In-Depth
Saying Goodbye to a Turbulent 2009
From the Sun/Oracle acquisition to radical changes in the server market, it's been a topsy-turvy year in IT. We take a look at the highlights.
Now that 2009 is almost over, we can all breathe a (collective) sigh of relief, though it looks like 2010 could go in any of several directions. Although the economy seems to be recovering, employment continues to lag; analysts say we’re in the midst of a dreaded “jobless” recovery.
Surprisingly, IT seems to have been something of a safe harbor: unlike the post-dot-com recession -- which disproportionately affected IT workers -- employment in IT is no less secure than employment in any other sector.
By all accounts, there’s plenty of pent-up demand for IT products and services (to say nothing of IT people know-how) -- but many key technology indicators (such as the rough-and-tumble server segment) are still deeply depressed. Meanwhile, regulators in the European Union (EU) are taking a closer look at Oracle Corp.’s bid for Sun Microsystems Inc. -- even as regulators in the U.S. seem newly curious about IBM Corp.’s mainframe market practices, too. Some folks say that’s just the tip of a soon-to-be-articulated regulatory spear.
So let’s celebrate 2009 for all that it was -- or, more happily, wasn’t -- as we look ahead to a 2010 that, we can only hope, won’t be any worse.
Goodbye, Mr. McNealy
The IT industry is poised to lose a giant: Sun Microsystems, the Silicon Valley computing powerhouse that (in the late 1990’s and early 00’s) once positioned itself as the last, best bulwark against the Microsoftification of the enterprise (this was before Linux really hit its stride), agreed to be acquired by Oracle back in April. Oracle was actually a suitor-come-lately: in late March, rumors started flying that IBM Corp. was in talks to acquire Sun. Oracle entered the fray in late April, surprising just about everyone with its $7.4 billion bid for Sun.
As of press time, Sun isn’t yet an Oracle asset: the European Commission (EC) placed a hold on the deal, citing concerns about potential competitive (or anti-competitive) ramifications.
The results have been just short of disastrous for Sun, which -- according to the latest market research tallies -- was recently surpassed by Hewlett-Packard Co. (HP) in its bread-and-butter Unix market. Sun -- the erstwhile Unix King -- now trails both HP and IBM in the Unix space.
Server Market Hell
Sun’s travails didn’t occur in complete isolation, of course. The enterprise server market plunged to all-time lows in both Gartner Inc.’s and IDC’s market research.
All server segments were down, but as George Orwell might put it, some server segments were more down than others. Blade servers, for example, fared surprisingly well, thanks, in part, to a pair of related technology drivers (namely, runaway virtualization and burgeoning interest in -- or experimentation with -- cloud computing). However, sales of non-blade Intel or AMD x64 systems dropped in 2009, posting lower year-over-year totals in the first three quarters.
More alarming for people who follow the midrange, mainframe, and high-end server segments was the fate of the stalwart Unix server, which -- in spite of an encouraging showing in the first quarter of the year (Q1 is always strong for Unix, according to market watchers) -- declined throughout 2009. Unix is by no means dead -- it’s still generating some $2.5 billion in revenues each quarter -- but the big server vendors haven’t been able to reverse a protracted slide that has Unix ceding share (on both a sequential and year-over-year basis) in just about every quarterly tally. Not that they aren’t trying. By the third quarter of this year, for example, Sun revenue had slid to the No. 3 spot in the Unix market, but it shipped more servers than HP or IBM thanks to aggressive cost-cutting.
At first, the mainframe fared slightly better. In a historically bad year, Big Iron wasn’t initially hit as hard as the volume x64 server segment or the hemorrhaging Unix space. As the year wore on, however, the mainframe took its licks, too: in the second quarter, for example, mainframe revenues declined by almost 40 percent year over year. (MIPS shipments were down a stunning 20 percent.) Things improved slightly in Q3, when mainframe sales were off by a quarter (26 percent), according to IBM’s financial reports. By contrast, Big Blue says, Q3 sales of its System p Unix servers were off by just 10 percent, year over year. (IBM has a 10-point lead over rivals HP and Sun in the Unix space. Unix hasn’t been growing, so IBM’s market share gains have come primarily at the expenses of Sun, and -- to a lesser degree -- HP.)
A Big Iron platform that for nearly half a decade had consistently kept pace with or outpaced its competitors fell flat in 2009. With a new System z11 mainframe on deck for a late-2010 debut, here’s hoping that Big Iron rebounds.
Virtualization: The Rubber Met the Road
It’s funny how hype cycles work. Three and four years ago, market watchers started talking up virtualization as a coming-and-inevitable tidal wave.
Most of us remember the breathless research blasts: 2006 -- then 2007 -- then 2008 would be the year in which virtualization really took off, we were told. It didn’t happen like that, of course. It never does.
