Trends I'm Watching

Implications of Google's Postini Purchase

Trend: Google is moving into enterprise software. Companies like Microsoft, IBM, and Oracle cannot ignore their most recent move.

Bill Burnham at Burnham's Beat discusses Google's July 9 purchase of Postini for $625M in cash. Excerpts below.

Link: Burnham's Beat: Google's Postini Buy Has Some Interesting Implications

Google is definitely going after Microsoft's Exchange franchise.  With the addition of Postini, if they just add push e-mail support and an off-line client, GMail will basically be as good, if not better than Exchange.

This is not good news for other anti-spam companies, especially if GOOG decides to offer Postini's basic anti-spam services for free.

If you look at Google's recent enterprise oriented acquisitions they are building a pretty compelling set of hosted applications.  Not only do they have e-mail covered but they have the big three productivity apps (word processor, spreadsheet, presentation) covered as well.  They also added in Wiki capability (via JotSpot).  To link all this together all they need is a hosted file server and integrated search across all these apps (basically a hosted version of Google Desktop).  That's a pretty powerful suite of services.

Google not only can afford to pay more for companies, it does pay more.  Google's competitors simply can't compete with Google's prodigious cash flow, multiples, and willingness to take dilution. Google not only pays more, but is perceived as a better place to work by most targets.  Thus, the management team is happy to support a Google deal because they know their team will be happy.   This does not bode well in the short term for Google's competitors.

Google’s Growing Online Office

Trend: Microsoft Office will be under assault by web-based applications soon. Google may provide the most significant challenge.

Jim Hedger describes Google's no-longer-secret moves to build a suite of office applications that could challenge Microsoft Office as the dominant productivity application platform.

Source: Google’s Growing Online Office

Google purchased Upstartle, the maker of a browser-based word processor called Writely.

Writely is an online word processor that enables multiple users to access and work on documents from any location. It can be used as a collaborative editing device and offers users online publishing options including the ability to convert Writely documents into “normal-looking web pages” or blog postings.

The acquisition of Upstartle, combined with other current and pending Google services poses a serious challenge to Microsoft’s desktop oriented products. Google is clearly building a suite of branded, browser-based applications that contains several daily use products designed to capture users from Microsoft Office.

Slashdot published a story suggesting Google is running a closed beta test of Google Calendar, including a link to a series of screen shots. The project, nicknamed CL2, will be integrated with Gmail in the future.

The stakes for both firms are high with Microsoft preparing to release its new Internet focused operating system, Vista before the end of 2006. Until recently, Microsoft was able to bank on the storage space offered by personal computers. Its operating systems run from the hard drive and most digital documents composed by computer users are stored on those users’ hard drives. The security of the hard-drive dependent storage system Microsoft enjoyed is about to change radically.

At its Analysts Day, held earlier this month, Google inadvertently announced the development of Gdrive, a virtually infinite, online data storage service. A series of slides offering preliminary details of Gdrive were included in notes for one of the day’s PowerPoint presentations but were later removed by Google.

"The notes were deleted from the slides we posted because they were not intended for publication," Google spokeswoman Lynn Fox said....

Google, like its competitors, is becoming a second generation web hosting firm. Another line from Slide 19 says Google wants to be able to “… house all user files including Emails, web history, pictures, bookmarks, etc and make it accessible from anywhere (any device, any platform, etc).”

Gdrive, like Writely is designed to facilitate work-group collaboration, much like a central file server in most IT offices does now. The copy kept on the hard-drives of members of a working group will be a cache of the most recent version displayed on that particular computer, but not necessarily the most up-to-date document.

Google Labs is pushing the other major Internet and search firms to work harder and faster. The addition of Writely to Google’s stable of membership-based products raises another series of hurdles for Microsoft and might force them to refocus their Vista strategies. Microsoft was hoping to challenge Google’s search dominance by integrating search within the desktop and operating system. Google appears ready to flank them by moving applications formerly found on the desktop into its sphere of search-related products. 2006 is shaping up to be a most interesting year.

Web-based office software

Trend: Software as a service is about to become much more visible as web-based office software (word processing, spreadsheet, and presentation applications) become functional and available.

Richard MacManus at ZDNet describes why web-based office software is coming and why it will be good for most businesses. Excerpts below.

Link: ? Why you need a Web Office | Web 2.0 Explorer | ZDNet.com

Collaboration

That's a key point - that office tools on the Web are about enabling users to more easily share information and collaborate. It's something existing desktop office tools are woefully inadequate in. Ever tried to email a Word document to 10 of your colleagues and then keep track of changes or suggested changes?

So here's where a Web-based word processing tool would come in handy. Imagine being able to view the latest version of a collaborative Word document, via your browser window. Instead of using emails to discuss the document, it's all done in one place - the URL of your online Word document. All changes are neatly tracked and versioned. Collaboration is happening, because there's a single point of reference on the Web - and it's not email!

