September 22, 2003

Blade pact is double-edged

Blade pact is double-edged

The blade idea was spawned during the Internet years, when interest in lower-end servers was intense and spending on them lavish, but the bottom dropped out of the market just as early blades from companies such as RLX arrived. Only now are blade servers from mainstream players trickling to market, but analyst firm IDC expects the category to take off.

"Server blades are on the cusp of tremendous growth in the market," IDC said in a September report. "While they represented only about 3 percent of the server unit shipments in the second quarter of 2003, with sales of 41,000 blades, IDC expects more than 2.2 million blades to ship worldwide by 2007, or about 27 percent of all new servers sold."

Standards for blades, whether set by a neutral group or by the dominance of a particular group, are a significant issue. If IBM and Intel succeed, they will have at least a year's head start developing products. And initial popularity could come with beneficial multiplier effects; a popular blade design could attract partners such as Nortel Networks or F5 Networks with special-purpose blades that plug into the same chassis, bringing new capabilities that could boost the popularity further.

September 22, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

IT in permanent decline, execs worry

IT in permanent decline, execs worry

Taking advantage of better talent outside the U.S. poses a challenge to smaller technology companies because they may not have the money for multiple facilities and international travel, according to Estrin, who has founded several startups. There's no real substitute for face-to-face collaboration in solving some kinds of problems, Estrin said.

"I think the smaller companies can't afford to be as distributed, so you could maybe have development in two places. It's hard to be all over the place, and the small and medium companies won't do that as much," Estrin said.

In response to a question from the audience, some panelists praised Europe as a site for innovation. Gelsinger said Eastern Europe has been the source of many new ideas since the fall of the Iron Curtain. But Sun's Papadopoulos bemoaned some employment laws there that he said prevent a smooth flow of workers among companies.

"It's a real risk to hire people in a lot of parts of Europe, just from the burden that you put onto the company in doing so," Papadopoulos said.

Globalization creates some new criteria for those setting up business locations. One audience member, an American currently working for a small company in Switzerland, told the panel it's a great place to work because he has easy access to partners: Asia and North America each are only about a 12-hour flight away. The issue rang true for Papadopoulos.

"The physics of time zones, in fact, is hard ... we should all move to the North Pole or something," Papadopoulos said.

September 22, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

September 19, 2003

Random stats about the impact of IM

In 2002, IT staff spent $48.90/email user
In 2003, IT staff spent $165.53/email user

IT staff spends 8.9 IT hours a week per 1000
email users resetting passwords.

With the introduction of IM, the typical user has
reduced email use by 12.6%, telephone use by 14.4%,
fax by 11.3% and travel by 13.4%.

September 19, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

September 09, 2003

Outsourcing financials

iCode's experience with Outsourcing -

Nowadays, iCode has 250 employees in India, and the burn rate for that entire crew is just $200,000 per month. Plus, look at the company's other operating metrics: Mehta says iCode spends 7 to 8 percent of revenues on R&D — an absurdly small ratio for the U.S., where software companies typically spend 25 percent.

With the venture funding in place, Mehta says growth is now the focus, and that's why marketing and sales each consume about 25 percent of revenues — pretty typical for an aggressive growth plan. Support and implementation costs are running about 20 percent of revenues, and admin eats up another 15 percent; that leaves, in very rough numbers, about 8 percent for profit.

And, prior to the VC infusion of cash last year, iCode has always been profitable. "Last year we invested money to build a brand-new channel," Mehta says. "But for our revenues to double, we only need a 20 percent incremental increase in expenses. Revenues are now $10 million, and our run rate on a quarterly basis is $14 million. We expect 100 percent growth for the next two years."

Let's be clear: We're not talking about outsourcing here; like many entrepreneurs, Mehta wanted maximum control, and figured the best way to retain that was through setting up his own office.

"There are a lot of small services organization that you could use to get your feet wet, then see how it goes, and maybe acquire them," he says. "My vision is to have your own setup there. The highest amount of control you can have is through your own employees."

September 9, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

September 04, 2003

The End of Systems Integrators?

The End of Systems Integrators?

Systems integrators, though, are feeling the pinch from application vendors, albeit not from their integration technology, he added. More and more, packaged-application vendors are relying on services to make up for dwindling licensed-software sales. That, coupled with the fact that a lot of integration work is now being done in offshore centers, is having a big impact.

Oracle (Nasdaq: ORCL) , for example, has opened a service center in India, Kempf said. For its part, PeopleSoft, which also has facilities there, recently has contracted with an Indian company to help it further support PeopleSoft engagements, Kempf reports.

