June 2010

While a niche offering today, open source Chrome OS is likely to follow Android’s success – and IT decision makers should plan on evaluating Chrome OS-based devices for at least some portion of their user base in the next twelve to eighteen months.

As PC World’s Ian Paul reported earlier this week, Dell revealed it is planning to utilize Chrome OS as the basis for future offerings. Details surrounding Dell’s Chrome OS plans, and more importantly, Google’s offer to PC makers, are still murky at best. However, it’s likely that Google will follow much of the same game plan as they did with Android.

Less than Free for PC makers is difficult to ignore:
Most readers are aware that the open source Android operating system is provided royalty free to device manufacturers. However, Google goes one step further – device manufacturers are actually paid to adopt the OS. VC Bill Gurley explains Google’s offer to mobile device manufacturers:

“….That’s right; Google will pay you to use their mobile OS. I like to call this the “less than free” business model. This is a remarkable card to play. Because of its dominance in search, Google has ad rates that blow away the competition. To compete at an equally “less than free” price point, Symbian or windows mobile would need to subsidize. Double ouch!!”

I would be surprised if Google doesn’t provide a similar offer for PC manufacturers to encourage the delivery of Chrome OS-based devices.

But Google is unlikely to stop there.

After the operating system itself, most IT decision buyers focus on is choosing an office productivity suite that meets their business needs, and employee skills. As this chart of Microsoft’s profit shows, the linkage, and combined success, of Windows and Microsoft Office is critical to Microsoft’s business.

Until recently, few could argue that MS Office alternatives were truly ready for everyday use. That is slowly changing – Google’s free SaaS-based Google Docs are increasingly becoming more enterprise ready by the week. In some respects, especially joint live editing within documents, Google Docs offers capability that many users of older Office versions would love to utilize.

According to Microsoft’s Office 2010 OEM pricing, Microsoft is charging PC manufacturers $2 per copy to preload Microsoft Office Starter Edition if they agree to preload other Microsoft components. The cost increases to $5 per copy if the manufacturer only wants to preload Office Starter Edition.

Google can offer Google Docs for free to PC manufacturers, thereby saving the manufactures millions in the long term versus Microsoft licensing fees for MS Office preloads. Google could potentially offer PC manufacturers incentives related to Google Apps users that upgrade to Google Docs on a given Chrome OS-based device. The net result will be higher profit margin potential for PC manufacturers considering Google Chrome OS and Google Docs.

Astute readers will note that the potential success of Chrome OS is poised to negatively impact Microsoft and desktop Linux vendor revenues.

One could question whether Chrome OS and Google Docs can in fact succeed against Microsoft Windows and Microsoft Office where so many other vendors have failed. The combination of Chrome OS plus Google Docs/Apps provides an interesting user experience that sets the combination apart from previous OS and office productivity alternatives. However, the most important factor is the profit motivation for PC makers. For instance, vendors offering desktop Linux or open source office productivity suites, can at best, provide a free offering to build from. These vendors cannot offer the revenue potential linked to search revenue that Google can offer. The “less than free” price point is difficult to ignore, and for other smaller OSS vendors, compete against.

Choose roll out candidates with caution:
Driven by PC maker’s profit motives, IT buyers need to plan for the inevitable future where some portion of their user base will be well served with a Chrome OS-based device.

In some respects, the growing trend towards Web-based applications makes is increasingly easier to move some users off a traditional OS and fat-client applications. For instance, of the eight applications I am currently running in the background as I write this post, there are exactly zero applications that either do not, or could not, run inside of a browser alone. I am not alone in this respect.

To be fair, and sane, few IT decision makers will roll out a Chrome OS and Google Apps-based PCs across their entire enterprise in the next twelve to eighteen months. The lack of enterprise manageability and control with Chrome OS is more than likely to be missing when these devices first hit the market. But that is a point in time statement.

