Allows Innovation

In preparation for the annual VMBlog Prediction Series, I sharpened my pencil and reviewed my list of forward-sounding acronyms to determine what to keep and what to throw out. The choices are still vast: SDN, SDS, SDDC, VDI, SSD, SaaS, IaaS, AWS, NSA and WTF. A few of these are clearly in the “that’s so 2012” category so I tossed those.  I was about to settle on a nice software-defined something when I had to ask myself, how much will software-defined really change the way the typical VM administrator or company functions in 2014. Software-defined technology clearly has a lot of potential, but it will primarily impact those on the bleeding edge of technology during the next year. 

A trend that is likely to impact a large number of IT users is commoditization of the systems and virtualization management market.  In 2014, the pace of commoditization will accelerate as the value proposition becomes a priority for more customers. Gartner estimates that the overall IT Operations Management Market was about $18.5 Billion in 2012 with $2.8 Billion in the Availability and Performance Management category.  They even call out companies that are disrupting markets with lower cost, easy-to-use products like SolarWinds® and ServiceNow as growing at rates greater than 45% versus many legacy vendors who had negative or low, single-digit growth in 2012. 

Server and virtualization monitoring is a mature market, but many solutions still command a relatively high price for their products. However, given the maturity of this market, a number of companies are currently commoditizing the market by offering similar solutions at a fraction of the price.  In the Availability and Performance market you can now find a server or virtualization monitoring solution with a similar feature set for as little as 20% to 30% (70% savings) of the price of many of the legacy solutions.  While the expensive solutions keep their pricing a well-kept secret, it is pretty easy to compare what your costs are with these other companies (e.g., SolarWinds publishes their price list online). Assuming that these products may not be applicable to half the market due to special features, enterprise license agreements, or legacy customization, a back-of-the-envelope calculation would reveal the following:

$2.8B * 50% applicability * 70% savings = $1 Billion potentially freed for Innovation

In general, the more expensive solutions are not enabling organizations to innovate.  In addition, if the solution is complex, it requires high levels of expertise to use, and/or is difficult to maintain and upgrade. This implements an additional drag on innovation by sapping key staff and skills that could be applied elsewhere.  So really this is an opportunity cost issue.  If the money and staff that is currently tied down on difficult and expensive server and virtualization monitoring can be allocated toward areas that will drive increased business innovation, the returns become even larger than just the cost savings in switching out software. Adding a new business application, improving IT responsiveness, or experimenting with new technology like the Cloud or solid-state disk storage are all much more likely to provide a measureable return to the business.  That can make for a nice holiday present all around. The business leader gets better business results, the IT Director looks like a hero, and the IT administrator gets to do something that is more interesting and impactful than spending all day keeping difficult management software running. Now there is a real holiday bonus for 2014.

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About the Author

Michael Thompson is a Principal for Product Marketing with SolarWinds, an IT management software provider based in Austin, Texas. He is responsible for SolarWinds application, server, virtualization and storage product lines. Michael has worked in the IT management industry for 12 years, including leading product management teams and portfolios in both storage and virtualization & cloud products.