I am in the middle of attending Microsoft’s Server Technology Business industry analyst event. I have attended this for many years but this year Microsoft decided that it would be a virtual event. Sessions would be streamed over the web to be watched whenever. One on one sessions were scheduled with executives and customers in 30 minute increments. There was one live session (slides over LiveMeeting). So, what did I think? I had very mixed feelings. I was happy to forgo a plane trip. It is much nicer to sit in my own office and sleep in my own bed. However, I don’t think that the virtual conference itself is ready for prime time. Here are the things that don’t work for me.

There is no substitute for personal interaction with people. When I attend an industry analyst meeting I pay attention to more than the words the speaker is saying. I read the body language. I want to understand how the management team relates to each other. I want to have hallway and lunch time informal conversations. I also want to be able to talk to invited customers informally.

Streaming videos for presentations are a wonderful idea but the vendor providing the videos needs to make sure that this works with many different networks and many different systems. I happen to use a Mac which wasn’t the system of choice for the Microsoft hosts. Even those using Windows and Explorer had trouble with the videos stopping in mid sentence. Even if the vendor tests out the videos internally, they cannot begin to guess the participant’s environment.

Will a typical analyst have the patience to watch five hours of pre-recorded videos? Not likely. I might listen to a video that I am particularly interested in (like cloud computing or service oriented architectures, for example). But I will not listen to all the presentations. There are simply too many distractions and too many things to do. That is the reality of my life as a researcher, analyst, and writer. The reality is that unless you present compelling presentations with information that draws me in you will not capture my attention for long periods of time. The context of this type of meeting hurts the  virtual conference. It is something like watching television. If you start to watch a program and it gets boring, you start to channel surf. If you expect the audience to watch from beginning to end you have to grab their attention.

The reality is you can get away with a lot more in person than you can in a virtual meeting. In an in-person meeting there is enough going on and enough possibilities of interaction that it works. In a virtual meeting you have to pay much more attention to the details. It is show business. The virtual meeting has to be orchestrated and managed so that the seams do not show. Microsoft had a good idea when they planned the meeting. They actually sent each of us a LiveCam so that speakers and audience members could see each other. It was never used.

I think that we will get to the point where we can have meaningful virtual conferences — someday. But they have to have the following characteristics before I will be enthusiastic:

1. Virtual conferences need really good planning and execution. It cannot simply be a disconnected voice with some slides on a shared screen. That is called a conference call.

2. Streaming or live video is wonderful but it needs to have the technology foundation so that it will work no matter what the customer/participant’s environment happens to be.

3. If virtual conferences are to work they have to be conferences.  I don’t think that we have good models for executing virtual conferences that work. They need to be electric, informative, and have interactivity.  Right now the virtual meeting is not a true model. It is simply old execution applied to a new idea.

I think that we will see the emergence of a true virtual conferencing model. I can’t tell you that I can visualize a virtual conference that I would enjoy. Like many analysts, I am not good at passively sitting and watching. I need to be engaged and part of the action. I am not sure how you do this virtually. But I am ready to be surprised and delighted since it would be great not to get on an airplane.

I haven’t been to IBM’s Rational Conference in a couple of years so I was very interested not just to see what IBM had to say about the changing landscape of software development but how the customers attending the conference had changed. I was not disappointed.  While I could write a whole book on the changes happening in software development (but I have enough problems) I thought I would mention some of the aspects of the conference that I found noteworthy.

One. Rational is moving from tools company to a software development platform. Rational has always been a complex organization to understand since it has evolved and changed so much over the years. The organization now seems to have found its focus.

Two. More management, fewer low level developers. In the old day, conferences like this would be dominated by programmers. While there were many developers  in attendance, I found that there were a lot of upper level managers. For example, I sat at lunch with one CIO who was in the process of moving to a sophisticated service oriented architecture. Another person at my table was a manager looking to update his company’s current development platforms. Still another individual was a customer of one of the company’s that IBM had purchased who was looking to understand how to implement new capabilities added since the acquisition.

Three. Rational has changed dramatically through acquisitions. Rational is a tale of acquisitions. Rational Software, the lynch pin of IBM’s software development division, itself was a combination of many acquisitions. Rational, before being bought by IBM in 2002 for $2.1 billion, had acquired an impressive array of companies including Requiste, SQA, Performance Aware, Pure-Atria, and Object Time Ltd.  After a period of absorbtion, IBM started acquiring more assets. BuildForge (build and release management) was purchased in 2006; Watchfire (Web application security vulnerability and compliance testing software) was bought in 2007; and Telelogic (requirements management) was purchased in 2008.

It has taken IBM a while to both absorb all of the acquisitions and then to create a unified architecture so that these software products could share components and interoperate. While IBM is not done, under Danny Sabbah’s leadership (General Manager), Rational made the transition from being a tools company to becoming platform for managing software complexity. It is work in progress.

Four. It’s all about Jazz. Jazz, IBM’s collaboration platform was a major focus of the conference.  Jazz is an architecture intended to integrate data and function.  Jazz’s foundation is the REST architecture and therefore it is well positioned for use in Web 2.0 applications. What is most important is that IBM is bringing all of its Rational technology under this model. Over the next few years, we can expect to see this framework under all of the Rational’s products.

Five. Rational doesn’t stand alone. It is easy to focus on all of the Rational portfolio (which could take a while). But what I found quite interesting was the emphasis on the intersection between the Rational platform and Tivoli’s management services as well as Websphere’s Service Oriented Architecture offerings. Rational also made a point of focusing on the use of collaboration elements provided by the Lotus division.  Cloud computing was also a major focus of discussion at the event. While many customers at the event are evaluating the potential of using various Rational products in the cloud it is early.  The one area that IBM seem to have hit a home run is its Cloud Burst appliance which is intended create and manage virtual images. Rational is also beginning to deliver its testing offerings as cloud based services. One of the most interesting elements of its approach is to use tokens as a licensing model. In other words, customers purchase a set number of tokens or virtual licenses that can be used to purchase services that are not tied to a specific project or product.

I admit that I didn’t read the whole article but then I really didn’t have to. I knew what Marc Benioff, CEO of Salesforce.com was trying to start. I remember many years ago seeing Marc at an industry conference where he proudly announced the end of software.  A nice marketing approach that definitely got everyone’s attention. Of course, at that time Marc was working on a little software as a service enviornment that became Salesforce.com. The rest is history, as we like to say.  Now, Marc is on a new mission to attack maintenance fees. While it is clear that Marc is trying to tweak the traditional software market I think that he is bringing up an interesting subject.

Software maintenance is not a simple topic to cover and I am sure that I could spend hundreds of pages discussing the topic because there are so many angles. Maintenance fees began as a way of ensuring that software companies had the revenue to fund development of new functionality in their software products. It is, of course, possible to buy software, pay once, and never pay the vendor anything else. Those situations exist of course. Ironically, the better designed the software, the less likely it is that customers will need upgrades. But, clearly that circumstance is rare.

There are major changes taking place in the economics of software. Customers are increasingly unhappy with paying huge yearly maintenance fees to software providers. Some of these fees are clearly justified. Software is complex and vendors are often required to continue to upgrade, add new features, and the like. There are other situations where customers are perfectly happy with software as is and only want to fix critical problems and don’t want to pay what they see as exorbitant maintenance fees.

Now, getting back to Marc Benioff’s comments about the end of maintenance. Here is a link from Vinnie Mirchandani’s recent blog on the topic.Marc is making a very important observation. As the world slowly moves to cloud computing for economic reasons there will be a major impact on how companies pay for software. Salesforce.com has indeed proven that companies are willing to trust their sales and customer data to a Software as a Service vendor. These customers are also willing to pay per user or per company yearly fees to rent software. Does this mean that they are no longer paying maintance fees? My answer would be no. It is all about accounting and economics. Clearly, Salesforce.com spends a lot of money adding functionality to its application and someone pays for that. So, what part of that monthly or yearly per user fee is allocated to maintaining the application? Who knows? And I am sure that it is not one of those statistics that Salesforce.com or any other Software as a Service or any Platform as a Service vendor is going to publish. Why? Because these companies don’t think of themselves as traditional software companies. They don’t expect that anyone will ever own a copy of their code.

The bottom line is that software will never be good enough to never need maintenance. Software vendors — whether they sell perpetual licenses or Software as a Service– will continue to charge for maintance. The reality is that the concrete idea of the maintenance fee will evolve over time. Customers will pay it but they probably won’t see it on their bills.  Nevertheless, the impact on traditional software companies will be dramatic over time and a lot of these companies will have to rethink their strategies. Many software companies have become increasingly dependent on maintenance revenue to keep revenue growing.  I think that Marc Benioff has started a conversation that will spark a debate that could have wide ranging implications for the future of not only maintenance but of what we think of as software.

I guess this is one way to start a Monday morning. After IBM decided to pass on Sun, Oracle decided that it would be a great idea. While I have as many questions as answers, here are my top ten thoughts about what this combination will mean to the market:

1. Oracle’s acquisition of Sun definitely shakes up the technology market. Now, Oracle will become a hardware vendor, an operating system supplier, and will own Java.

2. Oracle gets a bigger share of the database market with MySQL. Had IBM purchased Sun, it would have been able to claim market leadership.

3. This move changes the competitive dynamics of the market. There are basically three technology giants: IBM, HP, and Oracle. This acquisition will put a lot of pressure on HP since it partners so closely with Oracle on the database and hardware fronts. It should also lead to more acquisitions by both IBM and HP.

4. The solutions market reigns! Oracle stated in its conference call this morning that the company will now be able to deliver top to bottom integrated solutions to its customers including hardware, packaged applications, operating systems, middleware, storage, database, etc. I feel a mainframe coming on…

5. Oracle could emerge as a cloud computing leader. Sun had accumulated some very good cloud computing/virtualization technologies over the last few years. Sun’s big cloud announcement got lost in the frenzy over the acquisition talks but there were some good ideas there.

