2003 - Year summary
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Wireless
is hotting up. So is outsourcing, in particular offshoring and business process
outsourcing. Linux has become so significant that the vendors are fighting over
it. Security is a recurring theme as is Microsoft’s security record. Forecasts
for the IT Sector have gone from cool to ‘happy days are here again’. The good
news is already built into the share prices of the top tech companies. Anything
less than good news next year could trigger another bursting of the Tech
bubble. Caution is urged.
January
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WorldCom heading for the
hotspots
Telecoms and financial engineering company WorldCom has its sights
on the wireless market, in particular wireless local area networks. Like IBM,
and many others, it sees great potential in the ‘hotspots’ market. It is
expected that the charge will commence once WorldCom emerges from debt
management therapy (Chapter 11).
Our Windows are safe as
‘ouses
You would be forgiven for thinking that this was the boast of a
Cockney double-glazing salesman. But no, it’s the plea of Microsoft; keen to
impress international governments that their operating system is suitably
secure. To that end it has launched the Government Secure Program, which will
allow controlled access to its Windows source code. A possible alternative way
to regain the confidence of the public sector would be to remove government
recipients from the distribution list of its rather too frequent security
bulletin.
Wi-fIBM
Things are hotting up in the wireless short-range networking arena,
what with IBM entering into the fray with the intention of spending $100m on
deploying Wi-fi (aka 802.11b to the techno-cognoscenti) networks around Europe.
These hotspots will be found wherever there is a reasonable concentration of
users armed with wi-fi compliant appliances, eg. a laptop. These wi-fi networks
will enable users to get access to the Internet and corporate intranets in a
hassle-free manner. This new technology could pose a massive threat to the 3G
licence holders, who are hoping to recoup their investment by also offering
data-services to out-of-office users.
February
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Open outcry on Wall St.
Microsoft as part of its routine filing with the Securities and
Exchange Commission flagged the threat to its business model posed by the ‘open
source’ movement. Successful marketing of open source software to Governments
such as that of the US, France and Germany is clearly unnerving Microsoft.
Products such as Linux and StarOffice appear to be gaining traction in the
market. Perhaps this is another example of the market being the best regulator.
IBM plans to gridlock
customers
Erstwhile box shifter IBM believes it has found a new way to package
its hardware, software and services. Having let the idea nurture in the
backwaters of academe, IBM now feels that the time is right to change the way
we utilize computing forever. In a nutshell grid computing is all about squeezing
value out of one’s hardware investment. Specifically this involves ‘pooling’
the unused hardware capacity and utilizing it on tasks that would have perhaps
been too big to be carried out on any one of the individual computers involved.
In principle it’s a great idea, in practice, from an architectural perspective,
it is scary. You’ve been warned.
Dell breaks another
heart
Puberty is playing havoc with Dell’s hormones. Challenging the basic
tenets on which its success is based, the PC maker has rejected the love of yet
another partner (Click here – Tech sector Review 260902).
This time IBM faces rejection. It looked like a marriage made in commercial
heaven. IBM and Dell signed a deal back in the nineties worth $22bn over 7
years, which involved IBM providing both hardware and maintenance services to
Dell. Having IBM as a partner might well have been an obstacle in Dell’s
ambition to become the next IBM.
March
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Trustworthy Computing
Initiative II
Microsoft has now completed year one of its Trustworthy Computing
Initiative, designed to publicly acknowledge that the software giant is taking
security concerns related to its software seriously. The three priorities for
year two are patch management, raising security consciousness within Microsoft,
and the production of more security guidelines and utilities. I guess a total
overhaul of their security software architecture is a year three priority.
From grid to griddle
computing
IBM is investing heavily in convincing the world that grid
computing, an architecture that makes best use of your IT resources, is the way
ahead. This took an interesting turn recently when IBM demanded the return of
over 100,000 monitors because they might catch fire. Complaints relating to
overheating and emanating smoke have been received. Worried readers might like
to click here: http://www.pc.ibm.com/g51recall/.
I know they claim their technology is hot, but this I think is a gimmick too
far.
Penguin attacks Windows
Open source operating system Linux is taking share from both Unix
and Microsoft Windows according to Evans Data Corp. This contradicts
Microsoft’s assertion that Linux is growing at the expense of just Unix.
Specifically 52% of developers now using Linux were Windows based. 30% were
previously Unix based. From the Unix community Sun Microsystems’s Solaris led
the attrition rates with 9%. In summary Linux is more than a Unix replacement.
