Sunday, January 28, 2007

Transcript of BriefingsDirect SOA Insights Edition Vol. 8 Podcast On SOA Through the Eyes of Investors

Edited transcript of weekly BriefingsDirect[TM] SOA Insights Edition, recorded Jan. 12, 2007.

Listen to the podcast here. If you'd like to learn more about BriefingsDirect B2B informational podcasts, or to become a sponsor of this or other B2B podcasts, contact Dana Gardner at 603-528-2435.

Dana Gardner: Hello, and welcome to the latest BriefingsDirect SOA Insights Edition, Volume 8, a weekly discussion and dissection of Services Oriented Architecture (SOA) related news and events, with a panel of industry and financial analysts and guests. I’m your host and moderator, Dana Gardner, principal analyst at Interarbor Solutions, ZDNet blogger, Redmond Developer magazine columnist.

Our panel this week consists of Steve Garone, a former IDC group vice president, founder of the AlignIT Group, and independent IT industry analyst. Welcome, Steve.

Steve Garone: Thanks, Dana, great to be back.

Gardner: Also Joe McKendrick, a research consultant, columnist at Database Trends, and blogger at ZDNet and ebizQ. Welcome back, Joe.

Joe McKendrick: Thanks, Dana, I’m glad to be back as well.

Gardner: Its also a return visit for Jim Kobielus, principal analyst at Current Analysis. Hi, Jim.

Jim Kobielus: How’s it going, Dana? Hi, everybody.

Gardner: Neil Ward-Dutton, also making a repeat appearance, is a research director at Macehiter Ward-Dutton in the U.K. Hello, Neil.

Neil Ward-Dutton: Hi there. Hi, everyone.

Gardner: Our guest this week is Trip Chowdhry, a managing director of equity research at Global Equities Research. Welcome, Trip.

Trip Chowdhry: Hi, everybody.

Gardner: Our topics this week are going to revolve around three meaty issues. The first is the business opportunity for vendors around SOA. How will Wall Street, the City of London, other markets, and investor organizations view SOA as a growth opportunity, and what sort of companies will benefit?

Our second topic is going to be around the rcent announcement at Macworld -- and we’re talking about the week of January 8, 2007 -- by Steve Jobs and Apple Inc. of the iPhone, and what this might mean for a mobile front-end: Is it just for consumers? Is there an enterprise aspect to iPhone? And what might be some implications for SOA and composite applications?

First, let’s dig into this notion of SOA as a business opportunity for vendors. Some of the things you need to ask as an enterprise buyer are: "Am I buying into a company that’s going to be around in five years? Am I getting locked into a technology or relationship? If so, will that vendor be able to devote the resources for R&D, for support?"

I’d like to know that my vendors and primary suppliers are healthy financially. Some news just today: SAP came out with some results from the fourth quarter that came in below their Wall Street guidance. So, a little bit of a shocker there.

Let’s go first to Trip, because you’re an equity analyst, how do you view this SAP announcement? Is it a blip or is there some other opportunity to look at the impact of SOA and how the business is changing for business applications vendors?

Chowdhry: Actually, if you think about companies like SAP who have very long implementation cycles, they have a lot of moving parts. It's a complex product, and the problem that SAP has -- and to some extent, most of the SOA vendors have -- is that they’re trying to solve complexity with complexity, and with that you can easily get a few early adopters.

When it comes to mass adoption -- or the second phase of product adoption that needs to occur to show growth -- then you really have to ease the product, ease the message. You have to tell what you do in one bullet point. So far, our research shows that NetWeaver and SAP, and some other vendors, have very complicated messages, which CIOs are now struggling to understand.

That is going to create some sort of a downward pressure near-term in SOA-based initiatives from a business and financial point of view. From a technology adoption point of view and a trials point of view, SOA is definitely a trend, but it seems like the messaging, the product, and everything else need to be simplified, so that people can know how one initiative can correlate and coexist with other initiatives they have going.

Gardner: That’s interesting, because a recurring theme of our discussions over the past several months has been the complexity and the lack of clarity and understanding in SOA messaging and the business value. It seems to be also impacting how investors and those who value vendors look at this as an opportunity. It's like they don’t quite get it.

Steve Garone, do you agree with that, and do you think that there are certain types of companies, vendors, maybe systems integrators, that might be able to benefit from this complexity and lack of clarity?

Garone: Yes, I do. Dana, let me go back to your statement regarding messaging. Yes, we have had a variety of conversations about that, and in particular this sort of chasm that exists between technology messaging and business messaging. This is an architecture and a technology that can provide benefits from the technical point of view, but also from the business point of view.