6. Java gets  a new owner. It will be interesting to see how Oracle is able to monetize Java. Will Oracle turn Java over to a standards organization? Will it treat it as a business driver? That answer will tell the industry a lot about the future of both Oracle and Java.

7. What happens to all of Sun’s open source software? Back a few years ago, Sun decided that it would open source its entire software stack. What will Oracle do with that business model? What will happen to its biggest open source platform, MySQL? MySQL has a huge following in the open source world. I suspect that Oracle will not make dramatic changes, at least in the short run. Oracle does have open source offerings although they are not the central focus of the company by a long shot. I assume that Oracle will deemphasize MySQL.

8. Solaris is back. Lately, there has been more action around Solaris. IBM annouced support earlier in the year and HP recently announced support services. Now that Solaris has a strong owner it could shake up the dynamics of the operating system world. It could have an impact on the other gorilla not in the room — Microsoft.

9. What are the implications for Microsoft? Oracle and Microsoft have been bitter rivals for decades. This acquisition will only intensify the situation. Will Microsoft look at some big acquisitions in the enterprise market? Will new partnerships emerge? Competition does create strange bedfellows. What will this mean for Cisco, VMWare, and EMC? That is indeed something interesting to ponder.

10. Oracle could look for a services acquisition next. One of the key differences between Oracle and its two key rivals IBM and HP is in the services space. If Oracle is going to be focused on solutions, we might expect to see Oracle look to acquire a services company. Could Oracle be eyeing something like CSC?

I think I probably posed more questions than answers. But, indeed, these are early days. There is no doubt that this will shake up the technology market and will lead to increasing consolidation. In the long run, I think this will be good for customers. Customers do want to stop buying piece parts. Customers do want to buy a more integrated set of offerings. However, I don’t think that any customer wants to go back to the days where a solution approach meant lock-in. It will be important for customers to make sure that what these big players provide is the type of flexibility they have gotten used to in the last decade without so much pain.

As an industry analyst I am always looking at new technology innovations and new approaches that help companies transform their business process. There are some technologies that I have been seeing that are really excellent at adding robustness and sophistication to help companies transform the customer experience. But every once in a while you come across a business process example that makes you stop in your tracks and think about the small business process issues that can undue all the innovation.

Let me give you a real life example that got me thinking about this issue. An individual I knows owns rental property. It is a multi-unit house in the middle of a city. Needless to say, it needed insurance against potential disasters. My friend, being a responsible landlord sent his payment into his insurance provider. In fact, he set up a process with his bank so that his payment would be automatically sent out each month. Things were going great until one day my friend got a check from his insurance provider for “overpayment”. This really puzzled my friend since a process was in place for automatic payment. That process seemed to be working fine.  After numerous calls to the insurance company he finally got to the bottom of this complex business process problem. It seems that the company has a funny way of creating customer account numbers. The first seven digits of the number are the account number; the next two digits are the number of years that the policy has been in place.  My friend has put all nine digits in the account number field in his online payment system. Unfortunately, for my befuddled friend, no where on the insurance company statement did it suggest that those last two digits had nothing to do with the customer account number. So, basically, the payment was rejected because the year field was added. The company simply had not anticipated that anyone would not understand their process.

Now, I am sure that my friend wasn’t the only customer on the planet that thought that all nine digits were the account number. The happy ending is that the insurance was reinstated.

But here is the issue that I started thinking about. I suspect that this company spent a lot of money on its business process strategy, buying technology and tools. And they are pretty proud of their efforts. But it is so easy to get caught up in the broad process issues and forget the small issues like the structure of the customer account number. However, the reality is quite important. Take the example of my friend’s insurance company. If there were a few hundred customers who all made the same mistake it could result in an unanticipated loss of revenue. And in the future, those customers may decide that they really can’t trust their insurance provider and will choose to move to another insurance company.

An account number confusion problem will probably never be noticed by the management team. No one is going to call a meeting to discuss the fact that customers are confused by how we print our account number on our bills. But the reality may be that this small business process mistake made by an innocent programmer somewhere in the world can impact a company in a big way. I guess it isn’t a huge momentus issue in the full spectrum of world economies or technology evolution and it certainly isn’t the most exciting topic. But I think it is worth stepping back and thinking about.

For the last six months or so I have been researching cloud computing. More recently, our team has started writing our next Dummies Book on Cloud Computing. Typically when we start a book we talk to everyone in the ecosystem — vendors big and small and lots of customers.  For example, when we started working on SOA for Dummies almost three years ago we found a lot of customers who could talk about their early experience. Not all of these companies had done things right. They had made lots of mistakes and started over. Many of them didn’t necessarily want their mistakes put into a book but they were willing to talk and share.  As I have mentioned in earlier writings, when we wrote the second edition of SOA for Dummies we had a huge number of customers that we could talk to. A lot of them have made tremendous progress in transforming not just their IT organization but the business as well.

We had a similar experience with Service Management for Dummies which comes out in June. Customers were eager to explain what they had learned about managing their increasingly complex computing and business infrastructures.  But something interesting in happening with the Cloud book. The experience feels very different and I think this is significant.

Our team has been talking to a lot of the vendors — big and small about their products and strategies around the cloud. Some of these vendors focused on some really important problems. Others are simply tacking the word cloud in front of their offerings hoping to get swept up in the excitment. But there is something missing. I think there are two things: there is a lack of clarity about what a cloud really is and what the component parts are. Is it simply Software as a Service? Is it an outsourced infrastructure? Is it storage capacity to supplement existing data centers? Is it a management platform that supports Software as a service? Does cloud require a massive ecosystem of partners? Is it a data center with APIs? Now, I am not going to answer these questions now (I’ll leave some of these to future writings).

What I wanted to talk about was what I see happening with customers.  I see customers being both confused and very wary. In fact, the other day I tried to set up a call with a senior executive from a large financial services company that I have spoken to about other emerging areas. This company always likes to be on the forefront of important technology trends. To my surprise, the executive was not willing to talk about clouds at all.  Other customers are putting their toes in the cloud (pun intended) by using some extra compute cycles from Amazon or by using Software as a Service offerings like SalesForce.com. Some customers are looking to implement a cloud-like capability within their own data center. Could it be there they are afraid that if they don’t offer something like Amazon’s EC2 cloud that they will be put out of business? Just as likely they are worried about the security of their intellectual property and their data.

I predict that the data center is about to go through a radical transformation that will forever change the landscape of corporate computing. Companies have recognized for a long time that data centers are very inefficient. They have tried clustering servers and virtualizing their servers with some level of success.  But the reality is that in time there will be a systematic approach to scalable computing based on the cloud.  It will not be a simple outsourced data center because of the transition to a new generation of software that is component based and service oriented. There is a new generation of service management technologies that makes the management of highly distributed environments much more seamless. The combination of service oriententation, service managment, and cloud will be the future of computing.

The bottom line is that while the vendor community sees dollar signs in this emerging cloud based world, the customers are afraid. The data center management team does not understand what this will mean for their future. If everything is tucked away in a cloud what is my job? Will we still have a data center? I suspect that it will not be that simple. At some point down the line we will actually move to utility computing where computing assets will all be based on a consistent set of standards so that customers will be able to mix and watch the services they need in real time. We clearly are not there yet. Today there will be many data center activities that either cannot or will not be put into a cloud. Internal politics will keep this trend towards clouds moving slowly.

Like everyone else, I have been looking what would happen if IBM were to buy Sun Microsystems. I actually thought it sounded pretty good. IBM would get hardware, some database, virtualization, cloud, and operating system software. Oh, and did I mention that they would control Java. But it sounds (at least as I am writing this) the negociations have broken down. Greed is an interesting phenomenon. Prior to overtures by IBM, Sun’s stock price was around $3.00 a share. IBM was offering as much as $9.50 a share.  I actually thought that price was a bit high — but what do I know.

So, what happens now? I suspect this little drama is far from over. It is possible, if rumors are to be believed that Sun’s Chairman Scott McNealy will take over the reigns of the company once again to try to restore the company to its former glory. It has happened before. Steve Jobs returned to put Apple back on the right path. Michael Dell is trying to turn Dell into the innovator that it had been a decade ago.  Will it happen this time? I think that there are some difficulties with this plan, if it is indeed true. A lot has changed since Sun declared in the 1980s that the network was the computer. Clearly, the company leadership was right. I was an observer of the pragmatic and brilliant marketing company that Sun became in the 1980s, when I worked for its competitor Apollo Computer that was later purchased by HP.

Today, the market is quite different than the market Sun and McNealy had successfully finessed.  Today, the market is consolidating around either very strong global leaders such as IBM, HP, Microsoft, Oracle, Cisco, etc. There is a new generation of leaders emerging that had their start in the Internet era such as Google, Amazon, and Facebook and even Twitter. So, is there room for Sun to remake itself in this new world?

I guess that my take is that it will be very hard for Sun to resurface and remake itself. Here are the three main reasons that I have doubts and why I think that shareholders and board members should sell the company to IBM.

1. Sun Microsystems will have trouble regaining hardware leadership.  While it has some reasonable hardware assets, it is not big enough to take on HP or the emergence of Cisco as a hardware players.  Even companies like Google and Amazon play an important role in hardware — in the commodity relm.

2. While it owns some impressive software assets that it has bought over the past decade, Sun has never learned to leverage these assets to propel it into a leadership role.  It has further confused the market by opening sourcing its software. While this might be popular in a down market, it is not enough to create a repeatable revenue stream. I was watching a funny video of Steve Gilmore interviewing current CEO Jonathan Swartz (as a puppet) that I think captures part of Sun’s problems.

3. Is there a single area of technology where Sun can innovate and out shine its competitors? I imagine there might be some hidden jewels that are transformational and will turn the market upside down inside Sun — but I doubt it. I think that as Cloud Computing moves to center stage, Sun could be a player but not a leader. To be successful, Sun will have to find a way to lead in some area.

