Big Tin

Big tin: IT infrastructure used by organisations to run their businesses. And other stuff too when I feel like it…

Oracle buys Sun — but who really wins?

The big news this week this is undoubtedly the $7.4 billion purchase of the troubled server company Sun Microsystems by database specialist Oracle. But, given the very different nature of the two companies, will it work?

Well-known in the industry for being the favourite of developers and geeks, and among its customers for its high-powered, reliable but expensive systems, Sun has nonetheless suffered financially since the implosion of the dotcom bubble. Its accounts have bled red for years, and selling the company seems for eons — that’s eons in IT years — to have been the only way out.

Just two weeks ago, IBM made overtures to buy the company. This author among others could see that there would be some synergies, although I struggled to see how Big Blue would swallow Sun’s server range, given that it has a well-established and rational product portfolio already. IBM and Sun would have fitted together mainly on the software side, where the acquisition of Solaris, a major platform in the database world, along with Java and many open source technologies including OpenOffice, would have sat comfortably alongside IBM’s espousal of open source, and its conversion from hardware to software and services company.

It wasn’t to be. Sun demanded too much of IBM — more here — and the deal fell through. We wondered at the time how Sun could have let it happen, and accused the Silicon Valley stalwart of greed and complacency.

What we didn’t know was that it had another suitor in the wings, one willing to pay Sun’s pretty substantial asking price.

Early post-purchase signs are good. Most analysts and observers see more positives than negatives emerging from the deal. Oracle is a software company first and foremost, while Sun’s revenues stem mostly from hardware.

What’s more, Sun’s Solaris is a major platform for Oracle’s eponymous database, which means that Oracle can now offer the whole stack, from raw iron upwards, and so is in a better position to offer more tightly integrated solutions. As the company’s acquisition statement said: “Oracle will be the only company that can engineer an integrated system — applications to disk — where all the pieces fit and work together so customers do not have to do it themselves”.

Some systems integrators may suffer as a result, but that’ll be some way down the line, after two or three product refresh cycles.

The deal has even got some of the opposition thinking. As Colin Barker reports from an HP product launch in Berlin (which I was unable to make, sadly): “HP executives thought that the news was interesting and it was not difficult to see their internal calculators trying to work out any options the move would give them.”

So far so fitted.

But big questions remain to be answered. Sun has always been a fairly open company, and has always seen itself and wanted to be seen as part of a wider community. When open source came along, Sun gradually adopted it and, with no little external persuasion it seemed at the time, even made some of its own, expensively developed technology open source.

In complete contrast, Oracle has rarely if ever done that — apart perhaps from its development of its own version of Red Hat Linux, which the market has largely ignored. Oracle’s proprietary approach and eagerness to squeeze every last dollar out of its large enterprise customers is the stuff of legend.

This is unlikely to change, especially now that it can lock down those customers to a tightly integrated hardware platform. The reactions of those customers, of the competition, many of whom are in alliances with either or both the parties to the acquisition, and of the channel remain to be seen.

There will be layoffs too, given the economic situation, and the more obvious lack of need for duplicated sales, marketing or HR departments, for example. One analyst is reported to have predicted up to 10,000 job losses. I would expect the culture shock to squeeze quite a few through the out door.

But if you’re a customer, you might prefer not be locked in. If you’re a hardware partner of Oracle’s, you’re likely to be re-thinking that deal, big time. HP is in that boat, given that it’s co-developed servers for Oracle, in the database company’s first venture into hardware, back in 2008. And if you either work for Sun or are one of the developer community in Sun’s orbit, you might well find yourself wondering where to go next, whether voluntarily or not.

My take is that most customers will stay put. It’s not the time to start launching into expensive new IT roll-outs. That’s not to say that those with an aversion to single-supplier deals won’t bail as soon as possible.

However, the pressure on the competition in the current climate is likely to result in more mergers and acquisitions, and a jungle populated by fewer but bigger beasts.

