January 2009

Sun reported very healthy revenue growth for its Software category in Q209.  Chart 6 in this deck suggests that Software Billings grew at 21%.  To non-accountants, Revenue != Billings.  In Q209, ~$1 Billed = ~$0.9 Revenue.  Read the notes on chart 6 for more details if you’re interested.

Diving further into the Billing data, we find that Q209 Software billings were driven by strength in Sun’s Java licensing and MySQL/Infrastructure business lines growing 47% and 55% to $67M and $81M respectively.

The growth in Java licensing seems to be an anomaly compared the historical rates.  Typically, this category grew at <10% with 3 quarters of growth between 10% & 20% over the past 9 quarters, and no quarter over 21% growth until now.  Clearly, this is a result of Sun’s work to monetize the Java runtime install base.  It remains to be seen if this level of growth can continue each quarter.

MySQL growth is solid, although it too is down from a 111% YTY growth in Q109; but really, who’s complaining about a 55% YTY growth in billings!?!  MySQL definitely seems to be finding its groove inside of Sun.

And finally, the troubled child, “Solaris, Management and Virtualization”.  The category declined 29% YTY to $42M, after a 14% YTY decline in the previous quarter (Q109).  What gives?  Is Solaris the key driver behind this decline?  It would make sense compared to the ~25% declines in Systems quarterly billings.

Overall, the Software category at 21% vs. 27% YTY in Q209 vs. Q109.  A slight quarter to quarter decline, but completely understandable in this economic environment! Keep up the momentum guys/gals.

Port 25 is reporting that Microsoft has released Web Sandbox under the Apache License 2.0.  This is the first I’ve seen of the Web Sandbox, but it seems like a great idea, especially the part about an open standard around the technology.

As Web 2.0 applications and mashups continue to include third party content, the overall security of these applications comes into question.

The Web Sandbox website explains:

“We want you to get involved. We created a cross-browser JavaScript virtualization layer that provides a secure standards-based programming model without requiring any add-ons. We are not done yet. We need your help: experiment with the Sandbox and make sure it works. We’ve included a set of samples so you can try to break the Sandbox. Our goal is to provide reusable components that will allow you to secure your Web 2.0 mashups. Our goal is to work together to standardize a secure web platform. “

Web Sandbox not only provides enhanced application security across browsers, it also provides consistent W3C DOM support.

Go check it out and see if you can’t hack one of the samples!

Dan Lyons has a sobering outlook on the future of the American IT industry over at Newsweek.  The article argues that the Government’s focus on bailing out weaker industries is occurring at the expense of relatively strong industries such as IT.  Dan argues that a lack of investment in maintaining domestic IT talent could have serious implications in the future.  Dan writes:

“…unless we boost government spending on science, technology, engineering and math—STEM, in industry jargon—we will be unable to keep up with countries like China and India. At some point, companies such as Apple, Cisco, HP, IBM, Microsoft and Oracle could be eclipsed by foreign rivals, just as Ford, General Motors and Chrysler have been.”

Could American IT vendors face the same fate as American auto makers?  I’m not sure that the analogy holds.  American auto makers all but ignored the competitive threat from foreign rivals.  On the other hand, American IT vendors have made significant investments in growth geographies in order to establish a foothold with customers in these markets and take advantage of local skills.   One could argue that the investments in India and China by large American IT vendors will help create future competition to American IT vendors.  By that logic, Google is creating its future competition by hiring and creating teams of  bright programmers.  The history of employees leaving IT firms to start competitive or adjacent ventures is long and storied.

To the broader question about training STEM students, I absolutely think it’s important.  However, can America expect to graduate more STEM students than India or China in the long run?  So the real question is how can American IT vendors best leverage local and international skills? And in doing so, can America’s IT vendors retain their leadership position?  To the first question, I’d argue that this is exactly what American IT vendors are doing today with their hiring in growth geographies.  The answer to the second question remains much more open.