Big Mac – Now with Intel
inside
Fast-food burger house MacDonald’s is offering wireless Internet
access in ten of its New York outlets. The first hour comes free with a
combination meal. Subsequent hours are charged at $3. Intel is providing the
wi-fi wireless hotspot technology. This coincides with the launch of Intel’s
Centrino wireless notebook chip, by which I mean the processor, not the Big Mac
accessory.
April
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IT spending to recover
next year
Or at least not this year according to Gartner Group. CEO Michael
Fleisher believes that pent up demand for technology coupled with the growing
cost of maintaining current systems will trigger a return to spending. He
caveats this with the fact that the war in Iraq has the potential to cause
massive economic disruption.
Outsourcing out,
multi-sourcing in
Gartner Group believes that 50% of outsourcing contracts will be
deemed failures because they fail to deliver the expected value. It suggests that
in the shorter term there will be a move towards multi-sourcing, which involves
a managing vendor that acts as an interface to a number of suppliers. Until we
get universal agreement on what constitutes value in respect of IT spend, both
outsourcers and the IT industry in general will have ongoing difficulties
making a business case.
HP source
HP is getting good at being IBM. Its foray into outsourcing has led
to a $3bn deal with Procter and Gamble, and a $1bn deal with Ericsson. Today outsourcing is also a ‘shareholder
pleaser’ at Unisys and Accenture.
May
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US Cybersecurity Shock
You decide which is more shocking:
A - Howard Schmidt, the US Government cybersecurity czar’ intends to
quit the role citing that e-security is no longer a White House agenda item
B – The US Government’s ‘cyber security czar’ is Howard Schmidt,
whose previous role was that of Microsoft’s chief security strategist.
Does my software look
big in this?
HP has won the first quarter’s global battle of the ‘back ends’,
according to Gartner’s Dataquest unit. HP’s server sales led Dell by a healthy
distance, though Dell was ‘king of the hill’ in the US. At the mainframe end,
IBM and Sun Microsystems felt pain as customers showed reluctance to make ‘big
ticket’ purchases.
Linux under attack
Disturbances on a geological scale are happening in the Unix
community. SCO Group, formerly known as Caldera, formerly known as Santa Cruz
Operation has just discovered that intellectual property gives real shareholder
value. Thus it has launched an attack on the Linux community stating that they
have infringed its copyright. SCO Group owns the rights to the Unix operating
system. Linux and Unix are synonymous, but whether the Linux community has
actually copied SCOG’s software is now in question. SCOG has also sent out
1,500 letters to the world’s top corporations warning them that they may be
liable if it transpires that Linux actually contains part of its intellectual
property. This has thrown the Linux world into turmoil and is certain to jitter
users and prospective users. It has also doubled SCOG’s market capitalisation.
But apart from SCOG who else might benefit from this? Step forward Microsoft,
which coincidently has just paid SCOG an undisclosed sum for a Unix license.
The motto to this tale is that my enemies’ enemies are my friends.
Cash that!
Microsoft CEO and cofounder Steve Ballmer has reaffirmed his
commitment to Microsoft by cashing almost $1bn worth of shares. One shouldn’t
read too much into this as he still has $10.5bn worth of equity still left in
the company.
June
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Tectonic activity in EA
marketplace
Upheaval on a geological scale is taking place in the enterprise
application marketplace. PeopleSoft is planning to buy JD Edwards. Both sides
appear happy. Oracle has decided to buy PeopleSoft. PeopleSoft and JDE are not
happy. Nor is credit ratings agency Moody’s for that matter. SAP seeing its
rivals lose their customer focus has decided to capitalise on this chaos by
launching a charm offensive to lure away anxious clients.
Management by annual
email
Microsoft CEO Steve Balmer recently fired off his annual ‘state of
the union’ email to the staff worldwide. It flagged the danger of Linux and open
source software. This had a seismic affect on the market, sending Linux
vendors’ (Red Hat and VA Software) shares north and Microsoft’s south.
Interestingly Mr Balmer chose to release the email after he had sold $1bn worth
of shares. On the basis that he had privileged information in that he knew he
was going to send a ‘stock depressing’ email, could this be construed as
insider trading?
Linux community escapes
SCOtt free
The SCO Group, which owns the intellectual property rights (IP) for
the Unix operating system has been flexing its legal muscles of late, claiming
that there are a number of Unix and Linux vendors that have infringed its IP.