"It's ironic when you really think about it," Kempf said. "In one breath, the application vendors are saying they want to make it cheaper for customers by providing integration tools. But, in another, they are saying -- at least to shareholders and Wall Street analysts -- that they want to grow their services revenues."

In short, it is the competition from the application vendors' services division that is starting to cause SIs angst, rather than the integration technologies.

Greater Focus

Indeed, services have become an increasing focus among most of the major application vendors. There is PeopleSoft's Global Services group, for example, and Microsoft (Nasdaq: MSFT) has its Rapid Adoption Teams. Siebel, as well, has some 65 professionals on staff -- many of which have management-consulting or investment-banking backgrounds -- to provide consulting services.

"We assist with any senior-management problem that a customer might have that is strategic, business or financial in nature," Peter McCullagh, group vice president of CRM strategy and manager of the customer solutions team told NewsFactor's CIO Today.

These services are free, McCullagh says -- a perk for customers or serious potential customers. They vary somewhat from traditional consulting services, in that the team, on average, spends three to four weeks on a client site -- as opposed to the months-long projects that are SIs' bread and butter.

Small comfort, though, to SIs, who not only have to face more competition, but also -- in Siebel's case -- free competition.

Small comfort, as it turns out, for the end users too. Despite the growing number of choices companies have, systems-integration costs are not likely to decrease significantly, Kempf said.

"Why do you think the vendors are moving into this space, anyway? It's not for altruistic reasons."

September 4, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

September 01, 2003

Indian outsourcing market to see big shakeout in two years'

Datamonitor predicts that in five years the market will be - dominated by large Indian IT conglomerates - smaller Indian specialists, - and large Western multinational companies using the country as a base for the BPO practices. Goad said the significantly high attrition rates in the Indian BPO industry, which has risen from 25 percent last year to 30 percent now, would also contribute to the impending shakeout.

September 1, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

August 25, 2003

Decision Tools for Cost Management Tour

Decision Tools for Cost Management Tour

Interesting approach to compute IT's TCO. Still at the very qualitative level. Its very important to make this calculation as close to science as possible, any incomplete modelling will make way for subjective interpretations and short term conveniences.

Without tying Cost computation model with the operational framework its hard to calculate the hidden cost in providing IT infrastructure services.

August 25, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

Total Cost and Benefit of Ownership of Desktop Computers

Total Cost and Benefit of Ownership of Desktop Computers

This is another good analysis of TCO. Prakash Advani wrote a good comparison between Linux and Windows.

August 25, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

August 24, 2003

Amy Wohl : Too Long Away

Units of computing power

From Amy Wohl's blog -

"Units of Computing Power
Ths week I visited IBM's On-Demand Data Center in Boulder Colorado, where IBM can host customer applications that are served up, across the network, as if there were right there on the customer's site.

We are having a lot of trouble figuring out how to price what customers are buying. In fact, in one conversation I had with some of IBM Global Services' technical gurus, we agreed that so far all of these deals are one-off negotiated arrangements between vendor and customer, each unique. To scale up (down really, in terms of deal sizes and customer size), but way up in terms of number of customers served, we'd need an easier way to describe what the customers are buying.

In today's Wall Street Journal, HP's Bernardo Huberman is described as looking for a metric to describe what computers are delivering -- some combination of processing, storage -- and we'd guess services like management and application delivery. HP calls it the computon.

HP, of course, is not alone. IBM has been working on its own method, called a Service Unit, and Sun has Sun Power Units.

So someday we may not buy computers at all, but rather simply power all of our electronic devices from some computing utility, paying a monthly bill for computons -- or whatever they're eventually called -- or negotiating for flat rate deals like the ones offered by the phone companies. "

This is something we have been discussing, about the need to define a unit which is inclusive and representative of all computing resources.

HP's Computon
Sun Sun Power Units
IBM Service Unit

August 24, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack

Sun's Orion pricing

Sun's Orion pricing expected by June | CNET

Main points -

Employee headcount based pricing
Sun moving away from their own hardware platform, atleast in the entry and mid-server level:

"Neil Knox, executive vice president of Sun's volume system group and the leader of its lower-end server business, said at the conference that Sun is willing to do just that. Although sales of Intel-based lower-end Sun servers will likely cannibalize some of Sun's UltraSparc-based business, that alternative is better than losing sales to others, Knox said.

"If you don't do it, somebody else is going to do it to you," Knox said. "

August 24, 2003 in Economics of IT | Permalink | Comments (0) | TrackBack