IT decision makers should consider initial roll outs to specific groups, such as external facing customer service representatives, or within branch offices. Consider a pilot project with Chrome OS and Google Docs, or Google Apps, on existing, older, PCs to evaluate whether a future Chrome OS PC will be a good fit for some of your user base.

Plan ahead now – because if Chrome OS tracks Android adoption, at the manufacturer and user levels, you’ll be forced to into the evaluation by your vendors, and maybe even your users.

Follow me on Twitter at SavioRodrigues. I should state: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies, or opinions.”

The growing demand for mobile applications is set to challenge the apprehension that enterprise telephony buyers have towards open source telephony offerings. As IT departments strive to meet new mobile application requirements, they will play a role in driving open source and cloud telephony adoption within enterprises.

The IT versus Telephony divide:
IT and telephony departments are often separate departments, if not fiefdoms, within an enterprise. This historical separation has resulted in markedly different views surrounding open source usage. I was told of this reality when we launched the WebSphere Application Server Feature Pack for Communications Enabled Applications (CEA), and have since seen this reality play out.

Open source telephony solutions are not new. However, for enterprise telephony buyers, the risk of any downtime is too great to consider open source alternatives to Cisco, Avaya, Siemens or other well established telephony solutions. One can hardly blame enterprise telephony buyers. We don’t think twice about having to refresh a web browser if a web application crashes. But what if a conference call crashes or a call between a customer and a contact center representative is terminated abruptly?

One may sympathize with enterprise telephony buyers, but their decisions are impacting the seed at which IT departments can respond to end user demands for innovative applications.

Next generation mobile applications demand communications enablement:
As mobile web application usage grows, the first step will be to delivering today’s desktop browser application on a mobile browser. Forward thinking IT departments and enterprises will look instead to deliver a class of applications beyond those available on desktop browsers today. In time, the majority of enterprises will follow suit.

These mobile applications will be communications enabled from the start.

A mobile CRM application that lets a sales executive review a sales lead, and within the application itself, call one of her direct reports, based on presence availability and personalization information, and jointly co-browsing through the sales lead data online while speaking over the phone will become standard practice.

A mobile retailer application that lets buyers co-shop online using desktop or mobile devices, and if required, call the 1-800 number and be routed to the appropriate contact center representative, based on browsing history, without having to traverse automated call menus, will become standard practice.

The challenge for IT is that these and similar applications require IT and telephony groups to work more closely together. More importantly, these applications will require a degree of telephony flexibility that enterprise telephony buyers aren’t likely to be comfortable delivering based on their risk adverse nature.

So what’s an IT department to do?

Open source and cloud telephone to the rescue:
An interesting solution is being offered by open source Twilio Cloud Communications. Twilio recently announced OpenVBX, an open source telephony in the cloud solution. OpenVBX offers virtual telephone numbers, voice transcription, voice collaboration amongst users and a drag and drop approach to building call flows and menus.

OpenVBX is offered as a hosted solution so IT departments don’t have to trouble themselves with keeping a telephony infrastructure up and running.

Most importantly, OpenVBX can route calls to existing phone numbers. This means IT can build innovative new applications that rely on the enterprise’s existing telephony infrastructure without actually having to involve the telephony department in the application development process.

I am not proposing that IT circumvent the telephony department in the long run. However, I’m simply suggesting IT departments consider applying the lessons of grassroots open source adoption. It’s much easier to convince decision makers to use open source when the organization has already been using open source.

Neither am I suggesting that telephony departments should migrate away from their existing enterprise telephony solutions. That would be a fool’s errand. I am however suggesting that telephony departments should evaluate how open source and cloud offerings can augment the existing enterprise telephony environment to deliver end user application innovation.

A mobile communications enabled application generating revenue for the enterprise will go a long way toward convincing telephony departments to augment their telephony infrastructures with open source and cloud offerings.

As an end user, I can hardly wait.

Follow me on Twitter at SavioRodrigues. P.S.: I should state: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies, or opinions.”