It’s not clear that either the end-users or the providers of technology are able to clearly articulate either of them or have them interoperate -- so to speak -- have them mesh into a coherent vision of what SOA actually is and what it can deliver. So, I think 2007 is going to be a very important year for sorting out all that within organizations, and therefore in the responses that vendors provide in terms of messages.

Trip, I really loved your statement, "solving complexity with complexity." I think that’s right on the money. Another way to put that is that despite the Nirvana that SOA allegedly can provide, it’s still fundamentally about integration, and integration is always a difficult and complex problem. So, vendors who can address that in a robust and user-friendly way, are going to have significant amount of success.

In terms of companies like SAP, they sort of come at this from the enterprise application side. They in fact are going to have to move toward a model where they can present their products as a series of loosely coupled services that adhere to standards, and can therefore be integrated with other applications and easily accessed and used. I think they’re moving in that direction. I’m not really prepared to say that being unable to do this, or the speed at which a company like SAP is doing this, is affecting their financial results, but I do think that that’s going to become pretty much the ante that these companies have to put up in order to actually continue to play the game.

Gardner: It’s interesting, I speak to some systems integrators, and I characterize SOA as the gift that keeps giving, and they chuckle and they nod their heads and kind of wink. If you’re are a services organization, professional services, then complexity, integration, and such long-term trends always tend to be positive.

Garone: Yes, I agree with that.

Gardner: They also say they think SAP and perhaps other business or package business applications providers, monolithic application providers, are going to be yielding to some pressure in the market. Of course, it's too soon to tell from one quarterly result. We are having a robust global growth. Gross domestic products (GDP) are in growth mode. Even if the United States is in two to three percent growth, many of the emerging markets are growing much more rapidly.

You would think that a global vendor like SAP would be also enjoying some growth. So, it’s too soon to tell if there is a longer-term trend here. Let’s go over to Jim Kobielus. Jim, do you think that complexity is bad for vendors, good for SIs, and can you think of any types of vendor that might be able to go to Wall Street and say, "We’re going to be worth twice as much in two years because of SOA?"

Kobielus: I’ve joked for many years with people that the more change you have, the more complexity you have, and the more need you have for consultants to come in and explain it all. So, there’s always going to be an opportunity for consultants and analysts to explain what things like SOA are and are not, and what their relevance is to the average business user.

In terms of whether complexity is bad for vendors or good for vendors, and so forth, let’s take a step back here. In terms of the business opportunities in SOA or that SOA creates, first of all remember that SOA is just an architectural abstraction. How do you shrink wrap and make sexy something that’s just a three letter acronym?

In terms of differentiating your value prop as a vendor in this market, one of the problem with SOA is that SOA essentially has an architectural approach, smashing and dissolving the ability for vendor lock-in, because everybody is implementing common standards with any-to-any interoperability. So, these SOA universes are getting so multi-vendor and heterogeneous, the complexity can be overwhelming.

In many ways, the number-one opportunity that SOA presents for vendors are for those vendors that can reduce the complexity by providing SOA suites of software and other components, and secondarily those vendors, those service providers, who can provide SOA and integration best practices to enterprise customers.

So, how do you shrink-wrap SOA? Well, these suites -- from the likes of SAP/NetWeaver, Oracle, IBM, Microsoft, etc. -- implement all the piece-parts of SOA, the portals, the app servers, the databases, and the UDDI registries. Next, the Accentures of the world provide the warm bodies and warm brains of professional services to crunch this complexity down into greater simplicity, and deliver end-to-end integrated solutions that leverage the largesse that an SOA universe provides.

Gardner: What about middleware? We’ve seen IBM in the last several quarters come out with its newest growth engine, its software division, and within the software division the growth is in middleware: WebSphere. So, suddenly we’ve got the largest vendor and perhaps the largest SI as well, but their growth is in middleware. Oracle has also come out with some results in the last couple of quarters that have shown some strength in their middleware offerings.

Is SOA perhaps a leader to a larger infrastructure opportunity on Wall Street? What do you think, Joe McKendrick?

McKendrick: Well, Dana, I think basically at this point the terms middleware and SOA are fairly synonymous. If you talk about middleware and offering middleware out to the marketplace, you’re talking about some type of standardized, componentized service-based offering. So, absolutely. Middleware and SOA is the direction in which companies are going.

In terms of the opportunities, there are essentially three levels or three types of offerings vendors can offer, and put out to the marketplace. On one level, you have the applications. Then, there are the services, the systems integration (SI) services. And, then there are the development tools used to build these applications or systems. Microsoft, of course, still reigns as king of development tools. It has plenty of competition.

