By APNWLNS payday loans
December 5, 2006
An industry pundit with some serious delusions said that Open Source was "anti-capitalism." His assertion was that Open Source would not only cripple commercial software companies, but that the dot-communism crowd was doing so on purpose.
Silly executive! Increase your dosage and call me in the morning.
Every participant in every market reacts to every other participant both
individually and collectively. Regardless of their stripes, participants place their bets on solutions they believe will serve them the best. With technology, and especially IT technology, these are longer term wagers that may involve antes of capital, manpower, or sheer heartache.
I maintain the Open Source is a capitalist reaction to both new opportunities and market imbalances.
The opportunities afforded by Open Source are multifaceted. On the purely commercial aspect of it, there are financial (i.e., cheap) motives as well as strategic (i.e., CxOs want to consolidate IT skills, which in the long run saves money, which is cheap).
From the technical side, there are human desires to write systems code (every programmer secretly wants to be a systems programmer, and thus they will invest their time and talent for the joy and gory glory of contributing to Open Source projects). In production, Open Source gives IT professionals desired latitude to implement solutions that will not drive them into an early grave due to pure frustration with vendors.
All of these aspects, since they are based on free will and requisite investments, are capitalist reactions to the market. And the reaction is coming due to the perceived (if not actual) market imbalance held by vendors in general, and Microsoft in particular.
Markets react negatively when any one company or set of companies gain too much power (take note Larry … a backlash awaits you). If the market can invest in competing solutions, they do so, or at very least they will invest enough in competing solutions to keep the primary vendor on guard (I used to keep coffee mugs from IBM, DEC, and HP in my office and would use a competitor’s mug on days when a sales person was scheduled to visit). When voting with dollars fails, the market will employ the heavy club of government and unleash anti-trust hell hounds on the market leader.
Open Source is a market reaction to the dominance of a mindset — that the bulk of a solution set should come from a vendor. Though Microsoft is the obvious villain in this tale, so too are HP, IBM, and Sun who (for servers at least) long tried to build barriers to customers investing in competing technologies. Linux made the game nearly vender neutral, and eliminated the imbalance in the market.
Linux leveled existing markets that is. In new markets, not even Microsoft Windows will be able to build escape barriers because those markets may never adopt proprietary products to begin with.
It seems that in many emerging markets, where computing technology is a new phenomenon, people are uttering such quaint phrases as "Who is Microsoft? What is Windows?" Since wealth is an uncommon concept in these societies, they choose to implement what they can afford, and technocrats provide schools with Linux. Thus, entire flocks of future IT and knowledge workers are growing up completely ignorant of Windows, AIX, HP-UX and Solaris. In other word Microsoft, HP, Sun and IBM have no brand recognition in countries that may well outstrip North America in total IT software consumption in the decades to come.
As we all know, a lack of brand awareness defeats all subsequent marketing efforts. At least HP, IBM and Sun have hardware to peddle. Aside from keyboards and mice, Microsoft has does not, and may well be shut out of India, China, and other
neo-techno markets.
Bill Gates who?
November 28, 2006
Regular reader know painfully well my position concerning IT technology and how the application drives everything. No computer, middleware, database or even operating system is purchased except for the explicit purpose of supporting application software.
Now BEA is trying to remove the operating system as part of the stack.
BEA is producing a version of their WebLogic server runs Java directly atop a hypervisor, and eliminates the need for an operating system while delivering virtualized instances of the application server. In this Java becomes the unified OS and application server, dependant perhaps only on a DBMS somewhere on the network. Will it be long before a smart DBMS vendor or Open Source project creates a database system that too requires no OS?
With Sun Open Sourcing Java, with BEA creating OS-less application servers, and much of tomorrow’s applications becoming Java based, we may be witnessing a new definition of an IT stack — one that eliminates an entire layer and, in the process, eliminates the need for Microsoft, Red Hat, HP-UX, Solaris, or AIX.
Profit margins in the high tech world have been moving up the stack ever since Linux became enterprise grade. BEA’s approach pushes them a little higher, making profitability in IT technologies more and more an applications game. We’ll know for certain that this is the future wave the moment we see the Apache Group deliver an OS-less application server like BEA’s.
November 14, 2006
I am far too fond of preaching about seismic market shifts. But like any earth moving event, a large change is the herald of new realities, and those who ignore such seismic shifts get trapped under the rubble.
In as many weeks we have witnessed two seismic shifts in the software market that are worthy of worry and wonder. One contains an undercurrent of suspicion, and the other a ray of insane hope.
Novell and the Evil Empire: Most of the IT tech world collectively gasped when perennial foes Novell and Microsoft shared a stage and croaked forced love songs to one another (how anyone could sing romantically into Steve Ballmer’s mug is beyond the bounds of reason and digestive resilience). I know personally the depths of loathing within Novell for all things Microsoft having shared a Brainshare stage with Novell’s (then) co-chairman and his guest, Linux Inventor Linus Torvalds as we gleefully and publicly slammed Microsoft’s fault-prone technology (Torvalds, being a perfect gentleman in all respects, said nothing negative about Microsoft or anyone else). Novell has long had a nearly psychotic mindset and mission to destroy Microsoft given how Microsoft single-handedly wiped out Novell’s Netware-based PC networking empire. Call it a passionate grudge.
