Is the iPad a Game Changer?

It won't be easy for the iPad to change the e-reader and publishing markets, much like the iPod did to the music industry. But here's five recent Apple successes that give the iPad an edge.

At first glance, Apple's (AAPL) long-anticipated iPad seems like only a bigger, more colorful version of the iPhone. Not much to it, until you consider the iPad's improved iBook app reader that displays nicely on the iPad's bigger screen. Then add a fully integrated new iBooks Store that's backed by publishing heavyweights Penguin, HarperCollins, Simon & Shuster, Macmillan and Hachette Book Group.

Clearly, Apple sees the iPad as a game changer in the emerging e-reader market and perhaps even a savior for the embattled publishing industry. "We think iPad is going to be a very popular e-reader not just for bestsellers but for textbooks as well," Apple CEO Steve Jobs told the invited crowd gathered in San Francisco.

More than just an e-reader, the iPad is a well-rounded media device for browsing the Web, emailing, sharing photographs, watching video, listening to music and playing games. Its large touch keyboard is supposedly easy to type on. Apple will also sell a docking station with a keyboard attached to it.

"It's so much more intimate than a laptop and it's so much more capable than a smartphone with its gorgeous screen," Jobs says.

Here's a quick tally of the specs: Half-an-inch thick, 1.5 pounds, 9.7-inch display, 16GB to 64GB flash storage, WiFi, BlueTooch, 10-hour battery life, A4 chip. The iPad comes in two flavors, WiFi only and Wifi and 3G (with AT&T). Consumers of the 3G iPad won't have to sign a contract and can choose from two plans: 250 MB per month for $14.99, unlimited data for $29.99.

Apple took the air out of any sticker shock for the iPad itself: $499 for a 16GB unit, $599 for 32GB and $699 for 64GB, with an additional $130 for 3G units. Most industry watchers had predicted the cost to be near $1,000.

The iPad is positioned as a game changer for publishing, evident by the New York Times playing a prominent role during iPad demonstrations. And the iPad will likely play a supporting role as the New York Times transitions to a paid-content model next year.

For books, the iPad uses the popular open book epub format. CourseSmart, which provides 8,800 e-textbooks for college students via an iPhone app, said it plans to release an iPad app at the end of March that will take advantage of the iPad's larger screen size.

But "game changer" is a pretty lofty title, especially for a product that isn't necessarily groundbreaking.

That is, tablet PCs have been around for a while and, to a lesser degree, so have e-readers. The Amazon Kindle and Sony Reader were the first to make a splash, followed by a plethora of e-readers at this year's CES show in Las Vegas.

"We don't see the iPad as a big game changer, and certainly not on the enterprise front," says Rebecca Wettemann, analyst at Nucleus Research. "What we've got is a color Kindle—a Kindle for dummies—at a higher price point."

Moreover, given what happened to the music industry, Wetterman says, publishers should be a little wary of Apple. What about big-name publishers backing the iPad? "They're a little desperate," she says.

Nevertheless, given Apple's string of successes against conventional wisdom, backed by blowout quarters amidst deafening economic times, it's simply impossible to bet against Apple right now. Apple has great vision.

Still not convinced? Here's five things Apple has taught us this past year and how the iPad might play into them:

1. The iPhone: A Real Game Changer

Oracle's (ORCL) Larry Ellison pooh-poohed tech innovation in the Silicon Valley a few years ago. Well, Mr. Ellison, it's alive and well, thank you very much. Moreover, the tech world doesn't turn on an acquisition or two or a dozen. A single company like Apple can still innovate from within and move markets.

The iPad take: The iPod app and iTunes Store changed music for college-aged kids. With the iBook app and iBook Store, the iPad follows the same model. Now college-aged kids will be able to get their music and text books on the same device.

2. Touch: Can You Type?

The jury is in: Touchscreens work.

Only a few years ago, touchscreens were more of a novelty than anything else—but the iPhone changed all that. "Prior to the iPhone, the worldwide market for Pro Cap (iPhone's touchscreen technology) was about $20 million," says Geoff Walker, product marketing manager at NextWindow, which makes touchscreens. "This year it'll be somewhere around a half a billion."

The iPad take: The biggest drawback to touchscreens is that it's difficult for some people to type on a touch keyboard. Not so for Jobs, who says, "the iPad is a dream to type on." With the iPad, though, Apple has covered its bases by delivering an iPad docking station that has a hardware keyboard.

3. Individual: The Power of the Consumer

Note to IT staff: You lose again. Apple has shown that consumers count more than you do. And they'll continue to bring in Apple products, tap into your network, then call for support when they need it—and you'll do it. Also, don't expect a whole lot of enterprise support from Apple now or in the future.

The iPad take: How often do knowledge workers need to read documents, articles, manuals? Perhaps they need to watch instructional videos. Or maybe they've jotted down notes at home when inspiration hit them, and they need to bring those notes to work. The iPad will slowly make its way through the back door of corporations.

4. App Store: Imitation is the Sincerest Form of Flattery

Not only have a crop of iPhone contenders hit the market recently, the bigger surprise is the number of App Store imitations. Apple has changed the way people view and buy software. It single-handedly made a billions-of-dollars market for mobile apps. Gartner says consumers will spend $6.7 billion in mobile app stores this year, up from 4.2 billion last year. Better yet, this trend will continue to almost $30 billion in 2013.

The iPad take: It's true, the tables are turned for the iPad. During the iPad's coming out party, Apple flashed a picture of the Amazon Kindle, and Jobs said, "Amazon did a great job with their reader and we're standing on their shoulders here." But the e-reader market is still very new, with many e-readers announced only a couple of weeks ago at CES. "Apple isn't late to the party," says Manish Rathi, co-founder of Retrevo, a consumer electronics shopping site.

5. Money: Apple's Blockbuster (BBI) Earnings

Quarter after quarter, Apple has proven that consumers will spend top dollar for tricked-out tech candy despite being in the worst economic slump in recent history with one out of 10 Americans out of work. Earlier this week, Apple posted its all-time highest revenue and profits, $15.68 billion and $3.38 billion respectively. During the quarter, Apple sold 8.7 million iPhones and 3.36 million Macs.

The iPad take: Rathi says his surveys show that Apple needs to get to the $600 price point to maximize unit sales and convert PC consumers to an Apple product. To the surprise of many, the iPad came in $100 less than that.

Will the iPad be another game changer for publishing and reading? Maybe, maybe not. But history shows Steve Jobs is on his "A" game, and Apple is on a roll. A hot player with the hottest hand of all. In Texas Hold 'Em speak, we call that pocket aces.

SharePoint 2010: Five New and Improved Features

You may not need all the features SharePoint 2010 has to offer, but advances in areas such as social media, offline access and better CRM and ERP integration make it worth a look. Here's a rundown of what's new and/or improved.

Sharepoint, Microsoft's (MSFT) one-stop "content and collaboration" platform, has been around since 2001. But it didn't see widespread adoption until SharePoint 2007's debut and the integration with social software, such as blogs, wikis and social networking Web sites.

With SharePoint 2010, due in the first half of this year and available only in 64-bit, one of Microsoft's main goals is to improve on these social networking tools as well as provide better offline access, easier integration with line-of-business software like CRM and ERP, and improved search.

And then, of course, tie it all together.

The 2007 version of SharePoint (known as Microsoft Office SharePoint Server 2007 or MOSS 2007) was a breakthrough of sorts because of its Web 2.0 add-ons and its eventual offering to all Microsoft's customers as an online version in November 2008.

MySites in SharePoint 2010 have been updated to make profile pages more personalized, a la Facebook.

Yet, as is usually the case, Microsoft was forced to make the change due to the rising tide of Web-based Office alternatives, such as Google (GOOG) Apps and those from niche Web 2.0 companies such as Socialtext, SixApart and Jive. Last November, Microsoft cut prices for its BPOS (Business Productivity Online Services) suite, which includes online versions of both SharePoint and Exchange, to curb the threat of free and low-cost offerings.

[ For complete coverage on Microsoft's new Windows 7 operating system -- including hands-on reviews, video tutorials and advice on enterprise rollouts -- see CIO.com's Windows 7 Bible. ]

Microsoft also wisely partnered with young companies like wiki maker Atlassian and RSS (Real Simple Syndication) vendor NewsGator to incorporate more social technologies into MOSS 2007. Other enterprise social media companies like SocialText (wikis) and Jive (blogs and wikis) made their products compatible with SharePoint as a necessity.

And now arrives SharePoint 2010, with its many confusing versions, Office-like ribbon interface and ability to run in multiple browsers. And it also offers many more social networking tools than MOSS 2007.

In a recent Forrester report titled "SharePoint Server 2010: An Evolutionary Step Toward Content-Centric Middleware," principal analyst Rob Koplowitz writes that while the social technologies built into MOSS 2007 "have been effective, SharePoint 2010 improves on native social tools" and other features.

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Not all companies will need all of SharePoint 2010's new features, but here are five new areas worth noting, according to Forrester.

1. Improved Social Networking Tools

SharePoint 2010 should benefit from the addition of personal blogs, tagging and activity feeds within its social networking sites, called MySites. MySites will also integrate with Microsoft's BCS (Business Connectivity Services), which allows IT to link employees' MySites profiles to non-SharePoint data, such as information from a human resources system.

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Wiki and blog integration in MOSS 2007 was criticized for not being user-friendly, but Forrester's Koplowitz writes that SharePoint 2010 improves on this dramatically.

"Wikis are now expressed as a pervasive content type that can be accessed in most content-generation scenarios, as opposed to a specific template type," he writes. "Blogs are tuned for internal and external audiences."

Community interaction within SharePoint has been given a boost, as MySites now have a user interface similar to Facebook profile pages. SharePoint 2010 has also added tagging (word labels that describe and help find content) through a centrally managed metadata service, with "tag clouds" that list common tag words so users can find content quicker. In addition, SharePoint 2010 is emulating Twitter by bringing microblogging and activity feeds into the fold.

2. Going Offline with SharePoint Workspace

Offline access to MOSS 2007 has been a sticking point for businesses and is considered inferior to the offline capabilities of rival Lotus Notes/Domino.

SharePoint 2010 catches up to Lotus Notes with SharePoint Workspace, a client application based on technology designed by Ray Ozzie's old company (Groove Networks), that makes SharePoint libraries, lists and forms accessible offline.

SharePoint Workspace will offer two types of functionality: as a peer-to-peer collaboration system based on the legacy Groove architecture, and as a client to the SharePoint server. Any given workspace will be in either the client server or peer-to-peer, but not both.

3. Application Development Tweaks

Developers will deal with less coding in SharePoint 2010 with the improvements to design tool SharePoint Designer, tighter integration between development tool Visual Studio and SharePoint, and built-in support for Web application framework Silverlight for more multimedia interaction.

Also, SharePoint Design has been tweaked in SharePoint 2010 to become a "no-code" tool to reduce the chances of code instability.

4. Better Connection to Line-of-Business Data

Previous versions of SharePoint have had trouble connecting with enterprise software systems such as CRM and ERP, despite efforts from companies like ERP Link and a joint offering from Microsoft and SAP called Duet that brings SAP data into Office.

To integrate more business data in SharePoint 2010, Microsoft will rely on its BCS (Business Connectivity Services) suite. BCS helps make SharePoint 2010 the "connective tissue that bridges line-of-business systems and knowledge worker systems," notes the Forrester report. The previous iteration of BCS, called BDC (Business Data Catalog), could bring only line-of-business data into SharePoint. BCS will provide both read and write access between business applications and SharePoint 2010.

5. Expanding Search and Content Management

Forrester's Koplowitz writes that the embedded search function in SharePoint 2010 is superior to previous versions because of "improved scalability, query functionality and index redundancy." In addition, companies that have opted for the high-end SharePoint Enterprise CAL (client access license) will have full access to FAST Search Server 2010, the search technology Microsoft acquired in 2008.

As for managing business content, Microsoft has removed limitations in MOSS 2007's ECM (enterprise content management) feature. For example, lists in SharePoint now support 1 million items, and document libraries can grow to 200 million items.

Shane O'Neill is a senior writer at CIO.com. Follow him on Twitter at twitter.com/smoneill. Follow everything from CIO.com on Twitter at twitter.com/CIOonline.

Global CIO: How IT Builds Brands

Microsoft Buys Bridge Between Java and .Net Developers

Microsoft plans to acquire technology that has enabled Microsoft's TFS (Team Foundation Server) software to be an ALM (application lifecycle management) server for different software development platforms. The company will purchase Teamprise-related assets from SourceGear. Teamprise software lets Java developers using Eclipse-based IDEs or developers leveraging operating systems including Unix, Linux, and Mac OS X build applications via Visual Studio TFS.

Microsoft's move is in recognition of heterogeneous development shops building in both .Net and Java, Microsoft officials said. TFS serves as a central software artifacts repository. "We've just built a bridge to Java developers. ... If you're building [in] Java today and want to share assets with Visual Studio developers, you'll do that with the Teamprise technologies," said Dave Mendlen, Microsoft's senior director of development marketing.

Users often have a business need to develop on multiple platforms but developers must collaborate and understand different parts of the work being done, said Doug Seven, senior product manager for Visual Studio at Microsoft.

Microsoft's acquisition of Teamprise technologies addresses concerns of development shops reluctant to deal with a smaller vendor like SourceGear, said analyst Jeffrey Hammond of Forrester Research. "They were uncomfortable with a small partner providing the connectivity for their Java development teams," Hammond said. "Now they have Microsoft supporting their Java developers if they choose TFS as their single ALM solution.

Microsoft's Seven concurred that some customers had issues with the previous arrangement. "We've had a close relationship with Teamprise for a long time as being the provider of our heterogeneous development support, and both of us have heard from joint customers for a long time that it has been a struggle," Seven said.

Hammond lauded the acquisition. "I think it's a great move, and they should have made it a long time ago," he said. TFS offers a less expensive alternative to products such as Rational Team Concert, Hammond said.

Functionality from Teamprise Client Suite will be integrated into Microsoft's Visual Studio product line beginning with the Visual Studio 2010 IDE. Visual Studio 2010 will be officially launched on March 22, 2010 and ship around that time.

Leveraging Teamprise Client Suite technologies, developers on multiple platforms can use TFS for version control, work-item tracking, build management process guidance and business intelligence.

Teamprise Client Suite includes:

• Teamprise Plug-in for Eclipse, allowing developers to access TFS from such IDEs as Rational Application Developer, JBoss and Adobe Flex Builder
• Teamprise Explorer, combining functionality available to Eclipse developers using Teamprise Plug-in into a standalone, cross-platform GUI application for team members working outside of an IDE, such as graphic designers and quality assurance testers
• Teamprise Command-Line Client, offering a non-graphical interface for TFS

Customers can jointly purchase Teamprise Client Suite technology and one Team Foundation Server client access license. Also, customers with the Visual Studio 2010 Ultimate with MSDN variant of the software development platform will receive Teamprise Client technology as part of their subscription.

SourceGear will continue to support Teamprise products and sell the latest release of the suite until the Microsoft-branded product is available.

Terms of the acquisition were not disclosed.

This story, "Microsoft buys bridge between Java and .Net developers," was originally published at InfoWorld.com. Follow the latest developments in application development at InfoWorld.com.

Bing Vs. Google: Feature Wars

If you haven't noticed, Bing and Google are engaged in a tit-for-tat over which search engine has the best features.

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On Wednesday, Bing unveiled new and improved tools like Wolfram Alpha integration, Facebook Previews and full-page weather reports. Then Google hit back on Thursday with enhanced movie listings and even safer SafeSearch. Before that Bing unveiled an overhauled maps interface, the next day Google announced Street View was now available in all fifty states. Last month during the Web 2.0 Summit, the two search engines sent out competing press releases bragging about Twitter integration, and on and on it goes.

Google may be the dominant search engine, but Bing is doing its best to push its way up the popularity charts.

With so much attention focused on adding new stuff, you've got to wonder what the future has in store for search and whether this feature war is getting out of hand.

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The Battle for Search

It's nothing new to try and suck the life out of a competitor's product by making a competing major announcement around the same time. Palm and Sprint tried to do that to Apple with the launch of the Palm Pre. Not to mention that Google Wave launched on May 28, the same day that Bing made its debut. But lately, the battle between Google and Bing is getting to be like a tennis match that never ends, just a constant rally back and forth as each side tries to outmaneuver the other.

Look at Wednesday: Bing announces some interesting new features that integrate the computational power of Wolfram Alpha into its search results. As an added bonus, Bing gets limited Facebook integration and tweaks its weather results.

How does Google respond? An announcement about tweaked movie searches, and password protection for your SafeSearch settings--Google's filter for explicit content. Improved SafeSearch is worth talking about and likely a welcome improvement, but the Google Movies announcement looks like a desperate plea to prove that Google can be just as consumer oriented as Bing.

The Future

Although competing announcements can get a little tiring, there's a lot to love about the heavy competition in the search market. Google and Microsoft realize that search is where the online money is, which is why they spend so much time on new features and products that will keep you coming back for more. Increased competition could lead to helpful technologies emerging like improved semantic search, hyper local features, voice activated search on your PC and who know what else?

It's an exciting future for search--I can't believe I just said that--and Google and Bing are working hard to deliver the latest and greatest features to their loyal users. I just hope they don't lose focus on basic things like filtering search spam and phishing detection in the rush to deliver new features before the other guy does.

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Book review: What's wrong with software development

Computerworld - The title misses the mark, and the detours into architecture are overdone. But the new book Wrench in the System, by Harold Hambrose (John Wiley & Sons Inc., 2009), has one powerful message: We're building our enterprise software applications all wrong.

Think about how you feel when you use a well-designed product. It feels good, works great, makes the job easier, is enjoyable to use and requires little or no training. That certainly doesn't describe enterprise software such as ERP systems, which require a huge amount of training and force people to alter the way they work to suit the system.

Hambrose says the reason so many enterprise software projects fail is that the software is bought or built by people who are out of touch with those who will use the applications on a daily basis.

Sure, today's IT professionals and business analysts work hard to determine user requirements, but they often ask the wrong questions and get unhelpful answers. Hambrose says the missing ingredient is what he calls professional product designers. He's not talking about people who select color palettes and icons, but designers who are trained observers of human behavior and know the right questions to ask, such as the following:

• Who will be using this software?
• Will they understand the instructions and error messages?
• Why do they have so many Post-it notes sprinkled around?
• Which tasks will they perform most often?
• Can we improve the workflow first?
• Can we reduce the clutter on the screen?

Hambrose doesn't tell us how CIOs are supposed to find the designers, human factors experts, industrial psychologists and corporate anthropologists who might be able to transform software development into user-centered design.

But he does offer this tantalizing, ambitious goal: Businesses need software "that sparks excitement in its target community of human users -- excitement that their work is easier and more enjoyable, that they have become more effective, and that their employer is supplying tools that make them feel like part of a winning team."

We have a long way to go.

A Flexible Technology Architecture Is Key to Remaining Competitive

Banks are turning to service-oriented architecture, virtualization and cloud computing to enable the flexible technology architecture required to sustain cost-effective operations while responding to today’s volatile market. By Deena M. Amato-McCoy September 02, 2009 As the banking industry continues to navigate a recessionary economy, financial institutions are learning that they cannot sustain cost-effective operations or superior customer service using disparate platforms and siloed databases. A move toward more-open, flexible and even emerging platforms is not only saving banks capital but also offering organizations an agility that will keep them competitive once the economy turns around.

Even while the financial crisis continues to strain banks' technology budgets, they must maintain efficient and secure transaction processing, real-time customer interactions and business continuity -- all while continuing to pursue growth. Clearly this is not easy as "Many companies are simply trying to stay afloat during the recession," says Richard Daukant, VP and general manager, financial services, SAP (Newtown Square, Pa.). "However," Daukant adds, "the current economy is presenting a great opportunity for banks to position themselves for the future. The way to do so is to consider transitioning to more-flexible operating platforms."

Though some banks may not believe they have the funds now for an architectural overhaul, Daukant contends that they should begin to take stock of the complexity of their data storage configurations and business applications. Mergers and acquisitions have run rampant over the past decade, he notes, and thus many institutions are operating disparate software applications or, worse, disparate business channels.

"The biggest challenge we hear daily is that internal systems, either organically grown applications or those acquired through mergers, just don't 'talk' to each other," reports Daukant. "This causes issues, including not being able to bring new products to market in a timely manner or, worse, inability to present them across business channels."

SOA for Built-In Flexibility

To combat these challenges, experts are urging banks to consider flexible platforms that support end-to-end business processes and to utilize a single set of information and reusable applications. Enter: service-oriented architecture.

SOA provides an interoperable, scalable platform with loosely coupled applications. The open platform ensures that applications, which are accessible over the network, can be reused across the enterprise for various operations.

"One of our challenges was the delivery of products and services demanded in a modern banking environment, which consists of multiple channels," he relates. "We realized that creating a more complex computing environment to solve these issues could result in more points of failure" across that environment.

The bank chose to implement the SAP for Banking suite, which supports operational and analytic banking applications using a business process platform, according to the vendor. ATB expects the model to support a multichannel banking architecture and to reuse various applications within this framework, Casey says.

ATB operates multiple channels, including branches, ATMs, online banking, interactive voice response (IVR) and telephone banking services, a call center, and an interface for an online portal that supports sales and services as well as customer relationship management capabilities, according to Kris Hansen, ATB's chief architect. "Customer information is essential within each of these channels," he says. "By using our new SAP platform, we can ensure that we use one customer record and have a single version of the truth."

Data will flow over the enterprise business services and be shared through the middle layer that connects ATB to the platform, Hansen explains. Then SAP's platform will connect ATB to the interoperable services that extract the customer data from a single end-point service, he adds. The tight integration is scalable and can be reused as ATB adds more business channels or ties new applications to the customer data in the future, Hansen notes.

At press time ATB was developing approximately 40 business services, including payment systems and partner services, and preparing for the first tests. The bank plans to go live on the SOA platform by summer 2010.

A Virtual View

"At different points of the day, business demand changes," explains Lee Fisher, manager, worldwide financial services business development, scalable computing, with Palo Alto, Calif.-based Hewlett-Packard. "This increases storage needs."

Perhaps the most popular approach to server consolidation today is virtualization, which allows banks to essentially create multiple server environments on a single machine. Another, increasingly popular option -- one that allows banks to scale capacity up or down with extreme flexibility -- is on-demand computing: Rather than support servers in-house, off-site hardware is leased from third parties in a pay-as-you-go utility model. At the heart of this idea is the concept of cloud computing.

But while cloud computing has been getting a lot of attention lately, Bart Narter, a San Francisco-based SVP in Celent's banking group, cautions that the model isn't likely to play a mission-critical role going forward. "Cloud computing, in its truest form, is the outsourcing of storage, and using an interface to access information over the Web," he explains. "With data security top of mind these days, it is unlikely that banks will keep any core data on a cloud."

That doesn't denote the end of the trend, however. "Instead banks are opting for internal clouds, which is server virtualization within their own data center," Narter says. "I don't see pure clouds sweeping the financial industry, due to data concerns. Internal clouds are the hip way to take advantage of virtualization, and this trend will grow."

ATB has been using virtualization since 2005. "Virtualization is all about extracting key data from a variety of end points, and achieving high levels of uptime with minimum complexity and lower operating costs," says the bank's Hansen, who notes that ATB currently is determining which processes will drive additional savings in the future.

In addition to creating capacity flexibility, virtualization also is an ideal solution for banks committed to sustainability. Auckland-based Bank of New Zealand (US$16.8 billion), for example, was close to reaching capacity in its data center in 2007. While it needed to maximize space and lower operating costs within the data center, it also wanted a solution that would support its newly instituted carbon-neutral focus, a goal it wanted to achieve by 2010, according to a release.

Desktop multiprocessing: Not so fast

Not every application can be reprogrammed for multicore architectures, and some bottlenecks will always remain. Here's why.

August 18, 2009 06:00 AM ET

Until recently, you could reasonably expect this year's software to run faster on next year's machines, but that's not necessarily true going forward. For the foreseeable future, significant performance improvements are likely to be achieved only through arduous reprogramming.

Some time ago, computer vendors passed the point of diminishing returns concerning processor clock speeds, and could no longer keep hiking frequency rates. To maintain continued performance improvements, suppliers turned to installing multiple instances of the processor -- multiple cores -- on a processor chip, and as a result, multicore processors are now mainstream for desktops. But to realize any performance improvements the software has to be able to use those multiple cores.

And to do that, most software will need to be rewritten.

"We have to reinvent computing, and get away from the fundamental premises we inherited from von Neumann," says Burton Smith, technical fellow at Microsoft Corp., referring to the theories of computer science pioneer John von Neumann (1903 - 1957). "He assumed one instruction would be executed at a time, and we are no longer even maintaining the appearance of one instruction at a time."

But software cannot always keep up with the advances in hardware, says Tom Halfhill, senior analyst for the Microprocessor Report newsletter in Scottsdale, Ariz. "If you have a task that cannot be parallelized and you are currently on a plateau of performance in a single-processor environment, you will not see that task getting significantly faster in the future."

New law in town

For four decades, computer performance progress was defined by Moore's Law, which said that the number of devices that could economically be placed on a chip would double every other year. A side effect was that the smaller circuits allowed faster clock speeds, meaning software would run faster without any effort from programmers. But overheating problems on CPU chips have changed everything.

"The industry has hit the wall when it comes to increasing clock frequency and power consumption," says Halfhill. There are some chips edging above 4GHz, "but those are extreme cases," he says. The mainstream is still below 3GHz. "The main way forward is through multiple processors."

By adding more cores to the CPU, vendors offer the possibility of higher performance. But realizing higher performance through multiple cores assumes that the software knows about those cores, and will use them to run code segments in parallel.

Even when the software does that, the results are gated by Amdahl's Law. Sometimes called Amdahl's Curse, and named for computer pioneer Gene Amdahl, it lacks the upbeat outlook of Moore's Law. It says that the expected improvement from parallelization is 1 divided by the percentage of the task that cannot be parallelized plus the improved run time of the parallelized segment.

In other words, "It says that the serial portion of a computation limits the total speedup you can get through parallelization," says Russell Williams, chief architect for Photoshop at Adobe Systems in San Jose, Calif. "If 10% of a computation is serial and can't be parallelized, then even if you have an infinite number of infinitely fast processors, you could only get the computation to run 10 times faster."

People in the know often refer to Photoshop as a model desktop application in terms of multi-core support and parallelization. Williams says that Photoshop has been supporting multi-processor operations since about 1995, but adds that, even so, much of Photoshop's code is devoted to opening and closing dialog boxes, and therefore is not subject to parallelization.

Lots of algorithms have "significant chunks" of serial code, Williams notes. "People with PhDs have been working on this problem for 20 years -- it is not a matter of solving it by sitting at your desk and thinking hard for a few minutes. Typically, the way around Amdahl's Law is to simply find embarrassingly parallel problems, but you can't escape the fact you're limited by the serial portion of your calculations."

Even with parallelization, Williams explains, performance does not scale linearly -- two cores can give nearly 2X acceleration, but four cores gives less than 4X acceleration. This is due to memory bandwidth issues (i.e., the RAM being slower than the processor) and delays imposed by inter-processor communications.

"We can't take advantage of eight cores without improved memory bandwidth, and I know of no application that could take advantage of 16 cores," he says. "Memory bandwidth is a huge issue because after a while you are just waiting for the memory." New processors with on-board memory controllers are offering some help, he adds. On-board memory controllers speed up RAM access; however, they also lock the CPU into using a specific type of memory.

Parallelization progress, or lack thereof

References to Amdahl's Law may be somewhat premature, however. Aside from high-end games and video software, it may be years before parallelization for desktop applications is the norm.

When Microsoft first shipped Windows, most programs were still written for DOS, and it was a good 10 years until the industry saw more Windows than DOS software. Similarly, "most of the software on the shelf now is not parallel and some, like word processors, never will be," says Halfhill.

On the other hand, "We are talking about a similar thing here, but the presence of parallelization APIs in Windows 7 and in the Macintosh Snow Leopard operating systems will speed up the process, and the low-hanging fruit may be done in three to five years," Halfhill says. Further, not every program needs to be rewritten.

Microsoft's Smith agrees. "Not all software will be converted in five years, but we will have made significant progress. This is a more profound change than has ever been seen before in computing."

Microsoft's current desktop operating systems, Windows XP and Vista, "like most other systems," use the kernel to schedule threads on the multiple cores of the system, Smith explains. A thread is a code segment that the computer will execute entirely before executing another thread, which may be from another application entirely.

"When a thread needs to wait for something, like I/O or another thread's output, the kernel runs some other ready-to-go thread on the freed-up core," Smith explains. "When the first thread's wait is over and it becomes eligible to run again, it will eventually get a core assigned to it."

In general, consumer operating systems "don't do anything very smart" with multiple cores, says Jim Turley, head analyst with Silicon Insider, a consulting service and newsletter in Pacific Grove, Calif. Vista is "reasonably aware" of multiple cores, and is "fairly smart about dividing up background tasks and foreground tasks." Vista can run games on one or two cores while housekeeping tasks run the other cores.

Rob Enderle, principal at the Enderle Group in San Jose, Calif., says that Windows 7 does an even better job of it. "Windows 7 is designed to use as many cores as the machine has, and will partition an application among the multiple cores -- but that does not give as much benefit as if the application used the cores directly."

Windows 7 has an alternative mechanism called User Mode Scheduling (UMS), which lets thread multiplexing onto cores take place within the application itself instead of in the kernel. Multiplexing of threads is the process of deciding which thread is executed next. Handling this multiplexing within the application instead of in the operating system kernel "makes thread scheduling more efficient," Smith says.

A Microsoft blog link he supplied indicates that programmer access to UMS is possible through Visual Studio 2010, currently in beta, and involves use of the operating system's Concurrency Runtime facility. Windows 7 will also be able to use 256 cores, arranged in four groups of 64.

Meanwhile, most applications will run on only one core, "so you get the benefit of having multiple cores only when running multiple applications," Enderle says. Virus checkers and utilities that run in the background "tend to not visibly drag down your machine, whereas on a single-core processor they definitely do," he says. Two cores seem to be optimum and a third "gives you headroom." When watching the performance meter in Windows "you can light up two cores really easily, three occasionally and four hardly ever. Four cores are for video games, heavily threaded applications or DNA analysis."