What I find interesting is on the application level, and this is where SAP has a lot of work cut out for it. As we see more standardized, componentized middleware evolving into the marketplace, we’re seeing more of a commoditization of software taking place, just as we saw commoditization of hardware back in the '80s and '90s. This stuff is probably happening under the radar at the this point, but I wouldn’t be surprised if we saw a Dell-type of business model begin to evolve in the software space, where you’re not an original equipment manufacturer or you’re not actually producing the software, but you’re pulling together components that someone else makes and offering it to the marketplace.

Gardner: Joe has raised an interesting issue, which is the business model. Let me take it back to Trip Chowdhry. Wall Street tends to frown on companies that are in cycles that have peaks and troughs, sometimes two or three years cycles. They’re difficult to predict. Wall Street prefers a recurring-revenue model that can show consistent returns and growth.

It seems to me that a move from an enterprise license approach, which we’ve seen in these large vendors, to a services-support-maintenance type of model, which we might expect with SOA offerings, might in fact please Wall Street. Do you have a sense of whether a shift in business model is in the offing and what it means?

Chowdhry: This is very good stuff that you mentioned, because there are some companies that are trying to innovate SOA as more of a service. There is a startup company called Mule, that’s trying to have -- I won’t say integration as a service, but has some SOA flavors to it. It’s not exactly SOA, but when I speak to these CIOs, they don’t say "I want SOA." They say "I want to make two systems work together with the least effort." That is a change over the last year. If that’s the problem, then the solutions could be many.

That’s one thing that we’re seeing. Then, of course, the Apache Foundation has its own product called ServiceMix, which is given out free, and JBoss coming out with its own SOA. Then, we have these commercial companies including BEA Systems, webMethods, and TIBCO, which have commercial offerings that are still on a license model. If you look at the various kind of plays in the market, one is software-as-a-service SaaS).

You have open-source alternatives like ServiceMix and JBoss, and then you have commercial pairs. Investors hate it when there is uncertainty, and there is no clear winner. Right now, there is no clear winner who can say, "Here is SOA." As someone on this panel mentioned, there is no product called SOA. You have a product called "database," but SOA is still a concept. And Wall Street is having a tough time putting a valuation or momentum behind SOA. Wall Street is thinking that any company that is in a disastrous situation evolves to be in "SOA."

IONA is one of them. WebMethods is another. TIBCO is struggling with growth. IBM, at the end of the day, is a services company, and since they are services company, they can push their own software the way it is, even though it’s not the best. BEA is also in transition. They don’t know what will happen to middleware. Oracle is trying to create a vertical stack. SAP is going with the horizontal stack. Microsoft is thinking the world is Microsoft.

Now, from an investor point of view, they see confusion and uncertainty, and when that occurs, they stay on the sidelines.

Gardner: All right, let’s take it over to Neil Ward-Dutton. Neil, it sounds like we ought to invest in bonds until this whole SOA thing gets settled down. What’s your perspective?

Ward-Dutton: I’ve just been listening to everyone and frantically writing stuff down. It’s interesting what Trip just said about how SOA is still not a product, and I absolutely agree with what some of the other guys said. It will never be a product. I think it's interesting about the observations that were made around IBM and Oracle in their middleware results, the contribution of middleware to their business. I think putting SOA in front of that is like putting the cart before the horse.

I agree with Trip in that what’s not happening is people saying, "I want SOA." What’s happening is a desire for delivering multi-channel services, dealing in a more consistent way with compliance mandates, making supply chains more flexible to allow better syndication of products and services, BPO and the need to integrate services across and between organizations. Those are the things that are being done, and SOA is more and more just the flavor with which those things are being delivered.

So, the big theme that is not going away -- and someone else said this five or 10 minutes ago -- is integration. It’s easy to think integration was a fashion in the late 1990s with Enterprise Application Integration (EAI), which incidentally was something that only really got off the ground once the big SIs got involved. The integration specialist players didn’t really make a huge market by themselves. What made a huge market that became a multi-billion-dollar market was actually the systems integrators. And, it’s the same with SOA.

Pure-play technology vendors providing really innovative little bits and pieces aren’t going to make a mainstream market. It’s only the SIs who really make that happen, because they can take a complex proposition and can actually communicate that effectively to the right communities that need to play into this.

Gardner: It would appear that SIs might be in the role of kingmaker when it comes to SOA -- if they are leading in terms of business opportunity, taking advantage of the change. They’re also going to be saying, "Well, here’s the best-of-breed that we suggest you use." IBM might favor its own software, but I think they’ve taken some pains to be a little bit agnostic or ecumenical.

If the customer says, "We’re an Oracle shop, and we want to use Oracle," then IBM will help them use Oracle. As Trip pointed out, IBM finds itself in a pretty good position because it has both the software business and the systems integration business. HP could also be considered in a good position. They have hardware, they have software partners, and they have this strong systems integration and professional services capability.