The bottom line is that I do not see a good future for Sun as an independent company.  I think that the damage has been done. Not only does the company have to regain shaky customer confidence but it quickly has to start making a profit. It is not an easy climate even for the strongest companies.  While it is possible that McNealy will surprise us all and turn Sun from a struggling player in a consolidating market to a leader but it is probably too late.  Customers who are watching this drama unfold will have to be convinced that Sun has staying power — not just for this year for future decades. If Sun tries to maintain independent, I predict a long and difficult path that will not necessarily end in success.

Many years ago I heard a story about how AT&T redesigned the phone network in the 1950s. It doesn’t really matter if it is true or not but it holds a valuable lesson. The story goes like this. In order for AT&T to take its telephony technology to the next level, it had to break the old model and start fresh. Management called all of its key engineers into a meeting and told them that the existing network had been destroyed and they had to start from scratch and design a new network.  And that is precisely what they did. They came up with a new design that was not burdened by the past.

What does this have to do with the world we are living in right now? I think that businesses have a unique opportunity to use this economic downturn to rethink the world.  What would we do if we could start over and reinvent the way we run a business or work with customers or design products that are more modular, more creative, and more accessible? What if the products and services we offer were blown up and we could start over?

I actually think that this may be happening behind the scenes. The really smart companies are using a time of crisis and uncertainty to prepare for the future. There will be a time in the future when customers will be more willing to buy products and services. There may be fewer providers in the world. The companies that survive and thrive are the ones that accept the chaos of the current business environment and see the hidden opportunities.

There is some very good thinking going on in companies that are blowing up their old models and thinking creatively. These companies will be the ones that become the powerful players in their markets in the future.  Who will the losers be? They are the companies that are filled with panic and looking for who to blame. So, whether you are in the technology market or in manufacturing or something completely different, it is a time to think about innovation and reinvention. It is time to rethink processes. Great companies are a combination of great flexible products and great innovative processes.

There are five things that future leaders should do:

1. Investigate your customers pain. What is it that they want that they can’t do. Even if their needs sound unsolvable, it may offer opportunities

2. Leverage emerging technologies. Leverage technology that lets your company explore its information about customers, product requirements, unsolved problems, and opportunities. This means that you need to stop looking in the rearview mirror at the past. Look at information in a way that allows you to anticipate the future and what is possible.

3. Don’t be held back by current reality. Clearly, you depend on revenue from existing products to stay afloat. However, think about your intellectual property in completely new ways.

4. Listen. I am finding that in this tough market people are doing more talking than listening. It is better to listen.

5. Experiment and fail. The only way to innovate is to try new things and fail. More innovation comes from failures than from initial success.

Every year HP holds an industry analyst summit that includes everything but PCs and printers. While in the past HP has made quite a tidy profit with ink times are changing. The PC industry is also moving into a new era where margins are shrinking as well. So, increasingly, HP is looking to its server business, its software, and its services businesses to keep the company moving forward.  Having just spent two days at this meeting, I would love to say that I could encapsulate everything that I heard — and didn’t hear. You simply can’t be everywhere at once. So, instead, I will give you some of my observations on where HP is at this point in time.

I think that HP is at a crossroads. Today it is the largest technology company. This is a wonderful opportunity because size gives customers comfort. You don’t have to worry that a $100 billion plus company will wither away. On the other hand, it provides a challenge. When you are this big, you have to act big and bold. You have to set a leadership agenda that the market and the customers take note of.

I wish I had the time to tell you all of my observations but instead I will try to encapsulate my observations and conclusions in ten key points. If I miss something, you will have to forgive me. So, I’ll start by mentioning seven different points worth mentioning. I’ll then conclude with some general observations.

Point Number One.  Be Top Dog in Selected Markets. HP’s overall strategy remains consistent: it’s objective is to be either number 1 or 2 in each product category it participates in.  While HP has made some strides in achieving this lofty goal, it is still a work in process. For example, HP has achieved leadership in hardware — both in PCs, servers, and storage.  In fact, the company is doing a very good job in the blade market (that’s all I’ll say about hardware since I didn’t have time attend those sessions).  In services, HP’s bold move to buy EDS is a work in progress. EDS is obviously a big player in the services market — especially data center and process outsourcing.   The question is how well HP will transition EDS from a standalone company to become a part of HP.  Software, which I’ll discuss in more detail later, has the potential to be big but still has a way to go before becoming the number 1 or 2 player.
Point Number 2. EDS is larger than HP’s printer business. With EDS as part of the portfolio, the amount of revenue from printers and ink has started to diminish. In fact, HP executives proudly announced that EDS is as large as  HP’s printer revenue. Not only did EDS give HP a boost in overall revenue but it has been able to bring new customers into the HP fold.  It will be interesting to watch how EDS evolves under the HP umbrella.  Initially after the acquisition, EDS was positioned as an HP company. That will be changing this year as HP moves to integrate EDS into HP.  HP describes EDS’s value as owning the run time environment. In other words, outsourcing.  EDS will be charged with outsourcing infrastructure, process, and applications.  HP has taken its traditional consulting services business and aligned it with its software business. The combination of EDS and the strengthening of the consulting business will help HP gain credibility with customers.
Number 3. Procurve chases Cisco in network management. While HP has been in the networking business for decades, it has been a well kept secret. Because of HP’s tight partnership with Cisco, HP has been wary of appearing to compete. However, it appears that HP is now willing to take on Cisco in the networking switching arena. It should be interesting to watch as  Cisco takes on HP in the server business.

Number 4. The software business is (still) important. HP has long had a love/hate relationship with software. HP has selected management and automation to focus its software business. Therefore, it has proclaimed that it wants to be number one in data center automation, functional testing, service and software for ITSM (Information Technology Service Management).  HP has also made a commitment to what it calls information management and business intelligence (records management, backup, etc. and NeoView — data warehousing . The Knightsbridge consulting organization has been melded into this group, adding a lot of implementation knowledge. Service Oriented Architecture is included in the software group primarily with a strong focus on governance, risk, and compliance. HP has evolved its OpenView platform into a business service management business that it calls Business Technology Optimization. Within this framework is all of the management technology ranging from service optimization to network management. The integration of the Opsware technology into the fold has been complicated but it appears to be coming together as part of the overall data center management and cloud initiatives

Number 5. HP does the cloud. Like all the other vendors in the market, HP wants to be a big cloud player. HP defines the cloud as the next evolution of the Internet in which everything will be delivered as a service from basic compute services to power and business process. HP considers its Opsware acquisition from last year as the credential it needs to claim leadership in the cloud.  HP has a broad definition of the cloud and plans to approach cloud services from a broad perspective. It’s strategy is still evolving as we speak. The nacent management team seems to be smart and ready to move. But it is still early days.    Like other major vendors, HP would like to be the arms merchant to vendors who will resell cloud services to end customers. Clearly, the cloud strategy is a work in progress. But HP is thinking about the right issues as it makes its way into this important emerging area. HP’s intent is to leverage its software assets to create a common framework for its cloud strategy. HP anticipates that it can leverage EDS’s expertise to gain a cloud framework that it can leverage with customers.

Number 6. HP expands Software as a Service. When HP acquired Mercury it also picked up a growing SaaS business. The company is planning to continue to focus on this arena both in the enterprise market and the SMB market. SaaS offerings will continue to focus both on the testing and the remote monitoring markets. Most of these services are focused on the upper end of the SMB market.  Just today, HP announced what it called Cloud Assure, a SaaS offering intended to help SBMs prepare to adopt the cloud. It provides services that scan and validate the performance and security of applications.

So, what’s next?

As I have indicated, HP is a complicated, multi-dimensional company. On one hand, it has been able to innovate over the years, sometimes well ahead of the market. I remember spending days with HP in the early 1990s talking about a future where a customer could get computing capacity on demand. But over time HP has become a much bigger company with a large and complex portfolio of offerings.  At the same time, HP is very focused on being a provider of IT services, hardware, and software.  It has no desire to be a business management or a business consulting organization.  While HP  is most  comfortable in the hardware arena,  it is making important strides in this part of the business.  It is finally pushing its networking business and taking on Cisco directly.  The data center business seems to be well positioned to appeal to the IT operations management group that has been its traditional constituency.  The software business, on the other hand, is still at a transition point. While HP has done extremely well with its performance management and testing business, it has had a hard time creating an overall software portfolio. Opsware is clearly being used to provide the foundation for cloud computing but it will take some more time and cycles for this platform emerges as a power.

I think the most important acquistion that HP has done is really EDS because it brings in a new set of customers who would have never considered HP in the past. EDS also brings in a wealth of home grown enterprise software technologies, frameworks, and best practices that will help mature HP’s software portfolio. In my view, there will be more aquisitions to come for HP. I suspect that most will be in software and will have to fill the gaps in data management and security. HP is still learning to be comfortable in its skin as the biggest IT company in the market. It will have to work hard to maintain that position by executing big and buying big.

Having just completed Service Management for Dummies (scheduled to be in the book stores in June), I have taken a step back to think about what I learned from the process. When our team first started the research process a lot of people I talked to wanted to know if we were writing a book about ITIL 3.0 best practices. So, the answer is of course we covered ITIL 3.0 best practices. However, as part of our research and indepth discussions with customers it became apparent that there is something bigger happening here that transcends IT.  I am not sure that this issue has been noticed out there in the world of management of services but it is real and encouraging.  Corporate management is beginning to notice that much of their physical infrastructure and the components that are the essence of their corporate existence are technology enabled.  The X-ray that used to be stored on a piece of film and stored in a file cabinet is now digitized. The automobile is now managed by sensors and other computers. Security of physical buildings is computerized. The factory floor is a complex system. Of course, I could go on for months with lists that include RFID and the like. But I think I have made the point that increasingly everything must be thought of as a system, not just the servers and desktops and networks that sit in the data center.

In my view, this is why the service management arena is getting to be so exciting. Many of the CIOs that our team interviewed for Service Management for Dummies echoed this level of excitement.  These executives are finding that applying service management principles to both the physical and IT world is transformational. It means that organizations can have a greater ability to take a holistic approach to managing their companies from a holistic perspective.