Like politics, market realities make for some very odd bedfellows, and none stranger than Novell and Microsoft. It may be a corporate shotgun wedding, but one in which both paramours get collateral benefits aside from a flesh-and-blood bed warmer.
With SCO breathing their last financial breath, barely having in reserve two fiscal quarters of cash at current burn rates, and destined to lose their UNIX copyright challenge, Microsoft knows (a) that Novell will hold some Intellectual Property (IP) keys to the UNIX/Linux universe and that (b) Microsoft uses or is dependant on those IPs. Microsoft must play nice with Novell as they will soon key the king maker in those markets.
Novell faces a similar problem in as much as Linux, the center post of Novell’s Open Enterprise strategy, may well have some IP conflict with several hundred Microsoft patents. Nowhere is this more likely than with SAMBA, which allows Linux to poach Microsoft’s foundation of file and print services. Novell needs to protect itself from Microsoft’s litigation team, and offer their customers a level of legal security above and beyond potentially ruinous indemnification plans.
Given that the commodity server market was being divided evenly between Windows and Linux, it was time to call a truce of sorts. Microsoft wins because they can now control part of the Linux destiny by proxy, and Novell wins because they have a FUD tool with which to club Red Hat senseless. Coming on the heals of Oracle legally purloining Red Hat’s work to provide and support their own Linux distribution, Red Hat faces multilateral market mayhem …. which is exactly what both Microsoft and Novell want.
Lurking beneath these realities are the lawyers, a mutant species of dangerous but useful homo sapiens with which both Microsoft and Novell have great experience. Microsoft’s covenant to not litigate against "non-commercial" Open Source developers is a shallow promise.
Those who have read the agreement in detail claim that Microsoft has the ability to alter this covenant at will, which means anyone aside from Novell employees (who are contractually exempt) can be targeted at future dates. They also note that the covenant does not protect Non-Novell Linux end users, though I think Microsoft would suffer irreparable harm in the market and within anti-trust agencies if they even thought about suing Linux users. But Microsoft can use the FUD to halt erosion of it’s server sales opportunities, and Novell can use the same to switch Linux devotees away from Red Hat (having Larry Ellison as part of the Red Hat dynamic only amplifies
buyer angst).
The final facet is the mutual pledge to collaborate on products, though the cited collaboration has drawn a collective yawn from the market. The two IT software giants have proposed to support each other’s virtualization schemes (which they would have to do just to survive in the market), agree on a web services based approach to virtual and physical server management as well as federate their respective directories, and help Microsoft enter the 21st century by supporting (albeit in a limited way) open document formats for desktop applications.
Of these, mutual server management is the most compelling, and thus the most frightening. If their solution is jointly proprietary, the rest of the industry is largely shut out of the homogeneous commodity server management space. With x86/64 servers now the backbone of modern IT shops, and littering the racks of sites everywhere, and with such Microsoft/Linux based servers eating away at all competitors, this new partnership and collaboration is designed to block acceptance of alternative management tools. If you run commodity servers, and you use both Windows and Linux, then you will turn only to Microsoft and Novell for the mutual management of both.
Open Java: I’m not fond of eating my own words, but I will have to be humble (grumble) and acknowledge that my doubts about Sun opening Java were failed predictions given the weekend Grand Opening of Java under GPL. Though having no immediate impact on the market, like Linux in the early days this is a market shift that shant be ignored.
One must stipulate that applications sell everything. The only reason anyone buys a server or an operating system is in order to run an application. Java runs applications, with the enormous benefit of not being very picky about which server/OS combination upon which it executes. There are even OS-free Java-based devices, making the total market acceptance of Java deeper.
Putting Java under GPL (well, at least as much as they could given that there are some third party tidbits baked in) brings to the market a new dynamic. As Linux created relative vendor neutrality about the operating system, GPL Java will bring vendor neutrality about the execution environment and programming language. Already popular, Java now is free from the FUD constraints of vendor control, and can happily expand in the agora of ideas that a truly Open Source solution provides.
For the market this means a strong pull to put future applications on Java, and by default not put them on Windows or Linux per se. Application vendors like Oracle will have a clean path/conscious to ignoring allegiance to one OS vendor or another (removing some of the nuvo market power created by the Microsoft/Novell announcement). Likewise customers will have greater affinity for such products as the litigation threat by either Microsoft or Novell is diminished — it is relatively painless to move a Java development or execution stack from one OS to another, and thus banking your company on a GPL-Java application is less of a gamble.
(The interesting side note is that Sun decided to use the existing GPL version 2, and not the new and somewhat controversial version 3)
Why the market should care: In glacial terms, the operating system will become less important. Microsoft and Novell are engineering short- to mid-term market strength by casting FUD and creating joint value to divvy-up the server market while blocking some essential markets to viable competition. But the market always reacts to unhealthy consolidation of power, and Sun has given the market a long-term way out.
