IBM

MSFT

Source: www.finviz.com

“IBM is fully entitled to enforce its intellectual property rights and protect the investments we have made in our technologies. Competition and intellectual property laws are complementary and designed to promote competition and innovation, and IBM fully supports these policies. But IBM will not allow the fruits of its innovation and investment to be pirated by its competition through baseless allegations.”

My prescription remains Microzilla.

It is time to add Google to the official Platformonomics Hubris Watch (PHuW!™) based on a reported passage in the new Ken Auletta book about the company.  It is qualified slightly (“could”) and not a direct quote, but the official ruling is it is sufficient to get Google on the leaderboard:

In 2007, Eric Schmidt told me that one day Google could become a hundred-billion-dollar media company—more than twice the size of Time Warner, the Walt Disney Company, or News Corporation.

Here is the Official PHuW!™ Leaderboard:

Commentary:

• Google gets credit for having the biggest delta between current revenue and the aspiration.  They were smart enough not to put a date on it.  Or maybe they’re betting on hyperinflation.
• Arguably, this should be backdated to 2007 to the time of Schmidt’s comment (but we wouldn’t want to get into trouble for backdating…).  It is interesting that a lot of Google’s big dreams have come back to earth since Schmidt made the comment.  Google is still zero for all the megalomaniacal initiatives they have thrown at the wall (radio, TV, enterprise, alternative energy, personal DNA sequencing, Second Life clones, etc.).
• My general view remains that Google is going through the same arc that Microsoft went through except on a much more compressed timeframe.  They have less time to build additional businesses and competitors including sovereign nations have rallied to keep them from expanding their footprint as a prelude to going after their core franchise.  One of Microsoft’s big challenges was to pose a modest threat to the media, who buy ink by the barrel.  Google has this issue in spades as they pose an existential threat, and it is already coloring perceptions of the company.
• Oracle update: they have vacuumed up pretty much everything not nailed down in enterprise software, but they’re still not even halfway to the goal.  Jacking maintenance fees will only take you so far (the customer backlash is finally building) and the Sun acquisition buys them less revenue with every passing day.  The Sun bid sure looks like the acquisition strategy in pursuit of the big number has taken on a life of its own.  There is an argument they’re getting a great price, and I still think they’ll flip the hardware business as soon as they can.  But there is still a lot that can go wrong and the deal doesn’t fit the acquisition template they have been using (it is hard to jack maintenance fees for Sun’s give-it-away-for-free-and-make-it-up-on-volume software “business”).

Have I missed anyone else who should be on the leaderboard?

Out of the limelight, IBM has spent significant time and money lobbying various governments to hobble competitors in the last fifteen years, all the while maintaining the biggest monopoly in technology with the mainframe.  Now the antitrust spotlight returns to them, amid accusations that IBM is doing exactly what got them into trouble decades ago (refusing to unbundle their software from their hardware).

IBM is very good at milking the mainframe installed base and defend it aggressively.  And for good reason: I have seen numbers that suggest the mainframe is still close to half of IBM’s profits when you include hardware, software and surrounding (people) services.  Forced forklift upgrades every couple of years are a favored strategy.

They’re also always on the lookout for ways to get new workloads onto the mainframe.  Nary a new buzzword appears without some cockamamie story about how the mainframe is the right place for the latest trend, though they never quite pan out. 

While supporting a legacy installed base is both necessary and even noble, the biggest problem is the mainframe has truly been the land that Moore’s Law forgot.  The computer industry’s inexorable engine of improvement has been suspended on the mainframe in the absence of competition to pressure IBM to pass the almost unavoidable cost savings onto customers (IBM: feel free to prove me wrong and start publishing industry standard benchmarks, particularly transaction benchmarks).

But as much as I welcome scrutiny of IBM’s business practices, the whole cycle of antitrust action is depressing, akin to the endless cycle of violence in the Middle East.  Microsoft naively once thought they could just go about their business (as IBM no doubt did as well decades before), but they faced competitors with better lobbying chops than software chops.  So Microsoft spent and spent to build up its own defensive lobbying capacity, yet could not resist using it offensively when the opportunity presented itself.  And so Google, after being jerked around on DoubleClick and their Yahoo search deal, is looking for payback and building a lobbying force that they too will need to keep busy

Perhaps just coincidently, there is new EU action against Microsoft over Internet Explorer.  I suspect Opera is not the only complainant here.  It is amusing to see the EU arguing that ongoing IE’s market share losses are smaller than anyone else reckons (suggestion for Dean and crew: let the EU provide your scorecard metrics for the next review period).

