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VentureBeat | Microsoft sides with PSI, goes after IBM’s mainframe market

Platform Solutions Inc., a Sunnyvale, Calif. maker of mainframe computers that is going after IBM’s near monopoly in the sector, has raised filled its war-chest with more than $37 million in fresh capital from a group of investors including Microsoft.

PSI, as the company is known, has also signed joint sales agreement with Microsoft, giving it some good access to the large data centers of companies Microsoft already serves. It is going after the lower end of the IBM mainframe market, valued in the billions of dollars. It plans to undercut the dominant IBM product on price. Other investors include Blueprint Ventures

Late last year, IBM sued PSI alleging patent infringement and breach of contract, and the dispute is still in court.

It’s the company’s third round of capital.

PSI’s computers consolidate z/OS, Windows, and Linux operating system into a single operating environment based on Intel Itanium 2 processor technology.

Link: VentureBeat » Microsoft sides with PSI, goes after IBM’s mainframe market.

WSJ | Tibco Draws Takeover Talk

Unusual trading in Tibco Software Inc. led to fresh speculation that the business-software company could be targeted amid further consolidation in the technology sector.

Wednesday, as Tibco shares fell 5.7% to $6.75, down 41 cents each, traders snapped up call options on the stock for a second straight day, noted Frederic Ruffy, an Optionetics analyst.

The stock is off 25% this month, but that hasn't deterred traders. More than 11,000 call options on the stock changed hands, compared with 1,000 puts and daily average call volume last month of about 1,150.

Much of the activity centered on January $7.50 calls with almost 8,100 traded, compared with open interest of 3,936. The options were selling for 70 cents, up 10 cents.

Fresh positioning was evident in the February $7.50 calls, with more than 2,150 traded, compared with open interest of 1,584.

Mr. Ruffy said Tibco previously has been touted as a possible takeover target.

The pickup in trading coincides with a surge in implied volatility in Tibco. Rebecca Engmann Darst, equity options analyst at Interactive Brokers, said it had jumped nearly 40% to 66.75% in the past week.

Meanwhile, as the Financial Select Sector SPDR fund, or XLF, which tracks financial stocks in the Standard & Poor's 500-stock index, fell 1.55% to 28.59, almost 280,700 puts on the fund traded, compared with 177,200 calls, according to Track Data.

Trading was particularly heavy in the December $27 puts, with more than 57,600 changing hands, compared with open interest of 108,734.

Link: Tibco Draws Takeover Talk - WSJ.com.

Web2.0 Journal | SOA? SaaS? Web2.0? IBM has Got its Head in the Clouds ...

Reminding people of how its backing was the making of Linux, IBM, to no one's surprise, has thrown its support behind cloud computing, that delicious nexus of every chi-chi buzzword technology currently in vogue: Web 2.0, rich Internet applications, software-as-a-service, SOA, grid computing, Web Services, virtualization and utility computing.

IBM calls its initiative Blue Cloud - like it could have another name - and claims it's a "game-changing model for Internet-scale computing," providing customer with just the right size computer power while at one and the same time being "green" as well as "self-healing and self-managing" based on open standards and Linux.

Lordy, if this thing was a cute guy with money, it would be every mother's dream.

Anyway, IBM says it's got 200 researchers around the world developing Blue Cloud technology and it's collaborating with some companies, universities and government agencies like - brace yourself - the Vietnamese Ministry of Science and Technology.

Blue Cloud, when realized, is supposed to break businesses out of the old-fashioned "single server mind set," silly old local machines and remote server farms, IBM says, and transport them to the delights of a large pool of globally accessible systems where the Cloud breaks up data-intensive requests for videos, 3D images and online commerce and parcels the data into little chunks to be processed simultaneously by many computers linked to run without human intervention.

At this point IBM figures to have fully preloaded x86 and Power Clouds - BladeCenters and then dense rack clusters, it appears - bundled with software that can be grown on-demand available by the spring. There'll be a zSeries mainframe cloud available sometime next year too armed with a very large number of virtual machines.

IBM says its "secret sauce" is the virtualization software that automates, self-manages and -heals the cloud, to wit, open source Xen and PowerVM as well as its Hadoop parallel workload scheduling. Naturally IBM is using Tivoli to manage the things and is guaranteeing instant provisioning across multiple servers.

