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Market Roundup September 2, 2005 Itanium Solution Alliance Seeks to
Gather the Itanium Faithful? |
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Itanium Solution Alliance Seeks to
Gather the Itanium Faithful?
News reports have stated that a new Itanium processor
focused industry alliance dubbed Itanium Solutions Alliance will be announced
later this month. The reported goal of the alliance is to make it easier for
customers to adopt systems based on Itanium. Reportedly, the alliance will
sponsor porting events to assist developers, create porting centers where such
work can take place, and develop repositories of Itanium-based hardware and
software solutions with a vertical-specific eye towards customers’ needs.
Members of the alliance were reported to be Intel, HP, NEC, SGI, Unisys,
Hitachi, Fujitsu, and Bull, as well as software vendors Microsoft, Novell,
Oracle, Red Hat, SAP, and SAS.
While this announcement has not yet been made, we are
heartened by the possibilities it offers, should it happen. Although Itanium
has traveled a difficult path to fruition that has been marked by delays,
performance issues, and the incredible success of the x86 family
of processors, the reality is that Itanium is here and is seeking needs that
the once-hoped-to-be Juggernaut can address. Should this alliance happen, we
see it as an important step in driving Itanium beyond the rarified air of high-performance
computing and into the broader marketplace. Given Itanium’s incompatibility
with the x86 instruction set, at least without use of cumbersome emulation, the
platform’s deployment rate has been stymied due to users’ inability to easily
redeploy their existing applications. The fact that notable software vendors
are purportedly to be involved is a potentially game-changing event. There are
potential benefits for all; granted, Intel and HP probably have the most to
gain. Nonetheless, if Itanium is ever going to create substantial traction in
the marketplace, the hardware itself will not be sufficient to make this
happen. The ecosystem, which most importantly includes ISVs and other software
vendors, must be on board. People are increasingly not buying technology, but
rather solutions to business problems, which are embodied by the software
packages being purchased, not the hardware on which they run.
This alliance would also appear to have borrowed from the playbook of another 64-bit processor vendor, namely IBM. Power.org was established to promote the Power architecture throughout existing markets as well as seeking to create new places where Power-based solutions could ultimately go. A key part of power.org is reaching out to vendors who might not already be dyed-in-the-blue Power supporters. This approach could be a great benefit to the Itanium alliance as well. As much as HP and Intel can talk about how Itanium is an industry-standard platform, it simply is not. As such, market cultivation is required and initiatives such as this alliance are well positioned to help. Hopefully the Itanium folks will look beyond simply enhancing Itanium sales in existing niches but rather take the opportunity to pick their collective wits to develop new areas in which the processor could be taken to grow the overall opportunity for Itanium beyond what conventional wisdom would dictate. While we believe this initiative would have been very nice to have a few years back, the axiom “better late than never” still holds true. We are heartened to hear the market chatter of this potential alliance and look forward to its announcement.
Microsoft announced this week it has acquired Teleo, a VoIP
technology and services provider for an undisclosed sum. Microsoft stated that
the Teleo technology will be integrated into its MSN services, and will be
offered at some future date alongside its MSN Messenger service. Teleo provides
VoIP technology; it does not offer IM capability. Teleo had only run a
pre-release version of its services, which allow people with PCs, mobile phones,
and landlines to connect with each other over the Internet. The service has
been shut down while Teleo evaluated feedback on the service and sought to
upgrade its software. Microsoft and Teleo had an existing arrangement where
Microsoft Office users could call using Teleo. Microsoft gave no date as to
when the service would become available.
When Microsoft created MSN, there was a wide array of
questions concerning the company and its future. Was Microsoft a software
company? Or was it becoming an ISP, akin to AOL? We suspect similar questions
may occur as a result of this acquisition, such as: is Microsoft becoming a
VoIP vendor and therefore some sort of communications company? As we discuss
this week the issues surrounding the situation at Skype, we suspect that such
questions are largely irrelevant. VoIP is increasingly becoming a must-have, a
feature that users demand and service providers like MSN must provide. No big
secret here.
That said, it is interesting to note how much the Internet has forced companies such as Microsoft to extend their portfolios far beyond the original templates. Once a desktop OS and applications company, with the advent of the Internet Microsoft was forced to consider whether to merely hold its position or respond to changing conditions. In 1995, when Microsoft CEO Bill Gates declared that the company was “hardcore” about the Internet, it represented not so much a decision made internally to embrace the new realities of connectivity, but a decision that was forced on the company by external realities. For Microsoft, it was an “adapt or die” moment. Such moments keep coming, although not many are as momentous as that 1995 decision. In buying Teleo, Microsoft is acknowledging that it must stay current with competitors like AOL, Yahoo!, Google, and Skype as they drive the latest form of communications between hyper-connected users. If that means Microsoft is going to become a little more like a telephone service provider, so be it.