Most recently it has dropped its claim against the Linux community stating that
this could potentially destroy the Linux marketplace. However IBM is not so
lucky with a $3bn lawsuit dangling above its head.
PeopleSoft’s new
strategy - Bidding prayers
PeopleSoft’s management have openly declared their distaste for an
Oracle takeover. They appear to have painted themselves into a corner, which
could prove at the very least to be very embarrassing if Oracle is successful.
Thus PeopleSoft are hoping for an ABO (Anybody but Oracle) to ride in and save
the day. Potential white knights include Microsoft, IBM, Siebel and Sap. What
with HP’s Compaq assimilation going so well, the acquisition of PeopleSoft
could turn its solutions aspirations into reality.
July
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Intel stoking Wi-Fi
market
Intel, keen to grow the wireless market and thereby sell more
‘Centrino’ chips has bought stakes in two Asian technology companies, namely
IPone (South Korea) and Ocamar Technologies (China). This adds to recent
investments in Broadreach Networks, Pronto Networks, Vivato and rovingIP. The
Centrino chip was designed to give laptops longer battery life and wireless
(Wi-Fi) connectivity. These network solution providers will no doubt find it
much easier now to decide which processor they should use as the basis for
their network solutions.
Time to milk the cash
cow
Like many companies Microsoft has a cash flow problem. Unlike many
companies the problem stems from having too much cash. The challenge is how to
reduce the cash pile. Buying a country is out. Buying its competitors would
also attract government attention. Thus Microsoft may simply have to give it
away. The figure allegedly being discussed is $10bn, drip-fed to shareholders
over a number of quarters. Bill Gates would cop at least $1bn of this as a
major shareholder. Unlike his colleague Steve Ballmer, he wouldn’t have to
surrender any ownership, thus risking accusations of a loss of confidence in
the company. Guess who’s got the best accountant?
Microsoft sounds nervous
The new IT department ‘killer app’ is autonomic computing. The
thrust here is on computers that can take care of themselves and thereby reduce
the total cost of ownership, which in large can be attributed to the carbon
based life-forms traditionally required for their upkeep. The concept of
autonomic is based on our own autonomic nervous system (Click here for more
details – http://www.auridian.com/articles/HTML/Autonomic-computing.htm).
IBM has driven most of the marketing on this front, with the other hardware
vendors not ruling out their commitment to this. But Microsoft has leapt
forward to take this concept out of their hands by announcing that it will be
first to ‘deliver on vision’. Vision must be the new vapourware.
Nuclear winter extended
to 2007
Thought the market was on the ascendancy? Don’t think so, according
to IDC. They believe that software spending will not recover until 2007,
despite the industry murmurings that the upturn is actually just a couple of
quarters away. But despite this average trend there is still growth predicted
for security, business intelligence and content management in the shorter term.
Accenture gets dirty
Accenture, whose reputation is built on hiring the best and the
brightest young things, and charging them out at a premium, has of late had
problems winning ‘big ticket’ consultancy business. But rather than sit back in
denial, it has put its pride in cold storage, rolled up its sleeves and dived
headfirst into the grubby world of IT outsourcing. This tactical change in
direction is buoying up Accenture in these challenging times, with outsourcing
contributing 30% of its revenues. Expect cufflink prices to plummet as
Accenture consultants offload their ‘gravitas enhancers’ onto the market.
August
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Open warfare
The open
source movement is in a high state of flux now that SCO Group has started
to dispatch invoices to Linux users /developers, claiming that the open source
operating system infringes SCO’s Unix code. Its $3bn claim against IBM has been
met with a counterclaim. Red Hat a Linux vendor has also filed an action to
force SCO to detail what aspects of its code have been infringed. SCO’s PR
people are no doubt cringing at the heavy-handed approach being taken. There is
no hint of acting in the best interests of the customer. Either SCO is planning
to become a technology patent office, or it has an agenda to destroy the open
source movement.
HP goes funky
HP has just unleashed circa 100 new products aimed at the consumer
market. Seemingly following in the footsteps of trendy Apple, HP has focused on
multimedia gadgets and tools. HP needs to give serious thought as to whether it
wants to be the next IBM or the next Apple.
September
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BPO – The new
outsourcing
BPO (Business Process Outsourcing) is a service whereby the vendor
takes over the management and delivery of one or more business processes and
the underlying IT infrastructure. In a world where cost management and core
competencies are high on the agenda, BPO is a concept that will resonate with
the economic decision makers (ie the Board) in big organisations. The likes of
IBM, Accenture and CGEY are all focused on making this a principal revenue
stream. Possibly this is going too far. Whilst HR and Finance may not be core
competencies for many organisations, the flair with which they recruit and
retain staff or the skill in which their cash is managed, will be replaced by
organisations who offer to do it as cheaply (and thus as adequately) as
possible.
