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IT Trends In and Out of Downturn
An anonymous reader writes "Washington Post has an interesting article talking about how IT industry is changing its business models to survive (IBM: "Pay As You Save"; HP: universal printer driver; Consulting weak; Oursourcing booming), as well as how outsiders view the downturn (Merrill Lynch: it's just another bust after PC and mainframe, but the good thing is, "each 'wave' has so far represented a tenfold increase in the number of technology users."). I'm particularly interested in the outsourcing story. It might explain why IBM will benefit and other vendors like Sun Microsystem which don't have a strong service arm will suffer."
Well, don't ask EDS about it. And IBM seems to be a little sheepish on it, too. Outsourcing IT doesn't appear to be very strong lately, either. I don't know why that'd be focused on as a strength. (Although comparitavely, it isn't THAT bad as other things.)
Okay, does anyone else see a problem with this? First, an analysis of the tech market from a stock analyst. Second, the analyst in question works for a company under investigation for bogus analysis of market trends(click)? .NET propaganda. Oh wait, I suppose that Merril Lynch is in bed with Microsoft too.
Third, as I don't quite remember the pc boom, or the mainframe boom as being discussed by stock analysts, shortly after whatever previous bust I am even more likely not to believe this. Especially when the speil for the next great major advancement sounds like
This industry is shooting itself in the foot by bringing out a new 'technology' every 7.5 seconds.
Companies might start spending more on Information Technology if there were just a few months stability in the industry such that the media and C*O's can learn what's available, actually understand what things like 'XML' are, what it can do for them etc. and get round to planning ahead.
At the moment, this is industry is doing everything but helping C*O's see ahead by bombarding them with new whiz bang mega hyped new 'technology' all the time.
Let's just chill for a bit.
A little intro, I was one of the many that got laid of in IBM essex last year. There were about 6000 of us in all. Roughly 1/3 - 1/2 the engeniering work force.
IBM will survive because of it's products. Not services. The IBM service model is based entirley on the Hardware that it sells. The reason people are buying into it is because it is like insurance. Pay IBM a smaller amoutn and if anything tragic happens they will fix it. If nothing happens you are not out as much money as if you kept a full time person to deal with your IBM mainfrane systems.
I'm tired and sick (with a cold not mentally) so that's all I have to say. IBM will live or die by it hardware. It's service arm is only part of the PR machine.
A big story around here involves CSC laying off a few thousand people who had been working as part of a huge ($1B) contract that involved outsourcing numerous IT functions for United Technologies Corp (UTC). Reading the press coverage, it looks like a classic outsourcing problem: The project scope widens as the competitors bid each other down. Ultimately, some lucky company finds themselves as the winner[?] of a huge obligation to supply all kinds of services for a price may not be realistic. Quite frankly, I find it hard to believe that traditional IT departments could ever waste as much money as the outsourcers claim they can save.
There is a time and place to outsource certain functions, but these comprehensive deals are for the birds. To me, the key is an exit strategy. If you don't have enough non-outsourced resources, you can never fire the outsourcers. You can expect service and price to shift from the ultra-competitive model of the intitial contract to the "gotcha" model of the renewal.
I worked for the State of Connecticut in 1998. At the time, Governor John Rowland was most anxious to outsource all of state government IT. He was already despised by the state labor unions, and this was simply the icing on the cake. Rowland campaigned very hard to convince a skeptical legislature that big money would be saved. In the end, one of the largest outsourcing proposals in history collapsed when Rowland realized that the bidders were promising savings in later years, and there was zero (or negative) savings in the early years. By the time those years arrived, the alleged "savings" would be mostly funny-money comparisions based on hypothetical pie-in-the-sky projections. If Rowland could have saved a single dollar up front, he would have happily taken the deal if for no other reason than to screw the unions. Outsourcing has been a tough sell in this area ever since. When you can't fool the politicians, who is left to fool?
You're correct that the techs shouldn't guess at requirements based on their knowledge of the business. But to imply, as I think you have, that a technical person's knowledge of a business is of no value is silly.
Say you're building an accounting application. Would you as a designer want to know that there are several Asian people on staff, and sometimes they have trouble reading English? Would you like to know that the accounts receivable employee is a woman in her 50's who won't retire for 10 years, was raised on old DOS applications, and is terrified of GUIs? What are the chances of either of these people or groups communicating that to you clearly? Do you think management knows or cares?
