Business

The End of “End-to-End” in Tech?

(Image via Shutterstock)

(Image via Shutterstock)

Some say the recent moves by eBay, HP, and Symantec to split their businesses are driven by how Wall Street assigns value to companies. But I believe these companies are instead simply becoming more in tune with the evolving needs of their customers, be they enterprises or consumers. These tech giants are likely to be among the first of many in business to move toward a more specialized existence.

As head of strategy for a company that is deliberately rooted in a specialist model, I believe these organizations will be better positioned for long-term success as separate, more focused organizations. Like more and more companies, they operate in a hyper-competitive marketplace faced with significant industry-specific challenges.

In the networking space, bigger was historically better, and “end-to-end” was the norm until heightened competition in an increasingly global marketplace drove both greater demand as well as higher expectations for superior customer experience. End-to-end providers simply could not be best-of-breed in every area.

More than a decade ago, my company Ciena took deliberate steps to become the network specialist. We were the exception to the all-things-to-all-people model, and we remain a strong, leading competitor in our business as a result.

Today, the landscape is very different, as many industry giants, including Nokia, Ericsson (with whom we recently announced a partnership), and Alcatel-Lucent are refocusing on core competencies. Sometimes this plays out through wholesale changes like selling businesses or units; other times it happens through enhanced partnership programs that make it easier to connect customers to specialists.

Meanwhile, newer players—like F5 Networks and Brocade—are gaining ground as specialists within their own slice of the industry, offering better products and customer support than the big incumbents. In general, more specialized players are growing faster and gaining more market share.

To be clear, specialization is a strategy that can be executed, in part, by selling off pieces of a company. But specialists aren’t born of a single transaction. It takes significant shifts in  C-suite mentality, company culture, and support from shareholders. Becoming a specialist often entails re-aligning a business to best support a new, defined mission.

While not right for everyone in tech (Apple is one obvious successful exception), I expect the trend toward specialization to gain momentum and evolve into a movement, for two primary reasons.

  • The core competitive advantages of specialization are depth, speed, and agility. Those align well with the needs of successful companies to be dynamic and mission-driven in the face of challenges and opportunities such as the cloud, software-defined networking, and the expectations of customers that everything will be available on demand. Those kind of trends will likely define the winners and losers.
  • At its simplest, specialization is what the customer demands. As markets become more efficient and competitive, customers more thoroughly evaluate every technology investment. The concept of “end-to-end” connotes “a combination of good and mediocre products” to tech buyers, and there is no appetite to accept just average.

As technologies generally become more open, specialist offerings will not only deliver “best-in-class” solutions, but also facilitate much more rapid adoption. While not every company can or should pursue a specialist strategy, I expect the recent announcements mark the beginning of a movement that that will play out over years. Both the global marketplace and the customer have spoken, and corporations must adapt.

James Frodsham is senior vice president and chief strategy officer of Ciena, a provider of network infrastructure and software for telecommunications service providers, data center operators, and enterprises.

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