Oracle Plus Sun: What does it mean?

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.

Why Sun Microsystems can’t go it alone

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.

Ten things I learned about Citrix..and a little history lesson

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.

Can HP Lead in Virtualization Management?

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.

What does it mean if HP buys EDS?

I was minding my own business and twittering (I think that is how you say it) when I noticed a breaking news story from the Wall Street Journal: HP would be acquiring EDS. This is quite a significant transition for HP that will help transform the company into a new position in the market. Now, at this time it isn’t official — no conference call yet on my calendar but it certainly looks probable. In fact, Mark Hurd has acknowledged that the companies are talking. I picked up that detail from Larry Dignan and Justin Perlow’s blog. So, what does this mean? There are a lot of issues at play. Here are my five top ten thoughts:

One. HP needs more significant help on services and consulting. When Carly Fiorina was HP’s CEO tried to buy PriceWaterHouseCooper’s consulting practice and failed. After that failure, IBM scooped up the consulting practice which became the highly successful Global Business Services. Since then HP has made small targeted acquisitions. To compete in a global market, HP needs the deep expertise and customer relationships of a major consulting operation. And EDS is one of the biggest. The deal is reported to be worth between $12-13 billion. EDS revenues are around $22 billion.

Two. Synergy looks good between HP and EDS. Both companies have chosen to partner with many of the same software players including Oracle, Microsoft, Tibco, and BEA (now part of the Oracle family). In addition, both companies have focused on big outsourcing deals. Therefore, the business philosophy of the two companies are close. The trick, of course, will be to bring these two organizations together in a way that keeps important consultants happy. This will be important since a services company is only as good as its people. Leveraging the EDS big tent will be key. Ironically, it might be easier for HP to integrate a company like EDS into the fold than to integrate a big software company. HP’s existing services organization will fit into and under the EDS umbrella. The big challenge will be to manage costs. IBM has done a good job over the last several years making Global Services profitable and it hasn’t been easy.

Three. Keeping services partners happy will be a challenge. HP has used the fact that it wasn’t IBM Global Services as a differentiator. If it buys EDS it will have to do some work manage channel conflict. This might take some fancy footwork.

Four. What about the mainframe business? EDS has a significant mainframe business. The mainframe has been something that HP has studiously avoided. Does this mean that HP will learn to love the mainframe? It might consider such a relationship given the complexities of scaling and managing high end data centers and clouds. It might take some convincing but if HP watches carefully what EDS has achieved with the mainframe it might change its tune.

Five. Will HP know how to leverage EDS’s expertise to enhance the software business? There is nothing like being close to the customer in difficult implementations to know where the pain is. If HP goes through with the acquisition it would be wise to leverage this expertise in the software group. Leveraging EDS’s deep customer expertise could add assistance to the software business.

The Desktop as a Service: Can Desktone be a Focal Point?

I have been thinking a lot about the evolution of virtualization lately and so I was intrigued when a company I had never heard of called Desktone asked to come in for a briefing. When I heard that the company specialized on desktop virtualization I was intrigued. I was even more interested when I learned that the founder came from Softricity, the OS virtualization company bought by Microsoft.

What I liked about Desktone is its focus on desktops as a service. The company has been around since 2006 and has its developers in Shaghai. The company has taken a $17 million investment round. I liked David Marshall’s overview of the technology.

What is important about what Desktone has to say is that the desktop environment can become a service offering. While I don’t expect the masses of Microsoft Windows desktops to all move en masse to desktop as a service, it is an approach that is a leading indicator of where the desktop is headed. Think back to when Windows became the platform for desktop computing. In those days, customers wanted a easy to use and pragmatic way to write letters, create a spreadsheet, follow up on email, and surf the web.

What has changed over the past five years is the growing complexity of the desktop environment. Simply put, the desktop moved from its role as a terminal for corporate applications and a tool for productivity applications into a true computing platform. The implications are complex and startling. Customers who thought of their desktop as personal where suddenly forced to deal with everything from viruses, security of stored data, updates to the operating system, the need to coordinate between service components on the desktop and the server. Now, add to this, the need to add more power on the desktop to support the growing needs for a growing number graphics and computing requirements — and of course power.