There's no substitute for a person on the ground, so to speak. If you plan for the techs to have 0 knowledge of the business then you have to assume that the business is 100% cognizant of itself (for the particular problem domain) and can clearly communicate that knowledge. You must know that never happens.
This isn't as much "normalization" as it is "don't take so many drugs when you're designing tables."
Sun's position in the marketplace is really starting to slide and not having a strong service division is the least of their problems.
I work for a company that is Sun reseller, and recently they have been adding more bureaucracy and "rules" to their resellers. This causes the sales force to waste a lot of time and limits them from achieving a better sales position. Recently Sun "required" us to send a sun certified tech to a new product announcement in a town 8 hours away. This three day trip was a complete waste of time as the same knowledge could be obtained in one hour of reading information off their site and spend the remaining time billing hours to clients.
Sun is also slitting its own throat with their pricing. Several year's ago they use to argue price/performance, which was a strong argument for their products. Now with the improvements and wider sector approval of Linux, they can't make that argument. The only area where they have any strength in the marketplace is the very high end server and possibly security for the types that like to have a company behind a product. There market for the most powerful 5% isn't that small, and I think its only a matter of time before other products overtake them in the price department.
The answer to this might be succeptible to empirical study. On the one side, some bright, capable people like regular hours and good benefits; on the other some like irregular hours and independence. And - a different question - some may be more bright and capable in the one circumstance than the other.
But the central question is: What business model brings in the best IT people, in whatever formal (or informal) capacity? And on the informal side, if you bring in open source techies, to what extent are they bringing in a large part of the open source community as unpaid accomplices, and how much brilliant capability comes in by that route?
Of course, your business model also has to consist of - well - a business. The .com VC model of "Pile a bunch of sugar here and let the bright, capable ones feed on it, the concentration of them will be enough for success" was stupid, stupid, stupid. Still, given a going business, it's getting the best crew on the oars that matters, not whether their economic relationship to you is that of slaves or sportsmen or enlisted men - except insofar as the relationship type is coherent with engaging a superior crew.
And the faster more business crew effectively, the more their competitors will try to emulate them, and the happier techies in general will be with our prospects - except for the incompetents (many of whom seem to presently have jobs with hosting services) who should be driven out of the field.
"with their freedom lost all virtue lose" - Milton
* Vertical Integration is the practice of owning all of the aspects of your business. Rockefeller slaughtered his opposition by buying barrel manufacturing capabilities to store the oil, railroads to transport the oil, etc., all of which lowered his costs and provided a larger degree of control over the major factors immediately outside his core business of selling oil.
I'm constantly amazed at how often businesses don't seem to consider "purchasing" as a viable job title when it comes to their I.T. departments.
The fact is, when you don't assign purchasing and researching tasks to a specific member of your I.T. staff, you end up with a scattered mess of software licensing, fiascos such as the one you described with the bundled system w/19" monitor and RAM upgrade, and many other disasters.
With my previous employer, we had that issue, starting out. It was just generally understood that practically anyone in a salaried position could put in a purchase request, and then their direct manager had to "approve" the order before it was finalized. Seemed simple enough, except people in engineering would always dream up all sorts of hardware and software they "could get lots of use and productivity" out of. Of course, their boss would agree that it "sounded like a good plan" and sign for it. Then, I.T. would get stuck with all the support hassles if the thing wasn't playing nice on our network, didn't work as advertised, or what-not.
Even when we started trying to enforce a more strict policy of "only I.T. purchasing I.T. related goods" - things were still a mess. One person would prefer a certain vendor they used in the past, while another I.T. worker was trying to buy through someone else to keep up a minimum yearly purchase agreement (to lock in a discount).
Something I am seeing in my company, as a CEO and after spending the past year traveling around the midwest talking with other IT staff:
.Net applications and ship huge amounts of money to Redmond.
Java on Linux will lead the industry out of the bust, in at least one area.
1) By providing companies with business systems they can truly own themselves, and are not owned by other companies or cannot be purchased by competitors.
I mean, why pay $22 Million dollars for SAP when you can build your own system, for half the price, with Linux and Java.
Besides, your competitors can't buy what you build. What you do build will be truly an advantage.
2) You say SAP is too complex, too functionally rich to replicate? I say your are right. But most companies don't need SAP, they need a subset of SAP. They also need a system that represents a edge against thier competitors that can't be bought elsewhere.
Something you can get with a Linux and Java solution built homegrown, and probably at half the price.
3) Companies will do it. Why? Because they don't want to upgrade every 2-3 years and invest another million dollars because SAP or Microsoft says so.