The promise is the possibly of reducing the cost and complexity of the huge scale-out infrastructures required by the growing legions of connected devices and real-time data streams, search, social networking and mobile commerce.

IBM and Google are already busily establishing cloud computing in the academe.

Blue Cloud grew out of an internal IBM portal called the Technology Adoption Program used by IBM programmers for testing.

Link: IBM's Got its Head in the Clouds @ WEB 2.0 JOURNAL.

WSJ | SAP TomorrowNow Unit Managers Step Down

Senior managers at an SAP AG unit that has embroiled the German software maker in a legal dispute with rival Oracle Corp. have resigned, SAP said.

SAP said it might seek to sell the Texas unit, called TomorrowNow. Oracle sued SAP in March, alleging that employees at TomorrowNow had stolen proprietary information from the Redwood City, Calif., company.

SAP executives disclosed in July that the Justice Department is investigating the matter.

Oracle complained in its suit that TomorrowNow employees had "used the log-in credentials of Oracle customers with expired or soon-to-expire support rights," and then "accessed and copied thousands of individual software and support materials."

SAP then used the material to offer "cut-rate" support to Oracle customers in an attempt to lure them, Oracle said.

SAP said TomorrowNow Chief Executive Andrew Nelson and several members of his senior-management team were leaving the Walldorf, Germany, company. Mark White, who was appointed executive chairman of TomorrowNow after Oracle's lawsuit was filed, will remain in his position, SAP said. Mr. Nelson couldn't be reached for comment.

SAP is actively defending against Oracle's lawsuit, filed in U.S. District Court in San Francisco, with hearings expected to resume early next year.

An Oracle spokeswoman declined to comment.

Link: SAP Unit's Managers Step Down - WSJ.com.

WSJ | IBM to Buy Cognos - Further Legacy Vendors Market Consolidation

International Business Machines Corp. (IBM) said it will acquire business-software developer Cognos Inc. (COGN) for about $5 billion in cash, a move aimed at keeping up with rivals in the increasingly attractive field of business intelligence.

Under the agreement, IBM will pay $58 for each share of Cognos, an Ottawa-based software company whose products help businesses to manage their information flow and gauge their performance. The offer represents a 9.5% premium over the Friday closing price of Cognos shares.

Cognos shares were recently trading up $4.24, or 8%, to $57.22, while IBM shares were up $3.24, or 3.2%, to $103.49.

The deal comes as the race for business-intelligence assets accelerates. Just a month ago, SAP AG (SAP), the world's largest maker of business software, offered $6.8 billion for business-intelligence specialist Business Objects SA. Earlier this year, Oracle Corp. (ORCL) bought another business intelligence specialist, Hyperion Solutions, for $3.3 billion.

Steve Mills, the head of IBM's software group, said acquiring Cognos - which already had a business partnership with IBM - was not inspired by those deals. IBM has been on an acquisition tear in recent years to build out its software portfolio and improve the company's overall profit margins.

"We never do acquisitions on defensive moves or based on what others are doing," Mills said.

The research firm IDC estimates the market for business intelligence is worth about $6.3 billion in worldwide software revenue. When the Business Objects deal was announced, analysts said such an acquisition would get the likes of Microsoft Corp. (MSFT), Hewlett-Packard Co. (HPQ) and IBM to review their business-intelligence strategy. They pointed to Cognos as the most attractive potential acquisition target because of its independent status.

Andreas Bitterer, vice president at research firm Gartner, said the deal happened very quickly, suggesting there is a new sense of urgency to acquisitions in the sector as the most attractive targets disappear fast. "This is the end of business intelligence as we know it. The IBM move is evidence of the domino effect that's affecting the sector," he said.

While a counterbid is possible, Bitterer emphasized that IBM and Cognos have a long working relationship - something that plays in IBM's favor.

IBM, of Armonk, N.Y., said the acquisition supports the company's so-called Information on Demand strategy to provide a complete suite of software to help companies manage their data and run their businesses more efficiently. IBM said the Cognos deal is the 23rd acquisition undertaken as part of that strategy, unveiled in February 2006.

Cognos has about 4,000 employees and more than 25,000 customers. For the fiscal year ended Feb. 28, Cognos reported net income of $115.7 million on sales of $979.3 million.

The deal is expected to close in the first quarter of 2008 after a "plan of arrangement" is completed. Under that type of merger approval, a special meeting of shareholders is set up and two-thirds of the votes cast must favor the transaction.

