Websites that died in 2009
11:41, December 30, 2009
While some websites have flourished in 2009, most notably Facebook and Twitter, others have fallen by the wayside. Many sites that died were relatively small enterprises. But even the big Internet giants, Google, Microsoft and Yahoo ditched once popular services and websites.
January saw Google''s changes to Jaiku and Dodgeball. Jaiku, a social networking, micro-blogging and lifestreaming service comparable to Twitter, was not shut but will be left to flounder. On January 14, 2009 it was announced that Google would be open-sourcing the product but would "no longer actively develop the Jaiku codebase" leaving development to a "passionate volunteer team of Googlers". Dodgeball was a location-based social networking software provider for mobile devices. Users would text their location to the service, which then notified them of crushes, friends, friends'' friends and interesting venues nearby. Dodgeball was shut down by Google in March 2009 and replaced with Google Latitude. Google Notebook was also shutdown for new users as cloud services like Google Docs increased in popularity. Another cloud service owned by Yahoo also announced its closure in January. Yahoo''s Briefcase had been deemed somewhat useless by many observers. The site offered 30MB of online storage, a number that was quite useful when it was launched in 1999. However this was quickly eclipsed by other Web storage providers and Web mail services. Users were given two months to download any files before it was shutdown.
February saw the demise of Jubii, an online communication utility. It included e-mail, text chat, VoIP, and file hosting--all in one tool. However it was seen as being incomplete with tools that did not tie into other existing services. The Jubii brand was actually an attempt to repackage the Lycos brand to U.S. users, however it, along with the European versions of Lycos Mail and Tripod Internet hosting, were shelved in mid-February. HP''s Upline was an online backup solution built off of Titanize, a product it had absorbed as a result of acquiring makers Opelin in 2007. Upline let users back up their home and work computers to the cloud for a yearly fee. Unlike some of the other storage providers, Upline''s paid plans offered unlimited storage. But in late February Upline announced it was to shutdown the service at the end of March, giving users a little more than a month to grab their files from HP''s servers.
Microsoft''s Encarta began as a software encyclopedia and later moved to the Web. Microsoft ran it as a subscription service, but in order to compete with free services like Wikipedia, the company provided portions of it that were supplemented with advertisements to non-subscribers. But in late March, the software giant announced that it would be discontinuing both the online and software-based versions of the site. The service was finally shelved in October though the company continues to use Encarta''s namesake for its free, online dictionary service. Japan''s Encarta site remains online but is due to close on December 31, 2009.
Wikia Search launched in January of 2008 with the idea that it let users control the rankings of search results. The hope was to let people constantly vote up more relevant pages, while letting the less-relevant pages move down. Wikia and Wikipedia co-founder Jimmy Wales hoped the system would spread across the Web, as it was made open-source, but it failed to do so. At its peak the site drew around 10,000 users a month. But with competition from Google''s own similar solution, called Search Wiki, Wales called it quits on Wikia Search in March.
SpiralFrog, a music download service based in New York, collapsed in late March under a mountain of debt. The site, launched in the United States and Canada in September 2007, offered free and legal music downloads, all supported by advertising. But on March 19, 2009, SpiralFrog terminated operations due to loan recalls. Unnamed sources say that the music provider supposedly tried to borrow at least 9 million U.S. dollars last year to stay in business. Its shut down came on the heels of another ad-supported music provider, Ruckus, which was geared toward college students. Users who had downloaded music from the site were also left with unplayable tracks due to strict DRM conditions (Digital Rights Management) that required logging into the site every 60 days.
Yahoo closed another of its services in June. Jumpcut.com was a website that provided free video editing and hosting services. Launched in January 2006, it was was purchased by Yahoo in October of the same year. But due to corporate prioritizing and the on-going financial problems at Yahoo, the upload service was terminated in December 2008 and the site was closed on June 15, 2009. Then came another Yahoo coffin. Geocites, one of the oldest web hosting services, shut down confining to history some of the earliest existing online content. Yahoo picked up personal Web site maker Geocities in January 1999 for a staggering 3.65 billion dollars in stock. Many of its most fervent users moved to other hosting providers partly due to poor, post-purchase choices from Yahoo that changed the site''s terms of service as well as core functionality. The rise of easy blogging tools and social networks, which for many was a simpler way to publish personal information, also helped bring the death-knell for Geocities. Yahoo announced its decision in April and finally shut the site down in late October.
It was not a good year for Yahoo users who then saw Yahoo! 360° consigned to the dustbin. Yahoo! 360° was a personal communication portal similar to other social networking sites. The site included social networking, blogging, and photo sharing services. Users could create personal web sites, share photos from Yahoo! Photos, maintain blogs, lists of local reviews, supply profile information, and see which friends are currently online. In May 2009 Yahoo! announced that the Yahoo! 360° service would close on July 13, 2009 as Yahoo! developers aimed to "focus their efforts on the new profile on Yahoo". The site wasn't killed off entirely though. Despite its lack of popularity at large, it was remains popular in Vietnam where it is still available.
As well as its Encarta service, Microsoft also shutdown Windows Live Events which had been an effort to replace services like Evite, Facebook events, MyPunchbowl, etc. It was launched as part of the Windows Live rebranding back in late 2007, and let users create events that could be shared publicly. More importantly, it was a smooth move to get users friendly with other Microsoft services like Live Spaces and Live Messenger. But in August, Microsoft announced that it would be closing up Windows Live Events in favor of building some of its functionality into Windows Live Calendar. In September, the company disabled the capability to create new events. Come April 2010 the site will be taken offline entirely.
Facial recognition was big in 2009, but not for face-finding tech Riya. It shuttered its doors in late August. It had come close to being snatched up by Google just four years prior, but the search giant instead went with competitor Neven Vision. Riya was simply overshadowed by tech giants who had time to catch up with their own facial recognition products. This included Google with its Picasa Web albums and photo library software, both of which were offered free of charge. Even Apple, has introduced its own facial recognition features as a part of its latest iLife release.
Google's telecommunications service GrandCentral will shut shop at the end of the year. The voice service was acquired in 2007 but has been left dormant for more than a year. However, it has effectively been reborn in the form of Google Voice and old GrandCentral users will be switched to the new service.
Source:Xinhua/Agencies
Wednesday, December 30, 2009
Using The Cloud Computing For Business
Using The Cloud For Business
Dan Woods, 12.29.09, 06:00 PM EST
Why the cloud is much more than a technology phenomenon.