But pesky facts don’t matter so much in this case.  The EU is the most depressing aspect of the generally depressing antitrust topic.  While US antitrust policy is about protecting the consumer, the EU policy protects competitors, which of course makes them the first stop for any competitor looking for a leg up.

I suspect this latest action is the EU’s opening salvo for negotiations around Windows 7.  It has become a tradition for regulators to hold new versions of Windows hostage to their software design ambitions.

To return to our original topic, the obvious solution is IBM should just open source its mainframe software.  The bundling complaint goes away.  Mainframe software and competition probably improve.  IBM demonstrates their open source commitment extends to their own businesses and not just other people’s businesses.  And the EU regulators are happy and can focus all their attention on Windows 7 (as a counter, Microsoft should fess up and let the world know that Vista was actually designed by EU bureaucrats in Brussels).

International Business Machines Corp. will review its membership in the bodies that set common standards for the technology industry and may withdraw from some, potentially undermining the system that makes electronic equipment and software interoperable world-wide.

The Armonk, N.Y.-based computer maker is expected to announce the review Tuesday, according to company officials. IBM has become frustrated by what it considers opaque processes and poor decision-making at some of the hundreds of bodies that set technical standards for everything from data-storage systems to programming languages, those officials said.

It would be all the more noble a stance if IBM didn’t have decades of culpability in making standards bodies into cesspools of cynical politics and half-baked outputs (incomplete standards being a consultant’s best friend…).  They also lose points for making this move in a fit of pique after losing the Open XML battle.  I guess the appeal of standards dims when you don’t reliably get your way. 

The good news is perhaps IBM has figured out that “standards” are not the high order bit.  They certainly might make greater in-roads against Microsoft Office with an actual product strategy as opposed to just trying to make the Office file formats “illegal”.

Maybe more disconcerting is Microsoft’s embrace of IBM’s long-held comfort with the standards muddle:

A Microsoft spokesman said standards bodies are “invaluable” because they provide “an even and predictable playing field” to the industry. Their decisions reflect the views of a preponderance of members, “not the interests of any single party,” he said.

I will leave it to someone like Gartner to define the lifecycle of a company based on their evolving perspective on standards.  During ascendency, you have better things to do and your vitality and antipathy to standards scares people.  Then, you reach the comfortable, middle-aged embrace of standards, and start hiring employees for their ability to sleep sitting up during standards meetings.  To be followed by the post-partisan-whatever-it-is that IBM is now advocating.  Unless of course this is just a cynical maneuver to improve their position in the standards bodies they are threatening to leave, particularly by lowering membership requirements in order to expand the voting ranks with their allies for the next battle…

Linden Lab and IBM Achieve Major Virtual World Interoperability Milestone
Open Grid Protocol Enables Avatars to Teleport Between Second Life and OpenSim Virtual Worlds

NEW YORK & SAN FRANCISCO – 08 Jul 2008: Linden Lab®, creator of the virtual world Second Life®, and IBM (NYSE:IBM) have successfully demonstrated virtual world interoperability by teleporting avatars between the Second Life Preview Grid and an OpenSim virtual world server. The joint development project represents an industry first of a quantifiable milestone for virtual world interconnectivity.

Here is a screen shot from the demo:

Evidently the tumbleweed avatar was successfully teleported from Second Life into an enterprise-class IBM virtual world running on a mainframe (which they want you to know are more relevant than ever, especially for really popular applications like interoperable, enterprise-class virtual worlds…).  Unfortunately, no observers were present in either virtual world to verify the claim.

Looking ahead, with enterprise suitability and interoperability now firmly in hand for the burgeoning enterprise virtual worlds market, IBM will no doubt turn its attention to the security problems raised by interoperability.  After all, you wouldn’t want more typical Second Life denizens teleporting into your enterprise-class virtual world.  Expect a hue and cry about illegal virtual immigration, foreign avatars soaking up system resources and taking virtual jobs away from local avatars.  Politicians, responding to virtual outrage, will demand action.  And then, enter the virtual world lock-down solution with IBM Tivoli Avatar Access Firewall Manager for zSeries Enterprise Class Virtual Worlds.  Because sometimes you have to create the problem before you can solve it…

Some days the jokes write themselves.

Did they mean “Second-Class Enterprise Life”?

It’s like Second Life, only more expensive, with even fewer people, and minus the interesting bits?

