Showing posts with label Morgenthal. Show all posts
Showing posts with label Morgenthal. Show all posts

Sunday, February 07, 2010

BriefingsDirect Analyst Panelists Peer into Crystal Balls for Latest IT Growth and Impact Trends

Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 49, with panel of analysts discussing the future of cloud computing, SOA, social networks and the economy.

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Dana Gardner: Hello, and welcome to the latest BriefingsDirect Analyst Insights Edition, Vol. 49. I'm your host and moderator Dana Gardner, principal analyst at Interarbor Solutions.

This periodic discussion and dissection of IT infrastructure related news and events, with a panel of industry analysts and guests comes to you with the help of our charter sponsor, Active Endpoints, maker of the ActiveVOS business process management system.

Our topic this week hones in on the predictions for IT industry growth and impact, now that the recession appears to have bottomed out. We're going to ask our distinguished panel of analysts and experts for their top five predictions for IT growth through 2010 and beyond.

To help us gaze into the new IT trends crystal ball we are joined by our panel. Please join me in welcoming Jim Kobielus, senior analyst at Forrester Research. Hey, Jim.

Jim Kobielus: Hey, Dana. Hi, everybody.

Gardner: Joe McKendrick, independent analyst and prolific blogger. Howdy, Joe.

Joe McKendrick: Hi, Dana. Very nice to be here.

Gardner: Tony Baer, senior analyst at Ovum. And, Brad Shimmin, principal analyst at Current Analysis. Hi, Brad.

Brad Shimmin: Hey, Dana.

Gardner: Dave Linthicum, CEO of Blue Mountain Labs. Good to have you with us, Dave.

Dave Linthicum: Hey, guys.

Gardner: Dave Lounsbury, vice-president of collaboration services at The Open Group. How do you do, Dave? [Disclosure: The Open Group is a sponsor of BriefingsDirect podcasts. See more on the consortium's recent conference in Seattle.]

Dave Lounsbury: Hello, Dana. Happy to be here.

Gardner: Jason Bloomberg, managing partner at ZapThink.

Jason Bloomberg: Good morning, everybody.

Gardner: And, JP Morgenthal, independent analyst and IT consultant. Good to have you with us, JP.

JP Morgenthal: Good to be here.

Gardner: I've decided to do this in a random order this time. So, based on the pick of the short straw, Brad Shimmin, you're up, what are your top five predictions for IT in 2010?

Brad Shimmin

Shimmin: Thanks, Dana. And, I have got a set of five. Obviously, mine are geared toward collaboration and conferencing, so I'll just put that out there as a caveat, but I think it will help if we're going to try to strive for consensus later on.

Let me just begin with the first and most obvious, which is that clouds are going to become less cloudy. Vendors, particularly those in the collaboration space, are going to start to deliver solutions that are actually a blend of both cloud and on-premise.

We've seen Cisco take this approach already with front-ending some web conferencing to off-load bandwidth requirements at the edge and to speed internal communications. IBM, at least technically, is poised do the same with Foundations, their appliances line, and LotusLive their cloud-based solution.

With vendors like these that are going to be pulling hybrid, premise/cloud, and appliance/service offerings, it's going to really let companies, particularly those in the small and medium business (SMB) space, work around IT constraints without sacrificing the control and ownership of key processes and data, which in my mind is the key, and has been one of the limiting factors of cloud this year.

Next up, I have "software licensing looks like you." As with the housing market, it's really a buyer's market right now for software. It's being reflected in how vendors are approaching selling their software. Customers have the power to demand software pricing that better reflects their needs, whether it's servers or users.

I think the weapons will be user facing enterprise apps that work in concert with line-of-business solutions on the back-end.

So, taking cues from both the cloud and the open-source licensing vendors out there, we will see some traditional software manufacturers really set up a "pick your poison" buffet. You can have purchase options that are like monthly or yearly subscriptions or flat perpetual licenses that are based on per seat, per server, per CPU, per request, per processor, or per value unit, with a shout out at IBM there -- or any of the above.

You put those together in a way that is most beneficial to you as a customer to meet your use case. We saw last year with web conferencing software that you could pick between unlimited usage with a few seats or unlimited seats with limited usage. You can tailor what you pay to what you need.

Third for me is the mobile OS wars are going to heat up. I'm all done with the desktop. I'm really thinking that it's all about the Google Chrome/Android. I know there's a little bit of contention there, but Google Chrome/Android, Symbian, RIM, Apple iPhone, Windows Mobile, all those devices will be the new battle ground for enterprise users.

I think the weapons will be user facing enterprise apps that work in concert with line-of-business solutions on the back-end. We'll see the emergence of native applications, particularly within the collaboration space, that are capable of fully maximizing the underlying hardware of these devices, and that's really key. Capabilities like geo-positioning, simultaneous web invoice and, eventually, video are really going to take off across all these platforms this year.

Win or lose

But, the true battle for this isn't going to be in these cool nifty apps. It's really going to be in how these vendors can hopefully turn these devices into desktops, in terms of provisioning, security, visibility, governance, etc. That, to me, is going to be where they're going to either win or lose this year.

Four is "The Grand Unification Theory" -- the grand unification of collaboration. That's going to start this year. We're no longer going to talk about video conferencing, web conferencing, telepresence, and general collaboration software solutions as separate concerns. You're still going to have PBXs, video codecs, monitors, cameras, desk phones, and all that stuff being sold as point solutions to fill specific requirements, like desktop voice or room-based video conferencing and the like.

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But, these solutions are really not going to operate in complete ignorance of one another as they have in the past. Vendors with capabilities or partnerships spanning these areas, in particular -- I'm pointing out Cisco and Microsoft here -- can bring and will be bringing facets of these together technically to enable users to really participate in collaboration efforts, using their available equipment.

It will be whatever they have at hand. They're not forced to go to a particular room to participate in a conference, for example. They can just pick up their mobile phone or their preferred method of communication, whether they just want to do voice, voice/video, or chat.

For enterprise-focused vendors, we're going to see them playing in the waves in a number of ways.

And last but not least ... I'm sorry. I'm probably going to get kicked for this, but, because I'm a technical optimist . . . the Google Wave is really going to kick in in 2010. I may be stating the obvious, or I maybe stating something that's going to be completely wrong, but I really feel that this is going to be the year that traditional enterprise collaboration players jump head long into this Google Wave pool in an effort to really cash in on what's already a super-strong mind share within the consumer ranks.

Even though they have a limited access to the beta right now, there are over a million users of it, that are chunking away at this writing code and using Wave.

Of course, Google hosted rendition will excel in supporting consumer tasks like collaborative apps and role playing games. That's going to be big. For enterprise-focused vendors, we're going to see them playing in the waves in a number of ways. They're going to embed them within existing collaborative applications. They're going to enable existing apps to interact with Google Waves.

This is the case with Novell’s recently announced Pulse. You guys saw that. They're going to extend existing apps to make use of wave-like capabilities. They're going to create some competitive functionality that looks like a Google Wave but isn't a Google Wave, and doesn't really care what Google is doing with Wave. And that's it, Dana.

Gardner: Well, Brad, that was an excellent list. If I can plumb through this a little bit, it sounds like we are going to be using Google Wave to do unified collaboration on a mobile operating system, coming from the cloud and we are going to get to negotiate for the price we will pay for it.

Shimmin: Perfect. You strung them together like jewels on a thread. Thanks.

Gardner: Dave Linthicum, you're up next. What are your top five?

Dave Linthicum

Linthicum: My top five are going to be, number one, cloud computing goes mainstream. That's a top prediction, I'm just seeing the inflection point on that.

I know I'm going out on the edge on this one. Go to and do a search on the cloud-computing jobs postings. As I posted on my InfoWorld blog few weeks ago, it's going up at an angle that I have never seen at any time in the history of IT. The amount of growth around cloud computing is just amazing. Of course, it's different aspects of cloud computing, not just architecture with people who are cloud computing developers and things like that.

The Global 2000 and the government, the Global 1, really haven't yet accepted cloud computing, even though it's been politically correct for some time to do so. The reason is the lack of control, security concerns, and privacy issues, and, of course, all the times the cloud providers went down. The Google outages and the loss of stuff with T-Mobile, hasn't really helped, but ultimately people are gearing up, hiring up, and training up for cloud computing.

We are going to see a huge inflection point in cloud computing. This can be more mainstream in Global 2000 than it has been in the past. It's largely been the domain of SMBs, pilot projects, things like that. It's going to be a huge deal in 2010 and people are going to move into cloud computing in some way, shape, or form, if they are in an organization.

People are pushing back on that now. They’ve had it. They really don’t want all of their information out there on the Internet ...

That's going to continue going forward. I don’t think we are going to outsource everything as a cloud, but, in the next five years, there is going to be a good 10-20 percent existing on the cloud, which is huge.

The next is privacy. I’ll shift gears a bit. Privacy becomes important. Facebook late last year pulled a little trick, where they changed the privacy settings, and you had to go back and reset your privacy settings. So, in essence, if you weren’t diligent about looking at the privacy settings within your Facebook account and your friends list, your information was out on the Internet and people could see it.

The reason is that they're trying to monetize people who are using Facebook. They're trying to get at the information and put the information out there so it's searchable by the search engines. They get the ad revenue and all the things that are associated with having a big mega social media site.

