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The Old Paradigm, Resurgent
By Jim Balderston
Microsoft, Intel, and IBM have all announced
earnings for the first quarter, and all three had positive results to report.
Microsoft reported revenue for the quarter of $7.84 billion with net income
of $2.79 billion. Both figures were up from a year ago. Intel reported
revenue of $6.75 billion and income of $915 million, down slightly in both
categories from a year ago. IBM announced revenues of $20.1 billion, and
income of $1.4 billion, both figures up from the prior year’s first quarter.
Meanwhile a number of smaller companies like i2 Technologies, Ariba, and
others were forced to restate earnings going back a number of years, Ariba to
1999. i2 Technologies has been delisted from the
NASDAQ as a result of not having reported earnings for the past year.
While at first glance it would appear that being a
market leader – or monopolist in some people’s eyes – is the key to surviving
the ebbs and flows of the marketplace. Or that at least being a big system
vendor – like IBM – would provide shelter. Intel, IBM, and Microsoft were
challenged with the advent of the Internet; for a few giddy years they were
taunted by friend and foe alike for “not getting it.” They were called
dinosaurs and not a few sales pitches from the new, fast, agile, and
innovative companies like i2, Ariba and a host of other challengers played on
this fact. They were going to run circles around the big boys.
Ah, those were the days. Now, as we look back, we
see that much of the innovation that these lean new companies were practicing
was more focused on accounting practices than actual product improvements.
That cheap shot aside, we do think it is valuable if vendors can demonstrate
with reasonable authority that they are going to be around two years hence, a
situation that we believe will not be the case for many of these smaller
niche players, who in their short lives will burn bright and fast and make a
pretty streak across the sky. While the earnings reports for the big
companies at least provide some fuel for optimism in the depressed tech sector,
we believe that the carnage is still far from over, as more companies will
find themselves forced back to some sense of financial reality that was
clouded in the hysteria that surrounded the Internet bubble. IBM and
Microsoft, to be sure, will have some opportunities to improve their
offerings in the coming years as many of these niche players will become
bargain basement deals for acquisition. That said,
we believe that for large vendors – especially systems vendors like IBM –
this is a very good time to be a big bad dinosaur indeed.
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EMC and HDS Both Bolster Mid-Tier
Storage Portfolios
By Charles King
EMC has announced the acquisition of Astrum
Software, a developer of storage resource management (SRM) software for
multi-platform, mid-tier environments. According to EMC, Astrum’s solutions
are optimized for automated file management, file level reporting, and
capacity utilization; and complement EMC’s automated networked storage
efforts. EMC also announced that it would continue Astrum’s OEM relationship
with Overland Storage, a storage management software vendor. Approximately thirty
Astrum employees will join EMC’s Open Software Operations group. Financial
terms of the acquisition were not disclosed. In an unrelated event, HDS
announced the availability of the co-developed, co-branded HDS NetApp
Enterprise NAS Gateway, a special-purpose server that can attach directly or
through a Fibre Channel SAN fabric to external Hitachi Freedom Storage
systems, allowing enterprises using HDS systems and NetApp solutions to
consolidate information into common open storage pools under HDS HiCommand Management Framework. Two gateways for HDS’s
Lightning 9900V series, the GF940 which handles up to 9 TB of data and the
GF960 which handles up to 48 TB of data, are currently shipping. A gateway
for HDS Thunder 9500V systems, the GF825, which handles up to 3 TB of data,
will be available on June 30. HDS will make the GF825 available for Lightning
later in 2003. No pricing information was disclosed.
For the most part, the story of IT evolution unfolds
in episodes of incremental improvement. Vendors develop solutions and then
make adjustments as the market or circumstances demand. In enterprise data
storage, the latest hot spot is the mid-tier space, a complex environment
whose hodgepodge of technologies and customer strategies tend to defy
straight ahead approaches. For vendors to succeed in the mid-tier, they must
cast wide and tightly woven nets they make themselves or in concert with
myriad partners. HDS’s approach to the mid-tier has been sporadic, at best.