What Desktone is proposing is that service providers establish themselves as the provider of desktop capability. Clearly, an emerging player like Desktone couldn’t take on this goal but its partners are stepping up. In my discussion with CEO, Harry Ruda, the company has signed on partners including IBM, Verizon, Softbanks, and T-Systems. These companies all plan to use desktone to offer the virtual desktop as a subscription based service. Therefore, the desktone service provides an annuity stream for companies like Verizon as an alternative to the corporate desktop. Desktone has signed up a few high profile customers like Merill Lynch. Merrill Lynch are signing up for a very simple reason — they simply cannot get any more power in their data centers — even if they wanted to pay for it. Likewise, Verizon, which has substantial data center capacity in New York City simply cannot take on new co-location customers without a managed services approach.

What I found very interesting about Desktone is how the company positions the technology. The company seems want to from the traditional approaches to desktop virtualization right to the world of cloud computing — of course, for the desktop world. I am providing a link to Dana Gardner’s blog on the topic. Unlike some of the clouds that we hear a lot about, Desktone’s version is based on a private cloud that will be owned and run by the serivce providers. The approach is intended to treat the virtual desktop as PCs connected to a service provider that provides the “virtual container” for the desktops. This solves a lot of problems for both Desktone and service providers. In essence, the end customer is responsible for their own operating system and PC application licenses. Desktone is provide a virtual desktop grid — what Desktone called an access fabric. This fabric is intended to provide a management platform for desktop virtualization.

Desktone has an interesting opportunity. It is stretching what we have traditionally thought about for desktop virtualization. While desktop virtualization is not new but it is changing dramatically. One only has to look at the work that VMware, Citrix, IBM, Microsoft and HP are doing — to mention but a few of the players that understand the importance of virtualizing the device in front of the customer. I think that desktop as a service is the right conversation for the industry to be having just about now.

Is HP ready to rock and roll with its investments in software, hardware, and services?

Every year for the past 20 years I have attended HP’s annual analyst meeting. The first one I attended was quite small with a couple dozen analysts with all the focus on hardware. Having spent so much time with HP over these years I am in a unique position to give a point in time report card. I thought I was going to write up each day but I decided that one assessment would be best. It is not an easy task especially since HP has made 16 acquisitions (mostly in software and services) in the past three years. HP will not buy packaged software, it will however invest in providing vertical offerings for its most important customer segments including financial services, communications, media and entertainment, manufacturing, public sector, health and life sciences, energy, retail and consumer packaged goods.

I also heard that HP has begun to revitalize its lab organization and invest more in R&D. HP Labs has been a source of innovation for HP. It will be interesting to watch what new software and hardware technologies come out of the resource over the next couple of years. Mark Hurd, during his discussion with us mentioned that HP is spending $3.7 billion on R&D. This could result in some interesting opportunities for HP.

My take on HP is complicated — HP is a complicated company. I am struck by four key issues about this point in time of HP’s transition:

1. HP has finally begun to understand that the combination of hardware, software, and services are synergistic. HP was rather quiet about this change but it was clear that there is beginning to be orchestration both at the sales level and just as importantly at the software level. I am starting to see that HP is beginning to leverage software assets developed in its consulting organization and moving them into the software group. Likewise, software that had been captive in hardware is being decoupled and potentially given new life.

2. HP hardware organization is changing in interesting ways. There are four focuses for the hardware business: blades, power management, storage, and overall next generation data center (called Adaptive Infrastucture). This is the traditional business for HP which should remain a strong pillar of the strategy. HP has a strong client side hardware business unit that is separate from the enterprise server and storage organization. It will be interesting to watch how HP leverages its blade enclosures across its many hardware blades to create a powerful go to market strategy.

3. The software business. I get lots of questions about the viability of HP’s software business. I think that this has been complicated for HP. After all, HP has purchased so many software companies over so many years that it can be confusing. I am beginning to see some signs that a strategy is emerging here. While HP has some work to do to make all of this understandable and digestable. One good move was that HP has divided its software business into two units: Business Information Optimization, Business Technology Optimization (Enterprise Management and Automation), and First, HP has a very focused information management strategy with a focus on its NeoView data warehousing offering. The company is starting to win some important business — especially against Teradata. The other component of this business unit is based on records management. This includes integrated archiving and e-discovery (HP just bought Tower Software). In addition, there are some interesting new offerings in this area such as Exstream Software, a new acquisition that turns document data into electronic form so it can become information services. The company is focused on managing the content/document ecosystem. This should be a very interesting acquisition.

