2003 - a year in review

10 February 2006

If there was a year when the IT profession grew through its adolescence, then it was 2003. We look at the events that shaped the year.

If there was a year when the IT profession grew through its adolescence, then it was 2003. Multiple forces forced a new maturity on the industry - the scaling back of IT budgets, the need for greater IT governance, the pressing need for

Speaking out

"Currently, web services is like sex with aliens - some people say that it happens, but nobody is able to furnish any proof." IT market analyst Robin Bloor, head of Bloor Research, goes in search of customers who have had intimate encounters with SOAP, WSDL and UDDI (June 03)

"[It is] atrociously bad behaviour from a company with a history of atrociously bad behaviour." Craig Conway, PeopleSoft CEO, reacts to Oracle's hostile bid for his empire (June 03)

"You could have El Nino or anthrax or a currency crisis or a docks strike or a war - there's always something going on in the world. Do I think it's a cop-out [for company executives] to say 'Saddam ate my homework'? Yeah, it's nonsense. If there's one thing you can predict, it's something unexpected will happen. So get ready for it." Dell CEO Michael Dell dismisses others who blame anything but their own failure for weak financial results (July 03)

"This is a movie that has been played out. People have lost interest in it." Conway suggests the Oracle bid is running out of steam (Sept 03)

"R&D is over-rated." Michael Dell, CEO of Dell Computer, argues that spending 1.3% of his sales on R&D is a sound strategy. His words infuriate fellow speakers at the same conference, including Sun CEO Scott McNealy, who channels 16% of his company's revenues into R&D, and Hewlett-Packard CEO Carly Fiorina, who invests 6% of revenues in product creation and evolution (Sept 03)

"In some ways we are humbled by the events of the past few weeks." Steve Ballmer, Microsoft CEO, lets customers know he cares about a string of serious security holes found in Microsoft products (Aug 03)

"Java won. It's over. Ain't even close. The world hasn't figured it out, but Microsoft has. And they don't know what to do." Sun CEO Scott McNealy holds forth on the J2EE versus .Net war (Aug 03)

"The majority of UK office workers are willing to give away their computer passwords in exchange for a pen." InfoSecurity Europe conference attendee on the triumphant success of security-awareness programmes amongst users (Apr 03)

"If you look at [Intel's] Centrino today, it's really a piece of crap." AMD CEO Hector Ruiz gives technical appraisal of what will be the best selling microprocessor in 2004 (Mar 03)

"I'm tired of people not asking IBM and HP some tough questions about Linux. Like, why are they abandoning 20 years of investment and marooning customers." Scott McNealy demands some answers on whether Linux will superseded HP-UX, NonStop, IBM AIX, OS/400... (Mar 03)

"The popularisation of the open source movement continues to pose a significant challenge." Microsoft shares its greatest anxiety with the SEC (Feb 03)

"We're at the bottom and we've only got one direction to go." Intel CEO Craig Barrett announces the beginning of the end of the IT industry recession (Feb 03)

IT to be much more capable of delivering to the priorities of the organisation.

Over the year, those pressures manifested themselves in different areas. A fall in IT vacancies resulted in a sharp reduction in the cost of IT staff and consultants. Systems developers were costing organisations 20% less to hire than in 2002, and consultants' fees were in many cases down by 60% or more. In a buyers' market, enterprise software prices also plummeted, with IT executives reporting they were paying 25% to 50% less for products than in 2001/2.

While IT management juggled the spend within flat or falling budgets, there was an atmosphere of taking stock, of IT getting its house in order before the inevitable upturn. And by mid-year long the signs of that upturn were there, with the industry again showing positive growth (after a two year recession), with plans for budget rises in 2004 and beyond, and a cautious upturn in hiring. The themes that are driving that revival recurred again and again: security, mobility and IT effectiveness.

January

Microsoft broke ranks with most of its software peers by saying it would start paying annual shareholder dividends.

French company MandrakeSoft, developer of one of the most popular distributions of Linux, sought bankruptcy protection.

SAP unveiled a platform for running and integrating web services applications. 'NetWeaver', it said, was the biggest leap forward in its technology for a decade. Critics said that the technology's main purpose was to enable SAP to exercise greater control over customer accounts.

Systems vendor Sun Microsystems reported its biggest ever quarterly loss - more than $2 billion - after writing off some bad acquisitions and paying restructuring costs. Sales also fell 6%.

Business intelligence supplier Cognos ditched most of its own financial planning software in favour of code from Adaytum, the budgeting and planning software vendor it acquired in December 2002.