Can “Enterprise-Class World of Warcraft” be far behind?  “Enterprise-Class Grand Theft Auto”?

Imagine the resplendently rendered virtual bus that drives up to your virtual headquarters full of virtual consultants…

Coming soon no doubt: a push for the mainframe to run your enterprise-class Second Life.  (IBM’s mainframe site is a barrel of laughs all by itself.  Slogan: “The Future Runs on System z”.  And don’t miss Destination Z, “A vibrant community to help you make the most of your mainframe”  featuring stock photography of cool kids at least three decades younger than the average mainframe operator.  But I digress.)

It is a clever financial move.  Once you’ve realized the cost savings from off-shoring your consultants, the next obvious step is to replace them with software agents that can be infinitely replicated and don’t need salaries.  A people business like consulting scales profitably when you get rid of the people.  Who will know in a virtual world?  Suggestion: start giving any consultants bidding for your business a Turing Test.  Prepare now for the inevitable.

Meanwhile, on a more serious note, timesharing is back with a vengeance yet there is no sign IBM has ambitions to be a major player in the cloud computing era.  Instead they’re fiddling with avatars while the on-premise business starts a long, slow burn.  Where is the “one billion dollar” data center capex announcement that signals their ambition to play with the Amazons, Googles and Microsofts?  Perhaps it is harder to make a “billion dollar” commitment when it requires real dollars as opposed to “soft” and/or exaggerated dollars?  Or has IBM committed all its free cash flow to financial engineering, forcing them to watch the next generation of computing from the sidelines?  Selling servers and consultants by the hour is a far cry from offering (anything)-as-a-service.  In the cloud world, if you build it as a vendor, you also have to be willing to operate it at scale.  And enterprise-scale is dwarfed by Internet-scale, so enterprise chops are not enough.  Outsourcing “your mess for less” isn’t a service.  One can only speculate that virtual conference rooms in Second Life are inhibiting IBM’s ability to define their strategy.  I am still hoping they do OnDemand 2.0 and kill two birds with one slogan.

1. This is a seriously half-baked announcement.  The press release rambles on and on yet says very little.  This “next major advance in computing” merits a single page on IBM’s web site with two paragraphs of text and a stock photo.  IBM is the ultimate in top-down companies and tends to broadly execute against a single marketing theme.  Their current Innovation campaign seems to be ramping down and the replacement will no doubt start up in the spring heralding ”the next major advance in computing”.  So why this rushed announcement?  Why allude to the broad theme if you’re not ready to execute against it?  Who needs to know today that “IBM’s first Blue Cloud offerings” will ship next year even if it isn’t clear what those offerings are?
2. What is Blue Cloud exactly?  What makes it “game-changing”?  IBM repackaging some relatively obscure open source software?  IBM trying as usual to position the mainframe as the answer to whatever the question is?  Another offering delivered via a few busloads of consultants?
3. Why do the announce in Shanghai when the only customer was the Vietnamese Ministry of Science and Technology?
4. What ever happened to OnDemand?  They’re revisiting the same themes.  They could have even called it OnDemand 2.0…
5. Where is the statement about spending “$1 billion” or more on this initiative?  IBM doesn’t do anything without promising to spend at least <Dr. Evil voice> $1 billion </Dr. Evil voice>. 
6. Shouldn’t there have been a press conference in Second Life?  Or is this a sign that IBM’s previous game-changing, next major advance for computing is officially over?
7. Is IBM just going to package up some open source software or are they going to put their money where their mouth is and make the capital expenditures to build out serious data center capacity to support cloud computing by their customers?  Microsoft spent about $2.3 billion on datacenter capex last year and will likely spend even more this year.  Google was around $2 billion.  Yahoo came in a distant third with only about $600 million.  Given all their financial engineering needs to support their private LBO strategy, does IBM have the money to play in this game for real or will they settle for hazy press releases?

Evidently IBM decided in September of 2006 they would stress filing patents with “significant technical content”.  They are going to “sharply reduce” the filling of bogus, aka business method patents.  The company had no comment on their tens of thousands of patents filed and awarded before that date.

Further questions are emerging about whether this memo was ever actually circulated inside IBM.  This latest patent was filed after IBM’s sanctimonious change in policy and drips with irony as it is a business method for extracting more revenue out of a patent portfolio.  The company had no comment on how they reconcile a billion dollars of annual patent licensing revenue with their corporate embrace of the GPL.