Microsoft’s latest desktop OS, code-named Vista, has won the approval of Hollywood movies studios due to the
significant anti-piracy technologies incorporated into the OS. Microsoft has
worked with Hollywood studios to provide protection to copyrighted material by
walling off video and audio functions from users and outside programmers. The
safeguards even go so far as to shut off a computer’s connections to some
monitors and televisions, if those monitors and televisions are not also equipped
with anti-piracy software.
Hollywood writes screenplays, not code. As such, it needs
help from software and hardware vendors to try to protect its copyrighted
material. Simply relying on largely ineffective legislation to protect its
product is not going to cut it, no matter how many lawyers Hollywood puts on
the case. What Hollywood has not figured out to date is how to capitalize on
new distribution models that may force the industry to restructure and redefine
pricing models. In essence, the challenges facing the recording industry are
also those of the movie industry. Simply trying to force an old model down the
throats of consumers wallowing in a sea of entertainment options not even
envisioned a decade ago is not going to cut it any more.
Microsoft hopes that its apparent dedication to Hollywood and protecting video content will help earn it a place in the home as a digital media center. Microsoft has long wanted to move into the living room, with promises of a central platform for managing storing, playing, and recording digital content in all its (legal) forms. Such an idea has appeal, but we suspect that Microsoft is going to have to find a way to unseat incumbent providers like cable or satellite vendors, a task that may take more than anti-piracy features to accomplish. As it is now, cable boxes and Tivo-like recording devices offer nearly all the services a consumer could want, with none of the headaches associated with operating and maintaining a PC. Set-top boxes are essentially simple, firmware-based computers controlled from central offices that can invisibly download upgrades or patches to the user’s system. Furthermore, cable companies are very quick to simply replace set-top boxes when they malfunction, a service that we have yet to learn of in the PC industry. While at some point down the road the Windows Media Center may reach a level of reliability that makes its additional features worthwhile to consumers, we suspect that without the built-in, no-muss/no-fuss nature of cable and satellite boxes, Windows Media Center will have to wait before it dominates the end user’s living room.
News reports indicate that Skype Technologies has said
definitively the company is not for sale after news reports indicated that the
company had hired investment bank Morgan Stanley and Co. to explore its
options, including the possibility of an IPO. Skype provides VoIP services
along with instant messaging. Its computer-to-computer VoIP service is free
worldwide, and for additional fees Skype users can call landline telephones.
Skype claims 51 million users worldwide, and at any given time more than 3
million users are on the system, on average. Skype is the latest VoIP company to have IPO/acquisition rumors associated with it;
Vonage recently declined to comment on rumors that the company was planning an
IPO itself. Last week, Google announced it will be offering a VoIP/IM service as
well.
It is getting crowded in the VoIP/IM pool with all of the
new entries and established incumbents like MSN, Yahoo!, and AOL, the largest
provider of IM services. Each player is attempting to grow its subscriber lists
as large as possible before the inevitable shakeout occurs. While vendors are
using different business models to build out their services and subscriber
bases, essentially the end-user experience is largely similar, with inexpensive
or free calling over the Internet to fellow subscribers. When one considers
that VoIP and IM are increasingly an intricate part of people’s daily lives, it
is safe to assume that the use of such services is no longer a differentiator
but a must-have for services and consumers alike.
Given that reality, we suspect that the accretion of such vendors is quickly approaching. The market forces at work are irresistible; we are seeing a replay of similar consolidations that have happened in many industries in the past and in the IT industry recently. It was not all that long ago that offering a TCP/IP stack as a product was a viable business. No more. While we believe that the consolidation of VoIP is inevitable, we take note of the fact that at least two VoIP vendors have made denials or no comments concerning their plans. IPOs could be in the works for both Vonage and Skype, or both companies could be positioning themselves to prospective suitors. A company that raises two or three hundred million dollars in an IPO is at least that much more expensive to acquire than one that does not go through the process and is acquired prior to going public. By allowing rumors to float about possible IPOs, these companies are essentially signaling that they potentially are about to become much more expensive dates, as it were. With rumors, denials, or no-comments daily fare, we suspect that checkbooks are being scrutinized and strategic plans revised as VoIP begins the long trek into the vast maw of commodity desktop functionality.