In the book, our team uses the example of the ATM machine to make the point. The ATM is a relatively simple automated device that requires a matching of a customer number with an ID code. It requires that a request for cash from the consumer be matched with the availability of funds from that bank or one of its partner’s banks. It requires the ability to do the accounting to provide the customer with a receipt that states how much money was withdrawn and how much is left in the account.  And there is more! Behind that customer action that might take all of 5 seconds is a huge infrastructure: a data center, a security infrastructure, a sensor that detects of the machine itself is experiencing a problem. There is a network of trucks managed by a third party company that ensures that the trucks deliver cash to replenish the ATM machine. There are even more parts to this world that I am not mentioning — so forgive me. But what is most interesting is that all of these mini-ecosystems are intertwined. What if the bank’s management decides to save money by selecting a new cash delivery network. This company promises great service at a fraction of the cost. To save money the bank goes with the new service only to discover that its drivers are unreliable and cash is often not delivered in a timely manner.  Even if the ATM networks works well, the data center is flawless, and the security is solid, the bank is not able to deliver satisfaction to its customers because there is no cash.

The bottom line is that service management is becoming a corporate issue — not just an IT issue. The secret to service management is about the customer, partner, supplier, and employee experience. Like every other technology transformation over the past couple of decades, mature technology initiatives become management initiatives. Increasingly, service management is being tied to the key performance indicators of the business. Therefore, it is imperative that IT management understand the goals of corporate management as well as the needs of internal and external customers.

It has been only a few weeks since Ann Thomas Manes wrote her blog stating that SOA is dead.  Since then there has been a lot of chatter about whether this is indeed true and if SOA vendors should find a new line of work.  So, I thought I would add my two cents to the conversation.

Let me start by saying, I told you so.  Last year I wrote in a blog that we would know when SOA had become mainstream when the enormous hype cycle ended. Alas that has happened. What does this mean? Let’s keep this in perspective. Every technology that comes along and generates a lot of hype follows this same pattern. Why? I’ll make it simple. The hype machine is powerful. It goes like this. There is a new technology trend with thousands of new companies on the scene.  All of them vie for dominance and a strong position on someone’s magic universe.  They are able to gain attention in the market. Then the market takes on its own momentum.  The technology moves from being a set of products focused on solving a business problem to the solution to any problem.  We saw this with object orientation, open systems, and Enterprise Applications Integration – to name but a few.  Smart entrepreneurs, sensing opportunity, stormed onto the market, promising huge promises of salvation for IT. Now, if I wanted to write a book I think I could come up with 100 different scenarios to prove my point but I will spare you the pain since the outcome is always the same.
So, what happens when each of these technology approaches moves from hype heaven to the dead zone? In some cases, the technology actually goes away because it simply doesn’t work – despite all of the hype.  But in many situations an interesting thing happens – the technology evolves into something mainstream. It gets incorporated and sometimes buried into emerging products and implementation plans of companies. It becomes mainstream.  I’ll just give you a few examples to support this premise:
•    Remember open systems? In the early 1990s it was the biggest trend around. There were thousands of products that were released onto the market. There were hundreds of companies that renamed themselves open something or other.  So, what happened? Open became mainstream and the idea of designing proprietary technologies without open interfaces and standards support became unpopular. No one creates a magic quadrant based on open systems but I don’t know many companies who can ignore standards and survive.

•    Object orientation was as big a rage as open systems – maybe even bigger. There were conferences, publications, magic quandrants and lots and lots of products ranging from operating systems to databases to development environments.  It was a hot, hot market.  What happened? The idea of creating modular components that could be reused turned out to be a great idea. But the original purity and concepts needed to evolve into something more pragmatic and in fact they did.  The concepts of object orientation changed the nature of how developers created software.  It moved from the idea of creating small granular pieces of code that could be used in lots of different ways to larger grain pieces of code that could create composites.  Object orientation is the foundation that most modern software sits on top of.

•    Enterprise Applications Integration probably had even more companies than either open systems or object orientation combined.  The idea that a company could buy technology that would allow their packaged software elements to talk to each other and pass data was revolutionary at the time.  This trend was focused on providing packaged solutions to a nasty problem. If vendors could find a way to provide solutions that allowed customers to avoid resorting to massive coding, it would result in a big market opportunity. Vendors in this market promised to provide solutions that allowed the general ledger module to send data to and from the sales force application. What happened? There were hundreds of vendors telling into this market.  However, it was a stopping off point.  There are newer products that do a better job of integration based on a service oriented approach to integration and data management.  In addition, this market evolved into technologies such as Enterprise Service Buses that did a better job of abstraction. There are plenty of Enterprise Application Integration technologies out there but they have emerged as a part of a loosely coupled environment where components are designed to send messages between them.
Now, I could go on for a long time with plenty more examples. But I think I have made my point. Technology innovation just works this way. The products that took the market by storm one year become stale the next. But the lessons learned and the innovation does not die. These lessons are used by a new generation of smart technologists to support the new generation of products.
So, Virginia, Service Oriented Architectures will do the same thing.  But it is also a little different.  It is not the same as a lot of other technology shiny toys because so much of SOA is actually about business practices – not technology.  Sure when SOA started out a few years ago it was about specific products – hundreds of them. These products were eagerly adopted by developers who used them to created service interfaces and business services.
Today, business leaders are taking charge of their SOA initiatives. The innovative business leaders are using business focused templates to move more quickly. They are creating business services – code plus process. They are creating business services such as Order-to-Cash services that in the long run will be mandated as the way everyone across the company will implement a process according to corporate practices.  Some of these companies would like to rid themselves of huge, complicated and expensive packaged software and replace them with these business services.
Today these products are becoming part of the fabric of the companies that use them. They are enablers of consistent and vetted business processes. They are the foundation of establishing good governance so that everyone in the organization uses a consistent set of rules, data, and processes. This is not glamorous.  It is hard work that starts from a business planning cycle.  It is the type of hard work where teams of technologist and business leaders determine what is the best way to satisfy the company’s need to implement order to cash processes across business units.
And yes, Virginia SOA is not stagnant.  It is evolving because it offers business value to companies.  There are new initiatives and new architectural principles that have value within this service orientation approach.  There are architectures such as REST that helps make interaction within a business services approach more interactive.  There are emerging standards that enable companies using SOA to be able to exchange information without massive coding. There are information services and security services evolving for the same reason. There are new approaches to make SOA environments more manageable based on the emerging idea that, in fact, everything we do with the world is a service of some type that needs to work with other services.  The physical and virtual words are starting to blend – which makes service orientation even more important.
Maybe ten years from now, we won’t use the word Service Oriented Architecture because it won’t be seen as a market segment or a quadrant – it will be just the way things are done.  So, stop worrying about whether SOA is alive, dead, or comatose – I have. So, relax Virginia, and get back to work!

I went to Progress Software’s  industry/financial analyst meeting this week.  I have known Progress Software since the 1990s as it migrated from the 4GL database development market to client/server and then to SOA and Software as a Service.  Unlike some of its peers in the 4GL space, Progress has managed to change with the times and evolve.  What I like about Progress is that it had the ability to move to new generations of software.  In addition, Progress had the good fortune of moving early into the OEM business. It has a large base of packaged software vendors that use its OpenEdge application development and database as part of their solutions.  This solid business provides a good cash flow to support the business. In fact, OpenEdge represents almost about 60% of the company’s revenue. Since it is a mature product, it provides nice cash flow for the company.

Now, I didn’t intend to write an entire report on Progress and its financial performance, although it would be a fascinating exercise. What I wanted to talk about is the issue of what makes a great software company.  I think that Progress is a good software company.  They do a lot of  things right.  What do they do well? Well, here is my list:

1. They have a great OEM base that embeds its technology into packaged software and therefore provides a predictable revenue stream.

2. Progress has used its cash wisely to purchase complementary software companies that already had a good revenue stream in secure markets.

3. The company has a good and predictable process for integrating acquisitions into the company while keeping the revenue stream growing.

4. Progress knows how to sell its newly acquired products to the installed base.

All of this is good. In the end, Progress has established itself as a good software company with predictable revenue that has been growing at a steady pace over the years. Today has revenues of around $540 million with more than $100 million in cash.

But is Progress a great software company? It is interesting to think about what might have been. Progress at this year’s meeting stated that it was going to start providing solutions to its customers. Good idea, in fact this is the trend among many software companies (I have always like solutions more than tools).  And Progress has a handful of offerings for the financial industry based primarily on its Complex Event Processing engine (Apama).  But here is an interesting observation. Progress has many successful ISV/OEM partners that sell solutions in various markets.  During the meeting management mentioned that some of these partners have bought other partners that also leverage Progress’s software (Sonic ESB, appserver, OpenEdge, etc.).  Now, I was just thinking, what would have happened if Progress had started buying some vertical solutions software companies that had been built on their technology? Could they have become that elusive $1 billion software company?

So, what do I think makes a great software company rather than a good one?  Here are my top five recommendations:

1. Great companies start with a predictable business model and turn the model upside down. They look three years ahead and experiment with innovation. They have to have a combination of intuition, risk, and innovation. These companies are willing to take enough risk to win big but smart enough to know the difference between great opportunities and pipe dreams.

2. Great companies find new areas to position themselves for leadership. This is very tough to pull off. The area has to be important enough for the market to pay attention to but not too big that they look silly.  Great companies never try to take a big existing market with established leaders and try to claim primacy.

3. Great companies build great relationships. Management at these companies builds an ecosystem of influencers including great customers who will talk about the value, press, analysts, and partners who together help the company create a persona of innovation and greatness while the company is still building.

Great software companies are complicated to build.   The software business a complicated and brutal with  lots of failures at every turn.  It is therefore proper to admire what Progress Software has done in building a sustainable business model. It isn’t easy. Great software companies are even more difficult and scary to build.

I continue to spend a lot of time thinking and researching REST — REpresentational State Transfer. Yes, REST is a set of architectural guidelines introduced by Roy Fielding in his dissertation where he defined HTTP. While I couldn’t find a link to Fielding’s disseration, I did find a very good blog entry written by Fielding.