Some Intel processors additionally offer a form of on-chip dual processing, called Hyper-Threading Technology, where each core can run two threads in parallel, so the software sees twice as many cores as there really are. It is not as good as having two separate cores, and the boost you get varies greatly, but most people get a 20% to 30% boost through Hyper-Threading, according to George Alfs, an Intel spokesman.

Enderle notes that the Windows performance meter displays each core with Hyper-Threading as if it were two cores.

Re-coding

"What we'd all like is a magic compiler that takes yesterday's source code and spreads it across multiple cores, and that is just not happening," Turley says. "There are C compilers that make a modest dent, but a lot of research indicates that C will never take you very far since the fundamental problem is C itself -- it is inherently serial. There is no easy way to program in parallel; it's like writing poetry in Klingon."

Turley says that the world does not need yet another programming language. "Any third-year student worth his salt has invented one, but the trouble is getting people to adopt it -- no one wants to learn a new language." Since there are so many alternative approaches, "no one wants to commit," he says. If some authority would declare for one approach people would rally around it, but in the meantime there is widespread confusion and competing claims. "We may have to wait for the current generation of programmers to die off and be replaced by programmers brought up on a new paradigm," Turley laments.

The easiest way to add parallelism is to call code that is already parallelized, from a library, says Williams at Adobe. The next easiest is to use bottleneck routines, or separate little routines that only know about specific pixels. "That is the way we did it for a long time," he says. A third way is to write a parallel version of a complicated algorithm. But "that can easily take twice as much work [as writing a non-parallel version]. We're not talking about 10% more work here."

A fourth approach is functional parallelism, "where you let the user do different things simultaneously, such as getting thumbnail images while changing meta-images," Williams explains. "Photoshop was written before system software supported that, so we don't do a lot of that. Modern operating system facilities let you do functional threading without a huge amount of effort -- maybe 50% more -- but converting a large algorithm written before such stuff was available is a big effort," he says.

What is needed is not more code but different code -- and a different way to organize the application, adds Smith at Microsoft. "You must understand parallelism and that is not always obvious."

A first step is to minimize the use of variables. "Variables are artifacts of sequential execution," Smith says. "If it is always true that A+B=C, what if someone gets in the middle of that and adds something to B so that the equation no longer holds true? You must have a consistent state where that is prevented." Traditionally this prevention is done by locking the variables, but he advocates the use of transactional memory, which does much the same thing automatically by isolating the variables from other code that is running at the same time.

Market shift

If the application vendors have been slow to adjust to multicore, the public has not. According to the hardware vendors, buyers these days are counting cores instead of gigahertz.

"In the past, people really cared about the frequency of the processor and about making sure they had the latest speed," says Bob Grim, an AMD marketing executive. "Now we see them being more concerned about what kind of visual experience they will get."

(Perhaps for old time's sake, a few hobbyists and gamers still try overclocking, ramping their processor clock speeds from, typically, about 3.2GHz to 3.8GHz or even 4.5GHz, using ordinary heat sinks. If overclocking doesn't work, the system typically just reboots and the owner can try again at a lower speed, Grim explains. The record he was aware of was a 3.2GHz processor boosted to 6.9GHz, using liquid helium as a coolant.)

"Gigahertz used to be the metric for buyers, but now there is tiering," agrees Glenn Jystad, senior manager at PC vendor Acer Inc. in Irvine, Calif. "Single-core processors are limited to entry-level systems, while dual-core is a step up, and you really start to realize performance in the quad-core category, which is now mainstream." He predicts that three-core processors, promoted by AMD, will fade away by the end of the year, as there is little price difference compared to the more powerful quad-core systems.

Meanwhile, performance issues aside, vendors favor multicore processors for their ability to help reduce system power consumption. If the other three heads of a quad-core system have nothing to do, "you can put them to sleep," Turley says. "Being able to throttle back is one of the charming side-effects of multi-core processing."

"Using multiple cores will let us get more performance while staying within the power envelope," agrees Acer's Jystad. "Today's 95-watt Intel quad-core processor is substantially more powerful than the 95-watt Pentiums of three years ago."

But regardless, notes Alfs at Intel, "Moore's Law continues. We continue to integrate more and more capability onto the processor and the computer." But the chief result, he indicates, will be more cores.

Lamont Wood is a freelance writer in San Antonio. He can be reached at lwood@texas.net .

SQL injection attacks led to Heartland, Hannaford breaches

Details of the attacks could spur focus on Web app security

August 18, 2009 10:32 PM ET

Computerworld - This week's disclosure that the huge data thefts at Heartland Payment Systems and other retailers resulted from SQL injection attacks could finally push retailers to pay serious attention to Web application security vulnerabilities, just as the breach at TJX focused attention on wireless issues.

A federal grand jury on Monday indicted Albert Gonzalez and two unidentified Russian accomplices on charges related to data intrusions at Heartland, Hannaford Bros., 7-Eleven and three other retailers. Gonzalez is alleged to have masterminded an international operation that stole a staggering 130 million credit and debit card numbers from those companies. Gonzalez and 10 other individuals were indicted in May 2008 on charges related to similar intrusions at numerous other retailers, including TJX Dave & Busters, BJ's Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority, Forever 21 and DSW.

Court documents filed in connection with Monday's indictment spelled out how Gonzalez and his accomplices used SQL injection attacks to break into Heartland's systems and those of the other companies. Once they gained access to a network, the attackers then planted sophisticated packet-sniffing tools and other malware to detect and steal sensitive payment card data flowing over the retailers' networks.

In SQL injection attacks, hackers can take advantage of poorly coded Web application software to introduce malicious code into a company's systems and network. The vulnerability exists when a Web application fails to properly filter or validate the data a user might enter on a Web page -- such as when ordering something online. An attacker can take advantage of this input validation error to send a malformed SQL query to the underlying database to break into it, plant malicious code or access other systems on the network. Large Web applications have hundreds of places where users can input data, each of which can provide a SQL injection opportunity.

The vulnerability is well understood, and security analysts have warned retailers about it for several years. Yet a large number of all Web-facing applications are believed to contain SQL injection vulnerabilities -- a fact that has made SQL injection the most common form of attack against Web sites.

"We see SQL injection as the top attack technique on the Web," said Michael Petitti, chief marketing officer at Trustwave, a Chicago-based company that conducts security and compliance assessments for some of the largest retailers in the world, including -- ironically -- Heartland, for whom it was a security assessor.

"Not only is it the most attempted, it is also the most successful" form of attack now employed by malicious hackers, Petitti said.

Launching such attacks is not difficult, said Chris Wysopal, co-founder and chief technology officer at Veracode, a firm that offers application penetration testing services for companies. Tools are available that allow attackers to quickly check home-grown and third-party Web applications for SQL injection vulnerabilities, he said. One such tool might find a form field on a Web page, enter data into it, and check the response it gets to see whether a SQL injection vulnerability exists.

"It doesn't require much expertise at all," Wysopal said. "It is at the script-kiddie level to do these kinds of attacks." Exacerbating the situation is the fact that many companies are still using older versions of the MS SQL Server database that allow attackers to essentially take complete control of the database via SQL injection, Wysopal said.

The use of SQL injection attacks has gained popularity as companies have gotten better at shutting down other avenues for breaking into corporate systems and networks, said Matt Marshall, vice president of security engineering at Redspin, which performs security assessments for businesses. "One of the few ports that are still allowed through the firewall is Web traffic through the Web server," he said. "It is one of the few avenues of attacks that are still readily available" to hackers.

Those factors seem to have influenced Gonzalez's plans in attacking retailers. Initially, most of the attacks -- including the one at TJX -- took advantage of weak wireless access points. But starting around August 2007, he stopped using wireless vulnerabilities and turned almost exclusively to SQL injection attacks.

The success of those attacks and the high-profile nature of the retailers affected are likely to push more companies to deal with Web application security issues. "When vulnerable technologies get deployed, security people notice it and inform [clients], but no action is usually taken until attackers start becoming successful," Marshall said. "Until TJX, people didn't start locking down their wireless networks. If Heartland and Hannaford are not a wake-up call [for Web application security], I wonder what is."

According to Wysopal and others, there are several measures companies can take to limit their exposure to SQL injection vulnerabilities. One involves a code review of all Web applications to identify input validation errors. Companies need to identify such coding flaws and ensure that a Web form accepts only legitimate input. Web application firewalls can also be useful in protecting against SQL injection attacks, though they must be tuned properly to automatically block malicious traffic while permitting legitimate traffic to get through.

Hardening the underlying database and ensuring that the Web application connecting to it has limited access are also helpful in fending off attacks, Wysopal said.

With SpringSource Buy, VMware Constructs Cloud Platform

By Bernard Golden

The talk of CloudWorld this week was VMware's acquisition of SpringSource. The top-of-mind chatter focused on the price: $400 million plus, a very large sum for a company doing perhaps $25 million in revenues. Certainly there was a good bit of envy in this type of conversation. And, of course, the fact that SpringSource is an open source company further makes the number even more eye-watering.

However, looking beyond the envy and valuation puzzlement, what is the implication and meaning of the acquisition?

[ For timely virtualization news and expert advice on strategy, see CIO.com's Virtualization Drilldown section. ]

I must say that, to me, it looks brilliant—and it takes a lot for me to make that assessment. Having suffered a few disastrous acquisitions at companies I worked for, and observed at remove many, many more, I've come to view these events pretty skeptically. They're always announced with fanfares and group hugs among the management teams, and 18 months later, after the acquiree's top team has left and the struggle to integrate the products into the acquirer's portfolio seems doomed, everyone shakes their head and wonders "what did company X see in company Y?"

This acquisition seems different to me, and it holds the potential to really give VMware a premier position in marrying enterprises and cloud computing. Here are the reasons:

It provides a complete cloud offering: vSphere can offer a single product that offers both IaaS and PaaS, configurable at the application level; in other words, within a single cloud, some applications could operate in an IaaS environment, while others operate in a PaaS environment. Unlike other cloud offerings, which are single option -- either all applications that run in that cloud have to be based on IaaS or PaaS, the VMware offering can provide the opportunity for applications to assume an IaaS environment or a PaaS environment; moreover, this should be granular and configurable per application. So those applications that require total environment flexibility can use vSphere to provide empty VMs into which a complete stack—OS, middleware, application—can be poured. Those applications that can leverage a Java framework can achieve the higher productivity (and perhaps higher quality) of using a VM which already contains an OS and programming framework. The fact that a single offering can support both IaaS and PaaS, granular at the application level, is a real benefit.

It offers support for *the* enterprise language: Java is the default enterprise language for complex, highly-scalable applications. Offering a Java framework in a cloud environment is going to be very, very attractive to enterprises that want to implement cloud computing and want high developer productivity. I'm a bit dubious about some of the comment on this acquisition that explains the acquisition as following the Microsoft "get developer support and IT will follow" playbook. Commenters who support this analysis point out the fact that VMware's CEO comes from Microsoft, so, supposedly, he's just executing the same game plan he knows.

I think this misses the point. While that strategy may explain Microsoft's success, Java is in no need to gain acceptance at this point. And implementing cloud computing is not going to be driven on an app-by-app basis—it's a higher-level decision and one rooted in operations. The question is more likely going to be: "we've got a ton of Java apps and would like good support for them in our cloud implementation—which is the cloud best suited to support the Java apps we've already got (many of which are built on Spring) and that we'll do in the future? And, by the way, it would be great if that cloud choice also supported non-Java apps as well." From this perspective, the combined vSphere/SpringSource offering will be appealing.

It delivers a great offering for vSphere service providers: A lot of the hosters and outsourcers that are getting into the cloud game will love this offering. They're trying to move into cloud computing, driven by the realization that hosting machines or offering virtual machines is a less-than-desirable strategy in a world that wants the agility and scalability of cloud computing. By the same token, many of these providers, companies like Verizon Business, AT&T, etc., have been wracking their brains about how to compete with the low-cost Amazon offering. Offering a more complete and flexible cloud platform that supports both IaaS and PaaS will give them some competitive ammunition against commodification. Of course, they'll still struggle with the question of how they'll differentiate among themselves when they all offer vSphere, but that's tomorrow's struggle!

It supports the shift from licensing to services and monetizes open source the right way: I've always felt that cloud computing was going to be the way many organizations consume open source, given the seeming reluctance on the part of many organizations to embrace it in a packaged form. Moreover, most open source companies have struggled to achieve revenue levels commensurate with their product adoption levels—after all, why should people pay for something they can get for free? That goes away when what's delivered is not bits, but service: what you're buying is not software, but execution, so the licensing conditions of the bits is irrelevant. Likewise, I've felt that a transition from proprietary licenses to value-based service is the future of software companies. I know that VMware is a true-blue license company and that seems to negate the argument. However, it may be the last great packaged software success story, since most software today seems to be offered in a bits-and-service bundle. In any case, much of how users will consume sPhere will be via service provides who will transmute VMware licensing fees to usage-based cloud services.

The Negatives

Of course, no guarantee exists that the reality of the VMware/SpringSource mashup will prove successful. Many mergers offer brilliant opportunities and then founder on poor execution, organizational rivalries, shifting competitive environments, and plain bad luck. Here are some things that could challenge the happy consummation of the acquisition:

It could founder on the reality of enterprise Java applications: A common framework is great, but the reality of enterprise Java applications is that they are a mish-mosh of product versions. Every application requires a specific stack of OS and middleware, and even applications that have a common stack often require different versions of the individual components within the common stack. A vSphere/Spring stack that offers a consistent framework is great from an operations efficiency perspective, but may be unworkable in the face of individual applications being written to varying version and patch levels. Of course, this might not be as critical for home-grown applications that can be written to a consistent stack, but commercial applications define configurations based on the vendor's decisions, not the deployment operating environment's configuration. To be fair, this is a challenge for any PaaS environment, and I expect that Azure will face it as well. Nevertheless, corporate IT operations environments are messy places filled with varying application stacks, and a common framework may be a theoretical ideal that poorly maps to the pragmatic deployment reality.

It may be too complex, even though architecturally elegant: The jury is still out on internal clouds and this offering may prove too difficult for enterprises to implement. Getting a highly-automated virtualized environment to work properly is formidable, given the complexity of knitting together all the piece parts of the computing infrastructure. Making it more challenging is the cost pressure that most IT organizations are under, making investment in operations kit and personnel very difficult. Trying to overlay a complex cloud environment on top of complicated infrastructure may be too daunting for most IT organizations in a time of budget squeezes. Of course, this might mean that IT orgs will turn to service providers which, as noted, may be eager offerors. This question cannot be answered today, but gives thought for the future prospects of the offering.

It might be too late: Integrated product offerings are notorious for delays and an extended delivery timeframe for the IaaS/PaaS product might render its relevance moot. One need only look at the Oracle Fusion debacle to see how imposing integrating disparate products is. It was three or four years ago that, one year post-PeopleSoft acquisition, Oracle announced with great fanfare (I seem to remember the Oracle President announcing with pride "It's great when a plan comes together") that is was half-way through integrating all of the product portfolio with Fusion. Even allowing for Oracle math, this illustrates how hard it can be to get different software products to work together. While the vSphere/SpringSource integration might be very attractive, the pace of cloud computing adoption might mean the product misses a window of opportunity. An attractive product offering can freeze the market for a while, but customers will not wait forever before moving forward—especially on something as important as cloud computing. Again, this question cannot be answered today. Unlike the previous issue, however, this one would affect both internal cloud implementers as well as service providers.

I hate "on the one hand, on the other hand analyses" and wish I could provide a more definitive opinion on how this will work out. My sense is that it's an execution question, and it's impossible to predict how the two companies will come together and execute. The attractiveness of the potential product is obvious, and I think the strategy behind it is brilliant, not a word I overuse and definitely not one I apply to most mergers. There is such innovation and opportunity in cloud computing that this product could be a big winner. We'll just have to wait and see how the story turns out.

Bernard Golden is CEO of consulting firm HyperStratus, which specializes in virtualization, cloud computing and related issues. He is also the author of "Virtualization for Dummies," the best-selling book on virtualization to date.

Opinion: The 5 best things about iPhone OS 3.0

iPhone users finally get copy/paste, Spotlighting searches and push

June 17, 2009 02:56 PM ET

Computerworld - Apple Inc. today pushed out the much-anticipated iPhone OS 3.0 update that company execs touted at last week's Worldwide Developers Conference. After spending some time with iPhone 3.0 on both an original Edge-based iPhone and last year's 3G model, I can tell you the update makes even older phones more responsive and offers a number of improvements -- some of them long overdue. Aside from the new features I highlight below, iPhone owners who download the update through iTunes will notice that, overall, the user interface is smoother. Animations don't stutter as they did before and data loads more quickly.

After using the iPhone OS 3.0 for a week or so, I can say I'm impressed with the polish of the software. And I've come away with my list of the five best things in the new OS that I think are worth highlighting.

1. System-wide Copy/Cut/Paste -- Last week, a friend and I decided to go canoeing at a state park. Since we both had our iPhones, we never worried about finding the actual directions to the park until after we left the house. While my friend drove, I used the iPhone to visit the park's Web site to find the address. With a double-tap, I was able to select the address, copy it and then launch the Maps app, which accepted the paste and quickly found the address. Starting with iPhone 3.0, iPhone users will be able to Cut/Copy/Paste text and images from one application to another, and since this is a system-wide feature, developers can take advantage of this in their apps, if this feature is not already supported. It's been a long-time coming.

2. Push Notifications -- Ever since the iPhone was released, people have longed for the ability to run more than one application at a time. The iPhone itself is fully capable of doing so; for example, the iPod app still plays music even if you're not using the music playing software. The music plays while you are browsing the Web or using Maps. So, if the iPhone is capable of running more than one app at once, why has Apple not allowed third-party developers equal access? Other programs could certainly benefit from this feature: weather applications could alert you to severe weather advisories and you'd never miss a message in chat programs. While Apple isn't yet allowing for background processes to run just yet, it has implemented Push Notifications, which allow third-party developers the ability to add SMS-style alerts, sounds and icon badge alerts to their applications. So, while the AIM app may not run in the background as an active process, you'll now be able to receive alerts about your messages.

But Push Notifications isn't really the same as multiple apps running at once. You still can't listen to an internet audio service such as Pandora on the iPhone while doing something else. In that sense, Push Notifications are more like a workaround until Apple sorts out the engineering necessary to allow background processes to run on the iPhone without compromising system speed and battery life. Still, this is an important first step -- and a power-saving alternative -- to having actual background processes. But it's a significant step forward, and AIM will now find its way onto my Home Page screen; using it now in concert with Push Notifications will mean a smaller text messaging bill for the overzealous texters on my Family Plan.

3. Hardware compatibility -- Apple has created an API that allows developers to connect to external hardware via not just stereo bluetooth (a feature not fully implemented until 3.0), but through the Dock connector as well. The newly added ability to use external hardware in concert with the iPhone's software is going to open many doors for the phone. For instance, hardware peripheral makers were brought out at WWDC to demo connecting a guitar to the iPhone. Although the demo didn't quite work out, this is but a taste of what developers can do with access to the iPhone's dock. This may not be a feature that is noticeable right away to iPhone users, but it is one that will extend the phone's life and reach to an already powerful mobile platform.

4. Spotlight searching -- Swipe right on the iPhones touch-sensitive screen to bring up Spotlight (or press the Home button from the first page of apps) and with a few strokes of the keyboard, you can jump to anything on the phone. With Mac OS X 10.4, code-named Tiger, Apple added a system-wide search to its operating system that made finding just about any file or bit of data easy and quick. With iPhone 3.0, Apple brings that search functionality to the iPhone. Now you can quickly find and launch anything on the phone -- or if you're searching e-mail, even on servers. Songs, applications, notes, calendars, contacts, in my experience, Spotlight on the iPhone helped me find anything I searched for. And it's fast, too.

5. Safari -- One of the best features of the iPhone has been the Safari Web browser. While many people don't care how it's done, everyone appreciates how accurately web pages are rendered on the iPhone. Web marketshare for mobile devices has long skewed in the favor of Apple's products, and with the latest release, Apple continues to press its advantage. Safari for iPhone brings noticeable performance improvements and users will appreciate the addition of autofill for user names and passwords. Behind the scenes, Apple has worked in HTML 5.0 standards support and says it's improved the javascript rendering three-fold. Even more impressive is the support for HTTP audio and video streaming, which support automatic quality based on your connection speed. (This technology will also be available to other apps, and is already being utilized to stream live baseball games with the MLB At Bat 2009 app.) The best mobile browsing experience has just become even better.

No doubt, iPhone owners will find their own top five improvements in the new OS, but the one that permeates all is value. iPhone 3.0 is filled with refinements and improvements across the board, whether it's official support for internet tethering -- not yet available from AT&T -- MMS (coming this summer), the ability to finally sync Notes, or Landscape keyboard. iPhone 3.0 feels like a polished release that even manages to make the two-year-old original iPhone feel fresh and current. I find it an astounding feat by Apple that the latest, most current iPhone is running the exact same software as the iPhone that shipped two years ago, albeit with a few limitations dictated by the hardware. If there's one thing OS updates on any platform have showed us, it's that software updates often cause older hardware to become increasingly slow, pushing users to upgrade to the latest hardware. Apple has again bucked that trend with this release, a trend it stands to continue with the release of Mac OS X 10.6 Snow Leopard for Intel Macs in September.

Michael deAgonia is an award-winning writer, computer consultant and technologist who has been using Macs and working on them professionally since 1993. His tech-support background includes tenures with Computerworld, colleges, the biopharmaceutical industry, the graphics industry, Apple and as a Macintosh administrator at several companies.

Developers by Day, DJs by Night

What do mild-mannered software developers do for a second job? IT guys are increasingly taking over the turntables in clubs and at private parties--applying their technical skills to traditional turntable DJ'ing and finessing software to cue and mix music, scratch and beat-match. In the process, they're elevating the art of laptop DJ'ing and extending their cultural influence--and cool--to another field.

By Meridith Levinson

June 03, 2009 — CIO — House music rises from massive speakers and fills the dark, crowded club with its pulsing, trance-like beat. Beams of colored light wash across the throngs on the dance floor, tinting the dancers' ecstatic, sweaty bodies blue, red, green. A strobe light distorts their fluid movements so that they resemble characters in a cartoon flip book.

The swirling, sliding music—at once spacey and soulful—spreads out across the crowd like a sonic picnic blanket. The music crescendos and the dancers lose themselves in the expanding beats. They flow in perfect synch with every warp and twist in the track.

Overseeing all of this music and movement, controlling it like the great and mighty Oz, is not a jet-set superstar DJ from London or Ibiza with an ego the size of his MP3 collection. Increasingly, it's a mild-mannered software developer who's in the DJ booth, manning two turntables and a MacBook.

Laptop- or digital DJ'ing, as the practice of playing and mixing MP3s using a computer and special software is known, has emerged over the last decade, as music went digital and laptops shrunk in cost and grew in power. The use of technology in DJ'ing attracted young men with geeky tendencies—the guys who were members of their high schools' HAM radio and AV clubs, who played in the school band, and who tinkered with robots and electronic devices in their spare time. A decade later, these dudes are still tinkering, only now as software developers and hardware engineers by day and as professional or bedroom DJs by night. They see both traditional turntable and laptop DJ'ing as a way to channel their technical skills toward a creative pursuit that's universally regarded as cool.

[To learn more about the developer DJs interviewed for this story and the equipment they use, see the slide show, Two Turntables and a MacBook: Geeks Get Their Groove On.]

"I talk to a lot of DJs, and when I ask what they do during the day, it's some kind of technical job," says Nicholas Maddix, 33, a club DJ and the creator of Anagram software.

Alan Cannistraro, 31, a software developer who works for a computer manufacturer in Silicon Valley, says he was dumbfounded by the number of IT professionals in the San Francisco-bay area who claimed to be DJs when he moved there from Toronto.

"The Bay-area is dominated by people in technology, and the number of DJs here is ridiculously high," he says. "We sit in front of computers all day. We love it, but we all need creative outlets. DJing is a geekier creative outlet."

The Developer DJ's Edge

Although technology has made DJ'ing more accessible to people outside of recording studios, laptop DJ'ing still requires a fair amount of technical skill.

"You have to know how to wire up a rig with five different pieces of equipment, and you need to know how to operate those pieces of equipment," says Cannistraro.

In that sense, laptop DJ'ing is not unlike outfitting a small data center.

And while software, such as Scratch Live and Traktor, has made cueing music, beat-matching and making remixes much easier for DJs, they still need to know how to use the applications.

David Gallant, a former AV club member who now works in IT and DJs weddings and dances on weekends (he used to DJ in bars and clubs), can attest to the technical skills required for DJ'ing. He says he often serves as a helpdesk for non-technical DJs who spin at nightclubs in Boston. When they need help with the sound system or using the Scratch Live software, Gallant's phone rings.

"They know how to plug things in, but they don't know how to work it," says Gallant. "Twice in recent months, I had to fix DJ Skribble's sound system over the phone."

In some cases, IT professionals' technical skills improve their performances and help them stand out from more well known, but less dynamic, acts. (Electronic musicians such as Underworld and The Crystal Method aren't known for their electrifying theatrics or on-stage dynamism.)

For example, Cannistraro and DJ'ing partner Gautam Banerjee (a hardware engineer) incorporate gaming accessories, such as Nintendo Wii controllers, joy sticks and P5 gloves, into their shows to make them more interesting for audiences. They program the devices to mix and change music in response to their hand and arm movements. Cannistraro and Banerjee say the custom "instruments" allow them to "throw music" and generally appear more theatrical on stage (think Pete Townsend pinwheels, minus the Stratocaster). Without the instruments, the duo would just be staring at their laptops the whole time.

"When you watch someone playing drums or guitar on stage, you understand what they're doing," says Cannistraro. "But you can't really see what the DJ is doing. The point of the glove is to put physical movement into a performance."

It's not just shiny electronic equipment that attracts IT professionals to DJ'ing. The connection is deeper than that.

Dance Dance Revolution

With few exceptions, IT professionals operate in work environments over which they have little control and where they're often treated with little respect. On any given day, they can show up at work to find out their jobs are being outsourced or otherwise eliminated—never mind the work ethic that drives them to clock 50 to 60 hours a week. Never mind their specialized skills. Never mind the fact that they're always on call.

When they're on the 1s and 2s (turntables), however, IT professionals are in complete control—of the music, the crowd, the mood, the scene—and they thrive off of it.

"Being able to control the mood or energy of a venue is really fun for me," says Gautam Banerjee, 31, a hardware engineer for a Calif.-based electronic components manufacturer.

It's not so much an authoritarian sense of control that the developer DJs enjoy, but rather the high that comes from exciting a crowd and making people happy. It's the DJ's music that inspires people to move and allows club-goers to forget about their problems for a few hours. That desire to improve people's lives—whether through music or technology—drives developer DJs in both their professional and personal pursuits.

"What motivated me was that I was moving the crowd," says Cannistraro, reflecting on what attracted him to DJ'ing as a teen-ager. "The night would start with people just sitting around, and depending on what I played, I could alter the mood of the night. All these things were happening around me: Teenagers were getting together, and people were dancing."

But more powerful than the sense of control DJ'ing gives technology professionals is the instant cool it bestows on them.

Le Geek, So Chic

Like Clark Kent entering a telephone booth to become Super Man, when a developer hits the DJ booth at a club, he becomes a rock star. DJ'ing allows technology professionals—often ignobly dismissed as geeks—to don a different, undeniably cool persona.

Gallant, 23, the event DJ, says he's normally shy. But on stage, he assumes the role of entertainer with ease, and he feeds off of being the center of attention.

"It's cool to see a sea of people ooohing and ahhing," he says. "It's a cool feeling to see that, hundreds of people coming to see you play."

When people find out that Dan Abdinoor, 25, a senior software developer, DJs at Rise, an after-hours club in Boston on weekends, their perception of him quickly changes, he says. "When I tell people, their jaws drop a little bit. They see there's more depth to this person than just being a computer nerd."

For technology professionals who may be more socially awkward, another benefit of DJ'ing is that it gives them the opportunity "to be at a party without having to be at the party," says Jonathan Howard, 24, a senior applications architect and bedroom DJ. In other words, they can spin the music without having to socialize.

But mingling—especially with the legions of hot women who worship DJs like demi-gods—is a huge part of the fun.

Maddix, who travels all over the U.S. and Europe spinning house music when he's not developing software for his company, Textual, says one of the best experiences of his life happened last year, when he opened for Mark Farina, a popular house DJ originally from Chicago. Maddix says the club was packed with about 800 people, and he played an absolutely sick set. (Sick is good, in case you're wondering.)

"People were going beserk," says Maddix, of the crowd at his show. "Five women came up to me after my set and told me how sexy I was. That's never happened to me before."

The jubilant crowds and attention from women are forms of positive reinforcement IT professionals don't typically get in their day jobs.

"What was powerful for me was not about the women, but that I had inspired people," adds Maddix. "The next week on club event message boards, people were contacting me about what I played, trying to get mixes from me. When I get to play a gig that fits my style well, I get some version of that response, and that's why I do it."

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25 highly anticipated open-source releases coming this year

These open-source browsers, dev tools, mobile apps and more promise that 'Oooh, cool!' sense of discovery.

March 31, 2009 (Computerworld) When big companies release new software, they launch it with lots of hoopla: press tours, technical conferences, free T-shirts. Open-source projects, even the well-known ones, generally release their major new versions with a lot less fanfare. The FOSS (free and open-source software) community is often too busy coding and testing to bother with marketing, even when the new "point release" of the software is really remarkable.

And there are plenty of remarkable open-source applications on the way this year. Quite a few projects are quietly (or not so quietly) working on major releases or significant upgrades that they aim to make available sometime during 2009. I've rounded up 25 of the most notable here.

There are browsers and operating systems, mobile platforms, development tools, productivity applications, IT administration tools, collaboration software and a few hard-to-classify items. Some of these you've heard of; others may be relatively obscure but should give you the wriggly "Oooh, cool!" sense of discovery.

You're sure to feel that one or two really important upcoming releases are missing. (You try paring the list down to a couple dozen candidates!) But the FOSS community spirit can serve here too. Please add your nominations for can't-miss open-source releases of 2009 to the article comments, including links to the project sites, and we'll all benefit.

Browsers and operating systems

Ten years ago, who'd have thought there could still be so much innovation in Web browsers in 2009? Microsoft Corp. may intend to keep up the pace with Internet Explorer 8, but the FOSS options are at least as compelling.

