IBM’s new vision

The big blue yonder. In his first major address to employees and customers since taking over as IBM’s CEO in March 2002, Sam Palmisano laid out his vision for the company – revealing the central plank of the strategy to be managed computing and application services. IBM branded its new thrust ‘e-business on demand’ and said it will throw $10 billion into the strategy. It will create a new ‘On-Demand’ unit, open ‘On-Demand Design Centres’ around the world and rope in its services business to help with implementations. To prepare for this brave new world, IBM has bought PwC Consulting and six software companies in recent months.

Comment: IBM is not the only major vendor planning to move customers over to a services model. Hewlett-Packard and Sun Microsystems have both developed utility computing technologies to underpin service provision, and Microsoft is still working on its .Net My Services strategy, which could provide applications as services to end users and corporate organisations. IBM’s data centre credentials, however, put it in a very strong position in this market.

Logica acquires CMG

In another sign of the quickening pace of consolidation in the IT services sector, UK rivals Logica and CMG agreed to merge in an all-stock deal estimated to be worth about EU800 million. Logica said the deal creates Europe’s second biggest IT services company after Cap Gemini Ernst &Young, with combined sales of EU3.1 billion. Logica shareholders will own 60% of the new company, called LogicaCMG. The deal is set to close before the end of 2002 and should result in annual cost savings of more than EU90 million. One sector where both companies are particularly strong is in the delivery and integration of wireless messaging systems to mobile network operators.

Microsoft wins key battle

The end of the beginning. Software giant Microsoft escaped heavy punishment for violating US antitrust laws when a federal judge upheld the bulk of the original settlement struck in 2001 with the US Department of Justice (DoJ). Microsoft will not be broken up, as ordered by the first judge in the four-year trial, but it will have to change its business practices in a number of important ways. Under the original settlement, Microsoft must release technical data to developers wanting to write programmes for the Windows operating system; it cannot sanction PC suppliers that use rival products; it must create uniform licensing terms for its software; and it must make it simpler for manufacturers and customers to remove icons for some Windows features. As part of the final ruling the judge also ordered Microsoft to designate a board member responsible for compliance with the settlement. Most analysts greeted the ruling with a weary sigh of relief, while Microsoft heralded it as a major victory for businesses and consumers.

Comment: Microsoft has won the battle but the war goes on. Attention now switches from Washington to Brussels, where Mario Monti, Europe’s competition commissioner, is expected to rule on a separate antitrust case by the end of 2002. At the same time, a number of private lawsuits brought by rivals, including Sun Microsystems and Netscape, are preparing to come to court. Legal experts actually give these a greater chance of success than the politically charged DoJ case.

Symbian strengthens position

South Korean electronics giant Samsung became the latest mobile phone manufacturer to license Symbian’s operating system, strengthening the UK-based venture’s grip on the embryonic mobile data industry. The deal means that Symbian now can boast all five of the world’s biggest handset makers as licencees, the other four being Nokia, SonyEriccson, Motorola and Siemens. Symbian’s shareholders are Nokia, Ericsson, Motorola and Psion, which developed the basis of the technology. Meanwhile, CEO David Levin confirmed to Infoconomist that the company does not intend to go public until Symbian-based devices are sold in larger volumes. He estimated that between 17 million and 20 million devices need to be sold annually before Symbian breaks even. The company receives royalties of between $5 and $10 on each device, depending on the version of operating system installed.

Comment: What is good news for Symbian is also bad news for Microsoft. Samsung had been regarded as Microsoft’s flagship licensee in the mobile industry. Microsoft chairman Bill Gates once famously remarked that Symbian was Microsoft’s main enemy; if so, the Samsung deal shows that Microsoft is losing the war. After this deal, Symbian licencees control 80% of the mobile handset market. Who said Microsoft was a monopoly?

3G landmark reached

In a symbolic moment for Europe’s telecommunications industry, Mobilkom, Austria’s biggest mobile operator, won the race to launch the region’s first national third-generation (3G) wireless network. The launch may have been lowkey, thanks to a shortage of 3G handsets, but the embattled mobile sector nevertheless took great heart from the development. “Contrary to what the sceptics might say, 3G is happening and it is here today,” said Anders Runevad, vice president of business management and sales at Ericsson Networks, one of Mobilkom’s suppliers. The new network, which has so far cost about EU70 billion to build, covers about a quarter of the population in 11 cities. NTT DoCoMo, Japan’s largest telco, launched the world’s first 3G network in 2001.