In fact, uptake and deployment of virtualization technologies in non-traditional environments (i.e., on anything other than a mainframe, System i, or Unix platform) seems to have been a steady -- if inevitable -- phenomenon. The ironic upshot, of course, is that by the time virtualization had arrived -- sometime in late 2008, or in the first half of 2009 -- we’d missed it. That’s because we’d already moved on to cloud computing, which soared to an all-time-high level of hype in 2009.
Some analysts are already predicting a downpour -- let’s call it a cloudburst -- of cloud activity in 2010, citing survey reports (such as an end-of-the-year study from Aberdeen Group) that indicate that large shops are actively pursuing private cloud deployments.
It’s easy to dismiss such claims, but cloud computing -- in its enterprise-safe, private cloud instantiation, at least -- is basically a conceptual refinement of pervasive virtualization. In a certain sense, it’s the inevitable consequence of pervasive virtualization. Call it applied virtualization, with a business-centric mindset.
That we’re now waxing enthusiastically about the potential of the enterprise private cloud suggests that we’re operating in a sort of post-virtual landscape. That the private cloud is a logical consequence of pervasive virtualization suggests that -- notwithstanding the surrounding hype -- it also has some basis in substance.
Next year may be too soon for that substance to be borne out, but look for verifiable progress -- chiefly in the form of production deployments that move beyond the proof of concept -- on the private cloud front.
Regulatory Redux
After eight years of comparative laissez-faire-ness under the Bush Administration, regulators appear to be reasserting themselves now that President Obama is at the helm. To some extent, of course, the rise (or reassertion) of regulation isn’t at all the product of any specific policy change: regulators in the EU, for example, are increasingly subjecting business activities -- particularly those with potential (or even notional) anticompetitive ramifications -- to greater scrutiny. Oracle is still waiting for the European Commission (EC) to okay its acquisition of Sun Microsystems (regulators in the Russian Federation opted to take a closer look, too), and both the EU and the U.S. Justice Department are investigating IBM’s moves in the mainframe market. Industry veteran Charles King, among others, cites the latter as a likely example of the Obama administration flexing its regulatory muscles.
With consumer financial protections, health-care reform, energy reform (including a possible greenhouse-gas policy shift) and new SEC regulations likely on tap, shops should prep for even more in the form of (possibly obtrusive) regulation in 2010 and beyond.
Final Thoughts
Market-watchers have been talking up green IT for half a decade now. It wasn’t (or hasn’t been) clear that enterprise buyers were listening, however. This year, companies seemed to really warm up to the idea of going green -- and not just with respect to their IT practices.
The chief driver, of course, isn’t so much a tug of conscience as a tug of another kind: purse strings. For example, market watcher IDC noted that most companies that pursue green IT strategies do so primarily to cut costs: nearly half of respondents to an IDC survey identified a need to develop green IT and sustainability policies to manage future growth. “IT executives are feeling the pinch of their budgets being squeezed," said IDC senior vice president Vernon Turner in a statement accompanying IDC’s survey results. "Because they understand that much of their expanding infrastructure remains underutilized -- adding to their company's capital and energy costs -- green IT policies can help establish a more comprehensive approach to utilizing their assets."
On the other hand, the folks at Gartner say that the greening of IT won’t happen overnight -- or by the end of 2010. The delay, according to Gartner, is a lack of tooling: current data center management tools -- particularly next-gen technologies that can be used to monitor or measure energy consumption -- are still too immature to be of use to would-be green data center retrofitters, researchers claim. This isn’t stopping companies from going green, however, Gartner stresses: at this point, robust energy monitoring or measurement tools are a nice-to-have luxury, not a need-to-have staple. Shops are instead taking the first substantive steps toward green IT, focusing on consolidation, rationalization, and virtualization efforts.
There's much more likely on tap in 2010. Microsoft Corp., for example, plans several major project releases -- including new versions of SQL Server 2008 (a “Release 2” deliverable), Office, and SharePoint Server.
If 2008 was an extremely tough -- some might say bitter -- year for Microsoft, 2009 arguably had its low points, too: to start things off, Redmond announced its first-ever company-wide layoffs in late January. (Microsoft would ultimately cut about 5,000 jobs between January and November.) Moreover, Microsoft decided to pull the plug on its PerformancePoint Server offering after just 16 months, effectively relinquishing its push to take budgeting, planning, and forecasting mainstream -- much as it had done for online analytical processing (OLAP) and extraction, transformation, and loading (ETL).
Microsoft arguably finished the year on a solid note, however, thanks to a glitch-free Windows 7 launch. Elsewhere, Redmond shipped its Exchange Server 2010 in October and its Azure cloud computing platform in November. Not a bad year’s worth of work -- even if Office was delayed once again.
Next year should also bring IBM’s Power7 processor, which powers Big Blue’s System p and System i lines, along with a long-awaited Itanium processor refresh from Intel Corp. and HP. The upshot, of course, is that both RISC- and EPIC-Unix will get major performance infusions next year. Will it be enough to stem the tide in an ebbing Unix server segment? Check back in December of 2010. We’ll have a pretty good idea by then.