People are pushing back on that now. They’ve had it. They really don’t want all of their information out there on the Internet, who their friends are, who they are dating, all these sorts of things. They want it secured. I think the rank and file are going to demand that regulations be set.

People are going to move away from these social media sites that post their private information, and the social media sites are going to react to that. They're going to change their policies by the end of 2010, and there's going to be a big uproar at first.

Cloud crashes

Next, the cloud crashes make major new stories. We've got two things occurring right now. We've got a massive move into the cloud. That was my first prediction. We have the cloud providers trying to scale up, and perhaps they’ve never scaled up to the levels that they are going to be expected to scale to in 2010. That's ripe for disaster.

A lot of these cloud providers are going to over extend and over sell, and they're going to crash. Performance is going to go down -- very analogous to AOL’s outage issues, when the Internet first took off.

We're going to see people moving to the cloud, and cloud providers not able to provide them with the service levels that they need. We're going to get a lot of stories in the press about cloud providers going away for hours at a time, data getting lost, all these sorts of things. It's just a matter of growth in a particular space. They're growing very quickly, they are not putting as much R&D into what these cloud systems should do, and ultimately that's going to result in some disasters.

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Next, Microsoft becomes cloud relevant. Microsoft, up to now, has been the punch line of all cloud computing. It had the Azure platform out there. They've had a lot of web applications and things like that. They really have a bigger impact in the cloud than most people think, even though when we think of cloud, we think of Amazon, Google, and larger players out there.

Suddenly, you're going to see Microsoft with a larger share of the cloud, and they're going to be relevant very quickly.

With Azure coming into its own in the first quarter of next year in the rise of their office automation applications for the cloud, you are going to see a massive amount of people moving to the Microsoft platform for development, deployment, infrastructure, and the office automation application. The Global 2000 that are already Microsoft players and the government that has a big investment in Microsoft are going to move in that direction.

Suddenly, you're going to see Microsoft with a larger share of the cloud, and they're going to be relevant very quickly. In the small- and medium-sized business, it's still going to be the domain of Google, and state and local governments are still be going to be the domain of Google, but Microsoft is going to end up ruling the roost by the end of 2010.

Finally, the technology feeding frenzy, which is occurring right now. People see the market recovering. There is money being put back into the business. That was on the sidelines for a while. People are going to use that money to buy companies. I think there is going to be a big feeding frenzy in the service-oriented architecture (SOA) world, in the business intelligence (BI) world, and definitely in the cloud-computing world.

Lots of these little companies that you may not have heard about, which may have some initial venture funding, are suddenly going to disappear. Google has been taking these guys out left and right. You just don’t hear about it. You could do a podcast just on the Google acquisitions that have occurred this week. That's going to continue and accelerate in 2010 to a point where it's almost going to be ridiculous. Well, with that, Dana, those are my predictions.

Gardner: Excellent, Dave. We appreciate that. Let's go to other Dave today. This is Dave Lounsbury. Tell us please from your perspective at The Open Group, what your top five predictions are?

Dave Lounsbury

Lounsbury: I'm going to jump on the cloud bandwagon initially. We’ve seen huge amounts of interest across the board in cloud and, particularly, increasing discussions about how people make sense of cloud at the line-of-business level.

Another bold prediction here is that the cloud market is going to continue to grow, and we'll see that inflection point that Dave Linthicum mentioned. But, I believe that we're going to see the segmentation of that into two overarching markets, an infrastructure-as-a-service (IaaS) or platform-as-a-service market (PaaS) and software-as-a-service (SaaS) market. So that's my number one prediction.

We'll see the continued growth in the acceptance by SMBs of the IaaS and PaaS for the cost and speed reasons. But, the public IaaS and PaaS are going to start to become the gateway drug for medium- to large-size enterprises. You're going to see them piloting in public or shared environments, but they are going to continue to move back towards that locus of controlling their own resources in order to manage risk and security, so that they can deliver their service levels that their customers expect.

My third prediction, again in cloud, is that SaaS will continue to gain mainstream acceptance at all levels in the enterprise, from small to large. What you’ll see there is a lot of work on interfaces and APIs and how people are going to mash up cloud services and bring them into their enterprise architectures.

Of course all of this is set against the context that all distributed computing activities are set against, which is security and privacy issues.

This is actually going to be another trend that Dave Linthicum has mentioned as a blurring of a line between SaaS and SOA at the enterprise level. You’ll see these well on the way to emerging as disciplines in 2010.

The fourth general area is that all of this interest in cloud and concern about uptake at the enterprise level is going to drive the development of cloud deployment and development skills as a recognized job function in the IT world, whether it's internal to the IT department or as a consultancy. Obviously, as a consultancy, we look to the cloud to provide elasticity of deployment and demand and that's going to demand an elastic workforce.

So the question will be how do you know you are getting a skilled person in that area. I think you'll see the rise of a lot of enterprise-level artifacts such as business use cases, enterprise architecture tools, and analytic tools. Potentially, what we'll see in 2010 is the beginning of the development of a body of knowledge: practitioners in cloud. We'll start to recognize that as a specialty the way we currently recognize SOA as a specialty.

Of course all of this is set against the context that all distributed computing activities are set against, which is security and privacy issues. I don’t know if this is a prediction or not, but I wonder whether we're going to see our cloud harbor in 2010 its first big crash and the first big breach.

We've already mentioned privacy here. That's going to become increasingly a public topic, both in terms of the attention in the mainstream press and increasing levels of government attention.

There have been some fits and starts at the White House level about the cyber czar and things like that, but every time you turn around in Washington now, you see people discussing cyber security. How we're going to grow our capability in cyber security and increasing recognition of cyber security risk in mainstream business are going to be emerging hot topics of 2010.

Gardner: Thanks so much. Next up, Jim Kobielus. Tell us where you see things going in 2010. Your top five, please?

Jim Kobielus

Kobielus: Yes, my top five in 2010. In fact, I blogged that yesterday. I blogged six yesterday, but I'll boil it down to five and I'll make them even punchier. It's only going to be focused on analytics my core area.

Number one: IT more or less gives up BI. Let me constrain that statement. IT is increasingly going to in-source much of BI development of reports, queries, dashboards, and the like to the user through mash up self-service approaches, SaaS, flexible visualization, and so forth, simply because they have to.

IT is short staffed. We're still in a recession essentially. IT budgets are severely constrained. Manpower is severely constrained. Users are demanding mashups and self-service capabilities. It's coming along big time, not only in terms of enterprise deployment, but all the BI vendors are increasingly focused on self-service solution portfolios.

Number two: The users who do more of the analytics development are going to become developers in their own right. That may sound crazy based on the fact that traditionally data mining is done by a cadre of PhD statisticians and others who are highly specialized.

Basically, we're taking data mining out of the hands of the rocket scientists and giving it to the masses through very user-friendly tools.

Question analysis, classification and segmentation, and predictive analytics is coming into the core BI stack in a major way. IBM’s acquisition of SPSS clearly shows that not only is IBM focusing there, but other vendors in this space, especially a lot of smaller players, already have some basic predictive analytics capabilities in their portfolios or plan to release them in 2010.

Basically, we're taking data mining out of the hands of the rocket scientists and giving it to the masses through very user-friendly tools. That's coming in 2010.

Number three: There will be an increasing convergence of analytics and transactional computing, and the data warehouse is the hub of all that. More-and-more transactional application logic will be pushed down to be executed inside of the data warehouse.

The data warehouse is a greater cloud, because that's where the data lives and that's where the CPU power is, the horse power. We see Exadata, Version 2 from Oracle. We see Aster Data, nCluster Version 4.0. And, other vendors are doing similar things, pointing ahead to the coming decade, when the data warehouse becomes a complete analytic application server in its own right -- analytics plus transaction.

Predictive analysis

Number four: We're seeing, as I said, that predictive analytics is becoming ever more important and central to where enterprises are going with BI and the big pool of juicy data that will be brought into predictive model. Much of it is coming from the whole Web 2.0 sphere and from social networks -- Twitters, Facebooks and the like, and blogs. That's all highly monetizable content, as Dave Linthicum indicated.

We're seeing that social network analysis has a core set of algorithms and approaches for advanced analytics that are coming in a big way to data mining tools, text analytics tools, and to BI. Companies are doing serious marketing campaign planning, optimization, and so forth, based on a lot of that information streaming in real-time. It's customer sentiment in many ways. You know pretty much immediately whether your new marketing campaign is a hit or a flop, because customers are tweeting all about it.

That's going to be a big theme in 2010 and beyond. Social network analysis really is a core business intelligence for marketing and maintaining and sustaining business in this new wave.

Right now, we're in the middle of a price war for the enterprise data warehousing stack hardware and software.

And, finally, number five: Analytics gets dirt cheap. Right now, we're in the middle of a price war for the enterprise data warehousing stack hardware and software. Servers and storage, plus the database licenses, query tools, loading tools, and BI are being packaged pretty much everywhere into appliances that are one-stop shopping, one throat to choke, quick-deploy solutions that are pre-built.

