EMC and Riding the Decentralization Wave

(MoneyWatch)  I was reading about EMC subsidiary Iomega announcing an NAS appliance for home and SMB users, when I had a sudden realization about an industry trend. For years, companies from Cisco and EMC to SAP have tried moving toward selling to SMB companies. I used to think that it was the simple reaction to having no room to keep heavy growth in a largely sated enterprise market, but now I wonder whether executives are reacting almost unconsciously to a broad change in industry dynamics.

The more I look at how things are developing in high tech, the more I keep thinking that massive decentralization of operations and a reshaping of the business landscape. Over time, if operations move to clouds, but the clouds have to interact, because, well, IT departments aren't going to be too keen about being locked again into proprietary systems, you eventually have technical entropy with less and less control by any one company. Compounding that is the drive for companies to have people working out of their homes, or splitting operations over multiple continents.

It's like the Steve Martin routine about getting small. Companies may still be large, but as locations and operations become virtual, the need for massive storage at every location of every company disappears. Or for massive servers and faxing systems and almost anything else. If there's enough network infrastructure in place -- and much of that will be decentralized as well -- to carry the data, hardware vendors have fewer clients that could be big spenders.

As this shift happens, business models have to change. Instead of pulling in the one sale worth a ton, you have to make a ton of sales worth something each. Getting an approach to reaching the growing number of small installations and even one-person businesses becomes critical. There are some roadblocks:

• Tiny locations means providing solid support and pain-free ownership becomes key to selling to companies that don't want to send their IT staff all over creation.
• Installation and operation have to be smooth, as well. IT devices need to gain the reputation of being like Macs -- plug it in and let it work.
• Much of the selling may have to happen through intelligent use of distribution channels rather than depending on direct sales or large volume contracts through key VARs and integrators.

There is an advantage, though. I'd bet that the margin per CPU cycle or megabyte is higher on the smaller devices and systems than on their larger brethren. So even with extra costs it may be that manufacturers will be able to retain their profitability.

Image courtesy Iomega/EMC.