Mozilla Corp.'s Firefox 3.5 promises a native parser for JavaScript Object Notation (JSON), a data exchange format frequently used in Web apps, and several features to enhance rich media Web content, including support for the HTML 5 video element and the Ogg Vorbis and Theora open audio and video codecs.

And then there's whatever Google Inc. is planning for its Chrome browser, based on the open-source WebKit engine. The company is playing it close to the vest, but we do know Mac and Linux versions of the browser are in development.

Ubuntu 9.04, the Jaunty Jackalope.
Click to view larger image.

Linux fans have much to look forward to, too. Following the release of Ubuntu 9.04, the "Jaunty Jackalope," in April, the Ubuntu team is planning for Ubuntu 9.10, the "Karmic Koala," to see the light of day in October 2009. Among the promised new features are integration with the Amazon EC2 APIs, so users can set up their own cloud using entirely open tools, and a kernel mode setting for a smooth and flicker-free start-up. The Ubuntu Netbook Edition will get the latest technology from the mobile Internet project Moblin, including better screen support.

Every other Linux distribution is sure to get better, too, along with associated operating system components. For example, openSUSE 11.2, scheduled for November, should include KDE 4.3, GNOME 2.28, Linux kernel 2.6.30 (or higher), a Web-based YaST interface and netbook support.

Red Hat Fedora 11 is slated for release by this summer, with several updates. The project's goals include making Fedora boot and shut down faster (you'd be at the log-in screen in 20 seconds), changing supported architectures and default installed kernels, and improving support for fingerprint readers.

Mobile software

It's easy to keep our eyes focused on the proprietary technologies behind the iPhone and BlackBerry, but the FOSS community elves have been hammering out their own mobile innovations.

Android is Google's software stack for mobile devices, including an operating system, middleware and key applications. The current beta version of the Android SDK, released in early 2009, has tools and APIs for programmers to begin developing applications on the Android platform in Java.

Current focus is on support for input methods, such as devices other than physical keyboards. Later this year, Android should get support for displays beyond HVGA. Nobody is talking dates yet, but the entire mobile community is watching.

The T-Mobile G1, the first Android-powered device. Click to view larger image.

Maemo is a Linux-based software platform built by an open-source community (with Nokia as its principal sponsor and contributor) to support mobile devices, particularly tablets like Nokia's N810 Internet Tablet. The Maemo 5 Alpha SDK, introduced in March, has a new UI framework and APIs so developers can build location-aware applications that control vibrations and respond to changes in device orientation. Maemo 5 is also expected to have OMAP3 support, cellular data connectivity and high-definition camera support.

The new Wikipedia Mobile.
Click to view larger image.

For all the delights of Wikipedia, its mobile offering is ... underwhelming. Fortunately, Wikipedia Mobile is under active development. The new version (written in Merb) will give you access to Wikipedia on modern 3G mobile devices, such as the iPhone and Android phones, and also will have tailored versions. It's in alpha testing now and should be released sometime this year.

Also worth watching:

Programming tools and languages

Open-source developers understandably invest a lot of effort in improving the tools they use to write better software, whether it's a programming language, development platform or content management system. This category could have filled up an entire article by itself, but here are a few of the highlights.

In December 2008, the communities behind the Web development frameworks Merb and Rails agreed to merge rather than maintaining parallel development tracks. They intend to preserve the flexible configuration and advanced features appreciated by Merb users, along with the rapid productivity and ease of use that has given Rails so much attention from developers.

The new project, to be called Rails 3, will incorporate some key Merb features and concepts, including its agnosticism about object-relational models, JavaScript libraries and template languages. Rails 3 will also be more modular, letting developers opt in or out of specific components. It'll have significant performance improvements and will gain a defined public API.

According to the Rails blog, the "overly optimistic" date for the Rails 3 beta is for the Rails Conference in early May, but it'll be worth paying attention to whenever it arrives.

The Dojo Toolkit is a one-stop shop for developers creating dynamic Web applications, especially for those who don't want to become gods of DHTML and JavaScript. Dojo 1.3, now in RC1 and expected to be final very soon, has a collection of fast and concise DOM manipulation APIs, a more configurable NodeList class, a brand-new lightning-fast CSS Selector query engine, and new widgets and components.

The Dojo Toolkit. Click to view larger image.

Moonlight is an open-source implementation of Microsoft's Silverlight, a browser plug-in for streaming video and Internet apps. The result of a technical collaboration between Microsoft and Novell Inc. and related to the open-source .Net implementation Mono Project, Moonlight is primarily for Linux and other Unix/X11-based operating systems.

The Moonlight community has access to Microsoft's test suites for Silverlight and distributes a media pack for Linux users with licensed media codecs for video and audio. Moonlight 1.0 was just released in February, and work is already under way on Version 2, to keep it in sync with Silverlight.

Watching the presidential inauguration via Moonlight. Click to view larger image.

(You might also keep an eye on Moonshine, a Firefox browser plug-in and desktop player that encapsulates any WMV or WMA content into a Silverlight container.)

In fact, it's worth calling attention to Microsoft's active open-source involvement simply because so few imagined that Microsoft would ever show up at the party. Among the successes is IronPython, a Python implementation designed to run on .Net and Mono; Version 2 was released in February. Now that that's done, the team can turn its attention to an IronPython version to support Python 3.0. While the team is vague about a release date ("after 2.x is out the door," according to a spokesperson), it will likely arrive sometime this year.

Microsoft also created IronRuby, a Ruby implementation for .Net, and the Dynamic Language Runtime, a set of shared services for implementing dynamic languages on .Net. All three projects are distributed under the terms of the Microsoft Public License.

Also worth watching:

• The MariaDB project, a community-developed branch of the MySQL database using the Maria storage engine; the brainchild of Michael "Monty" Widenius, founder of MySQL AB and Monty Program AB.
• CodeIgniter 2.0, a PHP framework with a very small footprint, built for PHP coders who need a simple and elegant tool kit to create full-featured Web applications. (While Version 2.0 hasn't exactly been announced, you can pre-order a book about it on Amazon. Hmmm.)
• Eclipse Galileo, a coordinated release of different Eclipse projects, due to ship at the end of June 2009.

Most of the preceding projects are of interest mainly to geeks (and we mean that in a nice way). Increasingly, though, businesses are adopting open-source software for productivity use and line-of-business applications.

Primary among these is the open-source "replacement" for Microsoft Office. OpenOffice.org 3.1, expected imminently, is currently available as a "developer snapshot." It promises grammar checking, anti-aliased drawings, improved charting and better outline features.

That's on top of the new features from Version 3.0 (released in October 2008), including compatibility with ODF 1.2 and OOXML and native Mac OS X support.

The OpenOffice.org 3.1 developer preview. Click to view larger image.

But business-quality open source isn't limited to traditional desktop apps or enterprise software. Kaltura is an open-source platform for creating and viewing video applications. It's aimed at Web publishers, integrators and application developers. Kaltura currently has extensions for several platforms, including content management (such as Drupal), blogging (WordPress) and collaboration (MediaWiki).

Kaltura's Drupal plug-in.
Click to view larger image.

In the second quarter of 2009, Kaltura's Community Edition will be launched under the GNU General Public License, allowing any Web site to build its own YouTube-like video portal, fully independent of Kaltura. Optional enterprise support includes streaming and hosting, ad serving and content syndication.

Dimdim claims to be the first open-source Web meeting company; its software has been downloaded nearly half a million times. Among its existing features are unlimited use, multiparty video and audio conferencing.

A Dimdim Web meeting.
Click to view larger image.

Dimdim has big plans for 2009 (though it didn't get more specific than that on timing), including a commercial version. The Dimdim open-source platform will become a full webinar product, allowing meetings of more than 1,000 participants, which will make it attractive to anyone who needs to conduct general meetings or training sessions.

Also worth watching:

• LedgerSMB, a fork of the SQL-Ledger accounting package aimed at small businesses. Its rapidly approaching 1.3 release promises better contact handling and security that integrates with a company's network security infrastructure, such as Kerberos.
• The Lucid Desktop (formerly the Psych Desktop), a Web desktop (maybe a Web operating system) that integrates with the Web, existing desktop technologies and mobile devices, acting as a portable, online workspace to store files, play media and manage your office documents. Version 1.0, still in beta, is overdue, but it shouldn't be long now.

IT administration tools

Some categories of open-source software are of interest mainly to a niche set of users, such as network administrators or Web developers. That's fine; it just means that these tools are correctly tuned for their audience, and everyone else can turn to the next page. Or as Abraham Lincoln said, "People who like this sort of thing will find this the sort of thing they like."

For IT administrators, the most exciting release this year may be Samba 4.0, which is supposed to have active directory support, an internal Kerberos server and full NTFS semantics for sharing back ends. You might have heard all that before, as Samba has been stalled for a while, but the development team is actively working on it now, and there's a new build as of late February.

You can certainly expect action in the configuration management space -- tools that help system administrators get more work done, faster and more consistently. Among them is Reductive Labs Inc.'s Puppet 1.0, due to be released sometime in 2009.

Puppet 1.0. Click to view larger image.

Reductive Labs intends to fully rewrite Puppet's networking functionality, as well as optimize modeling, language enhancements and reporting. Preliminary testing shows the server will be about three times faster with a memory footprint that's a third of its current size, says a project spokesperson.

In April, Zenoss Inc. will release Version 2.4 of Zenoss Core, its open-source monitoring and systems management suite, with a new dynamic Web-based user interface and with agent-less Linux and Unix command-line collection via SSH to improve system-level monitoring. The group will also launch a Zenoss community collaboration platform, Zenoss.net, for users to submit and share network monitoring and management best practices and Zenoss extensions.

Zenoss Core. Click to view larger image.

These aren't the only new and improved tools for IT admins. Longtime Unix configuration tool Cfengine, which bills itself as "autonomous engineering for the data center," is now in Version 3.0 and backed by a commercial support company; an enterprise edition is planned for this year.

Also worth watching:

• Enomaly Inc.'s Elastic Computing Platform, a programmable virtual cloud infrastructure. Version 2, now in alpha, includes a Web services API, automated VM deployment with Elastic Valet and multiserver support.
• OpenQRM, a suite of data center management tools that may excite people dealing with configuration management and other administrative tasks in the cloud. As an example of the work under way, Version 4.4 (just out) includes remote control for the cloud using a SOAP Web service.

Content management and collaboration tools

Don't you hate it when perfectly good descriptive terms become buzzwords? That's been the case for "collaboration tools" and "content management" and maybe (just maybe) "knowledge management." These are useful categories, but the terms are so mushy that the products become hard to describe.

We humans are pretty good at creating meta-tools for organizing, sharing and presenting data ... and that's what this category is about.

Several open-source development frameworks and content management systems are in between major versions. Django 1.0 shipped recently and Plone 4 probably won't arrive this year, though each has incremental upgrades planned. (For example, Plone 3.3, currently in beta and due in the next few months, brings better support for multisites, better locking support and iCalendar support for events.)

Nevertheless, content management fans will find plenty to keep themselves occupied.

MindTouch Deki is an open-source application for enterprise collaboration that sports a wiki-like interface. It allows users to organize raw data into actionable information and ensures that it's dynamically updated from disparate, disconnected data sources.

Slated to be released in early 2009, MindTouch Deki Lyons will expose more ways to interact with the core Deki application by coupling Deki's traditional mashup strengths with new tools for developers, such as the ability to trigger actions based on activity inside Deki or use a built-in local storage mechanism.

A MindTouch Deki Lyons mashup.
Click to view larger image.

Foswiki is enterprise-ready wiki software that's a fork of TWiki (which has apparently moved its attention toward commercial products), initiated by former developers and users of the TWiki project. They just released Version 1.0 in January and are under way on 1.1, aiming to improve usability as well as interaction with updates in skins and plug-ins. Version 2.0, also planned for this year, will give attention to performance and scalability.

WordPress has grown to be more than a blogging system, with all sorts of plug-ins to extend its functionality. Version 2.7 just shipped, and Version 2.8 is under way with its top priorities widget management, theme browser/installer and performance upgrades. Beyond that, WordPress 3.0 is scheduled for August.

Other really cool stuff

Among the neatest things about open source is that its philosophy of collaboration isn't limited to strict "applications." Here are a few examples of work under way that may make a difference beyond ones and zeroes.

A Talking Book Device in a Ghana classroom. Click to view larger image.

Literacy Bridge created the Talking Book Device, an open-source digital audio player and recorder specifically designed for people living in poverty. Over the short term, Talking Book Devices will serve as mechanisms for the rapid and free distribution of essential, accurate information via device-to-device sharing. Over the long term, say its organizers, Talking Books facilitate literacy learning.

A pilot project was launched in Ghana early in 2009, enabling undergraduate students at MIT and other volunteers to collect information regarding device functionality and durability.

Literacy Bridge isn't the only company extending open source to the hardware realm. For instance, SparkFun Electronics is also providing "open-source schematics" for its microcontrollers, such as the LilyPad wearable technology -- the next iteration of the "wearable computer." Since these boards are meant for hobbyist experimentation, the definition of "wearable technology" is left up to you. It's released under the Creative Commons Attribution ShareAlike license, so you can download all the engineering files and hack on the hardware to your heart's delight.

EveryBlock is a microlocal news Web site funded by a grant from the John S. and James L. Knight Foundation. It has a distinctive approach to local news: You enter an address in one of 11 U.S. cities to see the news immediately near you. In June, the EveryBlock team will open source its publishing system, so that any news organization, government or citizen can create an EveryBlock-ish site for its own town.

Whew. That's quite a pile of cool open-source software (and hardware!) to look for in the coming year. Nonetheless, there's a good chance that you're thinking how unfathomable it is that I left out your favorite project, which is apt to change the face of computing. Groovy -- it's time to share it with the world. In the article comments, tell us about the open-source release you're most looking forward to seeing this year, and why it's such a big deal.

Esther Schindler has been writing about technology since 1992. She has a tropism for techie topics that make other people's eyes glaze over -- particularly software development, operating systems and open source.

Steven J. Vaughan-Nichols, a Computerworld columnist, provided extra reporting on this article.

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Citi/Morgan Brokerage Merger Presents Disruption and Opportunity

Though the integration process is bound to be slow and painful, and the likely layoffs have earned it the moniker ’Citi Morgue,’ Citi and Morgan Stanley’s retail brokerage joint venture has an opportunity to forge a best-of-both-worlds wealth management platform.
By Penny Crosman
February 05, 2009

As Morgan Stanley and Citi execute the largest-ever retail brokerage merger, combining Morgan Stanley's Dean Witter unit with Citi's Smith Barney unit to form a new entity, Morgan Stanley Smith Barney, the path ahead holds mostly challenges but also some opportunity for the two IT organizations.

Annie Morris, managing director of Linedata, sums up the challenges in one word: disruption. "All the plans you put in place -- strategic plans, goal setting -- get disrupted in these kinds of mergers," she says. "It might seem like a subtle thing, but it has a big impact for those two firms as well as firms like Bank of America and Merrill Lynch."

Hurdles for the Morgan/Citi deal include demoralizing layoffs and cost cuts, tricky platform integrations, breakaway brokers, and customer defections, according to experts.

Where Will the $1.1 Billion Come From?

Prominent in the merger announcement was the promise to make $1.1 billion worth of cost cuts, "in part by rationalizing and consolidating key functions including technology, operations, sales support, product development and marketing," according to a release. Note that technology is first on this list.

Considering that, premerger, IT budget for Morgan Stanley's retail unit was around $500 million (according to an insider), the $1.1 billion goal is very aggressive. But while the two firms would not comment on how they will achieve these savings, people interviewed for this story say the figure is realistic. "The tendency is to overpromise and under-deliver," says a vendor executive who works with both firms and spoke on the condition of anonymity. "So I would suspect that they feel comfortable being able to hit those targets."

Most observers agree that head count reductions are the most likely source of cost savings. In fact, because of all the layoffs expected, some have called the new joint venture "Citi Morgue."

"I don't think there's anybody in either technology organization at Smith Barney or the retail side at Morgan Stanley that's really feeling comfortable," comments a former executive in Morgan Stanley's global wealth management technology group who preferred not to be identified. "If the market and environment weren't bad enough, who knows what's going to happen with this consolidation?"

For instance, according to a Citi executive who spoke off the record, Smith Barney doesn't have an end-to-end automated account opening process; automating that process could result in slashing 100 jobs. Further, he says, both firms have bloated middle offices.

Another source of savings could be the consolidation of back-office systems onto one platform, which could shave hundreds of millions of dollars, according to sources with knowledge of the firms' operations. Other cuttable areas include marketing, advertising, real estate, human resources and finance.

The Rocky Road of IT Integration

Perhaps the most-complex cuts, however, will be in IT. While IT integration is a challenge any time two brokerage firms come together, this merger is notable for its magnitude, notes the vendor executive. "I don't think anybody's ever done anything this large," he says.

Much of the IT merger work will be in sifting through duplications -- wherever more than one technologies are doing the same thing, managers will need to choose one platform and extend it across the new organization or build or buy something new. Several factors guide these decisions, including the cost of running the systems currently, what would be required to scale one of them across an organization now twice the size of the original deployment, and how much client and adviser disruption each change would make.

In the process of making these decisions, however, Morgan Stanley, the controlling owner of the joint venture (with a 51 percent stake), should resist the tendency to take a winner-takes-all approach, advises Virginia Garcia, senior research director in the cross-industry practice at TowerGroup. "Historically in these types of mergers, the acquiring institution has come in and taken over the technology of the acquired institution," she points out. "In this type of business environment those rules no longer apply. CIOs would be well served by looking at everything on the table and making the right choices."

The integration of those platforms that do have to be merged will be extremely challenging. "Everything is different, all the databases are different," says the former Morgan Stanley IT executive. "The applications have so many hooks. It's very intricate work," he adds, noting that client platforms and customer databases will be the hardest to deal with.

One area in which Morgan Stanley and Citi may be able to skip the integration work is brokers' workstations.

While Morgan Stanley copresident James Gorman, former co-global CIO Daniel Petrozzo (now Fidelity's CIO), and Lance Braunstein and Michael Cantwell (former global wealth management IT managers) spearheaded in recent years a multiyear technology overhaul that upgraded the organization's networks and service-oriented architecture, including the adviser workstation (for more on this, read "Morgan Stanley's Global Wealth Technology Turnaround"), insiders say both firms' broker workstation technology is at or past the end of its life. Smith Barney's adviser desktop was built in the 1990s and is considered industrial-strength but in need of an upgrade.

In that sense the timing of the merger is fortuitous, says the Citi executive. "Each firm had several hundreds of millions, if not a billion, dollars' worth of technology upgrades to make to get where it needed to go," he relates. "Now only one company has to do that, so the cost will get divided by two, spread across twice as many advisers and twice as large an organization." While both firms have traditionally been inclined to build their own technology, the joint venture may opt for some cutting-edge vendor technology, sources note.

Placating Potential Breakaway Brokers

Making sure its brokers have best-in-class tools will be critical for Morgan Stanley Smith Barney as its success ultimately may hang on its ability to keep top brokers from leaving to join other firms or starting their own firms and taking their clients with them.

"Financial advisers are more mobile than they have been in the past," points out Roger White, managing director of consultancy Citisoft. "You're seeing a lot of movement of financial advisers and their teams starting their own shops or moving from one institution to another; it's one of the things you have to bear in mind when you start doing integration and consolidation. If you go too far in forcing operations, technology and data changes, that could push an adviser and his team to say, 'I've had enough -- I'm going to go out on my own or to a new firm.' "

Illustrating the impact of this trend, it has been reported that gains delivered by breakaway brokers represent about 22 percent of the $60 billion in new assets that all independent advisers brought to Charles Schwab last year and that one-third of the assets that Schwab has attracted in recent years has come from broker teams that used to work at Morgan Stanley and Citigroup's Smith Barney.

Securing buy-in for technology changes is critical to adviser retention, Linedata's Morris says. "A lot of it comes down to planning out how you're going to merge your technology and infrastructure, and during the planning process making sure the people impacted understand and buy in to why you're doing it," she explains. "If you're not constantly reminding people why they have to move off the system they love and have used for five years onto a new system that doesn't do everything they want, it's very difficult to get adoption on that new technology platform."

Compensation and incentives will naturally be the central factors in keeping Morgan and Citi brokers loyal. But the right new technology could help. "They have the opportunity to retain brokers by building out a great set of tools that will help them serve customers," the vendor executive says.

Keeping Customers Happy

But even if the majority of advisers stay, Morgan Stanley Smith Barney may still struggle to retain customers. Brokerage mergers typically cause unwelcome changes in customer service through branch closings, redesigned statements and Web sites, personnel changes, and the like. Sometimes products even are discontinued because the combined product line is considered too expensive for the firm to continue to support.

Late last year Accenture commissioned an online survey of 1,000 bank customers in the United States to determine how they react when their financial institutions merge with other firms. One-third of respondents whose banks had merged said they either had decided to move or were considering moving some or all of their savings and investments to a new financial institution (12 percent had made the decision to move funds; 22 percent were considering it). In addition, customers of merged institutions were twice as likely as others to say they were considering moving all or part of their savings and investments to a new firm and twice as likely to say they had recently become less loyal to their banks.

Adding to the challenge of customer retention is Wall Street's current state of disgrace. "There's perhaps never been a time when the individual's trust in the financial system was shaken more than now," notes Mark Halverson, senior executive in Accenture's capital markets practice. "Being able to continue to drive that trusted relationship with the end client is incredibly important."

To hold on to customers, Morgan Stanley Smith Barney needs to make the transition appear seamless. "They want to make sure there's no disruption in the way the customer receives information, that the customer statements are accurate, that there's not massive change that the customer has to absorb," the vendor executive says. "Firms with the sheer size and number of customers [that this organization has] are very sensitive to change."

Large mergers such as this one need to be rehearsed many times, he continues. "Before there's a cut-over, there needs to be several mock conversions done and SWOT [strengths, weaknesses, opportunities and threats analysis] teams on hand to make sure there isn't a disruption in the customer experience."

Creating a Sticky Web Site

A Forrester report released at the end of January, "What Morgan Stanley Smith Barney Must Do Now," suggests that the joint venture had better improve its Web site if it wants to impress customers. "The new firm needs a dramatic upgrade of the online channel," the report asserted. "After all, the vast majority of the firm's target market -- households with $1 million in investable assets -- is online. And 79 percent of these affluent investors visit their investment providers' Web sites at least a few times per year."

Click to see larger chart.

The Citi executive interviewed for this story wholeheartedly agrees with the Forrester assessment. "Both firms have an Internet site that's circa the Clinton administration," he says.

Forrester's research also found that Morgan Stanley's and Smith Barney's customers visit the firms' Web sites less frequently than their competitors' sites are visited by their customers. "Among all the major U.S. brokerages, the Morgan Stanley and Smith Barney secure client sites are two of the least useful," the report stated.

The problem, according to the Citi executive, is that "every time customers go to the Smith Barney or Morgan Stanley Web site, it screams, 'We're not up-to-date with the times, we don't get it and we don't get how you operate.' " He notes that, ironically, the only activities these sites allow clients to perform are activities the firms don't want them to do online: place trades and watch their portfolio performance. Clients can't communicate with their adviser, view their financial plan or conduct wealth management research online, he says.

The Citi executive further notes that affluent households are the first adopters of technology. And as the baby boomers begin to retire in two years and roll over their 401(k)s from places such as Fidelity.com, they're going to expect their new brokerage sites to carry, at a minimum, the same features that Fidelity supports, he adds.

Forrester's researchers also contend that better online information sharing and collaboration tools would strengthen the client/adviser relationship. "The Morgan Stanley Web site supports e-mail via a user's standard e-mail service, but there is no secure message exchange on the site for materials like planning documents and no information sharing or collaboration tools," the report said. "But investors do want them: Adviser communication and collaboration tools rank right behind account information as the Web site features most important to affluent investors."

Potential for a Whole Greater Than Its Parts

Despite the trials and tribulations in store for this merger, there is an upside. According to experts, the two firms have an opportunity to merge their customer segmentation ideas and come up with better ways to appeal to the ultrarich and mass affluent. If they pool their IT talent to create a best-of-breed wealth management platform, the resulting combined product lineup could be more comprehensive than either firm could offer before.

"Mergers bring the ability to span different product sets," Accenture's Halverson says. "If you look at past mergers, there have been new offerings and capabilities that help the merged firm offer the kind of primary financial relationship that advisers are seeking."

And as a former Morgan Stanley executive says, this merger makes sense from a practical point of view. "There are a lot of businesses chasing fewer dollars; consolidation is inevitable and this is just necessary for survival," he says.

Review: Windows 7 Beta 1 shows off new task bar, more UI goodies

Goodbye, Quick Launch bar -- there's a new task bar in town.

By Preston Gralla

January 7, 2009 (Computerworld) The just-released Beta 1 version of Windows 7 is a solid, fast-performing, stable operating system that appears to be just about fully baked and ready for prime time. It is much further along than Windows Vista was during its initial beta phase, and it appears to be feature-complete. Based on the stability and speed of this beta, don't be surprised if Microsoft Corp. releases Windows 7 before 2010 rolls around.

The new, powered-up task bar makes an appearance for the first time in this beta, and it proves to be something of a mixed bag. As I'll explain later in this review, the task bar makes it much easier to manage and switch between open windows and applications, but it also mixes icons for launching applications with icons for managing open windows.

Note that this review covers only the features that made their debut with Beta 1 of Windows 7. For an overall review of all of Windows 7, see "Windows 7 in-depth review and video: This time Microsoft gets it right." Also see my blog "Hacking Windows 7 beta problems" for help fixing some problems with the current release.

The new Windows task bar

The task bar, new in this beta, will no doubt be the most controversial new feature introduced in Windows 7. Gone is Quick Launch bar for launching applications that used to live at the left side of the task bar. Instead, large icons across the task bar are now used to launch applications.

The new task bar. Click to view larger image.

By default, Internet Explorer, Windows Explorer and Windows Media Player all have icons in the task bar. You can, however, add an icon for launching any application to the task bar by dragging the program's icon to it, for example, from the Most Recently Used list on the Start menu.

Those icons do double duty because they also manage your open windows. For example, if you've already launched Internet Explorer, and you have three tabs open to three different Web sites, the Internet Explorer icon changes subtly to show three icons stacked on one another, as shown in the image above, indicating that you have three tabs open.

The task bar in thumbnail view.
Click to view larger image.

Hover your mouse over the stacked icon, and you'll see all three open tabs as thumbnails just across the top of the task bar. Hover your mouse over any of the thumbnails, and your entire desktop is taken up by that open window. Hover it over another thumbnail, and the desktop is taken up by that one. Click any of the thumbnails or open windows, and you'll go straight to that window.

The task bar in stacked list view.
Click to view larger image.

If you aren't a fan of thumbnails displaying open windows, you can instead have all open windows display as a stacked list. When you're using stacked lists, to go to any open window, click on it in the list. To close the window, hover your mouse over it in the list, and click the red "X" that appears.

One more nice touch: When you download a file using Internet Explorer, a green bar on the icon shows you the progress of the download.

Jump lists

The task bar also makes use of another new feature that debuts in this beta -- "jump lists." A jump list is a list of actions or items associated with a particular application. To see a jump list for any application, right-click its icon in the task bar.

Typically, you'll see a history list of the most recent open files -- or Web sites, in the case of Internet Explorer -- as well as options to pin the application icon to the task bar (if you haven't already pinned it there) or unpin the application from the taskbar (if you've already pinned it there).

You can also unpin the three default task-bar icons -- Internet Explorer, Windows Explorer and Windows Media Player -- in this way.

Right-click an icon on the task bar, and a jump list of associated actions appears.
Click to view larger image.

Jump lists also make their appearance on the Start menu, in the Most Recently Used application list. A small arrow appears to the right of any application with an associated jump list. Click the arrow to see the list, then make your choice from the list.

There has also been a minor change to the Windows Shut Down button. Click an arrow to the button's right, and you get a list of shutdown options, including switching to a different user, logging off, restarting, locking the desktop, or putting your machine into sleep or hibernation mode.

The new Windows 7 Shut Down button.
Click to view larger image.

Aero Peek

The other major change to the interface in this beta is the addition of Aero Peek, a nifty little enhancement to the Aero interface introduced in Vista that lets you "peek" behind any open window to your desktop. It's far more fully featured than the Show Desktop icon that lived on the Quick Launch bar in previous versions of Windows.

Aero Peek lives as a small, rectangular area just to the right of the clock at the right edge of the task bar. When you have windows open and you mouse over the Aero Peek rectangle, all of your open windows disappear, and you see through to your desktop. But you don't see just the desktop -- you also see the outlines where each of your open windows would be.

Aero Peek makes your open windows disappear but shows their outlines on the desktop. Click to view larger image.

So, for example, if you have three open windows -- one near the top of the desktop, one to the left side, and one to the right -- you would see the outlines of each of those screens. If you prefer just to see the desktop itself, with no outlines, click the Aero Peek rectangle instead of hovering your mouse over it.

Aero Peek also works in concert with the task bar. As I mentioned previously, when you hover your mouse over an application with open windows, you'll see thumbnails of the open windows, and you can preview them by hovering over any thumbnail. That's Aero Peek at work. If you turn off Aero Peek, you won't be able to see the thumbnails -- you'll only see them as a stacked list. To turn Aero Peek on and off, right-click the Aero Peek rectangle, and either check or uncheck the box next to Preview desktop.

I did experience some problems with Aero Peek and the task bar thumbnails (which are turned on when you turn on Aero Peek). They worked only intermittently, then inexplicably stopped working entirely. I haven't heard reports of this happening to other people, so it's possible that the issue was specific to my test machine.

Update, 1/8/09: I fixed the problem using one of Windows' built-in troubleshooters. For details, see my blog, "Hacking Windows 7 beta problems."

Speed and compatibility

Microsoft set out to make sure that Windows 7 wouldn't have the same issues with hardware compatibility that Windows Vista had, and the company said that all hardware that works with Windows Vista should also work with Windows 7.

It appears that even in this beta version, that goal has been met. Windows 7 immediately recognized all the components of my Dell Inspiron E1505 without a hitch -- something that early versions of Vista had serious problems with, particularly when it came to wireless networking adapters.

And while the prebeta version of Windows 7 had problems connecting to my Linksys wireless router, this new beta version immediately recognized the router and connected to it without a problem.