Since the company tends to focus its own efforts on high-end DAS and SAN
solutions, it has approached the mid-tier NAS space via partnerships, first
and unsuccessfully with Network Storage Solutions, and more recently with
NetApp. At this point, it is unclear just how, if at all, the HDS/NetApp NAS
Gateway differs from NetApp’s own NAS gateway. HDS
claims the product is optimized for HDS Lightning and Thunder systems, but
did not offer any significant details about how this was achieved. In all,
the new solution seems designed primarily to provide HDS customers
HDS-branded NAS options should they need them, and could also offer the
company an avenue for pursuing future mid-tier opportunities.
EMC’s acquisition of Astrum offers a different view
of incremental evolution. Best known for its high-end Symmetrix
and CLARiiON storage systems, EMC has made significant
forays into the mid-tier hardware market via the lower end CLARiiON solutions the company co-markets with Dell, and
its Celerra NAS systems, which provide NAS
connectivity to Symmetrix and CLARiiON.
Applications are equally important to EMC’s mid-tier efforts, and the company
has notably expanded its software offerings through numerous acquisitions,
including the recent purchase of Prisa Networks, a
developer of management solutions for small to medium sized SAN environments.
EMC did not discuss how Astrum’s solutions will be incorporated into the
company’s SRM portfolio, but we expect that Astrum’s focus on Sybase,
Microsoft SQL and Exchange environments will broaden EMC’s ability to address
mid-tier storage needs for customers in this space. Additionally, EMC’s
decision to continue Astrum’s OEM relationship with Overland, which offers
tape-based storage solutions, suggests that EMC is approaching the mid-tier
with a healthy degree of pragmatism and a view to the future when
tape-dependent mid-tier players are ready to graduate to enterprise
disk-based solutions.
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SCO Linux for Itanium: Salvation or
Diversion?
By Clay Ryder
SCO Group announced this week the release of SCO
Linux Server 4.0 for the Itanium Processor Family, its Linux offering
designed for Itanium 2-based systems. SCO Linux Server 4.0 is based on the
UnitedLinux 1.0 distribution, and includes additional software, support, and
services that are targeted at the mission-critical Linux business
environment. Key features include the Linux 2.4.19 kernel; secure remote,
Web-based system, network, and security administration tools; and flexible
high-availability and clustering features. In addition, the offering includes
twelve months of the SCO Linux Update Service, which provides notification of
updates as well as an interface for downloading and applying updates. SCO
Linux Server 4.0 for the Itanium Processor Family is currently available from
authorized SCO resellers. Base Edition is priced at $999 and includes a
license for up to four CPUs.
Once upon a not too distant time, SCO and its
partners provided, for many, the only credible and affordable solution that
met the requirements of doctors, lawyers, and other professionals, as well as
remote/branch office users who needed to tap into main office client/server
applications. Filling this need with Open Server and UnixWare proved to be a
significant market triumph that filled SCO’s coffers for many years.
Unfortunately, for SCO, while it demonstrated the need for a small office
server solution on low cost hardware, it also raised the attention of the
Redmond giant who responded aggressively and in large part with Windows NT.
This signaled the beginning of a slow but steady decline for SCO. More
recently, in response to pricey proprietary operating systems (Windows and
RISC based UNIX), a new penguin arrived on the
block. Although many initially believed Linux would devour Microsoft and
Windows, the reality was quite different. While Linux did cause Redmond some
consternation it more effectively ravaged the low end of the RISC UNIX
marketplace and introduced a very low cost option into the IA32 UNIX
marketplace.
