Should you believe everything you read in a blog?

By Peter O'Neill

Or ….  Opalis NOT Acquired By Microsoft                              

We analysts always tend to want to be the first on the stage with impending news and blogs are a perfect medium for getting information out as quickly as possible. In fact, blogs can even sometimes be just a little ahead of the news it is predicting, and are sometimes held responsible for the said event. That is why financial analysts, when they blog, always disclose their portfolios in relation to the companies mentioned in the blog.    

the IT management software and operations communities have been buzzing the last weeks about reports that Microsoft acquired IT process automation vendor Opalis Software. As we have been receiving numerous inquiries on this news item, we went after this story and can now unequivocally confirm that this rumor is incorrect. So, as my illustrious colleague, Glenn O’Donnel will report in another Forrester Blog for the IT Operations professional, Opalis has NOT been acquired by Microsoft. It remains an independent entity, at least for now.

Opalis continues to be an attractive proposition larger vendors seeking to add strong process automation to their portfolios and many have expressed interest. It has also repeatedly reported impressive revenue growth over its short history, so its success probably allows Opalis to command a high premium that no suitor has yet been willing to pay.

It has built several tight partnerships, including one with Microsoft and this rich ecosystem positions Opalis as a viable standalone vendor. Of course, as we report in our market overviews, the onus is on Opalis to continue innovating aggressively to retain its desirability and prevent commoditization. So far it has been successful at keeping its innovation edge. If it slips, so will its valuation and that will certainly accelerate an acquisition.

Regardless of its stamina on the innovation treadmill, we do believe someone will eventually consume Opalis. It is premature to say who will prove to be that successful shopper. It may be Microsoft, but at the moment, that has not happened.

Always keeping you informed!

Peter

A Degree In SharePoint? Microsoft’s Live@edu Offers SharePoint Services To College Kids

Yesterday evening, Microsoft announced at the 2009 Annual Educause Conference that they would be rolling out SharePoint-based collaboration and productivity services for universities via Live@edu. While this news arrived quietly at a conference to which collaboration software vendor strategists rarely pay attention, it is potentially game changing in the collaboration platform space. Let me say that again: the fact that Microsoft is getting SharePoint in the hands of the future business leaders of America (and beyond) during their formative years is potentially HUGE. But let’s back up for a second and bring everyone up to speed. For those unfamiliar, Live@edu is Microsoft’s hosted email and collaboration suite targeted at universities. It’s a free service that in the last four months saw over 5,000 schools sign up. One of the underlying goals of Live@edu is to get college students ready for the real world by letting them play with Microsoft tools in college. This last point – training students on Microsoft software – is what makes SharePoint’s inclusion in the offering so important.

In a time when we hear so much about consumerization and business units starting to assert control in technology purchase decisions, smart vendor strategists find a way to endear themselves to business end users. It’s something that consumer-oriented companies transitioning to the enterprise, like Google, have already mastered. In the collaboration realm, SharePoint is king of the platforms, but its reputation among users hasn’t always been great: We’ve heard a range of complaints concerning usability and functionality. And while some of these things are technical hiccups that are cured with each new release of the product, there are others that can probably be chalked up to users not being properly trained on the software (and not particularly interested in taking the time to learn). In rolling out a SharePoint-based service to its Live@edu customers, Microsoft is making a bet: if they can get students comfortable with SharePoint at 18, they’ll be more than willing to use it in their first job at 21. Not a bad thought, and something that is working for other providers of SaaS collaboration and productivity tools like Google and Zoho. If successful, they could create a groundswell of demand for SharePoint as waves of college graduates weened on their products enter the workforce and look for SharePoint collaboration. This would cover Microsoft's flank against consumerized offerings that have, on occasion, become enterprise-wide solutions (see SAP's adoption of CubeTree). But can Microsoft really capture the hearts and minds of the youth in a manner similar to those other vendors?