But who and which? Here are some questions: will IBM swallow EMC? Will Cisco buy Brocade? And could Microsoft finally buy Yahoo!? And how many more yachts will this deal enable Oracle CEO Larry Ellison to buy?

Filed under: mergers & acquisitions, operating systems, Servers, , , , , , ,

EU takes the Janus position

The UK government has on many occasions shown itself to be more interested in spying on its subjects than on fixing the recession — and this week’s no different but the European Union seems with one hand to be aiding and abetting such activity, and with the other hand, bashing the UK round the head for something similar.

This week brings us news that the European Union has followed up its threat of legal action against the beleaguered New Labour administration by instating a case against the UK for allowing BT to test Phorm’s deep packet inspection and behavioural advertising. Customers were unaware that their data was being examined by BT for commercial purposes.

As a result, the EU has told the UK that it must comply with the EU Directive on privacy and electronic communications, which is equivalent to a legally enforceable requirement, and which mandates that member states must “ensure confidentiality of communications and related data traffic data by prohibiting unlawful interception and surveillance” unless the users concerned have consented.

The legal case follows numerous letters, to which the UK government responded that it was happy that the Phorm system meets European data laws, and then ignored further requests for clarification.

On the other hand however, the EU’s Data Retention Directive has provoked widespread condemnation. This compels member states to store users’ communication information for a full year starting on 15 March 2009. It means that every email, phone call and text message sent or received will have to be recorded.

The thinking behind it is that: “retention of data has proved to be such a necessary and effective investigative tool for law enforcement in several Member States, and in particular concerning serious matters such as organised crime and terrorism, it is necessary to ensure that retained data are made available to law enforcement authorities.”

That’s despite the assertion in the directive that, in a democracy, “everyone has the right to respect for his private life and his correspondence”. It does however go on to say that the directive: “relates only to data generated or processed as a consequence of a communication or a communication service and does not relate to data that are the content of the information communicated.”

In other words, it’s the contact not the content that will be stored — although this does include your user ID, IP address, DSL line (where appropriate) and the date and time of contact.

Even so, it seems contradictory for the EU to be lambasting the UK for spying on Internet traffic, while on the other hand it’s insisting that your phone bill be made available to the local police forces.

Filed under: data protection, Privacy, Surveillance, , ,

Microsoft trashes its brand — with Apple the big winner

You have to wonder if Microsoft really knows what it’s doing. There’s a lot of hoo-hah around the Web about Windows 7, and how it’s going to fix Vista’s problems. Thing is, the signs are that it won’t — and that Apple will be the biggest winner.

That Microsoft understands it has a problem with Vista is obvious: the company took — what? — six years to drag Vista onto dealers’ shelves after the launch of Windows XP, following which Microsoft seemed to just squat on its haunches and watch the money roll in. In comparison, Windows 7, slated to launch later this year, follows hard on Vista’s heels, just over two years later.

Windows Vista’s done a lot of damage to Microsoft’s reputation and brand. The last sheer dog was Windows ME, which answered a question no-one asked (a bit like a Porsche Cayenne – only prettier) but proved to have all sorts of technical problems associated with it (not at all like a Porsche Cayenne, apparently).

But when ME was launched, messing with PCs was still by and large a minority sport.

No longer. Everyone and his or her dog has at least one PC. My sister-in-law, who knows close to nothing about computers, has two in her family — and guess who gets the tech support questions — but let’s just leave that one there. The point is that the brand is now ubiquitous, and Microsoft messes with it at its peril.

So the damage to Microsoft is proportionately bigger when it messes up as it has done with Vista — it’s so bad even people who know nothing about Vista notice. They notice that some of their old software doesn’t run properly any more. They notice too that they keep getting asked stupid questions to which they don’t know and couldn’t possibly be expected to know the answer. So of course they click OK — in which case, users quite reasonably say, why does the computer bother them at all?