The investment is also preserved over the lifetime of the hardware with the simple requirement you need a certified VM for your new target hardware and thats it.
4) Companies want to be able to upgrade when they require it, and when it makes business sense, not when Microsoft shareholders want more money.
This will make costs that are out of control right now, and outside the control of IT oragnizations, very much more controllable from year ot year.
Linux and Java delivers that promise.
In the end, Linux delivers this promise bacause it makes people the important part of this equation.
How?
Well, lots of people ask me how I make money with Linux? They don't seem to understand.
Which, for most of my competitors that wonder how I stay in business month to month, I am quite pleased they don't "Get It" as they gear up to write
Meanwhile, I am paying health insurance benefits, bonuses, and paid vacations to my staff to keep them happy at only $80 bucks an hour for software development. All that and in the state of Wisconsin for that matter. One state that taxes businesses quite brutally I am afraid. (I think we are the top 3 or probably in the #1 spot right now....)
Why? Because I don't have those costs. Which are enourmous in respect to how much I spend on software with Linux and Java for my customers...which is ZERO.
I figured out I must be saving close to $50K per year per programmer by not using Microsoft products for example on one of my customers projects.
The point is, in closing, is that IBM figured it out. More specifically, Lou Gerstner, who you can all thank, if you are a IBM shareholder. If Lou didn't see many of these things comming, almost a decade ago, IBM would be a vastly diffferent company both in size and scope right now.
But like Lou, my company makes money by competiting on the value of your organization, in the open source world, not by:
1) How many units of software I shipped.
2) How many server hardware pieces I shipped.
as the primary revenue stream.
You know what? Thats the LAST thing I think about when doing my companies overall goals and improvements list every year.
Both of the points are out moded methods of producing, manufacturing and basing the future industry of IT on. At least if we want to go from a depression like the US IT market is now experiencing, to another good times market.
What single company is doing more to insure that software and shrink wrap software remains the top reason to buy computers and the status quo remains?
Microsoft.
Microsoft is the enemy of everyone on slashdot who is currently out of work, or is looking to a better economy and better times ahead. More specifically, the 28 billion in cash Microsoft has and what it is doing with it is the real problem.
Why? Because Microsoft desperately knows, that it cannot survive very much longer simply on the desktop if it wants to maintain a monopoly market it worked so hard to legalize in the courts and in dustry.
Instead of leadership at that company that is reorganizing and retooling Microsoft for the future, like Gerstner did for IBM in the 90's, the company is using its vast financial resources to:
1) Buy off congress, judges, and lawyers to rule in thier favor on software rights and patents. I won't go into detail HOW they do this, since they already HAVE done it.
If you have been on Slashdot, and have been keeping tabs, you already know the how.
This is thier first step and it involves the DMCA, EULA's. Specifically attack Linux and free software, and slow it down.
To kill Linux, and the widespread use of software that manages information on the internet they will need something else. Since Linux is free, they can't attack it buy illegally appropriating technology, or through illegal hiring practices or just plain threatening a single entity or startup to scare investors away.
What Microsoft needs, is something equivalent to RAT poison to killoff the vast army of pengiuns.
That poison will come in the form of a harmless DRM law.
But not just any DRM, a friendly to Microsoft DRM is what they are after, and in its current stages, lawyers and judges will provide Microsoft with what it needs to kill not only Linux, but any software produced anywhere in the US that isn't licenses by Microsoft.
What Microsoft is aiming to not just secure its OS, but to secure how information is processed and used.
They won't have to develop anything innovative, they will lets the court system establish precedent and cases, to insure that all future information is only handled by DRM approved systems that make software, handle Email, or browse web pages or process information of any kind.
How?
Simple.
By making it criminal to write free software of any kind. They will do this buy buying off and creating companies that insure information cannot be tranismitted or created without the proper ownership credentials.
They will build into thier OS this requirement, and DRM laws will require that all OS's in the US do the same.
However, the algorithms that implement the DRM, will be owned and licensed by Microsoft, and only Microsoft.
If you create any program or recieve any information created by a Microsoft system, that doesn't have a DRM approved license to determine if you have ownership rights, will be illegal.
You see how this is done? It is done from the desktop, where information is created. That way, all the inroads into the server room can be reversed, and Linux or any free derivative there-of. (BSD, Unix..Macintosh etc.)
Simply because Microsoft knows that is currently the only bastion of its Kingdom not under tremendous erosion right now. This way it can deal with Linux and all competitors, from a position to strength, to dictate how much each of us will pay for DRM right to read/write or create ANY information with our computers.