Since the onslaught of Linux, hardware and software
players have been scrambling to protect their turf and expand their
opportunities in light of the destabilizing effect of Linus Torvald’s
religious awakening. This may seem like an opportunity that a small systems
UNIX supplier like SCO would dread. However, given the affinity of Linux and
UNIX, there is an opportunity for a highly differentiated IA32 vendor to
recapture some past glory as it sought to provide cost effective, vertically
focused solutions for the small business. Despite the success of Windows NT
and its descendents, there is a sea of older small UNIX systems in place,
ripe for upgrading/updating. But we wonder if SCO’s focus on Itanium may be
misguided in the short term. While an Itanium/Linux combination may play well
in lab and university environments where Open Source has a loyal following,
the small businesses that were the core of SCO’s original success generally
have little affinity for technology, but a great affinity for solving
business needs in a cost-effective manner. For them the upgrade from IA32 to
Itanium is a painful requiring at a minimum recompilation of applications and
other IT drudgery. With the imminent release of the AMD Opteron
CPU, and its binary compatibility with IA32 applications, we believe SCO has
a brief but potentially lucrative opportunity to engage with its channel
partners to upgrade many of these legacy small systems, whether they are Linux or UNIX, without the painful platform
change. Additionally, AMD’s favorable price point compared with Intel would
allow SCO and friends to maintain a low-cost, but high-performance position
in the marketplace. So we applaud SCO’s long term eye on Itanium. However,
given the company’s recent financial woes and dwindling market relevance, we
wonder if SCO will last as a viable player until the time that Itanium
becomes the norm, as opposed to the exception in the small system
marketplace.
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The Internet: Is It All That?
By Jim Balderston
The Pew Internet and American Life project has
released its latest findings concerning Americans’ use of the medium and note
that a significant number of non-users have either used the medium and then
ceased doing so or do not use it despite the fact that other members of their
family or friends use it regularly. The report notes that 20% of the
non-users live with someone who uses the Internet from home. These so-called
“Net Evaders” will have someone else provide them with Internet-related tasks
or avoid using the medium altogether while proudly proclaiming their
independence. Another 17% of non-Internet users were once online, but have since
ceased, many due to technical problems with either their computers or ISPs.
This number has increased since 2000, when 13% of non-users had once been
online. The report also notes that 24% of non-users have never been online
and have no direct or indirect contact with the Internet. The report also
notes that age, income, education, and location have an impact on Internet
usage. The most likely people to not use the Internet are older, retired, and
living in rural areas. Forty percent of non-users today report they intend to
go online some day, this group tending to be younger than those who said they
had no plans to ever go online. The report notes that Internet penetration
rates have hovered between 57% and 61% since October 2001, a departure from
increases in prior years.
While the traits that tend to make people Internet
users – or non-users – remain largely a product of age, education, and income
levels, this report reveals some interesting sub-currents in the overall
adoption patterns of Internet usage that have not been apparent in the past.
The report reveals that not everyone has been seduced by the Internet’s siren
song, and in a significant number of cases some have been, only to break the
spell and unplug the modem. While these figures should come as no real
surprise – there is after all no such thing as 100% market penetration – we
think they offer some interesting insights into market behaviors that should
be heeded by vendors in the IT market.
The first thing that jumps out at us is the idea
that the Internet – despite all of its hype and its truly revolutionary
impacts – is not for everyone. This rubs a bit of gritty reality into the
argument that the Internet and its global reach, its ever-increasing size,
and its apparent indispensability for many folks is enough to declare its
universal usefulness and validity. The Pew report shows that not only did
everyone not get that message; but many that did rejected it. The study shows
that for a significant number of people, the hype and promise of the
technology were not enough to make them change their ways. We would also
suspect that within many of the Internet users sampled by this survey, a
significant portion could be found to use the medium because of the fact that
so many people around them did; the idea of being online may in fact for
these people be as much a product of social pressure as it is one of actual
utility. Such observations also have validity in the enterprise IT space as
well, we believe, where the siren song of many dazzlingly marketed products
has given way to the grim reality of
underused, somewhat dysfunctional, or wholly abandoned IT product
installations. This report gives those of us that regularly use the Internet
and IT a glimpse into people who are going to need more than “hey, everybody
is doing it,” sales pitches. It also serves as a reminder that utility,
appropriateness, and actual return on investment of money and time spent on
IT are more important to many potential customers than “the next big thing.”