Another positive for Web-based office software is that it makes integrating with other web-based software easier, via open Web standards and formats.

Reduces Costs

... "Web Office is cheap", which it certainly is compared to those large licensing fees your company is probably paying Microsoft currently! Plus as some commenters on Slashdot noted, deploying office software ONCE on a server is much more efficient than deploying hundreds or thousands of instances on desktops. It's also easier to do upgrades and backups.

Productivity

Business decision makers are interested in productivity - and Web Office software potentially increases that.

Does Distributed Software Development Work?

Trend: Software developers can work from any location with a broadband connection as long as appropriate procedures and tools are implemented.

Here are excerpts from an interview by GL Ness of Always On with Borland senior vice president Chris Barbin about distributed software development. (Disclosure: I do distributed development.)

Link: Does Distributed Development Work? :: AO.

There's something to be said for having a critical mass of people in one location: It makes it easier to communicate, collaborate, and learn. However, with the right technology, people skills, and processes in place, an individual working in a home office can just as effectively contribute to the team as someone working at headquarters or in a branch office.

...we're really only at the beginning of the virtual enterprise with software development. People used to think that knowledge capital had to exist in one place for software development to be most effective, but our customers have found this isn't necessarily the case. What is important is that the employer defines roles, responsibilities, and business goals up front and then properly aligns teams to accomplish those goals—regardless of where those teams are located.

Distributed development  is a broader term that refers to software that's being developed by team members in different locations: It could be in a different city, a different country, or by a different company altogether (as in outsourcing). Outsourcing,  in contrast, is just one type of distributed development scenario.

What's behind on-demand software's rise

Trend: Software-as-a-service continues to gain momentum.

Source: What's behind on-demand software's rise

Corporate IT is being drawn to the concept of software delivered as a service and its promise of less maintenance and lower operational costs. Vendors are responding with innovations and commitments to offer the model of hosted application services.

Software-as-a-service is a model of delivering software over the Internet, eliminating the need for companies to buy, build, manage and maintain infrastructure and applications. The concept has its roots in the application service provider (ASP) revolution that fizzled in the late 1990s, but it is now white-hot with its promised IT benefits and is putting pressure on vendors of traditional shrink-wrapped software.

Two recent surveys show that corporations are betting that software-as-a-service is a part of their future.

A survey released in November by AMR Research shows that more than 78% of 500 respondents across major vertical industries and company sizes are currently using or considering software-as-a-service. Only 18% said they have no plans to consider software-as-a-service.

In an October survey of 118 IT professionals by Cutter Consortium, an IT advisory firm, 65% of respondents said they were using or considering software-as-a-service, while 35% said they are not considering it. Of the 34% who are considering adopting software-as-a-service, 82% said they plan to do it in the next six to 12 months.

Economy of Scale Might Inspire Companies to Ditch IT Departments

Trend: Outsourcing corporate IT is becoming a viable strategy.

Link: Economy of Scale Might Inspire Companies to Ditch IT Departments

...journalist Nicholas Carr is infamous for his 2003 article in the Harvard Business Review declaring that information technology was no longer a significant source of corporate competitive advantage. Carr is back with an equally controversial notion -- the death of the corporate IT department -- that he launched in the spring issue of MIT's Sloan Management Review and is now peddling in speeches to business groups and industry conferences.

Now, Carr predicts, the same transition is coming to the world of information technology. Instead of each company buying, maintaining and upgrading its own hardware and software -- most of which are remarkably similar from one company to the next -- it will buy computing services from a utility-type company, paying for only what it uses while enjoying the lower costs that come from scale economies.

Carr argues that the current setup is rife with inefficiency and excess capacity, citing studies showing that the typical corporate data center uses, at most, only a third of its available processing power while more than half of its storage capacity is wasted. And if you are the typical employee, you use just 5 percent of the computing power of that PC on your desktop.

In essence, the trend toward centralization began back when Ross Perot first persuaded a corporation to "outsource" its IT department to his new company, EDS. And even before Carr's article appeared, companies like Sun and IBM were already peddling early versions of a utility-type service, renting out processing and storage capacity for a fixed unit-price. Sun is even setting up an online auction of excess computing capacity. MCI's Digex unit, meanwhile, has been targeting small and mid-size companies with data centers that use shared hardware and software in a utility-type arrangement.

Microsoft, meanwhile, is about to introduce a new generation of products -- Web 2.0 and Microsoft Live -- that essentially embraces the utility model by allowing users to buy into software over the Web rather than installing it on their own computers. And what is Google, after all, but a giant computer utility providing search capabilities and now a growing set of services to huge numbers of customers?