PC – The only way is up
Research firm IDC is in bullish mood as far as PCs are concerned.
Because second quarter shipments were better than expected, it was upping its
annual shipments forecast. The growth appears to stem from consumer and Public
Sector demand. Independently Merrill Lynch upgraded its forecasts for the
market and Intel raised it third quarter expectations. Possibly thin-client
computing is taking hold in the business arena and the day of the high spec
office PC is over.
October
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Open source – Almost
universally mandated
The open source phenomenon (More details click
here) looked set to get a very high profile endorsement from the United
Nations at a forthcoming World Summit on the Information Society, but was
recently toned down to acknowledge the role of proprietary software. The
proponents of open source in this context see it as a perfect model for the
cash strapped governments of developing nations. No doubt pressure from
software vendors played a part, but one can’t help feel that the recent Linux
related ‘SCO Group versus the planet’ spat might have made the decision makers
jittery.
Merrill Lynch predicts
IT spend upturn
Merrill Lynch’s survey of 75 CIOs in the US and Europe points to a
mild recovery next year. Responses highlight that there is a concern over
desktop security and so Linux could start to replace Windows, despite the
uncertainty over the future of Linux. Hardware spend looks more promising than
software, with networking taking the top priority slot. Cisco and all the other
Internet plumbing companies should start to dust down their order books.
Credit
rater observes Sun
Sun Microsystems appears to be teetering
on the edge of a black hole. This well respected stalwart and Microsoft conscientious
objector is starting to look like it’s heading for the Tech Sector departure
lounge. Credit rating agency Standard and Poor has decided to put Sun on its
CreditWatch list after an analyst from Merrill Lynch made some hard hitting
recommendations in respect of how the business should be taken forward. Sun’s
‘everything Microsoft is bad’ philosophy could steer it towards becoming one of
this decade’s best-loved technology casualties. I am sure Dell is already
sizing it up.
Gone
phishing
UK bank Halifax is the most recent victim of an online scam known as
‘phishing’, causing it to close down the website. In essence this involves
fooling customers into taking action such as revealing their security details
or to even transfer money overseas. The victims do so because they believe they
are receiving official emails from the bank. Barclays, Lloyds TSB and NatWest
have also been targeted.
November
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Forrester
bullish
US research firm Forrester has become very
upbeat about Europe’s anticipated services spend. It anticipates growth of 66%
between now and 2008. With the next two years providing strongest growth. It
highlights Business Process Outsourcing, offshore services and strategic
consulting as the main drivers. If the strategic consulting is to advise
clients to outsource their business and IT functions to offshore locations,
then the post 2008 vision doesn’t look too good for Europe.
Gartner
bullish
There is definitely something in the air.
US research firm Gartner announced at its recent Tech Investor Summit that a
key combination of technology advances, architectural changes, market forces
and best practices would lead to a good recovery for IT in the near future,
leading on to very strong growth in the longer term. They claim that 2003 was
the bottoming out year and that at least single digit growth is expected in
2004 and 2005. This upbeat vision is both reassuring and worrying. It is not
clear what has changed to suggest that ‘happy days’ are just around the corner.
Caution is urged.
Novell
looking for a rematch
Novell just won’t lie down. It was once
one of the world’s most successful IT companies, until it became apparent that
Microsoft had purposely steered itself in the direction of Novell’s core
business, print and file sharing for networks. The collision was devastating
for Novell and it has been zigzagging along the side of the road in a dazed
state ever since. Until now that is. By purchasing German Linux vendor SuSe, it
is in danger of incurring the wrath of Microsoft, which is not known to be a
fan of Linux, because of its market-eroding effects on its Windows family of
operating systems. IBM appears to taking on Novell’s trainer role in
preparation for the big fight.
December
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Mixed
messages?
Gartner issued a
report stating that there will indeed be a recovery in IT spending in 2004.
Oddly this report coincided with Gartner axing 5% of its workforce.
Outsourcing
doomed
According to MIS
Asia, Gartner predicts that half of all outsourcing projects worldwide will
fail to meet expectations. The main causes being a lack of business planning,
failure to outline change management processes, and inadequate service level
agreements.