The Business Technology Optimization area is the most complex. It encompasses most of the enterprise infrastructure software and it the least well understood. For example, HP’s SOA strategy is within this space. The crown jewel for HP is the Systinet registry/repository for SOA governance. The product was picked up as part of the Mercury Interactive acquisition and has given HP a great starting point. The Mercury Interactive acquisition also provided HP with a strong position in software quality and testing. It is a sign of the change the new HP software that HP has been able to keep the value intact and use it as a foundational technology in many of its initiatives.

HP’s legacy software platform: OpenView is also part of Business Technology Optimization. The business continues to grow well and over time I think it will be a better understood strategic management asset. But I imagine that traditional OpenView customers are probably a bit confused. Long term the new organizational software structure will help HP sell at a higher level in the organization.

The most interesting transition for Business Technology Optimization is the addition of Opsware into the mix. OpsWare has a lot of very interesting IP in data center automation and in overall integration. I am still learning about all the buried value but the underlying data model and integration technologies make it an interesting set of services to fill out HP’s SOA strategy. OpsWare has been part of HP for only about six months but it is clear that this set of resources and people are having a big impact on the HP software strategy.

4. HP’s Services. HP’s services organization which has grown steadily. The biggest change that I am seeing is the adoption of a common framework. There is a lot more synergy between the services organization and the software group. Services now exchanges its software services into software. This is one of the strongest areas where HP can demonstrate its SOA strategy.

5. Virtualization. HP started to talk a little bit about the importance of virtualization as part of the future for HP across hardware, software, and services. There were a few interesting comments about cloud computing. But HP has a huge opportunity in virtualization that I think did not come through in the way I would have expected. I imagine that by next year the volume for this strategy will be a lot louder (at least I hope). I was encouraged by Mark Hurd’s comment, “Virtualziation creates interruption of the server market. The more of the market that virtualizes, the better for HP.”

I love the smell of acquisitions in the morning: BMC Gets BladeLogic

The great thing about acquisitions is that it provides a lot of fodder for bloggers and pundits. And there have certainly been a lot lately. For example, just yesterday BMC finally got a data center automation company. It almost had landed OpsWare when HP swooped down and landed the deal. Now BMC is planning to purchase BladeLogic for about $800 million. This acquisition allows BMC to claim that it has all of the pieces to elevate its position in the data center automation market along side HP — its biggest rival. It also helps BMC demonstrate that it can use its cash to fund growth. BMC has more than a billion dollars in the bank and was under pressure to do something with the cash to fuel growth.

BMC has an interesting challenge. Much of the company’s growth has come from its acquisition of Remedy Software — which provides help desk automation solutions. While the company might have used Remedy as the center of its future strategy it decided to try for a bigger play. In 2004 it announced its Business Service Management strategy focused on providing measurement and management of IT resources from a business impact perspective.

The BladeLogic acquisition is a continuation of this strategy. BladeLogic adds more data center automation software into the platform. While this is a good move for BMC is not without risk. BMC has some much bigger and stronger competitors who seem the same potential for helping customers create a next generation computing environment. HP, for example, has a jump start on BMC through its Opsware acquisition. Ospware, now part of HP’s Business Technology Optimization (BTO) platform, adds to the depth of the HP management portfolio. In addition to HP’s some significant software assets for data center automation but HP has at least 15 of experience in both its consulting and outsourcing organization. In addition, HP picked up some significant talent from the Opsware team. IBM has been building its service management platform for years both through development and a slew of aquisitions too numerous to mention (I would definitely leave a couple dozen out if I tried). IBM has begun to leverage its resources to build a significant in Service Management portfolio under the Tivoli brand. Tivoli has been working over the last few years to rearchitect these assets into a platform. Some interesting assets that IBM has put into the mix include management software such as Netcool and Micromuse to ISS Solutions for security management. IBM has a significant consulting, services, and outsourcing organization in management as well.

Two other companies that BMC has to be worried about: CA which has been quitely rearchitecting its managment platform over the last few years with good results and EMC which has been buying management assets over the past several years and is putting together a potentially powerful platform.

Why is data center automation and service management suddenly the rage?