Is Windows 7 going to fix these issues? We’re told so and I hope to be able to report on a copy on the release candidate in the not too distant future.

Just as important from Microsoft’s point of view is the enterprise market. A recent survey of over 1,100 IT managers and commissioned by KACE, a systems management company, found that “84 percent of IT staff polled do not have plans to upgrade existing Windows desktop and laptop systems to Windows 7 in the next year”.

Why aren’t IT managers following the Microsoft roadmap — assuming such a thing exists (Redmond used to flaunt one but hasn’t done so for years)? They cited software compatibility, cost of implementation, and the current economic environment as their main concerns.

The story told to me by the company’s Wynne White is that enterprises are sticking with XP for the time being. Some 89 per cent of the 500,000-plus desktops managed by KACE appliances use it, while just 1.89 per cent use Vista. For sure, deployments of new enterprise desktops are always slow — it’s the nature of the beast — but White reckoned that he could see at least five years’ life in XP yet.

And while they’re not going to Vista, they’re also being much more cautious with Win7. “People’s perception is positive but they’re being much more cautious in their approach,” he said.

“Eighty-four per cent are not going to adopt Windows 7 in the next 12 months, but more telling is that 72 per cent said they were more concerned about upgrading to Windows 7 than they were about staying with XP,” said White.

What all this suggests is that Windows has run out of steam. People no longer have any real reason to upgrade — if that’s the right word. It’s hard to avoid the conclusion that, for all intents and purposes, Windows XP is good enough: it’s easy to use, robust, stable, and reasonably secure (could do better, of course). Neither of its two successors offer all of that — and they’re just as expensive.

Linux looks to be a big desktop OS winner — at least in the enterprise. White reckoned that, in the 2007 version of this annual survey, 42 per cent said they’d switch to Linux, but two years later in 2009, half said they’d switch. And when asked if they either had switched or were in the process of switching, nine per cent said yes in 2007, 11 per cent in 2008 and 14 per cent this year.

But Linux isn’t the big beast Microsoft fears: it’s Apple. Between a half and a third of those IT managers said they were contemplating going Mac for their next tranche of desktops.

It’s hard to avoid the conclusion that Microsoft seems to be in the process of trashing its brand — and Apple looks to be the biggest picker-up of the pieces.

It’s just a major shame that Apple’s business model and contempt for its users is even less appetising than Microsoft’s…

Filed under: desktops, operating systems, , , , , , , , ,

Where does the Sun-IBM deal failure leave Sun?

So Sun Microsystems turned down IBM’s offer to buy it — even though Big Blue’s $7 billion buy-out bid was twice the valuation of the troubled Silicon Valley stalwart.

We read on Bloomberg that the sticking point was a clause in the contracts of top Sun execs. The news service reports that: “chief executive officer Jonathan Schwartz and chairman Scott McNealy have contracts that mean they would receive three times their annual pay, including salary and bonus, should Sun be acquired.”

IBM reportedly didn’t think too much of that stipulation and would not honour it — even though its acquisition of the fourth-placed server vendor would have boosted its position against number one vendor HP.

We also read that “Sun’s board contended IBM wanted too much control over Sun’s projects and employees before the deal closed”, which is hardly surprising: coughing up $7 billion has a way of concentrating the mind.

And especially when it appears that some super-rich employees wanted to grow even richer than they already are. Top Sun execs get paid in millions of dollars: Bloomberg reports that Schwartz’s salary was $1 million last year and his target bonus was twice that amount. And company founder McNealy was awarded $6.45 million in compensation last year, including $1 million in cash for his “service as an employee of Sun”.

But in this day and age, exactly how much money does one already super-rich individual truly need?

There’s another factor. Even before the recession, Sun consistently failed to show a profit so IBM would be bonkers not to want to manage Sun closely. And Sun looks to be heading for its biggest loss since 2003.