I found no software problems either. Windows 7 ran every piece of software I threw at it, including not just obvious programs such as Microsoft Office, but lesser-used ones as well, such as Windows Live Sync. In addition, several antivirus applications are already compatible with Windows 7, including AVG and Kaspersky. I've been running the free version of AVG without problems.

I found a problem with Windows 7, in which it doesn't recognize multiple drives. Several people have reported similar problems. I installed Windows 7 on a dual-boot machine, in which the C: drive boots to XP and the J: drive boots to Windows 7. Unaccountably, when I boot into Windows 7, Windows 7 shows the J: drive as if it were a C: drive. And the real C: drive is invisible -- it simply doesn't show up in Windows 7 at all, and I have no access to it. However, when I boot to XP, I can see both the C: and J: drives.

Update, 1/8/09: I've found a fix for the problem. See my blog "Hacking Windows 7 beta problems" for what to do.

Beta operating systems typically run slower than the shipping version, but Beta 1 of Windows 7 is already surprisingly fast. It appears to be clearly faster than Vista, without delays associated with displaying menu items or boxes, launching programs, or doing other tasks.

The bottom line

This first beta of Windows 7 is a polished piece of work, with few apparent kinks to be worked out. Windows 7 is much further along at this beta stage than Windows Vista was at a similar point. In Vista's Beta 1 stage, the user interface was still being tweaked, the operating system was sluggish, and there were many hardware incompatibilities. Not so with Windows 7. Because so little has changed between the prebeta and beta versions of Windows 7, don't be surprised if Windows 7 is on a fast track to release.

That being said, the new task bar is somewhat confusing to use at first. After you live with it for a while, you get used to it doing double duty as a task launcher and windows manager. Still, it wouldn't surprise me if Microsoft tweaked it in future beta versions.

Given the beta's stability and speed, you can safely download it and use this on a test machine. As with any beta of an operating system, though, you shouldn't use it on a production machine.

Windows 7 public beta to be available Friday

Microsoft will limit downloads to 2.5M people; TechNet, MSND subscribers can get it now; (See Ballmer at CES video below)

By Gregg Keizer

January 7, 2009 (Computerworld) As anticipated, Microsoft Corp. on Wednesday night launched the beta of Windows 7, posting the preview of the company's next operating system to its developer download services.

The general public will be able to download the beta starting Friday, said CEO Steve Ballmer in his first-ever opening speech at the International CES in Las Vegas. "We will make the beta available worldwide," Ballmer said. "I encourage you all to get out and download it."

Microsoft made it clear that the beta will be available for a "limited time," and said it will cap the beta after the first 2.5 million downloads.

IT professionals and developers who subscribe to the Microsoft

Developer Network (MSDN) or TechNet services, however, get a jump on the public at large; they can grab the beta right away, said Ballmer.

The beta, which Microsoft called "feature complete," requires a PC with a 1-GHz processor, 1GB of memory, 16GB of available hard disk space and support for DX9 graphics with 128MB of memory, according to Microsoft, which also warned that the recommendations could change for the final version. The beta only supports an upgrade from Windows Vista Service Pack 1 (SP1).

Microsoft declined to get specific about upgrade paths for the final version of Windows 7, or to spell out how many editions it would produce and what it would charge for each. The beta is "roughly equivalent" to the Ultimate version of Vista, it added.

Both 32- and 64-bit versions of the beta will be available for downloading, but only English, German, Japanese, Arabic and Hindi editions will be posted Friday. Other language versions are expected at the product's launch.

To install the beta, users must have a DVD drive able to burn disk images to a blank disc. The beta, said Microsoft in a follow-up blog it published Wednesday, will be available as an .iso file. It did not spell out the size of the download.

The beta expires on Aug. 1, 2009.

Not surprisingly, Ballmer was bullish on Windows during his speech, even in the face of an economic downturn. "No matter how long this recession lasts, our digital lives will get richer," he said early in the keynote. "[And] Windows will remain at the center of peoples' technological solar systems."

His announcement of Windows 7 availability was no surprise. Expectations that he would take advantage of the CES stage began to build last month, when clues on Microsoft's own Web site pointed to a release no later than Jan. 13. Less than two weeks ago, copies of a Windows 7 build believed to be the same as the beta leaked to file-sharing sites, where they proved extremely popular.

Microsoft has not named a launch date for the operating system, other than to say it would deliver Windows 7 by about this time next year. On Wednesday, Ballmer said nothing about ship dates.

Some pundits and analysts, however, expect Microsoft to have learned from its mistakes and believe it will ship Windows 7 in time for the back-to-school and holiday selling seasons later this year. Vista missed both of those crucial selling periods during 2006.

The pace of Microsoft's revelations about Windows 7, the designated successor to the problem- and perception-troubled Windows Vista, has been quick. The company first talked up Windows 7 last May during a one-day marketing blitz, for example, and issued "pre-beta" copies just over two months ago to developers at a pair of conferences in October and November. Shortly after that, it promised it would expand testing to the public by releasing a beta in early 2009.

Also on Wednesday, Microsoft announced the public availability of the beta of Windows Server 2008 Release 2, the server software that shares a code base with Windows 7.

The Windows 7 download will be posted to Microsoft's site on Friday.

Risk and Customers Key Considerations in Mergers

For successful acquisitions, banks must be mindful of their focus during the integration process.
By Maria Bruno-Britz
Bank Systems & Technology
November 20, 2008
May you live in interesting times." The way the financial services industry is being battered lately, it seems as if this ancient Chinese curse was custom-made for today's banks.

Over the course of just two months, the world saw some of the most prestigious financial services firms left to die (see: Lehman Brothers), while others were compelled by the federal government into hurried unions in an effort to keep the economy afloat. After being sucked into the vortex of bad mortgages, Charlotte, N.C.-based Wachovia ($764.4 billion in assets), considered a bastion of customer service, found itself at the center of an "acquisition triangle" between New York-based Citi ($2.1 trillion in assets) and San Francisco-based Wells Fargo ($609 billion in assets), which ultimately claimed Wachovia as its prize. J.P. Morgan Chase (New York; $2 trillion in assets) became the new owner of Washington Mutual (Seattle) and its failed portfolio. Charlotte-based Bank of America ($2.7 trillion in assets) stepped back into the investment banking space with its acquisition of Merrill Lynch (even after BofA CEO Ken Lewis said he'd had his fill of that kind of banking). Most recently it was announced that Pittsburgh-based PNC ($146 billion in assets) would acquire National City (Cleveland; $150.4 billion in assets). And the list will go on, say experts.

What's most striking about these marriages is that, unlike traditional mergers, the recent spate of government-backed acquisitions leaves the acquiring banks with little time to do their homework -- including analysis of the systems integration and staffing implications of the deals. The potential for risk exposure, then, is greatly amplified. "These are shotgun weddings," says Sean Drewitt, strategy and transformation consulting leader with Paris-based CapGemini. "A lot of the preplanning and due diligence can't take place. They're finding out a lot [about the acquired assets] after the fact."

Jim Gahagan, global industry executive for financial services with Columbus, Ohio-based business process integration provider Sterling Commerce, definitely sees a distinction between the current mergers born of necessity and traditional unions. "A lot of the past mergers were very calculated, strategic plays," he explains. "This is a different climate. It's a reaction to liquidity. The rate at which this change happened and the volume of mergers occurring at one time is a big difference."

But whether a bank acquires another under duress or a merger occurs for more practical reasons around synergies and cost savings, there are several best practices banks should keep in mind to make the process less painful. BS&T contacted a number of institutions, including J.P. Morgan Chase and Bank of America, that have been involved in recent deals for their input on the current M&A environment, but all declined comment. However, the experts who help financial institutions through these lengthy integration projects have several tips to facilitate a more seamless union.

Do Your Homework

While the speed with which many of today's megamergers are occurring doesn't permit the most careful evaluation, due diligence nonetheless is vital to any successful merger plan. The acquiring banks must keep up their efforts to attempt to see what it is they are inheriting. "I can't over-emphasize homework and due diligence," says Thomas McAllister, industry principal with SAP's (Walldorf, Germany) financial services group.

McAllister was once a bank CIO and has been involved in his share of M&As while in that role. "I knew as a CIO well in advance that we were going to buy someone," he relates. "Today it's happening so fast. You still have to do the due diligence so you don't bring more risk into your own systems."

McAllister points out that with advances in technology, the available information on an acquisition target is better organized. "From a systems perspective, the information is a lot better today, especially around the financials, because the technology is so much better," he says.

Even so, there is always risk whenever two organizations' IT systems are brought together, stresses Michael Lloyd, chief scientist with RedSeal Systems, a Redwood City, Calif.-based company that develops security risk management software for vulnerability management and compliance audits. "The main worry for banks in a merger is whether it's a financial risk," he says. "You look at toxic assets as an acquiring bank. But the same is true in networking. You can take over a toxic network, too. The problem is that the security stance can vary enormously from bank to bank. If you take over a bank with less-mature processes and technologies, you take on their IT risk as well."

To mitigate such problems, Lloyd notes, more and more banks are establishing due diligence teams for the IT side. "IT due diligence has to be looked at in the same way as financial due diligence," he asserts. "If there's a security problem at the acquired bank, then it becomes your security problem." To help customers with these tasks, Lloyd adds, RedSeal offers technology that can map the defenses on a bank's network and automate the discovery of IT risk.

Of course risk assessment doesn't end when the merger is official, notes Bob Metzler, senior consultant and managing director with Charlotte, N.C.-based Project Managers, which provides change management services. "You have to do a continuous risk assessment," he says. "Many times, banks focus on the day they convert, but they haven't allowed sufficient time to understand the risk."

To sharpen their M&A focus, suggests Eric Bass, the lead for the financial services business consulting practice at Devon, Pa.-based SMART Business Advisory and Consulting, organizations should form some kind of merger management office (MMO). "A bank must understand that to gain the benefits of an acquisition in a reasonable amount of time, ... execution on a merger needs to be a core competency of the bank," he says, adding that few banks traditionally exhibit this strength. But even if a bank doesn't come into an acquisition with a long-established M&A department, Bass explains, an MMO is vital to providing a sense of cohesion and leadership throughout the merger process.

Team Effort

Tony Viola, VP with Patni Computer Systems (Mumbai), adds that an M&A team facilitates communication among the various departments involved in the integration. "What we've seen as important with regard to orchestrating these transactions is the M&A team and its ability to communicate with the key constituents in the organization -- business and IT," he comments.

Open communication, however, isn't always possible, notes Fred Cohen, group VP with Patni, who says things can really get dicey for both the acquiring bank and its target during the "quiet period" between the announcement of the merger and the closing. "The most difficult time is the quiet period," he explains. "This is before communication can flow because regulations state that both banks must still operate as separate entities. It's a period of uncertainty and lack of direction."

The prevailing uncertainty during the the quiet period, Cohen continues, can drive employees to begin looking for work elsewhere. "Staff in both banks begin spending time thinking about their careers," he relates. "People tend to leave in shifts: first it's the experts, then it's those people who may not have a huge stake in the merger but have a lot of knowledge. So the faster a bank can produce solid financial information and communicate its plan, the better." Cohen notes that Patni is working on developing tools to streamline the quiet period, but he declines to elaborate.

To minimize this kind of uncertainty, Sterling's Gahagan says, it should be clear from the beginning of the M&A process who is in charge of integration. So in addition to establishing an MMO, it is also wise to install someone to oversee the entire process, he advises. "The CEO will appoint a merger 'czar' who will make big decisions on things like which platform to move to in the future," Gahagan notes. "It's really important for everyone in both organizations to know who's in charge during the merger, especially on the technology side."

Even so, there is always risk whenever two organizations' IT systems are brought together, stresses Michael Lloyd, chief scientist with RedSeal Systems, a Redwood City, Calif.-based company that develops security risk management software for vulnerability management and compliance audits. "The main worry for banks in a merger is whether it's a financial risk," he says. "You look at toxic assets as an acquiring bank. But the same is true in networking. You can take over a toxic network, too. The problem is that the security stance can vary enormously from bank to bank. If you take over a bank with less-mature processes and technologies, you take on their IT risk as well."

To mitigate such problems, Lloyd notes, more and more banks are establishing due diligence teams for the IT side. "IT due diligence has to be looked at in the same way as financial due diligence," he asserts. "If there's a security problem at the acquired bank, then it becomes your security problem." To help customers with these tasks, Lloyd adds, RedSeal offers technology that can map the defenses on a bank's network and automate the discovery of IT risk.

Of course risk assessment doesn't end when the merger is official, notes Bob Metzler, senior consultant and managing director with Charlotte, N.C.-based Project Managers, which provides change management services. "You have to do a continuous risk assessment," he says. "Many times, banks focus on the day they convert, but they haven't allowed sufficient time to understand the risk."

To sharpen their M&A focus, suggests Eric Bass, the lead for the financial services business consulting practice at Devon, Pa.-based SMART Business Advisory and Consulting, organizations should form some kind of merger management office (MMO). "A bank must understand that to gain the benefits of an acquisition in a reasonable amount of time, ... execution on a merger needs to be a core competency of the bank," he says, adding that few banks traditionally exhibit this strength. But even if a bank doesn't come into an acquisition with a long-established M&A department, Bass explains, an MMO is vital to providing a sense of cohesion and leadership throughout the merger process.

Team Effort

Tony Viola, VP with Patni Computer Systems (Mumbai), adds that an M&A team facilitates communication among the various departments involved in the integration. "What we've seen as important with regard to orchestrating these transactions is the M&A team and its ability to communicate with the key constituents in the organization -- business and IT," he comments.

Open communication, however, isn't always possible, notes Fred Cohen, group VP with Patni, who says things can really get dicey for both the acquiring bank and its target during the "quiet period" between the announcement of the merger and the closing. "The most difficult time is the quiet period," he explains. "This is before communication can flow because regulations state that both banks must still operate as separate entities. It's a period of uncertainty and lack of direction."

The prevailing uncertainty during the the quiet period, Cohen continues, can drive employees to begin looking for work elsewhere. "Staff in both banks begin spending time thinking about their careers," he relates. "People tend to leave in shifts: first it's the experts, then it's those people who may not have a huge stake in the merger but have a lot of knowledge. So the faster a bank can produce solid financial information and communicate its plan, the better." Cohen notes that Patni is working on developing tools to streamline the quiet period, but he declines to elaborate.

To minimize this kind of uncertainty, Sterling's Gahagan says, it should be clear from the beginning of the M&A process who is in charge of integration. So in addition to establishing an MMO, it is also wise to install someone to oversee the entire process, he advises. "The CEO will appoint a merger 'czar' who will make big decisions on things like which platform to move to in the future," Gahagan notes. "It's really important for everyone in both organizations to know who's in charge during the merger, especially on the technology side."

Banks Look to Multimedia Technology to Grow Branches

The branch of the future takes shape using interactive and self-service technologies to enhance customer satisfaction.
By Maria Bruno-Britz
Bank Systems & Technology
October 29, 2008

At a time when the buzz is all about online and mobile banking, the physical branch has begun to take on a bit of an old-fashioned pallor. The perception of the branch as out of date and pedestrian has been taking shape since Web banking first gained popularity in the late 1990s.

But banks are striving to change the branch's image by reworking the channel to appeal to a wider array of customers. Terms such as "store" and "retail center" are replacing the "branch" label. And technology is playing a key role in this branch modernization as banks transform their retail outlets into efficient, automated, multimedia centers.

"Banks are looking for efficiencies where they can find them -- from paper, to FTEs [full-time employees], to travel -- so you want to try to deliver services in a different way," explains Lani Hayward, EVP, creative strategies, with Portland, Ore.-based Umpqua Bank ($8.3 billion in assets).

"The main event is to drive revenue in the physical store," adds James Greene, VP, global head of the financial services Internet business solutions group, with Cisco (San Jose, Calif.). "You want to find the most expedient ways to drive cost efficiencies and monetize every foot of physical space. But technology in the store isn't about being 'cool,'" he points out. "The technology has to be relevant in context."

One of the factors that is driving the reinvention of the branch is the combination of the Internet with the retail experience. "The Internet is driving customer preferences -- we have to keep up," notes Umpqua's Hayward. "It's instant information, and this drives the expectation of the same delivery in a face-to-face situation."

Consumers expect the same experience in the physical store that they have online, Cisco's Greene concurs. "The online environment has set the expectations of the physical environment," he says. "Online, people have an on-demand, relevant experience at the click of a mouse."

To respond to the trend, banks are creating a different customer experience in the branch. "Much of the potential here involves moving things to a self-service model," says Greg Lowell, a Reston, Va.-based senior manager with Accenture's financial services practice. "You need to provide convenience for the customers. Moving to self-service, particularly for low-value activities, is one way to go."

But experts agree that after years of trying to move customers to self-service channels such as ATMs and the Internet, relationship building has suffered. Now there is a renewed interest in rekindling the flames between bank and customer. Ironically, the same kind of self-service technologies that moved customers out of branches can be deployed in a manner to encourage more interaction within the branch.

Helping Customers Help Themselves

Such technology, however, needs to be deployed carefully in the branch. "Self-service is the grail here," says Michael Redding, director of development for Accenture Technology Labs, who is based in Chicago. "But the risk of doing this wrong is that you take away the customer's choice. The science is the technology, but the art is making it so attractive that it fits the customers' needs so they'll want to use it. But you must always give them a choice. That's why we still have branches -- people want to talk to someone when making product acquisitions."

This is where a multimedia-enabled branch can enter the picture. Some banks have been experimenting with deploying different types of customer-facing technologies in their branches. The technology can consist of a variety of solutions, such as self-service kiosks, image-enabled ATMs, videoconferencing solutions that bring in experts from anywhere to help meet customers' needs, and even digital displays to communicate messages to customers. The model usually consists of a combination of self-service technologies, sometimes coupled with human staff to provide assistance or handle higher-value transactions.

First National Bank of Omaha ($20 billion in assets) is among the banks that are creating a truly different branch experience. Of course technology takes center stage in helping the Omaha-based institution create this new environment, but Rajive Johri, the bank's president, explains that the goal is never about deploying technology for technology's sake.

"In this industry, the value of technology is its benefits to the consumer," Johri explains. When First National looks to deploy new consumer-facing technology, he continues, the bank asks four questions: Is it an enabler of a new experience for the customer? Does it make life easier for the customer? Is it secure? And is it fun and user-friendly?

These are the four pillars of First National's Destination Banking branch operating model. The company has opened a number of these branches in its footprint designed to make an impact on those who enter its doors.

The first such store, which Johri calls the bank's "Coffeehouse Branch," was opened in February 2008. It features a "virtual koi pond" built with IBM (Armonk, N.Y.) that uses virtual fish to direct customers to the appropriate interactive kiosks to complete transactions or receive product information. The branch also sports safe deposit boxes that are secured with iris-scanning biometrics, storewide wi-fi access, an image-enabled ATM, a concierge, flat-screen TVs and a children's play area with a coin counter designed to look like a wizard. And while people surf the Internet, they can sip a cup of coffee at the gourmet coffee bar.

"This creates an experience -- you're doing a lot more in the branch," says Johri. "We've gotten a good response from people. It shows in the number and size of the deposits and accounts opened," he adds, declining to cite specific figures.

Beaming In a Better Experience

Like First National Bank of Omaha, Umpqua Bank also has grasped the branch-as-experience concept. One area it has jumped on, according to Umpqua's Hayward, is video. Umpqua uses telepresence technology from Cisco to power its Ask An Expert service, which connects customers with product specialists when needed. "People can have a conversation with a specialist who's off-site," Hayward explains. "They get things done faster, it's better for sales, there's no travel involved [for the bank] and you have happy customers because their needs were met immediately."

Chris Gill, a senior manager with New York-based Deloitte, specifically points to videoconferencing as an opportunity for banks today. "Videoconferencing can be the killer app for branch sales productivity," he opines. "It addresses the fundamental issue involved in specialized product sales -- that an expert might not always be on duty to help customers. Customers have to leave their names and numbers and hope to hear back from someone. This affects the bank's credibility."

With videoconferencing, however, someone is immediately available to assist customers. Not only will the customers be happy, the bank saves on travel expenses and salary by having these experts beamed in from a central location, Gill notes.

Accenture's Redding says deploying telepresence technology is the logical solution for banks that can't always guarantee an in-branch specialist because they want to cut costs and don't wish to overstaff. "Broadband in branches is spreading because the price is making it more possible. Plus, with unified communications platforms being deployed more at banks, we're poised for rapid adoption of telepresence," he predicts. "You can beam in an expert for customers at the branch or even over Web cams in their own homes."

David Luff, global bank and finance practice leader with Oslo-based Tandberg, a provider of video solutions, says that video is more critical to banks today than ever. "Even when it's used internally, it can eliminate confusion and anxiety among staff," he states.

But while First National uses video technology from Tandberg internally for its quarterly town hall meetings with staff, telepresence does not currently meet First National's four-pillars requirements, according to the bank's Johri. "It's not well distributed among customers," he explains. "You have Apple and Microsoft, but they don't always talk to each other. It will get better, but ... I'm not sure if customers are ready to spend time in a public area or in a vestibule talking about private things."

Tandberg's Luff disagrees. "The technology has gotten better. It's high-definition, DVD-quality sound, and the price points are better," he says. "People are more comfortable using this technology, too. It's more robust and scalable."

Probably the most commonly deployed multimedia technology in branches today is the flat-screen TV. But this technology can do much more than play CNN while customers wait in line, according to Jeff Collard, president of Omnivex, an Ontario-based provider of software and services around digital signage. "This is a visual communications medium," he explains. "The more you can make the data valuable and real time, the more functions you'll have. It's something to facilitate decision making for customers."

And these are no dumb terminals. According to Collard, the digital signage technology available today can provide banks with information on service levels in the branch, the number of customers and peak times. And with the right message, "This is something that will prime the customer for a sale once he gets to the teller," Collard maintains.

These screens can be monitored from a central IT location where the content can be controlled, adds NEC's Mike Zmuda, director of business development for the Japanese company's Itasca, Ill.-based display solutions division. "You can set up playlists and duty lists of when you want the monitors on and off," he relates. "The branch people don't have to become IT experts because problems can be diagnosed remotely." The displays manufactured by NEC, Zmuda adds, aren't consumer-grade TV sets but commercial-grade equipment designed to operate for hours a day in excess of five years.

According to Zmuda, adoption of displays by banks is growing quite a bit. "A lot of the banks I talk to are tuned in to digital signage," he explains. "They know what's going on in the retail industry about conveying messages to customers when they have some kind of dwell time."

These steps can help banks migrate to a retail model. "This is all done on the premise of being a retailer of products and services," states Umpqua's Hayward. "We use the notion of people coming in and shopping, maybe impulse buying. What are we introducing that's relevant, entertaining, educational and plain helpful?"

New York-based Citi ($2.1 trillion in assets) is heavily leveraging this type of technology, especially in its operations in Asia, according to Christopher Kay, SVP, Citi Innovation. One thing Citibank Singapore has done was develop a highly automated branch model designed to fit in with the local transit stations. "We are deploying multimedia technology throughout different channels to create a superior retail experience," he says. "We are also leveraging digital information as a way to attract, engage and sell through a marketing wall, which showcases Citi products and services alongside pertinent local information, such as top news stories, traffic reports and weather forecasts."

The Banking Lifestyle

Frankfurt-based Deutsche Bank ($1.3 trillion in assets) has taken this concept to the extreme in its experimental branch. According to Accenture's Lowell, the idea is to promote banking as a lifestyle. "They put banking products in boxes and placed them on shelves so that people can browse them like they would in a retail store," he explains. But the bank also supplies staff in the lab with multimedia tablets so they can "sit with a customer on a couch over a cup of coffee and discuss financial products," Lowell notes. "This gets staff out from behind a desk or screen -- it's high-touch but still high-tech."

Umpqua's Hayward emphasizes that the people who staff bank branches are just as important to making the new branch concept work as is the technology. This is what drives customer acceptance of such technologies, she says. "Part of this has to deal with how your people interact with the customers," Hayward asserts. "How do you make it look inviting to encourage a person to use the technology? You want to compel people to use these time and again, so your employees have to be on board." For instance, with the bank's Ask An Expert video service, someone from the branch is there to explain the service to customers and show them how to use it.

Citi's Kay emphasizes the importance of using the technology to create new experiences for the customer and to enhance the relationship. "The mix and purpose for technology differs based on the context in which it is used," he says. "Technology can enable high automation of quick transactions, and technology can also enable deep understanding and trust building for high-touch transactions."

As always, banks must use care when deploying any kind of new customer-facing technology. "You don't want customers to come into Times Square when they walk into a bank," comments NEC's Zmuda. "In most areas, banks are looked at as being more tasteful. So be selective with how you locate displays and the way you deploy your messages. It's a balancing act not to inundate your customers."

The Branch Can Wait?

Balancing other investments with investment in multimedia bank technology also can be a challenge. In the face of a global financial crisis, will banks invest in multimedia branches?

"Branch infrastructure is expensive," acknowledges Bob Meara, senior analyst with Boston-based Celent. The firm conducted a survey of banks asking about their branch investments. According to Meara, very few banks were looking at high-end technology investments. "We don't see this as a big trend [right now]," he relates. "It makes sense to do this little by little. You want to invest in the branch in a way that makes financial sense."

But Accenture's Redding thinks the economic situation may actually prompt many banks to consider such investments. "Over the next six to 12 months, you're going to see an inverse opportunity for banks," he claims. "Some of the big guys left standing will be inheriting whole new networks from acquisitions. As they go through the transaction, how will they change the experience and create a new customer base at a different scale?"

Proper testing will be the key to winning any dollars for any such investment, says Deloitte's Gill. "Given the economic situation, there will be more of a focus on testing concepts first and using the ones that will drive greater revenue or lower cost at branches," he notes. "They must be deployed relatively easily without major capital outlays."

For Citi's Kay, the multimedia branch isn't the be-all and end-all -- rather, it's just a part of a larger customer service strategy. "The important thing to figure out is how to change the branch network to create the best customer experience and franchise efficiency as the lines between physical, virtual, online and digital become increasingly blurred," he says. "Banks need to provide mobility solutions that support nomadic behavior while creating new and sustainable value for customers who want an in-person interaction."

Cloud Computing Survey: IT Leaders See Big Promise, Have Big Security Questions

Cloud computing has become the most over-hyped tech buzzword this year, but CIO's new survey of IT leaders shows that despite security concerns, enterprises see real promise for flexibility and savings from the cloud.

By Laurianne McLaughlin

Tue, October 21, 2008 — CIO — Cloud computing has become too popular a term for its own good. As Oracle chief Larry Ellison pointed out recently, so many tech marketers are using the term "cloud computing" in so many contexts that it can almost mean anything—and thus often means nothing. Still, a new CIO survey of IT and business leaders shows that Ellison's dismissal of cloud as a disruptive force in the technology industry is premature. Among our survey respondents, 58 percent say cloud computing will cause a radical shift in IT and 47 percent say they're already using it or actively researching it.

Just 18 percent of our survey respondents call cloud computing a "passing fad."

CIO surveyed 173 IT and business leaders in August, 2008 to get first-hand feedback on what enterprises really think about cloud computing, and how, when and why they plan to deploy it in their enterprises. (Among our respondents, 54 percent are the head of IT at their company or business unit; 74 percent work at companies headquartered in the United States.)

For the purposes of the survey, we used a broad definition of cloud computing from market research firm Gartner: "a style of computing where massively scalable IT-related capabilities are provided 'as a service' using Internet technologies to multiple external customers". Cloud computing offerings are often described in terms such as "on-demand services", "cloud services", "Software-as-a-Service (SaaS)", etc."

If you want a plain-English primer on cloud computing and what Google, Amazon and other vendors mean when they say "cloud," see CIO's jargon-busting blog on this topic.

One sentiment came through loud and clear in our survey: IT wants the flexibility and cost savings that cloud computing promises—the same kind of flexibility you've won from virtualization, which is a key enabling technology for the cloud. But you will not rush with regards to implementing use of the cloud. 54 percent of our respondents say that cloud computing is an evolving concept that will take years to mature. That's right in line with what CIOs told us earlier this year in our look at early cloud adopters, Cloud Computing: Tales from the Front.

Unsurprisingly, the number one factor stopping IT leaders from tapping into the cloud right away is security worries. A whopping 59 percent of our survey respondents say vendors have not adequately addressed security concerns related to on-demand offerings.

Read on for the details on what you and your peers say about cloud computing and how you are using it or planning to do so.

Cloud Computing: No Passing Fad

As Gartner analyst David Cearley recently commented to attendees at Gartner's Symposium ITxpo, "You can't swing a dead cat without hitting somebody that's talking about cloud computing these days." The hype level has been extreme, and IT pros know it. Many of you say current offerings are still not quite baked or appealing enough to roll out in production environments.

But you have not written off cloud computing. More than half of you believe cloud computing will radically change the way enterprise IT looks in a few years.

And research firm IDC (a sister company to CXO Media) believes the current U.S. economic woes will only drive more enterprises to consider and adopt cloud offerings. IDC predicts that spending on IT cloud services will hit $42 billion by 2012. "The cloud model offers a much cheaper way for businesses to acquire and use IT—in an economic downturn, the appeal of that cost advantage will be greatly magnified," noted Frank Gens, senior VP and chief analyst at IDC.

Still, some of you refuse to even think of cloud computing as a technology, per se. "We view it as another sourcing option," wrote one respondent to our survey.

When You'll Jump Into the Cloud

A big question about cloud computing: When will IT departments stop talking about it and start actually using it? According to our survey results, IT's comfort with using cloud options in the near term is split. Almost half of you (47 percent) say you're either currently using or implementing or actively researching cloud options.

But a notable 29 percent say you have not placed cloud computing on your technology roadmap yet.

And breaking down these responses by those people who say they head IT in their company reveals more skepticism among IT chiefs than IT staffers: 38 percent of respondents calling themselves IT heads say cloud computing is not on their technology roadmap.

Consider this survey respondent's verbatim comment as to why cloud is not on his roadmap: "We're waiting for reality to strike, vendor solutions/pricing to mature and the hype to be replaced by honest to goodness experience." The lack of case studies and customer references is a real stumbling block now, according to our survey respondents.

What You Hope to Gain From the Cloud

What's even more precious to IT than cost savings? Agility. The big win with virtualization, to date, has been the ability to deliver to the business on IT requests in a lightning fast way, as compared to the old one-app-one-server days. Virtualization has helped many IT departments change from "no" people to "yes" people.