Jan Baan, founder of Baan Corp., was present at the creation of enterprise resource planning. While leading the ERP software company from 1978–98, Baan observed what worked well and what failed as companies automated their business processes using a datacentric approach. For the past 10 years, Baan has spent his time and more than
250 million euros ($360 million) of his money on Cordys, a software company that creates what Baan calls a business operations platform. In this Q&A, Baan examines what the cloud means for business, what went wrong with ERP, and how a business operations platform delivers flexible automation of business processes that can be optimized through cloud computing.
Forbes: Why are companies getting the cloud wrong?
Baan: If you want to get the cloud right, put away the slide decks on virtualization and infrastructure and start thinking about who you should be working with and how to work with them, and then think about how you can support that better than ever before. Too many people look at the cloud as a technology phenomenon when they should look at it as a business opportunity and an accelerator for collaboration. The cloud is an environment for creating ways of doing business that are radically different from monolithic ERP-based processes. The age of command-and-control in business technology is over. You empower the knowledge worker through collaboration.
What does the cloud really mean for business?
Business processes should be the core element in the cloud, not Word documents or e-mail. Everything in the cloud should grow out of an inherently collaborative business process. You have to think beyond the business processes in your company to linking your customers' customers to your suppliers' suppliers, and draw them all together in a common end-to-end business process. You can create those relationships much faster now, but people aren't taking advantage of it. They are still very much in the ERP paradigm, which can be limiting. The cloud allows everyone to focus on their own processes, share them with others, and add some individual elements to their own processes and optimize them.
Some of these same promises about end-to-end business processes were made about ERP when it was new. What went wrong?
In the ERP world, everything is data-centric. Data is king, and business processes became embedded in data silos. Many big companies have created stovepipes that are isolated from each other, with business processes stored in the data. The vendor's best practices are then overlaid on the processes. Those stovepipes are still isolated, trapped on premise. That inhibits innovation.
What is your vision of making the cloud work for business?
I don't want to imply that everything has to be on the cloud. The optimal situation is a combination--a kind of composition between legacy systems and the optimized business process from the business and its partners, and it lives in the cloud.
I call it a business operations platform, a bridge between traditional service-oriented architecture and some of the heavy-duty infrastructure and standard components from ERP. Business components are decoupled from underlying technology. The concept of "programming," in which a businessperson conceives of an idea and technologists program something that achieves it, gives way to describing a business process, and the IT landscape responds in kind. There is much more of a "what you model is what you get" feeling to this new paradigm.
What is the role of ERP in this scenario?
Your ERP system, along with a product life-cycle management system, logistics systems and others, can be integrated and used as vanilla components, while being further enhanced by best practices or best processes, achieving a state of operational effectiveness. Take what you have learned through years of experience with ERP and apply it to the cloud.
What are the benefits of getting this right?
Dramatic improvements in business processes, reduction in IT costs, and a radical expansion of partners to help you run your business. Applications in the cloud cost less than 10% of an on-premises application. That means double-digit-percentage cost savings, and, more importantly, a boost to the value stream. Lead time for product creation can be reduced from 60 days to one or two hours. It's already happening. Instead of building a car in six weeks, we can do it in a day.
What stands in the way of this transformation?
First of all, the role of CIO sometimes seems afraid of its own shadow. The CIO should become more of a business leader. Maybe we should change the title Chief Information Officer to Chief Process Officer (CPO).
CIOs with guts are crucial to change. The CEO is too isolated and unaware of the development of these trends, but now the CIO, in the new role of a CPO, could be a tremendous asset to the CEO, providing leadership for changing the company and improving business processes. The value is in aligning IT and business, and the CPO is much more on the business side, not just on the IT side.
Too much attention is focused on technology innovation and not enough on business innovation. When that happens, we add functionality, but also complexity. The technology innovations with real impact are those that reduce complexity.
IT should be democratized in the same way Henry Ford democratized the car. Currently, fully functional IT is only for Fortune 1000 companies with a big budget. In the future, the benefits of IT will be available for everyone. Small and medium-size enterprises are, with the new technology wave of a business operations platform, able to connect their supply chain much faster than Fortune 1000 companies can. Agility is the mantra for today's smart companies.
Social media and cloud computing are exciting because they foreshadow this future.
Dan Woods is chief technology officer and editor of Evolved Technologist, a research firm focused on the needs of CTOs and CIOs. He consults for many of the other companies he writes about. For more information, go to evolvedtechnologist.com.
Dan Woods, 12.29.09, 06:00 PM EST
Why the cloud is much more than a technology phenomenon.
Jan Baan, founder of Baan Corp., was present at the creation of enterprise resource planning. While leading the ERP software company from 1978–98, Baan observed what worked well and what failed as companies automated their business processes using a datacentric approach. For the past 10 years, Baan has spent his time and more than
250 million euros ($360 million) of his money on Cordys, a software company that creates what Baan calls a business operations platform. In this Q&A, Baan examines what the cloud means for business, what went wrong with ERP, and how a business operations platform delivers flexible automation of business processes that can be optimized through cloud computing.
Forbes: Why are companies getting the cloud wrong?
Baan: If you want to get the cloud right, put away the slide decks on virtualization and infrastructure and start thinking about who you should be working with and how to work with them, and then think about how you can support that better than ever before. Too many people look at the cloud as a technology phenomenon when they should look at it as a business opportunity and an accelerator for collaboration. The cloud is an environment for creating ways of doing business that are radically different from monolithic ERP-based processes. The age of command-and-control in business technology is over. You empower the knowledge worker through collaboration.
What does the cloud really mean for business?
Business processes should be the core element in the cloud, not Word documents or e-mail. Everything in the cloud should grow out of an inherently collaborative business process. You have to think beyond the business processes in your company to linking your customers' customers to your suppliers' suppliers, and draw them all together in a common end-to-end business process. You can create those relationships much faster now, but people aren't taking advantage of it. They are still very much in the ERP paradigm, which can be limiting. The cloud allows everyone to focus on their own processes, share them with others, and add some individual elements to their own processes and optimize them.
Some of these same promises about end-to-end business processes were made about ERP when it was new. What went wrong?
In the ERP world, everything is data-centric. Data is king, and business processes became embedded in data silos. Many big companies have created stovepipes that are isolated from each other, with business processes stored in the data. The vendor's best practices are then overlaid on the processes. Those stovepipes are still isolated, trapped on premise. That inhibits innovation.
