Vertical Integration is Back

Post date: Oct 29, 2012 4:07:59 PM

They was a time when Dinosaur's roamed the data center that you got all of the your hardware, support, software and documentation from a single vendor. That vendor was not always but was often IBM. Many customers and users did not like this state of affairs as they felt like they did not have a choice and the these solutions were expensive. This vertical integration did however deliver very good service and allow the customer to focus on running their company not running an IT integration shop.

Departments began to buy mini-computers that were sold and serviced for hardware and operating systems software from a single vendor, but they bought their software from an Independent Software Vendor (ISV). Many of these systems were sold by companies like Digital Equipment Corporation (DEC), and HP. Later smaller Unix based vendors such as Sun and Apollo also sold hardware, operating systems and support all bundled together.

Then in the late 80's came the great unbundling (of sorts). New Intel processor based Personal Computers were being sold by IBM. The hardware was made by IBM but the operating system software was written by another company called Microsoft. Even if IBM found a problem with the software it need to get Microsoft involved to fix it. For a while you got some support with your hardware. By then Compaq and a lot of other companies started sell "compatible" PC's running Microsoft operating systems and other peoples application software such as Lotus-1-2-3 spreadsheets.

As the competition between hardware manufactures increased the level of support decreased and the documentation for the hardware and software was unbundled to lower costs. In addition, support and other items were additional costs. Well written documentation for personal computers and software is not written by the manufacturer of the software but 3rd party publishers. Customers normally buy the application software as a separate item and get the software installed and working correctly. In the case of the Personal Computer, each user has become a system administrator.

This is generally the state of affairs today. Each user or the company are responsible for integrating all the different unbundled pieces of software and hardware from various vendors to build a usable system. Once they have something that works they must also operate it and hope that changes by one vendor to their hardware or software does not break something that another vendor is doing. The customer is also responsible for all of the security patching and configurations to attempt to keep everything working together. They is not "single throat to choke".

IBM has even taken to this model by offering professional service to put together a working solution from all of the various software components that other parts of IBM will sell you. It is entirely possible to spend millions of dollars with IBM Global Services to build an IBM only solution from unbundled parts.

There are a couple of trends that are moving the industry back to a vertically integrated model. The first and biggest one is the advent of software as a service (SaaS) The leading program sold under this model is Salesforce.com. The system is delivered via web browser. Salesforce.com takes care of the hardware, software and operations, the end-user just uses the software they do not have to worry about upgrades or operations. This is the ultimate example of vertical integration.

There are other areas beyond Salesforce.com and Software as a service that are showing this growth of vertical integration as well. One of the most visiable is Apple computer. They design everything, the operating system, the hardware and the fun, in this case the iPod. This vertical integration approach has allowed them to create innovative services such as iTunes that just work. Without this vertical integration customers would need to cobble together their own solutions and manage all the different pieces.

One place that seem ripe for an approach to vertical integration is open-source software. We are see attempts in that direction such as the Asterisk@Home distribution that bundles together the operating system and the associated applications for VoIP. I think this is a trend that is going to accelerate as companies decide that to many choices can be a real problem, especially when these choices lead to versionitas problems where different software is running into conflicts.

This leads to the ideas of the Stack Architecture that I have been working on at BTS. This is something I will most likely write more about over time.