Platformonomics TGIF is a weekly roll-up of links, comments on those links, and perhaps a little too much tugging on my favorite threads.
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CAPEX: You Ain’t Seen Nothing Yet
Jordan Novet at CNBC digs into Microsoft’s future CAPEX commitments in the form of finance leases (mostly for servers). Those commitments are very, very large. Someone characterized it as an “insane ramp”.
Yay Google: Nuclear Edition!
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It’s Time to Build: Energy Edition, Cloud Power Up, An Even More Nuclear-Powered Cloud, The Nuclear Power Vibe Shift Continues, Not That Kind of Nuclear Cloud, Better Late Than Never, Power Crunch, Behold the Nuclear Cloud, Nuclear Powered Cloud Data Centers Are Happening, A Nuclear-Powered Cloud, When Nuclear-Powered Data Centers?
Yay Google: New Zealand Edition!
Link taxes force large tech companies to pay for the privilege of including links from politically connected media companies in their search results or social media feeds, even though the value flows to the linked sites. They’ve been implemented in Australia and Canada, and despite being completely antithetical to the Web, Google has been their biggest enabler by playing along with this shakedown.
Meta opted out in Canada by blocking all media links rather than paying for the privilege of sending them traffic. Local media traffic plummeted while Meta was unaffected. It looks like Google is finally waking up and realizing they don’t have to perform these unnatural acts.
The newspapers need to find a new business model (and offer a better product). It would be nice to find some magical subsidy to support their bygone way of life, but that isn’t realistic economically. More importantly, becoming a ward of the state imperils the fourth estate’s ability to hold government accountable. The Internet isn’t going away, so it is time to adapt and innovate rather than lobby.
Similarly, governments need to resist the seemingly free lunch of forcing (foreign) tech companies to rain money on their local media.
Dockworkers vs. Automation
The dockworkers’ stridently Luddite position might just be for negotiation purposes, but battles over port automation are not new.
The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger is a fabulous history of containerization including how the unions adapted. From my previous review:
It is also a good tale of labor strategy in the face of technological change. The longshoremen initially fought the coming of the container (and thereby preserve perks like the right to steal loose cargo), but ultimately the longshoremen on both the east and west coast did deals that protected existing jobs at the expense of new employees. But the fact there are no longer longshoremen in New York City, once the US’s biggest port, shows perils of flouting change.
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IBM is Not a Technology Company: Employees Agree
A brutal, yet to the point, Reddit thread:
I have been at IBM for a couple of years now and I honestly question why any of us are still here, pretending that this company is going to turn it around. Our best days are long gone and what we are witnessing is the slow, painful death of IBM yet we are still on this sinking ship.
IBM Cloud is an absolute joke. It accounts for an extremely tiny fraction of the market and only because most companies that use it are trapped with IBM’s legacy systems. They’re not using it because it’s good but because they have no choice. We bought Red Hat for $34 billion because we dropped the ball so hard on cloud. Why build innovative cloud solutions when we can just acquire something decent and slap our logo on it? Our hybrid cloud strategy is merging old systems with slightly newer systems. Most of our cloud revenue comes from services, consulting, and managing cloud infrastructure AKA getting paid to help other companies figure out our legacy technology.
This is mostly why Global Services is our biggest revenue stream. We basically sell the solution to problems that IBM products make. Our strategy is to sell complexity and eventually that company spirals into integration nightmares so they crawl back to IBM consultants to fix it.
IBM makes billions from just keeping system Z mainframes on life support because they are the backbone to so many major institutions. We can charge a ridiculous amount for software fees for enterprise software and they have no choice but to pay up in order to stay alive. The complexity and cost to move off these systems that have been built for decades is too high and we exploit that tremendously with insane maintenance fees.
This is exactly how our software licensing works too. We just lock companies into proprietary software hell for decades because our core software products like DB2 and Websphere have become deeply embedded in the infrastructure of large organizations. Companies are trapped when we charge high maintenance and support fees and they have to shell out for upgrades they barely need. ELAs are traps designed to squeeze as much money as we can possibly can.
We fail to integrate our acquisitions within our corporate strategy. We just have a mix of cloud platform extensions, AI solutions, and industry specific solutions. We are not innovating ourselves. This is more to help our consulting sales than it is to make a competitive product strategy.
watsonx is a desperate scramble to pretend that we are in the AI market. Everyone knows that we’re not coming up with anything innovative. We are just riding off the coattails of Meta and other open source models just like what we did with Red Hat. No one new will ever adopt watsonx. This is again targeted for our legacy customers who are trapped. It is all just mostly repackaged algorithms and models that everyone is already doing.
Our workforce rebalancing efforts aka our cost cutting strategy by offshoring and replacing highly-paid employees with lower-wage employees has ultimately damaged our long-term profitability. Employees feel less motivated and valued when we see our peers get laid off for cheap labor in India. Employee motivation, experience, and collaboration are crucial for overall productivity and long-term success, but we do it value any of that. It’s all for the short-term profit gains, which again will be overtaken by the long-term negative impact of declining productivity.
Our future is collapsing rapidly. We are holding onto legacy contracts and mainframe lifelines but once those clients migrate off, IBM is left with nothing but scraps. Microsoft, Google, AWS will destroy us as cloud AI leaders and eventually, they will also perfect mainframe-to-migration tools and our mainframe clients with jump ship. I envision we will be sold off as pieces or die all together.
So again, I ask: Why are you still here? IBM is draining your energy and trapping you in an endless cycle of bureaucracy, outdated tech, and corporate nonsense. Do you truly believe that watsonx or IBM Cloud will save us? There is no growth or innovation and you will either be patching up legacy systems, trying to sell dead AI products, or stuck in consulting purgatory. We are not turning it around. Get out while you can and develop skills in modern technology and work somewhere where the future is bright.
TLDR; IBM monetizes on confusion, legacy systems, and corporate inertia. We sell tech to trap companies in it, then charge them forever to keep it working. The only reason companies are with IBM is because the cost of leaving is higher than the cost of staying and we make billions just off that equation. There is no bright future.
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IBM is Not a Technology Company: Layoffs Are Their Specialty, IBM is Not a Technology Company: But Ecstatic to be Treated Like One, IBM is Not a Technology Company: McDonald’s Edition, This Week in Securities Fraud, IBM and the Art of Misleading Investors, Last IBM Strategic Imperative Bites the Dust, IBM’s “Cloud” Business (or Lack Thereof), Tweetstorm Digest: Reactions to Barron’s “IBM’s Reboot” Story, IBM’s Lost Decade, Follow the CAPEX: The Clown Car Race Checkered Flag, Introducing Platformonomics ClownWatch™
Blog Roll Addition: Crazy Stupid Tech
Crazy Stupid Tech was catalyzed by Wired magazine’s tedious transition from “optimism about the future” to yet another “ephemera of modern zeitgeist” echo chamber.
Crazy Stupid Tech is a weekly newsletter about innovation and new technologies by longtime tech journalists Om Malik and Fred Vogelstein.
Together we have followed Silicon Valley’s innovation engine for decades. We’ve seen a lot. But one observation stands out: The best ideas – the ones that launch meaningful companies – need to seem crazy and stupid at first.
Self-recommending as they say.