Similarly, you already see the ability to deliver more flexibility to the business via cloud offerings: In fact, you named this as your top desire from cloud computing, followed by reduced hardware and staffing costs.

Cloud computing "allows the IT organization to focus on differentiating IT capabilities and not on infrastructure," one respondent to our survey wrote, explaining why he thinks the cloud will change his IT department—and his company. "It also allows the business to pursue an opportunity that has unclear ROI without significant capital expenditures on infrastructure."

What You're Already Doing in the Cloud

Cloud computing offerings that fall under what most people think of as software on demand or SaaS, in the style of Salesforce.com, have been around for years now.

Thus some IT departments are not only comfortable with the cloud but also banking on it for operational savings and flexibility. Not surprisingly, SaaS offerings are the top way you're already using the cloud, followed by storage on demand. Only 19 percent of respondents say they're tapping into extra computing power on demand right now, though that's perhaps the most exciting flavor of cloud computing for the future.

Clearly, the size of your enterprise is a factor with regards to your comfort with cloud offerings. As Forrester Research analyst James Staten notes, for example, it's simpler today for startups or smaller companies to use Amazon's EC2 and S3 cloud services, as opposed to large enterprises. Staten believes large enterprises may inch their way into the cloud for the ability to do quick and cheap experimentation. Also, end users could use cloud services to bypass IT for some needs or projects, Staten predicts.

Applications That Call Out for Cloud Options

What specific applications are leading you to use or actively research cloud offerings? Collaboration apps rank as early winners, according to our survey results. A significant portion of you are also trying to figure out the server and storage on demand equations now. And a surprising 54 percent of respondents mentioned ERP as on the radar or in use—notable since ERP apps often represent the most mission-critical and expensive applications to the business.

"Like every other technology, it (cloud computing) has its place," wrote one respondent to our survey. "Mobile access, non-mission-critical capabilities, and general support functions (provisioning, e-mail, etc.) are easy targets."

What's Stopping You: Security and Control Concerns

A whopping 45 percent of you cite security as the top concern surrounding cloud computing at your enterprise. And you've been through blockbuster tech waves like the ERP revolution, so it's not surprising that you're already worrying about integration issues with existing systems and cloud computing.

As we've recently reported, cloud computing will rely on virtualization to quite an extent. The economics demand it for cloud vendors to succeed. Yet such basic issues as moving virtual machines between physical servers with processors from differing vendors (AMD and Intel) have yet to be resolved by the industry. And when you start talking about making customer data easily portable between different cloud service providers, even industry vets give wishy-washy answers right now. Microsoft has its own vision for solving the problem, a vision heavily dependent on client OS power. VMware has another vision. Bottom line: It's early and the integration questions are real.

As has been the case with SaaS offerings from the start, availability and performance worries still register, with almost a quarter of you citing them in our survey.

Show Me the Security

"I believe cloud computing places too many variables out of our control," wrote one respondent in the verbatim comments to our security questions. That opinion is not uncommon among IT vets, according to our research.

How will IT leaders get their heads around the security issues with cloud computing? After all, many IT leaders just got comfortable with virtual servers: now they're being asked to work off virtual servers in cloud providers' physical locations—where their precious data will be further from reach, and co-located with many other customers' data.

Consider this, the CEO of a cloud infrastructure company recently told me: Each day, IT departments hand reams of paper to an Iron Mountain representative and trust that he will shred and destroy it or otherwise deal with it according to instructions. Do you see the rep do it? No, you trust the vendor. Cloud vendors, he said, must get to that kind of trust with IT, before cloud computing can take off in a mainstream way.

Based on our survey results, vendors have a long road ahead before they earn that kind of trust.

Understanding the Cloud and Trusting It Are Very Different

Despite the amount of marketing hype in the marketplace right now, your core understanding of cloud computing is not the problem, according to our survey results. A full 78 percent of you call yourselves very or somewhat knowledgeable about the cloud.

It's just early in the game and your security and integration concerns are real.

SURVEY

METHODOLOGY NOTE: The margin of error on a sample size of 173 is plus or minus 7.5%. Percents on questions where a respondent could only select one answer may not sum to 100 due to rounding. Not all respondents answered all questions.

Debate Over the Future of Mainframe Computing Rages On

Mainframe computers continue to play a central role in Wall Street data centers despite years of predicted demise. Now, some are forecasting the venerable machines are making a comeback, of sorts.
By Anne Rawland Gabriel
September 16, 2008

SunGard to Unveil Next Generation Messaging Platform at Sibos

SunGard’s new ambit messaging hub to offer increased performance, flexibility and connectivity
By Leslie Kramer
September 04, 2008

15 Percent of FX Trades Could be Completed With Algorithms by 2010

Market participants are rapidly adopting electronic trading strategies in FX market, says Aite Group report.
By Greg MacSweeney
September 02, 2008

The Almost-Meteoric Rise of SaaS on Wall Street

Salesforce, SunGard and other providers are pitching Software-as-a-Service as a universal answer to application needs. But how many Wall Street firms will adopt SaaS beyond CRM?
By Penny Crosman
August 14, 2008

Financial Firms Try to Protect Themselves Against the Insider Job

Following the Societe Generale scandal, Wall Street firms have reexamined their internal security practices. But a number of factors, including the economic downturn and business pressures, continue to make rogue employees a very real threat.
By Melanie Rodier
August 18, 2008

Buyout Banks Take Peace-Making Turn

A group of banks and buyout firms helped salvage the $52 billion takeover of Canadian phone giant BCE Inc. The compromise closes a year of bickering about how to fund boom-era deals, which may at last help banks begin new lending commitments to corporations and buyout groups.

That follows an amicable agreement the day before, greased by bank lenders' concessions, to abandon a $6.1 billion acquisition deal for casino operator Penn National Gaming Inc. (See related article.)

In Penn, the banks paid handsomely to free themselves of underwriting $7 billion of unsold debt on which they would have had to take substantial write-downs.

The BCE deal, which will have its closing delayed until December, also lets the banks avoid having to sell BCE debt to investors amid brutal fixed-income markets and likely incur sizable write-downs. Their hope is that the credit environment will improve by December. Also, the banks buy themselves time to clear unsold debt on their balance sheets before having to bring this deal to market.

The banks had to play key roles in the BCE and Penn deals. In the BCE deal, banks led by Citigroup Inc. and Deutsche Bank AG helped craft the pact that delays the closing until December but maintains the transaction's original price struck one year ago.

BCE agreed to suspend its dividend payments through year-end, leaving it with more cash and effectively lowering the purchase price.

The private-equity firms, led by Providence Equity Partners, agreed to small concessions on the $34 billion loan package, including paying a slightly higher interest rate to the banks.

In Penn National, the banks, knowing they would take have to take big losses in order to sell the deal's debt, took the unusual step of agreeing to cover a $225 million breakup fee to Penn as well as $325 million in fees and expenses for the buyers, Fortress Investment Group and Centerbridge Partners LP.

Roughly one in five LBOs involving U.S. targets struck in 2007 have been terminated, a record number according to data provider FactSet MergerMetrics. In many of the situations where deals fell apart, banks and companies accused the private-equity firms of buyers' remorse, while the buyout firms have accused the banks of lenders' remorse. The truth is somewhere in between.

Some deals got done only after price cuts were agreed to, such as the sale of Home Depot Inc.'s supply unit and the Clear Channel Communications Inc. privatization, which is pending. Other LBOs failed to close, but the private-equity buyers invested in their targets to avoid litigation.

That was the case with Fortress and Centerbridge's stake in Penn National, as well as Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc.'s investment in audio company Harman International Industries Inc.

Then there are the busted buyouts that have collapsed in litigation. Student lender SLM Corp. (or Sallie Mae) sued private-equity firm J.C. Flowers & Co. after the $25 billion buyout of the student lender fell apart; the case later was settled.

One more big legal battle remains, between Huntsman Corp. and Apollo Management LP, the last of the large unconsummated buyouts struck last summer. The scuffle is shaping up to be perhaps the nastiest of the lot. Apollo and its portfolio company, Hexion Specialty Chemicals, ran to court last month, asking a judge to scrap the $6.5 billion buyout of the chemical company. The Apollo side argues that, because of Huntsman's poor financial performance since the deal was struck, a combined company would be insolvent. Huntsman fired back, suing Apollo and its founders personally in Texas state court, accusing them of fraud.

Even though the most contentious period of the buyout boom is over, the ramifications will linger. A report by the Bank for International Settlements released Friday said companies will struggle to refinance the debt they have taken on in these deals. Companies bought in leveraged-buyout deals will have to roll over an estimated $500 billion in loans by 2010, according to the bank's Committee on the Global Financial System.

In the pact that BCE, its private-equity buyers and the banks hammered out, by keeping to the original $42-per-share deal price, BCE avoids having to ask shareholders to approve the transaction again. It also avoids having to repeat lengthy judicial and regulatory processes in Canada to clear the deal. In recent weeks, the banks financing the deal had argued for a lower price, according to these people.

Key to the pact is BCE's commitment to not pay out its dividend through year end.

Withholding its dividend payments would increase the company's cash by $900 million, giving Citigroup and Deutsche Bank greater comfort in providing the gargantuan loan package, roughly $34 billon.

BCE said in the past week it was skipping the payment of its $294 million second-quarter dividend.

Also, BCE is expected to generate roughly $600 million in cash flow through the balance of the year, further bolstering the company's balance sheet.

The retained dividend and earnings amount to roughly $2 a share in cash, effectively giving the banks a price reduction without having to change the price of the deal.

BCE is the dominant telecommunications carrier in Ontario and Quebec. As part of the deal's closing, the company announced the long-planned departure of its chief executive officer, Michael Sabia. He will be succeeded by BCE President George Cope.

Trendlines from 6/15/08: New, Hot, Unexpected

In this issue: Low-cost laptops; Wi-Fi on campus; Africa eyes outsourcing; Execs on globalization; Software piracy on the rise; and CIOs and social responsibility.

By Steff Gelston

June 11, 2008 — CIO —

Microsoft Looks Beyond Low-Cost Laptops

Microsoft is looking beyond ultra-low-cost laptops to cheaper alternatives such as smartphones and shared computing in the drive to give people in developing nations a way to communicate and access the Internet.

The world's largest software maker has a few projects in the making, including a push to use mobile phones in computing and microfinance. Mobile phones have had an impact in the developing world, enabling people such as farmers and fishermen to find better markets and prices. Handsets give a person a way to be reached for jobs.

"Technologies like the mobile phone promise to take things like very small loans, microfinance, and allow them to operate in a very efficient infrastructure so that the price and the availability of financial products can be far broader," said Microsoft chairman Bill Gates at the Jakarta Convention Center last month.

One reason companies are looking more to mobile phones for developing nations is because of the huge number of handset users worldwide, estimated at 3 billion, and because mobile phone network coverage is widespread. Nearly 90 percent of the global population is covered by a mobile phone network, according to the GSM Association and CDMA Development Group.

Microsoft is also looking at ways to hook up smartphones to TVs to use the computing power and connectivity of the handset with the television's larger screen for a better and cheaper Internet experience in the developing world. It began working on Fone+ a few years ago and has tested prototypes, proving that such devices can lower the cost of computing for the poor.

Ultra-low-cost laptop PCs (ULCPCs) do have an important role to play in providing Web access to developing countries, but such devices are still expensive, according to Craig Mundie, Microsoft's chief research and strategy officer, and the head of its Unlimited Potential Group, which works on projects for the poor. That's why it is working on Fone+ and MultiPoint, a technology in which each student has his or her own mouse and unique cursor to use the same computer. That drops the price of computing dramatically, to one PC, a projector and 30 computer mice per classroom, instead of $200 per laptop.

Using ULCPCs to bring computing to students in developing countries began with the $188 XO notebook from the One Laptop Per Child Foundation (OLPC). The XO originally started with an open-source OS, but OLPC has worked with Microsoft on using XP, and Microsoft has dropped the price of a suite of Office software for such devices.

Microsoft and other organizations are concerned with bringing computing to the developing world. The fear is that modern countries with access to IT and the Internet will continue to expand the gap in technological know-how over developing nations.

-Dan Nystedt

Colleges to Speed Adoption of Next-Gen Wi-Fi

Though 802.11n is in its infancy and there's still no associated official wireless standard, 99 percent of all North American universities will be using it by 2013, according to a report by ABI Research. A proposed upgrade to today's wireless networking schemes such as 802.11b and 802.11g, the new standard promises far greater speed than its predecessors.

Less than 3 percent of North American universities are using 802.11n but adoption will grow rapidly during the next five years, ABI predicts. Wi-Fi usage in K-12 schools is also expected to grow during that period, due to a need for enhanced security and the fact that schools are instituting "anytime, anywhere" learning.

Europe is also starting to join in, according to ABI. However, Wi-Fi adoption there could be hindered by lingering health concerns associated with the technology.

Regardless, global revenue from Wi-Fi access point and controller equipment in the higher-education space will jump more than sixfold from $137 million in 2007 to $837 million in 2013, ABI says. "Wi-Fi access point and controller equipment revenue in the global higher education space will skyrocket," says Stan Schatt, ABI VP and research director.

And despite a common belief that the Wi-Fi industry in general is fueled by large enterprise wireless deployments, a separate ABI report found that consumer and small-business customers make up the vast majority of the marketplace for the technology. In fact, 95 percent of all access point shipments last year were to consumer and small enterprises, ABI says. Revenue from large enterprise purchases accounted for just 32 percent of all access point revenue in 2007.

-Al Sacco

Africa has outsourcing in its sights

Move over, India: Africa wants a piece of the IT outsourcing market. Egypt, Ghana, Nigeria, Senegal and South Africa are becoming increasingly aggressive in their push to compete with India—and the rest of the world—in outsourcing.

"There is an opportunity," says Yankee Group analyst Mindy Blodgett. "India is going to remain the offshore outsourcing leader probably forever, but you never know. That market is in trouble because of attrition. Companies are plagued by it."

Prices are also going up in India, which is a good thing for Africa. Many of its countries also have a time-zone benefit when dealing with European customers.

Several African nations have attracted outsourcing business but to compete they need to develop a larger, better-educated workforce. Problems with power grids, telecommunications infrastructure, transport infrastructure and unstable governments also must be addressed.

International capacity, a talent pool and a good environment for investments, with tax incentives, favorable labor laws, and economic and political stability, sum up what Orange Business Services looks for in a country. "Once you get that, the business will come and the customers will come. The demand is much higher than the available resources," says Yasser Radwan, vice president, Customer Services and Operations, Orange, Egypt.

There is reason for Egypt and other countries to be interested in IT and business process outsourcing. "These are good jobs...they tend to pay well, and it lifts an economy," says Blodgett.

-Mikael Ricknas

Source: EquaTerra and World 50

Execs Put a Positive Spin on Globalization

Globalization is viewed by top executives at leading organizations around the world as a business challenge that is here to stay, according to a study by EquaTerra and World 50 of 217 business leaders. Most say they view the trend as having a positive long-term impact on their business.

Study: Software Piracy Still Growing

computers First, the good news: The use of pirated software dropped in 67 of 108 countries surveyed in a study by the Business Software Alliance, which represents software vendors and their hardware partners and pursues companies that use pirated software.

Now, for the bad news: The software piracy rate increased by three percentage points to 38 percent in 2007 because the worldwide PC market grew fastest in high-piracy countries, according to BSA. Countries such as Armenia (93 percent piracy rate), Bangladesh (92 percent) and Azerbaijan (92 percent) led the way in software pirating.

"We are making much-needed progress in the battle against PC software piracy, and that's good news for governments, end users, businesses and the industry," says BSA President and CEO Robert Holleyman. "The battleground is now shifting, however, to emerging markets."

Several market factors contributed to a rise in piracy rates. First were the market dynamics in the PC segment, where the fastest growth is in the consumer and small-business arenas. "These are the hardest sectors in which to lower piracy," the report notes. Second was expanded Internet and broadband access in emerging markets.

Market research company IDC (a sister company to CIO's publisher) conducted the study for BSA, relying on proprietary statistics for software and hardware shipments gathered through surveys of vendors, users and the software sales channels; it also enlisted IDC analysts in more than 60 countries to review local market conditions.

In total, according to IDC's estimate, dollar losses from piracy hit nearly $48 billion in 2007, a 20 percent increase from 2006. That loss number has been controversial, however. Some critics say BSA wrongly assumes that every illegal software copy sold would have been purchased legally otherwise.

-Thomas Wailgum

Social Responsibility on CIOs' Agenda

Social responsibility isn't just for CEOs anymore. As the CIO role continues to change and expand into the business, some technology executives are also making it their mission to transform how IT is viewed by and can benefit the community.

One CIO who is making a difference is Steve Scopellite, winner of the CIO of the Year award from Computers for Youth (CFY), a nonprofit organization that provides computers for low-income families. Scopellite, managing director and co-CIO of Goldman Sachs, is committed to creating an environment that can sustain a diverse workforce at Goldman Sachs; he also works with schools and other organizations to engage young people in technology.

"We need to get technology in the hands of kids at an early age. And I don't mean Game Boys," says Scopellite. His work mentoring and recruiting future IT workers is why he was chosen as this year's CFY winner.

Recruiting new talent for Goldman Sachs became Scopellite's main focus after he realized the company could do a better job of getting women and minorities more interested in technology careers. "I visited schools, worked with our recruiters and vendors, and together with our management team, we changed the process with some very positive outcomes," he says.

Scopellite is the sponsor for the Technology Black Network within Goldman Sachs, a network that is part of its diversity strategy. He also helped establish the Career Development Committee and the Diversity Committee for the Technology Division.

"Recognizing CIOs for being socially responsible sends an important signal about how critical the role of CIO has become," says Elisabeth Stock, CEO and cofounder of CFY.

Previous CFY award winners include Becky Blalock, CIO of Southern Company, and Fran Dramis, CIO of Bell South. For more information about CFY, visit www.cfy.org.

-Jarina D'Auria

GameStop Plans to Stop Selling
Microsoft's Zune Media Player

SAN FRANCISCO -- Videogame retailer GameStop Corp. plans to stop selling Microsoft Corp.'s Zune media player due to insufficient demand.

GameStop's already pulled its stock of Zunes from its stores. The media players will be available via GameStop's Web site until supplies are exhausted. The Zune "didn't have the appeal" that GameStop expected, a spokesman said.

Microsoft's Zune product line

Adam Sohn, Microsoft's Zune marketing manager, said in response that Zune sales "have seen good momentum" during the last few months, and that there's been a "great response to our spring release."

The decision is another blow to Microsoft's chances against Apple Inc.'s dominant iPod media player franchise. GameStop is a premier videogame and console retailer with 4,500 outlets.

With approximately 2.5% of the market share, the Zune, which costs around $130, has not proven much of a challenger to iPod. About two million Zunes have been sold since they were introduced in October 2006; by comparison, approximately 80 million iPods were sold during the same period.

Developers: Facebook redesign risky but needed

By Juan Carlos Perez, IDG News Service
May 23, 2008

Facebook's major overhaul of its core member profile pages is a risky but necessary move for the world's second-largest online social network, according to several developers of popular applications for the site.

The move is risky because Facebook will alter the user interface significantly, which can clash against people's natural resistance to change and prompt them to complain.

In addition, for some developers, particularly those new to the platform, the new profile design may limit the visibility of their applications, affecting their ability to build a user base.

"The redesign seems an overall step forward, but it will definitely have speed bumps from an actual implementation standpoint," said Tim O'Shaughnessy, co-founder and CEO of Hungry Machine.

However, with the explosive growth in members and in applications on Facebook, the average member profile interface has become very cluttered, a situation that harms end-users and developers alike.

"Facebook is a social [networking] operating system, and the profile is your entry point and your desktop. The utility of that [desktop] interface becomes less and less useful to the end-user as it gets more and more cluttered," said Shervin Pishevar, co-founder and CEO of Social Gaming Network (SGN). Thus, taking a bold step to clean up the member profile interface is a logical and natural enhancement for Facebook to make, he said.

Facebook has been talking about its redesign for a while, but this week provided concrete details about its plans, which are aimed at retaining the layout's orderly and clean look, a differentiator from competitors like MySpace.

At the heart of the redesign is the redistribution of profile content into different tabs so that users can better organize components such as the activity feed, photos, personal information, and applications. In addition, the activity feed tab will feature a new authoring control panel for creating and posting content called the Publisher Box. Moreover, the profile will have at the top a new horizontal navigation line with drop-down menus for its core features.

"The three main goals we have for this are: to make the profiles simple and clean; to give users control; and to let them emphasize the most recent and relevant content. This is what we've come up with as the best way to accomplish those goals," said Facebook's Mark Slee, the product manager of the new design.

Of course, any user interface change of this magnitude entails dangers, especially when it will affect about 70 million end-users and thousands of application developers. Facebook has experienced backlash from changes in the past, such as the initial versions of its activity feed feature and Beacon advertising program, both of which were criticized for being too intrusive on people's privacy.

"It's a pretty significant redesign, so users will definitely have an adjustment period," O'Shaughnessy said. "People are generally opposed to change, so there'll be a pretty reasonable amount of consternation from users just because it's different."

This is why O'Shaughnessy has been surprised that Facebook is opting to roll out all the changes at once, as opposed to doing it more gradually, since the latter approach might lessen the impact on end-users. "It's always a risk to roll out a really big change all at once," he said.

Yet, Slee is confident that the change won't be traumatic for end-users, since Facebook has been actively communicating the changes and plans via a Facebook group. Facebook also plans to have a time during which end-users will be able to toggle back and forth between the old and new layout, before the change is finalized at some point in June, Slee said.

From the application developer perspective, the redesign will also have significant effects, O'Shaughnessy said. "The applications aren't present nearly as much as they were before," he said, alluding to the fact that the new design groups applications into a separate tab.

Although users will be able to create tabs for individual applications and the new top-level navigation includes a drop-down list of applications, "there's definitely the capability for apps to be less discoverable," O'Shaughnessy said. "For newer developers especially, that'll be really hard."

Not that O'Shaughnessy worries about being affected by this. Hungry Machine began launching its applications in mid-2007, shortly after Facebook opened its platform to external developers, and they have gained very good traction and popularity, and are generating a healthy revenue stream.

However, Facebook argues that the new design will be good for developers, not only because applications can get their own tabs, but because users will be able to add application controls to the Publisher Box. "All applications will be able to tie right into that. We think that's a huge opportunity for developers," Slee said.

Meanwhile, having an entire tab devoted to applications will let developers "build a rich and deep experience that can take advantage of more space than has ever been provided in the profile," Slee said, adding that Facebook is opening a "sandbox" for developers to get acquainted with the profile changes.

Boris Silver, co-founder and CEO of Sport Interactiva, a developer of sport-themed games, also believes that end-users are likely to recoil at first and that visibility for applications in general will be diminished, but believes the changes will ultimately be for the better, particularly for companies like his whose applications are firmly established on Facebook. "It'll give room to high-quality and useful applications that people value most to rise up," Silver said.

Pishevar holds a similar view, saying that the changes will benefit applications that are genuinely engaging and of high quality, and not those that try to succeed via in-your-face, aggressive self-promotion tactics, something Facebook has been trying to discourage among developers.

"The apps shouldn't be reliant on real estate on a profile page to thrive. There was tremendous benefits early on in the platform from having that real estate, but it also made it probably too easy to get users without actually investing real resources into making quality, highly engaging applications," Pishevar said.

Despite the possible bumps in the road, the developers interviewed agreed that, as far as the actual redesign is concerned, Facebook is hitting the right notes. "I'm pretty high on the design itself. It's smoother, more efficient, more clear," O'Shaughnessy said.

Criminal negligence: The sorry state of law enforcement data sharing

Nearly seven years after 9/11, information-sharing problems that hobble law enforcement are just beginning to be solved.

May 26, 2008 (Computerworld) U.S. Border Patrol agents intercept a man trying to enter the U.S. illegally from Mexico. Unaware that he is wanted by the FBI for three murders, they return him to Mexico. The man returns to the U.S. and murders several more people before being caught.

A team of investigators works for 20 years to bring down an international drug-trafficking organization. Had they known about related information in other law enforcement databases scattered across the U.S., the case might have been closed in three.

True stories like these have highlighted the critical need to improve information sharing among law enforcement organizations, but it wasn't until the 9/11 attacks, the subsequent 9/11 Commission Report and a presidential mandate that better information sharing became a top priority.

The initiatives that arose from that mandate are finally beginning to open up stovepiped data repositories by transforming how law enforcement agencies at the federal, state and local levels capture, store and share data.

The biggest changes have come in two areas: how law enforcement identifies bad guys, and how investigators gain access to incident reports documented by more than 20 federal agencies and 20,000 state, county, local and tribal law enforcement organizations nationwide. "You'll be able to search data that you never had access to before," says Tom Bush, assistant director in the FBI's Criminal Justice Information Services (CJIS) division.

Most of the improvements in data sharing flow from the development of the Global Justice XML Data Model, a standard that provides a common vocabulary and structure for the exchange of data among law enforcement databases. Initiated by the U.S. Department of Justice, GJXDM was released in 2003. "By 2004, there were projects all across the country using it," says Paul Wormeli, executive director of the Integrated Justice Information System Institute, a public-private partnership that helped develop the standard.

In 2005, CIOs at the DOJ and the U.S. Department of Homeland Security agreed to build the National Information Exchange Model (NIEM), an extension of GJXDM that facilitates data sharing beyond law enforcement to the areas of justice, public safety, intelligence, homeland security, and emergency and disaster management. Work is also beginning on direct computer-to-computer data exchanges using Web services. "This field is waking up to service-oriented architectures," says Wormeli, noting that some reference architectures are already in place.

These standards are designed to solve the problem of proprietary and incompatible law enforcement record management systems without requiring every organization to throw out what they have and start over. "The beauty of NIEM is that it preserves the legacy systems. We're building middleware," says Wormeli.

Law Enforcement Databases
Click to view larger image

Most of the identity databases at the federal level aren't yet NIEM-compliant, but agencies are planning upgrades to those systems and have already taken steps to facilitate data sharing. Although federal agencies use many databases for law enforcement, the three primary identity databases are the FBI's Integrated Automated Fingerprint ID System (IAFIS); the DHS's IDENT fingerprint database of 90 million foreign nationals, gathered from visa applications and used at all points of entry; and the U.S. Department of Defense's Automated Biometric Identification System (ABIS), currently used to monitor foreign nationals entering and leaving U.S. military bases in Iraq and Afghanistan.

IDENT, IAFIS and ABIS are all capable of some data exchanges by way of GJXDM today, but each is being reworked to natively support the NIEM standard and allow data exchanges with databases in fields outside of law enforcement, such as emergency management. IDENT is in the process of being updated, and contracts to develop the next generations of IAFIS and ABIS, which will add facial and iris image-recognition capabilities, were awarded in February.

Broken Records

The second half of law enforcement's silo problem is the inability to access incident reports.

Agencies share information on criminals and arrest records with the FBI, but the incident reports, which detail the crimes, remain isolated in thousands of federal, state, county and local record management systems. Those records, consisting of structured and unstructured data, are the lifeblood of investigations, says Maj. Chris Brown of the Oregon State Police.

Although 75% of police agencies use automated systems to store those records, less than 25% of those systems are capable of sharing that information, says Dan Hawkins, director of public safety programs at Search, a national consortium of state agencies that promotes information sharing.

Regional data-sharing networks have sprung up around several metro areas, but there is currently no way for investigators to access all of the disparate record management systems across the country. That ability to "connect the dots" is important not only for FBI trending and analysis, but also for wide-ranging investigations, such as Brown's ultimately successful 20-year pursuit of an international drug ring. In that case, he says, "the scope of the organization, the number of places involved and the distribution of people presented an incredible challenge to investigators."

So last March, the DOJ and the FBI's CJIS division began rolling out the National Data Exchange initiative (N-DEx), a NIEM-compliant database and data-sharing network. N-DEx was designed to gather and exchange incident and case reports, as well as arrest, incarceration and parole records, and other data with all NIEM-compatible systems in local, state, tribal and federal agencies.

Both the FBI and the DOJ wanted to have federated search capability across incident reports residing in state and local record management systems nationwide while allowing those records to be updated and maintained by their local owners. "The locals maintain possession, but we have visibility into their sharable information, and they have similar visibility into ours," said Vance Hitch, Justice Department CIO, in an e-mail exchange with Computerworld.

"Within the system, we'll do correlation of data, pull out entities [incident data] and provide the ability to search the data," says program manager Kevin Reid. Investigators can use the system to make connections among incidents that might help to identify and track down suspects, says Brown.

In the first phase of the $85 million project, N-DEx will incorporate about 100 million records, including records from federal agencies. Initially, records will come from case management systems at the FBI and the Air Force Office of Special Investigations, followed later by those of the Bureau of Alcohol, Tobacco and Firearms, the Drug Enforcement Administration, the U.S. Marshals Service, and the Bureau of Prisons, says Reid.

The regional data-sharing networks are also being connected. Initial deployments include networks in Delaware, Oregon, Nebraska, Texas, Ohio, San Diego and Los Angeles.

In this phase, 50,000 law enforcement users will have access to the N-DEx system. The next step will be to support Web services access and expand the user base to 100,000, says Reid. Ultimately, the system will have about 200,000 users and contain 250 million records. CJIS plans to add tools to enable investigators to work together on cases that cross borders. Investigators will be able to use N-DEx to create virtual regional information-sharing systems and form joint task forces on the fly, says Reid.

Brown was an early adopter of N-DEx and is a true believer in the system. If N-DEx had been at full capacity when he was working his drug investigation, he says, "we would have been able to do this in two to three years instead of 20."

Linda Rosenberg, director of the Pennsylvania Office of Criminal Justice Improvement, credits CJIS with doing "a tremendous job" with N-DEx. The state has 1,200 municipal police departments and no central department of public safety, so tying those disparate systems together has sometimes looked like an insurmountable challenge. "Now you don't have to go back and build these data warehouses and totally redo your entire infrastructure," Rosenberg says.

Chicken and Egg

For the system to work, the information needs to flow in both directions. "That's the challenge," says David Gavin, assistant chief of the administration division at the Texas Department of Public Safety, which runs a regional data-sharing network known as T-DEx. "How do you get all of the record management systems in the country to export in that format so that they can participate and not just access [N-DEx]?"