What do you think?

News out today from Lucid Imagination’s commercial offerings around the Apache Lucene portfolio:

“Our commercial offering includes support, training, consulting services and value-added software for enterprises using Lucene- and Solr-based search solutions.”

As many of you know, Apache Lucene’s project is widely used in enterprise search products.  Solr is a sub-project of the Lucene top-level project.  Think of Lucene as the library, and Solr as a higher level abstraction.

Lucid’s President & CEO, Eric Gries, quotes a few figures regarding Lucene/Solr:

  • Amongst top 15 open source projects
  • One of top 5 Apache projects
  • Installation at over 4,000 companies
  • Over 6,000 download per day
  • Playing in a $1.8B market growing at a 28% CAGR

Companies like Netflix and Ticketmaster utilize Lucene/Solr.  As Lucid’s CEO highlighted to me, these companies live and die by the quality of their search results.  Up until now, these companies have been doing the heavy lifting themselves, or securing the services of Lucene committers.  The Lucid team saw an opportunity to become the commercial entity behind Lucene/Solr (especially since key Lucene committers work at Lucid).

A great thing about Lucid’s business model is that search software isn’t a “set it and forget it” solution.  As Lucid’s CTO, Marc Krellenstein, explained to me, search needs initial design assistance and ongoing tuning to improve the quality of search results.  Lucid’s team wants to help customers across the end-to-end use of Lucene/Solr in the enterprise. Very cool.  Good luck to the Lucid team!

By now, news of layoffs at IBM and Microsoft are being reported far and wide.  Some may take this opportunity to predict victory for open source.  However, I’m hard pressed to reach this conclusion.  Indeed, as an IBM Software employee, I have a biased view.  But hear me out.

IBM reported a 10.5% YTY increase in 2008 Software revenue to $22.1B.  Microsoft’s Server & Tools business grew 15% YTY in Q2-FY09 to $3.74B.  I call out the Microsoft Server & Tools business division because the majority of Microsoft’s products that compete against open source (Windows Server, SQL Server, and Visual Studio) reside in the Server & Tools division.  Yes, you could argue that Linux on the desktop was the driver behind the 8% YTY quarterly decline in Microsoft’s Client division.  But, it’s more likely, as InfoWorld’s Tom Sullivan points out, that Vista’s issues drove the decline in Microsoft’s Client division business.

None the less, when you look at the growth rates from IBM and Microsoft’s divisions that could compete against open source, 10.5% and 15% are very healthy growth rates.  This is doubly true when the size of the revenue (tens of billions) is taken into account.  So it’s difficult for me to see open source as the driver behind the layoffs.

I do however fear that these layoffs are a precursor to similar actions we’ll see from open source companies.  It’s been argued that open source will do better during the belt tightening due to lower initial costs.  However, what’s lower than $0?  I’ve had three discussions with friends whose companies have made the choice to go with open source solutions for projects that they’ve typically used commercial products.  These companies have decided to save costs by asking their internal developers to shoulder the cost of supporting the open source products.  So, while commercial vendors were kept out of these three deals, so too were open source vendors.  Clearly, three isolated examples don’t make a trend.  But I fear that we’ll see a lot more of this in 2009.

What are you seeing out there?

I completely agree with Matt Aslett’s view that 2009 will see consolidation in the open source arena at the hands of established software vendors (e.g. IBM, Oracle, Microsoft, SAP).  Aslett writes:

“As proprietary vendors will be looking to open source to extend their reach into new potential customers, many open-source vendors will be looking to proprietary technology as a means of converting community interest into revenue.”

Matt Asay also agrees with Matt Aslett, and Asay predicts that Microsoft will make its first open source acquisition in 2009, probably Zend.  Indeed, folks at Microsoft have, at a minimum, considered this acquisition.  I think it’s a bad idea, here’s why:

IBM was long considered an open source supporter before we made our first “open source acquisition“.  Sun was considered an Open Source company well before acquiring MySQL.  Oracle’s acquisition of Sleepycat didn’t really add to its Open Source credibility.  Intel and HP are considered open source supporters, without open source acquisitions.  Simply put, a Traditional vendor can support the open source movement without acquiring an open source company.