Comment: The mobile industry can breathe a collective sigh of relief. It was beginning to seem as if no operator was going to launch a service in 2002. But the technical problems remain – Hutchison, an operator with licences across Europe, admits it has “hundreds” of issues with new handsets and networks. And operators everywhere are planning for launch delays. The first, albeit low, hurdle has been cleared. But much bigger ones lie ahead. For more on Hutchison and 3G turn to ‘Superman’s biggest challenge‘.

Portal consolidation

Vignette, the content management software company, demonstrated its desire to be a major player in the neighbouring enterprise portal market when it bought Epicentric for $32 million (EU32.5m). Vignette CEO Tom Hogan said the company will merge Epicentric’s portal software into the core Vignette V7 content management platform. This will enable its customers to integrate web content and enterprise applications together on a single scalable software platform. Vignette gains about 250 new clients from Epicentric, including joint customers. The deal is due to close in December 2002.

Comment: Vignette has more than EU330 million in cash and short-term investments, making its balance sheet healthier than some of its more acquisitive rivals. But CEO Tom Hogan still needs to boost flagging sales, which have been in freefall during 2002. Setting his company up as a portal vendor seems certain to create tensions with some of its partners, including BEA, IBM and Sun. So the Epicentric deal may help – but at what cost?

Sun finally joins WS-I

Systems vendor Sun Microsystems said it will join the WS-I (Web Services Interoperability) standards organisation. In a reversal of its previous stance, it has agreed to do so only as a contributing member for now, rather than on an equal footing with other board members such as Microsoft, IBM and Oracle. That means it will have less ability to influence the development of interoperability standards for web services. However, Sun said it plans to run for election to an expanded WS-I board in March 2003.

Comment: Microsoft chairman Bill Gates has sought to minimise Sun’s involvement in the WS-I. It is not difficult to see why. Sun wants to push the development of web services based on Java. On the other hand, Microsoft wants its alternative .Net technology to play a dominant role, helping to drive future sales of other Microsoft products such as its forthcoming Windows .Net Server operating system. The Java-.Net war is about to be stepped up.

Borland acquires TogetherSoft

Come together. Software tools vendor Borland bought its US rival, TogetherSoft, in a deal valued at $185 million. TogetherSoft, which has more than 4,000 customers, has been growing steadily on the back of the increasing popularity of its suite of Java development tools, claiming important client wins from Rational Software.

Borland CEO Dale Fuller promised to continue development of TogetherSoft’s ‘ControlCenter’ product alongside Borland’s popular JBuilder IDE (integrated development environment). Borland also will pursue TogetherSoft’s strategy of providing design and analysis products that work with competitive IDEs. But both companies’ product lines will be merged on to a common technology platform during the next 12 months, enabling Borland to cut costs.

Comment: Fuller has completed a remarkable turnaround at Borland. The company was on its knees when he joined in 1999. That it survived through those dark days was thanks largely to a timely cross-licensing agreement with Microsoft. Since then Borland has cleverly straddled both the Java and .Net camps. But by acquiring TogetherSoft, a highly rated Java tools developer, Borland has moved a significant step further away from Microsoft and risks alienating one of its key partners.

End of the Neuer Markt

Deutsche Boerse, the owner of the five-year-old Neuer Markt stock exchange, said it planned to ditch the technology heavy market and shift the 265 companies listed there to a reorganised Frankfurt Stock Exchange by the end of 2003. In its heyday the Neuer Markt was the world’s fastest growing exchange. But it was hit hard by the bursting of the technology and telecoms bubbles, and its reputation was damaged by a series of financial scandals. The new exchange will be split in two. Companies listed on the ‘Prime Standard’ segment must issue quarterly reports, abide by international accounting standards, hold annual analyst conferences and provide information in English. Smaller companies with a more German emphasis will join the ‘Domestic Standard’ exchange, and will be subjected to less rigorous regulations.

Comment: The Neuer Markt became a by-word for value destruction. The market cap of the top 50 companies plunged from a 2000 peak of EU234 billion to just EU12 billion when the plug was pulled. Its demise was caused not only by the wider IT downturn but also by low trading volumes and allegations of widespread shoddy reporting and market manipulation. What now for Europe’s other technology heavy exchanges and for Nasdaq’s planned German exchange?

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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