Microsoft sought to lessen confusion over the increasingly wide-ranging scope of its .Net brand by saying it would only attach the .Net logo to software that contained web services technology. It also released the first version of its customer relationship management (CRM) software - the first full application built on .Net.

Hewlett-Packard regained its position as the world's leading PC maker from Dell Computer. Total market shipments grew by a relatively healthy 4%.

SCO, the owner of the System V source code on which most mainstream Unixes are based, established SCOsource to police its intellectual property. David Boies, famed for his aggressive representation of the anti-trust case brought by the US government against Microsoft, was appointed as advisor.

IBM cut the price of its iSeries servers - the mid-range systems formerly known as the AS/400 - by up to 80% after sales of the iSeries fell 13% in 2002.

February

Divine, the content management, collaboration, call centre, portal and instant messaging software and services company, collapsed. In the subsequent fire-sale, the half billion dollar company was dismantled even faster than it was assembled by founder and CEO 'Flip' Filipowski.

Reports suggested that a former darling of the storage market, back-up software supplier Legato, had been put up for sale with a price tag of between $800 million and $1 billion. Rumoured suitors included EMC, IBM, Sun Microsystems and Veritas Software.

Systems vendor Sun Microsystems underscored a heavy marketing push into utility computing by giving its Unix server line a makeover, releasing a powerful new mid-range server and unveiling a line of blade servers and beefed-up storage management.

Cisco Systems, the networking giant, moved to enhance its network security portfolio by acquiring privately held, four-year old Okena for a hefty $154 million.

Supply chain management software company i2 Technologies admitted it was being investigated by the Securities and Exchange Commission over allegations of improper financial reporting practices.

Microsoft announced it had bought the rights to three products from emulation and virtual machine software vendor Connectix for an undisclosed sum. The plan was to use the software to encourage organisations running applications

Books of the year

Leading Geeks by Paul Glen

Rather than yet another book about the world's top software gurus as the ambiguous title might suggest, this entertaining work aims to help executives corral the talents of those cerebral individuals who contribute a great deal to the organisation (that is, technology staff) but whose modus operandi, personal aspirations and behaviour challenge standard people management techniques. Practical advice on herding creative cats.

Backfire by Peter Burrows

In the wake of the largest ever technology acquisition - Hewlett-Packard's $20 billion takeover of Compaq - two books analysed the rise of the industry's most powerful woman: HP CEO, Carly Fiorina. Perfect Enough by George Anders was somewhat fawning and was weak on critical analysis, possibly as a result of having too much friendly access to HP and the CEO herself; Backfire digs deep into the individual and corporate ambitions that underpinned the acquisition, and analyses where it might lead (notwithstanding Fiorina's blacklisting of Business Week author Burrows half-way through the deal).

The Strategy Gap by Michael Coveney, et al

Humbled by the IT recession, several company executives turned out insightful, hype-free texts in 2003. From German software giant SAP came a sound analysis of the 'adaptive enterprise' (Adapt or Die by Claus Heinrich) and a practical and clear guide to business process management and web services (Packaged Composite Applications by Dan Woods). But one of the best, credited to the senior management team at veteran business intelligence software company Comshare (itself a victim of the year's M&A ferocity when it fell into the arms of vertical apps specialist GEAC) explains how corporate performance management thinking and technologies can help ensure the best laid plans can result in solid execution and, ultimately, in the fulfilment of strategic goals.

The Innovator's Solution by Clayton Christensen

Harvard professor Christensen's 1997 book Innovator's Dilemma became a business school classic with its rigorous analysis of why large, established vendors typically fail to match the innovations of smaller competitors. Innovator's Solution sets out to address how the leviathans of the industry can overcome that dilemma - poor nimbleness. The author may be straining a little too hard to engineer an innovative follow-on product of his own, but this is still a thought-provoking and insightful book.

Softwar by Matthew Symonds

An 'intimate portrait' of Oracle chief executive Larry Ellison by the Economist's former technology editor (and annotated with footnotes by Ellison himself). Although a highly entertaining biography and profile of the world's number two software company, it provides a rather rose-tinted image of life among the hard-driving, ambitious Oracle ranks, and of its products and customer service (for a full review of this book, see Information Age, January 2004).

on Windows NT 4 to upgrade to Windows Server 2003, by offering them the opportunity to run NT 4 apps on Server 2003.

March

Services giant EDS bid farewell to its CEO of four years, Dick Brown. Brown got a 'golden shove' worth some $35 million.

