Moving Up and Down the Stack

Which level please?

This has been going on for quite some time. Companies which have traditionally specialized in certain areas are forced to examine related areas in order to grow. Once a tech company grows past a certain point (perhaps when it reaches close to the market saturation point), it needs to understand what will help it grow further.

Obviously the business that they are in has other players. These businesses are assessed and decisions are made about whether or not to invade that space. This can happen from acquisition or from brute force development. It’s usually much easier to acquire a seed company than to start from scratch.

If you were to look at Citrix around 8 years ago, you would see a business revolving around providing access to applications remotely in a efficient manner. This product was called MetaFrame and it did well for Citrix and the customers that used it. The sales curve for this market has continued to rise but not as fast as it was in the beginning. Obviously when a new reserve is tapped, it is going to grow really fast. Eventually things level out in a way that make it clear that it is time to tap other areas.

Citrix’s initial attempt at bridging to a new market came with the acquisition of Sequoia. The thinking at the time was that the portal was going to be a big business area. Citrix spent around 300 million dollars for the company. After it was acquired, Citrix rushed to make it work with Citrix software. There was a major investment put into the effort after the acquistion. Internally, there was a big push to see the portal as the future and that less focus should be put on presentation server. It was explained that the investment was already so high in CPS that it was time to move on to invest in other products. Any key message from that time is that we didn’t want to be a single product company.

The end result was that it failed. It is hard to classify why it failed. From my own observations I would conclude that the Sequoia and Citrix cultures did not mix and that the resulting blend was not suitable for the portal market. Major players like Microsoft had their own ideas about portals and made a much more convincing story than what Citrix had.

Citrix learned from this mistake and was much more cautious with its next acquisitions. It had a major success with Expertcity. They would be called the new Citrix Online division and they would not provide software but rather service. The market was similar but targeted users using the Internet and using a different remoting technology. Another key move was to isolate the company away from the main engineering group. It was perceived that mixing engineering with other acquired companies tended to cause strife.

When the X-1 project rolled onto the scene, a new vision was put forward. Instead of just looking for individual new products, Citrix would instead strive to have an end-to-end solution. This meant that Citrix would be seriously looking at providing elements from the network stack layer. It also meant that Citrix would be looking for ways not to get squeezed out the multiuser business.

This act of going down the stack was important since many customers want to solve problems with as few providers as possible. This act makes sense it makes it easier to deploy and vendors are less likely to blame other vendors if there are less vendors involved. I would equate the idea to having a car built from many different vendors. Supporting this model in a consumer business would probably just be insane. I was first exposed to this as a reseller in 1997 when customers told me that they only worked with Microsoft and did not want to deal with another vendor as well. This was across the board and obviously not just for remote access.

Things get much more competitive as time goes by. Companies that historically have not competed heavily are forced to compete either because newcomers have arrived or they have decided to venture out of their space. A couple of months ago I was surprised to find that Cisco was venturing into Citrix territory. Yes, they still have a bias towards comms as can be expected but they have proven a real effort into understand the desktop space. The most obvious overlap is WebEx (which they own) but there are newer areas that strive to making more things remote. The Telepresence product is very interesting and even though it is too expensive right now for the average business, it does present a very good option for doing meetings in the future.

Microsoft is constantly hungry for new markets. They still acquire companies just to get a foot in that business door. They are incredibly persistent and even though the first few releases might fail to address the competition, rest assured that they will not stop until they have gained the upper hand. Several struggling products have been bolstered by millions of dollars and years of work to produce something that gains widespread acceptance.

Much of this is driving by Wall Street. The market forgets the past and expects continued growth. It wants the most it can get with the least amount of capital. Big companies like Microsoft struggle to satisfy the demands. It is like a big fish struggling in a small pond to find enough to eat so that it can grow further. There is only so much the fish can do before it loses touch with reality and starts seeking things that don’t make sense. So far, Microsoft still has a great track record for pursuing its future. Given time, it will eventually falter. It is the name of the game.

Big Fish Little Bowl

A much smaller fish named Citrix understands this pattern and is doing its best to grown the size of the pond. Of course there are going to be other fish it will encounter that also want the same business. Good competition is more about understanding what the customer wants than what it takes to bring the other company down.

Regardless of how it is labeled, there is now more overlap between Citrix and other vendors that before. This translates to more competition but also a healthier relationship with the business of selling and supporting products to customers.

Personally, I think it would be better for companies to co-operate than to compete on everything. Sometimes it seems like just some kind of battle for the sake of battle. Sometimes it is better to admit that another company does something better and work with them and share your strengths. It creates a better ecosystem since there is less duplication and the best of breed can be focused on instead of everything under the sun.

In the real world, capitalism spells out that competition is best. The invisible hand works wonders but sometimes it is better to see what kind of waste the invisible hand is causing.

Live near Brisbane, Australia. Software developer currently focused on iOS and Android. Avid Google Local Guide

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