The biggest technology companies are changing right in front of our eyes.   Goldman Sachs, UBS, and other traditional analysts are putting out old school analysis advice to their clients on the big players prospects.  Of course those analyst state the obvious:  Cloud is up, mobile is hot, consumer social is passe, entertainment going digital, Netflix and HBO are booming, big data is changing the world.

Buy Sell Hold — what the hell is really going on.   It’s time to break down the market for those guys.  Goldman Sachs, UBS, and other analysts pay attention.

At a recent Thomson Reuters investment conference in Boston, I gave a talk about my view on the big disruption that will spur investment.

I wrote the following sweeping statement of my vision and what I’m seeing….

We are living in a new era of computing that is experiencing accelerated change from old technology paradigms to new faster modern computing, software, and user/consumer technologies and solutions.

Disruption Trends: Moving to a consumer experience and new business requirements for solutions on run on new electronic devices and networked physical and virutal environments.

Topics include: Cloud computing, mobile computing, and social/connected consumers and devices.

Companies like Apple, Facebook, Amazon Google, and new crop of emerging companies hitting the investment scene are examples of the disruptive companies who are the showcases demonstrating this transition to a new modern era of computing, software, and hardware. All of these new emerging companies and entrepreneurs are pushing new devices, software, and hosted technology powering new ways to create value, generate new solutions and experiences. This new modern era of technology is expected to power our world for upcoming decades.

Now it’s all coming together – We are living in a new modern era that is completely disrupted and the impact will be change the industry landscape in a radical way. Here is why.

Application and Modern Computing Architectures – Software

How modern applications are being developed and deployed, and the role of hyperscale and cloud computing has changed the game in the computer industry.  The world is flipping upside down.  Generations of computing paradigmns, technologies, and business models are being turned around and are upside down.  What does this mean and what is enabling this disruption?

What?  Hyperscale Computing:  Open source software; faster, smaller, and cheaper hardware; connected devices and big data.

Why?  Creates new opportunities for value creation.

Hyperscale is coming mainstream and started with the new modern consumer companies.  The largest modern consumer and business providers today such as Amazon, Apple, Facebook, Google, Microsoft, Yahoo and Zynga use hyperscale systems in very large data centers. These systems are defined to fit a relatively small number of systems or system components. These big modern leaders mostly build their own systems to their specifications as dictated by their application.  Yes that’s correct they build their infrastructure from the top to bottom – from the applications down to the physical.  This is a complete reversal of how it was done with “old legacy” IT technology – legacy like in 10 years ago.

These new hyperscale leaders had to build their own with a new mindset because the general computing hardware and commercial software markets and business models just didn’t fit the needs of the massive scalable application centric needs.  In other words these new modern leaders ushered in the “purpose built” infrastructure.  The disruptive enabler to this trend was open source software.  Open source software allows companies to spend on people to save on equipment and software, and to tailor open-source software and commodity hardware and software to the needs of the applications. In other words they spend time and people resource to save money.  This new mindset aligns with the core of their business which is the quality and value of their applications.   Facebook, Zynga, and Google (search mainly but all their apps) are great examples.  This is why the recent Open Compute Summit event last fall and the amazing HP #hpmoonshot event in NYC is so important– these trends are changing the game.

The old world in contrast, enterprise data centers support many applications, tend to spend on equipment and software to save on people costs.  In other words they will spend money to save time that requires people to build stuff.  That old mindset was excellent in the commercial software era but not open source.  This old legacy spending included outsourcing facilities and operations to large data centers, and increasingly outsourcing to cloud service providers – the cloud.  These cloud providers are using much lower costs, using open-source software where possible, and are spreading the costs over many customers by running a multi-tenant environment across multiple locations.

We are now seeing hyperscale computing being deployed by large IT service providers – centered round a specific application(s).   This trend will see rapid adoption to industry specific applications – today as mentioned above it’s mostly consumer apps.

Another area of interest in the database market.  The database costs are plummeting and it’s a race to “zero”.   Sounds good right?  Nope.  The people cost will go through the roof.  The current challenge for large commercial IT enterprises will be hiring qualified people to run the new modern era of infrastructure.  We all this DevOps.  Hiring developer and operations people.  The cost of people in DevOps is much higher as additional functions such as extremely secure multi-tenancy are developed and maintained.  However the benefits of DevOps is fast development of services and applications very  quickly while the costs of deployment are minimized, and the security and compliance can be externally audited.

Other big trends supporting the vision here is the rise in relevance for corporate tech buyers around Openstack.  VMware spinning out Pivotal, vCloud, and Greenplum, rise of corporate adoption of Hadoop for big data, HP changing their server strategy, and IBM announcing big moves in flash technology. among all the other trends and technology affecting scale out open source infrastructure and technology.

This is a huge opportunity and challenge.

Wikibon analyst David Floyer published his research on the topic.  Floyer goes into great detail on this topic.    Floyer believes hyperscale is a profound change in IT and the potential value IT can bring to its organizations. Wikibon expects this trend to start with mid-sized companies, who will move faster to ensure competitive advantage. Overall, Wikibon expects that IT spend will increase as a result of this trend, because of the very high returns of 20% or higher productivity improvements for most organizations.

Floyer is recommending that all organizations should have a strategy for moving towards this environment, and for taking advantage of new application opportunities

Free Research from Wikibon.org on Hyperscale:  http://wikibon.org/wiki/v/Flash_and_Hyperscale_Changing_Database_and_System_Design_Forever

Dave Vellante, Wikibon founder, also posted a similar thesis on the topic of hyperscale called Flash Storage will Radically Change Systems and Application Design.

Vellante (@dvellante) calls out enterprise IT infrastructure saying the current legacy infrastructure is limiting application value.  Vellante aggressively supports my vision that applications are driving infrastructure changes and fast.   Vellante goes on to explore the topic of how system and storage architectures are changing and the impact this will have on application delivery and organizational productivity.

The value IT brings to an organization flows directly from the application to the business and is measured in terms of the productivity of the organization. Infrastructure in-and-of itself delivers no direct value; however the applications, which run on infrastructure directly affect business value. Value comes in many forms but at the highest level it’s about increasing revenue and/or cutting costs; and ultimately delivering bottom line profits.