All this has profound implications for the type and quantity of equipment that will be sold, and how it will be priced. And, not surprisingly, the industry has largely pooh-poohed Carr's thesis and thrown up all sorts of reasons why things won't -- or shouldn't -- develop in that direction.

via The Business of Software

The Processor Wars: AMD's Momentum Increasing

Trend: Intel's processor dominance is weakening.

Source: Investor's Business Daily: AMD Gets Momentum In Yet Another Finding

Two industry reports recently found AMD gaining ground in the PC and server chip markets.

On Monday, a server hosting company called Rackspace Managed Hosting is set to release a survey showing that most of the 320 or so customers who responded prefer AMD technology over Intel technology, at least at the moment.

"It looks like perception is changing," said Paul Froutan, a Rackspace vice president.

In various data centers, San Antonio-based Rackspace maintains some 17,000 servers — both AMD-powered computers and Intel-powered computers.

Rackspace leases space on those machines and hosts applications for big users. It counts 15 of the Fortune 100 firms among its customers.

Rackspace says its survey was unbiased and that it had absolutely no stake in the outcome.

The hosting company says more than 15% of 2,111 customers queried responded to the survey. It says it has more than 8,000 customers overall; 36% of respondents said AMD offers either a little or a much better speed vs. 31% for Intel. The rest rated them even.

In power efficiency, AMD came out on top 34% to 26%.

Moreover, 65% said they "would not be prepared to pay a premium" for an Intel server. Froutan says that surprised him. Intel has worked hard to build its brand, he notes.

Intel didn't lose entirely. Asked, "In the long run, which company do you think will win the server race?" Intel won 41% of the vote vs. 11%. The rest were unsure.

Microsoft Acknowledges Software as a Service Threat

Trend: Software as a service threatens traditional software applications.

Source: Investor's Business Daily: Bill Gates Memo Aims To Rally Microsoft Around Web Services.

Microsoft (MSFT) must reshape its businesses to respond to the growing threat from Internet-based software and services, Microsoft Chairman Bill Gates warned senior executives in a recent memo.

The trend toward Internet services represents a massive and disruptive "sea change" for the information technology industry, and Microsoft must respond quickly, Gates wrote in the Oct. 30 memo, which leaked to the media Tuesday.

Analysts say the memo was meant to rally employees around a strategy to take on new competitors, such as Google (GOOG) and Salesforce.com. (CRM) Many of the company's new rivals offer software as a hosted service, which means it's delivered online.

Microsoft building a fully Web-based Office?

Trend: Most office software is difficult to install and too complex to use. There is a vacuum and an opportunity.

Microsoft changes direction very quickly for a large corporation. Making Office a hosted application will hurt their rich revenue stream from the Office Suite but will prevent other companies from stealing market share with a less expensive hosted solution.

Source: Microsoft building a fully Web-based Office? | Web 2.0 Explorer | ZDNet.com.

Microsoft is leaping into hosted applications big time. InformationWeek reports that Microsoft plans to offer hosted implementations of SharePoint, CRM and ERP applications. But the best quote in that article was left till last. A "Microsoft insider" was asked which other products and services Microsoft would host and the reply was: "Everything. Hosted Office. Everything hosted."

Ahem, can anyone say Web 2.0 Office? Exactly a month ago I wrote what turned out to be a very popular post entitled The Web-based Office will have its day. My main focus in that post was all of the small start-ups that are currently building web-based office apps. I forgot to mention that of course there's nothing stopping Microsoft from building their own Web 2.0 Office! Perhaps that's their only option to head off Google, because Google Office has been rumored to be around the corner for 1-2 years now.

Web-based Office Applications

My PC went dark last week. I felt sick thinking about re-installing all the applications on it (my data is backed up to a DVD every night). Not just re-installing, but getting all the updates and security patches in place. Fortunately, Windows XP Pro System Recovery let me recover and I didn't have to rebuild. But web applications look better and better when I think about installing software and keeping my PC secure from internet vermin.

Source: The Web-based Office will have its day | Web 2.0 Explorer | ZDNet.com.

A recent Computerworld article states that laptops will soon replace the desktop as the preferred business PC, citing mobility as the main reason for this trend. Microsoft office products - and increasingly OpenOffice and other open source desktop programs - will continue to be used on both laptop and desktop PCs for the forseeable future. The reason is the advanced and wide ranging functionality they offer, together with perceived stability in an office environment.

However I do think that long-term, the writing is on the wall for desktop office applications. Once the current crop of alpha and beta web-based office products reach a level of maturity, they will be ready to challenge Microsoft for the minds and pockets of consumers. One of the keys is achieving the level of functionality that Microsoft Office undeniably has. But there are also issues of online security and reliability that web-based apps will need to address, in time. Office apps are just too important to corporate productivity for CIOs and IT managers to entrust their businesses with web-based apps, without complete confidence in their functionality (ability to do the job efficiently) and performance (security and uptime).