Increasingly, they'll be for specific vertical and horizontal applications and will be available to enterprises for a fraction of what it would traditionally cost them to acquire all those components separately and figure it out all themselves. The vendors in the analytics market are all going appliance. They're fighting with each other to provide the cheapest complete application on the market.

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You can see what Oracle has already done with Exadata Version 2, 20K per usable terabyte. We see other vendors packaging even more functionality into these appliances and delivering them to mid-market and large enterprises. Small companies can deploy a complete analytics environment with BI, ETL, and everything for much less than they could just a few years ago.

And, one last thing. There is a cloud twist in everything I am describing or discussing here. Analytics gets dirt cheap, and even more so, as more of this functionality is available in the cloud. We're seeing a boom of SaaS-based BI and data warehousing vendors. In the coming years, pay-as-you-go, subscription-based, low risk, fund it out of OpEx rather than CapEx, is coming to analytics everywhere. So, that will be a huge trend in the coming year.

Gardner: Thanks Jim. Next, we're going to Joe McKendrick. Joe, what's your top five for 2010?

Joe McKendrick

McKendrick: Thanks, Dana. You also gave us the option to talk about the decade ahead, and I was thinking whether I should talk about the year ahead or the decade ahead. It occurred to me that just as we had a 2000 problem a decade ago, we now have a year 2012 problem. I just saw the movie 2012 a couple of weeks ago. The world is going to end and it's going to get flooded.

Gardner: So, the cloud is going to be big, dark, and made of soot. That's it. It's all over. We are all going to – cloud.

McKendrick: Exactly. I might have some arks floating around, and you worry about the IT systems on those arks.

Gardner: Well, you are a pessimist. Back down to earth.

McKendrick: Back down to earth. Okay, 2010. My world, of course, is SOA, and the big question for 2010 is what will Anne Thomas Manes have to say about SOA to start off the year?

Gardner: What's dead this year?

McKendrick: Right. In the first week of this year, Anne came out and said that SOA is dead. That caused a lot of angst, anxiety, discussion, and brooding for pretty much the entire year. It really had an impact.

Gardner: It kept you in page views.

McKendrick: Yeah, thanks, Anne. So, I am hoping Anne will come out with something good at the beginning of 2010. She'll probably say that SOA is still dead. That's my prediction.

Gardner: What is the state of SOA in 2010, Joe?

McKendrick: Part of it will be tied into the economy. By all indications, 2010 is going to be a growth year in the economy. We're probably in this V shape. See, I'm actually an optimist, not a pessimist. The world may end in 2012, but for 2010, we're going to have a great economy. It's going to move forward.

For this decade, we're looking forward to the rise of something called "social commerce," where the markets are user-driven and are conversations.

What happened with SOA? SOA really proved itself through 2009. I know a lot of instances where companies had a service-oriented culture, had flexibility, had visibility into their applications, their services, and their data. This played a great role in helping them pull through in terms of visibility into the supply chains and logistics. I know of a home builder -- and that's a tough industry -- where a SOA implementation really increased its sales turnaround time and enabled it to tighten up, be more efficient, and pull through this economic dark hole we went through.

I think 2010 will be a year of growth. As I said in previous podcast, we had these economic downturns: 2000-2001, 1990-1991, 1981-82. These downturn periods were always followed by periods of spectacular growth, especially in terms of technology -- and usually a huge paradigm shift in technology.

It's hard to say what. Nobody at the time of those downturns could have predicted what was ahead. Nobody predicted the dot-com boom back in 1992. But, what we're seeing is the service-oriented thinking. It's not just IT. It's service-oriented across the board -- the idea of the loosely coupled business, businesses that could start on a shoe string budget in IT, thanks to the availability of cloud, and move forward in the market.

Ten years ago, we saw the rise of e-commerce. For this decade, we're looking forward to the rise of something called "social commerce," where the markets are user-driven and are conversations. To use the quote from the book "The Cluetrain Manifesto," markets will be driven by users who interact with each other. Companies that will succeed and get ahead will encourage this social commerce, the interaction with customers over social networking sites.

Gardner: Alright Joe, I'm confused. Are we still on number one prediction or are you on number two?

McKendrick: That was my number one prediction, the impact of the economy. We're going to start seeing some new paradigms rising. Folks here talk about cloud computing.

The new normal

Number two: Cloud computing. We’ve all been talking about that. That's the big development, the big paradigm shift. Clouds will be the new "normal." From the SOA perspective, we're going to be seeing a convergence. When we talk about cloud, we're going to talk about SOA, and the two are going to be mapped very closely together.

Dave Linthicum talks a lot about this in his new book and in his blog work. Services are services. They need to be transparent. They need to be reusable and sharable. They need to cross enterprise boundaries. We're going to see a convergence of SOA and cloud. It’s a service-oriented culture.

Number three: Google is becoming what I call the Microsoft of the clouds. Google offers a browser and email. It has a backend app engine. It offers storage. They're talking about bringing out an OS. Google is essentially providing an entire stack from which you can build your IT infrastructure. You can actually build a company’s IT infrastructure on the back of this. So, Google is definitely the Microsoft of the cloud for the current time.

Microsoft is also getting into the act as well with cloud computing, and they are doing a great job there. It’s going to be interesting to see what happens. By the way, Google also offers search as a capability.

Gardner: Is there anything that Google won’t do? That’s the easier list. What won’t Google get into this year?

McKendrick: They probably won’t get into building and selling hardware.

Gardner: I heard about a phone they’re into selling. Are they in partnership with a phone?

Everybody will be providing and publishing services, and everybody will be consuming services.

McKendrick: Right, with Verizon, but it's the only thing they won’t really touch.

Gardner: My prediction is that they won’t get into snow plowing. Google will not get into snow plowing in 2010. That’s my only safe bet.

McKendrick: That’s probably about it.

Number four: We're going to see less of a distinction between service providers and service consumers over clouds, SOA, what have you. That's going to be blurring. Everybody will be providing and publishing services, and everybody will be consuming services.

You're going to see less of a distinction between providers and consumers. For example, I was talking to a reinsurance company a few months back. They offer a portal to their customers, the customers being insurance companies. They say that they offer a lot of analytics capabilities that their customers don’t have, and the customers are using their portal to do their own analytic work.

They don’t call it cloud. Cloud never entered the conversation, but this is a cloud. This is a company that’s offering cloud services to its consumers. We're going to see a lot of that, and it’s not necessarily going to be called cloud. You're not going to see companies saying, "We're offering clouds to our partners." It’s just going to be as the way it is.

Number five: In the enterprise application area, we've seen it already, but we're going to see more-and-more pushback against where money is being spent. As I said, the economy is growing, but there is going to be a lot of attention paid to where IT dollars are going.

I base this on a Harvard Medical School study that just came out last month. They studied 4,000 hospitals over a three-year period and found that, despite hundreds of millions of dollars being invested at IT, IT had no impact on hospital operations, patient care quality, or anything else.

Gardner: And, that’s why I don’t go to hospitals.

McKendrick: There are ramifications for other industries as well. What’s the impact of all this IT expenditure? Ultimately, this may help the cloud model in the long run. Okay, that's my five.

Gardner: Excellent. Let’s go to JP Morgenthal. What are your top five predictions, JP?

JP Morgenthal

Morgenthal: First, I'm going to predict that Microsoft, Oracle, Google, IBM -- none of them are going to be supporting Tiger Woods as a sponsor next year.

Gardner: Another risk-taker.

Morgenthal: Sorry, man. I had to throw it out there. It was just sitting there, and no one else picked it up, like a $100 bill on the street. Okay, number one: Cyber security. As someone stated earlier, it's interesting what’s going on out there. I am beginning to understand how little people actually understand about the differences between what security is and information assurance is, and how little people realize that their systems are compromised and how long it takes to eliminate threat within an organization.

Because of all of this connectedness, social networking, and cloud, a lot of stuff is going to start to bubble up. People who thought things were taken care of are going to learn that it wasn’t taken care of, and there will be a sense of urgency about responding to that. We're going to see that happen a lot in the first half of 2010.

Number two: Mobile. The mobile platforms are now the PC of yesterday, right? The real battle is for how we use these platforms effectively to integrate into people’s lives and allow them to leverage the platform for communications, for collaboration, and to stay in touch.

It seems everywhere I go, people are willing to spend a lot of money on their data plan. So, that’s a good sign for telecoms.

My personal belief is that it overkills information overlook, but that’s me. I know that everywhere I go, I see people using their iPhones and flicking through their apps. So, they hit upon a market segment, a very large market segment, that actually enjoys that. Whether small people like me end up in a cave somewhere, the majority of people are definitely going to be focused on the mobile platform. That also relates to the carriers. I think there still a carrier war here. We've yet to see AT&T and iPhone in the US break apart and open up its doors to other carriers.

Gardner: Let that happen in 2010.

Morgenthal: We all say that, but this is a fertile ground for priming what’s been a notoriously dead pump. Two years ago, I wrote a blog entry about what happens to technology in an era where the economy is down? It seems everywhere I go, people are willing to spend a lot of money on their data plan. So, that’s a good sign for telecoms.

Gardner: Yeah, the human species has spoken. They like mobile and they like ubiquitous broadband, and that’s not going to change, right?

Morgenthal: I agree with you. But the question is, should people pay for it or should the government give to you free? In the US, I hear a lot of social groups saying, "Hey, everybody should have broadband like it’s electricity."