Cisco Systems purchased IP telephony specialist SignalWorks and SOHO networking hardware maker Linksys, signaling its intention to dominate the networking market from top to bottom.

Hasso Plattner, co-founder and joint CEO of enterprise resource planning (ERP) software supplier SAP, announced his retirement. The job of running SAP day-to-day fell solely to Henning Kagermann, who has been joint CEO alongside Plattner for the last five years.

SCO announced plans to sue IBM, claiming that part of IBM's AIX Unix operating system ended up in Linux, thereby contravening SCO's licensing of Unix System V to IBM.

Reports suggested that Unix systems vendor Sun Microsystems was to dump Sun Linux less than a year after its launch, prompting speculation that it would adopt Red Hat, SuSE or both.

European services vendor Getronics became more deeply mired in a bitter dispute with its stockholders over a debt-for-equity rescue plan that would see them emerge with just 4% of the company.

April

Microsoft finally released its server operating system, Windows Server 2003, after delaying the launch three times. The goal of the new release: to re-position the company as a high-end 'software stack' supplier, competing head-to-head with Sun Microsystems and IBM.

Dr Edgar 'Ted' Codd, the inventor of the relational database, died aged 79. Codd's ideas inspired IBM's core database product DB2 and provided the basis for the Oracle software empire.

Engineering conglomerate Invensys put its Baan enterprise resource planning software division up for sale. Invensys acquired Baan for $708 million in 2000.

Hewlett-Packard won a $3 billion, 10-year outsourcing contract with consumer goods giant Procter &Gamble covering virtually all of the consumer goods company's IT operations. The contract was the third major outsourcing deal signed by HP in the space of a week. The others: mobile phone maker Ericsson and the Bank of Ireland.

Network Associates, the security software supplier, announced two acquisitions in the intrusion detection space in one week, paying $100 million for IntruVert, and $120 million for Entercept Security Technologies.

May

The IT jobs market in the UK showed encouraging signs of recovery, with a 4% rise in vacancies overall, and a 7% jump in demand for contractors.

Germany's Munich Council decided to switch the city administration's 14,000 desktop PCs from Windows to Linux-based open source software.

A controversial article in Harvard Business Review, titled 'IT Doesn't Matter', by editor-at-large Nicholas Carr sparked outrage amongst industry executives, IT managers and analysts by suggesting that the use of IT in business no longer confers any real competitive advantage.

SCO continued its 'how to lose friends and alienate people' strategy by sending letters to 1,500 of the world's largest companies, warning them that they could face legal action if they continued to use Linux.

Sun Microsystems made further concessions to the increasing hegemony of Linux on Intel-based systems by releasing a new range of low-cost commodity servers.

Advanced Micro Devices launched its 64-bit Opteron microprocessor, regarded as a potent alternative to Intel's Itanium.

June

PeopleSoft launched an agreed $1.7 billion bid for its rival in enterprise applications software, JD Edwards.

Oracle unveiled a hostile $5.1 billion bid to acquire PeopleSoft in an attempt to become a serious rival to business applications leader SAP. Its plans to stop marketing

Hot topics in 2003

WiFi hotspots

Service-oriented architectures

Corporate performance management

Agile/adaptive enterprise

Opt-in marketing

Offshoring to India

Grid/utility/on-demand computing

Information lifecycle management

Business process management

Sarbanes-Oxley

Basel II

PeopleSoft products shocked PeopleSoft customers.

Canada's applications software company Geac bought one of the oldest software companies in the US, Comshare, for $52 million. A pioneer in business intelligence, Comshare had remodelled itself as a vendor of performance management software.

Unix System V 'owner' SCO said it was revoking IBM's right to distribute its AIX Unix version because an unspecified amount of AIX code has allegedly ended up in Linux.

UK engineering group Invensys sold its ailing business applications software unit Baan to enterprise resource planning software company SSA Global Technologies.

Bull, France's beleaguered systems supplier, lurched towards another crisis after the French government said it would withdraw financial aid, under pressure from Brussels, when Bull's latest restructuring effort was complete.

Amid growing competition from PocketPC, smart phones and wireless laptop computers, PDA pioneer Palm acquired rival Handspring for $169 million.

July/August

Blackouts on the Eastern US seaboard and in the South East of England raised serious questions about the business continuity plans of tens of thousands of organisations.

Consolidation in business intelligence software continued with Business Objects buying rival firm Crystal Decisions for $820 million, and Hyperion announcing it would scoop up the less glittering prize of Brio Software for $142 million.