Well, this all really depends on the success of Live@edu – and this is why I stressed the word “potential” before “game changing.” Microsoft faces stiff competition from Google and other smaller vendors in providing hosted email services to educational institutions. And there is no guarantee that students will embrace the SharePoint-based service simply because their school provides it. That being said, Microsoft is thinking in the right direct, and it’s something other large collaboration software vendors might want to contemplate; getting a foothold with information workers when they’re students could mean they will not stray when they are middle management.  

As Expected, Data on Q3 2009 US IT Market Showing Continued Decline, But With Signs of Nearing Bottom

This morning, the US Department of Commerce’s Bureau of Economic Analysis released preliminary data on the US Gross Domestic Product in Q 3 2009, which included data on business investment in computer equipment, software, and other IT equipment (principally communications equipment).  The headline news is the 3.5% increase in real GDP in the US from Q2 2009 to Q3 2009 (at a seasonally adjusted annual rate).  That is the first positive growth in US real GDP since Q2 2008, and the strongest since 2007.  Some special factors, such as the cash-for-clunkers program in autos and the tax incentives for first time home buyers, contributed to this strong growth, so growth in coming quarters will be closer to 2% since these incentives have expired or are likely to do so.  Still, the economic data does suggest that the recession is over. 

That news is a positive for the tech market, because improving economic growth almost always leads to an upturn in the tech market one-to-two quarters later.  However, it is the year-over-year growth rate in nominal (or current dollar) GDP that is the most important predictor of growth in year-over-year nominal growth in business IT investment, which of course corresponds most closely to the revenue growth that vendors sees.  By this measure, nominal GDP in Q3 2009 was still down by 1.7% from the same quarter in 2008 – less of a decline than the 2.4% drop in Q2 2009, but still falling.  Q4 2009 nominal will come close to being flat with the year before, and we expect positive year-over-year growth in 2010.

As we expected, Q3 2009 year-over-year growth in US business investment in computer equipment was down 16%, in software was down 9%, and in communications equipment was down 15%.  These declines are similar to what we have seen in the vendor data for US revenues from the vendors who have reported so far (Accenture, EMC, Ericsson, IBM, Infosys, Microsoft, Motorola, Nokia/Siemens, Oracle, SAP, Tata Consultancy Solutions, Unisys, and Wipro) or projected for other large vendors.  US revenues from computer equipment sales from these vendors in Q3 were down 15%, from communications equipment sales were down 11%, and from software sales to business were down 7%; revenues from IT consulting and outsourcing sales were up 0.6%, mostly due to positive growth in IT outsourcing.  However, these declines were less than in Q2 2009. Looking ahead to Q4 2009, we expect that software and IT services vendors on average will be reporting positive year-over-year growth, that computer equipment vendors will narrow declines down to single digit rates, and that only communications equipment vendors will still see declines of 10% or more. 

With these numbers in the bag, we think the stage is set for a strong tech recovery in 2010, even with the economy posting only moderate growth.  “Strong” is a relative term – we define it as tech investment growing twice as fast as nominal GDP.  With real GDP likely to grow by 2% to 3% in 2010 and inflation in the 1%-1.5% range, nominal GDP growth is likely to be 3%-4.5%.  Double that growth rate, and we think 6%-9% is the likely range for US tech purchases in 2010.  After the downturn of 2009, that will be positive news for tech vendors. 

The next step in virtualization

As a high school student I had to go through a Philosophy class, even though my curriculum was in sciences. Zeno's paradox, or the negation of movement, was one of the subjects of that class through which I suffered enormously. Years later, my daughter came back one day with some math homework: the subject was to explain why Zeno's paradox was wrong. And I suffered through it again. This familiarity with Zeno, which I really could have done without, lead me to apply it to IT and what I consider to be the ball and chain that slows IT progress. In Zeno's paradox a runner (Achilles) cannot catch a turtle which started a race earlier than him because each time the runner reaches the point where the turtle was, the turtle has of course moved forward. Repeating this reasoning leads to the conclusion that the interval will become very small, but that the runner will never catch the turtle. What's wrong with the reasoning is that it explains a continuous movement variation through a set of discrete events. But this is what we do in IT: we have a continuous progress of IT technology, hardware and software, and IT projects which are discrete events. When we decide to start an IT project, all hardware and software components are frozen for the duration, while technology continue to progress. The obvious conclusion is that IT is always behind the latest technology and will never be able to catch up. The consequence is that we drag legacy applications running on legacy hardware for sometimes decades. What it does to IT organization is that it forces them to support all their past sins: this diversity in the data center is a major impediment to progress. Standardization of infrastructures would lead to a major reduction in costs.