Gardner: So, maybe Tiger Woods pays for everybody’s broadband for six months. He's got the money to do it, and then everybody will forget about this marriage thing.

BI and analytics

Morgenthal: I think you’ve got a new business model. Number three: Business intelligence and analytics, especially around complex event processing (CEP). CEP is still in an immature state. It does some really interesting things. It can aggregate and correlate. It really needs to go to that next step and help people understand how to build models for correlation. That’s going to be a difficult step.

As somebody was saying earlier, you had these little Poindexters sitting in the back room doing the stuff. There's a reason why the Poindexters were back there doing that. They understand math and the formulas that are under building these analytical models. Teaching your average USA Today reader how to build an analytical model is akin to teaching everybody how to write programs by drawing pictures. It still hasn’t happened. There's a reason why.

Gardner: So, you are saying that this is a year of CEP, that’s your stake in the ground?

Morgenthal: CEP and analytics -- and the two tied together. You’ll see that the BI, and data aspects of the BI, side will integrate with the CEP modeling to not only report after the fact on a bunch of raw data, but almost be proactive, and try to, as I said in my blog entry, know when the spit hits the fan.

Gardner: Right. So, at this time next year, I won’t be having analysts on to predict that what’s going to happen in 2011. We’ll just plug it into a CEP engine and we’ll get all the right answers.

Morgenthal: That’s assuming you could find the right people to program it, which is a whole other issue. I had done as my number five, so I’ll save that, but number four is collaboration. We’ve crossed the threshold here. People want it. They're leveraging it.

The labor market has not caught up to take advantage of these tools, design them, architect the solutions properly, and deploy and manage them.

I've been seeing some uptake on Google Wave. I think people are still a little confused by the environment, and the interaction model is not quite there yet to really turn it on its ear, but it clearly is an indication that people like large-scale interactions with large groups of people and to be able to control that information and make it usable. Google is somewhat there, and we'll see some more interesting models emerge out of that as well.

Gardner: So, is there another way to say that, JP, which is the people stop living in their email and start living in something more like Google Wave?

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Morgenthal: I don't see them doing that and wouldn't predict that, but they are clamoring for collaboration, and I think the market will respond.

Gardner: Alright.

Morgenthal: New and innovative ways to collaborate.

Gardner: Alright, number five for you.

Morgenthal: Labor. We're at a point where the market is based on all these other things based on the cloud. We had a lot of disruptive technologies hit in the past five years -- enterprise mashups, SOA, and cloud computing. The labor market has not caught up to take advantage of these tools, design them, architect the solutions properly, and deploy and manage them.

I think that 2010 has to be a year for training, rebuilding, and getting some of those skills up. Today, you hear a lot of stories, but there is a large gap for any company to be able to jump into this. Skills are not there. The resources are not there and they are not trained. That's going to be a huge issue for us in 2010.

Gardner: Thanks. We're on to our next analyst prediction, and that would be with Jason Bloomberg. Jason, what are your top five?

Jason Bloomberg

Bloomberg: Thanks for getting to me, Dana. I'm going to be a bit of the naysayer of the bunch. We work primarily with enterprise architects now, so we are on the demand side more than the supply side for IT capabilities. So, our perspective is colored through the glasses of the architect.

Dana, you asked us for not just the one- or 10-year predictions, but also positive and negative. So, my first four are things that I predict won't happen, and we can fill in the blanks in terms of what will happen.

First of all, sorry, Dave, I just don't see cloud computing striking it big in 2010. When we talk to enterprise architects, we see a lot of curiosity and some dabbling. But, at the enterprise scale, we see too much resistance in terms of security and other issues to put a lot of investment into it. It's going to be gradually growing, but I don't see such a point coming as soon as you might like.

Small organizations are a different story. We see small organizations basing their whole business models on the cloud, but at the enterprise level, it's sort of a toe in the water, and we see that happening in the 2010.

Another thing we don't see really taking off in any big way is Enterprise 2.0. That is Web 2.0 collaborative technologies for the enterprise. You know, "Twitter On Steroids," and that kind of thing. Again, it's going to be more of a toe in the water thing. Collaborative technologies are maturing, but we don't see a huge paradigm shift in how collaboration is done in the enterprise. It's going to be more of a gradual process.

Another thing that we are not seeing happening in 2010 is CIOs and other executives really getting the connection between business process management (BPM) and SOA. We see those as two sides of the same coin. Architects are increasingly seeing that in order to do effective BPM you have to have the proper architecture in place. But, we don't see the executives getting that and putting money where it belongs in order to effect more flexible business process. So, this is another work in progress, and it's going to be a struggle for architects to make progress over the course of the year.

Gardner: Alright, Jason, would today's announcement that IBM is acquiring Lombardi be a buttress to your point there?

Bloomberg: Well, that's a software story at this point. It's not a best practice story. IBM, being on the supply side, is attempting to push products like this into the market and they have this strategy for integrating the Lombardi technology with their existing technology. That doesn't necessarily mean that, from the buyer perspective, they see the full connection of how BPM and how SOA fit together and how leveraging architecture will support the business process optimization efforts in the enterprise.

Software vendors were hoping for a huge year, but they're going to be disappointed. It's going to be a growth year, but it's going to be moderate growth for the vendors.

So, tools are there and the tools are maturing, but as far as the demand, I see it growing slowly in fits and starts, as people figure out the role architecture plays.

Gardner: Okay, next one please.

Bloomberg: As far as the end of the recession, yeah, we're all hoping that the economy picks up, and I do see that there is going to be a lot of additional activity as a result of an improving economy, but I don't see a huge uptake in spending on software per se.

Spending in IT is going to go up, but in terms of what the executives going to invest in, they're going to be very careful about purchasing software. That's going to drive some money to cloud-based solutions, but that's still just a toe in the water as well.

Software vendors were hoping for a huge year, but they're going to be disappointed. It's going to be a growth year, but it's going to be moderate growth for the vendors.

Gardner: So that must be why Oracle bought Sun, right?

Bloomberg: Well, we'll have to see. There's been a lot of press on their core strategy in terms of what they are trying to do. Clearly, consolidation is in the cart. I'd agree with that. Part of that is because there are only so many software dollars to go around, and that's going to continue to be the case for a while.

Gardner: Okay, thank you. What’s your next point?

Bloomberg: Those are my first four. Those are the negatives. Not to be too negative, in terms of the positive, what we see happening in 2010 is increased focus on "MSW." You know what MSW is, right? Politely speaking it's "Make Stuff Work." Of course, you could put a different word in there for the S, but Make Stuff Work, that's what we see the architects really focusing on.

They have a good idea now of what SOA is all about. They have a good idea about how the technology fits in the story and the various technologies that have been mentioned on this call, whether it's analytics, data management, SaaS, and the cloud-based approaches. Now, it's time to get the stuff to work together, and that's the real challenge that we see.


The SOA story is no longer an isolated story. We're going to do SOA, let's go do SOA. But, it's SOA plus other things. So, we're going to do SOA, BPM, and the architecture driving that, despite the fact that the CIO may not quite connect the dots there.

SOA plus master data management (MDM) -- it's not one or the other now. It's how we get those things to work together. SOA plus virtualization. That's another challenge. Previously, those conversations were separate parts of the organization. We see more and more conversations bringing those together.

SOA and SaaS -- somebody already mentioned that SaaS is one segment of the cloud category. It's little more mature than the rest. We see more organizations understanding the connection between those two and trying to put them together.

Gardner: Are you that we're seeing services orientation of the enterprise?

Bloomberg: You can put it that way, and we like putting it that way, because we're the SOA guys. It depends on who you talk to whether the people in the organization see it that way or, rather, see that that there's a role for architecture as part of how you do things right. When we talk about architecture broadly, we're just talking about general best practices.

No one piece of the story is the whole story anymore. It's going to be a heterogeneity story in the enterprise and how we actually get this stuff to work together.

If you think about governance, for example, as a core set of best practices for running an organization, the key best practice is for it to be architecture driven, and that simply means best-practice driven. So, you can think of architecture as a way of codifying and communicating IT best practices as well as organizational best practices for leveraging IT.

We see that becoming more prevalent over time, as organizations understand the importance of connecting architectural best practices with the other things they're doing.

Before, we had this disconnect. We'll do middleware and we'll do SOA, but we don't really see the connection where we confuse one for the other, and that was a big issue. A large part of why Anne Manes said SOA was dead was because we were confusing SOA with the software enablers that vendors were trying to sell them. With the SOA label on the box, they opened the box and said, "Where's my SOA? I don't get it."

Well, organizations are getting that. Now, they're seeing that there is a connection, and they're trying to get this stuff to work together. In the enterprise context where it's heterogeneous, it needs to scale. It’s broad based, and there are a lot of moving parts. No one piece of the story is the whole story anymore. It's going to be a heterogeneity story in the enterprise and how we actually get this stuff to work together.

Gardner: A services-oriented whole greater than the sum of the IT parts?

Bloomberg: Yeah. We're happy to call this services-oriented, even though the organization, as a whole, may call it variety of different things, depending on the perspective of the individual.