IBM intends to integrate Cognos within its Information Management Software division. Cognos CEO Rob Ashe will continue to lead the business.

By sales, software remains the smallest of IBM's three main lines of business, but it is by far the biggest driver of profit growth. Big Blue's giant services arm has narrow profit margins, and its core hardware unit is struggling with weak sales growth. But margins in software are fat and, boosted by deals, sales are growing well.

Link: Article - WSJ.com.

TechCrunch | Set the Data Free

Is OpenSocial open enough? The problem with OpenSocial, Google’s new platform for social-networking apps, notes Tim O’Reilly, is that it doesn’t go quite far enough. It lets applications out from the confines of any one Website, but it does not let the data out. Apparently, you cannot mix and match data from more than one app to create a new social app. This is wrongheaded, argues O’Reilly:

It’s the data, stupid.

We don’t want to have the same application on multiple social networks. We want applications that can use data from multiple social networks.

That is an important point. You cannot have a proper mashup without complete data portability. Programmers would prefer to have access to the underlying data powering these social apps so that they can create their own new social mashups. Such new social apps would also benefit consumers who would have more social apps to choose from, and broaden the market overall.

Unfortunately, the business models have not been worked out yet to accommodate such mixing of data. If a social mashup starts making money from ads, how would that be split up between the host site, the app developer, and all the other applications or social networks from which that mashup pulls data? O’Reilly doesn’t really have an answer for that one.

Under the OpenSocial rules, it is the host sites who make the rules. The more players involved in any given app, the more complicated the economics—unless they take the Facebook approach that data can move everywhere, but you only make money on the pages you control.

Link: “Set the Data Free”.

Read/Write Web | E-Government Meets Web 2.0: Goodbye Portals, Hello Web Services

Gartner recently released a couple of reports on how web 2.0 technologies are being used in e-Government. The reports are entitled The E-Government Hype Cycle Meets Web 2.0 and Government and Web 2.0: The Emerging Midoffice. Both are about how modern e-government efforts are moving away from the 'one stop shop' portal approach that characterized early efforts, and are turning more towards mashups and (to quote the first Gartner report) "a number of mostly adventurous initiatives with blogs, wikis or islands in Second Life." But it's the ecosystem of Web Services - and the reusability of content and services that Web Services enable - that really excites Gartner about web 2.0 in e-government.

Control

The 'Hype Cycle' Gartner report makes it plain that Gartner analysts do not consider all aspects of Web 2.0 to be useful in e-government. Wikis, Ajax, virtual worlds and blogs require "control" if used in an e-government context, according to this passage:

"Actions such as jumping on the wiki bandwagon, leveraging technologies such as Ajax for richer user interfaces or diving into virtual worlds to entice the so-called "digital natives" will result in a sudden awakening for governments. We expect several governments in developed economies to establish virtual government strategies that define how to participate in a variety of virtual communities, ranging from internal ones that engage employees, to external ones where they will reach out to constituents.

Such efforts will provide value only if they are very well-focused and conducted — at least initially — in the context of gated communities where governments can exercise some degree of control."

Don't all IT projects require focus? Admittedly though, for government business it is important to have strict security, ID, accountability and compliance functionality in place. These things have presented challenges for quite some time in regards to wikis and blog. However, products like Atlassian - which recently partnered with Microsoft to integrate with SharePoint - have more than enough 'control' to satisfy most government departments.

Gartner encourages e-government efforts to "experiment with innovative means to better serve and engage constituents", but it warns that "such pilots have to remain very well-focused and somewhat isolated from mainstream processes for at least the next two years."

Note: this isn't an official government presence in SecondLife. Image by hackshaven

Web Services to the Rescue!

Where Gartner sees the most potential for web 2.0 in e-government is "the shift from service-oriented to Web-oriented architectures (WOAs)", which Gartner states will "have a much greater potential effect on the ability to transform government than anything else in the Web 2.0 world." By WOA, they primarily mean Web Services and mashups. In particular, Gartner says that Web Services should be reusable. They encourage information to be designed "in a more-granular fashion", so that it can be mashed up and reused by others - which they call "(partially) unintended use". The report also points out that this information should be made available to non-government entities, where appropriate.

