In-Depth
Enterprise IT: Five Predictions for 2007
The year was something of a mixed bag, milestone-wise. We offer five trends to watch in 2007.
As we bid farewell to the year that was 2006, we take our leave of a 12-month period that was a mix of milestones.
The major players are still the major players: IBM Corp., Microsoft Corp., Oracle Corp., and SAP AG today comprise a redoubtable Gang of Four in the enterprise software segment – and will continue to do so, if their performances over the past year were any indication. Similarly, IBM, along with Dell Computer Corp., Hewlett-Packard Co. (HP), and Sun Microsystems Inc., are still tops in the enterprise hardware segment. If HP continues to fight IBM in the enterprise server market, and if Sun executes on its aggressive multicore UltraSPARC roadmap, the enterprise server space—in particular—could prove considerably entertaining in the coming year.
Elsewhere, several trends came to the fore in 2006 that should continue into 2007.
Enterprises Get SaaS-y
After years of underground—and even quasi-mainstream—success, Software-as-a-Service (SaaS) came to the fore in 2006. Joining pioneers Salesforce.com, NetSuite, and others, Oracle Corp., Business Objects SA, Informatica Corp. (to name just a few) announced new SaaS offerings or expanded existing on-demand services.
Business Objects, for example, exposed its enormously launched CrystalReports.com, a SaaS version of its ubiquitous Crystal Reports enterprise reporting tool. Informatica, for its part, announced plans to SaaS-ify its data integration stack.
If SaaS-ification achieved mainstream success in 2006, it’ll likely develop into a bona fide institution over the next several years. In this respect, analysts suggest, 2007 could be a signal year in SaaS expansion and adoption. Market watcher
International Data Corp. (IDC), for example, lists SaaS growth and adoption as one of its big trends to watch in 2007. Gartner says SaaS is primed for enormous expansion: growing from just 5 percent of software revenues in 2005 to fully one-quarter of software revenues in 2011.
“As SaaS became a viable delivery model from 2000 to 2003, most providers supplied ‘good enough’ functionality with core configuration capabilities. SaaS and solving business complexity were two phrases not associated with each other,” said Gartner research vice president Robert DeSisto in a statement. “The trend has clearly begun to change. For example, SaaS providers are enhancing their software functionality and improving the ease with which companies can customize … SaaS software to meet business requirements."
And In This Corner, Google
As we noted earlier, IBM, Microsoft, Oracle, and SAP collectively comprise a “Gang of Four” in the enterprise software segment, thanks largely to a consolidation wave. Oracle snapped up PeopleSoft, Siebel, and a host of smaller players; IBM nabbed Ascential, Filenet, and several others; and both Microsoft and SAP continued to expand their respective shares, by dint of both in-house development and small-scale acquisition.
The SaaS-ification of enterprise software could impact this power structure, however. While 2007 probably won’t produce any significant reshuffling of the status quo, the onus is on some players—and Microsoft, especially—to flesh out their SaaS strategies. IDC, for example, expected Microsoft to make a significant SaaS move this year. While Microsoft did take a SaaS check-swing—it announced a Web services integration layer for its Dynamics (ERP) application architecture—the company hasn’t yet committed itself to an all-or-nothing swing for the SaaS fences.
With SAP fielding its own on-demand service, Oracle expanding its existing SaaS lineup, and IBM trumpeting its data-center outsourcing capabilities (which effectually comprise SaaS platform solutions), Microsoft is under pressure to make a big SaaS move of some kind in 2007.
Another threat to the enterprise software status quo—at least to the Microsoft-centric enterprise software status quo—is the emergence of search giant Google Inc. as a potential enterprise power-player. Google had a banner 2006, expanding its line of enterprise search appliances, publishing an enterprise search API and enrolling prominent software vendors in its enterprise search partner ecosystem. Google also ponied up $1.5 billion for Web 2.0 content powerhouse YouTube an acquisition which demonstrated—at the very least—that the search giant has the courage of its self-aggrandizing convictions.
Google also took its fight directly to Microsoft, striking at Redmond (albeit in a heavily prototypical fashion) in one of its bread-and-butter market segments: its Office productivity suite cash cow. Microsoft’s Excel is the single most pervasive business intelligence (BI) tool, and its other Office applications (including Word, Outlook, and PowerPoint)—enjoy near ubiquity in the productivity segment.
For now, at least. Earlier this year, Google announced a new “Spreadsheets” prototype that lets users securely create, store, and share basic spreadsheets on the Web. Google Spreadsheets supports real-time collaboration between and among users, Google officials claimed: in fact, several users can share, update, and edit the same spreadsheets at the same time. Users can tap Google’s AJaX-powered Chat service to collaborate while they’re editing or viewing spreadsheets—for free. This may pose a challenge to Microsoft, whose SharePoint Office Server and Groove application are being pitched as collaboration tools.
Google Spreadsheets, as it turned out, was the tip of Google’s own Office spear. Just three months ago, Google announced an entire family of hosted apps—dubbed Google Apps for Your Domain—that it pitches to enterprise customers. Google Apps for Your Domain consists of e-mail, calendaring, voice over IP (VoIP), and Web-authoring tools. It’s packaged in either a “standard edition”—a beta is now available—or as a-yet-undeveloped “premium version,” which will boast (as-yet-undisclosed) advanced features.