Given its origins, REST follows the philosophy of HTTP. In other words, you give everything an ID, you link these services or components together though some standards methods.  These services communicate in a stateless manner.  In addition, these resources can be used in many different contexts.  What is very important about rest is this idea of linking resources based on self-describing interaction where there is no state between requests. Therefore, from a customer perspective it offers the fast, effective model for development that is fundamental to being able to make organizations more fluid and effective.

As part of my research, I had an interesting conversation with Martin Nally,  IBM Rational’s CTO  about REST, its value and its relationship to SOA. From his perspective, REST looks like a data set that is exposed with Internet protocols.  And if you look at the way REST is described in terms of GET, PUT, POST, and DELETE.  In Nally view, REST provides “a simple style of using HTTP if you can look at your problem set as a web of interconnected hyperlinked resources.”  I thought that Nally put it very well, “In the old days we would create a data model with a representation of department, employee, etc. to create the data in a database. Then we would write two styles of applications: one that was basically to conduct simple data based operations (Create, Read, Update, Delete) and a second to type of application that would apply that information to business process — how do you rate a customer’s credit worthiness?”  In other words, it is necessary to intermix web based services that are stateless and can link data together across a distributed computing environment combined with well defined business services that encapsulate business rules and process. In the operational environment based on business services — based on a Service Oriented Architecture — there are many resources provided based on components that require a lot more structuring of process and more overall governance.  For many types of implementations, there needs to be the foundation of technology concepts such as a registry/repository for both management and governance.  There needs to be a transport mechanism for guarenteed transactions.

I think that we need to look at both two world views — REST to support the web, data oriented linkage style with the structured world of  a services and process based approach.  Let’s leave the religious wars to someone else and recognize that there is room in our complicated software world for both.

I never really thought about this question until about a month ago when I got a strange phone call from a a collection agency wanting to know when I pay my bill to a major network services provider.  Naturally, my answer was I don’t do business with that company and I don’t owe anyone any money.  My new friend persisted. Aren’t you Judith Hurwitz — yes, I replied, I am guilty as charged. Then she wanted to confirm that I was indeed the CEO of a company called Changepond Technologies.  Now this was when I stopped pleading guilty. No, I answered, I haven’t even heard of a company called Changepond and I am therefore, not their CEO.

Now, how would this my friend assume that I would be president of a company I never heard of?  She did what we all do; she did a google search and on one of the “social networking sites” called Spoke, it lists me as the CEO of Changepond.  Imagine my surprise (especially since I never got a salary).

Judith Hurwitz’s Professional Profile

Judith Hurwitz This is me President & CEO Changepond Technologies 233 Needham Street Newton, Ma 4037

Send E-mail Get More Info Has this info changed? Claim your page.

Tags:

It seems like just the other day that our team was busily finishing the first edition of SOA for Dummies. But it was two years ago since that book came out. A lot has change in that time. When we first wrote the book, we heard from lots of people that they really didn’t know what SOA was and were happy to have a book that would explain it to them in easy to understand language.

Because so much has changed, we were asked to write a second edition of SOA for Dummies which is coming out on December 19th.    What has changed in those two years?  Well, first of all, there have been a lot more implementations of SOA. In fact, in that edition, we were happy to have gotten 7 case studies.  Many of the customers that we talked (both that were featured in the book and those who took the time to speak with us without attribution) were just getting started. They were forming centers of excellence. They were beginning to form partnerships between the business and technical sides of their companies. They were implementing a service bus or were building their first sets of services.

In this second edition, we were fortunate to find 24 companies across 9 different verticals willing and able to talk on the record about their experiences implementing SOA.  What did we learn? While there is a lot I could say, I’d like to net it out to 5 things we learned:

1. Successful companies have spent the time starting with the both the key business services and business process before even thinking about implementation.

2. Companies have learned a lot since their initial pilots. They are now focused on how they can increase revenue for their companies through innovation using a service oriented approach.

3. Many companies have a strategic roadmap that they are focused on and therefore are implementing a plan in an incremental fashion.

4. A few companies are creating business services extracted from aging applications. Once this is done, they are mandating the use of these services across the company.

5. Companies that have been working on SOA for the last few years have learned to create modular business services that can have multiple uses. This was much harder than it appeared at first.

There are many other best practices and lessons learned in the case studies.  It is interesting to note just as many companies that said yes also were not able to participate because management felt that they didn’t want competitors to know what they were doing.

The bottom line is that SOA is beginning to mature. Companies are not just focused on backbone services such as service buses but on making their SOA services reach out to consumers and their business partners.

We have also added a bunch of new chapters to the book. For example, we have new chapters on SOA service management; SOA software development, software quality, component applications, and collaboration within the business process lifecycle.  Of course, we have updated all existing chapters based on the changes we have seen over the last few years.

We are very excited that we had the opportunity to update the book and look forward to continuing the dialog.

I have been thinking about the software industry and what is going to happen to companies in this really lousy economy. There will clearly be companies that don’t weather the storm — either because their venture capital backers get nervous or because their customers do.  But, as in every downturn, there will be companies that figure out how to do the right thing and actually thrive. There will also be companies that simply have a business model for another time and will not make it.  So, I thought that I would put together a list of the characteristics of the software companies that will fail:

1. My technology is so revolutionary everyone will want it. I see too many companies that don’t actually know what problems their technology solves for customers. If it doesn’t solve pain — don’t bother.
2. The platform we offer to our customers is a complete architecture and we’re going to build an ecosystem. Software companies that think they can offer a complete platform to customers — even if they have only a few dollars in revenue.  This isn’t the time to try to do it all. Anyone, no one will believe you. Pick something you do well and stick to it!
3. We don’t plan to try to partner with the big players; it’s too hard. In tough economic times, customers want to know that there is someone big and powerful behind the scenes…just in case.
4. We’d love to partner with a large vendor if they are willing to put our product on their price list and sell for us. Keep dreaming. Big vendors will partner but only if there is something in it for them. If you can fill a hole in their product line you have a good chance but you have to be realistic.
5. We sell a great tool. Everyone needs tools but they are commodities. So, unless a software company has a deep channel, this plan won’t work.  I have seen too many really nice tools companies go out of business. It takes a lot of energy to make one sale to a customer. If the return on the sales effort is only $199.00, it will takes a long time to get to a million.  And in tough economic times, customers will put a software company throught the same due diligence process for a $200 item as they would for a $20,000. Everyone is afraid to make a decision.
6. Our technology sells itself. Just a few months ago companies were talking about how they wanted technology that would foster innovation. Now that desire hasn’t changed and probably won’t. However, customers want to know that they can get a fast return on investment.  Therefore, successful vendors are structuring their offerings in a modular way so that customers can quickly prove value.
7. We sell an entire turnkey environment. The days of big all encompassing implementations are over — at least for now.  Customers need to be able to implement just what they can afford or get budget for. If it is successful, they want to be able to add the next chunk…next year.
8. We are implementing precisely what our customers tell us they need. I know that it is important to listen to customers. However, there are important lessons to remember. Customers do not always say what they mean. They don’t always know what they want. They might be asking a software company to add functions that are specific to the way their company operates and may not be wise for the market overall. So, to avoid failure, listen but make sure that you are not walking into a trap. Look beyond fear and to what will make your buyer successful in their jobs.
9. We are thinking about Software as a Service (SaaS)…but… In scary times, it is easier to stay with what you know and not make waves. But customers will buy SaaS offerings because there is no capital expenditure needed. If you don’t know how to do this, partner with someone who does. It is going to become the normal way that many software offerings are provided now and even more so in the future.
10. We are limiting our outreach in the market. It is too expensive to advertise or market. We’re going to wait until things get better. While these are scary times it is not wise to hide.  While companies are hiding smart software companies are out there doing a lot of low cost but very effective marketing initiatives. It takes some hard work, but prospects will notice because everyone else is really quiet

There is no doubt that there is lots of uncertainty out there. There will be a lot of companies who don’t know how to position, price, and partner. There will be lots of companies that simply don’t know how to prove to prospects that they are worth betting on.  I suspect that the companies that survive will be the ones with great business models, interesting and accessible innovation and a lack of fear.

So, who could argue that we need a smarter planet. I certainly couldn’t. I am at an IBM software analyst meeting. I have been attending this meeting for many years. The focus, as you might imagine is on the software strategy. But  there was something this time that I think is worth talking about.  Rather than providing us analysts with a laundry list of products and go to market strategies (yes, they did some of that too), the focus this year is around vertical solutions and markets.  But more than that, there is an overarching theme that is about to become the major theme that will envelope IBM over the coming years – Smarter Planet.  This initiative is driven by Sam Palmisano not just with his operational good sense, but his ability to provide vision for the company.
In his address to the Council of Foreign Relations in New York City on November 6, 2008, Palmisano proclaimed that the next challenge as our world gets more interconnected, hotter, and challenged for growth we need to leverage a new approach to innovation that is smarter.
This approach according to Palmisano, “This isn’t just a metaphor. I mean infusing intelligence into the way the world literally works – the systems and processes that enable physical goods to be developed, manufactured, bought and sold…services to be delivered…everything from people and money to oil, water, and electronics to move…and billions of people to work and live.”
Good thinking but what does this mean from a technology lens? It is clear that we have an overabundance of technology. What we lack right now is the right way to leverage technology to truly focus on customer benefit from both an agility perspective (being able to change quickly and without too much pain) and the ability to support an increasingly connected world.  It is interesting to think about looking at the world this way.