Following its rejection of IBM, Sun’s share price dipped 23 percent, its biggest fall since 2002, according to Bloomberg.

So what are we to learn from this? Chatter among techies in the industry demonstrates tremendous loyalty to Sun and its technology. However, a company selling semi-proprietary kit — yes, I know that Solaris is now open, and that it uses Intel processors and so on, but that’s not where the bulk of its sales are — was always going to struggle now that hardware is commoditised and standardised.

Analysts agree.

“Sun can survive as an independent company, but the longer the recession goes on, the more likely it is the value of the franchise begins to fade,” said one.

“Sun made a horrible mistake. Wall Street analysts probably optimistically expect their revenue to decrease year-over-year for the next several years — they should have just taken that money and ran,” said another.

Is this the beginning of the end for Sun? Industry observers — including this one — have called this before and been wrong. Largely down to the company’s huge cash cache, Sun has continued to trade even as its accounts bleed red.

What’s different this time is that Sun’s top execs seem to have forgotten that we’re in the middle of a recession. It might be because Silicon Valley has its own mental micro-climate. I was there a couple of months back, talking to venture capitalists and heads of startups looking for funding, and the untrammelled optimism was palpable: I almost started sweeping it up off the floor.

But in the real world, there’s near-universal anger and disappointment at the shenanigans of the stupendously well-paid at the heads of companies. Keen to be seen as corporately and financially responsible, IBM is likely to have been sensitive to the appearance of funding what looks like plain greed.

Neither of the two parties has commented on their falling out. But if Sun is to survive, you’d have to hope that hubris doesn’t get in the way of deals with any future suitors.

If there are any.

Filed under: mergers & acquisitions, Servers, , , , ,

Beware the Skype-iPhone hype-fest

There’s a battle heating up in the burgeoning voice-over-wifi (VoW) space.

On the one hand you have Skype, which has just launched its eponymous app for the iPhone and, despite the almost audible gnashing of teeth from the mobile operators, has reportedly become a hugely popular app for the Jesus phone. Skype is claiming that it’s had a million downloads in two days, and that’s the top download in the App Store. If true, that’s big.

Gnashing of teeth? It’s all about conflict of interest. Skype takes voice traffic and routes it over a Wi-Fi hotspot, or your home or office Wi-Fi network. The mobile operators make no money out of voice over Wi-Fi: they make money out of voice calls and data traffic routed over their cellular networks.

And that’s the attraction of Skype for end users, and why mobile operators have dragged their feet  over the years. Many mobile operator contracts include a phrase that explicitly forbids users from using VoIP applications, for just this reason.

Yet over recent months, some operators have relaxed this stipulation in the face of vociferous end-user protests, via both their wallets and by the generation of poor publicity. End users want no limits on what they can do with their devices and data feeds, while operators want a walled garden that constricts end user choices to those that generate revenue — but they’d still rather have some of your business than none of it.

As a result, Skype is likely to become accepted across all networks.  So what’s the conflict I mentioned at the top of this story? There’s another VoW player in the mobile space, namely Truphone.

This company’s been around for a while but its business model differs from Skype’s in that Truphone reckons its service ‘provides Skype calls outside of Wi-Fi on the iPhone’.

Truphone’s system also allows you to make calls when not in Wi-Fi coverage by routing the first leg of the call over the mobile network — just like a standard call, says Truphone, — and then running the call from there over Truphone’s own network.

The advantage here is that the mobile network’s coverage is always going to better than that of Wi-Fi, a technology whose coverage is measured in metres, not kilometres like the cellular networks.

Is it important? When you compare the hype-fest surrounding Skype to Truphone, possibly not.

So if you want coverage wherever you go and don’t want to pay the extortionate prices charged by mobile operators for calls outside the UK, Truphone is a viable alternative.

The moral? Beware hype-fests: like that surrounding the iPhone, glitz often wallpapers over a multitude of shortfalls.

Filed under: Wireless, , , , , , , ,

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