So, the question is: Are the SIs in a very strong and advantageous position over the next several years?

Ward-Dutton: SOA is a change in mindset. The challenge is primarily a change in the way you think about delivering capabilities through IT. So, what does that mean? Well, who’s going to make the money? The people who can help you change the way you think, not the people who give you bits of technology.

If you look at how the technology is being delivered, a lot of the technology that gives you the on-ramp to SOA -- the Web services enablement pieces -- those are being delivered free or nearly free as part of upgrades. The vendors are baking those technologies into products in the hope of making sure customers renew. That technology is finding its way to the market and to customers without lots of new money being spent. It's part of the regular upgrade cycle of technology, and the way that’s being procured.

The really interesting stuff is around change management, organization, and culture. That's where the real SOA market value is coming from. It absolutely plays into what everyone else was saying a minute ago about more of a subscription model on the technology side, because it's that kind of model that actually aligns the value of the investment with the value you’ll receive with the customer.

Gardner: Are you saying that SOA as a vision or a concept -- as it works its way into how people design, develop and integrate and manage and run their IT departments -- will in fact lower the amount of money that the market projects onto these vendors? Is that to say that SOA is a disruptive influence in terms of the amount of money required to do IT?

Ward-Dutton: No, at all. SOA does not create a whole pot of money to dive into. What it’s doing, because it’s a flavor of technology that’s being baked into existing upgrade cycles, is to create a replacement market. SOA-related technologies are replacing others.

Gardner: Let’s go around the table. I want to ask a very simple basic question and that is: Does SOA create more demand and more net spending over a two- or three-year period, or does SOA, in fact, spur on and create less IT spending? This is very general and aggregate, but we’re trying to determine whether SOA subtracts from the amount of money -- the pie that’s spent on IT -- or not? First, let’s go to Steve. What do you think?

Garone: Wow, that’s quite a question, Dana. I’m not sure that I can give a precise answer today.

Gardner: Gut instinct?

Garone: We’ve all recognized during these conversations that SOA is really just starting out, people are just really starting out with SOA. If you look at all the case studies that are around, and I’ve talked to end users about this, they’re really just beginning to ramp up with pilot projects or even small production projects, but it really hasn’t permeated a lot of organizations. There’s going to be a fair amount of money invested in new products and technologies, in training people to understand these and use them, and, in cases where you can’t do that or don’t see it cost-effective to do that, to go outside to system integrators to get that done.

Gardner: Steve, I was hoping for a short answer here.

Garone: I’m sorry.

Gardner: Is SOA a growth impetus or is it an contraction impetus?

Garone: I think it’s a growth impetus, especially in the short-term.

Gardner: Okay, Joe McKendrick?

McKendrick: It depends on how the economy does over the next two to three years, if the economy goes downward, we go into a recession or some type of economic downturn, when IT budgets decline, SOA will be seen as a strategy to cut cost. Formerly, a systems integrator would come in and spend about a year working on tying two systems together in an enterprise. If the two systems are SOA standardized to some degree, that could be shaved to a matter of weeks.

Gardner: So you’re seeing SOA as a cost-saving and somewhat of a contractor in terms of total spent?

McKendrick: If the economy goes into a downward cycle.

Gardner: Let’s just say the economy is adjusted, we’re going to have an adjusted perspective in terms of what the macro economics are.

McKendrick: IT spending probably will remain constant, but it’s going to shatter the types of projects that are out there. The systems integrators are in a tough spot because these one-year engagements that they could charge tens of thousands, hundreds of thousands, of dollars for are probably going to be going by the wayside. You’re going to see a lot of smaller engagements, smaller projects.

Gardner: Jim Kobielus, what do you think?

Kobielus: SOA is primarily going to be a belt-tightening approach that will come in very handy when the economy turns down. I mean if you do SOA right, it’s the whole notion of "don’t reinvent the wheel." In fact, you share, reuse, and consolidate all your existing silos down into fewer silos that can be then repurposed into new applications fairly quickly though some open standards.

If you do SOA right, then the SOA-specific projects will result in a leaner, meaner IT organization. Conceivably, the budgets might remain the same, but the share of the money will go not so much into the SOA plumbing, as UDDI registries and so forth, but will go for value-added projects in terms of business process reengineering (BPR). This will be based on the project accelerator templates that more and more of these SOA software vendors are providing -- more of the high-level systems integration.

Gardner: So over time there might be a bump in spending in order to actualize and realize SOA advantages, but once they are realized, the total amount of money required for IT should go down. This means a smaller pie for the vendors, which means vendors will be fighting over a smaller total marketplace, and we can expect some of the bigger players to perhaps have an advantage there.