In the other report, 'The Emerging Midoffice', Gartner discusses how mashups, REST and other Web Services technologies (bundled into the term "Midoffice") can be used in e-government initiatives. The reason, states Gartner, is that "in the future, government single points of contact will become even less relevant than they are today." This trend follows online consumer behavior and the popularity of web 2.0 technologies. R/WW readers will know that web 2.0 has been infiltrating the enterprise and other organizations for the past couple of years - a trend often termed 'the consumerization of the enterprise'.

e-Government Portals Become Less Important

The second report mentions that more citizens are using [consumer] "information and service aggregators, as well as social networks", to get the government information or services that they need. The report states:

"The first-stop shop for almost anything on the Internet is a search engine, a personal home page, or a preferred home page that matches the consumer's needs and interests. This type of home page is likely to be provided — not by a government organization, but by an Internet player (such as Google, Yahoo or MSN), a media company (such as CNN or The New York Times), a telecom operator (especially for mobile devices), an investment firm, a parent association or a golf club."

These are all channels that consumers use to find Internet services and content nowadays - and Gartner suggests that consumers will expect to find e-government services through those channels too. So Gartner's conclusion is that governments "should make sure that their information, services and applications are accessible through a variety of different channels, some of which are not controlled or directly owned by government."

Conclusion

These two Gartner reports suggest that there are opportunities for startups to provide information and services channels for e-government. We're already seeing it on a larger scale with Google, eBay, Facebook and others. But there are probably hundreds or thousands of niches open to startups to explore, to provide channels for e-government. For example job search engines and aggregators could hook into government Web Services for unemployment. It will be different for each country of course.

There are challenges for startups too. On the question of accountability, the second report states that "in most cases, government remains accountable for what each of its more granular Web services is bound to provide, but service aggregators and intermediaries are liable for how they process and transfer information between those services." Privacy and security are two other issues - Gartner suggests a federated identity scheme is required for the latter. So working with e-government will require more complexity; and perhaps giving governments the "control" they need too.

Overall, it is very encouraging to see web 2.0 technologies being used more in e-government initiatives these days. In the early part of this century I was very interested in e-government, but at that time the 'one stop shop' portal approach was king. In 2007 - in the era of search, aggregators, Web Services, social networks, etc - e-government is much more about 'small pieces loosely joined'. Or at least it promises to be, which will benefit citizens as well as startups looking to tap into this very large market.

Thanks to Gartner for providing the above-mentioned reports to us. Top image by ClintJCL

Link: E-Government Meets Web 2.0: Goodbye Portals, Hello Web Services.

Gartner | Microsoft Oslo Tries to Leapfrog Application Platform Rivals

Event On 30 October 2007, Microsoft announced Oslo, its technology strategy for designing, building, deploying and managing composite applications. Oslo will encompass several products, including BizTalk Server, BizTalk Services, .NET, Visual Studio and Microsoft System Center. Analysis Oslo is Microsoft's effort to jump ahead in markets for service-oriented architecture (SOA) and business process management software, and prepares the ground for further advances in the software-as-a-service (SaaS) market. Oslo-based composite applications can be deployed "on premises" and "in the cloud," following an application-platform-as-a-service model and a dynamic scale-out deployment architecture. Oslo is based on a decentralized service bus and application platform architecture that is intended to be more naturally capable of the scalability and heterogeneity needed for global composite applications than other more centralized architectures. Oslo is an opportunity for Microsoft to break out of its isolationist stance on SOA into a more forward-looking view. It attempts to go beyond current model-driven approaches in three ways: Its meta-modeling language — the most complex aspect of modeling — which promises to be much simpler than previous languages Its approach to weaving together a much broader fabric of domain-specific models such as process, identity, security, topology, policy and management Its ability to bind those models to heterogeneous realization environments The size and scope of Microsoft's investment makes the initiative credible, but it faces stiff technical and marketing challenges. Historically, projects this complex and ambitious (from Microsoft and other vendors) have been delayed, reduced in scope and changed direction several times before delivery. Microsoft is a late entrant to the composite application market, and unless it quickly provides more details of its unique approach, Oslo runs the risk of seeming either a me-too offering or unrealistic. Oslo products will not be available before 2009, so Microsoft may continue to lag leading Java Platform, Enterprise Edition (Java EE) vendors such as BEA Systems, IBM and Oracle when it comes to enterprise computing.