- If you are in the application business, you have a clear path to
creating a more compelling customer value proposition.
- If you are in the middleware business, you have fewer choices to make
which is good for you, and ultimately good for your customer.
- If you are in the OS business and are not Microsoft or Novell, you may
want to consider a new line of work.
- If you make hardware, these moves drive you even further toward a purely
commodity market and you must develop an
operational discipline that contains your costs to preserve your
margins.
October 31, 2006
Business models are beautifully tragic things. Like Shakespearian economics in action, we see mighty kings brought low by pivotal character flaws. Fundamental weakness will draw heroes or villains to ruinous demise.
Which may be how Matthew Szulik, CEO at Red Hat feels today.
To the surprise of very few, high tech’s own Darth Vader, Larry Ellison, found a way to take command of the entire IP stack with little investment, a lot of grand media attention, and the fulfillment of his own
addiction to winning for the sake of it. For months Ellison had pondered publicly about the desirability of adding Linux to Oracle’s portfolio, and thus providing to enterprises every element of the server stack above hardware.
Ellison found a way to do that by legally swiping the hard work of others (i.e., by hijacking Red Hat’s Linux distribution) and discounting competitor support pricing. Indeed, all Larry and his buccaneers have to do is provide adequate support, at which they failed in the first week.
There are so many technology marketing parable at play in this saga that volumes will undoubtedly be penned and published (hmmm, perhaps I should write another book). The ones worth examining include Red Hat’s fundamental business strategy mistake, Novell’s lucky coincidence, and where demand and branding play in customer buying.
Red Hat is a one trick pony. All they offer is repackaged Open Source software and support to go with it. I won’t argue if their products are good or bad, because I have financial biases toward the SuSE brand. But Red Hat’s business model has a genetic defect in that all their revenue comes from
a single, and very exploitable fount. Red Hat placed all their financial eggs into one market basket, leaving them vulnerable to the effects of usurpation by more dominate forces. And if there is a more dominate force in the IT technology business than Larry Ellison, I don’t want to witness it.
Red Hat’s weakness was more profound than proprietary software vendors in as much as what they sold was, by deign of the underlying license, free to poach. Within a day the financial markets scrubbed away 26% of Red Hat’s market cap, which likely caused everyone at the newly acquired JBoss to weep in despair given that part of the acquisition deal involved Red Hat stock and saved JBoss from Ellison’s clutches, a fate that may be reversed in the future. Investors understood the implications of having $96B in capitalization compete against Red Hat’s, which is now only 3% of Oracle’s. If Red Hat were more diversified, the impact and the discounting of their share price might have been lessened.
Take Novell as an example. On the same day that Red Hat’s stock was chopped up like so many characters in The Bard’s plays, Novell fell only a fraction. Granted, Novell’s Linux revenues are small compared to Red Hat’s, but they are also vastly more diversified. Despite proclaiming being the vendor of “Software for the Open Enterprise“, Novell still peddles proprietary goods in prestigious amounts. The market punished the weak in Darwinist fashion, penalizing Red Hat’s pure bread genetic defects and
being more kind to Novell’s mutt genealogy.
Open still is the question of the ultimate outcome from Ellison’s maneuver. Within IT circles there has always been a desire to have “one throat to choke”, a quaint and semi-violent way of showing preference in buying the bulk of your IT technology from one vendor, and by doing so having one source for fixing problems. This is Larry’s gambit – to give IT buyers a driving reason to choose
Oracle. If you actually implemented an OS-to-application stack from Oracle, and assuming you were not previously institutionalized, nothing short of a hardware failure would fall outside of Oracle’s sphere of responsibility. This is attractive to CIOs as it reduces variation in the data center, and gives them mighty leverage when negotiating with their master vendor.
Shrewd too was Larry’s decision to purloin Red Hat’s code. Red Hat is the Linux market leader, and Ellison is now offering Red Hat Linux and support for less. IT buyers get the Red Hat brand and Oracle’s
throat. IT benefits. Larry benefits. Red Hat gets dirked faster than Polonius, which shows the real value of being true to thine’s own self.
It will take time to play out, but if Ellison’s strategy works and IT buyers flock to Oracle for Linux bits and backing, then Red Hat’s revenues will decline. This will inevitably lead to fears of their stability, dropping of share price, and I’d wager Larry executing a hostile buyout at deeply discounted share price.
Oddly the two companies likely to benefit the most from Larry’s New War are Novell and IBM, who have been so tightly entwined that rumors of romance between Hovsepian and Palmisano persist. Novell will pick up refugee Red Hat customers who loath Larry and all he stand for. IBM wins as their services group makes money from any messy situation. And I have few doubts that the two are already collaborating on how to take advantage of any technological breakdown and violation of the Open Source mantra that may arise from Oracle butchery of Red Hat code, or Red Hat attempts to prioritize any Open Source.
Indeed, misery acquaints a man with strange bedfellows.
October 28, 2006
Well, I went and did it now. I managed to become a judge for the 2007 CODiE awards. I’ll be covering a couple of categories including groupware. Send bribes to the address on the contact page … just kidding!
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