McKendrick: In any given IT project, the role of the IT analyst will shrink and the role of the business analyst will grow, because then the value-added will be in process optimization as driven by the business people.

Gardner: I dare say that productivity will increase, but again we’re looking at this through the lens of how to size the total market for SOA and how vendors will adjust to that. Neil Ward-Dutton, what do you think about this, is SOA a contracting influence over time or is it a growth influence?

Ward-Dutton: It’s neither. Things won’t change, and the reason has to do with the size of the pie. There’s a maturing view of IT as a business enabler out there, and so IT budgets are really going to pretty much track the overall business performance. The thing that is going to happen is, while the budget stays the same, SOA enables better choices to be made around where the money gets spent in IT. That’s what’s really important.

It’s about being able to draw a line between stuff you want to reduce cost on and stuff you want to go crazy on, because it’s where you really differentiate the business. SOA enables you to move that line, as and when you want. That’s really interesting. It puts the customer in the driver's seat. SOA is like table stakes for the vendors, SOA is not a net new market opportunity, it's table stakes.

Gardner: So, spending remains fairly neutral in real terms, but productivity as a result of that spending increases?

Ward-Dutton: Yes.

Gardner: Trip Chowdhry, you’ve done some studies, how do you see the total pie for enterprise software and infrastructure being affected by SOA?

Chowdhry: If you look at the big picture, the industry is going through consolidation. Companies are merging, and that definitely puts integration as a top priority. Even before the two companies merge, the second thing they look at is: Can the two ITs work together, can the two IT departments, can the two products and platforms, work together between the two companies that are merging?

Definitely, an SOA kind of an architecture makes the M&A activity more fluid, but the question is, Who will benefit? Would it be software product vendors or would it be system integrators and consultants? I think there will be in two phases. The first phase would be the system integrators and consultants will win, because I think when we speak to the CIOs, anybody who can help them understand the mess gets the money. In the long term, software vendors may make money relatively or literally more than the SIs, because they may automate and simplify many of these processes. But net-net I think SOA is good for IT sector as a whole.

Gardner: Why, exactly, is it good as a whole?

Chowdhry: Because the past infrastructure has been wasted on legacy technology. Now, business is being done across every geography. Even a small company has to interact with a producer in China, a call-center in the Philippines, a software developer in India. When you think about the companies that are evolving today, it requires strong agility.

If you don’t like your vendor in India, you should be able to fire it and immediately get another one -- say, in Ghana or South Africa -- up and running. What SOA provides for a business user is flexibility, agility and the ability to optimize your processes to get the resource where it is cheapest and sell it where it’s more profitable. From a business point of view, SOA is a dream come true. The only problem is that it's not mature enough for everybody to put their hands around. The biggest problem SOA has is people and vendors saying, "It’s a concept! It’s a concept!"

The day people say, "SOA is a product, and I have a SOA product," like a database, then overnight SOA can become a reality and it could show the same sense of maturity and adoption that databases or Microsoft Office have.

Gardner: Okay. So, for investors, they want to see a product that they can sink their teeth into and say, "This is SOA and this is how it’s going to be sold into the enterprise." That way I can estimate and value the monetary flow.

Chowdhry: Exactly. They want to have an SKU and hear the price. That’s their mentality. Concepts are very difficult, because there’s no end to concept. The pushback I'm getting is that the problem with SOA is that it’s a constant evolution of various standards. First, it was SOAP; then, REST, and then the whole community debate about which protocol is good and which is not. Whenever there is so much discussion going on, people step back and say, "Let them figure it out. Maybe I'll put money into it next year."

Gardner: My take on this is that ultimately SOA is a growth influence, because it’s been the history of IT that when you’re about to crest from investment into recovering productivity benefits phase, and the cost begins to go down, there’s yet another thing that you have to begin to invest in. So, it’s ongoing. We’re still in the early stages of IT. This is not going to be something that you’re just going to mature to and then pull the plug and say, "We’re all done." It’s a journey and the spending will ultimately continue to grow.

Let's go on to our next subject. This week we saw Steve Jobs get on stage and introduce a fairly innovative confluence of what we’ve seen in multiple devices and multiple services. He’s taken a mobile device footprint, put a flat screen on it, given it a GUI, with a touch screen, brought together communications, both in text and voice, together with a full-blown operating system -- in this case OS X -- that can connect through Wi-Fi and through its Cingular partnerships, the EDGE network.

I’ve been very encouraged by this. It does a lot of what I would like to do from a personal productivity perspective. The iPhone product isn’t due until June, and it seems as if the feature and function list is still not completely nailed down.