Unless we abstract the application from the technology. Virtualization is what enables this abstraction. In the past, we have applied it to files and disks, to internal memory, etc. to great success.

The only issue today is that virtualization is still proprietary, as is the computing environment. We can virtualize Intel based systems, or AIX based systems, etc. But we cannot relocate an AIX application and its OS on an Intel box. Implementing a proprietary "decor" on an Intel platform has been done before: mainframers have re-implemented their mainframes using this type of technology. But it does voraciously consume cycles and calls for a myriad of CPUs. What we can hope is that, in a couple of technology cycles, enough power will be available at a reasonable price and will let us build hypervisors that include "decors" for proprietary environments.

I strongly believe that it would enable IT to do so much more.

I welcome you opinion, even if you want to talk about Zeno's paradox.

Regards,

JP Garbani

Still Accessible: But Elsewhere

By Peter O'Neill

Pretty soon now, you will be noticing that I am no longer posting reports or blogs on the Vendor Strategy Professional pages. This does not mean that I have left the stage. It is just that I am assuming a new research focus and targeting my reports at a new role, one serviced within the Technology Product Marketing and Marketing pages. I will be building up research for one of my favorite marketing contributors, the Field Marketing Manager, that true marketing schizophrenic.

They are schizophrenic because the field think they are factory, while the factory thinks they are Sales. Their success depends on being effective at communicating both downstream, converting technology statements to business value propositions; and upstream, giving actionable feedback to product management on an ongoing basis. And by the way, we estimate that 40% of a vendor's marketing budget goes through their hands.

So, watch out for this research and stop by to check me out at the Technology Product Marketing and Marketing pages.

Also, feel free to let your field marketing colleagues know this is coming. All suggestions for research ideas, best practices, benchmarks are welcome. If you would like a copy of my new research agenda, just drop me a line.

 Always keeping you informed!

Peter

IT Management Software Market Update

By Thomas Mendel 

We’ve decided to publish a mid-year market update for the IT Management Software market. We’ve revised our original 2009 market forecast in light of Forrester’s new demand-side survey results. The report is still a few weeks out, but we felt that we should share the data as early as possible.

 

 

We’re also working on an updated five-year outlook and forecast, revisiting some of the market categories and segmentations. There will be a few surprises as categories merge and new one appear. Let me give you just one example of a particularly exciting new category, which we tentatively call process and workload automation, some vendors refer to it as intelligent workload management. Forrester believes that this represents a big market opportunity. The technology answers customer needs to manage and optimize IT resources across all physical, virtual and also cloud environments. Stay tuned, more on this shortly.

What recent acquisitions mean to SAP?

Or How Many Legs Does An Elephant Need?

By Holger Kisker

 

While Oracle’s acquisition of Sun Microsystems is still pending there has been a lot of speculation about which IT giant will take the next big acquisition step in response.

 

Is there a rule of cause & effect that fuels the spiral of acquisitions?

 

·         Know your enemy and know yourself

Of course companies have to watch their competition closely. As Sun Tzu stated in his famous book The Art Of War: ‘Know your enemy and know yourself and you can fight a hundred battles without disaster.’ A billion dollar acquisition is certainly a strategic step that needs to be analyzed properly. Some acquisitions target to increase market share, others to get access to superior technology but the most dangerous acquisitions for competitors are those that surround them and open new battlefields where the competitors are weak.