Recommendations

Microsoft users and partners: There is no need for immediate action, but analyze Oslo technology as soon as technical previews are available (likely in 2H08) to determine the impact on investments related to .NET and BizTalk. Prospective users: Evaluate Microsoft products on their current merits, but factor in the potential benefits of the Oslo vision. Challenge Microsoft on its commitment to deliver business-level services that can legitimize the idea of Software + Services. Challenge the model-driven software idea by demanding those models enable people-driven processes as well as system-driven ones. Composite application infrastructure vendors: Don't engage in "format wars." Any successful composite application architecture will have to be based on open standards. Work together to define common standards and then compete on the best implementations, just as with Java EE and Web services. Additional research contribution and review: Daryl Plummer.

Recommended Reading

"Magic Quadrant for Application Infrastructure for Composite-Application Projects, 2Q07" — This market is still in its infancy and vendors' positions will change, but sound technology is available. By Massimo Pezzini and others "Introducing SaaS-Enabled Application Platforms: Features, Roles and Futures" — Emerging SaaS-enabled application platforms are starting a new cycle in the battle for industry influence and leadership among vendors of core application platform stacks. By Yefim Natis (You may need to sign in or be a Gartner client to access the documents referenced in this First Take.)

Link: Microsoft's Oslo Tries to Leapfrog Application Platform Rivals.

VentureBeat | Xkoto, data virtualization for large companies, raises $7.5M

Data virtualization is a way of creating a “virtual” copy of data on a centralized server to make it accessible to more users. Essentially, the data is distributed across a network, allowing companies to avoid investing in expensive servers for better performance.

The company, which counts Genworth Financial, Travelport and United Healthcare among its customers, also brought on new CEO David Patrick, the former head of Ximian, a company acquired by Novell.

The funding was led by GrandBanks Capital, which is located in Boston, along with GrowthWorks Canadian Capital. Xkoto will also move soon, from Toronto to Boston.

Link: VentureBeat » Xkoto, data virtualization for large companies, raises $7.5M.

WSJ | Sun Micro Posts a Profit, But ...

Sun Microsystems Inc. continued a comeback in its fiscal first quarter, though sales grew a bit less than Wall Street expected.

The Santa Clara, Calif., company swung to a profit in the period ended Sept. 30. But revenue grew just 1%, sending Sun's shares down about 2% in after-hours trading following the news.

Sun, which specializes in server systems, experienced a string of quarterly losses and revenue declines during a slump triggered by the Internet bust earlier in the decade. But the company's bottom line has improved, due to new products and cost cutting during the past fiscal year.

Sun said operating expenses in the first quarter fell 3% to $1.39 billion from $1.43 billion in the year-earlier period. Some $27 million was trimmed from the company's research-and-development budget, which totaled $446 million in the quarter, and the company's gross profit margin of 48.5% was five percentage points higher than the year-earlier period.

"We continued to focus on operational discipline and execution in our first quarter," said Jonathan Schwartz, Sun's chief executive officer, during a conference call with analysts. He added that the company's focus in the current fiscal year will shift to boosting revenue. "Top-line growth is absolutely our No. 1 priority," he said.

The latest quarter included a restructuring charge of $113 million, or three cents a share. The company attributed the quarter's slight sales gain to increased sales of its high-end servers and identity-management software. In August, the company introduced a long-awaited chip called Niagara 2, which Sun says can carry out as many as 64 sequences of programming instructions simultaneously. Servers based on the chip were announced in October.

Revenue from selling computer systems only increased by 0.5%, and revenue from support services fell 0.8%. But the company's storage business posted a 2.9% increase in sales, after struggling for the majority of the company's previous fiscal year. Sun also posted a 7% increase in its professional and educational services sales.

Toni Sacconaghi, analyst with Sanford C. Bernstein & Co., called the quarter mixed. While Sun's improved gross margins were a positive development, Sun's server sales face problems that include declining demand for systems based on the Unix operating system -- long a hallmark of the company -- and stiff competition from rivals such as Hewlett-Packard Co., International Business Machines Corp. and Dell Inc.

"This has been a problem for several years now," Mr. Sacconaghi said. "Really what we need to see is if this company can ever grow again, and the jury is still out on that question."

The company reiterated that it expects revenue in the current fiscal year, ending in June, to grow by a "low-to-mid single-digit" percentage over the prior year. Michael Lehman, Sun's chief financial officer, added that the company's revenue will be higher in the second half of the year.

Link: Sun Micro Posts a Profit - WSJ.com.