Regional law enforcement networks will want to tie in, but connecting multiple record-management systems will be challenging. To facilitate that, the Office of Justice Programs' Community Oriented Policing Services program at the DOJ last year awarded $159 million in technology grants, with one caveat: Any record management system project is required to be NIEM-compliant.

Moreover, several vendors of record management systems have been mapping law enforcement agency data to the NIEM-standard format free of charge in hopes of getting future upgrade contracts, says Reid.

The DOJ's objective is to have all 20,000 agencies online within three years, but Reid is more optimistic. "By 2009, I think we'll have the majority of the country participating," he says.

That may be enough time to get the major regional information-sharing systems linked up, but Hawkins thinks it will take much longer for the rest of law enforcement community to follow along.

And Brown isn't so sure that things will proceed smoothly. Most record management systems in use by law enforcement are so highly customized that they often can't even share information with other localities using the same software, he says. Integration is expensive.

The federal government set aside $85 million to complete the N-DEx back-end systems and allocated nearly twice as much in grants last year to help state and local agencies update and connect their record management systems. But state and local officials say the federal government needs to spend much more to get everyone's data connected -- a critical step to making N-DEx truly useful.

"I don't believe that there is the federal funding to make it happen," says Hawkins, noting that the $159 million in grant funding last year went to just 37 out of more than 20,000 agencies nationwide. Barring a major increase in federal funding, Hawkins says that it could be 10 years before the majority of agencies are online with N-DEx.

Rosenberg is also doubtful. Despite the $159 million, "the pot of money [from the DOJ] that's used by state and locals for information sharing has been cut by two-thirds," she says. Rosenberg says she worries that without more federal dollars, smaller agencies will simply forgo uploading their own data.

Hawkins also worries about unanticipated integration issues. "There's still a lot of testing to be done as to what NIEM-compliant means," he says.

But Reid says mapping data to GJXDM and validating the data isn't that complicated. "All they need is an XML mapping tool," he says.

Wormeli sees a bright future for data sharing in law enforcement. "We have the standards, we have the architectures, and for the first time, the president has created an information-sharing policy," he says. "There's a feeling of collaboration."

Microsoft Is Appealing
European Antitrust Fine

BRUSSELS -- Microsoft Corp. Friday said it is appealing the €899 million ($1.38 billion) fine imposed on the tech giant by the European Commission for failing to comply with a landmark antitrust ruling.

The company said in a statement that it was seeking to annul a decision imposing the fine -- the highest amount the EU has ever imposed in an antitrust case. Microsoft said it appealed in a "constructive effort to seek clarity from the court."

A spokesman declined to elaborate on that statement, to say why the company had appealed or what its arguments might be, or provide a copy of its filing with the Luxembourg-based Court of First Instance. The appeal covers only the imposition of the fine, not the underlying conduct. The record fine is based on the commission's decision that the Microsoft hadn't complied with an antitrust ruling for 488 days. The €899 million was still only 60% of the maximum fine the commission had said it could apply under EU law.

Microsoft has a long and difficult antitrust history with the commission, which is currently investigating the company on two allegations of monopolistic behavior.

These investigations followed a near 10-year battle over accusations that Microsoft had illegally kept out rival Sun Microsystems Inc. by withholding computer code needed to make Sun's computers work with those of Microsoft, and that the firm had abused its monopoly position by bundling media-player software into its operating system. A court ruled in the commission's favor in that case in September 2007.

Facebook Agrees to Add
Child-Safety Measures

SAN FRANCISCO -- The attorneys general of 49 states have reached a sweeping agreement with Facebook Inc. to implement new safety and privacy rules designed to protect younger users from sexual predators and inappropriate Internet content.

Under terms of the agreement, Facebook will begin to provide automatic warning messages when a child is in danger of giving personal information to an unknown adult, restrict the ability of users to change their listed ages, and act more aggressively to remove inappropriate content and groups from the site, Pennsylvania Attorney General Tom Corbett said in a statement.

The agreement, which also includes the District of Columbia, is the latest attempt by law enforcement officials to shield children from sexual predators and other strangers on the Internet following a wave of high-profile cases in which adults have been charged with trolling social-network sites to meet young members. The agreement is similar to one reached in January with News Corp.'s rival social network MySpace. News Corp. owns Dow Jones & Co., publisher of The Wall Street Journal.

As part of its agreement, Facebook will join the industry-wide technical task force, which was created after the MySpace agreement, to explore and develop age and identity verification tools. The group will issue a formal report with findings and recommendations at the end of 2008. Companies that make widgets, software applications that provide services to Facebook users, will also be required to implement and enforce the social network's safety and privacy guidelines.

Furthermore, Facebook has agreed to maintain a list of pornographic Web sites and regularly remove any links to such sites. It has agreed to remove groups for incest, pedophilia, cyber bullying and other violations of the site's terms of services, and will expel members who violate these terms.

Opinion: Get ready for these 6 game-changing technologies

These six breakthroughs will deliver on their promise

March 20, 2008 (Computerworld) Promises, promises. When a new mobile phone appears on the market, or a new wireless standard emerges, the pundits and prognosticators chime in about all the game-changing possibilities.

WiMax will change the world! Apple's iPhone is the second coming of portable gadgets!

Yet, in the daily grind of computing, we just need to get our jobs done. We'll believe the promise of a new technology if it really does solve a nagging problem.

Consider this the companion piece to my earlier article, "10 broken technology ideas -- and how to fix them": six promising technologies and how they can actually deliver on the promise.

1. Light-as-air laptops

I mentioned in the broken-technology writeup how ultramobile PCs and mobile internet devices aren't nearly as useful as a good smart phone.

Stepping up a bit in size to notebook PCs, we've come a long way from models such as the massive Toshiba Protege from a few years ago -- the one with a 17-in. display. (It was touted as a "desktop replacement," which even sounds heavy.)

And even the popular Dell Latitude models from not so long ago were heavy enough -- at about five or six pounds -- that they weren't exceptionally mobile.

But smaller, more recent offerings such as the ultraportable Asus EEE aren't getting it right either. Sure, it's light, but it's not packed with many of the features we've come to expect on our portable computers.

Lightweight notebooks such as this MacBook Air mean much more get-up-and-go mobility.

But the new MacBook Air and the ThinkPad X300 really are game-changing, even though many reviews of the MacBook Air haven't been all that positive.

A 3-lb. laptop with a big screen is really the ultimate goal, and both Apple and Lenovo Group achieved it. (I also like the Sony Vaio SZ, even though it weighs 4 lb. and the "profile" measures 1 in.) So, what's so promising? As laptops get lighter, you'll be more likely to grab one and go -- at home, at work and anywhere.

Soon, more light-as-a-feather laptops packed with features will finally get it completely right, which means they won't stay on the desktop for very long -- and the desktop PC might not exist for long, either.

2. Mobile broadband in laptops

I had an interesting conversation with a Verizon spokesperson about three years ago. The marketing rep told me that I had it wrong: Mobile broadband was not intended as a Wi-Fi competitor. Oh no, it's merely another option for the mobile user.

Mobile broadband -- also known as wireless WAN -- comes standard with laptops such as this Lenovo X300 and works smoothly, runs fast and is available just about anywhere.

Yet, as wireless wide-area network (WWAN) capability is more widely available as a standard on notebooks, the connection speed approaches or exceeds 2Mbit/sec., and the data signal becomes ubiquitous even in rural areas, WWAN will encroach into and possibly take over the 802.11 market. That's a good thing, especially if you have tried to connect to a hot spot in a crowded airport, from a parking lot in a shopping mall or in a small town where they think a hot spot is a popular hangout.

WWAN is also gaining because WiMax is just not happening as fast as everyone thought it would. Case in point: The Lenovo X300 I mentioned earlier comes with Wi-Fi (of course) and WWAN (thankfully) but also has the chip set for WiMax, even though there is no actual service available. One is a lessening reality, one is a promise and one is a letdown.

3. Wireless USB

Place your bets on wireless USB -- a technology that will finally flourish this year.

In-Stat estimates that 21 million wireless USB (also known as ultrawideband) devices will ship this year. Now that's promising! The reason: We're all getting strangled by too many USB wires -- such as for digital cameras, printers, fax machines, scanners and external drives. I'm looking at eight cables at my desk right now.

There are just too many USB devices out there. There are USB toy rocket launchers, coffee-cup warmers and even one for doing pottery. WUSB completely eliminates this entanglement. The only catch is that most recent products from Belkin and IO Gear require that you install a driver, so it's more complicated than just plugging in a wire.

Fortunately, as the wireless protocol becomes more common -- Guess what? It's built into that Lenovo X300 I've mentioned for the third time now -- you won't have to install drivers.

4. PC home theaters

Here's the biggest promise of the past 10 years, one that has failed again and again as consumers have become confused by the connections and lack of interoperability among consumer electronics gear and computers. Besides, no one has invented a keyboard and mouse you can actually use comfortably on a sofa.

But the time is coming -- maybe this year, or next -- when a PC finally establishes a permanent place in the living room. It will only happen when a home-theater PC starts looking like it belongs there. The round, glossy, stylish Sony Vaio VGX-TP25E/B is a step in the right direction. I like where Denon is going with the AVR-5308CI -- it's not actually a home-theater PC, but it accepts wireless media streams and looks like a receiver.

Home-theater PCs will be a major hit this year, if recent products such as this Sony Vaio model and others from Denon are any sign.

Also, the Onkyo APX-2 is a big step forward. It's a PC aimed at audiophiles that uses Pure Audio technology to bypass Windows Vista's poor audio handling. The APX-2 is for audio only and -- alas -- Japan only, but it points to a promising home-entertainment trend.

5. Robotic appliances

Today, the leading robotics company -- iRobot, based near Boston and one of the best companies to come out of MIT in the past 20 years -- has sold about 2.5 million robots to date. Its popular Roomba vacuum cleaner is a miracle of engineering when you consider it can clean under your bed or behind a corner hutch with ease.

Yet, 2.5 million robotic appliances equals about 1% of the U.S. population. But iRobot is on a rampage lately, introducing pool- and gutter-cleaning robots that work just as well as the Roomba. And, yes, robots were supposed to be doing all of our housework by now, so this promise has a long legacy of underdelivering.

Robotic enthusiasts finally have the tools they need to make useful home-appliance robots to rival handy gadgets like this gutter cleaner from iRobot.

The real reason robots will finally transform from cute pets (like the Pleo robot dinosaur) to useful aids has to do with a groundswell of dedicated amateurs who finally have the tools they need, such as Microsoft Robotic Studio, to make their own creations. There's no telling what a couple of guys in a garage can come up with -- just remember Apple and Hewlett-Packard.

6. GPS on a cell phone

The BlackBerry 8820 and Nokia N95 are two incredibly popular smart phones that just happen to have built-in Global Positioning System receivers. This makes them game-changing in ways that the iPhone is not, even though the iPhone trumps them for music, movies, Web and many other functions.

With GPS on a cell phone such as this Nokia N95, you can carry one less gadget and skip the in-car navigation option in your next Audi.

GPS on a cell phone works quite well -- I used the 8820 in Boston recently and never even looked at a map. GPS doesn't drain the battery as much as Wi-Fi. The voice prompts work just as well as an in-car navigation system, and the maps look clear and bright on the screen (brighter and clearer than some dedicated GPS handhelds).

But here's the killer feature: When GPS is built into the device you use all day anyway, you start relying on it even more. I use one to go for walks (it can measure speed and distance) and even find my way to meetings in a large building (for example, by heading northwest to a corner office). I previously wrote about some other uses for GPS.

If you have some promising ideas of your own in mind or disagree with my choices, please weigh in below in the article comments section -- I'd love to hear what you think and get some back-and-forth discussion going (as you can see here).

John Brandon is a freelance writer and book author who worked as an IT manager for 10 years.

Ballmer Says Microsoft Can Build
Ad Business Without Buying Yahoo

Microsoft Corp. Chief Executive Steve Ballmer said he is confident that his company can build a competitive online-advertising business without buying Yahoo Inc., but that it "could just take more time."

Mr. Ballmer's comments, in an interview Thursday, came as Microsoft was expected at any time to announce its intentions on Yahoo, which it made an unsolicited offer to buy in January. He declined to indicate Microsoft's decision and wouldn't say when the company will make its decision public. "With the right circumstances it'll happen. Without the right circumstances it won't happen," he said.

See complete coverage of the Microsoft-Yahoo deal, including recent articles, blog posts and an interactive stock timeline.

Mr. Ballmer outlined why he thinks Microsoft can benefit from buying Yahoo, but also expressed optimism about Microsoft's options if it decides not to pursue its Yahoo bid. His comments follow remarks he made earlier in the day to an assembly of Microsoft employees at the Redmond, Wash., headquarters.

At the employee meeting, Mr. Ballmer told staff that he wouldn't pay "a dime above" what he thought Yahoo was worth, as the company continues to weigh whether to go hostile or walk away from its pursuit of the Internet company. "I will go to what I think it's worth if that gets a deal done," Mr. Ballmer added. His comments to employees were provided by a spokesman following the meeting.

In the interview, Mr. Ballmer reiterated the company's rationale for trying to buy Yahoo: Microsoft feels it has strong technology but not the "scale" -- such as numbers of customers and advertisers -- that it needs. "The question is, is there a better way to get to scale more quickly?" he said.

Still, his remarks to employees and in the interview appear to be an effort to build a case for backing away from the deal. Mr. Ballmer shrugged off the perception that the bid is a sign that Microsoft's attempts to build its own online services and ad business wasn't working.

A Yahoo spokesman declined to comment on Mr. Ballmer's remarks to Microsoft staff.

"We like our strategy. We don't like our position," Mr. Ballmer said in the interview. "I'd like to have a better position relative to the guy who sells the most advertising," he said in a reference to Google. In response to a question over alternative acquisitions to Yahoo, Mr. Ballmer said there are very few Internet companies that have the kind of size that Microsoft needs to expand its business faster. "Look at all the properties on the Internet -- everything on the Internet. There's really only five or six that really have any scale. Worldwide, you'd maybe get seven or eight."

He ticked off those companies, including News Corp.'s MySpace, Facebook Inc., Yahoo Inc., Google Inc., Time Warner Inc.'s AOL and Microsoft's MSN service.

In his meeting with employees, Mr. Ballmer said the software company would announce its decision "in relatively short order."

Microsoft this week indicated a willingness to raise its bid to as much as $33 per Yahoo share, while major Yahoo shareholders have signaled they want in the range of $35 to $37 a share, according to people with knowledge of the situation. Microsoft's original cash-and-stock offer for Yahoo was valued at $29.48 per share as of 4 p.m. trading Thursday on the Nasdaq Stock Market.

Microsoft's board didn't reach a final decision when it met Wednesday, leaving Mr. Ballmer broad discretion to go hostile or abandon the Yahoo pursuit, said people familiar with the matter.

For its part, Yahoo is awaiting Microsoft's decision, as it continues to pursue alternative deals with Google and Time Warner's AOL Internet unit, say people familiar with the matter. A broad pact to carry search advertising from Google could possibly be reached within the next week and discussions about a Yahoo merger with AOL are ongoing, the people say.

Microsoft Tests
Subscription-Based
Office Software

Microsoft Corp. is experimenting with a subscription-based model to sell its popular Office software suite and other applications to U.S. consumers, as the company faces heightened competition in its core desktop products market.

In a statement on its Web site Friday, Microsoft said that the program, code-named "Albany," had been launched in a private beta testing program, with plans to release the product before the end of 2008.

If launched, Albany will be the first time Microsoft, the dominant maker of consumer office software, has experimented with a subscription-based Office product in the U.S. The company has already launched subscription-based versions of its Office products in some emerging markets.

The package will include the latest versions of word-processing application Word, spreadsheet tool Excel and presentation software tool PowerPoint. It will also include security tools to block viruses.

A Microsoft spokesman said pricing and distribution details for the commercial launch of the product hadn't been set and declined to comment on the planned launch date.

Bryson Gordon, group product manager for Microsoft Albany, said on the company's Web site that the test was designed to address consumer demand.

"Consumers...expressed frustration at having to spend time and effort installing different types of software, keeping current on new versions and getting their computers set up," he said.

"We found from our research that when you bring these categories together and keep them automatically updated, a subscription model makes a lot of sense."

The test comes amid heightened competition from search giant Google Inc., which has recently been making applications, including word processing and spreadsheet tools, available free over the Internet.

Other Internet companies, including Yahoo Inc. and Salesforce.com Inc., have recently been making similar business and office applications targeted at consumers and small businesses available free over the Internet.

Write to Jessica Hodgson at jessica.hodgson@dowjones.net

Venture Capitalists
Invest in Internet,
Energy in Slow Year

Facing an uncertain economic environment, venture capitalists showed restraint with their wallets in the first quarter.

These investors sank $6.8 billion into U.S. companies across 603 deals in the period, according to data from Ernst & Young and VentureSource, a division of Dow Jones & Co., publisher of The Wall Street Journal. The deal total is the lowest since the first quarter of 2005, while the investment level is down 8% from the $7.4 billion recorded in the year-ago quarter and 9% in the fourth quarter of 2007.

The health care sector showed particular weakness in the first quarter. Venture capital firms invested $1.74 billion in 142 health care companies, a drop of 43% and 19%, respectively, from the year-ago quarter.

Since several health care firms have recently raised large funds, the drop-off may be temporary. For now, though, instead of the customary six weeks of diligence, some firms are scrutinizing deals in the sector for two or three months, said Brian G. Atwood, managing director of Versant Ventures. "We're seeing timelines extend out pretty significantly," he said.

On the flip side, companies in the area that VentureSource classifies as information services, which includes many companies dealing on the Internet--continued to receive strong interest from investors. Investment funding jumped to $1.59 billion in the first quarter of 2008, more than doubling the $776 million reported in the year-ago quarter. And the number of deals here rose 38% to 170 from 105 a year earlier.

Another hot area for venture capitalists continues to be energy, where 22 companies raised $368 million, up 5% from $351 million reported in the first quarter of last year's record-breaking period for the category.

Some of the largest deals in the quarter were the result of a tightening IPO market. Companies such as Web analytics and marketing firm Coremetrics Inc. had expected to make a public offering but instead raised a $60 million eighth round of funding. Other large deals came about because start-ups explicitly decided to raise larger rounds just in case they need to survive through difficult economic times, such as widget company Slide Inc., which raised $50 million.

Many venture investors say they aren't overly concerned by short-term economic factors, instead looking for the next big company that will emerge as a mainstream hit in two to four years.

"Investors continue to be bullish about secular trends as opposed to cyclical trends," said William Price, who left his position as a general partner at Hummer Winblad Venture Partners last month to become chief executive WidgetBox Inc., a start-up that provides tools and online distribution for Web application developers. "They're brushing off near-term volatility and focusing on the very long term."

Still, investors are telling their portfolio companies to conserve cash and are looking especially closely at potential new companies to make sure they have clear and strong revenue channels.

"You want to make sure your portfolio companies have two years' of capital, so what may have been a year or 18-month bar before is extended out, given that none of us have a crystal ball for when the market might turn," said Dennis Miller, general partner at Spark Capital. "And capital efficiency may move up the hierarchy of questions and concerns you have with new companies. An inability to monetize for some time is also going to cast a shadow over companies that might have gotten funded more quickly in the past."

The slowing economy will likely push down valuations on start-ups, as public offerings by start-ups and acquisitions by larger corporations slows, said Don Wood, managing partner at Draper Fisher Jurvetson.

A report earlier this month from VentureSource showed that 80 U.S. start-ups either merged or were acquired at a total deal value of $7.78 billion in the first quarter, a big drop from 110 deals valued at $15.69 billion in the fourth quarter and 105 deals at $10.2 billion in the first quarter of 2007.

Despite the broader economic downturn, venture investors still see specific sectors in which they expect to realize big returns in years to come. Draper Fisher Jurvetson, for one, has had strong deal flow with clean technology, "Web 2.0" and mobile companies, Wood said. The firm also has investment teams in Asia, Europe and South America, in addition to the U.S., and that diversification helps offset any particular geographic declines, Wood said.

The continuing interest in Web start-ups is based on their potentially quick international roll-outs and the anticipation of continuing growth of new Internet users, especially in countries like Brazil, China, India and Russia, WidgetBox's Price said. And the broad trend of media moving online, including the Internet broadcasting of full-length movies and television shows by major studios, is an indication of strong growth potential, Price said.

Despite these positive trends, there is still an abundance of venture capital in the market, which leads to funding of some companies that will probably not succeed in the long term and a need for caution when investing, Miller said.

In addition to digital media, Price also sees strong bullish impulses from investors in start-ups in the enterprise software-as-a-service and open-source sectors. Miller, meanwhile, whose firm focuses on technology and media, has been actively investing in mobile, infrastructure such as optics and Internet television, and a variety of digital media companies.

Google Beats the Bears

Despite analyst nay-saying and fewer paid ad clicks leading up to its first-quarter earnings announcement, the search giant reports solid growth

by Robert Hof

Eric Schmidt, chairman and CEO of Google Torsten Blackwood/AFP/Getty Images

The Google bears are scurrying back into the woods. On Apr. 17, Google quelled concerns that the slowing economy would finally hurt its business. Thanks to strong international growth and better payoffs from its search ads, Google (GOOG) turned in higher profit and revenue than Wall Street had expected. The shares jumped more than 17% in post-market-close trading Apr. 17, and soared 18% to $529.17 in early trading Friday. The stock closed at $449.54 the previous session.

Google had been facing increasingly stiff headwinds during the quarter, from reports of a drop-off in ad clicks on its search results pages (BusinessWeek, 4/3/08) to increasing competition and the departures of some key executives.

But the company reported that earnings, excluding employee stock compensation, rose 30%, to $4.84 a share, higher than Wall Street estimates of $4.52 a share. Gross sales were up 42% from a year ago, to $5.19 billion, while net sales after payments to Web sites providing traffic to Google totaled $3.7 billion. Both beat analysts' expectations. "This will mean a sigh of relief from investors," says Rob Sanderson, an analyst at American Technology Research. "Google came through with a very solid quarter."

Google's Effect

Google's results add to signs that the faltering U.S. economy is having a muted impact on tech companies with growing international businesses. First-quarter results from IBM (IBM) and eBay (EBAY) were stronger than analysts had forecast (BusinessWeek.com, 4/17/08). In Google's case, overseas revenue accounts for more than half the total for the first time. Other Internet companies also rallied in the wake of Google's repost: Chinese search engine Baidu (BIDU) gained 8%, and Amazon.com (AMZN) climbed 3%.

First-quarter figures from Google may also hold clues to how another closely watched Internet company, Yahoo! (YHOO), will fare in efforts to resist an unwelcome takeover bid from Microsoft (MSFT). Better-than-expected results would give credence to Yahoo's assertion that it's worth more than the $31 a share Microsoft has offered. Yahoo reports first-quarter results on Apr. 22.

Currently "Well-Positioned"

Google CEO Eric Schmidt made clear the company expects few economic obstacles. "We do not see an impact at this time," he said in an analyst conference call. "We're well-positioned for 2008 and beyond, regardless of the business environment." Moreover, in the event "economics change," Google's targeted ads should prove even more appealing, Schmidt added, referring to the idea that companies would demand advertising with a measurable impact.

The company's bottom line also benefited as Google kept costs under control. Although the purchase of ad-serving firm DoubleClick added 1,500 people to Google's staff, for a total of 19,156, the company slowed the pace of hiring. Google hired about 850 people, much fewer than the 2,130 it brought in the peak third quarter. It also laid off 10% of DoubleClick's U.S. staff and expects 15% more to leave as the companies meld.

Responsible for Ad-Click Decline

One of the biggest concerns Google faced in the runup to its results stemmed from reports of a precipitous decline in paid clicks. Figures from market researcher comScore (SCOR) suggested paid-click growth had screeched to a near-halt, rising just 1.8% in the first quarter from a year ago. Google measures paid clicks differently than comScore, which employs a panel of Internet users to gauge clicks. By Google's count, paid clicks rose 20% from a year ago and 7% from the fourth quarter.

That's still down from 30% year-over-year growth in last year's fourth quarter and 45% growth in the third quarter. The slowing had put Google's results under a microscope and contributed to the pessimism that prompted at least 16 analysts to reduce Google earnings estimates. Investors had hammered the stock, sending it down 34% so far this year, to 449.54 on Apr. 17 before the earnings report. In extended trading, Google stock rose to 525.96.

Google has attributed virtually all the decline in paid clicks to changes it purposely made. Late last year, it decreased the clickable area around ads to reduce accidental clicks. It also has been gradually reducing the number of search results that return paid ads by tweaking its search formulas to discourage ads that link to sites chiefly intended to capture clicks rather than sell products or provide useful content.

The result, Google and many analysts contended, should be an increase in what advertisers pay per click, since those clicks will be from more serious buyers. That appears to be just what happened. American Technology Research's Sanderson says revenue per paid click rose 17.2% in the first quarter, up from a 14.7% gain in the fourth quarter and a 7.6% increase in the third quarter. Search marketing firms concur that clicks are getting more valuable. "Click prices continue to move up slowly and steadily," says Kevin Lee, executive chairman of search marketing firm Didit.

Concerns for the Future

Even if Schmidt doesn't see clouds on the horizon, other recent reports suggest the company faces challenges ahead. Search marketing firm SearchIgnite said Apr. 15 that Google's share of search marketing spending fell to 70.4%, from 74.5% three months ago, largely at the expense of Yahoo, whose share rose from 19.6% to 24.2%. "We're concerned about intra-quarter trends that showed declining growth," says SearchIgnite CEO Roger Barnette.

And while Google's numbers show ad-click growth isn't slowing as much as comScore figures indicate, some analysts remain concerned about the decline nonetheless. Google still hasn't proved the price-per-click increase is big enough to make up for the overall decline in clicks, says Clayton Moran, an analyst at Stanford Group. "It wasn't as bad as the original fears…but the results don't negate the trend," Moran says. "It is clear that growth is decelerating rather rapidly." Moran has a hold rating on Google, with a $500 price target.

Economic Impact

John Aiken, managing director of Majestic Research, believes that besides Google's own changes, most of the decline in paid clicks is due to Google's mainstay small and midsize business customers cutting back their search-ad spending as the economy sours. "If you're less likely to search for a vacation to Bermuda, you're going to be clicking less," explains R. Michael Leo, CEO of ad technology and services firm Operative.

At the same time, however, Leo sees no slowdown in online advertising to date. And the impact of the slowing economy on online advertising could yet go in Google's favor. Although few believe the industry is immune to a recession, a downturn could drive more ad money online because ads there are more accountable, noted Andrea Kerr Redniss, a senior vice-president at ad agency Optimedia, who spoke at an ad technology conference in San Francisco Apr. 15. If so, it appears Google is in a position to benefit as much as anyone.

Hof is BusinessWeek's Silicon Valley bureau chief.
With Catherine Holahan in New York.

GEs Disappointing Results
Rattle Nervous Stock Markets

April 11, 2008 9:40 p.m.

Surprisingly weak earnings from General Electric and data showing a 26-year low in consumer sentiment rekindled investors' worst fears about the U.S. economic slowdown, pushing stocks sharply lower.

The Dow Jones Industrial Average ended down 256.56 points, or 2%, at 12325.42, led by an 12.8% drop in component GE. The conglomerate has significant presence overseas and was thought to be somewhat resilient to a slowdown in the U.S. economy, but it posted earnings well below analysts' expectations, a near unheard-of outcome for a company renowned for posting profits at or above Wall Street forecasts. GE also cut its 2008 earnings outlook.

The decline in GE shares was the worst in percentage terms since the 1987 market crash. The drop erased about $47 billion in market capitalization.

Investors also digested data from the University of Michigan, which said its index of consumer sentiment fell to a reading of 63.2 this month, down from 69.5 in March. The latest reading is the worst since 1982.

The profit and economic developments cast a pall over the entire session, as investors were reminded that the U.S. economy's slowdown may be deep and persistent.

"Unfortunately, it could be awhile longer before we see" significantly better economic readings that would justify a lasting run-up in stocks, said strategist James Paulsen of Wells Capital Management.

The Nasdaq Composite Index was down 2.6%, or 61.46 points, at 2290.24. The Standard & Poor's 500 was off 2%, or 27.72 points, at 1332.83, led by its industrial sector, off 4.1%.

Mike Thompson, research director at Thomson Financial, which tracks earnings data, called GE's report "startling," underscoring both the seriousness of the economy's problems and the extent to which analysts' profit expectations remain far too rosy.

According to Thomson, Wall Street's latest consensus expectation is that aggregate profits at S&P 500 companies will be down 14.1% for the first quarter, a starker estimate than just a few days ago, when analysts were expecting a decline around 12%.

For the rest of the year, however, analysts' predictions are relatively mild, looking for a 3.2% profit decline for the second quarter, a 16.1% increase in the third quarter and a 64.2% surge in the fourth quarter.

As a practical matter, Mr. Thompson says it's unlikely that many analysts truly believe there will be such a late-year surge in profits, given the weak growth and threat of inflation in the U.S. economy. But a familiar pattern is playing out in which analysts seem to be waiting until the last minute to "officially" take down their expectations for far-out quarters, cutting estimates on paper only after the latest round of disappointing reports is in hand, accompanied by weak economic data.

"It's been this way the last few quarters," said Mr. Thompson, who believes S&P companies will struggle to grow their earnings in any quarter this year. "It's like the analysts are just trying to get over the next hill every quarter. Then when they get to the top and they don't see much promise in the valley below them, they finally cut their estimates."

Fears about the U.S. economy reverberated in the prices of other assets aside from bonds and stocks Friday. The dollar weakened, with the euro recently at $1.5827 from $1.5741 late Thursday. Against the Japanese currency, the dollar traded at 100.84 yen from 101.89 yen.

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As investors sought safe havens, Treasurys rallied. The two-year note gained 6/32 to yield 1.746%. The benchmark 10-year note was up 24/32, yielding 3.464%. The 30-year bond climbed 1-1/32 to yield 4.293%.

Traditionally, analysts view consumer-sentiment readings with a heavy dose of skepticism, since Americans often tend to keep spending even when they say they are nervous. But with the University of Michigan reading hitting such a long-term low, Friday, the yardstick is getting harder to ignore. In particular, it represents a strong confirmation that everyday Americans believe the economy is already in recession, said Lehman Brothers economist Ethan Harris.

