The Next Generation - SaaS? Virtualization? Cloud Computing?

Recently on Motley Fool, Anders Bylund wondered if virtualization is getting played out as a hot technology and is on the brink of being replaced by cloud computing. This is just a few weeks after VMWare’s attempt to redefine virtualization did little to wow analysts. Is this the beginning of the end for virtualization?

To me, this question sounds like the kind of alarmism we’ve seen in this phase of many technology cycles. As any new technology approaches commoditization, the nature of product innovation must be adjusted.

There are several successful strategies for how to differentiate product offerings in a commoditized market, most revolving around different ways to apply the base technology to specific verticals or interesting combinations or mash-ups with other technologies. In How Breakthroughs Happen (ISBN: 1-57851-904-7), Andrew Hargadon argues that the mash-up process has always been the main engine for technology innovation. Technology factories created by Thomas Edison, Henry Ford and at the Xerox PARC were all based around this process.

I had a great view of one such transition in process. At Citrix 8-9 years ago, there was a vocal subgroup in the engineering department who wondered what could possibly be added to the Presentation Server product line since all possible features for Server Based Computing had been built and market penetration was virtually absolute. While Presentation Server feature development never stopped, Citrix also adopted a strategy of expanding into adjacent markets. I was fascinated to see how each new product added into the product line provided fertile new areas of feature ideas and combined value until the limits of the old product had been rubbed out. The continued evolution from Server Based Computing to Access Infrastructure to Application Virtualization to Application Delivery has succeeded in redefining the original technology in a way that VMWare has still not been able to manage.

Still, while the core technology of OS virtualization has been commoditized, it has in no way become less relevant. Mr. Bylund does grudgingly admit that cloud computing relies heavily on OS virtualization but seems to think this represents small comfort for virtualization vendors. In fact, as each new technology innovation wave builds on the last it is the very experts in the building blocks from the previous wave who have the best insight into the recombinant forms of the base technologies. To utilize these insights requires the organization overcoming Clay Christiensen’s Innovators Dilemma, and the individuals learning to see beyond the lines they’ve used to define themselves for years. It’s not always easy, and history is littered with companies that have failed to meet the challenge, but the future is bright for any virtualization vendors who do.

At the same time the mash-up process, like its close cousin evolution, has always favored diversity. Many of the more interesting applications of the virtualization/cloud computing/Software as a Service evolution are coming because now that the tool box is so full of options, areas like online application marketing and application rental can take radically new approaches to old problems and dramatically change companies abilities and options to reach new customers. My guess is that the next big buzz word that in a few years will be “about to kill cloud computing” will be growing from a combination of several of these seeds.