What is your vision of making the cloud work for business?
I don't want to imply that everything has to be on the cloud. The optimal situation is a combination--a kind of composition between legacy systems and the optimized business process from the business and its partners, and it lives in the cloud.
I call it a business operations platform, a bridge between traditional service-oriented architecture and some of the heavy-duty infrastructure and standard components from ERP. Business components are decoupled from underlying technology. The concept of "programming," in which a businessperson conceives of an idea and technologists program something that achieves it, gives way to describing a business process, and the IT landscape responds in kind. There is much more of a "what you model is what you get" feeling to this new paradigm.
What is the role of ERP in this scenario?
Your ERP system, along with a product life-cycle management system, logistics systems and others, can be integrated and used as vanilla components, while being further enhanced by best practices or best processes, achieving a state of operational effectiveness. Take what you have learned through years of experience with ERP and apply it to the cloud.
What are the benefits of getting this right?
Dramatic improvements in business processes, reduction in IT costs, and a radical expansion of partners to help you run your business. Applications in the cloud cost less than 10% of an on-premises application. That means double-digit-percentage cost savings, and, more importantly, a boost to the value stream. Lead time for product creation can be reduced from 60 days to one or two hours. It's already happening. Instead of building a car in six weeks, we can do it in a day.
What stands in the way of this transformation?
First of all, the role of CIO sometimes seems afraid of its own shadow. The CIO should become more of a business leader. Maybe we should change the title Chief Information Officer to Chief Process Officer (CPO).
CIOs with guts are crucial to change. The CEO is too isolated and unaware of the development of these trends, but now the CIO, in the new role of a CPO, could be a tremendous asset to the CEO, providing leadership for changing the company and improving business processes. The value is in aligning IT and business, and the CPO is much more on the business side, not just on the IT side.
Too much attention is focused on technology innovation and not enough on business innovation. When that happens, we add functionality, but also complexity. The technology innovations with real impact are those that reduce complexity.
IT should be democratized in the same way Henry Ford democratized the car. Currently, fully functional IT is only for Fortune 1000 companies with a big budget. In the future, the benefits of IT will be available for everyone. Small and medium-size enterprises are, with the new technology wave of a business operations platform, able to connect their supply chain much faster than Fortune 1000 companies can. Agility is the mantra for today's smart companies.
Social media and cloud computing are exciting because they foreshadow this future.
Dan Woods is chief technology officer and editor of Evolved Technologist, a research firm focused on the needs of CTOs and CIOs. He consults for many of the other companies he writes about. For more information, go to evolvedtechnologist.com.
Trouble ahead for US community banks
Trouble ahead for community banks
By Rob Cox, breakingviews.comDecember 29, 2009: 3:03 PM ET
(breakingviews.com) -- During the recent financial crisis it appeared that America's small banks could do no wrong. President Barack Obama said the world would have been better off if the entire financial system had been more like them.
Legislators tried to ease their burden, often at the expense of their bigger banking competitors. Last week, community bankers even won a meeting with the president to try to convince him to reduce red tape on their part of the industry.
But while it's true that the nation's 8,000 small banks mostly managed to avoid the excesses of their mega rivals and are healthier than big ones, they're not yet out of the woods.
A majority of the 140 banks that have failed were small -- and most on regulators' watch lists have less than $10 billion in assets. As Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and other problem hulks of the financial firmament have shored up their balance sheets and exited the government's bailout scheme, the small bank fraternity could see more pain ahead.
Take net charge-offs as a percentage of average loans, a measure of the relative health of loan portfolios. For banks with less than $5 billion of assets, these amounted to just 0.25% in the third quarter, compared to 1.53% at larger banks, according to SNL Financial. But the percentage actually declined somewhat from the second quarter for the big banks and rose by a quarter for the small ones.
One of the biggest problems smaller banks face is that they generally have higher concentrations of their loan books in commercial real estate, a sector that investors expect has further to fall. That could result in greater asset writedowns for this heretofore healthier corner of the banking world. Losses on real estate could lead to more failures and easily stymie lending, particularly to smaller businesses.
Though they account for less than 12% of all American banking assets, financial institutions with less than $1 billion of assets make nearly a third of all loans of $1 million or less to companies, according to the Independent Community Bankers Association, eight of whose members met President Obama last week. Less lending from such banks could have powerful knock-on effects for an economy struggling to rebound.
For now, America's smaller banks have more capital, make more on their assets, and have fewer problem loans. But as defaults in the commercial real estate arena begin in earnest next year -- and consumers continue to feel the economy's pinch -- the relative fortunes of the small fry and leviathans of finance will almost certainly converge.
By Rob Cox, breakingviews.comDecember 29, 2009: 3:03 PM ET
(breakingviews.com) -- During the recent financial crisis it appeared that America's small banks could do no wrong. President Barack Obama said the world would have been better off if the entire financial system had been more like them.
Legislators tried to ease their burden, often at the expense of their bigger banking competitors. Last week, community bankers even won a meeting with the president to try to convince him to reduce red tape on their part of the industry.
But while it's true that the nation's 8,000 small banks mostly managed to avoid the excesses of their mega rivals and are healthier than big ones, they're not yet out of the woods.
A majority of the 140 banks that have failed were small -- and most on regulators' watch lists have less than $10 billion in assets. As Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and other problem hulks of the financial firmament have shored up their balance sheets and exited the government's bailout scheme, the small bank fraternity could see more pain ahead.
Take net charge-offs as a percentage of average loans, a measure of the relative health of loan portfolios. For banks with less than $5 billion of assets, these amounted to just 0.25% in the third quarter, compared to 1.53% at larger banks, according to SNL Financial. But the percentage actually declined somewhat from the second quarter for the big banks and rose by a quarter for the small ones.
One of the biggest problems smaller banks face is that they generally have higher concentrations of their loan books in commercial real estate, a sector that investors expect has further to fall. That could result in greater asset writedowns for this heretofore healthier corner of the banking world. Losses on real estate could lead to more failures and easily stymie lending, particularly to smaller businesses.
Though they account for less than 12% of all American banking assets, financial institutions with less than $1 billion of assets make nearly a third of all loans of $1 million or less to companies, according to the Independent Community Bankers Association, eight of whose members met President Obama last week. Less lending from such banks could have powerful knock-on effects for an economy struggling to rebound.