My thoughts go back to when the Apple Newton was first discussed -- we’re talking 10 or 12 years ago. There was some vision about doing away with the PC for many workers. Now, notebook computers weren’t nearly as ubiquitous back then, and they were heavy. They were kludgey. The batteries didn’t work so well. But this notion of having a small-footprint device that can pretty much do what you’d want a PC to do strikes me as something that’s still of interest to the enterprise.

We see a lot of vertical niche applications with this. For example, when a FedEx person shows up at your home with a package, they’re essentially carrying a mobile PC device, but it’s highly verticalized and very expensive. It strikes me as being a very significant development, if we could get a common-footprint approach, an industry standard approach to this. If we could bring that into the enterprise and realize some of these benefits around business process and around edge workers and knowledge workers and business analysts getting out of their cubicles, going to where the activity is happening. They could tap applications through a mobile full-function browser anywhere, anytime, at low expense.

Am I alone in this? Steve Garone, do you think that things like the iPhone, and the Sony Mylo -- although that’s been directed more at college students -- are going to be the end-points for SOA?

Garone: It’s an interesting question, and to me there are actually two questions there. One is whether this is a useful device for the enterprise. Based on what I’ve seen of the iPhone, personally I’d love to have one. It’s very cool. The indications that I get from people who are actually implementing solutions in the enterprise is that there are some questions around what email systems it can work with, how robust the email is, which of course is very important in an enterprise environment. I was a little bit turned off by the fact that this is a single carrier only, which I think is contrary to the whole notion of an open interconnected network, and SOA, in particular.

Gardner: Not to mention competition.

Garone: Right. We can all talk about the tendency of Apple to do things like that throughout its history. But conceptually these kinds of devices from the very beginning have been part of the SOA vision. The question is: Is this the right device, does it meet enterprise needs in terms of email, and in terms of application access?

Gardner: Couldn’t you do Webmail through the browser?

Garone: You could conceivably do Webmail through the browser, but we haven’t even seen this device yet so we don’t know.

Gardner: If it runs OS X, it probably will run the Mac Mail program which is a strong POP client.

Garone: I agree. One issue that could come up, though, is one of the visions that has been talked about in the context of mobile devices and handheld devices is being able to access and download parts of all applications and databases for local use. The question is whether this the kind of device that can do that in an open and robust way in terms of other platforms and other technologies?

Gardner: Now, you mentioned you’d like one of these personally. This is how the PC entered in the enterprise. People liked PCs and they brought them in. They weren’t sanctioned by IT. They called them toys and trinkets. Perhaps the same effect could happen with something like the iPhone. What do you think, Joe McKendrick. Is this an end point that will find its way into the enterprise?

McKendrick: It’s interesting. I suspect it remains to be seen how deeply consumers embrace iPhone or whatever they’ll be calling it a few months from now. It’ll be interesting to see if this is something that enterprises embrace, which I don’t think will happen, I think it’s going to be kind of a bottom-up percolation.

Employees will be bringing these things into work with them, just as the cell phones and smart phones and PalmPilots had their roots, and the PCs began back in the early 1980s -- not as a deliberate strategy of the enterprise to reach these devices. But if there’s enough of a critical-mass of employees who are using the devices -- the iPhones, in this case -- then enterprises will begin to take a second look and reach out. I don’t think enterprises are looking at it right now or will be looking at it when it’s introduced in a few months.

Gardner: Jim Kobielus, do you see this as taking a step toward that notion of a mobile device that’s closer to a PC but does voice and other things that the enterprise could make good use of?

Kobielus: Oh yeah, for sure. But I don’t see anything terribly revolutionary in the iPhone, other than the fact that it comes from the Steve Jobs godhead. There’s no doubt that Apple does great design, does a great marketing, and does a great zeitgeist. They made a splash with the Newton and look what happened there. What in the iPhone is not already being used in corporate environments in a major way? People are carrying their iPods into the office and using them to listen to podcasts, or using their cell phones. They’ve already got mobile messaging and mobile browsers in a variety of devices that they’re using.

Gardner: They use iPods as a mobile storage device, too.

Kobielus: It's a nice design. I don’t want to sound to flip and cynical about it, but it's one of those things where Apple does a very good job, just like Microsoft does, of getting the average person on the street aware of the fact that we are reaching some sort of a tipping point in terms of putting these things in the hands of the average individual and the average office worker. Quite frankly, I’d like to wait another six to 12 months to see if this gets any traction in the enterprise arena. It probably will, but I don’t think there is anything strongly differentiating this particular client device.

Gardner: What do you think, Neil? Is having a low-form factor, but highly functional browser, something that will blow this open, something that brings together the necessary ingredients for a whole greater than the sum of the parts?