If you think about it, the world is, in fact, a system. To make the concept even further, the world can be viewed as a biological system. The human body itself is an interconnected set of sensors, actions that trigger other actions. The body interacts with other humans, with the physical world as well as the virtual world. We take actions based on the information we are given or intuit from our experiences.
IBM is trying to tap into one of the most important transitions in our world today. And they are not shy about focusing these transformations to their products and services (it is a commercial world, after all).
Here’s a quick view of this idea of the Smarter Planet.  If we look at the idea of a Smarter Planet, it starts with the idea that everything is an asset that takes inputs processes them and produces outcomes.  Therefore, we can look at this from Smarter Planet from five different perspectives:
•    Innovation can transform companies, countries, and governments to lower costs and increase revenue
•    Intelligence that provides an ability to learn from the vast amounts of information in the world (I call this anticipation management). In essence, this means managing information, predicting outcomes, leveraging information across partners, suppliers, and customers
•    Optimizing, managing, and changing based on the customer experience. Organizations no matter how big or small are looking for ways to transform themselves so they are ready for whatever happens.  Companies that focused on this type of change are better able to weather very tough and complicated times.
•    Greening of business. You can’t talk about the planet without thinking about the impact of green on everything we do. This includes everything from saving cash by better usage of energy to protecting the climate.
•    Leveraging smart people.  I think that people makes or breaks this noble goal. Leveraging all these innovative approaches to doing things smarter and more responsibly typically fail if people don’t work together as effective teams.  Politics can kill innovation more quickly than anything else.

Now begin to take this concept out of the general view and apply it to specific industries, their problems, and opportunities. That is precisely what makes the idea of the Smarter Planet intriguing.  For example, manufacturing itself is being transformed as we speak.  Manufacturing has been transformed by technology with sensors and actuators so that the information produced is helping smart companies better control the manufacturing process both in terms of innovation, efficiency, and energy conservation.  In retail, companies are leveraging new processes and technology to leapfrog the competition. If a retailer can optimize the way they change inventory based on an early understanding of changing buying habits of customers they can become a leader.

I think it is important that IBM is talking about this idea now.  This idea of a Smarter Planet is really tailor made for a time when the natural inclination is to hide until things get better.  There is no question that we are in very challenging time.  It isn’t the first time that we have found ourselves in this position and it certainly won’t be the last.  But in my experience, the companies that take action when everyone else is hiding under the bed to innovate, change, and learn will win.  When the world comes back, these companies will be way ahead and everyone else will be playing catchup.

What a difference a year makes. The past year was filled with a lot of interesting innovations and market shifts. For example, Software as a Service went from being something for small companies or departments within large ones to a mainstream option.  Real customers are beginning to solve real business problems with service oriented architecture.  The latest hype is around Cloud Computing – afterall, the software industry seems to need hype to survive. As we look forward into 2009, it is going to be a very different and difficult year but one that will be full of some surprising twists and turns.  Here are my top predictions for the coming year.
One. Software as a Service (SaaS) goes mainstream. It isn’t just for small companies anymore. While this has been happening slowly and steadily, it is rapidly becoming mainstream because with the dramatic cuts in capital budgets companies are going to fulfill their needs with SaaS.  While companies like SalesForce.com have been the successful pioneers, the big guys (like IBM, Oracle, Microsoft, and HP) are going to make a major push for dominance and strong partner ecosystems.
Two. Tough economic times favor the big and stable technology companies. Yes, these companies will trim expenses and cut back like everyone else. However, customers will be less willing to bet the farm on emerging startups with cool technology. The only way emerging companies will survive is to do what I call “follow the pain”. In other words, come up with compelling technology that solves really tough problems that others can’t do. They need to fill the white space that the big vendors have not filled yet. The best option for emerging companies is to use this time when people will be hiding under their beds to get aggressive and show value to customers and prospects. It is best to shout when everyone else is quiet. You will be heard!
Three.  The Service Oriented Architecture market enters the post hype phase. This is actually good news. We have had in-depth discussions with almost 30 companies for the second edition of SOA for Dummies (coming out December 19th). They are all finding business benefit from the transition. They are all view SOA as a journey – not a project.  So, there will be less noise in the market but more good work getting done.
Four. Service Management gets hot. This has long been an important area whether companies were looking at automating data centers or managing process tied to business metrics.  So, what is different? Companies are starting to seriously plan a service management strategy tied both to customer experience and satisfaction. They are tying this objective to their physical assets, their IT environment, and their business process across the company. There will be vendor consolidation and a lot of innovation in this area.
Five. The desktop takes a beating in a tough economy. When times get tough companies look for ways to cut back and I expect that the desktop will be an area where companies will delay replacement of existing PCs. They will make do with what they have or they will expand their virtualization implementation.
Six. The Cloud grows more serious. Cloud computing has actually been around since early time sharing days if we are to be honest with each other.  However, there is a difference is the emerging technologies like multi-tenancy that make this approach to shared resources different. Just as companies are moving to SaaS because of economic reasons, companies will move to Clouds with the same goal – decreasing capital expenditures.  Companies will start to have to gain an understanding of the impact of trusting a third party provider. Performance, scalability, predictability, and security are not guaranteed just because some company offers a cloud. Service management of the cloud will become a key success factors. And there will be plenty of problems to go around next year.
Seven. There will be tech companies that fail in 2009. Not all companies will make it through this financial crisis.  Even large companies with cash will be potentially on the failure list.  I predict that Sun Microsystems, for example, will fail to remain intact.  I expect that company will be broken apart.  It could be that the hardware assets could be sold to its partner Fujitsu while pieces of software could be sold off as well.  It is hard to see how a company without a well-crafted software strategy and execution model can remain financially viable. Similarly, companies without a focus on the consumer market will have a tough time in the coming year.
Eight. Open Source will soar in this tight market. Open Source companies are in a good position in this type of market—with a caveat.  There is a danger for customers to simply adopt an open source solution unless there is a strong commercial support structure behind it. Companies that offer commercial open source will emerge as strong players.
Nine.  Software goes vertical. I am not talking about packaged software. I anticipate that more and more companies will begin to package everything based on a solutions focus. Even middleware, data management, security, and process management will be packaged so that customers will spend less time building and more time configuring. This will have an impact in the next decade on the way systems integrators will make (or not make) money.
Ten. Appliances become a software platform of choice for customers. Hardware appliances have been around for a number of years and are growing in acceptance and capability.  This trend will accelerate in the coming year.  The most common solutions used with appliances include security, storage, and data warehousing. The appliance platform will expand dramatically this coming year.  More software solutions will be sold with prepackaged solutions to make the acceptance rate for complex enterprise software easier.

Eleven. Companies will spend money on anticipation management. Companies must be able to use their information resources to understand where things are going. Being able to anticipate trends and customer needs is critical.  Therefore, one of the bright spots this coming year will be the need to spend money getting a handle on data.  Companies will need to understand not just what happened last year but where they should invest for the future. They cannot do this without understanding their data.

The bottom line is that 2009 will be a complicated year for software.  There will be many companies without a compelling solution to customer pain will and should fail. The market favors safe companies. As in any down market, some companies will focus on avoiding any risk and waiting. The smart companies – both providers and users of software will take advantage of the rough market to plan for innovation and success when things improve – and they always do.

I have been researching and thinking about the problem of the packaged application for many years now.  Over the years I have had conversations with many CIOs who are planning to implement large complex ERP systems as part of their initiative to streamline their operations.  There is an assumption that implementing one of these systems will simplify corporate IT. There is also the assumption that it is possible to implement an ERP system as is – in other words, without complex customization.  The sad reality is that this just doesn’t happen in the real world.

This brings me to a conversation I had about a month ago with a CIO.  He was in charge of the IT organization in a relatively large corporation (I am not at liberty to mention the company name).  The company had decided to replace its assortment of corporate business applications with a comprehensive ERP system. The idea was correct – the company needed a system that would implement business process and best practices to support the business in a uniform and efficient manner.  The problem, in my mind was two fold – first the cost.  To purchase and then implement this software cost the company $500 million dollars. Obviously, a considerable part of this expense was for professional services.  And maybe that is the point. The idea that a company can purchase a packaged ERP system that is really packaged software is a misnomer. In reality, packaged software is not really packaged.  It is a set of tools, a set of templates and processes that are linked together based on marketing and promise.  The CIO I was speaking with provided some insight into the complexity of this implementation. It required a lot more customization than anyone had anticipated. The promise of out of the box implementation was a myth.  Once the customization was applied to this package, the concept of a packaged environment was gone.  Therefore, it should not have come as a shock when the next time the base platform of processes and tools had to be upgraded; it cost the company an additional $50 million.

So, what am I saying here? Should we throw the bums out? Should we declare that the concept of packaged software is dead and flawed? Probably.  Now, let’s get real. Obviously, companies cannot and should not go back to paper based processes. However, I think that we need to get real about what it means to package software.

Here is what I propose. Let’s not pretend that packaged software is packaged.  The reality is that good software that is designed to meet a specific corporate goal should have the following five components:
1. Business best practices should be component based.  Packaged software should be a set of business services that implement well-tested business processes that are either industry or practice based. For example, accounting practices are fairly well understood and well codified.  Accounting best practices may be different between industries but it is straightforward to create modular components that are populated with processes.  It should not be constructed as a set of complex intertwined code. It should be independent modules that can be linked to each other and that can exchange data.
2.  Create standards based links. Well defined interfaces that enable the customer to link these components and other components without complex coding, including easily usable interfaces to all data files and databases.
3. Separate business rules from code. Business rules should be contained in a separate set of components or a rules engine so that they can updated easily. These rules should have a visual interface so that management can easily review them and map them to corporate governance
4. Implementations should be configurable. It should be straightforward for an organization to change the details of a process or a service without recoding.
5. Modularity is the key. Company specific rules, configurations, and services should be modular and separate from the connective tissue that links the components of these environments.  In this way, when a system foundation needs to be upgraded, it can be done without impacting the value that is the lifeblood of a company.

The bottom line: the packaged software market is at a transition point

The state of the packaged software market is complicated.  Companies across the globe have spent trillion of dollars trying to automate business practices.  Some implementations have been successful. But even those companies that have had the good fortune of implementing packaged software to streamline their business have done so at a steep financial and organizational price.  I predict that we are entering a new stage of evolution of software.  Many of the CIOs I have spoken with lately are beginning to rethink the conventional wisdom about packaged applications.  They are beginning to take the concept of business services that is the foundation of a service oriented architecture and applying that to the packaging of codified best practices.
One CIO I spoke with has started methodically to peel away key business services from packaged applications.  This might be an order to cash process that is rewritten hundreds of times across hundreds of applications.  Now, the company has created one business service called order-to-cash.  This order-to-cash service will be used anywhere in the company where this capability is needed.  This very patient CIO plans to replace duplicated services locked in inflexible packaged applications with well-constructed and very independent business services.  And some day, there will be no more complicated, inflexible, and repetitive packaged applications.  I think this might lead to a lot more innovation at a fraction of the cost.