For now, America's smaller banks have more capital, make more on their assets, and have fewer problem loans. But as defaults in the commercial real estate arena begin in earnest next year -- and consumers continue to feel the economy's pinch -- the relative fortunes of the small fry and leviathans of finance will almost certainly converge.
Tuesday, December 29, 2009
Making Money with Social Media
Making Money with Social Media
Do blogs and tweets help a company's bottom line? An Austin-based startup thinks it has the answer.
By Erika Jonietz http://newscri.be/link/976105
In retrospect, 2009 may be viewed as the year "social media" came of age: Facebook passed 350 million active users, Oprah made Twitter mainstream, and LinkedIn introduced a service to help recruiting agencies search the site for job candidates. But using microblogs, photoblogs, user-generated content, and even traditional blogs to interact with customers takes time and money, and some companies still question whether all that effort is doing them any good. So how does a company not only measure the results of its social media efforts but also effectively manage them?
Early in December, Social Agency, a five-person startup based in Austin, TX, launched a Web-based software package called Spredfast that helps companies manage their social media campaigns. The software not only measures audience size and engagement but also allows coordinated planning and automated posting across multiple social media platforms.
Specifically, the Web-based software counts how many people view a company's Twitter, LinkedIn, Facebook, YouTube, and Flickr updates, as well as posts managed by several popular blogging platforms, such as Moveable Type, WordPress, Blogger, Lotus Live, and Drupal. It also measures how the audience is interacting with all this content--for instance, how much they are commenting on posts, clicking on links, or retweeting updates.
The goal, says Social Agency cofounder Scott McCaskill, is to let companies see "whether all the time put into doing those things is really helping build brand or product awareness, which kinds of content are most successful, what days and even times of day result in the most traffic or new followers/friends."
A free version allows a company to manage a single identity or "voice" across each platform. Paid versions let companies coordinate multiple users and voices, and provide a longer data history. McCaskill says the software has had the most success with units of large companies and marketing agencies.
Spredfast gives companies a way to plan and manage content deployment. For instance, users can write blog entries, tweets, or Facebook updates ahead of time and then schedule when they will be posted. A store that might offer an online coupon code or one-day sale could, with Spredfast, have Twitter push that code out several times a day to increase the number of site visitors. The software's metrics, McCaskill says, let marketers figure out the best times to post updates. Spredfast also makes it easy for them to test different strategies.
The company launched a year ago as a maker of custom Facebook applications. When Facebook redesigned its home page, says McCaskill, Social Agency's business model was effectively torpedoed. As part of its sales strategy, the company had spent a lot of time helping clients plan their social media strategies. So the founders retooled and used their expertise to start building Spredfast about nine months ago. The software launched in private beta in September, public beta in October, and had its "official" launch on December 2.
Social Agency plans to introduce a feature by the end of January that will help users design a social media campaign based on their objectives. McCaskill says that Spredfast will most likely present users with a list of common marketing goals that they can check off. The software will suggest a template for a campaign based on what's worked best for clients with similar goals.
Do blogs and tweets help a company's bottom line? An Austin-based startup thinks it has the answer.
By Erika Jonietz http://newscri.be/link/976105
In retrospect, 2009 may be viewed as the year "social media" came of age: Facebook passed 350 million active users, Oprah made Twitter mainstream, and LinkedIn introduced a service to help recruiting agencies search the site for job candidates. But using microblogs, photoblogs, user-generated content, and even traditional blogs to interact with customers takes time and money, and some companies still question whether all that effort is doing them any good. So how does a company not only measure the results of its social media efforts but also effectively manage them?
Early in December, Social Agency, a five-person startup based in Austin, TX, launched a Web-based software package called Spredfast that helps companies manage their social media campaigns. The software not only measures audience size and engagement but also allows coordinated planning and automated posting across multiple social media platforms.
Specifically, the Web-based software counts how many people view a company's Twitter, LinkedIn, Facebook, YouTube, and Flickr updates, as well as posts managed by several popular blogging platforms, such as Moveable Type, WordPress, Blogger, Lotus Live, and Drupal. It also measures how the audience is interacting with all this content--for instance, how much they are commenting on posts, clicking on links, or retweeting updates.
The goal, says Social Agency cofounder Scott McCaskill, is to let companies see "whether all the time put into doing those things is really helping build brand or product awareness, which kinds of content are most successful, what days and even times of day result in the most traffic or new followers/friends."
A free version allows a company to manage a single identity or "voice" across each platform. Paid versions let companies coordinate multiple users and voices, and provide a longer data history. McCaskill says the software has had the most success with units of large companies and marketing agencies.
Spredfast gives companies a way to plan and manage content deployment. For instance, users can write blog entries, tweets, or Facebook updates ahead of time and then schedule when they will be posted. A store that might offer an online coupon code or one-day sale could, with Spredfast, have Twitter push that code out several times a day to increase the number of site visitors. The software's metrics, McCaskill says, let marketers figure out the best times to post updates. Spredfast also makes it easy for them to test different strategies.
The company launched a year ago as a maker of custom Facebook applications. When Facebook redesigned its home page, says McCaskill, Social Agency's business model was effectively torpedoed. As part of its sales strategy, the company had spent a lot of time helping clients plan their social media strategies. So the founders retooled and used their expertise to start building Spredfast about nine months ago. The software launched in private beta in September, public beta in October, and had its "official" launch on December 2.
Social Agency plans to introduce a feature by the end of January that will help users design a social media campaign based on their objectives. McCaskill says that Spredfast will most likely present users with a list of common marketing goals that they can check off. The software will suggest a template for a campaign based on what's worked best for clients with similar goals.
The Decade of Big Zero
The Big Zero
By PAUL KRUGMAN
Published: December 27, 2009
Maybe we knew, at some unconscious, instinctive level, that it would be an era best forgotten. Whatever the reason, we got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever. (Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?)
But from an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.
It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next.
It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. And for those who bought in the decade’s middle years — when all the serious people ridiculed warnings that housing prices made no sense, that we were in the middle of a gigantic bubble — well, I feel your pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages in Florida, are underwater, with owners owing more than their houses are worth.
Last and least for most Americans — but a big deal for retirement accounts, not to mention the talking heads on financial TV — it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520.
So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened.
For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we — more than anyone else in the world — knew what we were doing.
Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary (and now the Obama administration’s top economist), gave in 1999. “If you ask why the American financial system succeeds,” he said, “at least my reading of the history would be that there is no innovation more important than that of generally accepted accounting principles: it means that every investor gets to see information presented on a comparable basis; that there is discipline on company managements in the way they report and monitor their activities.” And he went on to declare that there is “an ongoing process that really is what makes our capital market work and work as stably as it does.”
So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system.
What percentage of all this turned out to be true? Zero.
What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes.
Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage.
Then there are the politicians. Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better? Stay tuned. Oh, and happy New Year.
By PAUL KRUGMAN
Published: December 27, 2009
Maybe we knew, at some unconscious, instinctive level, that it would be an era best forgotten. Whatever the reason, we got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever. (Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?)
But from an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.
It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next.
It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. And for those who bought in the decade’s middle years — when all the serious people ridiculed warnings that housing prices made no sense, that we were in the middle of a gigantic bubble — well, I feel your pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages in Florida, are underwater, with owners owing more than their houses are worth.
Last and least for most Americans — but a big deal for retirement accounts, not to mention the talking heads on financial TV — it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520.
So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened.
For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we — more than anyone else in the world — knew what we were doing.
Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary (and now the Obama administration’s top economist), gave in 1999. “If you ask why the American financial system succeeds,” he said, “at least my reading of the history would be that there is no innovation more important than that of generally accepted accounting principles: it means that every investor gets to see information presented on a comparable basis; that there is discipline on company managements in the way they report and monitor their activities.” And he went on to declare that there is “an ongoing process that really is what makes our capital market work and work as stably as it does.”
So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system.
What percentage of all this turned out to be true? Zero.
What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes.
Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage.
Then there are the politicians. Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better? Stay tuned. Oh, and happy New Year.
China Charts Its Own Path
China Charts Its Own Path
Keith R. McCullough, 12.28.09, 09:30 AM EST
While America dithers, the Chinese set up a currency reserve fund against -- U.S. crashes.
"Don't look back. Something might be gaining on you."--Leroy "Satchel" Paige
Satchel Paige was an American baseball legend who played ball from 1926–66. He was the first player from the Negro Leagues to be elected to the Baseball Hall of Fame. He was one of America's great winners.
Article Controls
The saddest part about Paige's success is probably that it took America too long to realize it. The man didn't play his first game in Major League Baseball until he was 42 years old. American Groupthink isn't new. It's always been a part of our culture. We are human. So are the Chinese.
This morning the Chinese are reminding us that: 1) they are still wearing the pants in this relationship; and 2) they aren't leaving this new game of global financial risk anytime soon. China is heading into 2010 with a full head of political and economic steam. If America and Europe don't let her into the major league of global finance, China may very well just start up her own.
This morning, the Association of Southeast Asian Nations (ASEAN), plus China, Japan and South Korea, have announced that they are moving forward with the Chiang Mai Initiative and forming a $120 billion foreign-currency reserve pool. In a joint statement, the countries said the move was intended to "strengthen the region's capacity to safeguard against increased risks and challenges in the global economy." In Mandarin, that means protect against American crashes.
Chiang Mai is a city in northern Thailand that sits strategically on the Ping River. This is where plenty of Asian trading has been done over the last few centuries. This is where Asia's new economic powers decided to lock arms and play some red rover with Western leaders of Perceived Financial Wisdom.
China and the U.S. are in two totally different situations,China is developing and growing trying to stabilize and manage that growth, so far successfully. We on the other hand have had the large
Like MLB ignoring Satchel Paige, Westerners ignoring the new reality of Asian economic power doesn't mean it ceases to exist. The Asians have been working on forming their own economic safety nets since the Japanese tried to form the Asian Monetary Fund in 1997. The Chiang Mai Initiative was formed in May 2006. Today is simply a recognition that the proactively prepared have a plan--and they are executing on it.
An analyst at Bank of America ( BAC - news - people ) is revealing to his squadrons of consensus callers this morning that China could see her property bubble "pop." Hello, McFly--the Chinese property stocks peaked in July of this year and have been popping for three months! Understand that many sell-siders on this side of the pond really don't know what they don’t know.
China's premier, Wen Jiabao, is very aware of his liabilities. Unlike Bush and Obama, he seems to actually know what he doesn't know. He and his financial leadership team have been explicitly targeting the property and loan markets for the last 3 months. They are not behaving as willfully blind as we were.
This morning, here's what Wen told Xinhua, the Chinese News Agency: "Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize them."
Dugg on Forbes.com
Unlike the U.S., which keeps interest rates at zero to fuel debt-fueled asset-price speculation, at least China has a plan to both generate savings amongst her citizenry (with a savings rate of return greater than zero) and, at the same time, show some respect for the cost of capital.
On the currency front, Wen said that China will "absolutely not yield" to the Western calls for currency appreciation. He explained that the plan will remain the plan, and that China will move both her currency and interest rate policies whenever she darn well pleases. Sound familiar? It should. That's what we do.
2010 will be here by the end of this week, and so will China overtaking Japan as the world's second-largest economy. For a long time Americans and Europeans could see this economic and political juggernaut coming. For a long time some of us chose to ignore the power of their self-directedness.
As America moves the YouTube dials to another populist debate (whether or not we should reinstitute Glass-Steagall-like regulation in her financial markets in 2010), be certain that the Chinese are going to be moving forward at their already decided pace.
After closing up 1.5% overnight, the Shanghai Composite Index closed at 3,188. Despite the S&P 500 closing at a higher YTD high on Christmas Eve, it’s only up 24.7% for the year. Relative to China's 75.1% gain, that's puny. Kind of like how Satchel Paige made 20-year-old men look with a curveball coming from his 45-year old arm.
My immediate term lines of support and resistance for the S&P 500 are now 1,112 and 1,129, respectively.
Keith R. McCullough is CEO of Researchedge.
Keith R. McCullough, 12.28.09, 09:30 AM EST
While America dithers, the Chinese set up a currency reserve fund against -- U.S. crashes.
"Don't look back. Something might be gaining on you."--Leroy "Satchel" Paige
Satchel Paige was an American baseball legend who played ball from 1926–66. He was the first player from the Negro Leagues to be elected to the Baseball Hall of Fame. He was one of America's great winners.