 

·         The elephants are stretching their legs

Large IT vendors have recently started to buy into markets that did not used to be their core business. If we structure the IT market into four segments of hardware, middleware/database software, application software and services we can see that most of the large IT vendors are already standing or stretching solid legs into several of these segments. Traditional hardware vendors are buying into services (e.g. HP with EDS) or into Apps Software (e.g. IBM with Cognos and Maximo) and software vendors are buying into hardware (e.g. Oracles with Sun). The benefits are obvious – higher integrated solutions from hardware to software to services with superior performance and efficiency for the clients.

 

For more insights into this market consolidation please see the Forrester report ‘Oracle’s Sun Acquisition Is A Game Changer’.

 

·         SAP is getting surrounded by competition

So what is SAP doing on this matter? The largest application software vendor continues to buy additional application software vendors (e.g. Business Objects, SAF etc.). Yes, SAP has service business and middleware business as well, but those merely support the software business and are not managed as independent business lines. As a consequence it is no surprise that a lot of speculation is posted about possible acquisitions by SAP into service companies or a middleware companies such as TIBCO. We do not have any evidence if concrete discussions are taking place and there are also good reasons that are not in favor of such a deal (e.g. a significant portfolio overlap), but SAP seriously needs to consider to stretch its legs out of the software box.

 

What do YOU think? Is it better for SAP to continue to focus on its core application software business or is it time for the elephant to stretch some legs into other markets?

 

Please leave a comment or contact me directly.

 

Kind regards,

Holger

Leaning The Other Way Now

By Peter O'Neill

Here is quick addendum to my recent blog entitled "Leaning Into The Kindergarten".

I had pointed out that a certain vendor had set up a webinar event with the title "Why Lean IT doesn't Work". Well, within just a few hours of my posting the blog, the title was changed to

"Why Lean IT is Here to Stay and What You Can Do About It ".

Now that's more like it. Thanks for the change.

Always keeping you Informed!
Peter

Leaning Back To The Kindergarten

By Peter O'Neill

I have just come back from our own Business Technology Forum in Chicago where my colleagues presented about the concept of “lean production” to an audience of application development and business process professionals: how the IT industry, including enterprise IT, must now finally address and improve its R&D and production processes, just as other industries have done already.

An elegant enhancement to this story was the invitation to John Swainson, CEO of CA to keynote on this topic. CA has been marketing most of this year under their slogan of “Lean IT” and encouraging IT operations professionals to apply the principle in their shop. They were the primary sponsor of the event as part of their corporate campaign to increase their general visibility as a major IT vendor. As expected, John’s speech was illustrative, informative and a perfect fit within the conference. 

Now I have had to field several inquiries from other vendors who wondered about this conjunction of Forrester talking “lean” and one of our clients using the same vocabulary. It is just that, coincidence. After all, there are not that many words that can be used. My colleagues and I, those of us who talk about IT operations, have certainly been working with CA on their marketing programs but we had no influence at all on the scripting of the BTF. A similar situation arose a few years ago when Forrester started to talk about the journey from IT to BT and HP Software decided to declare their mission as providing business technology optimization.

The concepts of lean are not rocket science, unique and certainly not proprietary. It is a good metaphor for discussing many of the potential process improvements that IT still needs to pursue in all its departments. So I must admit to some surprise when I discovered this forthcoming webinar from a CA competitor.

Session 4: Why Lean IT isn’t Going Anywhere, and What You Can Do About It

I do love to highlight best practices so I thought I would, for completeness, also point you to this practice.  As a marketing professional, I find this approach a little depressing and I am convinced that it will be non-productive. This has nothing to do with anybody disagreeing with Forrester as it is clearly a lame attempt to attack a competitor - something which every marketing 101 textbook advises strictly against. remember, this blog is for vendor strategy professionals, no users, so this discussion is strictly within our community.

Do you disagree with me? Anything I have missed? Feel free to let me know.

 Always keeping you informed!