Sound too incredible to believe? It already is happening, although, what I really mean to say there is already precedent.
It is pretty hard write now to transmit information globally or easily without the USE of Versign certs in a secure way. Sure, you can make your own authority for these scripts, but truth is, it is a pain and is a "so called" security risk.
So Microsoft alread has some precedent to understand how a certain kind of information, that is created can be controlled by one or two companies on such a wide and vast scale.
If you look at how they are approaching this, you can see they are setting themselves up to be the "Versign" of information rights management.
Everyone here agrees, that Verisign is a racket. You pay them for a paper trail. Sure. Tell me though for all this added security, how many equitable "Versign Approved" certs last year do you think were used to rip people off online?
Don't know? Just ask a credit card company or look at your bill the next time you get it.
We are all paying for huge fees on our credit cards just to have the priviledge to use our Credit Cards online.
Doesn't really seem like $300 bucks and all that paper is really helping people or the credit card companies....does it?
Yet Verisign maintains a monopoly. I wonder how they can do that?
Interesting issue isn't it?
It forms many of the foundations for which Microsoft is currently building an attack against everyone here on slashdot, or any user in the world that uses a computer.
Imagine a Microsoft OS that has the same requirements, perhaps in partnership with Verisign, who would make the DRM database.
It would seem Microsoft has all the advantages.
But, for all these, they have one thing against them.
That thing is time and it is a very BIG disadvantage because we are living in a depression time in our industry.
You see, the legal system is not exactly fast, even when you are paying off congressional leaders. Our court system is extremely slow.
You can pay off judges, it has been done before, but I don't think paying off one judge would get Microsoft what it needs like in the AntiTrust case. It needs much more, something almost akin to a law that says you MUST use our software.
But IT in America is showing signs it doesn't want to wait. Many of the people I talk with are ready to chuck thier Microsoft servers and explore alternatives....even on the desktop.
Especially in such hard times.
But the hope for our industry lies in Linux, and where it can take us. To remove cost barriers that many IT professionals have always come to expect or think are requirements to run a business. The hope that people finally become the primary selling and buying points in organizations instead of software and hardware licenses.
Linux is growing by leaps and bounds, and provides a hope for our industry to defeat this madness before it shows up on all our budgets, whether we like it or not because Microsoft makes it illegal to do otherwise.
That is a world I would not want to live in and with a new found hope in Linux and Open Source born of hard times indeed, I think we will avoid it.
When we finally do, a healthy industry of many diversified companies will return, and replace the monopolized, expensive and extremely value poor industry we now have.
Until then, Linux will continue to change the rules, and will offer companies in these uncertain times true value that will allow them to compete on a more sound financial basis when building IT systems as part of a company business model.
Hack
Got Geometrodynamics? Awe, too hard to figure out? Too bad.
I worked at a Honeywell site in the IT dept. as a lowly tier 2 tech and lost my job (along with about 30 other people) when the reigning CEO thought it would be a swell idea to outsource IT to IBM due to all the money Honeywell would "save". (Well, actually Allied Signal would be saving money but that's another issue all together)
I didn't work there long as I had just recently found myself in need of work after being laid off from my "real" job at an avionics firm, but in my brief stay at Honeywell the first thing I noticed was how utterly helpful the help desk and IT dept was. I have never seen end users recieve such royal treatment anywhere and of course that all changed when the transistion started. What normally would take us anywhere from a few minutes to a few hours to correct soon became a "guaranteed 72 hour response time" courtesy of IBM's superior service. Keep in mind this could be something as simple as resetting a users password from my desk because they failed to remember it (very common and takes about 10 seconds to fix) but this was now a "Priority 1" problem for IBM which contractually could take up to 72 hours to fix.
Unfortunately CEOs seldom see anything beyond dollar signs and are easily convinced by the bean counters that outsourcing is a sound idea. IBM offered about two thirds of the IT staff jobs, and Honeywell's policy was that if we were offered at least two-thirds our current salary we either had to accept the offer or lose our jobs AND our severance packages. Naturally IBM wanted me and the others low on the totem pole but had no use for those with 20+ years experience... because they didn't want to pay them for their knowledge no doubt.
I'm done venting but to me it seens painfully obvious that outsourcing IT is a bad idea unless your IT department is the worst ever because in the couple of instances I've seen it happen it resulted in a much lower level of service and IMHO IT is not where you want to cut corners. It may seem like a nice way to make your numbers look better but in the long run I believe it will be a costly mistake.