Article Controls
The saddest part about Paige's success is probably that it took America too long to realize it. The man didn't play his first game in Major League Baseball until he was 42 years old. American Groupthink isn't new. It's always been a part of our culture. We are human. So are the Chinese.
This morning the Chinese are reminding us that: 1) they are still wearing the pants in this relationship; and 2) they aren't leaving this new game of global financial risk anytime soon. China is heading into 2010 with a full head of political and economic steam. If America and Europe don't let her into the major league of global finance, China may very well just start up her own.
This morning, the Association of Southeast Asian Nations (ASEAN), plus China, Japan and South Korea, have announced that they are moving forward with the Chiang Mai Initiative and forming a $120 billion foreign-currency reserve pool. In a joint statement, the countries said the move was intended to "strengthen the region's capacity to safeguard against increased risks and challenges in the global economy." In Mandarin, that means protect against American crashes.
Chiang Mai is a city in northern Thailand that sits strategically on the Ping River. This is where plenty of Asian trading has been done over the last few centuries. This is where Asia's new economic powers decided to lock arms and play some red rover with Western leaders of Perceived Financial Wisdom.
China and the U.S. are in two totally different situations,China is developing and growing trying to stabilize and manage that growth, so far successfully. We on the other hand have had the large
Like MLB ignoring Satchel Paige, Westerners ignoring the new reality of Asian economic power doesn't mean it ceases to exist. The Asians have been working on forming their own economic safety nets since the Japanese tried to form the Asian Monetary Fund in 1997. The Chiang Mai Initiative was formed in May 2006. Today is simply a recognition that the proactively prepared have a plan--and they are executing on it.
An analyst at Bank of America ( BAC - news - people ) is revealing to his squadrons of consensus callers this morning that China could see her property bubble "pop." Hello, McFly--the Chinese property stocks peaked in July of this year and have been popping for three months! Understand that many sell-siders on this side of the pond really don't know what they don’t know.
China's premier, Wen Jiabao, is very aware of his liabilities. Unlike Bush and Obama, he seems to actually know what he doesn't know. He and his financial leadership team have been explicitly targeting the property and loan markets for the last 3 months. They are not behaving as willfully blind as we were.
This morning, here's what Wen told Xinhua, the Chinese News Agency: "Property prices have risen too quickly in some areas and we should use taxes and loan interest rates to stabilize them."
Dugg on Forbes.com
Unlike the U.S., which keeps interest rates at zero to fuel debt-fueled asset-price speculation, at least China has a plan to both generate savings amongst her citizenry (with a savings rate of return greater than zero) and, at the same time, show some respect for the cost of capital.
On the currency front, Wen said that China will "absolutely not yield" to the Western calls for currency appreciation. He explained that the plan will remain the plan, and that China will move both her currency and interest rate policies whenever she darn well pleases. Sound familiar? It should. That's what we do.
2010 will be here by the end of this week, and so will China overtaking Japan as the world's second-largest economy. For a long time Americans and Europeans could see this economic and political juggernaut coming. For a long time some of us chose to ignore the power of their self-directedness.
As America moves the YouTube dials to another populist debate (whether or not we should reinstitute Glass-Steagall-like regulation in her financial markets in 2010), be certain that the Chinese are going to be moving forward at their already decided pace.
After closing up 1.5% overnight, the Shanghai Composite Index closed at 3,188. Despite the S&P 500 closing at a higher YTD high on Christmas Eve, it’s only up 24.7% for the year. Relative to China's 75.1% gain, that's puny. Kind of like how Satchel Paige made 20-year-old men look with a curveball coming from his 45-year old arm.
My immediate term lines of support and resistance for the S&P 500 are now 1,112 and 1,129, respectively.
Keith R. McCullough is CEO of Researchedge.
Monday, December 28, 2009
From Outsourcing To Multi-Sourcing
From Outsourcing To Multi-Sourcing
Ed Sperling, 12.28.09, 06:00 AM EST
Much has changed since outsourcing was introduced.
IT outsourcing has been around for decades, but in the past it was a one-for-one handoff. Either a company ran the IT department or an outsourcing contractor did it for them.
Much has changed. Companies are choosing from a menu of options and a list of competitive offerings, with results that still aren't fully understood. To help shed light on what's changing, Forbes caught up with Jamie Erbes, chief technology officer for Hewlett-Packard ( HPQ - news - people ) Software and Solutions.
Forbes: Outsourcing IT is hardly a new concept. What's different this time?
Erbes: We've certainly seen this outsourcing trend in the past, but what we're seeing now is uptake of more selective sourcing. The CIO and IT organization are looking at sourcing some of their operation to cloud providers, but not all of it. They're also looking at ways to keep tabs on the integrity of IT as it all blends back together into the business services that they need to offer back to the business units.
What's driving that change?
A lot of conversations I've had recently with customers is how they can capitalize on the resources from various providers including the Amazons and Rackspaces of the world or enterprise services from companies like HP. How can they take advantage of that sourcing model and put an effective framework above it--one that comprehends IT financial management, for example, or service-level aggregation and management? Those are the questions we're starting to hear.
So there's more CIO involvement in the outsourcing?
Yes. If you go back 20 years, the message behind outsourcing was, "Come and take over my IT." The IT organization handed over responsibility for everything including interaction with the business units. It was not just a portion of IT or a piece of the data center. It was all of IT, and in some cases that included the CIO. The change that we've seen is there's a step toward multi-sourcing. There may be a line cut, for example, between infrastructure outsourcing and applications development. Some of these services are best-of-breed outsourcing selections and a lot of analysts are encouraging clients to do multi-sourcing. But when they outsourced to a sole provider, the management level on top and the reporting and transparency was intact. With multi-sourcing you have silos of management and reporting, limited visibility and service-level agreements in silos.
What's the best way to deal with that?
The next step will be to pull all of that together into business services. There's a layer of service management at the enterprise level that is necessary to do all of the translation from the intricate specific detail around service levels, availability and outages, for example.
What does the corporate IT department do in the future?
Before we used to counsel the client on how to be the best they could be at planning, designing, building and running IT. There's still some of that activity, but they need more of a skill set for sourcing, integrating and managing. That's an evolutionary need now within IT.
And it's no longer just about data, right?