The next generation data centers is a big deal because organizations are trying to consolidate the number of data centers they are managing and they are trying to make those resulting data centers more efficient in terms of resources and energy. These companies also want to be able to treat all of their systems and software as though they are a set of assets that can be moved around and reused in a safe and predictable way. At the same time, existing data center technology has been aging. During the tech downturn during the last recession, companies stopped buying and updating their infrastructure until they figured out how to absorb what they had already bought. While customers were doing this, massive changes were happening in the industry — most notable has been the rise of virtualization –everything from grid computing to server virtualization to desktop virtualization. Now, combine virtualization of resources with the ability to manage this combination of resources as though it were an integrated environment based on business needs. This is where we are headed. It is little wonder that the acquisitions are happening. I think that it only the beginning of the big players buying the resources they need to win.

Top 10 Predictions: Innovation, ROI, Cloud Computing and more…

I love the end of the year. I get to sneak out of the office for a few days and stay off of airplanes. I also have a chance to look ahead to the new year. I like making predictions. Sometimes, I am years ahead of the market; other times I am able to hit the nail on the head. So, for what it is worth, here are my top ten predictions for 2008 (Hey, how did that happen? What happened to 2007? I thought it just started!)

1. There will be two hot buzzwords this year: innovation and ROI. Companies want to find ways to leverage the technology they have invested in, to do things in totally new ways. At the same time, companies are nervous about investing in technology. They want assurances that there will be a return on their investment — quickly. So, you will see a lot of discussion of both issues. But here is one prediction that I guarantee: most of the proof about innovation and ROI will be fluffy and devoid of any real meat!

2. Here come the clouds! I think that cloud computing, one of the latest versions of virtualization, will become one of the hottest trends of 2008. Any infrastructure company you can name will come up with a cloud computing strategy. No single leader will emerge in 2008 but you won’t be able to move without bumping into the hype.

3. Software as a Service goes mainstream. Sure, SalesForce.com has been the industry darling over the past few years. There can be no doubt that SalesForce CEO Marc Benioff’s imaginative adventure hit the bulls-eye. But I expect that in 2008 there will be numerous mainstream, innovative approaches to Software as a Service. We already saw SAP announce SAP By Design as its entry into the SaaS market. Expect a lot more from mainstream players. Now add a social networking twist and things really get interesting.

4. The world gets more virtual. VMWare’s spectacular IPO made the rest of the market wakeup and smell the roses. Maybe there is money in this virtualization stuff after all. There will be three virtualization market segments: client, server, and application. I can’t decide which one I think is more important. How about all three!

5. More vendors will make more acquisitions (that’s another one you can take to the bank). Yes, Oracle will certainly make more acquisitions, but I don’ t think that BEA will be in the mix. Nor will HP buy BEA. However, I do predict that BEA will probably go private. I predict that HP will buy more software companies, especially in the data management area. IBM will continue its buying especially in software — more companies in what they call information management, more in systems management, and in the collaboration space. I expect to see more action from EMC as well primarily in management and security. The list is too long for this entry but stay tuned, it is going to be a very, very busy year.

6. So, I didn’t mention Microsoft yet. This is the year when Microsoft’s server/enterprise business will get the respect it deserves. Therefore, I expect to see Microsoft continue to make small but strategic acquisitions that will fit into the forthcoming Oslo strategy. I would expect to see Microsoft look for information management picks (among others). However, I don’t expect that Microsoft will be buying big, traditional software companies. I expect that Microsoft will make interesting acquisitions in web collaboration, social networking, and advertising.

7. Online goes off-line. Companies like Zoho are starting to gain traction because they can provide both online services combined with offline usage. Being able to continue working when you can’t get connectivity is the tipping point for these collaboration offerings to challenge Microsoft in the office and collaboration space.

8. This is the year that Service Oriented Architectures (SOA) moves from IT strategy to business strategy. Therefore, SOA will officially move out of the hype cycle and into mainstream. CEOs and CIOs have bought into the importance of consistent business oriented services. Therefore, expect that customers will get down to serious business of moving out of pilots into slow, deliberate implementations. This doesn’t make for splashy headlines but it does make business sense.

9. Google will continue to move into any market that leverages the advertising revenue model — including collaboration software and various cloud computing options. No surprise there. I do not expect that Google will make a bid for the traditional enterprise applications. I do expect to see a strengthening partnership with IBM.