Ward-Dutton: No. Something I always try to remember is that I am not typical, and it's something I need to burn into my forehead. I am not typical, and I’m afraid neither are you guys. You are atypical. Most people aren't anything like us and don’t have our interests, nor all the time that we have to think about this stuff.

That mistake was at the heart of an awful lot of the far-out rhetoric that you heard in the late '90s- and early 2000-time around the previous generation of PDAs and mobile computing and how it was going to revolutionize the way that all business processes were enacted. They’re not, because actually it’s a minority of people that need this functionality. Most people aren’t mobile workers.

Gardner: Is it just another hype-curve here?

Ward-Dutton: I’m afraid so. As a consumer and an individual who loves gadgets, I think it's incredibly lust-worthy. I read some of the reviews and they'd crawl over broken glass to get one. It’s not going to be cheap, but as an individual, I think it’s awesome. Someone just said, "I’ll wait six to nine months." I’ll wait six to nine years.

Gardner: Trip Chowdhry, what do you think? You’re in Silicon Valley. Is this something that’s going to have an impact on the enterprise?

Chowdhry: Actually, I did see the iPhone at Macworld and I was very impressed. It seems like the name may have to change to Apple Phone, because Cisco has sued them. I think there are definitely enterprise kinds of applications that could work very easily on it. That is based on the demo that I saw at Macworld. First of all, browsing is very good -- very, very good. I would say very, very impressive.

It's very easy to use. If somebody sends you an email attachment or PDF or Word file, you can see it like you'd see it on a computer. It's totally amazing. You can expand it and contract it. The visual things are very good. Instant messaging is another application, which -- at least in the financial sector -- people like to communicate with.

Someone on this panel mentioned that the feature-effects are not complete. I think down the road there will be two or three versions. One could be for teenagers, one could be for a business user edition or small business edition, and the third could be for entertainment. The IM feature, as well as email and attachments, which are very business-centric, could do very well.

IM was one of the things I feel could be a killer app. I wouldn’t believe that many of the enterprise applications, like of stuff or running some mobile enterprise ERP system, on this PDA would do justice to it. But you can effectively communicate with your colleagues without a lot of baggage, and have four hours of battery life and being able to carry a very small battery as a spare.

I think it’s a good form-factor that can fit in every pocket. The feature sets still needs to be sorted out, but it’s a development platform. So, third-party guys will also come out with their own platform. First step, it will be a good replacement for products like BlackBerry and others.

Gardner: I tend to look at this optimistically in regard to the enterprise. I think that for salespeople, the mobile warriors, for those who are in the field, or internally on a factory floor, for example, this pulls together a lot of what was necessary and doesn’t require the integration on the back end.

The IT people will say, "Listen, all the stuff we’ve got can be plugged into this, whether it’s through the browser, through POP, through other standards of instant messaging. We can have a VPN go to it, and have secure access through the browser to our applications."

I think what makes this an intriguing to the enterprise is that Jobs and company have done the integration for them, and they don’t have to go and take each and every application or function and force-feed it to a device. That's done through standards and it could be very interesting as an accelerator to replacing the laptop and even desktop computer for a lot of workers.

Chowdhry: We think more in terms of data, but the people who were standing next to me [at Macworld] were representing a biotechnology company. They said, “I'll use iPhone at work, just to make sure I can scan through my voicemails.” That’s a feature where you can preview your voicemails just like you preview your emails. They felt that was the killer application for the enterprise. They said, “We have 20 to 30 voice messages in the morning. We have to go from one to thirty without knowing which one is important.”

Gardner: As I have alluded to in some of my blogs, if we bring Voice over IP (VOIP) into this, and we can do telephony and get the convergence benefits of having CTI and other benefits from an all-IP environment -- a lot of what we used to think of as "unified messaging" becomes a reality. And, as you say, that’s a very important productivity benefit.

McKendrick: Dana, this is Joe. The real test for the iPhone will be if a year from now we can do this entire podcast all using iPhones.

Kobielus: The problem with iPhone is that the hoopla surrounding it has still got us fixated on this notion that we all need or want one gadget for everything. I think the way it's all shaking out is that each of us possesses a federation of gadgets of our own. I don’t think so much that iPhone is a replacement for your laptop or even for your desktop, but rather yet another device that will hook up with them in various ways, through Wi-Fi and Bluetooth, and so on.

Then, you can zip all kinds of contents back in forth. What interests me more than iPhone from this past week is Apple TV or iTV, whatever they’re calling it -- the IPTV appliance. That seems to me to be a more exciting development on the whole. In a year’s time, we simply can be doing this video podcast using Apple TV.