Red Hat is, without a doubt, the poster child for an open source subscription-based business model. This business model has come under scrutiny of late, stemming from a recent interview in which Red Hat’s CEO explains that reaching $5 billion in revenue requires replacing $50 billion in revenue currently flowing to other computer companies.

After joining Red Hat in December 2007, Whitehurst was quoted:

When I look at the quality of our existing technology, and the incredible brand that we have and the markets we play in, we should be a $5 billion company or more. If you just look at operating systems and middleware–that’s nearly a $100 billion business. We’re a $500 million business. We have barely scratched the surface.

Whitehurst and team grew Red Hat’s annual revenue to nearly $750 million in their most recent fiscal year. Computerworld UK columnist Glyn Moody asked Whitehurst whether Red Hat would reach the $5 billion revenue mark he had originally aspired to. Moody details Whitehurst’s response:

His answer was a good one. He said that he did think that Red Hat could get to $5 billion in due course, but that this entailed “replacing $50 billion of revenue” currently enjoyed by other computer companies. What he meant was that to attain that $5 billion of revenue Red Hat would have to displace software that currently costs $50 billion. Selling $50 billion-worth of software — even if it only costs $5 billion — is somewhat hard, which is why it will take a while to achieve.

Before I go on, let me explicitly state that I have a lot of respect for Red Hat and its people. In my role at IBM, I compete with JBoss, a division of Red Hat — but this post isn’t about JBoss. It’s about Red Hat’s business model choices.

I don’t accept Whitehurst’s explanation as to why reaching $5 billion will take longer than he may have originally anticipated.

Whitehurst seems to be saying that every $1 made by Red Hat results in $10 of existing revenue loss to established vendors. I won’t question the 1-to-10 ratio, as I have no data to offer.

I will, however, question the base assumption that Red Hat revenue comes at the direct loss of existing revenue enjoyed by “other computer companies,” as Whitehurst puts it. This may once have been true at the Linux level, where Red Hat Enterprise Linux (RHEL) has been a migration path for Unix customers.

But are masses of Unix customers still looking to migrate to RHEL? Or is it more likely that the majority of customers with Unix workloads today are going to remain on Unix? IDC’s estimates of server operating system market opportunity suggest as much — the revenue opportunity for Unix operating systems is forecasted to be flat from 2009 to 2013. If RHEL was growing largely at the expense of existing Unix revenue, one would expect a decline in these IDC figures.

I would assert that Red Hat’s Linux revenue growth potential is no longer linked to displacing another vendor’s revenue. Rather, the revenue potential is linked to growing usage of RHEL for new projects. Being the incumbent, Red Hat should find it easier to sell more RHEL licenses into an account than before, when it had to displace an alternative operating system to get into the account.

Yet, Red Hat’s business model, which focuses on low cost, has trained its customer base to fixate more on the price of Red Hat products than the value these products deliver. It encourages customers to trade RHEL for cheaper options.

Next, considering Red Hat’s JBoss business, it’s difficult to argue that JBoss is growing at the expense of IBM or Oracle. For instance, only 13 out of 133, or 9.8 percent, of JBoss-related customer case studies involved a migration from an establised enterprise application server to JBoss. Do migrations happen? Of course. But much more often, customers select JBoss for new projects alongside projects running on established enterprise application servers. However, by training customers to seek out low cost, rather than value, JBoss is now exposed to the likes of VMware SpringSource tc Server and other open-source-based application servers that are less expensive, if also less rich in features.

RHEL and JBoss products continue to perform well in the market and to drive revenue for Red Hat. That is without question. It will take Red Hat at least 13 years to reach $5 billion in revenue if the company is able to maintain the 15 percent year-on-year growth rate it achieved in the past year.

My issue is with Whitehurst suggesting that Red Hat’s revenue gains are linked to another vendor’s revenue slide. This may have been true in the past, but not any longer. Red Hat’s revenue growth is much more related to increasing workloads at existing customers or customers considering new projects. As Red Hat attempts this, the company has to realize that its focus on low cost has benefits and consequences.