That's correct. The whole concept of portfolio management is taking on a new life in these organizations. It's almost like a product manager role that's evolving within IT. One CIO told me he needs a sales and marketing team--and a product management team. They have to understand what they're crafting in terms of cost models and pricing models back to their business. If you look at the aptitude of the type of person that takes, it is like a product manager. You have to be able to talk about the IT capabilities you have and what you can offer to the business because now the business has choice. The last thing you want is for them to avoid IT. If IT is a hidden-cost overhead that's a pain to deal with, it's going to be avoided. The IT organization has to draw the client in with products and services their business wants to consume. That mitigates the desire for businesses to go out and directly obtain these cloud services or software-as-a-service--basically an end-run around IT.
It used to be a matter of assessing technological capabilities and applying them to a business. Now it appears to be less about the technology.
IT always will have to have a competency for understanding the technology, but it's unlikely they'll have to be the expert on server technology in the future. If they do a smart sourcing strategy, they don't need the server experts. But they will need the platform expert to blend the server and storage and the application types to make sure the outsourcing decision they make around the infrastructure-as-a-service fits well with their application strategy.
Who are you selling this stuff to? Is it the companies or the cloud providers?
Our strategy has three prongs. The first is we are a cloud service provider. The other two are in terms of aligning products and consulting and enablement services for the service provider. We helped Verizon ( VZ - news - people ) craft their compute-as-a-service strategy set, for example. We also help the enterprise business to be a better and wiser consumer of services, and to be a better provider of services internally.
Will the software in a cloud be customized, and if not, what is the penalty?
We think the question should be, "What is the cost of all that choice and heterogeneity in the data center?" The penalty you pay is one of the concerns. Customers need to understand application or workload characteristics and to be able to construct private clouds or pooled infrastructure within their own data centers. They need to manage workload against that target, as well as provision applications out to other cloud providers such as Amazon. If you have several choices, each with different compute styles, that should give you the right granularity so you can run them where they should be run. But too much choice and variety is a bad thing. There are some specialized applications such as airline systems where that's required, but for most it is not.
Aside from those specialized cases, is there a difference from one organization to the next?
Some of the mature organizations--those with a concept of ruthless standardization--have normalized their hardware platforms and their networks and their compute styles. They have a handful of compute styles. That's compared to the immature organizations, which may have grown by acquisition or decisions that were made without a clear sense of architecture. Those are very messy environments. Our challenge is to span both environments and hide some of the complexity.
Ed Sperling is the editor of several technology trade publications and has covered technology for more than 20 years. Contact him at esperlin@yahoo.com.
Ed Sperling, 12.28.09, 06:00 AM EST
Much has changed since outsourcing was introduced.
IT outsourcing has been around for decades, but in the past it was a one-for-one handoff. Either a company ran the IT department or an outsourcing contractor did it for them.
Much has changed. Companies are choosing from a menu of options and a list of competitive offerings, with results that still aren't fully understood. To help shed light on what's changing, Forbes caught up with Jamie Erbes, chief technology officer for Hewlett-Packard ( HPQ - news - people ) Software and Solutions.
Forbes: Outsourcing IT is hardly a new concept. What's different this time?
Erbes: We've certainly seen this outsourcing trend in the past, but what we're seeing now is uptake of more selective sourcing. The CIO and IT organization are looking at sourcing some of their operation to cloud providers, but not all of it. They're also looking at ways to keep tabs on the integrity of IT as it all blends back together into the business services that they need to offer back to the business units.
What's driving that change?
A lot of conversations I've had recently with customers is how they can capitalize on the resources from various providers including the Amazons and Rackspaces of the world or enterprise services from companies like HP. How can they take advantage of that sourcing model and put an effective framework above it--one that comprehends IT financial management, for example, or service-level aggregation and management? Those are the questions we're starting to hear.
So there's more CIO involvement in the outsourcing?
Yes. If you go back 20 years, the message behind outsourcing was, "Come and take over my IT." The IT organization handed over responsibility for everything including interaction with the business units. It was not just a portion of IT or a piece of the data center. It was all of IT, and in some cases that included the CIO. The change that we've seen is there's a step toward multi-sourcing. There may be a line cut, for example, between infrastructure outsourcing and applications development. Some of these services are best-of-breed outsourcing selections and a lot of analysts are encouraging clients to do multi-sourcing. But when they outsourced to a sole provider, the management level on top and the reporting and transparency was intact. With multi-sourcing you have silos of management and reporting, limited visibility and service-level agreements in silos.
What's the best way to deal with that?
The next step will be to pull all of that together into business services. There's a layer of service management at the enterprise level that is necessary to do all of the translation from the intricate specific detail around service levels, availability and outages, for example.
What does the corporate IT department do in the future?
Before we used to counsel the client on how to be the best they could be at planning, designing, building and running IT. There's still some of that activity, but they need more of a skill set for sourcing, integrating and managing. That's an evolutionary need now within IT.
And it's no longer just about data, right?
That's correct. The whole concept of portfolio management is taking on a new life in these organizations. It's almost like a product manager role that's evolving within IT. One CIO told me he needs a sales and marketing team--and a product management team. They have to understand what they're crafting in terms of cost models and pricing models back to their business. If you look at the aptitude of the type of person that takes, it is like a product manager. You have to be able to talk about the IT capabilities you have and what you can offer to the business because now the business has choice. The last thing you want is for them to avoid IT. If IT is a hidden-cost overhead that's a pain to deal with, it's going to be avoided. The IT organization has to draw the client in with products and services their business wants to consume. That mitigates the desire for businesses to go out and directly obtain these cloud services or software-as-a-service--basically an end-run around IT.
It used to be a matter of assessing technological capabilities and applying them to a business. Now it appears to be less about the technology.
IT always will have to have a competency for understanding the technology, but it's unlikely they'll have to be the expert on server technology in the future. If they do a smart sourcing strategy, they don't need the server experts. But they will need the platform expert to blend the server and storage and the application types to make sure the outsourcing decision they make around the infrastructure-as-a-service fits well with their application strategy.
Who are you selling this stuff to? Is it the companies or the cloud providers?
Our strategy has three prongs. The first is we are a cloud service provider. The other two are in terms of aligning products and consulting and enablement services for the service provider. We helped Verizon ( VZ - news - people ) craft their compute-as-a-service strategy set, for example. We also help the enterprise business to be a better and wiser consumer of services, and to be a better provider of services internally.
Will the software in a cloud be customized, and if not, what is the penalty?