Gardner: I would just add to that. I think this is going to reduce the number of gadgets I’ve got to have. In a sense, my notebook computer becomes my server, and it serves my television as a node using something like Apple TV or TiVo or Slingbox or whatever it might be. My notebook computer becomes my server for my content, so that I can manage it up to the cloud or to the other devices. It could be the cell phone, an iPod, or an iPhone. It really increases the value and strength of what the notebook computer does. It gives me a mobility node and also a home entertainment node. And that’s, I think, the vision here.

Kobielus: Didn’t Apple release, or didn’t they discuss, a home server this week as well?

Gardner: No, that was Microsoft, at CES.

Kobielus: Microsoft, I get these guys mixed up.

Gardner: The notion of a server is necessary, but whether we actually want to go out and buy another $1,000 Microsoft device that’s going to require a systems administrator behind every potted plant in every living room is still an open question.

Kobielus: I think it’s inevitable. I think the whole notion of a SOHO server is coming to the fore, I think every household in the world is going to have its own SOHO server before long, to coordinate this federation of gadgets and channels.

Gardner: Will it be a discrete box or will it be a virtualized server, where part of it’s on the cloud and part of it is just availing the extra power, capacity and storage I’ve already got on my notebook computer?

Kobielus: It’s a so-called set-top box repurposed.

Garone: Now, Dana, this is Steve. I just want to ask a sort of a devil’s advocate question here. Given what you just said, how does that pertain to the enterprise?

Gardner: Well, it’s interesting because if more and more people do this and they're getting this great functionality, productivity, and I guess you could call it client-server approach for their home and their personal life, and then they walk into their enterprise and they’re left with this kludgey, uncoordinated, un-integrated stuff, they’re going to be thinking, "Wow, I’d be better off having my SOHO and be a contractor to this enterprise than I would be by being actually a member of the enterprise."

Garone: That’s probably true, but I think what I’m getting at here is you see this as a very powerful browser, and certainly you can’t argue with that. But in terms of doing real enterprise work on this device, is this the right device for that at this point in time? I’m not getting the sense that it is -- maybe some day.

Gardner: I think it’s a combination of a notebook computer and something like the iPhone, because all the enterprise has to do is put things into an IP stream and put it onto a VPN, and that way I can access it through my notebook if I want full feature, or my iPhone type of a device if I want mobility. Plus that same device can then be something I use in my home for entertainment and managing my personal life as well.

So, for me this frees up the enterprise. I, as a user, have to worry about the node, the end-device. And they, the enterprise IT department, simply need to worry about putting their applications or their services or their SOA services into a stream through IP through a VPN.

Garone: That paints the picture of this device being an extremely thin client that communicates with and leverages assets that are on a server.

Gardner: It’s a rich convergence client, which is really what people have been looking for.

Chowdhry: I had a comment regarding the iTV, I saw it. Actually, I came back little less optimistic about it, because it uses Wi-Fi, and there are serious problems with Wi-Fi if you want to deliver high definition TV. Wi-Fi has a lot of problems with collision and jitteriness. They were showing some high definition videos on iTV and you could see jitteriness. For the way it’s being positioned, delivering high definition TVs within your home, at maximum you could only do it as one channel.

I am little less optimistic about that, because the right technology for something like that is probably a power-line technology. There’s a company, I think its called DS2, which has these 200 megabits-per-second chips that you could just broadcast right over your existing home networks. Some company -- I think its LG Electronics or Samsung -- are trying to use broadband 200 megabits power per second right into the electrical outlet. With that, you can deliver four to five high-definition streams.

Probably the first generation of iTV could just have mere success. It will take at least two or three years before iTV also incorporates some of these power-line technologies to get at least consistent broadband within the home.

Gardner: That’s a good point. The iPhone, iTV and even the AirPort (the Apple Wi-Fi device) are limited right now. But the fact that they are putting so much emphasis into it tells me that there are might be further generations of these wireless network capabilities out there that they’re banking on. It’s the paradigm that they like. Whether the current level of standards and capabilities meets the task of the future remains to be seen.

Okay, folks, we’re about out of time. I want to thank our guests: Steve Garone, Joe McKendrick, Jim Kobielus, Neil Ward-Dutton and Trip Chowdhry. Thanks all for joining.

I’m Dana Gardner, principal analyst at Interarbor Solutions. You’ve been listening to BriefingsDirect, SOA Insights Edition. Come back and listen again next week.

If any of our listeners are interested in learning more about BriefingsDirect B2B informational podcasts or to become a sponsor of this or other B2B podcasts, please fill free to contact me, Dana Gardner at 603-528-2435.

Listen to the podcast here.

Transcript of Dana Gardner’s BriefingsDirect SOA Insights Edition, Vol. 8. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.

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