UPDATED 08:43 EDT / APRIL 09 2013

HP Moonshot Leaves an Elephant in the Room

In many ways the HP Moonshot announcement April 8 was an amazing event. HP executive David Donatelli rightly called it “the day the industry changed”. But in some ways it, and in particular Cube interview of Suresh Gopalakrishnan, corporate VP and GM of the Server Business at AMD, was as notable for the elephant left unremarked in the room as for anything that was said.

For some months now Wikibon.org CTO and industry guru David Floyer, has made no secret of what he sees for the future of Intel versus AMD. In his latest analysis of this future, “Intel’s Nightmare Worsens….”, he estimates the Intel’s market share will fall from today’s 30+ percent to 3 percent by 2022, based in part on the sudden growth in noise around wearable computing devices like Google Glasses and the announcement of a 64-bit ARM processor from AMD.

So knowing that, one might expect that when SiliconAngle CEO John Furrier and Wikibon Chief Analyst and Co-founder David Vellante interviewed Gopalakrishnan live on the Cube webcast from the Gemini event that someone would have mentioned these predictions and asked what AMD thinks and how Gemini, which is the first commercial server line built on AMD rather than Intel processors, will affect that. I certainly did. Didn’t happen.

So that leaves it to lesser mortals to speculate. I wonder if the top executives at Intel watched that Cube webcast, and if so what they thought. Intel is already shedding marketshare in the consumer market at an incredible rate. And it isn’t just that consumers worldwide are buying tablets and smartphones, very few of which have Intel’s powerful but power-hungry processors inside them, as fast as the manufacturers can produce them. It’s also that sales of what are now suddenly “traditional” laptops and PCs with the “Intel Inside” sticker on them are falling. And where the consumer market goes, the business market will follow. In a decade few people outside of engineers and architects will have PCs. They will have tablets and smartphones, and all the processing and heavy duty applications will run in the background, on servers in the cloud, one way or another.

The last hope of the Intel crowd was Windows 8. And it was two years late and several dollars short. Win 8 will undoubtedly replace XP and Win 7 on work laptops, but even given that those devices will be convertible systems allowing their users to pull the top out of the cradle and carry it as a tablet, Windows will still end up with only a fraction of the end-user computing market it has owned practically since IBM announced the Personal Computer in August 1981. And unless Intel suddenly blossoms forth with a real competitor to AMD, its end-user market share will at best be limited to that. Floyer doesn’t expect it to hold even that – he believes both Apple and Microsoft will migrate their desktop operating systems to AMD processors in the next few years, leaving Intel with nothing.

Intel’s main remaining market, Floyer says, will be servers. But with Moonshot, HP has defined the future of the server market, and that future runs on AMD.

Of course that will not happen overnight. Donatello talked about how HP announced the first x86 processor at the height of its success with its Unix-based servers in 1989, and that eventually x86/Windows replaced Unix. That’s true, but it took 15 years. Commodity servers based on AMD chips are clearly the future of the server market, but a decade from now a healthy, if shrinking market for x86 servers will remain.

But the bad news for Intel is that that server market that looked fairly secure now appears very shaky in the long run. Intel needs to find something new to do or it will will become a footnote in the history of computers, much like Burroughs.

The Software Vendors

Microsoft, on the other hand, still has a bright future. First it is a software company, not tied to hardware. And it is highly diversified. It will move some software to the new AMD platforms and develop new products, often new versions of what it has now, for those markets. And it is already moving strongly into the Cloud with SaaS offerings such as Office 365 that at least in theory can run on any end-user platform. It will lose its end-user dominance but grow in other areas.

Similarly Apple is already moving strongly into the new era and probably will end up with a much larger share of the end-user market than it had in 1990. It even may become the Microsoft of end-user computing, an ironic thought, depending on how successful Google Android is in the medium term.

Oracle and SAP have a more difficult road. Both are tied to monumental, scale-up, Intel-based platforms. SAP has the advantage that it sees the future and is working very hard to get there, for instance with HANA. However, eventually it will need to rewrite that massive core of its architecture not only to run on scale-out rather than scale-up hardware but to meet the fast evolving expectations of both corporate C-suites and end-users. The Germans are nothing if not resourceful, and it will probably succeed.

Oracle’s problem is ego. For a long time it has basically refused to admit that things are changing and that its dominance in the enterprise market today is no guarantee of tomorrow. It’s strategy has been to try to hold its customers back. It still has no real mobile strategy, for instance. At best that is not a growth strategy, and at worst it is vulnerable to a competitor that develops replacement solutions that can convert or run Oracle databases natively but are built on the scale-out model supporting a mobile computing end-user device population.

Worse, Oracle’s business strategy is based on its premium pricing. Its customers are tired of that, which means that a competitor who comes in and tells them they can replace their expensive Intel servers with Moonshot and their expensive Oracle software with an alternative that costs half as much, runs faster, and can handle Big Data natively, can walk away with Oracle’s entire market.

Overall we are living in interesting times. The IT industry is being buffeted simultaneously by Open Source, Big Data, the Cloud, mobile computing, flash storage, incredible increases in computing power that are being applied in part to automating and adding intelligence to processes of all kinds, and now hyperscale commodity Linux servers. Any one of these would be considered a major revolution, as big as the PC revolution of the 1980s, in the past. Things are changing rapidly and unpredictably, and any professionals in any industry from IT to medicine who want to be around in ten years should start updating their skills now.

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