"Unfortunately, that belief can become self-fulfilling," said Mr. Harris. "If people believe we're in a recession, they often start to spend like we're in a recession, which cuts into growth."

Even companies reporting positive earnings developments saw shares decline. Genentech fell 1.6% despite reporting a stronger-than-forecast 12% profit rise, helped by sales of its cancer and arthritis drugs. Dow component Chevron said oil price strength will help first-quarter earnings despite a drop in production and low refinery profits. Its shares fell 0.9%.

Oil futures rose 3 cents to $110.14 a barrel. The International Energy Agency cut its 2008 oil product demand forecast citing lower economic growth prospects from the U.S. and elsewhere, but said supply fears may keep oil prices high.

Young workers more likely to break corporate Web apps rules

Survey shows only 45% of younger workers stick to company devices and applications, compared with 69% of older workers

April 7, 2008 (CIO) Growing up in the Digital Age, millennials (those born after 1980) are far less likely to leave their preference of technology, specifically Web 2.0 applications, behind as they head to work.

According to a survey released last month by antivirus and security software vendor Symantec, less than half of millennials -- 45% -- say they stick to company-issued devices and applications. That's much less than other workers, 69% of whom said they only use work-sanctioned products.

Half of the 600 respondents have policies banning applications such as social networking, iTunes, streaming video and gaming applications, which millennials tend to access far more than other workers. This kind of attitude should be a spark to business leaders to change how they structure their companies, says Samir Kapuria, managing director of advisory services at Symantec. The survey also found that workers save an average of five to six hours per week by using these types of technologies. The respondents included 200 millennials, 200 older workers and 200 IT executives.

Kapuria said the survey suggested that, instead of blocking applications and preventing workers from using Web 2.0 applications, CIOs should be trying to use these technologies as recruiting tools.

"Instead of blaming their culture, why not ask your IT department why the company's software isn't what the employees are used to and want to use?" says Kapuria.

These younger workers have learned to use Web 2.0 applications to increase their proficiency. While the social networking site Facebook.com started out as a way for college kids to meet, some millennials have begun to use the site's nearly endless database of contacts as a way to network in business. Such applications have no physical like bygone limitation, making Rolodexes a thing of the past. Instead of contacting one person at a time with a phone, employees can contact many people simultaneously, therefore increasing the amount of information they receive, with much less effort.

CIOs should recognize these skills and learn to harness the millennials' proficiency within their IT infrastructure, says Kapuria.

Focusing on the Millennial workers is a vital part of keeping a business afloat in a environment dependent on technology. "CIOs need to understand how young people use technology," says Penelope Trunk of Brazencareerist.com, whose Web site is focused on the hiring and training of young professionals. Learning these skills can even help CIOs run their departments and lead to success, especially as businesses become more dependent on technology.

What employees are accessing at work

	Millennials	Others
Personal e-mails	75%	54%
Facebook/ MySpace	66%	13%
Instant messaging	46%	22%
Streaming Audio/Video	38%	18%
Photo sharing applications	37%	17%
Gaming applications	23%	14%

More data from the survey:

• 69% of millennials will use whatever application/device/technology they want, regardless of source or corporate IT policies (compared with 31% of workers in other generations).
• 47% of IT respondents feel younger workers pose a moderate to significant new challenge; 12% say they are more risk-savvy.
• Only 57% of both groups think they have been trained on their company's policy regarding technology usage at work.
• Millennial workers have differing attitudes regarding technology use and adoption in a work environment, when compared with their older colleagues.
• When asked whether they feel entitled to use whatever application/device/technology they would like, regardless of source or corporate IT policies, 69% of millennials said "yes" (only 31% of "other" workers' fell into this category).
• 75% of millennials have downloaded software onto their work PCs for personal use (only 25% of other workers have done so).
• Millennials indicate they are slightly more productive because of new technologies: 54% say productivity has been at least slightly improved (42% of 'other workers' claim at least some productivity improvements).

It would be career death for a CIO to ignore young people," says Trunk. The biggest problems for CIOs are hiring and staying current with the newest technology. Both these problems, according to Trunk, could be solved by hiring those most familiar with the best tools, which would be millennials. "The next generation is too big and too powerful to not hire them," she says.

Of course, with the good comes the bad. Even though these programs increase efficiency, downloading software from an outside company can be seen as a security risk. The Symantec survey showed 89% of corporate IT managers have recognized at least some increase in risk in the past five years, due to the new wave of younger workers and technologies, and 36% have written new policies and enforce them regularly. One of the security risks correlated to millennials is their tendency to store corporate information on personal devices, such as their personal PCs (39%) or external USB drives (38%).

On the other hand, many everyday tools can also be seen as risks to the corporate environment, such as telephones, says Trunk, so these new technologies might just need an adjustment period. "People can pick up the phone and read corporate memos to competitors, but businesses certainly couldn't survive without a phone," she says. That same type of logic can be used to show the benefits of younger workers. Without them, businesses would have a harder time keeping up with the pace as technology changes around them, so the argument against Web 2.0 use is "ridiculous," she says.

The cultural differences between the generations are obvious, mostly involving the availability of technology. Baby boomers grew up with a regimented 9-to-5 idea of the working world, with the personal life kept out of the office, says Symantec's Kapuria. Millennials, on the other hand, tend to mix personal with professional, he says.

With that being said, millennials still have productivity and efficiency on their minds, says Kapuria. They aren't better or worse than other workers; they are simply different, and IT executives need to shift their structures to incorporate these differences. "It's a wake-up call" he says, "to prepare businesses for millennials to come and apply Web 2.0 applications in their organizations."

Microsoft makes C++ move, discontinues Visual Basic 6.0 support

April 10, 2008 (InfoWorld) In separate moves, Microsoft has released its Visual C++ 2008 Feature Pack but discontinued extended support for the Visual Basic 6.0 IDE.

The feature pack had been available in a beta release since January, said S. "Soma" Somasegar, senior vice president of Microsoft's developer division, in his blog this week.

"The Feature Pack provides several exciting features for C++ developers, such as a major update to MFC (Microsoft Foundation Class) and an implementation of TR1 (Technical Report 1). Using the included MFC components, developers can create applications with the 'look & feel' of Microsoft's most popular products — Microsoft Office, Visual Studio, and Internet Explorer," Somasegar said.

Technical Report 1 is a document that featured a Visual C++ implementation with extensions to the C++ ISO standard. Microsoft's implementation of TR1 contains such features as regular expression parsing and sophisticated random number generators.

Also included in the feature pack are a component for the Office 2007 Ribbon Bar, Visual Studio docking, autohide windows and Windows Vista theme support. The feature pack is downloadable by any Visual Studio 2008 Standard or above customer, Somasegar said.

Also this week, Microsoft ended extended, paid support for the Visual Basic 6.0 IDE, which is more than 10 years old.

"If you haven't converted all your apps to .Net, shame on you, but don't freak out. Microsoft will continue to support the VB 6.0 runtime for all existing application in all the next versions of the Windows OS, including Windows Server 2008 and Vista," said Microsoft's Jeff Nuckolls, a technology specialist, in a blog entry from last week. Nuckolls still advised users to devise a migration plan.

An online petition in 2005 sought to save Visual Basic 6.0 and Visual Basic for Applications. Still available, that petition had gathered 13,341 signatures as of Wednesday afternoon.

A Visual Basic user who had participated in the petition drive downplayed his need for support of Visual Basic 6.0 Wednesday afternoon.

"'Support' is not something I need or have needed outside the peer support of other VB developers," said Visual Basic user Don Bradner. "Now if it gets to where I can't write a VB6 app or my VB6 apps won't run, that's a lot different; it is also likely to be a long way into the future."

Reprinted with permission from

For more enterprise computing news, visit Infoworld.com
Story copyright 2006 InfoWorld Media Group, Inc. All rights reserved.

OS Smackdown: Linux vs. Mac OS X vs. Windows Vista vs. Windows XP

By Michael DeAgonia, Preston Gralla, David Ramel and James Turner

April 8, 2008 (Computerworld) Since the dawn of time -- or, at least, the dawn of personal computers -- the holy wars over desktop operating systems have raged, with each faction proclaiming the unrivaled superiority of its chosen OS and the vile loathsomeness of all others.

No matter how fierce the language or convincing the arguments, however, these battles began to seem somewhat irrelevant to regular working stiffs. While Mac OS, OS/2, Linux and many other desktop operating systems have all had their devotees over the years, the truth is that the majority of home and business users have simply used the current version of Windows as a matter of course.

Windows Vista has changed all that. Never has a Microsoft operating system been greeted with such a lack of enthusiasm from consumers and businesses alike. Whether it's because of Vista's confusing array of versions, its hefty hardware requirements, its driver issues or its invasive security features, users are resisting the upgrade to Vista and considering other options, from Mac OS X to Linux to just sticking with Windows XP, thank you very much.

Suddenly, the OS wars have a new relevance.

That's why we've asked four experts to lay out their best arguments in support of their desktop operating systems of choice:

• James Turner for Linux
• Michael DeAgonia for Mac OS X
• Preston Gralla for Windows Vista
• David Ramel for Windows XP

Each is positive that his operating system is the best and will try his hardest to convince you of that -- and is not above taking a few swipes at the competition. These are not rational, disengaged reviews; these are opinionated essays meant to sway your point of view.

When you've read all the arguments, you make the call by voting in our reader poll -- and of course we welcome your own arguments in the comments area as well.

Linux: Light on its feet and ready to strut its stuff

Let's get the unpleasant part out of the way first: If running Adobe Premiere is the most important thing in your life, or you want to play Halo, Linux isn't going to do it for you, at least right at the moment. While most Windows software can run under Linux in one fashion or another, applications that make extensive use of hardware drivers or high-end graphics may not work right.

But for everything else, Linux is definitely the way to go.

Unlike Mac OS and Windows, Linux is free as air and open to development by folks who are motivated by the desire to make the technology better, rather than by corporate tech farms whose real interest is the bottom line. Which is all very nice, but is it any good as a desktop operating system? You bet.

Size and speed

Let's start with the hardware footprint: With the possible exception of BSD, Linux's 'sister,' Linux is the lightest thing you'll ever install on your computer. While the minimum required hardware for Windows has been bloating, and Macs need more and more horsepower to run OS X, you can still dig out your old 486 and fire up Linux without problems.

© Larry Ewing, Simon Budig, Anja Gerwinski

I recently got one of the One Laptop Per Child XOs -- a machine with 256MB of RAM and a power-miserly processor -- and had no trouble running Xubuntu Linux on it. Meanwhile, Windows XP needs to be sliced and diced like crazy to fit onto the same hardware.

It's not for nothing that you'll find Linux inside of devices where hardware cost is an issue, like DVRs (TiVo anyone?) and routers. I was somewhat shocked to find that my recently purchased 52-in. LCD TV has a Linux kernel inside of it. If you hunt around, I'll bet you'll find at least one device in your home running Linux.

Stability, security, transparency, flexibility

Linux is not only small, but it's also stable. I have several Windows boxes at home, and it seems like whenever I blink, something has gotten screwed up in the registry or I have a Dynamic Link Library conflict.

Linux has all the configuration data and libraries right out where you can see them, in files. You can see what's changed and make edits manually, without having to figure out which of 9 million HKEY_LOCAL_MACHINE registry entries is the one you want. Even the system-configuration tools that have nice graphical user interfaces (GUI) end up generating human-readable and editable files at the end of the day.

In the recent "Pwn 2 Own" hacker challenge, computers running Mac OS X and Windows Vista were cracked, but the Linux machine wasn't. I won't claim that Linux has no security or virus problems, but they tend to be right out in the open where you can see them if you look. At the moment, there are far fewer Linux viruses out in the wild than Windows viruses, and there are fairly bullet-proof ways to detect viruses under Linux using checksums on files.

Conversely, it's much easier to move your Linux system to new hardware or clone an existing system because there's no licensing. I've never had a problem moving a Linux system disk to a new computer, even when the hardware was drastically different. There's basically no way to do this on either a Windows or a Mac system.

You also have your choice of Linux distributions, from geek-friendly Debian and end-user-friendly Ubuntu to business-friendly Red Hat and Novell SUSE. And no matter which one you pick, you can rest assured that they'll all run the same apps.

The Ubuntu Linux desktop

Applications and interface

It used to be the conventional wisdom that the problem with Linux was desktop applications. But with tools such as Wine, CrossOver Linux and VMWare Player, many Windows applications run just fine under Linux these days.

And in some cases, native Linux applications may serve you just as well. OpenOffice is a mature replacement for Microsoft Office, and there are good (and free) tools for video and photo editing, audio editing, and many other common applications. Just do a quick Google search for "Linux video editing," for example, and you'll see what I mean.

More importantly, more and more applications are transitioning to Web-based versions using JavaScript or Flash/Silverlight/Flex/Air. Who cares if you can't run TurboTax on Linux, when you can use the Web-based TurboTax right from your browser?

Finally, the Linux desktop experience is now the match of any other desktop GUI in existence. The user interface is intuitive and clean, but still powerful. If you choose a user-friendly distribution like Ubuntu, installing Linux is as easy as installing Windows -- and unlike Windows, you can even "try before you buy," since distributions such as Ubuntu have a "live" install CD/DVD.

You can even run a full Linux distribution such as Damn Small Linux from a 128MB (or larger) USB drive. Did your Windows PC crash again? Plug in the USB drive, and you've got access.

Heck, most Linux distributions will even shrink a Windows partition and set up dual-booting automatically. Ignore all the fear, uncertainty and doubt you'll hear about nightmare installs and bad device support -- that's from the bad old days!

Bottom line

Linux is free, fast, small, powerful, stable and flexible. It will get you off the "new hardware every other year" life cycle and let you concentrate on being productive rather than playing nursemaid to your operating system. You almost certainly already have Linux in your home or business, even if you don't know it. So why not give it a try on your desktop?

Mac OS X: All you need in one dynamite package

Computing nirvana isn't difficult to find. If you want a simple-to-use computer that can run virtually any application you need on stylish hardware that gives you easy online access and instant connectivity to all types of satellite devices, just go to an Apple store and buy a Macintosh.

A complete software/hardware ecosystem

When it comes to integration, no other operating system can boast the unity of purpose and results that exist on the Mac platform. While the competition is busy mashing feature after feature into poorly designed products, Apple Inc. focuses on what's important: creating a software/hardware ecosystem that gets out of the way so you can do what you bought a computer to do -- work, make movies, build Web sites, communicate or crunch data.

You know what I'm taking about -- all those annoying little things that add up when using Windows. Plug in a mouse on a PC, and a little dialog box pops up exclaiming that it just sensed you plugged in a mouse, and after installing the driver, it's ready to go! This isn't a shuttle launch; I just plugged in a mouse. I'll know the operating system recognizes it as soon as I can move the pointer, so stop bugging me with alert boxes!

Apple's relentless attention to detail has created a world where hardware and software are equally polished -- so polished, in fact, that a wireless mouse, an iPod or an iPhone feels more like a natural extension of the Mac than a separate device.

For those still stuck with Windows, that kind of experience remains a mirage, always just over the horizon. With Vista, users get an operating system that comes in six -- six! -- different versions, all of them with driver issues. Many older PCs can't handle the operating system -- and even a lot of those newer "Vista Capable" machines may not be so capable after all.

Sure, you could try Linux. But the kind of integration I'm talking about isn't possible in Windows, never mind Linux. When software and hardware engineering and design are divvied up among multiple companies and communities -- each with its own agenda -- complete hardware/software unification is just not a realistic expectation. (I'll give devotees an A+ for effort, though.)

Elegance and ease of use

The glue that binds the hardware is the operating system, and Mac OS X 10.5, a.k.a. Leopard, has elegance and ease of use baked right in. Leopard easily leads the pack in terms of security, ease of installation, maintenance and integration of applications whose learning curves are so minimal Apple doesn't even bother with full manuals. That isn't an accident.

Let me just reel off a few Mac OS X advantages:

• Drag-and-drop application installs
• Notifications written in real English and not Geek-English
• One-click, set-and-forget automatic backups that people actually use
• The ability to peer inside files without having to launch an app
• Tech support that doesn't involve being bounced between different companies
• Inherent security with no real-world exploits, despite dire warnings every year
• A clean and consistent look throughout the operating system and applications

The Mac OS X 'Leopard' desktop

Run any application in the world

Other operating systems have their strengths. Windows is ubiquitous; it isn't going anywhere soon. And the collective hive of developers working to make Linux better is impressive. But Apple's switch to the Intel architecture, along with today's impressive virtualization software, means Macs can now run those other operating systems -- at full speed. That gives you access to software across all three platforms, letting you work and play without walling yourself off from the rest of the computer world.

Let me say it again: All Macs can run Windows and, consequently, all of the software that runs on Windows. All versions. At once, if you want to.

Did I mention that Leopard is a certified Unix product, too? Mac OS X is the only operating systems that can run all mainstream Windows and "*nix"-based operating systems -- and host "*nix" software natively -- with few of the usual security risks.

Security

Along with its famed user interface, one of the keys to the success of Mac OS X is the lack of malware, spyware and self-propagating viruses. We can debate the reasons -- whether it's the security inherent to the modern BSD underpinnings of Apple's code or the "security by obscurity" theory -- but Macs are not susceptible to the problems that have always plagued Windows PCs.

Let me put it in perspective: I have been working with Macs since 1993, and not a single second of downtime has been caused by a virus, spyware or malware. Think about that for a moment. Not a single second has been wasted dealing with security.

And ponder this: If 100,000 viruses or malware variations targeting OS X sprang up tomorrow, that number would still pale in comparison with the malware aimed at Windows every year.

Look, it's the 21st century. Computers are everywhere; shouldn't they just work by now? Who wants to spend their time running spyware scans and virus scans? (Imagine having to run a virus scan on a microwave or DVD player.) Just because folks who use other operating systems have to put up with it doesn't mean that's the way it has to be.

Bottom line

I want more from my computer, and Apple capitalizes on its unique position as sole operating system designer, application developer, hardware engineer and media distributor, offering a seamless experience across its entire slate of product lines and services.

Macs may not "just work" exactly 100% of the time, but they sure work when I need them to. And, after all, isn't that the point?

Windows Vista: The best there is (despite the bad rep)

If you want the best operating system available today, there is only one choice: Windows Vista.

You heard me right: Vista, the operating system that people love to hate. The system that has been blamed, it seems, for everything from global warming to the U.S. economic meltdown.

I'm here to tell you that the conventional wisdom is flat-out wrong. Vista is a solid, hard-working operating system that will run whatever software you need with simplicity and grace. And it doesn't suffer from the world of woes that affect its competitors.

Interface, tweakability and extras

Why is Vista the best operating system? The interface is a good place to start. Vista has a straightforward elegance, featuring transparent windows that niftily whoosh into and out of place when you minimize or maximize them.

Don't like the way Vista looks or works? No problem; change it. From the transparency of windows down to almost every level of the operating system, there's a way to customize it. And there's plenty of free and cheap software for further tweaking.

Vista's user interface is more than just a pretty face. Windows Flip 3-D, which shows you all of your open windows in a 3-D flip book, is exceptionally useful. So are Live Thumbnails, which show small thumbnails of what's happening in your minimized windows, including real-time video.

The integration of search into every level of the OS, including the Start menu and Windows Explorer, makes finding any information easy and fast. All your documents, files and communications are instantly indexed, and searching is lightning-fast. And it integrates with Microsoft Office applications, so that when you search in Outlook for e-mail, for example, you're using the Vista search tool, and you get near instantaneous results.

Vista also includes some very nice extras, such as gadgets for the Sidebar; the Sync Center, which makes it easy to keep data on multiple PCs in sync; and easy wireless networking.

Best choice of software

An operating system by itself is a lonely thing ... in fact, a worthless thing. Its true purpose is to let you run software for work, play or hobbies.

Do you need to run enterprise software at work? Don't try it with Mac OS X or Linux -- most likely they won't work. How about games? Again, Windows rules. There simply aren't nearly as many games that run on the Mac or Linux. The same holds true for many other kinds of software.

Now, it's true that for the moment, Windows XP is superior to Vista when it comes to software compatibility. But that won't last long. The best and newest software will be built for Vista, not XP. So if you want to look to the future, not the past, Vista is the way to go.

The Windows Vista desktop

Security

With its built-in firewall, antispyware and antiphishing features, Windows Vista is far safer than XP. Making it even more secure are its under-the-hood features such as Window Service Hardening, which stops malicious activity from taking place in the file system, the Registry and the network to which the PC is attached. Similarly, Network Access Protection (NAP) stops an infected computer from making a connection to a network, ensuring that it can't infect other PCs.

Much has been made of the fact that Windows has been subject to more attacks than Mac OS X or Linux. That's not necessarily due to inherent Windows security problems, though. It's simply because there are so many more copies of Windows in existence, so malware writers target it.

Why it beats the competition

Why is Vista better than the Mac OS X, Linux and XP? Let's start with the Mac. There's no doubt that Mac OS X is a very pretty operating system. But it also runs only on expensive, proprietary hardware, and it can't run much common software, including enterprise applications and games.

Some people claim virtualization software like Parallels Desktop for Mac solves that problem, but it's not true. Virtualization software creates big problems for organizations with regard to volume licensing, technical support, creating standard enterprisewide images and so on. And as for games, consider this: Parallels can't run even the most basic Vista games such as FreeCell, Hearts, Pinball, Solitaire and Minesweeper, because it doesn't support DirectX 9.

So if you want to pay through the nose for a computer that can run only a limited number of apps and games, go ahead and throw away your money. Just keep in mind that you'll be putting money into the coffers of a company whose CEO has hypnotized its users into drinking the true-believer Kool Aid. Do you really want to join the club of users who get a big dose of their sense of self-worth from the type of computer they use?

As for Linux, if you're a fan, feel free to fly your uber-geek badge every time you boot up -- but don't expect to run your company's enterprise software, much less mainstream software and games. And do expect to become very familiar with the confusing vagaries of the specific version of Linux you've installed.

Windows XP? It's cartoonish and gauche compared with Vista, plus it lacks Vista's security, fit and polish, and extras. It's also looking backward, rather than forward. I have a dual-boot Vista/XP laptop, and every time I boot into XP instead of Vista, I cringe at what faces me.

Bottom line

If you want a safe, modern operating system that will run the software you want on reasonably priced hardware without requiring an advanced degree in geekology, Windows Vista is the only way to go.

Windows XP: The people's choice

The people have spoken. Windows XP rules.

Forget, for a moment, Mac OS X and Linux with their puny 8% combined market share. First, just consider how the "upgrade" from XP to Windows Vista is going.

Microsoft gamely touts increasing Vista adoption, but the backlash against XP's successor is unprecedented. I would call it a near-disaster. When is the last time a petition was circulated that gathered more than 100,000 signatures to save an operating system?

Dell Inc. has caved in to customer demand and reversed its Vista-only policy for many of its computers. Earlier, Dell had pointed out to Microsoft several mistakes made with the Vista rollout, including confusing marketing, broken drivers, hardware compatibility issues and other problems, according to a class-action lawsuit about Vista marketing.

Internal documents brought to light in the lawsuit show that Microsoft officials themselves dissed Vista shortly after its release.

I could go on and on, listing articles about tests showing that XP is faster than Vista at some tasks, explaining to anxious users how to make XP last for seven more years and instructing frustrated Vista users how to downgrade from Vista. See a common thread there?

Security

Security has always been the favorite criticism of Microsoft operating systems in general, but Service Pack 2 vastly improved the safety of XP, with better network protection, memory protection, improved e-mail security and safer browsing.

And do you really think Mac OS and Linux will be any safer if they gain enough market share to become relevant and get the full attention of hackers?

All the features you need

Of course, Microsoft will eventually force the migration to Vista. But for right now, you will get several Vista features, such as Network Access Protection, in the upcoming XP Service Pack 3. Other Vista components available for XP include Media Center, Internet Explorer 7, Media Player 11 and Windows Defender.

And there are plenty of sites that tell you how to get or at least simulate other Vista features in XP.

The Windows XP desktop

Mac or Linux -- why bother?

I use Mac OS X occasionally and have dabbled in Linux, and I've found nothing that makes me want to switch to either. Even if I liked Macs, which I don't for mostly subjective reasons, there's got to be a good reason they have such a pathetic presence in the enterprise.

The operating system is OK, but as with most things from the Apple tree, it seems to be more about style than substance. Sure, it's cool when you hover over the little icons at the bottom of the screen and they get bigger. But take a look at those icons: iTunes, iPhoto, iDVD, Garage Band, etc. It's clear whom Apple is targeting, and it's not the run-of-the-mill cubicle stiff like me who's just trying to get work done.

The proprietary software/hardware marriage, the higher cost and the extra training needed all detract from the Mac's allure -- unless you have funky facial hair and say, "Dude!" a lot.

As for Linux, I've been hearing it's "ready for the desktop" for years now. Well, it's not ready. It's getting better (market share doubled recently -- to almost 1%) but there are too many distros, packages, ISOs, GNUs, Gnomes, awks, GREPs, flavors, kernels, KDEs, licenses and modules.

In other words, it's still too techie. It might be fine if you're the type of person who used to type "debug" in the DOS command line to make hexadecimal changes to standard operating system messages just for fun, like I did long ago. But I don't have time for that anymore.

I recently installed Ubuntu Linux successfully, though I found the partitioning choices a bit confusing. But to simply play an MP3 file, I had to download and install a separate package. Wireless connectivity was a joke. Absolutely ridiculous. Others at Computerworld have had problems with Linux, too.

Bottom line

Like most people, I just want to do my work. I don't want to think about the operating system. The operating system should be like a referee -- invisible and anonymous -- and that's exactly what XP does. It provides all the features I need in an environment that is completely familiar and easy to use.

There will always be people who claim that a losing technology is technically better than a winning technology (Betamax vs. VHS, HD DVD vs. Blu-ray, and so on) but just lost out because of inferior marketing, political clout or some other reason. They view themselves as the enlightened few vainly railing against the ignorant masses.

Meanwhile, the masses are getting their work done.

Yahoo in Talks With Google
To Handle Some Search Ads

Yahoo Inc. is close to announcing that it plans to carry search advertising from Google Inc. as part of a test that could lead to a broader partnership, according to people familiar with the matter.

The short-term test, involving a very limited percentage of Yahoo's Web search queries, is designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement. They have been discussing such an arrangement as part of Yahoo's pursuit of alternatives to Microsoft Corp.'s unsolicited acquisition offer, according to people familiar with the matter.

MICROSOFT BIDS FOR YAHOO

 

• Yahoo Rebuffs Microsoft Again
4/8/08

• Microsoft Pressures Yahoo Board
4/7/08

See complete coverage of Microsoft's bid for Yahoo, including recent blog posts on the deal and an interactive stock timeline.

The test under discussion, given its short time frame and limited scope, shouldn't stand in the way of any eventual sale of Yahoo to Microsoft, says the person familiar with the matter. But it could factor into the dynamics of the ongoing deal standoff, as a way for Yahoo to signal to investors its alternatives to the Microsoft deal and potentially as an irritant for Microsoft, which views Google as a major rival.

Analysts have predicted outsourcing its search ads to Google would boost Yahoo's cash flow, since Google's system generates significantly more revenue for each search query than Yahoo does. Under such an arrangement, Yahoo would likely garner a majority of the revenue and Google keep the rest as a commission.

But antitrust experts say any broader ad pact between the two would likely face intense regulatory scrutiny, given Google's and Yahoo's significant shares of the Web-search and online-advertising markets.

Microsoft Chief Executive Steve Ballmer in a letter Saturday gave Yahoo directors a three-week ultimatum before Microsoft would go hostile, implying that Microsoft would lower its bid in that case. Yahoo's directors have rejected Microsoft's offer as too low, and in a letter responding to Mr. Ballmer Monday called his ultimatum "counterproductive." Some major Yahoo shareholders, including Legg Mason Inc. portfolio manager Bill Miller, have subsequently said they likely wouldn't support Microsoft in any hostile contest were it to lower its bid.

Prior to Microsoft's offer for Yahoo, Yahoo already had been in negotiations to outsource its Web-search advertising in Europe to Google, say people familiar with the matter. Since last year, some investors have called for Yahoo to abandon its own search advertising system as a quick way to boost its revenue.

Citigroup Global Markets analyst Mark Mahaney in a February research note had estimated that Yahoo could boost its cash flow more than 25% annually by outsourcing all its search advertising to Google. Yahoo executives had considered such a maneuver as part of a strategic review last year, according to people familiar with the matter, but Mr. Yang in October signaled that it had decided against it.

"We believe having a principal position in both search and display advertising is critical to creating...long-term shareholder value," Mr. Yang told analysts during Yahoo's earnings conference call in October.

Yahoo's search for alternatives to a Microsoft purchase and poor performance, including a sinking share price prior to Microsoft's bid and a 2008 revenue outlook considered tepid by many investors, possibly spurred the change of heart toward Google.

Sun Micro Improves Servers Performance

Sun Microsystems Inc. is announcing a big jump in the performance of its small server systems, the latest example of a trend to push computer chips to do many jobs at once.

The company says the new servers can simultaneously carry out up to 128 computing instructions, known as threads. Not all programs can take advantage of such "multithreaded" chips, but some customers are reporting impressive results.

One is IT.com, a Washington company that specializes in technology for sifting through email and other documents for purposes such as discovering litigation evidence. Jason Pratt, the company's chief information officer, said it was running into roadblocks trying to efficiently process large volumes of messages to prepare them for searches using conventional servers.

Using one of Sun's new servers, however, IT.com was able to process about 50 gigabytes of data an hour -- compared with four to seven gigabytes using conventional machines -- without any changes to its software. "It's just incredible," said Mark Cordover, the company's founder and chief executive.

Companies are using several technologies to do more computing jobs in parallel. One technology puts the core circuitry of multiple calculating engines on each piece of silicon, creating what are called multicore chips. Multithreading technology allows each processor core to do multiple tasks at the same time.

Sun uses both techniques in a line of chips, code-named Niagara, that are a variant of its internally developed Sparc microprocessor line. The company developed a second generation in the family, which features eight processors that each can execute eight threads simultaneously, or 64 instructions in all.

With the new servers, the company has added capability for two of the 64-thread chips to work almost as if they were a single chip, said John Fowler, the executive vice president in charge of Sun's computer-systems unit. Two models being unveiled, priced at $14,995 and $17,995, each have two of the chips, which are called UltraSparc T2 Plus.