Gardner: Great. Thanks so much. Okay, last but not least, Tony Baer, are you still out there? Thanks for your patience.

Tony Baer: I am here, present, and I am alive.

Gardner: You have to be quick, because we're almost out of time. What are your top five, Tony?

Tony Baer

Baer: Not a problem. I’ll make it very, very quick. Actually, I am just going to add various comments. On cloud and virtualization, basically I agree with Jason, and I don't agree with David or with Joe. It’s not going to be the "new normal." We're going to see this year an uptake of all the management overhead of dealing with cloud and virtualization, the same way we saw with outsourcing years back, where we thought we'd just throw labor costs over the wall.

Secondly, JP, I very much believe that there is going to be convergence between BI and CEP this year. I agree with him that there's not going to be a surge of Albert Einsteins out there. On the other hand, I see this as a golden opportunity for vendors to package these analytics as applications or as services. That's where I really see the inflection curve happening.

Number three: Microsoft and Google. Microsoft will be struggling to stay relevant. Yes, people will buy Windows 7, because it's not Vista. That’s kind of a backhanded compliment to say, "We're buying this, because you didn't screw up as badly as last time." It doesn't speak well for the future.

Google meets a struggle for focus. I agree with Joe that they are aspiring to be the Microsoft of the cloud, but it may or may not be such a good thing for Google to follow that Microsoft model.

Finally, I agree with Jim that you are going to see a lot more business-oriented, whether it's BI, BPM, or IBM buying Lombardi. I hope they don't mess up Lombardi and especially I hope they don't mess up Blueprint. I've already blogged about that.

I very much believe that there is going to be convergence between BI and CEP this year.

One other point -- and I don't know if this fits into a top five or not -- but I found what Joe was talking about very interesting in terms of the let-down on health-care investment in IT. There's going to be lot a of pushing in electronic medical records (EMR) this year. I very much believe in EMRs, but, on the other hand, they are no panacea. We're going to see a trough of disillusionment happen on that as well.

I don't know if that's fast, but that's my story and I am sticking to it.

Gardner: Well, that was great, very zippy, I appreciate that and I'm afraid we're out of time. I want to thank our guests and our panel for these very insightful predictions. It's going to be a fun year. Everything from Google and snow plowing to cheap, but not private and not secure, cloud -- a lot to look forward to.

Let me again thank our panel, Jim Kobielus, senior analyst of Forrester Research, thank you so much.

Kobielus: Have a good, happy new year everybody.

Gardner: Joe McKendrick, independent analyst and prolific blogger. Thank you, sir.

McKendrick: Thank you and looking forward to a great 2010.

Gardner: Tony Baer, senior analyst at Ovum, thank you.

Baer: Yes, thanks.

Gardner: Great insights from Brad Shimmin, principal analyst at Current Analysis. Thanks.

Shimmin: Thanks much, Dana.

Gardner: Dave Linthicum, CEO of Linthicum Group, again appreciating your insights.

Linthicum: Thanks, everybody.

Gardner: Dave Lounsbury, vice president, collaboration services at The Open Group, thanks so much for joining us.

Lounsbury: Thank you, Dana.

Gardner: Jason Bloomberg, managing partner at ZapThink. Very good. I appreciate your input.

Bloomberg: Thanks, Dana.

Gardner: And JP Morgenthal, independent analyst and IT consultant. Thank you, sir.

Morgenthal: Thank you, Dana. Thank you for inviting me. It's always a pleasure to be with this group.

Gardner: And, I would like to thank our sponsors for the BriefingsDirect Analyst Insights Edition, Active Endpoints.

This is Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening, and come back next time. Have a great and happy new year.

Listen to the podcast. Find it on iTunes/iPod and Download the transcript. Charter Sponsor: Active Endpoints.

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Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 49, with panel of analysts discussing the future of cloud computing, SOA, social networks and the economy. Copyright Interarbor Solutions, LLC, 2005-2010. All rights reserved.

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Monday, April 13, 2009

Open Source and Cloud: A Curse or Blessing During Recession? BriefingsDirect Analysts Weigh In.

Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 39 on open source software and whether it has hidden risks or undercuts viability of commercial software models.

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Dana Gardner: Hello, and welcome to the latest BriefingsDirect Analyst Insights Edition, Volume 39. I'm your host and moderator, Dana Gardner, principal analyst at Interarbor Solutions.

This periodic discussion and dissection of IT infrastructure related news and events, with a panel of industry analysts and guests, comes to you with the help of our charter sponsor, Active Endpoints, maker of the ActiveVOS, visual orchestration system. We also come to you through the support of TIBCO Software.

Our topic this week on BriefingsDirect Analyst Insights Edition, and it is the week of March 30, 2009, centers on open-source software. The recession, virtualized data centers, cloud computing, and rumored mergers involving the likes of Sun Microsystems and Red Hat have all stirred the pot recently on the role and impact of open-source software.

We are going to look at open source in the context of economics, complexity, competition, and the disruption of the shifting business models in software, away from traditional per-processor licenses, to the pay-as-you-go and ongoing support and maintenance models.

The major question we want to answer is, does using open-source software pay off in a total sense, compared to commercial offerings? Furthermore, how will this change over the coming several years?

Here to help us dig into the changing world of IT and how open source fits into all of that are our analyst guests this week. We're joined by Tony Baer, senior analyst at Ovum. Hey, Tony.

Tony Baer: Hey, Dana. How are you doing today?

Gardner: Doing great. Jim Kobielus, senior analyst at Forrester Research.

Jim Kobielus: Hi, everybody. Hi, Dana.

Gardner: JP Morgenthal, independent analyst and IT consultant.

JP Morgenthal: Hi, Dana, glad to be here.

Gardner: David A. Kelly, President of Upside Research.

David A. Kelly: Hey, Dana. Hello again.

Gardner: We're also joined by several guests this week. I'd like to introduce Paul Fremantle, the chief technology officer at WSO2 and a vice president with the Apache Software Foundation. Welcome, Paul. [Disclosure: WSO2 is a sponsor of BriefingsDirect podcasts.]

Paul Fremantle: Hi, Dana. Hi, everyone.

Gardner: We're also joined by Miko Matsumura, vice president and deputy CTO at Software AG. Welcome, Miko.

Miko Matsumura: Hi, everybody.

Gardner: And, Richard Seibt, the former CEO at SUSE Linux, and, in 2006, the founder of the Open Source Business Foundation. He also serves on the board of several software companies. Welcome, Richard.

Richard Seibt: Hi, Dana. Hi, everybody. Glad to be here.

Gardner: Great. Let's dig right in. JP, let's start with you. You mentioned in a past show that you detected some downside to free open source and open-source software, particularly in the implementation in the real world. I wonder if you could take the opportunity now to fill out what it is about open source that, from your perspective, provides risk.

Short-term thinking

Morgenthal: Sure, Dana. The issue, as I've been following it, is one of unexpected consequences. I don't believe we're accounting for more of the short-term thinking that has placed us in the situation we're in now in the United States or even probably worldwide, and less of the long-term thinking about how things impact everything else.

For the record, so that I don't end up Slashdot fodder, let me say that I believe that open source and noncommercial licensing is a good thing and has been very positive for the industry as a whole.

My concern is for the proliferation of free software, that is, the commercial software that businesses use without paying any license and, optionally, only have to pay maintenance for to run their business. They earn their profit using that software to run their business, and yet nothing is given back to the software industry.

In my opinion, it's like a flower that's not getting fed through its roots, and eventually that flower will wither and die. To me, it’s almost parasitic, in that there are good parasites and bad parasites. Right now, it's proving itself to be a little bit on the good parasite side, but with a slight permutation, this thing can turn around and kill the host.

Gardner: So, your concern is that there might be short-term gain, but in the long term, without a good commercial, viable, vibrant commercial software market and industry, innovation and ultimately the capabilities of software will deteriorate.

Morgenthal: Exactly.

Gardner: Let’s take that over to Jim Kobielus. Jim, you've been tracking software for many years. Do you share concerns that commercial industry will wither and die as a result of open source?

Kobielus: I have to respectfully disagree with JP on that. What's important is to sustain innovation in the software world, and open source has accelerated innovation. The whole open-source phenomenon across all market segments, where open source has invaded parasitically, has stepped up competition, stepped up innovation, and expanded the range of options for enterprise customers -- options in terms of software components to address a broader range of requirements.

Also, there's a broader range of options for the buyer in terms of how they can acquire this functionality through open-source or commercial licenses, appliances, cloud, and so forth.

So, it's been a good parasite. I agree with JP, though, that the issue is that the open-source phenomenon is causing a hollowing out of all the traditional software solution providers' business models. It's causing a deconstruction and a destruction of formerly viable companies all across the board.

What's happening though is that as more organizations license open-source programs, and with or without premium maintenance, a lot of the understanding of the guts of this software is now migrating to the user organizations. The user themselves understand the guts of these open-source packages, as well or better than the vendors who are supporting them. So, the expertise in software is being privatized out to both the IT groups within enterprises and also out to the world of open-source devotees.

So, innovation is going like gangbusters, but the business model of being a pure software vendor based on pure commercial licensing is dying out.

A growing conundrum

Gardner: Tony Baer, there's a conundrum, if you will, where software seems to be innovative and growing, but the business model is perhaps weakening. What about the advent of cloud and software-as-a-service (SaaS), hosted services, and co-location?