If you are not in the software industry and not conversant in the jargon, you probably think I have lost my mind. What do you mean WOA? It stands for Web Oriented Architecture (WOA).  So, from what I can see the positioning is that SOA is about back end services and protocols like SOAP, etc. and WOA is about cool web protocols like REST, etc.  So, perhaps we are supposed to say, thank goodness that we can move away from SOA and find something new and exciting to focus on.

Well, I hate to burst the bubble but SOA is not just about back end protocols and services. Protocols like REST that provide stateless communication are, in fact, an integral part of a service oriented architecture. Before you get mad at me. Let me explain.  When we talk about SOA we really aren’t talking about protocols. Sure there are lots of protocols and interfaces that are an important part of service orientation. But the power of SOA is in the fact that it enables businesses to focus on two key enables:

1. creating business services that are key business functions

2. enabling these services to be used flexibly to create a variety of business processes that can be changed quickly to enable change and innovation

Companies are getting pretty creative with this approach. Not only are they creating business services involving software components, but they are tying those business services into business elements such as monitoring electric meters.  An excellent example is the SOA implementations of two electric utilities: Delaware Electric and Austin Energy. Neither of these utilities are the biggest in the world. Both are mid-sized utilities with limited IT resources. However, they have both leveraged SOA to tie the ability to monitor and manage power usage and working with constituents to help make the customer experience better and save money at the same time.

These are just two of the 25 case studies that are part of the forthcoming second edition of SOA for Dummies.  What did we learn? Simply put, customers are implementing SOA from a business perspective. They are leveraging back end and web based capabilities and gaining huge business value. These customers don’t care if you call this approach SOA, WOA, or CASH…they simply know that it is allowing them the flexibility they never had before.

The bottom line is that we simply don’t need another new acronym. SOA is not a fad, it is a long term business approach to turning IT and business assets into services that can be used as part of an evolving business process.

I am going to try the neat new capability in my blog and post a survey.

I participated in a SaaS event this week that was sponsored by IBM.  It was sort of a funny feeling to be at a very good, positive event that focused on SaaS as a platform right in the midst of an economic meltdown.  In some ways, I had one of those out of body experiences. What am I doing talking about the future of SaaS when the world seems to be crashing and burning. As we sat listening to speakers and talking to each other the stock market went down 700 points. I met many different software executives from companies that are creating very significant SaaS based offerings — and they are getting good traction from their customers.

But the question remains and one that I will attempt to answer is what will happen to SaaS in this economy. I think that SaaS is going to be hugely successful in this economy. First, it is clear that customers are growing increasingly comfortable with the idea of using software that is managed by a third party vendor and hosting provider.

Now not all these vendors are equal. It is actually tricky to ensure success in a SaaS world.  After all, if you buy a regular software license and then decide that the software is not as good as you thought, you are stuck. Now, next year you might forgo the maintanance fee, but you still own the code.  It is different with SaaS. If you decide to take on the 30 day free trial there is no guarantee that you will become a life long customer. Likewise, if you do take the plunge and sign on for a month or two, there is also little guarantee that you will become devoted to the application. My point is that becoming a good, profitable and predicatable SaaS vendor is harder than it looks. Basically, you’ve got to be pretty good to make it.

Now, back to the economy and SaaS. Customers who will still need software even in a horrible market are going to think twice about captial expenditures.  Do you really want to spend a lot on servers and storage and the like? I predict that in tough economic times paying someone a monthly or even a yearly fee and letting them buy the capital intensive stuff will be just the ticket.

So, I think you will see the really smart SaaS vendors that know how to proactively nuture their customers so that they will really use their technology will win.  These smart SaaS vendors will also figure out the meaning of scalability, performance, and managability.  They are already figuring out how to make their software configurable and they are even creating versions that appeal with vertical market segments.

This economic climate may be making us all a little crazy and scared but there are some nice opportunities for those who are willing to solve customer problems. This will be the beginnng of the SaaS renissance and I think it will be a positive move for customers and the market.

I had an opportunity to have a chat with Ambuj Goyal, General Manager of IBM’s Information Management division about the idea of an information agenda –  an initiative that IBM recently announced. The company intends to make a major investment in methodologies, best practices, and technologies over the coming years as way to help its customers implement the information on demand strategy.
While it may seem confusing at the outset, I think that the idea of an information agenda makes sense.  But first, I want to clear up a confusion that I have seen.  I asked Ambju to define the difference between information on demand and the information agenda.  While he agreed that both ideas are aspirational goals, he distinguishes between the two.  Information on Demand is really the specific techniques and technology that help companies architect their information assets so that they can be able to deliver business value on time and in context.  In contrast, he explains that an information agenda is really the business strategy for information that becomes the road map for the future.  While the distinctions are subtle it is interesting to think about these two concepts.
Here are my thoughts.  This problem is not new, it has been around for many generations of information management.  I won’t use this blog to remind you that we have so many disconnected information sources, with differing definitions of what the simplest concepts – what’s a customer and what’s a price – just to name a few.  And the problem is really getting worse. It isn’t enough anymore to just do joins across relational data sources. There is so much information that is stored in documents, on websites, in social networks, and customer service sites.  And you can’t just throw everything into one massive warehouse.
I think that the initial instinct of most technically oriented organizations is to react.  They embark on a Master Data Management strategy to quickly get one consistent view of data across relational sources.  Or in many situations, they might go out and buy a tool that makes it easier to query many different sources.  In some situations, customers are apt to invest in a massive data warehouse.  Each one is a valid strategy and will work to solve one specific problem.  But here is the difference that I see — reacting to one problem at a time is what has always gotten us into a mess with enterprise software in the first place.
Our team has been finalizing the second edition of Service Oriented Architectures for Dummies.  One of the key lessons we have taken away from this project is that customers who are successful are those that have moved away from being reactive to the crisis de jour to creating a business focused strategy.  For example, rather than taking on a project in isolation, these managers will make that project fit into an overall strategy for managing their business services or managing data across lots of business units.  So, while they are solving problems on an incremental basis, they are ensuring that these problems are solved in context with the overall business strategy.
What I like about the idea of an information agenda is that it focuses customers on the idea of having a strategy and a plan.  So, here’s my view of the top three things that should be in a customer’s information agenda:
1.    Starting with an honest assessment. Companies need to start by taking a step back and determine how they use information as part of their business strategy.  Information is used in different ways – both formal and informal.  It is used as part of structured databases, document management systems, warehouses, and informal paper based workflows.  Companies still use spreadsheets as their formal information management strategy.  Taking stock is critical.
2.    Imagining success. What would it look like if information could be available on demand and if that information could be trusted?  I think this approach could become a strategic differentiation for companies.  In fact, many of the companies that were interviewed for the second edition of SOA for Dummies were in the process of creating a strategy based on this idea.  Most of these companies were looking for ways to leverage information as part of the strategy to proactively engage customers.
3.    Fit small steps into a roadmap. I think this is the most important issue for companies.  It is so easy to devolve into a reactive state – especially in complex financial times.  I suspect that many companies will dump the idea of having a strategy and just try to do only what is necessary to survive.  You can’t blame them.  But, it is dangerous to take this approach.  Yes, companies should implement pragmatic projects that match their current pain. However, they should be a step in a journey towards a strategic approach to managing information.

Back in January of this year I signed up for a Twitter account. I have to admit I was skeptical. Why does anyone need to know what I am doing right now? I wrote a blog about how silly I thought it was. Then after playing around with Twitter for about five months I wrote another blog about how it had the potential for becoming a platform for innovation. So, clearly, I had changed my mind.  I began to see that something here was more interesting than what I had assumed.

Well, now a few months later I would like to report that I have been getting deeper and deeper into my Twitter research and I have some new conclusions that I would like to share.  Here are the five conclusions I have come to about why Twitter is important:

Number One. The water cooler effect. As a technology industry analyst I really enjoy connecting with other analysts. It is especially helpful when a bunch of us are at an industry analyst meeting and we can exchange impressions in real time about what speakers are really saying. When colleagues are at a meeting I am not attending, I get a vicarious real time impression about the meeting without being there in person! It is amazing what you learn from only 140 characters. I have found that the companies we analyst are twittering about eagerly follow what we say about them and their competitors.

Number Two. Connecting to the political world.  During this election season, I have connected to many of the candidates, pundants, and journalists Twitter links. They often will provide links to articles and commentary that I never would have thought to look at – and I probably would never have known that they existed. I also took the opportunity to send direct messages to some candidates. I’m sure they never read what I said but it made me feel better. (Some candidates removed the ability to send a direct message after a while). I have noticed that a number of cable news reporters are now using Twitter to connect to people about specific issues they researching.  It can definitely be a good reality check for these guys.

Number Three. Connecting to people in the computer industry. I have connected with executives and technologists that I haven’t been in touch with in a while. Sometimes, I have sent messages to set up a new meeting just based on seeing them make a statement about something happening in their company.  It isn’t a substitute for other communications methods — traditional email, etc. but it is handy.

Number Four. The reach of the platform. Twitter, like other social networking platforms has created a range of related services — some that add better interfaces and there are lots. Here is a link to Todd Ogasawara’s   blog that lists lots of them.

Number Five. Twitter will need a revenue based model at some point. Where’s the business model? This is something I haven’t figured out yet. How will Twitter make money?  Are they planning what I call a Google Sneak Attack? Is there a plan to create an advertising model or new SaaS software model built on the base platform?

Clearly Twitter has momentum and some buzz right now.  Will it last? I think some of that depends on how well the company does at working on scalability,  partnerships, and figuring out a business model. Semantic search is something they desperately need. I could envision Twitter evolving to create specific applications for companies that want to set up real time feedback with customers and partners. I’ll keep working with Twitter — I enjoy the interaction (when I have time).