Now, considering Zend specifically; the problem with buying Zend is that the acquisition delivers very little customer value or impact to the acquirer’s top/bottom line.

What would Zend deliver to Microsoft (or another suitor, be it IBM, Oracle, SAP, or even Red Hat)?  Two key items that come to mind, first control over the PHP language, and second, revenue that Zend drives from Zend’s enterprise PHP products.

Control over the PHP language is a red herring.  Customers can be well served without control of the PHP language.  IBM and Oracle both have PHP-based offerings without having control over the language.  If Microsoft were to buy Zend, what could Microsoft do with the PHP language?  Microsoft couldn’t make any language-specific changes that would favor the Windows environment or allow native access to Windows resources without users fearing that their PHP applications will be locked into the Windows OS.  One great thing about PHP is that I can develop on my Windows desktop and deploy to my hosting service provider running Linux.  If this changes, Microsoft (or any Zend acquirer) should expect an uproar from millions of PHP users.  Also, we shouldn’t neglect the possibility of another vendor or “the community” forking the PHP interpreter under the guise of protecting PHP users from Microsoft’s commercial interests.

Next, let’s consider the revenue potential through Zend.  Today, the revenue is nowhere close to impacting Microsoft’s growth targets.  The reality is that PHP use is so widespread that the “community PHP” has become solid enough for all but a few usage scenarios.  So, the need to pay for a “production ready PHP” or advanced management, scalability, etc. for “business critical PHP” is minimized by the quality and breadth of community driven PHP offerings.

Having PHP in its toolbox isn’t going to help Microsoft grow revenue in the enterprise market.  Let’s not ignore the fact that the PHP language hasn’t been able to attract developer interest at the enterprise level.  This has been a surprise to me considering the level of PHP use outside of the enterprise.  Yet, Python and Groovy have had a lot more traction than PHP in the enterprise.

This leaves us with Microsoft using PHP to further penetrate small & medium sized business (SMB) and partners.  Microsoft already owns this segment, and VB is the lead-with language here.  So, adding PHP into the mix isn’t going to drive a lot of net new revenue.  Unless Microsoft is experiencing VB losses to PHP, which I doubt.  And even if these losses are occurring, then I’d argue that Microsoft’s current partnership with Zend delivers the same benefit to Microsoft that owing Zend would.  In both cases, the likelihood that the SMB is paying for the use of PHP, e.g. Zend-driven revenue, is minimal.  In both cases, the likelihood that the SMB is running the PHP application on Windows is very high.

Maybe it’s just me, but I see a lot more risk than upside for Microsoft in this particular deal.

What do you think?

While Change is coming to the U.S.A. tomorrow, it is with some anxiety that change is coming to the Office productivity suite that I use during my day job at IBM.

The IBM WebSphere division is shifting to using IBM Lotus Symphony, based on OpenOffice.org, documents in future presentations to IBM executives at several decision checkpoint meetings.  We can continue to use Microsoft Office as we have in the past, but presentations to these standing meetings must be delivered using IBM Lotus Symphony.  It’ll be interesting to see how long we can maintain two versions of each file, PPT and ODT, before breaking down and working solely off the ODT file.  I can probably hold out for 1 month.

As far as I can tell, this is not an IBM wide shift.  But considering the level of chart and deck sharing that occurs at IBM, the decision will expose a lot of IBMers, inside and outside of the WebSphere division, to Symphony (and OO.o).

It’s not that I have anything against OO.o or Symphony.  I’m simply 10x more productive using a tool that I have over 10 years experience with.  But, if change is coming, best be in front of it, than being dragged along for the ride.

I guess I’ll never get to try Office 2007 ;-)

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