10. Partner ecosystems will reach a new level of intensity this year. Enterprise software leaders will be working hard to make sure the most popular emerging players support their platforms. They will be joined in the mix by Software as a Service players who are trying to build up their arsenal of partners. Emerging players will live or die by their ability to sign the best partnerships. At the same time, enterprise software leaders are upping the requirements for participation. The bottom line is: what’s in it for me?

11. I know I promised 10 predictions but I have to add one more. There will be at least a few trends that will come out of the blue. But that is what makes things interesting!

 

EMC’s Innovation Journey: from storage to information centric computing

Today I am at EMC’s annual analyst meeting. Just like IBM, EMC’s theme is innovation. EMC is on an interesting journey from its roots in storage managment. EMC has been on a journey for a number of years with acquisitions in information and content management (Documentum and eRoom) and security (RSA, Verid), management software (Smarts, and NLayers), virtualization (VMware), Software as a Service (with the Mozy acquisition). Initially, it looked as though EMC was going to position itself as a technology holding company. I have changed my mind after listening to the management team talking about EMC’s evolution. Over the past four years EMC has spent an average of $2 billion a year acquiring 30 software companies. So far, EMC has spent $8 billion acquiring software companies. I expect that we will see more over the coming years.

Joe Tucci, EMC’s CEO provided some interesting insights about EMC’s transition. Clearly, it was a lot easier in the days when the company could only worry about storing and retrieving information. Now that EMC has gone well beyond that vision, Tucci has done a good job of both focusing on the core competencies of the company. Tucci has made this look easy. But, in fact, it is hard. In essence, what he has done is to keep to its knitting — buying software that is adjacent and complementary to storage. And this makes sense — storage is about putting information somewhere (obviously an over simplification). So, not surprisingly, the theme is information.

Now, EMC is trying to take its core assets focused on “information” so that there is cross leverage across product lines. For example, EMC is leveraging its security software in order to provide higher levels of security in storage and document management. I think that Tucci put it well, “the information infrastructure is a shared set of products, serivces, and best practices for storing, protecting, optimizing, and leveraging information.”

Where is EMC taking this strategy? Clearly the Mozy acquisition demonstrates that EMC is looking at the SMB market and at Software as a Service (SaaS). How about information and storage in the cloud? Why not.

I expect to see EMC focus a lot of attention on unstructured and semi-structured information. One executive during the meeting commented that 90 percent of a customer’s information is unstructured in a variety of formats (images, documents, etc.). Not surprising, this unstructured data has huge storage requirements. Now think about the security of this information including rules for who is allowed to look at, copy, and modify that information.

And, of course, virtualization of information, storage, and collaboration isn’t lose on EMC — with VMware. VMware is clearly one of the jewels in the crown and I expect that EMC is going to find more and more ways to leverage virtualization across its portfolio.

According to Jeff Nick, EMC’s CTO, EMC is focused from a strategy perspective on infrastructure, information assets, applications, and interaction. From his perspective, security is at the core of this approach — not an unreasonable assumption. I like his view on taking a holistic view of how all of these components are interrelated. Taking a holistic view of information management is music to my ears! I also liked the fact that Nick spent considerable time talking about the fact that you can only provide this holistic approach through a service oriented approach. He went on to point out there is a whole different way of managing based on SOA. In this way, you take applications and operating systems and leverage them as elements and virtualize them in the context of how they are used within the customer environment.

This thinking is good but it will require that a lot of pieces come together. Clearly, this isn’t a short term strategy. If EMC can pull this off, it will be quite interesting for the company’s future.

The bottom line is that I see EMC as a company that is changing itself from a storage leader to one that is reaching beyond its comfort zone. Suddenly, its acquisitions make a lot more sense. However, the road will not be especially easy. There is a lot of work to do on information management itself — including the entire areas of meta data and master data management. EMC doesn’t have a master data management strategy and it does not control the databases and data stores where this information lives. Clearly, the key players in this market will not necessarily want EMC to emerge as the leader. In the management space, EMC has made some good strides in leveraging its Smarts and NLayers acquisitions to make its products more manageable. Will it strive to be a management vendor and take on players like HP and IBM? Not clear yet.

EMC is a well managed company that has made good acquisitions and managed their integration into the company fabric well.