I attended Citrix’s industry analyst event a couple of weeks ago. I meant to write about Citrix right after the event but you know how things go. I got busy.  But I am glad that I took a little time because it has allowed me the luxury of thinking about Citrix as a company and where they have been and where they are headed.

A little history, perhaps? To understand where Citrix is headed, a little history helps. The company was founded in 1989 by a former IBMer who was frustrated that his ideas weren’t used at Big Blue.  The new company thought that it could leverage the future power of OS/2 (anyone remember that partnership between IBM and Microsoft?).  Citrix actually licensed OS/2 code from Microsoft and intended to provide support for hosting OS/2 on platforms like Unix.  When OS/2 failed to gain market traction, Citrix continued its partnership with Microsoft provide terminal services for both DOS and Windows.  When Citrix got into financial trouble in the mid-1990s, Microsoft invested $1 million in the company.  With this partnership firmly in place, Citrix was able to OEM its terminal servicer product to Microsoft which helped give the company financial stability.
The buying spree. What is interesting about Citrix is how it leveraged this position to begin buying companies that both supported its flagship business and move well beyond it.  For example, in 2003 it acquired Expertcity which had two products: GoToMyPC and GoToMeeting.  Both products mirrored the presentation server focus of the company and enhanced the Microsoft relationship. In a way, you could say that Citrix was ahead of the curve in buying this company when it did.
While the market saw Citrix as a stodgy presentation focused company things started to change in 2005. Citrix started to make some interesting acquisitions including NetScaler, an appliance intended to accelerate application performance,  and Teros, a web application firewall. There were a slew of acquisitions in 2006.  The first of the year was Reflectant, a little company in Lowell, Massachusetts that collected performance data on PCs.  The company had a lot of other technology assets in the performance management area that it was anxious to put to use.  Later in the year the company bought Orbital Data, a company that could optimize the delivery of applications to branch office users over wide area networks (WANs).  Citrix also picked up Ardence, which provided operating system and application streaming technology for Windows and Linux.
Digging into Virtualization. Clearly, Citrix was moving deeper into the virtualization space with these acquisitions and was starting to make the transition from the perception that it was just about presentation services. But the big bombshell came last year when the company purchased XenSource for $500M in cash and stock.   This acquisition moved Citrix right into the heart of the server, desktop and storage virtualization world.  Combine this acquisition with the strong Microsoft partnership and suddenly Citrix has become a power in the data center and virtualization market.

The ten things I learned about Citrix. You have been very patient, so now I’ll tell you what the things I thought were most significant about Citrix’s analyst meeting.

Number One:  It’s about the marketing.  Citrix is pulling together the pieces and presenting them as a platform to the market. My only wish is that some company would not use the “Center” naming convention for their product line.  But they have called this Delivery Center. The primary message is that Citrix will make distributed technology easier to deliver. The focus will be on provisioning, publish/subscribe, virtualization, and optimization over the network.

Number Two: Merging enterprise and consumer computing. Citrix’s strategy is to be the company that closes the gap between enterprise computing and consumer computing.  CEO, Mark Templeton firmly believes that the company’s participation in both markets makes it uniquely positioned to straddle these worlds.  I think that he is on to something.  How can you really separate the personal computing function from applications and distributed workloads in the enterprise?

Number Three.  Partnerships are a huge part of the strategy. Citrix has done an excellent job on the partnering front.  It has over 6,000 channel partners.  It has strong OEM agreements with HP and Dell and Microsoft.  Microsoft has made it clear that it intends to leverage the Citrix partnership to take on VMWare in the market.

Number Four: Going for more. The company has a clear vision around selecting adjacent markets to deliver an end-to-end solutions.  Clearly, there will be more acquisitions coming but at the same time, it will continue to leverage partnerships.

Number Five: It’s all about SaaS. Citrix has gained a lot of experience in the software as a service model over the past few years with its online division (GoToMyPC and GoToMeeting).  The company will invest a lot more in the SaaS model.

Number Six. And its all about the Cloud. Just like everyone else Citrix will move into Cloud Computing.  Because its NetScaler appliance is so prevalent in many SaaS environments, it believes that it has the opportunity to become a market leader. It is counting on its virtualization software, its workflow and orchestration technology to help them become a player.

Number Seven:  Going for the gold. With the acquisition of XenSource combined with its other assets, Citrix can take on VMWare for supremacy in virtualization.  This is clearly an ambitious goal given VMWare’s status in the market.

Number Eight.  Going after the Data Center market. Citrix believes that it has the opportunity to be a key data center player. It is proposing that it can lead its data center strategy by starting with centralization through virtualization of servers, desktops, and operating systems and provide dynamic provisioning, workflow, and workload management.  Citrix has an opportunity but it is a complicated and crowded market.

Number Nine: Desktop graphic virtualization.   Project Apollo, Citrix’s desktop graphics virtualization project seems to be moving full steam ahead and could add substantial revenue to the bottom line over time.  However, there is a lot of emerging competition in this space so Citrix will have to move fast.

Number Ten: Size matters. And speaking of revenue — Citrix is ambitious. While its revenues have topped $1 billion, it hopes to triple that number over the next few years. And then, what? Who knows.

HP has been a player in the virtualization market for quite a while.  It has offered many hardware products including its server blades have given it a respectable position in the market. In addition, HP has done a great job being an important partner to key virtualization software players including VMWare, Red Hat, and Citrix. It is also establishing itself as a key Microsoft partner as it moves boldly into virtualization with HyperV.  Thus far, HP’s virtualization strategy did not focus on software. That has started to change.  Now, if this had been the good old days, I think we would have seen a strategy that focused on cooler hardware and data center optimization. Now, don’t get me wrong — HP is very much focused on the hardware and the data center. But now there is a new element that I think will be important to watch.

HP is finally leveraging its software assets in the form of virtualization management.  If I were cynical I would say, it’s about time.  But to be fair, HP has added a lot of new assets to its software portfolio in the last couple of years that make a virtualization management strategy more possible and more believable.

It is interesting that when a company has key assets to offer customers, it often strengthens the message. I was struck by what I thought was a clear message that a found on one of their slides from their marketing pitch, “Your applications and business services don’t care where resources are, how they’re connected or how they’re managed, and neither should you. ”  This statement struck me as precisely the right message in this crazy overhyped virtualization market.  Could it be that HP is becoming a marketing company?

As virtualization goes mainstream, I predict that management of this environment will become the most important issue for customers. In fact, this is the message I have gotten load and clear from cusotmers trying to virtualize their applications on servers.  Couple this will the reality that no company virtualizes everything and even if they did they still have a physical environment to manage.  Therefore, HP focuses its strategy on a plan to manage the composite of physical and virtual.  Of course, HP is not alone here. I was at Citrix’s industry analyst meeting last week and they are adopting this same strategy. I promise that my next blog will be about Citrix.

HP is calling its virtualization strategy its Business Management Suite.  While this is a bit generic, HP is trying to leverage the hot business service management platform and wrap virtualization with it.  Within this wrapper, HP is including four componements:

• Business Service Management — the technique for linking services across the physical and virtual worlds. This is intended to monitor the end-to-end health of the overall environment.
• Business Service Automation — a technique for provisioning assets for distributed computing
• IT Service Management — a technique for discovering what software is present and what licenses need to be managed
• Quality Management — a technique for testing, scheduling, and provisioning resources across platforms. Many companies are starting to use virtualization as a way of testing complex composite applications before putting them into production. Companies are testing for both application quality and performance under different loads.

I am encouraged that HP seems to understand the nuances of this market.  HP’s strategy is to position itself as the “Switzerland” of the virtualization management space.  It is therefore creating a platform that includes infrastucture to manage across IBM, Microsoft, VMWare, Citrix, and Red Hat.  Therefore, it is positioning its management assets from its heritage software (OpenView) and its acquisitions to execute this strategy. For example, its IT Service Management offering is intended to manage the compliance with license terms and conditions as well as charge backs across hetergenous environments. It’s Asset manager is intended to track virtualized assets through its discovery and dependency mapping tools.  HP’s Operations Manager has extended its performance agents so that it can monitor capabilities from virtual machines to hypervisors.  The company’s SiteScope provides agentless monitoring of hypervisors for VMWare.  The HP Network Node manager has extended support for monitoring virtual networks.

HP’s goal to to focus on the overall health of these distributed, virtualized services from an availability, performance, capacity planning, end user experience, and service level management perspective.  It is indeed an ambitious plan that will take some time to develop but it is the right direction. I am particularly impressed with the partner program that HP is evolving around its CMDB (Configuration Management Database).  It is partnering with VMWare to embark on a joint development initiative to provide a federated CMDB that can collect information from a variety of hosts and guest hosts in an on demand approach. Other companies such as Red Hat and Citrix have joined the CMDB program.

This is an interesting time in the virtualization movement.  As virtualization matures, companies are starting to realize that simply virtualizing an application on a server does not by itself save the time and money they anticipated.  The world is a lot more complicated than that.  Management wants to understand how the entire environment is part of delivering value.  For example, an organization might put all of its call center personnel on a virtualized platform which works fine until an additional 20 users with heavy demands on the server suddenly causes performance to falter.  In other situations, everything works fine until there is a software error somewhere in the distributed environment.  The virtualized environment suddenly fails and it is very difficult for IT operations to diagnose the problem. This is when management stops getting excited about how wonderful it is that they can virtualize hundreds of users onto a single server and starts worrying about the quality of service and the reputation of the organization overall.

The bottom line is that HP seems to be pulling the right pieces together for its virtualization management strategy. It is indeed still early. Virtualization itself is only the tip of the distributed computing marketplace.  HP will have to continue to innovate on its own while investing in its partner ecosystem. Today partners are eager to work with HP because it is a good partner and non-threatening.  But HP won’t be alone in the management of virtualization.  I expect that other companies like IBM and Microsoft will be very aggressive in this market.  HP has a little breathing room right now that it should take advantage of before things change again. And they always change again.