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In on the Ground Floor
By Jim Balderston
IBM and Intuit Eclipse have announced a marketing
and technology agreement targeted at small and medium businesses within a
select number of verticals, focused on the building trades and building
maintenance fields. Under the terms of the deal, which covers the U.S.,
Mexico, and Canada, Intuit Eclipse will optimize its Distribution Management
Solutions suite for IBM WebSphere Application Server Express. IBM will
promote the DMS product as part of its SMB Solution for ERP, SCM, and CRM for
markets like plumbing and heating, specialty industrial, electrical, building
materials, and bearings and fasteners. This new agreement expands on an
existing pact between the companies, in which Intuit Eclipse is built on the
IBM Universe Database, and runs on IBM eServer, pSeries and xSeries hardware.
IBM said the newest arrangement with Intuit is one of the first in its new
ISV Advantage Initiative.
While partnering announcements rarely get our juices
flowing, this announcement reeks of a positive strategic sea change. For
many SMBs, the idea of hauling IBM in to handle inventory control or supply
chain issues would feel like hitting a very small nail with a very large
hammer. Here, partnering with Intuit, a well-known brand in the small
business space and a lesser-known one in the medium class of enterprises,
both companies seem to have a real opportunity to expand markets. IBM gets
its nose in on the smaller businesses and Intuit Eclipse now has street cred
with larger companies that before may have shied away from it due to its
small business cachet.
While we think this deal makes sense, it is not one
that will flourish without ongoing care and feeding (most won’t). Intuit does
get a more visible place in the ERP and SCM markets, but we believe that as
the technology malaise begins to unwind, the big-name vendors are going to
come back with a vengeance as the tech slowdown stymied these companies just
as they were on the verge of getting real, sustainable market traction.
Intuit will have to deliver against the big boys. Meanwhile, IBM can help
both Intuit and itself by making sure that its much vaunted autonomic
computing initiative reaches well down into the SMB market. Many of these
target companies have very little in the way of on-site IT staff; offering
more highly reliable and self-healing computing environments has real appeal
to these customers, who have a reasonable aversion to making large
commitments to IT support, both internally and externally. If IBM can
convince the market that the company is delivering Intuit products requiring
much less muss and fuss than competitors, this could be the proverbial
camel’s nose under the tent in SMB market for IBM. While autonomic computing
seems most often cast in a large scale enterprise computing environment, we
would urge IBM to remember the little people.
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Yahoo Announces New Version of Its
Search Service
By Myles Suer
Yahoo has announced a new version of Yahoo! Search.
The company indicated that there are several enhancements including a new
user interface and the ability to find relevant information more rapidly. The
update is the result of eight months of research aimed at understanding what
users need in search. Additional new features include a redesigned look and
feel, a new navigation interface, shortcuts to information, customized search
preference, and additional advanced search features. The product is now
available on the preview section of Yahoo’s Web Page.
Search remains the anchor tenet for consumer
portals. For this reason, it continues to be a significant place to earn ad
dollars: 60%+ of Yahoo!’s revenue comes from ads.
Given’s Yahoo!’s split with Google, the company
obviously felt the need to bring back some of the capabilities it lost in the
split. As such, while we commend Yahoo’s improvements in user interface, most
of the “new” features do not dramatically change the current search
experience. This begs the question, why didn’t Yahoo create a natural
language front end that allowed it to ask clarifying questions of the user’s
query? Additionally, why didn’t Yahoo add search result clustering by
keywords? These capabilities could have dramatically improved the search
experience and further differentiated the search offering.
Given its endeavors in improving its search
capability and its ongoing quest for new revenue, it is interesting that
Yahoo! has not (at least publicly) announced its intention to make available
direct interfaces to enterprise applications. In this scenario, Yahoo! might
be able to position itself as a pre-search capability for Web based content,
which could then be run through an enterprise class search engine such as
Autonomy, Verity, or Inxight, which are tuned for searching unstructured
text. Such a combination would not only narrow outside content but also
present the relevant content within a sorted and captured document. So while
Yahoo! announces it latest and greatest, we wonder if this is more a case of
catching up to where one has been, as opposed to breaking ground with new
capabilities or in new directions.
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