It seems like just at the time we are concerned that enterprises won't be buying software commercially and therefore reducing the innovation in the field, they might, at the same time, be going to outside hosts that can, in fact, really focus on the software combination of commercial and open source and offer services, rather than software. How do these two things fit together?

Baer: I was just running down a couple of things during Jim's response and during what JP was talking about with the hollowing out. In terms of dealing with the cloud, it’s part of a larger trend toward commoditizing -- I'm going to sound very redundant here -- the commodity aspects of the software market.

Part of this is, "I'm not necessarily in the business of trying to provide myself, as a business, unlimited computing capacity. Therefore, I'll rely on the cloud for that." The other side of the coin is that, in general, there's been a commoditization as a result of several factors.

Part of it is open source, but you have to take into context what's been going on in this decade. There was a popping of the IT bubble back around the 2000-2001 time frame. It's been called dot-com, but it also happened the same time that everybody got finished with their Y2K work. At that time IT could no longer just demand infinite pay rates.

That happened along with the globalization of IT, where we had offshore, which provided much cheaper alternative. SaaS, with its subscription model, changed the business model for software companies. Forget about open source for a moment. Just consider the fact that subscription was a major disruption to any existing software company whose business model was predicated on licenses.

Cloud is just one of many commoditizing factors. I just concluded a study for Ovum on application lifecycle management (ALM) tools and looked at which tools seemed to be best suited for the cloud. The fact is, and I will say the same thing with regard to open source, certain areas are better suited for the cloud and certain areas are better suited for open source than others.

In terms of just ALM, I found that collaborative tools are well suited, whereas tools that required lots of maintenance of intellectual property, such as coding, you really didn't see in the cloud. There's a new Mozilla project that just came out, but that doesn't necessarily disprove the theory.

With regard to open source, I agree with Jim that it has hollowed out the enterprise software market. On the other hand, where open source has made its maximal impact is in areas that are commodity, for example open operating systems. Where Unix was supposed to be open, Linux made it very open.

Look at content management. Unless your content management is part of an enterprise middleware platform, chances are you're using open-source content management. Anything that does not require extensive domain expertise is fair game for open source.

Gardner: Let's go to Miko. Miko, we're hearing that the enterprise software business is hollowed out. The last time I looked, some of the major players in enterprise software were holding up quite well. They're actually growing in the last quarter of recorded earnings and results, even though there is a recession. You're at a software company that's commercially viable and is happy to sell software. What gives? Is open source really hurting the big vendors like Software AG?

The power of complexity

Matsumura: Well, Software AG is characterized as being a medium-sized vendor. We just crossed $1 billion in revenue, and we're growing at a pretty healthy clip.

There's a thing that's interesting from our side. You mentioned a real interesting word, complexity. Complexity is a really powerful force in the economy and in enterprise software in general. One of the things that open source is doing is helping to simplify some of the infrastructural components and to decrease the overall condition of heterogeneity.

One of the things that we have learned in the business from service-oriented architecture (SOA) and then business process management (BPM) -- which are called middleware businesses -- is that chaos is perpetual, in the sense that there are two major driving forces in the economy: competition and consolidation.

As people contract from the downturn, they start buying other companies and this creates heterogeneity in the local enterprise. It's what people in complexity theory would call a hold-on. Then, the notion that there is complexity within that local domain is just the function of consolidation. As soon as you start to see economic expansion, then you start to see more heterogeneity in terms of things like business process and the opportunity to capture information.

Sure, there is commoditization in the IT platform, which is advanced by open source. Contrary to what JP was saying, one of the great things about open source is that it forces IT organizations like Software AG to selectively pick where they make their investment. They will put their investments in at the leading edge of complexity, as opposed to where things have slowed down and are not changing quite as fast.

Gardner: Paul Fremantle, you've seen this progression. We've seen a lot of use of open source earlier on with Linux and Apache Web Server, and it's progressed into databases, middleware, and SOA infrastructure. Do you see this as a progression, and how far does open-source software move up the stack before it does what JP fears, which is to undercut a commercial software marketplace?

Fremantle: This is a really interesting subject and it's something I think about a lot, obviously, running an open-source company. One of our main questions is, how many people will pay us for what they use of our technology that we spend a lot of money and effort writing?

There's a change in the marketplace, if you look back to the traditional open-source model. A traditional open-source model is to come along with something that doesn't exist in open-source and costs a lot. Build an open-source version of it. Be the first of a kind. Therefore, everyone who wants an open-source version downloads your software, uses it, and you get a very small monetization out of that.

It was typical in early open-source projects like MySQL and so forth to have incredibly small percentages of people paying you for that software, but to have such a large volume that it still worked out.

That's not how I see the open-source model moving. What I see is what you might call "managed commoditization." In a way we've had commoditization of all sorts of things. No one pays money for the TCP/IP stack. That's a piece of open-source software that has now become ubiquitous. It's not of interest to anyone. It's just a commodity that's free.

It comes with every operating system and it works. I don't think we need innovation in that space. Yes, there were some companies that were trying to make money out of TCP/IP stacks 20 years ago, and those companies aren't making money out of it. That's tough luck. They have to find something more interesting today.

Interesting and innovative

My experience with customers is that, if you do something interesting and innovative, whether you are open source or not, if you partner with your customers and really add value, then they will pay you, whether or not your license forces them.

The license is a blunt instrument. It's a blunt way of getting people to pay you for stuff you've written. To me, that's something that was abused by software companies for many years. What open source is doing is sorting the wheat from the chaff. It's sorting out, is this something that is a commodity that I don't want to pay for, or is this something that has real value and is innovative, and that I need the support, the subscription, and the help of this company to help me implement?

Gardner: Okay, Richard Seibt. Now, we've heard from some of the analysts the fear that innovation will suffer because of open source, and we have heard from some commercial software people that say, "We'll be happy to go to that bleeding edge of where the complexity is. We'll add value there and we will be able to charge appropriately for it." You are an innovator at the board level in several software companies. Isn't the ability to innovate also quite rich within startups that are focused on an open-source model?

Seibt: It's absolutely true that open-source companies are very innovative. If you look at SaaS or even cloud computing, there are many startups that probably lead the way. For open source, we look at that market from a customer perspective. They use the software because of its innovation, its quality, and its cost, and they wouldn't use it for any other reason. It is the innovation, quality, and cost.

I agree with some of the people who talked before. Open source is moving up the stack and has reached the SOA level. For example, large corporations are using open-source SOA frameworks, because they want to be fully independent from any vendor. They trust themselves to develop this piece of software together with the bigger community, which becomes a community of enterprises.

Therefore, innovation is not only from startups, but it's from large corporations, as well. They jump on the wagon and start to involve themselves in open-source projects, especially as being part of the Eclipse Foundation.

Gardner: Right. We saw a recent announcement of Swordfish, which is an enterprise service bus (ESB), an open-source ESB through Eclipse that was a result of work and coding done at Deutsche Post. Isn't that correct?

Seibt: Yes, it's absolutely right. This is a perfect example. The CIO of Deutsche Post mentioned, when he opened the conference, that large software vendors and the IT system integration companies can't help them anymore, because they don't understand their business as they should. Therefore, they have to do much more from a software development perspective on themselves. They have now joined many logistic companies and are doing a joint effort as part of the Eclipse Foundation, and this is the project, Swordfish.

Gardner: David A. Kelly, we heard that innovation could or couldn't be positively or negatively impacted -- business models also. What gives? What's going on now?

It seems that a lot of the reasons for open source was to prevent lock-in or overly powerful pricing in the market by commercial vendors. In a sense, that's been mitigated, but now we are in a recession where cost becomes even more important. We're also looking at this idea of increasingly having applications and services acquired as a service.

Does that mean that we are now looking at not so much being concerned about lock-in at the code level, but perhaps lock-in at the service-provider level? We also saw this week the announcement of an Open Cloud Manifesto, still rather loose in terms of its details, but which purports to try to keep the cloud from being another abstraction of lock-in.

The most efficient will win

Kelly: I'm not sure that cloud computing necessarily opens up the field for open-source computing. To some extent, it almost shuts it down, because it then becomes cloud as a series of application programming interfaces (APIs) or a series of standardized connections or services out there that could be supported by anything. Open source is one solution. The one that's going to win is going to be the most efficient one, rather than the lowest cost one, which may or may not be open source.

To some extent, as you look at cloud computing, some of the initiative that we saw with original open-source roll out over the past ten years has been almost mitigated from my perspective. The original open-source roll out leveled the table as you said. It mitigated that price difference in terms of the traditional, proprietary software vendors and software models.

It said, "Okay, maybe there isn't as much value in some of that software, whether its TCP/IP software, basic operating system functions, or Web servers, as the large software companies are suggesting there is." That really did help enormously on innovation, but it takes the lower 10 percent or 20 percent of the software infrastructure off the table.

My question really is how far the open-source innovation can go. As organizations move into business processes and business-driven value, all the executives that I talk to don't want to focus on the lower-level infrastructure. They want to focus on what value this software is giving to me as a company in terms of supporting my business processes. They're not allowing me to compete more effectively. They don't want to be in the software-development business, for the most part.

