Commoditisation. It's HAPPENING. This is NOT a drill

Longevity of Margins

I don't understand why people are taught just enough about business to confuse them. Maybe that's the point actually, a 1/4 informed person feels safer, but doesn't realize that there's a 270 degree window of vulnerability that's left wide open.

Any industry, absolutely any, that depends on economies of scale for its profits, cannot, under any circumstances maintain its historical margins for more than a few years, maybe a decade at most if the market is truly enormous.

Without a thesis on the economies of manufacturing I'll super summarize. Economies of scale require the things being made to be as alike as possible. The principal is wholly invalid if the differences between products a,b,c and d are in any way significant.

Economies of scale don't work like people think. Individual products aren't cheaper to manufacture, the costs for making 10 are the same as for making one, but if you make 2-9 the costs are astronomically high. It's really, really, really complicated and mind numbingly expensive to actually create a situation where economies of scale are worth the trouble of figuring it all out.

Inevitably you end up with a massively complex system that runs smoother than a Swiss chronometer but it can't be changed too much because you run into the '2-9 Problem' mentioned earlier. The practical implications of that mean a significantly different product, or new fashion in business models, can destabilize, and potentially destroy, even the largest players in that space.

The costs and timelines of scaling up to reach the levels of margins you previously had are simply too large and take too long to be practical. You'd be flat broke for 7 years and start putting out the new thing at about the time the next new thing came along.

The only viable solution is to scale back R&D, narrow your catalog, go with cheaper parts/processes (that's how a formerly great name in (space) turns out products with the same SKU and specs but is a complete piece of shit), beat the Bejesus out of your employees and start trimming your margins.

The company has shifted focus from making products and is now wholly focused on the convoluted voodoo accountants use to make two positives a negative and turn billions in physical assets into unwieldy paperweights and horribly unsafe (but fun!) playground equipment.

The company has entered the land where the traditional stereotype of CEO's thrive. The old bald white guy with a bit of a paunch, a funny twitch that always means a serial killer on meds (in the movies), and a disdain for everything that isn't him that is so potent children in the womb die and mules in the field go lame when he walks by. Like Dick Cheney.

Output can no longer keep the company alive. Output must remain stable, but costs have to go down far enough that the new 'thing' or business model no longer offers an advantage to your customers. That's never good for longevity.

Anyway, economies of scale go both ways. It's great when it's working, but nearly impossible to maintain when things change. The smart money is usually getting in, grabbing all the loot you can, and moving on. Being trapped inside a slowly sinking ship is quite likely one of the worst feelings in the world.

The writing is on the wall

The trick in the top right hand corner of the Gartner storage magic quadrant ... will be a vanishing trick.