We think the question should be, "What is the cost of all that choice and heterogeneity in the data center?" The penalty you pay is one of the concerns. Customers need to understand application or workload characteristics and to be able to construct private clouds or pooled infrastructure within their own data centers. They need to manage workload against that target, as well as provision applications out to other cloud providers such as Amazon. If you have several choices, each with different compute styles, that should give you the right granularity so you can run them where they should be run. But too much choice and variety is a bad thing. There are some specialized applications such as airline systems where that's required, but for most it is not.
Aside from those specialized cases, is there a difference from one organization to the next?
Some of the mature organizations--those with a concept of ruthless standardization--have normalized their hardware platforms and their networks and their compute styles. They have a handful of compute styles. That's compared to the immature organizations, which may have grown by acquisition or decisions that were made without a clear sense of architecture. Those are very messy environments. Our challenge is to span both environments and hide some of the complexity.
Ed Sperling is the editor of several technology trade publications and has covered technology for more than 20 years. Contact him at esperlin@yahoo.com.
The Cloudy IT Landscape
The Cloudy IT Landscape
Ed Sperling, 12.28.09, 06:00 AM EST
The shift to a utility-based computing model has massive implications for everything we've ever known about IT.
pic
Ed Sperling
Gartner's outlook for the next few years shows a steady migration toward cloud computing, driven at first by cost and then by quality of service. But the bigger issue that emerges from the research house's new report on the effects of cost-cutting and utility-based computing is who's going to be offering what to whom?
The immediate driver for cloud computing on the IT side comes from the economic downturn and the need to cut costs, says Frances Karamouzis, a Gartner research vice president. It's cheaper to outsource some operations to places like India, where labor costs are lower. But over the next couple years, those deals will be renegotiated or revisited as risk-management becomes the big issue.
Article Controls
This shift is massive, both in physical scale and economic impact, and it's tough to make sweeping generalizations. Some CIOs already have a firm grip on risk-management. Others will never care because of their specific business models. But the push toward utility-based outsourcing, which allows companies to turn on and off servers, storage and software, has profound implications for the companies that have provided IT hardware, software and services for decades.
"The competition gets blurred about who buys what from whom," Karamouzis says. "Everyone's business model gets squeezed."
So where is this new competition coming from? First, it's open-source software. Gartner says about 15% to 25% of all software costs is for product support in the way of patches and updates. That has made open source particularly popular in some markets, and the appeal will only grow as IT departments get a firm grip on how they spend money and where those dollars actually go.
The second area of competition is caused by the convergence of software, hardware and services with the emergence of the cloud model and software-as-a-service. That helps explain why large systems vendors have been buying up service companies. IBM ( IBM - news - people ) bought PricewaterhouseCooper's consulting arm, Hewlett-Packard ( HPQ - news - people ) bought EDS and Dell ( DELL - news - people ) bought Perot Systems ( PER - news - people ). But it also shakes up the image of what each company really provides.
"The value is shifting to a relationship-based model that is inherent in the services world," Karamouzis says. "As a result, you could see a company like Accenture ( ACN - news - people ) competing head-to-head with a software company."
But if the real value comes from utility-like service, then how do these companies differentiate themselves from a software company like Oracle, which will also provide service and hardware, or a services company like Accenture, which can establish partnerships to provide everything it doesn't have? And what's to stop service giants from places like India--TaTa Group and WiPro, for example--from moving into the market where they barely had a toehold?
Big changes are coming and so far it's uncertain who will emerge stronger from these shifts. While CIOs enjoy the short-term benefits of pricing benefits and, in many cases, increased service for every dollar spent, the longer-term effects may not be quite so kind to the smaller utility-based service consumers.
Ed Sperling is the editor of several technology trade publications and has covered technology for more than 20 years. Contact him at esperlin@yahoo.com.
Ed Sperling, 12.28.09, 06:00 AM EST
The shift to a utility-based computing model has massive implications for everything we've ever known about IT.
pic
Ed Sperling
Gartner's outlook for the next few years shows a steady migration toward cloud computing, driven at first by cost and then by quality of service. But the bigger issue that emerges from the research house's new report on the effects of cost-cutting and utility-based computing is who's going to be offering what to whom?
The immediate driver for cloud computing on the IT side comes from the economic downturn and the need to cut costs, says Frances Karamouzis, a Gartner research vice president. It's cheaper to outsource some operations to places like India, where labor costs are lower. But over the next couple years, those deals will be renegotiated or revisited as risk-management becomes the big issue.
Article Controls
This shift is massive, both in physical scale and economic impact, and it's tough to make sweeping generalizations. Some CIOs already have a firm grip on risk-management. Others will never care because of their specific business models. But the push toward utility-based outsourcing, which allows companies to turn on and off servers, storage and software, has profound implications for the companies that have provided IT hardware, software and services for decades.
"The competition gets blurred about who buys what from whom," Karamouzis says. "Everyone's business model gets squeezed."
So where is this new competition coming from? First, it's open-source software. Gartner says about 15% to 25% of all software costs is for product support in the way of patches and updates. That has made open source particularly popular in some markets, and the appeal will only grow as IT departments get a firm grip on how they spend money and where those dollars actually go.
The second area of competition is caused by the convergence of software, hardware and services with the emergence of the cloud model and software-as-a-service. That helps explain why large systems vendors have been buying up service companies. IBM ( IBM - news - people ) bought PricewaterhouseCooper's consulting arm, Hewlett-Packard ( HPQ - news - people ) bought EDS and Dell ( DELL - news - people ) bought Perot Systems ( PER - news - people ). But it also shakes up the image of what each company really provides.
"The value is shifting to a relationship-based model that is inherent in the services world," Karamouzis says. "As a result, you could see a company like Accenture ( ACN - news - people ) competing head-to-head with a software company."
But if the real value comes from utility-like service, then how do these companies differentiate themselves from a software company like Oracle, which will also provide service and hardware, or a services company like Accenture, which can establish partnerships to provide everything it doesn't have? And what's to stop service giants from places like India--TaTa Group and WiPro, for example--from moving into the market where they barely had a toehold?
Big changes are coming and so far it's uncertain who will emerge stronger from these shifts. While CIOs enjoy the short-term benefits of pricing benefits and, in many cases, increased service for every dollar spent, the longer-term effects may not be quite so kind to the smaller utility-based service consumers.
Ed Sperling is the editor of several technology trade publications and has covered technology for more than 20 years. Contact him at esperlin@yahoo.com.
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