Richard Partridge, an analyst at the research firm Ideas International, said early Niagara systems were good at jobs such as managing Web sites. But Sun has added modifications to make the chips better suited for other jobs, like running databases -- and the company needs to educate its customers about those applications, Mr. Partridge said.

The Niagara family is a departure from a long-term shift of many computing jobs to chips from Intel Corp. and Advanced Micro Devices Inc., based on a design called x86 that started in personal computers. Another approach, typified by rival International Business Machines Corp., is to increase the clock speed of chips, a measure of the timing pulses that coordinate computing activity. IBM's Power6 chips operate at more than five gigahertz, compared with 1.4 gigahertz for Sun's Niagara chips.

EMC Reaches Deal to Buy Iomega

EMC Corp. reached a deal to buy data-storage firm Iomega Corp. for $213 million in cash, scuttling a deal Iomega previously made with a group of Chinese companies.

The two sides agreed to the deal after EMC sweetened its offer to $3.85 a share. Iomega turned down EMC's original offer of $3.25 a share in mid-March, saying it was not good enough to overturn a takeover agreement with a consortium led by ExcelStor Great Wall Technology Ltd., which would have given substantial control of the company to the Chinese government.

EMC later sweetened its bid to $3.75 a share and Iomega agreed to enter into negotiations. Iomega said Tuesday it had terminated its deal with the Chinese group and will pay a $7.5 million fee to exit that deal.

EMC wanted to add San Diego-based Iomega to boost its presence in the consumer market. Iomega created the once-popular Zip drive, and now focuses on storage devices like portable hard drives and DVD burners. Most of EMC's revenue comes from the sale of technology and services that help large companies store and manage vast amounts of computerized data.

"Iomega will play a key role to expand our information storage and management capabilities deeper into the high-growth consumer and small business markets," said EMC Chairman and Chief Executive Joe Tucci.

Iomega CEO Jonathan Huberman will join EMC as head of EMC's new consumer and small business products unit, the companies said.

The deal is expected to be completed in the second quarter.

Google Hosts Web Applications
By Outside Software Developers

Google Inc. is letting software developers run their Web applications on its technology infrastructure in a move that highlights the increasing competition between tech companies to provide the computing and network backbones that power Web services.

Developers who sign up for the test of the Google App Engine will be able to have their Web-based applications run on computer servers in Google's data centers. Such applications are services that consumers access through their Web browsers, sometimes as part of other sites such as Facebook Inc.'s social-networking site. Web applications range from word processors to simple games people can play against their friends.

Google will provide limited data storage, computing and network capacity as part of the App Engine test and eventually make available additional storage and network bandwidth to developers for a fee. Amazon.com Inc. is among the other tech companies that provide to developers such Web services, which are increasingly viewed as a potential source of revenue and online influence as consumers use more applications on the Web rather than installing software on their computers' hard drives.

Write to Kevin J. Delaney at kevin.delaney@wsj.com

Q&A: A Google stalker deconstructs the secrets to its success

By Kathleen Melymuka

April 7, 2008 (Computerworld) Educators used to follow the auto industry because that's where all the lessons came from, says Bala Iyer. Then it was Microsoft. Now it's Google. In this month's Harvard Business Review, Iyer, an associate professor of technology operations and information management at Babson College, looked deep into Google's DNA to discern what makes it an innovation machine. Iyer talked with Kathleen Melymuka about what he and co-author Thomas H. Davenport discovered.

Let's talk about some of the key attributes that you say contribute to Google's success. The first is "strategic patience." What do you mean by that? Look at their mission statement: "to organize the world's information and make it universally accessible and useful." This requires a long period to execute, and they're not kidding. CEO Eric Schmidt says it's probably going to take 300 years. When a company has such a powerful long-term mission, that sets it apart from the others. They go in knowing they're in for the long haul. Every action they take, you can see that.

In these days where quarterly results are everything, how can other companies emulate this? Google won't play by those rules. Google changes the rules by this mission statement. They can take actions they feel are good for the long term. Google won't even give [Wall Street] guidance for their quarterly results.

This is a basic thing in business: You want to make sure you have a powerful mission statement. You can give people a lot of freedom to do what they want to do and be productive and innovative when you have a mission statement like this and allow people the freedom to operate within it. Companies do try, but sometimes the mission seems like it's separate from the company.

How does Google's infrastructure support innovation? Everybody thinks that when a company is based on the Internet, you [get a] free ride on the Internet's infrastructure. But this company put billions of dollars into building things on top of the Internet. Google has its own operating system that works on top of the Internet and is based on Linux. It customizes the Internet to its advantage.

For example, Google deals with huge amounts of data. Data centers are very important to them. They need to be able to add them as necessary. When Google plugs in a data center, they can make it operational within eight hours, which is a phenomenal capability, but they have it because they made this investment. When they introduce new products and services, no one questions whether their infrastructure can support it.

I imagine this is something almost impossible to copy. The lesson is not about building another billion-dollar infrastructure, but about how much you could customize to your own advantage. You could still layer your own system on top of the available public infrastructure. Isn't that what Salesforce.com is doing? Amazon's cloud, eBay's infrastructure -- that's what it is. The platform should be built on top of the available Internet. The idea is to put your own secret sauce on top of it to support your ecosystem.

This platform on top of the Internet even supports Google's product development, because they can test-drive products on their own infrastructure and can allow third parties to write products, which we're now calling mashups.

Let's talk about those. Stacks have always been a big part of our industry. And the value is migrating up the stack. These guys are creating higher value. An example is Housingmaps.com. Somebody thought it would be a good idea to combine Craigslist and Google Maps to look at properties for rent. You get permission from Google, and that's a mashup.

When you build, you have to pick a platform, and each has own API and languages and so on. If I'm an independent software developer, what languages should I be learning today? Google's APIs, Amazon's, eBay's, Salesforce.com's. I should keep track of the number of mashups being developed on these platforms so I can learn these APIs and build my own mashups that run on them. That is a good career path. You've got to watch the evolution of these platform companies and see which are the next operating systems, if you will.

You write that innovation is literally built into job descriptions at Google. How does that work? Managers are required to spend 70% of their time on core business, 20% on related but different projects, and 10% on anything else. [Technical employees spend 80% of their time on core business and 20% on projects of their own choosing.] It doesn't have to be on a daily basis; they can chunk it or spread it out.

Sounds good, but if you don't track it, it's just a meaningless statement. But these folks track it. That 20% time has produced phenomenal products, including Gmail, AdSense and Google News. When you have creative people and you make this part of the job description, it's a great fit.

That would seem to be something any company can do, if they commit to it. Every company should do it. You may think it's goofing off, but that's where the best ideas come from: time to sit down and actually think. People are so caught up in delivery that we don't have think time. Everybody who wants to add value knows it comes from our free time.

Next, Google cultivates a taste for failure and chaos. How so? Failure is not considered to be a bad thing. They encourage people to make new mistakes. If people are not feeling stretched, they're not trying hard enough. In this business where innovation is happening on a day-to-day basis, unless you push the envelope, you're not going to be leading. There's a story about how a senior executive made a big mistake that cost several million dollars, but [Google co-founder] Larry Page told her he was happy she made the mistake. Because if they're not making mistakes, they're not taking enough risks. They would rather try and fail than sit back and say, "What if we had ...?"

And finally, Google uses data to vet inspiration. Is that backing away a little from failure and chaos? We didn't want readers to feel that Google is totally chaotic and there are no processes in place. Actually, they have very good processes. They listen to ideas. Ideas get vetted on an internal discussion board. Once ideas come through, people get to present them to the top team -- 15 minutes per idea. And they don't care about what you think; they want data to back it up. So first, you alpha-test your product, find out what users are telling you, and then you present that. They're very brutal internally, and a lot of ideas get killed. But then you feel confident that the right ideas are being pushed up.

Microsoft threatens Yahoo with proxy fight

By Linda Rosencrance

April 5, 2008 (Computerworld) Microsoft Corp. today told Yahoo Inc. that it has three weeks to agree to its unsolicited $42 billion takeover bid or face a proxy fight and possibly a lower offer.

"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board," said Microsoft CEO Steve Ballmer in a letter he sent to today Yahoo's board.

Ballmer added that if Microsoft was forced to take an offer directly to Yahoo's shareholders, it would most likely reduce its offer.

"It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo's shareholders and employees," Ballmer said. "We think it is critically important not to let this window of opportunity pass."

"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal," Balmer wrote.

Yahoo could not immediately be reached for comment.

Ballmer said even though Microsoft made its offer to acquire Yahoo at 62% above Yahoo's market value on Jan. 31, the day before the software giant made its offer, Yahoo has continued to drag out the process.

Microsoft's bid was initially worth $44.6 billion, however a decline in Microsoft's share price means the offer is currently about $42 billion.

Ballmer said although there has been some interaction between executives at the two companies, there has not been any meaningful negotiation to conclude a deal.

The companies met earlier this week, but because Microsoft executives did not raise their offer, Yahoo officials refused to talk further.

"We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we've seen no indication that you have authorized Yahoo management to negotiate with Microsoft," Ballmer said in the letter.

Although there have been rumors about a deal that would merge Time Warner's AOL Internet business with Yahoo, industry observers have said the mostly likely outcome is expected to be an acquisition by Microsoft, in part, because no company wants to take on the software giant. Yahoo has also looked to Google Inc. and News Corp. to help stave off Microsoft, but to no avail.

"By any fair measure, the large premium we offered in January is even more significant today," Balmer said. "We believe that the majority of your shareholders share this assessment, even after reviewing your public disclosures relating to your future prospects."

In March, Yahoo told investors the company will roughly double its operating cash flow from $1.9 billion to $3.7 billion and generate $8.8 billion in revenue, excluding costs, in 2010.

Census Bureau scales back handheld plans, while project costs keep rising

By Patrick Thibodeau

April 3, 2008 (Computerworld) WASHINGTON — The U.S. Census Bureau's plan to rely on automation, instead of paper, to conduct much of the 2010 national census is now officially a boondoggle. The agency is facing a cost overrun of up to $3 billion on the census, as well as angry members of Congress who are looking for someone to blame.

And Census Bureau officials are scaling back their automation plans, reducing the 500,000 custom-built handheld devices that the agency is buying from Harris Corp. to little more than bit players in the next census. At the same time, the size of the five-year contract that the Census Bureau signed with Harris in 2006 is more than doubling, from just under $600 million to about $1.3 billion.

The mood was caustic at a hearing on the census held here today by a subcommittee of the House Committee on Appropriations. Subcommittee members received the bad news that the 2010 census may now cost as much as $14.5 billion. And they seemed incredulous about the increase in some cost estimates, such as the ballooning of a $37 million expenditure for an IT help desk to nearly $220 million. Or the addition of $30 million to build a new data center.

As the questions at the hearing grew more pointed, the main witness, U.S. Department of Commerce Secretary Carlos Gutierrez, turned to the audience and started asking Census officials sitting there for help in answering them. One of the people that Gutierrez called on — Jay Waite, the Census Bureau's deputy director — was candid in explaining why the original help desk cost estimate was way off. "It was clear to me that there wasn't sufficient skepticism" applied when the estimate was developed, Waite said.

In the case of Harris, the less ambitious but more expensive handheld plan also drew sharp comments at the hearing. The Census Bureau originally planned to use the handhelds to electronically gather data during in-person visits to residents who didn't return written questionnaires to the agency. Now the devices will be used in a more limited way, to verify street addresses via GPS technology.

U.S. Rep. Alan Mollohan (D-W.Va.), chairman of the Subcommittee on Commerce, Justice, Science and Related Agencies, accused Census officials of "abdicating their responsibility" in dealing with Harris. The new plan "reduces the scope of the contract," said Mollohan, "yet Harris will be receiving more than twice the amount of the original contract."

"This is not what anybody likes to do," Gutierrez said. "It's disappointing that we have to make this decision, but I would rather be disappointed with the recommendation than with the actual results of the census."

The bleak outlook at today's hearing jibed with a report issued early last month by the Government Accountability Office, in which the GAO put the Census Bureau's automation efforts on its list of high-risk projects at federal agencies. That list is reserved for IT projects that are in danger of failing because of mismanagement or wasteful spending.

At a Senate hearing held March 5, Gutierrez — whose department includes the Census Bureau — agreed with the GAO's assessment that there were serious problems with the handheld project. He and Census officials outlined the agency's options: everything from completely abandoning the automation project to going forward as originally planned. What they staked out today was a middle-of-the-road plan that will rely on automation, but not to the extent originally envisioned.

Shortly after completing the 2000 census, the Census Bureau began making plans to go "virtually paperless" in 2010. But the automation plan ran into significant problems last year, during tests of the handheld technology. In addition, the agency made more than 400 changes to its technical requirements for the handhelds.

At today's hearing, Mollohan said Harris officials have told Congress that the handheld technology was not at fault. The subcommittee chairman was particularly interested in finding out whether Steven Murdock, the director of the Census Bureau, agreed with that assessment.

Murdock, who became the agency's director in January, didn't blame Harris but didn't leave it entirely off the hook, either. There have been issues with the technology, Murdock said. But, he added, the biggest issue is that there isn't enough time to fully test out all the capabilities of the handhelds before the census begins.

According to Census officials, much of the additional cost of conducting the census will result from the need to hire more people because of the reduced reliance on the handhelds and related back-end technologies.

Harris defended its work on the project and pointed to comments made by Gutierrez, who said that the vendor has successfully updated the census database and completed much of the planned integration and security work. "The company and its industry partners are committed to helping the Census Bureau make the 2010 census the most complete, secure and accurate in history," Harris said in a statement issued today.

What is Next for IT?

What's the future of the IT department?

Some analysts have suggested the IT department is withering. Most of the work it now performs eventually will be automated, outsourced or handed off to other departments, these observers say.

THE JOURNAL REPORT

 

Companies try to make the Web an alternative to phone support. Plus, read about the latest technology deals from Dow Jones VentureWire.

• See the complete Technology report.

But others see the IT department growing in importance as it takes on an increasingly strategic role. From this perspective, IT is undergoing a transformation from a behind-the-scenes department to one that holds real clout within the company and plays a significant part in the development of products, processes and services that help the company grow.

Francesca Donner, an editor for The Wall Street Journal Online in New York, discussed the changing role of the IT department in an email exchange with three chief information officers -- Meg McCarthy of Aetna Inc., Frank Modruson of Accenture Ltd. and Steve Squeri of American Express Co. Following are edited excerpts from their discussion.

A Stake at the Table

THE WALL STREET JOURNAL: Analysts have written that IT departments are becoming more strategy- and business-oriented. Do you agree?

MS. MCCARTHY: I totally agree. At Aetna, the IT organization is critical to enabling the implementation of our business strategy. I report to the chairman of our company and I am a member of the executive committee. In that capacity, I participate in all of the key business conversations/decisions that impact the company strategy and the technology strategy.

Meg McCarthy, CIO of Aetna Inc.

MR. MODRUSON: Accenture's research has shown that IT today is supporting more business processes than back-end processes. Today, IT has earned a stake at the table, has gone away from the bits and bytes, and is, more than ever, a partner to the business.

MR. SQUERI: I agree that technology organizations are getting closer to the business. It's a must.

This doesn't happen overnight, though. We need to help the business better understand technology. We need to help our technology employees better understand the business strategies.

One way we are doing this is by moving people across the organization, from the business to tech and vice versa. Alignment with our senior leaders helps build the connection at all levels within the organization -- we're all at the table together.

I'm a good example -- I came from the business, where I was president of global corporate services, and now as CIO I report directly to the CEO and am part of our operating committee. That has helped technologies have visibility at the company and a seat at the table.

HOW'S YOUR IT?

 

What are your views on the IT department? How careful are you about your company's security? How large a role does IT play in your company? Will it evolve into a bigger player in the future or is it more likely to be phased out? Join the discussion.

MS. MCCARTHY: Steve's note is very consistent with some of the strategies we are employing [at Aetna] to bring greater alignment with our business partners.

Transitioning people from the business into IT and rotating IT people to the business brings a greater understanding to the broader organization. At Aetna, we also use a "Portfolio Management" role to support the alignment process. This is a person who may have come from either the business or IT. They are responsible to the business for managing the business/IT initiatives in a particular business area and assuring the return on investment for the specific portfolio.

The other important aspect associated with Steve's comment and his business background is the focus that most of us have on building a services-oriented architecture.

The analogy that I'll use here is Legos. In a services architecture, we build discrete services that are individually tested and certified, versus a more traditional programming method. These services can be used and reused very efficiently, i.e., the Lego concept of taking Legos apart and reusing them to build something new. The promise of this approach is significantly reduced costs and speed to market. The ability of the IT organization to do this work efficiently is a function of how well we work with our business partners to define our business processes at the right level.

MR. MODRUSON: What we have found at Accenture is that effective communication with the business is critical. IT has to understand the needs of the business and the business must understand what is necessary from a technology perspective. Otherwise, you can fall into "order taking" mode.

For example, we present all major IT projects to the business and clearly explain the business benefits. We also audit the realization of business benefits delivered by all IT projects -- to ensure that our IT projects are delivering business results. It all comes back to partnering and communicating with the business. You want business people on your IT team to facilitate both.

The Big Challenges

WSJ: What do you see as the greatest challenges and hurdles facing IT departments? And in light of that, how do you see the CIO's role evolving to meet these challenges and hurdles?

MR. MODRUSON: Accenture's research, conducted with CIOs around the world, has identified that high-performing IT organizations are not consumed with the problems of IT, but rather with how they can leverage IT to drive business performance. (Know your customer, empower your employees, facilitate supplier relationships.)

Frank Modruson, CIO of Accenture Ltd.

Essentially, the role of CIO has evolved from fixing IT problems, which is internally focused, to being a catalyst for using technology to help the business perform better, which is externally focused. Of course, this assumes that the company's basic IT needs are met internally.

MS. MCCARTHY: The big challenges for most companies will be the continued work on building an adaptable architecture that provides for seamless interoperability with other companies, i.e., ease of communications and transaction processing with business partners and customers.

The CIO in this work will be an important strategic partner who can educate and vision with their business partners. [As CIOs] we need to understand the business, the technologies that are evolving and work closely with our business partners to identify opportunities for the company and our customers to exploit these technologies to achieve market leadership and competitive advantage.

MR. SQUERI: I believe that finding the right talent is a key priority and challenge we're facing.

We all talked about the need to align technology and business strategies. Part of getting there is bringing in and developing people with technical, business and management skills. Our technology leaders need all of these skills to be successful and make our businesses successful. We're facing a dual crisis -- an aging employee population and a shortage in young talent to fill our pipeline. IT organizations have a population base with deep subject-matter expertise, but a lot of that base is near retirement.

Unfortunately, there isn't much of a pipeline of younger employees who can learn and develop from that base to become the new subject-matter experts, since our colleges and universities aren't turning out enough graduates with computer-science or engineering degrees who want to enter IT organizations.

A big part of that shortage is probably due to the perception that IT jobs aren't a priority at companies today since there are so many vendors around the world providing IT resources. What a lot of people don't understand is that IT departments still need people with subject-matter expertise to run our projects and systems, and we need young talent to learn about these systems through knowledge transfer and experience at the wheel.

So the biggest challenge we face is how to fill the pipeline of people we need to keep our business running and then developing these people to be the future leaders of IT.

MR. MODRUSON: I agree with Meg and Steve. Without a doubt, top talent is critical. You are only as good as your team.

Changes Coming

WSJ: We've talked a little about sourcing "top talent." Let's talk about the IT department itself. How do you envision the IT department a decade from now? How will it function alongside other departments? Might there be a case for outsourcing certain tasks? And which areas of IT, if any, will become defunct or be disbanded?

MR. MODRUSON: There are two pieces to IT: strategy and operations. Ten years from now, you will see CIOs focus even more on strategy, whereas operations will be industrialized and outsourced to providers that are at market-efficient scale and have the ability to invest and attract top IT talent to operate the technology.

CIOs can then lead the IT organization to focus more on meeting the needs of the ever-changing business environment. CIOs will also work more closely on internal customer relations to understand the business needs, and the IT team will manage the contracts of those to whom they have outsourced IT operations.

MS. MCCARTHY: I agree with Frank on the 10-year view regarding strategy and operations. The other big change will be with our customers. How our customers want to receive information and interact with us will change dramatically over the next 10 years. Creative technical talent will continue to be important to all of us as we work to meet our customers' needs.

MR. SQUERI: I believe that over the next 10 years, the CIO will get more involved in the overall business strategy of the company and see their role expand in importance. The CIO will be increasingly called upon not only to translate business strategies into capabilities but to become even more forward-looking to determine what capabilities the business will need in the future.

Steve Squeri, CIO of American Express Co.

The days of tech leaders as relationship managers and "order takers" will go by the wayside and they will be called upon to create and drive technology strategies that drive business capabilities.

Technical architecture will become a core function of IT departments (today some of this is outsourced) as the basic architectural footprint becomes important to own, manage and control as we begin to manage platforms and capabilities as opposed to one-off projects. I believe that project management, testing, coding, maintenance and basic infrastructure support and day-to-day operations will continue to be outsourced.

Security and compliance will become even more important to control as compliance and data security continue to evolve due to increasing regulation and increasing threats.

Learn and Adapt

WSJ: What advice would you give to non-IT managers and CEOs on how they should approach IT and address the IT department?

MR. MODRUSON: IT and business are inextricably linked -- from day-to-day operations to interaction with customers. CEOs, [other top executives], managers -- everyone needs a fundamental understanding of IT.

Web 2.0 is familiar to new graduates just as COBOL was once the standard college-exit credential. Yet many successful senior business leaders are just getting fully acquainted with Web 2.0, wikis, Facebook, etc. Willingness to learn, adapt, incorporate is a must for senior-level and mid-manager players.

Technology presents an opportunity to change business in ways we cannot yet imagine. (It always has, but the pace and degree of change have quickened.) Board members and business leaders must stay current. In their planning, they should develop ways to learn what's new in IT. Hands-on learning, such as rotation in IT, is one possibility. [Top executives] can undertake periodic self-assessment and consider retreats or workshops. Midlevel managers might find an actual rotation in IT easiest to schedule, and it might enhance career options. Similarly, entry-level IT professionals should find ways to leverage what they know.

MR. SQUERI: For businesses that leverage information or use technology as a competitive advantage, it is important that business leaders know how to leverage the technology groups to enable their strategies. This means that just as technology groups are learning to translate business strategies into technology capabilities, business leaders will have to think about their strategies in terms of long-term capabilities.

The only way that can really take place is by deepening the working relationship and ensuring that IT has a seat at the table.

MS. MCCARTHY: Our current CEO and chairman has a technology background which has been invaluable to our business at Aetna. He encourages all our non-IT leaders to have a good working understanding of technology and to understand the systems that enable their business areas. He also has the business leaders report on all the "systems" projects/programs for their business areas -- a recognition that this work is not just systems work but business and systems work.

I would encourage all non-IT managers to get an orientation to their systems organization. I would also encourage non-IT leaders to spend time with their IT partners, particularly the architecture team during their strategic planning process. Have the architecture team look out three years and identify technologies that could be applied to the business to improve productivity or increase revenue. Working together on these things can generate creativity on both sides.

I would also recommend that midcareer leaders rotate into an IT role for a period of time.

Emerging technologies will soon marginalize ITs role in BI

By Heather Havenstein

March 19, 2008 (Computerworld) The role of corporate IT units in business intelligence will become increasingly marginalized in the future as emerging technologies like search and collaboration tools allow individual users and business units to build their own analytic applications, according to a study released this week by Gartner Inc.

By 2012, IT's role in BI will begin to lessen as users turn to interactive visualization, in-memory analytics, search integrated with BI, software as a service and service-oriented architectures to build and consume their own reports, according to Gartner.

"Evidence suggests that BI is used aggressively by just 15% to 20% of business users," said Kurt Schlegel, an analyst at Gartner, in a statement. "For the BI sector to thrive, it needs to overcome the fact that most business users feel BI tools are hard to use. Other technologies, such as personal productivity, collaboration and Internet search have been widely adopted by mainstream users in both their business and personal lives. BI has the same opportunity for massive adoption, but it must overcome its well-earned reputation of being difficult to use."

The emerging technologies will help reach the 80% of users not using analytical applications today. The use of such technologies outside of IT control has the potential to "dwarf" today's problem of users creating thousands of spreadsheets (often called spreadmarts) to perform their own analysis, Gartner noted.

"The reality is that central IT has very little power to prevent business units (and users) from adopting these technologies," according to the report.

For example, propelled by the popularity of rich Internet applications, interactive visualization technology will likely become accepted by users over the next two years as a common front end to analytical applications, the report notes. Interactive visualization allows users to perform typical BI tasks like data filtering, drill downs and pivots by clicking on a pie wedge or circling dots on a plot. Because this technology relies heavily on attractive displays rather than the grid-style analysis and reporting offered by relational databases and spreadsheets, users will find it easier and more fun to use, Gartner added.

Search integrated with BI will help users better find existing reports and information from structured sources where a report doesn't exist, the report noted. Applying a search index to structured data sources, rows and columns allows end users to perform their own ad hoc exploration of the data, according to the research firm.

IT departments attempting to handle these emerging technologies shouldn't try to fight by prohibiting them. "This policy didn't work with spreadmarts and it won't work with these emerging technologies," the report said.

Instead Gartner recommends that IT:

• Incorporate the emerging technologies into the standard BI architecture whenever possible to prevent business units from using them to create "rogue" analytic applications.

• Clearly communicate which performance measures should be used to run the business because these technologies will be used to build analytic applications independently from a central BI architecture.

• Build a governance strategy that incorporates the potential explosion in the number of analytic applications, and includes an inventory of analytic applications with clearly defined owners and use cases.

New Firefox: 3 Times Faster Than IE

By Gregg Keizer

March 13, 2008 — Computerworld — According to benchmark tests, Firefox 3.0 is dramatically faster than its predecessor and rivals -- the result of hundreds of performance improvements designed to make the open-source browser the best at running complex Web 2.0 applications, Mozilla Corp.'s chief developer claimed today.

"We've been working on performance for a long time," said Mike Schroepfer, Mozilla's vice president of engineering. "Each beta of Firefox 3.0 got better. Beta 1 was better than Firefox 2.0, Beta 2 was better than Beta 1, and so on. Some of the big architectural changes [we've made] had begun paying off. Now we're at the point where we can turn the knob to get it to perform well."

Firefox 3.0 Beta 4, which Mozilla released late Monday, has been put through its paces by users and bloggers, some of whom have published the results of head-to-head benchmark tests among Firefox, Opera, Apple Inc.'s Safari and Microsoft Corp.'s Internet Explorer. According to Percy Cabello, who posted his results on the Mozilla Links blog, Firefox 3.0 Beta 4 is 53% faster than Opera 9.5 beta, twice as fast as Safari and three times faster than IE7 on the SunSpider benchmark, which tests JavaScript performance.

Schroepfer, however, refused to be drawn into a conversation about benchmarks. Instead, he talked about what the open-source project is looking to do.

"There are lots of ways to 'game' the system [in benchmarks], but what we're trying to do is speed up the things that enable people to run the really heavy-duty applications on the Web."

Saying that all browsers are alike when rendering basic Web pages, Schroepfer added that the challenge Mozilla took on was how to build a browser that performs well when asked to run much more complex Web 2.0 applications, such as Yahoo Inc.'s Zimbra online collaboration and document suite.

"Web apps today are magnitudes more complex than those from five years ago," said Schroepfer. "When Yahoo started out, it wasn't anything more than a bullet list. Now it has widgets and word processing. It's important for us to make it possible for Web designers to create complex applications. They can be confident building [big Web applications] knowing that Firefox can handle them."

Firefox's developers have dealt with more than 400 performance-related bugs and changes, Schroepfer said. "There are a bunch of things that have to come together to get these kind of results," he said, ticking off several. "We optimized JPG encoding, developers took advantage of more and newer compiler options, and we found a way on Mac OS X to keep it from throttling page rendering."

Larger-scale modifications included new graphics- and text-rendering architectures in Gecko, Firefox's engine, and a completely revamped JavaScript engine.

Boosting Firefox's performance is also important for the mobile market, which Mozilla has begun exploring, Schroepfer said. "The performance gains carry over into mobile, where underpowered devices are the rule," he said. "It should really help us there."

Mozilla is at the end of the line in the mobile market. There, Opera Software ASA leads all others in popularity on handsets. IE, which is found on Windows Mobile-powered smart phones, and Safari on the iPhone trail Opera in installations, but they are ahead of Firefox by miles.

"I think better performance goes back to the mission of Mozilla," said Schroepfer. "That mission is to move the Web as a platform forward." That's happening, he argued, with Firefox leading the way.

"I'm happy to see that other browsers are working on performance now, too," Schroepfer said.

Firefox 3.0 Beta 4 can be downloaded for Windows, Mac OS X and Linux in 36 languages from Mozilla's site.

© 2007 Computerworld Inc.

Facebook vs. LinkedIn: Which is better for business

By Preston Gralla and Jake Widman

March 4, 2008 (Computerworld) Social networking is no longer the Next Big Thing; it's now as much part of our Web experience as search engines. Previously considered the province of kids who wanted to keep up with class gossip, social networking services are being co-opted by grownups who are examining ways to use them both within and outside of their places of employment.

At least one social networking site, LinkedIn, has been vying for an adult usership since its introduction in 2003. LinkedIn allows users to create and maintain a list of their professional contacts (and friends as well); the purpose is to be able to network — to have access to your contacts' contacts, and in that way further your professional outlook. You want to find a job? A new sales opportunity? Information about a client? Here's a way to do that.

LinkedIn has remained remarkably stable in its services. It has made some concessions to Web 2.0 expectations by adding a job board as well as areas where you can find recommendations for service providers or answers to questions. It also offers premium services that allow users to access more information and the ability to contact second- or third-degree contacts (in other words, friends of friends of friends). However, it has not swerved from its original mission: to be a business-only service rather than a more generalized social networking site.

There are few other sites that are as focused as LinkedIn, but at least one has moved from being only for socializing to being a business tool as well. Facebook began in 2004 as a site for college students — i.e., people with university e-mail addresses — to socialize online, and was only opened to the general public in 2006. Since then, it has rivaled MySpace as the place to hang out, but it has also attracted an increasingly adult audience who want to use it as a means to discuss their professions rather than their latest crushes.