Descartes Systems Group (TSX:DSG) CEO Art Mesher appeared on BNN’s “The Close” Tuesday to weigh in on an ongoing series at BNN called “The Next Big Thing in Tech”.
Mesher says federated networks; technology that links individual parts of a supply chain to streamline delivery and lower costs are, in fact, the logical evolution of business computing.
The Descartes CEO says federation is part of a thirty year trend of systems (hardware software and networks) moving from disintegration to integration. Federated networks, he argues, are clearly the next wave of this trend, and will eventually encompass every business vertical, including telecom, handsets, even healthcare.
The first real example of a large federated network, said Mesher, is one he worked on in the early part of his career. Sabre’s network, which now totals 55,000 travel agencies around the world and services more than four-hundred airlines, revolutionized the travel business.
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BNN host Mark Bunting, pulling a comparison from today’s headlines, asked Mesher about similarities between Descartes and Research in Motion. Mesher said there are strong parallels, in that both RIM and Descartes operate networks that are used by hundreds of carriers. In Descarte’s case, the carriers move goods. RIM, on the other hand, moves data.
Mesher says RIM allows many carriers to operate across their network, but also sells handsets. He says this makes for some potentially tricky stickhandling. “It is difficult to inhale and exhale at the same time” he said, adding: “You can’t be neutral and then build something that competes against everybody.” Mesher said Descartes had that problem before he took over, and he chose to simply focus on building a flexible network.
Today, Cantech Letter caught up with Art Mesher to talk about the hardware/network puzzle that has some observers, including long time follower Mike Abramsky, who recently left RBC for Red Team Global, suggesting that RIM split the company into two parts: a phone business and a network operations business.
Mesher says the first thing to remember about RIM’s story is that it isn’t really new. “History is just repeating itself” he said. “Historically, since the advent of the microprocessor, he points out, “hardware has become a commodity over time leading to a new world of open applications and content.” But Mesher says one thing is clear: history demonstrates that integrators end up winning. He cites a pivotal IBM decision to get out of the personal computer business.
After watching mainframe computer competitors Burroughs, UNIVAC, NCR, Control Data Corporation, and Honeywell (which collectively became known as the BUNCH), come unraveled after the mainframe business unbundled and database vendors, apps vendors and integrators emerged, IBM made a critical and controversial move. The company decided, in 2004, to sell its PC division to Lenovo, even though it represented billions in revenue at the time. IBM’s successful decision to discontinue making hardware that was rapidly commoditizing and focus on a more profitable services and networks model is one blueprint available to RIM, says Mesher, but it might require the Waterloo company to shrink before it can grow again.
The Descartes CEO says he believes there are two things that make RIM’s market ripe for a federator. The first, he says, is the degree of standards proliferation. In RIM’s case there is email, video, music and a potpourri of wireless protocols that “create enormous chaos for application developers and carriers, and creates a great opportunity for a guy to sits in middle trying to make it right.”
The second thing is what Mesher calls the “span of deployment”, which has to do with the extent to which systems are distributed. If the span of the systems deployment contains multiple enterprises (RIM’s and Descarte’s systems contains hundreds of carriers) there is chaos and someone needs to be in the middle, becoming the de facto standardizer. If the chaos is localized, however, there is no need for an integrator such as Descartes.
Mesher says federating its system would mean RIM could embrace the role of integrator by enabling each member of its federation (in RIM’s case, carriers) to brand and bundle their products with RIM products.
While Mesher says he isn’t certain what will happen with Research in Motion, he says the real danger, historically, for a company at RIM’s point of evolution has been that the corporate decisions were driven by “gadget geeks” who are in denial of systems evolution theory. Mesher says he believes this is what happened at companies such as DEC and Palm.