It’s still early, of course, but Google and its enterprise application strategy could turn up the heat on Microsoft. With the premium version of Google Apps for Your Domain slated to go live soon, 2007 could be a Year of Living Dangerously for a long-dominant Microsoft.
Acquisitions a Fact of Life
There weren’t really any blockbuster technology acquisitions of which to speak --none, at least, that were in the same league as last year’s acquisition coups: Oracle Corp.’s conclusion of its too-long-prolonged pursuit of PeopleSoft as well as its seemingly anticlimactic purchase of Siebel.
To be sure, chipmaker Advanced Micro Devices (AMD) Inc. snapped up graphics card specialist ATI Technologies Inc. for $5.4 billion, while Hewlett-Packard Co. (HP) acquired management specialist Mercury Interactive Corp. for $4.5 billion, but the former acquisition isn’t (at this point, anyway) much of an enterprise play, while the latter lacks the brand cachet of either a PeopleSoft or Siebel.
The $11.5 billion acquisition of technology high-flier Lucent Technologies by Alcatel does have enterprise ramifications, although it remains to be seen just how well the combined Alcatel-Lucent can execute in the enterprise against entrenched giant Cisco Systems Inc. Stay tuned: Both vendors should step up the competition through 2007 and beyond.
The salient point, of course, is that with mega acquisitions taking place on a yearly basis, they hardly qualify as a trend. By this point, acquisitions—even mega acquisitions—have become all-too-mundane facts of life.
Expect more such jockeying, elbowing, and weight-throwing-around-ing by the major players in 2007.
Mainframe Growing Like It’s 1979
On the other hand, 2006 was a resurgent year for mainframe boosters. Big Iron enjoyed three strong quarters—including a Q3 in which it recorded 18 percent year-over-year growth in MIPS shipments—and helped IBM grow its server market share, thanks in large part to System z (see (http://www.esj.com/Enterprise/article.aspx?EditorialsID=2316).
To be sure, there was a downturn of sorts—mainframe sales dipped in Q2—but that was also ahead of IBM’s z9 Business Class (BC) and z9 Enterprise Class (EC) system refresh. What’s more, IBM introduced a new dedicated processor engine (zSeries Integrated Information Processor, or zIIP) and announced a $100 million investment to simplify mainframe management and programming.
All in all, 2006 was a great year for mainframe pros. As you’ll see, 2007 might be even stronger.
The Greening of IT
Thanks to another emerging trend—we’ll call it the “Greening” of IT—the mainframe looks primed for additional growth in 2007.
Concern about mounting power, cooling, and data center floor space requirements came to the fore in 2006, amid skyrocketing energy costs and a growing consensus over the reality of global warming (see http://www.esj.com/Enterprise/article.aspx?EditorialsID=2279). That was just the beginning, however. Energy costs should be foremost in the minds of IT decision-makers in 2007, too: organizations will continue to deploy high-density, power-hungry gear, researcher Gartner Inc. projects; by 2008, half of all data centers will be underpowered and undercooled.
“With the advent of high-density computer equipment such as blade servers, many data centers have maxed out their power and cooling capacity,” said Gartner research VP Michael Bell in a statement. “It’s now possible to pack racks with equipment requiring 30,000 watts per rack or more in connected load. This compares to only 2,000-3,000 watts per rack a few years ago.”
This plays right into one aspect of IBM’s System z strategy. “Power costs [for distributed Intel servers] are a very direct issue for a lot of our customers. It’s starting to factor into how they make their buying decisions. I ran into a very large customer [with] a huge Intel server environment and they’re beginning to measure the acquisition costs [of additional Intel servers] in kilowatts per server,” Stallings told ESJ in an interview earlier this year.
“In the data center, every square foot is air-conditioned, so there’s the cost of the real estate, but then there’s the cost to power and cool all of that. In one-fourth of the footprint, you can run the same workload [on a mainframe]. The price of [data center] real estate is not going down, it’s going up. Data centers are getting larger and larger. As customers acquire more and more servers, you’ve got to cool them.”
The Energy Conservation Push
Look for energy conservation to be a huge trend in 2007. Quite aside from the spiraling cost of data center power and cooling, organizations will have still another incentive to reduce energy consumption—increasing federal oversight.
Just before the 109th Congress adjourned for the year, it passed legislation which authorizes the Environmental Protection Agency (EPA) to prepare a report that assesses the growth of data-center power consumption in both the public and private sectors. This study—which the EPA must deliver in 180 days—will evaluate the status of energy-efficient computer gear; analyze the benefits (reduced cost among them) of more aggressive energy-conservation policies; and recommend federal incentives to encourage data center conservation.
What it all adds up to, analysts say, is a mandate for change. “This bill will help to focus industry and public attention on the extraordinary consumption of electrical energy in data centers by power-hungry, high-density equipment,” write Gartner analysts Michael Bell and Ed Holub. “The passage of this bill will send a clear message to both vendors and users that energy conservation must become a high priority for data center infrastructure, IT equipment, and operations.”
What we can expect, Gartner suggests, are additional conservation incentives and other federal efforts to promote data center energy efficiency.
“We feel that the bill falls short in mandating energy conservation thresholds,” Bell and Holub conclude. “[T]o the extent that the EPA sets forth aggressive recommendations for federal incentives, including investment tax credits, the legislation will accelerate technology innovations and encourage data center user conservation measures. The legislation may also prompt state and municipal energy conservation initiatives.”