So, how far can open source go up that stack to the business process to support custom applications, or is it always going to be this kind of really lower-level infrastructure component? That's the question that I think about.

Gardner: We'll take that to JP Morgenthal. You've heard a little bit of the back and forth. Dave Kelly's point is that the new era of competition is at the business-process and API level, regardless of how it's supported. We would assume that organizations, be they Amazon, Google, Yahoo, or Microsoft, will be providing services, but with economics in mind, and they might be utilizing open source as best they can. We know that Google, Amazon, and Yahoo already do.

Is that right? Are we talking about a dead horse here? Do we not really need to be concerned about open source, but focus more at the API and business-process level?

Morgenthal: Dave is absolutely correct with regard to the cloud. The cloud actually hides a whole other layer of the "what and the how" from the user and the consumer, which could work in favor of open source or it could work against open source. Nobody really cares. As long as that thing works, it's reliable, and can be proven reliable, it can be put together with chewing gum and toothpicks and no one would know the difference.

Gardner: Well, wouldn't that really be a good thing for open source?

Morgenthal: In what way?

Gardner: Well, if people could choose between free software, were building a data center, had the skills on hand, and knew what their requirements were for the cloud infrastructure, they'd be able to do that and probably focus on the open-source alternative.

Coming full circle

Morgenthal: Again, it takes us full circle back to my initial premise, this concept of free software. There's no such thing as free software. What I see happening is this belief that software should be free. It's actually penetrating the market on many levels. I see that there is a whole concept outside of IT people, who actually understand what it takes to deliver.

Let's take Twitter, for example. What does it take to deliver Twitter infrastructurally, as that thing begins to grow? An IT person understands about scalability and billing, pub-sub engines that have to pump out a single message from a hub to 20,000 spokes, which equate to followers. The amount of infrastructure required to make that happen grows daily.

Not to mention that, there's no plan behind it for monetization right now. It's completely venture backed. It has built this huge community, and it could go away tomorrow, leaving a complete vacuum. There is no free lunch. The value of software, and software delivered as a service, extends this even further and diminishes in the eyes of the consumer, when they don't have to pay for something.

Anytime you have a model where something is given away for free, and, at some point, the free stops, it's very difficult to monetize going forth, because every buy is a buyer's remorse. "I could have had that for free."

Today, it happens very easily with software, because it's intangible. We have vendor lock-in in a lot of other industries. If you drive a Toyota, there are proprietary parts in there. The auto parts market didn't say, "Hey, with your oil change, we'll replace all these proprietary parts for you, because we don't want vendor lock in." Your vacuum cleaner has a proprietary bag. A market didn't pop up that says, "Hey, if you let us service your vacuum cleaner, we'll give you a lifetime supply of vacuum bags free."

Gardner: Isn't software different? Software is published. Software is code. Software is something you can change, if you have the permission. It's not the same as a physical part or a wheel?

Morgenthal: Well, a product is a product. Now, you're going on to the edge of the industry that wants to say, "This isn't something I can touch. It's not real, so it doesn't deserve the same protection at the same level of credibility in the marketplace. It's not something that I can physically touch and feel."

I'm not placing judgment on that. Maybe that's the case, or maybe it's not. I'm just pointing out what you said is the opinion a lot of people in the marketplace have, which is, because it's not tangible, because I can't touch it, it doesn't deserve the same level of respect.

What's going to happen with e-books versus physical books? I can't go into Borders and steal a book. Hey, should I pass around that PDF? I can't go into Borders and steal a CD, but hey, can I give that MP3 to my friend? We feel a change in the market.

My only point here is economically long-term, I don't believe anybody has thought about where these changes stop and what they end up cannibalizing. Maybe we end up with a great market, and maybe we don't. I'd just love to see some attention paid to detail before people just willy-nilly go do these things. What is the long-term impact here?

Looking at risk

Gardner: JP brings up an interesting issue. It's about risk. If I go down a fully open-source path as an enterprise or as a service provider, is that going to lead me into a high-risk situation, where I can't get support and innovation? Is it less risky to go in a commercial direction? Perhaps, the best alternative is a hedged approach, where there is a hybrid, where I go commercial with some products and I go open source with others, and I have more choice over time.

Let's go back to Miko. Miko, is that the way the world is shaping up, that we are going to have a hybrid? We're going to have a hybrid of commercial and open source? We are also going to have a hybrid of on-premises and as-a-service or cloud base. Does that make sense?

Matsumura: Absolutely. Frankly, we're already beginning to hybridize. Even with customers who are acquiring our technology, our technology takes advantage of a lot of open-source technologies, and we have built components. As I said, we're very selective about how we choose to make our investments.

We're investing in areas that obviously are not as commoditized, just because a rolling stone doesn't gather any moss. The big sections of the market, where things have cooled off a lot, where open source can kind of create pavement, is somewhat irreversible.

What makes me hopeful for the industry is in, once again, turning to the notion of the fractal component model. Imagine a fractal image. You've got the major portions in the operating system. That whole thing has been commoditized. The thing that's unique is that while a fractal image occupies a finite amount of volume, which you could see as kind of a market share, it has an infinite surface area. As you diversify, the forces of consolidation are mirrored by the forces of competition.

Our customers need to be able to successfully compete in the market, not just on the basis of lowering the cost of operations through free stuff, but really to be able to differentiate themselves and pull away from the pack. There is always going to be a leading edge of competitive capability through technology. Companies that don't invest in that are going to be left behind in an uptick.

Gardner: Suffice it to say that we are really still in the early stages of IT and that there is always going to be for the foreseeable future a great deal of innovation and change, and therefore a growing pie for those companies that are at that adoption edge.

Let's go to Paul Fremantle. Paul, if what we are describing is accepted as the premise -- that we're going to have hybrids of commercial and open source and that we're going to have hybrids of self-supported, on-premises IT functionality, as well as service acquired -- it seems to me that the real differentiator for enterprises is how well you choose.

It's how well you decide. Should you stay with commercial? What should go with open source? What should you keep on-premises, and what should you go to a cloud for? How are those decisions being made now and how should they be made?

Opportunity for frameworks

Fremantle: It's not just how you choose, but what framework you apply to that. There is an opportunity here to build frameworks that really scale out.

For example, you may have an internal cloud based on Eucalyptus and an external cloud based on Amazon. You can scale seamlessly between those two, and you can scale up within your internal cloud till you hit that point. Open-source software offers a more flexible approach to that.

I just want to come back to something about the use of the term "free software." Most open-source software is not free. If you want the same things that you get from a proprietary vendor -- which is support, bug fixes, patches, service packs, those kind of things -- then you pay for them, just as you do with a proprietary vendor. The difference is in the partnerships that you have with that company.

What a lot of this has missed is the partnership you have in an open-source project is not just about code. It's about the roadmap. It's about sharing user stories more openly. It's about sharing the development plan more openly. It's a whole ecosystem of partnership, which is very different from that which you have with a standard commercial vendor.

Gardner: Let's go back to Tony Baer. As we think about what choices to make in terms of how we provision and acquire technology, we might consider a lower risk in terms of what Paul was describing, in being a member of a community of development, rather than just as a customer of technology. How do you view that?

Baer: First, I do agree with Paul, but I want to make a careful differentiation here, which is, there is a difference between an open source, if I am consuming the software and being an active member of the community or being a customer who is basically buying commodity software.

A good example of that is the difference between the Red Hat Enterprise Linux base and the Fedora base. The Red Hat Enterprise Linux customer base is not looking to get on the latest bleeding edge distros or anything like that. They want stable, supported software. They'll pay for that, and there is a viable business model for that as commodity software.

If you're in the Fedora base, that's where you want to be. That's where basically you don't have a life, you work at 3 a.m., and you're working on trying to improve the distro or trying to mess around with it.

Therefore, in terms of the level of risk, if I'm a commercial customer, I'm going to want software that is essentially release supported. I'll want to lower my risk. Where I'm willing to take risks is the same as I would do with normal commercial software. I'll take, let's say, an early beta release or take some of the community technology previews and I'll have some of my developers work with it in a sandbox. So, I don't think it really changes that equation at all.

I agree with Paul and I disagree with JP. I don't think that open source will be the death of the commercial software market, because the other thing that open source requires to be viable is skill. You need enough of a developer base, enough of a community, to innovate the software. Otherwise, the whole model crashes down.

By definition, what that will not include will be software that is not commodity. It may be, as I said before, where that requires domain knowledge or where there is a huge cost of switching.

I don't think you're going to see any enterprise customers pull out their SAP systems tomorrow for an open-source equivalent. That's just not going to happen. On the other hand, they might move their SAP systems to Linux instead of Unix. So, you need to take this whole question about risk in context.

Monetizing in a different way

Gardner: Jim Kobielus, we're talking about how code, intellectual property, and research and development get developed, monetized, and then brought back into a market. We have these powerful cloud providers, and they monetize in an entirely different way. They sell advertising, subscription services, or retail goods and have a margin. They can monetize their infrastructure in another way.

If they use open source and contribute back to the community, then in fact we have a richer monetization ecology of how software is developed. How do you view that? Look at Yahoo and Hadoop, as an example, where a MapReduce technology has been brought to the open-source environment because it was cultivated at a company that makes money from advertising. [UPDATE: Amazon gets on the MapReduce bandwagen.]

