News and analysis to 23rd November 2006
MS Linux
Odd thing are happening in Linuxland. First Novell,
creator of Netware, acquired Suse Linux. Some thought that the once high
profile operating system vendor was looking to enact revenge on Microsoft for
effectively removing it from the software premier league. But now we hear that
these two combatants are getting all lovey-dovey. Microsoft is going to pay
Novell $348m upfront and spend at least $94m annually for five years marketing
Suse Linux. Novell will in turn pay Microsoft at least $40m over the same
period. The exact figure will be based on how much open source software Novell
sells. How peculiar. Distilled down this appears to suggest that Microsoft will
become a Linux reseller, and that Novell is in effect paying some form of
licence fee. The latter point implies that Linux in some way uses Microsoft’s
intellectual property, which Microsoft has been strongly suggesting of late.
Microsoft is trying to send out the message that if you want to go Linux you
need to use Suse Linux or risk incurring the wrath of Microsoft’s intellectual
property lawyers. This is likely to cause a schism in the Linux community,
which could all be part of a master plan to bring down the open source
community. Novell appears to have sold its soul. All we need now is for Oracle
to buy Red Hat.
Microsoft’s in fine form
The European Commission has informed Microsoft that it has
until Thanksgiving Day to provide the competition commission with documentation
that will give the Seattle giant’s rivals visibility of how its software works.
Failure to comply will result in daily fines of 3m euros per day. Earlier in
this long running drama, Microsoft had been threatened with a 2m euros per day
fine, which the EU commission has now commuted to a 280.5m euro fine.
Demonstrating EU humour at its best, the competition commissioner Neelie Kroes
pointed out that she does not have ‘eternal life’, implying that Microsoft
needs to hurry up in respect of its legal obligations. Microsoft’s legal tactics
may well have ‘eternality’ at its core. The EU is fighting for the rights of
European citizens. But the value to citizens in this court case reaching a
conclusion is inversely proportional to the time it takes to conclude. Beyond a
certain point in time the EU will appear foolish in pursuing this. So
Microsoft’s lawyers are likely to string this out for as long as it takes.
Tech workforce facing global redistribution
Cap Gemini’s recent takeover bid for Kanbay International
in India for $1.3bn highlights the fact that the top IT service players are
building up the percentage of their workforce operating from ‘low cost’
countries. In fact six of the top ten vendors now have more than 20% of their
workforce in low cost locations. IBM
intends to triple its investment in India to $6bn over the next three years.
EDS plans to grow its offshore workforce from 30,000 to 45,000 by the end of
2008. This redistribution of staff is in direct response to the major Indian IT
service providers. China hardly registers on the offshoring radar with the top
players. The ratio of Indian staff to Chinese staff is greater than 100 to 1.
Though Fujitsu and NTT Data use China because of the cultural affinities with
Japan. The big winners in the talent battle will be the off shoring staff. This
will in turn make them less ‘low cost’ which will undermine the reason for
acquiring them. Perhaps now is time for smart IT service providers to
reconsider the global sourcing model?
Cold Fusion?
Oracle’s acquisition strategy is not a universal hit with
the users of the acquired technologies. Last year Oracle’s Fusion roadmap,
which outlines the care with which Oracle will evolve the acquired product
ranges (and ultimately demise them) seemed to appease the relevant users
according to the Oracle User Group. This year tells a different story with
contentment levels descending to neutral (possibly shock induced).
Interestingly the users of more recent acquisition Siebel are delighted.
Possibly there is a honeymoon period associated with becoming entwined with
Oracle, and over time the affection decreases. It will be interesting to
observe how Oracle responds to this. Possibly it won’t, signalling that as far
as Oracle is concerned romance is no longer on the agenda.
CA Prison Center
Sanjay Kumar former CEO of Computer Associates was given a
12-year prison sentence and an $8m fine for his part in the $2.2bn accounting
fraud that cost some investors dearly. Computer Associates has renamed itself
CA to distance itself from this scandal. The associated accounting
irregularities were more related to misreporting than theft. Though the
severity of Mr Kumar’s sentence in part relates to the fact that he misled the
court two years ago thereby adding obstruction of justice to securities fraud
and conspiracy.
MS Vista to ship for January sales?
Microsoft has now officially announced the release date of
its much-heralded desktop operating system MS Vista. Commercial customers should be able to get it now. Consumers must
wait until after Christmas. This will dent the sales of the PC outlets as
buyers hold off until Vista’s release. Coincidentally Microsoft is releasing
Office 2007 and a new release of its CRM solution. Only the very brave and
those suffering from ‘crash test dummy’ syndrome will become early adopters of
all three offerings.
HP brand cleansing programme
Now that HP has secured the acquisition of Mercury
Interactive (for $4.5bn), it is considering how to present itself so that the
merged companies appear to be beautifully integrated. Unsurprisingly the
Mercury brand will be dropped because having a brand closely linked to
governance and equally closely linked to bad governance is certainly not brand
enhancing. Surprisingly perhaps the HP OpenView brand will also be dropped. The
intention is to combine Mercury’s performance tools with HP OpenView’s network
and system management tools. They will be rebranded collectively as HP Software
(a marketing masterstroke, product differentiation is clearly overrated). Given the boardroom pre-texting scandal, the
HP brand itself may be the next in line for cosmetic surgery.
Google’s Wikid
Google has acquired JotSpot, which describes itself as an
enterprise Wiki service provider. Wikis can be thought of as a poor man’s
knowledge management system. The JotSpot
offering enables users to share content online using tools that provide MS
Office-like formatting, rather than the traditional HTML look and feel of
traditional wikis. It also provides calendaring and spreadsheeting capability.
Interestingly the founders of JotSpot were the principals behind the Excite
search engine back in the days of Web 1.0. JotSpot, looks very much part of
Google’s arms build up in preparation for an attack on Microsoft’s business.
HP weathers pretext storm
HP’s business appears to be in robust shape. Despite the
boardroom shenanigans relating to the pretexting scandal, the enterprise vendor
has reported the best quarterly result in years. Net income was up 308%. It
predicts 2007 sales to hit $98bn compared to fiscal 2006 sales of $92bn. During Q4 it laid off 4,200 staff with a
further 1,000 planned for Q1 2007. This will mark the end of the redundancy
programme initiated in 2005, give or take a few board members.