Integration software vendor Mercator was sold for $106 million to data integration software company Ascential.

Interwoven found a strategy to compensate for the continued moribund state of the web content management market by buying collaborative software vendor iManage for $171 million.

Sobig-f became the fastest spreading virus of all time, infecting one email in 17.

The final shortlist for one of the largest ever UK public sector contracts, the £2.3 billion modernisation of the computer systems of the National Health Service (NHS), was announced. Contenders included Accenture, BT, Cap Gemini Ernst &Young, CSC, EDS, Fujitsu and LogicaCMG.

Oracle's hostile bid for PeopleSoft heated up when Oracle upped its bid to $7.5 billion in order to take into account PeopleSoft's successful assimilation of JD Edwards.

SCO Group's legal crusade against IBM over Linux gained pace as SCO CEO Darl McBride claimed that one million lines of code had been stolen from SCO and injected into Linux.

After a two-year recession - the longest and deepest in its 40-year history - the IT industry returned to growth. Information Age's Infoconomy Index, based on revenue figures from the world's 200 largest IT vendors, showed a 1% rise in August. The subset of European IT companies still languished at -8%.

September

Members of the European Parliament (MEPs) voted to dilute a proposed directive that would have introduced a new patenting regime across the European Union. Opponents argued that the proposed legislation would inhibit entrepreneurial vigour and open source development.

Advanced Micro Devices (AMD) unveiled the Athlon 64, notable for offering backwards compatibility with current 32-bit Intel and AMD PC chips - unlike Intel's slow-selling Itanium.

The first round of the NHS's IT modernisation programme reached a conclusion with SchlumbergerSema emerging as the preferred bidder for the £150 million patient booking component of the £2.3 billion programme.

Sema found a new home when industrial giant and parent Schlumberger passed it to Franco-Dutch Atos Origin for E1.3 billion - less than a third of the EU5.1 billion Schlumberger originally paid.

Oracle launched its 10g grid database. Based on Oracle's real application clusters (RAC) technology, the product enables organisations to run their database management systems over clusters of low-cost Linux-based servers.

October

The European Commission's anti-spam measure, the Directive on Privacy and Electronic Communication, came into force, obliging member states to enforce an 'opt-in' policy for email marketing.

Novell acquired Linux distributor SuSE for $210 million, with IBM funding the deal in part by buying a $50 million stake in Novell.

Microsoft blamed a disappointing set of quarterly financial results on a series of security scares (the Blaster and Sobig worms) that scared customers into deferring upgrades. Others said its unpopular Software Assurance licensing scheme was the cause.

Siebel Systems announced its return to the application service provider (ASP) market by paying $50 million to acquire customer relationship management ASP UpShot.com.

EMC splashed out $1.7 billion to buy Documentum, the document management software vendor.

November

The ongoing battle between Oracle and PeopleSoft ramped up a level with Oracle pre-announcing plans to nominate four candidates for election to PeopleSoft's board in order to thwart anti-takeover tactics.

The Chinese government announced plans to roll out more than 200 million open source-based desktop computers.

Microsoft revealed plans to enter the anti-spamming market with a server-based Windows product, SmartScreen.

In a bid to grab a chunk of the $500 million web conferencing market, Cisco Systems acquired Latitude Communications.

Epicor Software announced the acquisition of Dutch business applications company Scala for about $87 million.

December

Email spamming (in theory) was outlawed in the UK under the 2003 Privacy and Electronic Communications Regulations unless targets have 'opted in'.

Acquirer	Main activity	Target	Activity	Price
Ten high-impact M&As in 2003
PeopleSoft	Business applns s/w	JD Edwards	Business applns s/w	$1.8bn
EMC	Storage systems &s/w	Documentum	Enterprise content mgmt s/w	$1.7bn
Atos Origin	IT services	SchlumbergerSema	IT services	$1.3bn
EMC	Storage systems &s/w	Legato	Storage mgmt s/w	$1.3bn
Business Objects	Business intelligence s/w	Crystal Decisions	Business intelligence s/w	$820.0m
Network Appliance	Network attached storage sys	Spinnaker Networks	Networked storage systems	$300.0m
Microsoft	Systems &appln s/w	Placeware	Collaboration s/w	$200.0m
Novell	network &web srvcs s/w	SuSE	Linux distributor	$210.0m
Interwoven	Content management s/w	iManage	Collaboration s/w	$172.0m
Hyperion Solutions	Financial analytics s/w	Brio Software	Business intelligence s/w	$142.0m

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