Kobielus: That's a very interesting observation, Dana. Basically, everything you said is exactly right. The whole cloud community, the public cloud provider, is attempting to build their business models based on subscription revenues. It's not so much from advertising. It's the monthly charge for access to the Google or the Amazon cloud. To a great degree, many of them are relying on various open-source components to build up their infrastructure.

To the degree that the cloud providers are active participants in open-source communities and essentially contributing their personnel's time to further develop and extend open-source software that's then available for free, essentially that is the whole open-source community being funded or subsidized by the cloud community.

In many ways, the cloud community, as it grows and establishes itself as a viable business model, will increasingly be funding and subsidizing various open-source efforts that we probably haven't even put on the drawing board yet. That will be in a lot of areas, such as possibly an open-source distribution of a shared-nothing, massively parallel processing, data warehousing platform for example. Things like that are absolutely critical for the ongoing development of a scale for cloud architecture.

If there is going to be a truly universal cloud, there is going to have to be a truly universal open-source scale-out of software.

Gardner: Let me pause you there. Let's take that to Richard Seibt. Richard, you mentioned that it's a very rich and fertile way for software to get developed when a large enterprise like Deutsche Post does work and then contributes it back to the community. Wouldn't the same be the case for large cloud providers, such as Yahoo, Amazon, and Google?

Lack of contributions

Seibt: I think it would help, but I don't believe that they want to do that. They see themselves as a kind of proprietary open-source development shops, and, as you know, they don't contribute back a lot.

But, from a large enterprise perspective, it would absolutely make sense to do a lot of contributions, to be able to move their application and their complex infrastructure to the cloud, because you have to solve cloud security, cloud storage, and cloud systems management, and this is not available yet. This needs to be developed to solve their issues. This is possible in a cooperation between open-source projects or commercial open-source companies and large enterprises, and I am sure they will do it, because they get the value out of it.

As one of my colleagues just said, it's about how you work together, and this is the value of open source. You have influence on the roadmap. You have influence to get what you need, and this makes you agile and more flexible. At the end of the day, software is too important, because all of your business is running on software. Every part is running on software, and that's the reason people want to use software that is open and can be influenced. It's not only about cost.

Morgenthal: Dana, do I get one counterpoint, since somebody said that they don't agree with JP that it's going to be the death of the commercial vendors. I never said that. I just want to clarify. I never claimed that it was the death of commercial. I think you summarized it well with the risk factor. All I pointed out is that there is a long-term risk potential here that nobody is talking about.

Gardner: Well, let's talk about that. In the context of on-premises or private clouds, as I mentioned, there was a rumor -- and something might happen by the time this show airs, we don't know -- that IBM and Sun are in some kind of a merger discussion.

One of the rationales that was theorized for that was that Sun has a great deal of open-source software that could be used to create a cloud, an on-premises cloud infrastructure of some sort. That could for IBM be an opportunity to enter that market more quickly, or it could be an opportunity for IBM to stop development in that direction in order to preserve its own ideas about how a private cloud might be constructed -- perhaps of a System Z mainframe platform.

So what do you think JP? Is this whole potential for an on-premises cloud market a new battleground for commercial versus open source?

Morgenthal: I see it more as breathing new life into platforms that were getting harder and harder to justify, because you had commoditization. Commoditization is a real market thing that we've got to deal with. We've had commoditization in hardware to the point where it is relatively inexpensive to get very powerful server architectures, and that reduces the need for some of the larger processing machines that are offered by the likes of IBM and Sun.

So for them, it's being able to target some of this existing investment into a new direction, to build some sort of coherence around how this makes sense to a buy-side community, in building out this compute infrastructure that is easily oriented towards different applications and different uses, allowing for scalable demand, taking advantage of things that they've already built and never really had a model for selling. It actually puts the ball back into their court where its been taken away for them for so long.

Gardner: Okay. So, from your vantage point, the notion of an on-premises cloud infrastructure is great news for commercial providers.

Morgenthal: I think so.

Gardner: David Kelly, how do you see it? Do you see that the open-source versus commercial risk continuum is now being placed at this on-premises cloud market that's just only very nascent? It's really not even off the ground. How do you see that tension?

Services not hardware

Kelly: Just talking about the IBM-Sun deal is great for a services company, which is where IBM is making a huge amount of money -- services. They don't care so much about the hardware anymore. This plays right into the direction that they want to go, because open source is all about the services. There is no revenue in the upfront. So, there is opportunity there.

I don't know how fast that market, in terms of on-premises cloud, is going to develop. That's where my hesitation would be. But, it makes sense from that shifting traditional software model that was pushed off the cliff perhaps 10 years ago by this kind of change that we are seeing across the economy. But, organizations still need services. They need the software. We're just going to be paying for the services and the software as we go forward.

Kobielus: I want to add a quick comment here. In terms of the risk for software vendors from the whole cloud phenomenon, the issue on business models is, what is the razor and what are the blades in the old Gillette model? Well, the razor and blades used to be just the commercial software licenses themselves, and then primarily the razor has always been the maintenance and support service, as well.

Open source has made that the dominant revenue model for a growing range of software vendors. But now, professional services are, in many ways in this new world, becoming the blades.

Professional services are now able to deploy like a global services organization to help customers put together their private clouds, leverage all the SOA and the virtualization technologies, and to really pour deep business domain content into building custom services. That's becoming, in many ways, the blades in this new world. The risk factor for vendors is that we don't have that.

Gardner: Hold on, Jim. If that's the case, what about these external cloud services, where the APIs and the business process are the differentiator? The blades and the razors are really about not professional services involved with creating the infrastructure, but with, how you leverage these business processes in innovative new ways across markets, across ecologies of participants, cutting your IT costs while improving your ability to develop products without upfront capital and without professional services.

Isn't there another side to this, which is the shift from the concern about creating infrastructure into, how do I leverage someone else's infrastructure?

Kobielus: It comes down to either you, as a vendor, bring your professional services to bear on integrating all of that, or you bring your partner ecosystem in to handle that integration and tweak those business processes. So, in many ways, you rely on your partner ecosystem to build the blades.

Gardner: Miko, let's take this to you. It seems to me that if you're building complex event-processing infrastructures and you're creating fabrics of SOA support, you might want to create the enticement of the business-process benefits, while at the same time, monetizing around the infrastructure. Is that a viable go-to market in this new year?

Matsumura: Absolutely. The areas that you describe are the areas where the stones are rolling and there is not a lot of moss. If you look at the rolling stone gathering no moss theory, IBM services would be the moss, in a way. They are just trying to grow over anything that's kind of stabilized and cooled off sufficiently to build their own ecosystems.

The 'uncommons'

It's the thing that I see happening with the Sun acquisition. It's kind of funny. Sun actually had a lot of fairly speculative ventures in different kinds of models for leadership, standards, and open source -- things like JCP, NetBeans, these hybridized models and complexities. The thing I think IBM is trying to prove with this acquisition is basically that professional services are the way that they provide what I would call the "uncommons."

One of the things that I've seen as a pattern in open source is that open source tends to be driven by the needs of the commons, in the sense that the more community, the more common infrastructure, one has, the more you can drive towards an open-source model.

The remaining question for commercial providers is, where are the uncommons? What are the forces that drive organizations to differentiate? Where can you find those differentiation points? The IBM answer to that is, pour in a bunch of consultants. There is plenty of room for other models.

Kobielus: The uncommons is actually the solution provider's ongoing relationship with the customer, the ongoing engagements whereby the solution provider has the expertise to solve the customer's problems and continues to bring that expertise to bear in engagement after engagement after engagement. That is the lock-in. You know your customer better than any other potential provider.

Baer: It's all about relationships.

Kobielus: Yeah, relationships.

Gardner: Paul Fremantle, how about that last word on relationships versus code? You were talking about the community. Isn't that, in effect, a different kind of relationship, perhaps even a lower risk relationship member of a community than simply a buyer from a large seller?

Fremantle: I hate to use jargon, but if you look at where the free and open-source business model is going, if you were going to have a 2.0 business model, it would be all about relationships, and no longer about just being the only open-source project in a space and then everyone jumping on it.

The community is the key to that. The key to using open source to be more powerful than a proprietary model is completely about building a community in which your customers participate. At WSO2, we have some amazing customers, who really participate in the roadmap of the products, in helping out other customers, in working together and building a shared community. That is what's powerful, and that's what's much harder to do as a proprietary vendor. You own the source code, and that ownership is kind of a weapon against your customers. In open-source models, that isn't true.

Gardner: We'll have to leave it there. We're out of time. I want to thank our panel. I also want to thank our charter sponsor for the BriefingsDirect Analyst Insights Edition Podcast series, and that's Active Endpoints, maker of the ActiveVOS, visual orchestration system. We also want to thank TIBCO Software.

This is Dana Gardner, principal analyst at Interarbor Solutions. Thanks for listening and come back next time.

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Edited transcript of BriefingsDirect Analyst Insights Edition podcast, Vol. 39 on open source software and whether it has hidden risks or undercuts viability of commercial software models. Copyright Interarbor Solutions, LLC, 2005-2009. All rights reserved.