Follow me on Twitter at SavioRodrigues. I should state: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies, or opinions.”

Redmonk analyst Stephen O’Grady uses Facebook and Twitter as a guide for the future of development. Is your company ready to follow the prescribed guide?

In the post “Beyond Cassandra: Facebook, Twitter and the Future of Development”, O’Grady reaches the conclusion that since enterprises are beginning to realize that data is their most valuable asset, enterprise IT departments are should revisit their application development methodologies. Specifically, only invest application development resources in applications that will differentiate one’s business from their competitor.

O’Grady points to the fact that the vast majority of enterprises historically wrote their own CRM or ERP applications, but don’t do so anymore. Enterprises are differentiating elsewhere in the business process, or have found ways to differentiate by customizing off the shelf, and increasingly, open source, packages.

Some may argue that Facebook, Twitter, Google, Amazon and Yahoo, whose application development practices O’Grady uses to draw his conclusions are, frankly, a little different than a typical enterprise. But, these firms built strong businesses using development methodologies that have trickled down into the typical enterprise.

The use of open source, the emphasis on good enough, or the notion of convention over configuration, or the use of dynamic scripting languages, are all finding their way into a traditional enterprise. These development trends grew out of web native firms. If next generation enterprise application development is to resemble the practices of web native firms, O’Grady suggests that your enterprise should be ready to:

  • Default to Open Source
  • Use Permissive Licensing
  • Use Third Party Project Hosting

These are three of the five predictions O’Grady makes. Let’s consider these three as they will be the most difficult for enterprises to accept.

Plainly put, if there is no competitive advantage in developing an application in house, look to open source it using a permissive license into a third party hosting site or foundation such as Github or Apache.

A permissive license, such as the Apache License, and external hosting will help others, possibly in your industry, find the application, and fingers crossed, contribute to evolving the application. The end result is that each enterprise using and contributing to the application benefits from spreading the development costs.

Well, that’s the theory. Putting it into practice is an altogether different issue.

This new development model requires a major shift in line of business and IT decision maker mindset. It’s one thing to use an open source product, such as Linux or Alfresco, within your enterprise even whilst knowing your competitor is doing the same. It’s entirely different to open source, for instance, your custom developed partner on boarding application, and watch your competitor being to use the application also.

Considering the level of purchased applications in the enterprise, the only true application development occurring should be on applications that differentiate the enterprise from competition. Is that truly the case at your company – you can be honest; your CIO isn’t reading over your shoulder.

Through no intended malice, enterprise IT departments continue to devote application development resources on projects that differentiate the business, but not to the degree that a project higher up the application stack would.

Let’s assume you take a serious look at your application development investments and, as O’Grady suggests, validate that they increase your company’s differentiation, and by how much. This results in an ordered list, with high value application development projects at the top of the list. What can you do about the projects at the bottom of that list?

Before open sourcing the project, consider whether it would in fact be easier stop internal development on the project and use an open source or commercial off the shelf product in its place.

If open sourcing the project is the desired route, ensure that your company actually owns the Copyrights to the source code. Some enterprise developers unwitting utilize open source code within internal projects without consideration for the associated license. They assume, since the application will never be distributed outside of the company, the requirements of Copyleft licenses will never be triggered. In parallel, reach out to others in your industry to gauge interest in contributing resources to the potential open source project.

I almost dismissed the idea of competitors working on an open source project together. But then I remembered this happens all the time in the software industry. For example, IBM and Oracle both work on the Apache HTTP Server project because it allows both companies to save development resources versus building an HTTP Server internally.  The saved resources are used on higher value products higher up the software stack. Also, if world wide banks are willing to create a technology buyers consortium in order to negotiate more effectively, why wouldn’t these companies collaborate on open source application projects – especially for lower value applications?

Follow me on twitter at: SavioRodrigues

PS: I should state: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies or opinions.”