Peter

IBM Moves Ahead In Smart Computing, But Still Has Ways To Go

IBM threw a big event in New York City on Thursday, October 1, and Friday, October 2, to publicize its Smarter Cities initiative, part of its Smarter Planet marketing message.  The event featured an impressive list of politicians (Mayor Bloomberg, NY Governor Patterson, governors from Vermont and North Carolina) and CEOs (CEOs from ABB, Verizon, American Electric Power, etc.).  I was part of the crowd of hundreds of attendees and IBMers on Friday, and my colleague Doug Washburn attended on Thursday. 

It would be easy to dismiss this as part of hype machinery that IBM is running to build awareness of and create customers for its Smarter Planet initiative and the emerging offerings that it is creating under that rubric.  But I think there is more going on here.  What IBM is really doing is creating a vision – or more precisely, half a dozen visions – of how a new generation of technology can help address some critical challenges facing the planet.  Visions of course can easily become hype.  But as several speakers noted, visions are also a necessary first step in any transformation process, building awareness of what can be different at the end that will inspire people to start the journey.  And IBM to its credit put concrete examples behind the proposals.

Here is what IBM is doing right:

• Focusing on key social and economic problems facing many countries around the world.  Cities and national governments face challenges of providing healthcare more efficiently, improving the quality and delivery of education, managing greater and greater volumes of people travel and goods transportation, providing public safety and security in the face of increased threats of terrorism and persistence of crime, and encouraging energy conservation and alternative energies to counter global warming.  These are the problems that IBM’s Smarter Cities initiative focused on.
• Identifying ways that new technology solutions can address these problems.  IBM has begun to describe and document that ways that new awareness techniques like embedded sensors and capture of real-time data on the location and movement of objects, people, and energy, plus more advanced analytics, can be applied as part of solutions for governments and infrastructure providers like utilities.
• Starting to build solutions for vertical industries with these problems.  Classic horizontal technologies still represent the vast majority of IT purchases and will provide the foundation stones for these new technology solutions.  But we think most of the future growth in the IT market will come from highly verticalized solutions.  IBM’s organization of its Smarter Cities presentations shows that it understands this prospect.

These actions are putting IBM way ahead of most other vendors in building the case for business and government investment in what we at Forrester are calling (coincidentally) “smart computing” technologies.  But IBM still has work to do to translate its early lead into actual business success.

1. Show the pay-offs.  The presentations at the New York Smarter Cities event were strong in vision and soft benefits like helping reduce CO2 emissions.  However, the case studies with concrete dollars-and-cents benefits were less concrete.  While IBM does have some examples of how health care providers, transportation departments, utilities, policy departments, and school districts are realizing tangible savings, it will need to show many more examples of financial and public benefits if it is going to get these generally slow moving institutions to buy what it is offering. 
2. Create the needed solutions.  So far, IBM has some experiments and pilots in helping clients in local governments, utilities, health care, and education assemble many of the elements of what they need to make their operations more effective.  But in many ways IBM is at the same stage as the early ERP systems in 1990 and 1991.  It is still working with individual clients to try to pull together the pieces of what are admittedly complex solutions.  It is also building what it calls software frameworks for different industries.  But IBM is still learning what works and doesn’t work, what is needed vs. what is available, and what it would provide and what partners would contribute.  So, IBM still has work to do to create replicable solutions. 
3. Make its solutions software-and-hardware products, not consulting projects.  IBM for the past decade has been moving from being a product vendor to a services vendor.  But now it has to start moving the other way.  It won’t make economic sense for thousands of utilities to implement smart grid and smart meter systems as individual, custom-built service solutions; they will need offerings that are much more like turn-key products at a fraction of the cost of a customized service solution, albeit with extensive configuration options to meet their requirements.  Same thing for health care systems, urban transportation management systems, etc.  Will IBM have the discipline to resist the temptation to keep building high-cost (and high-revenue) custom consulting solutions for individual clients, and instead create the core industry-focused offerings that could be sold as lower-cost (and lower revenues) semi-packaged products to dozens or hundreds of clients?

Will IBM be the first vendor to get Smart Computing right, or will other vendors get there first? Let me know what you think.  Thanks.