Coop's Corner

OpSource is hosting a very timely conference in San Francisco this week on software-as-a-service. What with the meltdown in the economy and continuing concern about the cost and environmental impact of energy use, there's interest in how cloud computing will impact the IT world.

And what better way to cut through the hype over the so-called green aspects of SaaS than to assemble veteran technologists who might share their experiences with the uninitiated? That's the usual format: People ready to impart knowledge to people eager to receive knowledge.

(Credit: CNET News)

Good idea but, well, maybe another day.

As I sat in a cavernous ballroom in San Francisco's Westin St. Francis Hotel scribbling down notes, it dawned on me that I was one of, literally, a handful of people listening to the lecturer. At most, there were 10 or 15 of us--a pity because as he faced a sea of mostly empty seats, Randy Bias, a technology strategist for GoGrid, a supplier of cloud computing infrastructure, offered up a convincing brief on the energy-saving advantages of virtualization and why it makes sense to offload server functions to the cloud.

He was followed on stage by Adrian Bowles, a director at Datamonitor, who was equally eloquent about why there are compelling business reasons to rip up the procedures of hardware provisioning that IT followed until the recession (some call it a depression) hit. "The old days of 'buy it, plug it in, and run it' are probably gone forever," Bowles said, proceeding to lay out a hard-headed case on behalf of going green.

By then, I counted eight people--eight--in the ballroom (not including the speaker). Most of the folks attending this two-day kaffeeklatsch couldn't be bothered with a topic that obviously bored them silly. No matter that green tech at its most basic is technology done with a low environmental impact. For some reason, a discussion of low-energy technologies, virtualization, and improved cooling techniques weren't enough to hook them.

As they used to say back in my Brooklyn neighborhood, whaddya gonna do? But truth be told, I was puzzled by all the no-shows. It wasn't as if the other sessions being held at the same time--"SaaS marketing in a downturn" and "Architecting and delivery for SaaS success"--were so much more thrilling.

Could it be that "green" remains too squishy a concept for most of these red-blooded show-me-the-money types? I buttonholed one attendee in a hallway, who agreed as he was munching down a free ice cream provided by the show's sponsors. But the proverbial man on the street interview doesn't suffice.

I heard it said at one of the sessions how IT compensation plans now hinge on how successful you are doing projects faster and doing them more inexpensively. That's why SaaS advocates believe their timing couldn't be any better. Maybe that's misplaced optimism; we'll see as the year progresses.

But this much is clear: telling the boss that you're saving the environment in the process is not likely to be the clincher. Ever.

Today the Rocky Mountain News publishes its final edition after nearly 150 years. Elsewhere, newspaper publishers everywhere from San Francisco to Philadelphia face equally grim prospects.

The reasons have been well chronicled by others like Poynter Online and I won't waste time rehashing familiar arguments and analyses. But one complaint about newspapers is that they increasingly are out of step with their readers, who for too long were ignored at the bottom rung of a one-way hierarchy which defined their relationship.

Facebook's Mark Zuckerberg: "Openness and transparency isn't an end state. It's a process to get there."

It was only a coincidence, but the Rocky Mountain News announcement came on the same day that Facebook declared that it would embrace a community-driven process for governing. Responding to a controversy earlier this month over changes to its terms of service, Facebook said it will henceforth put any proposed modifications to its membership up for public debate in a "notice and comment" forum.

Not everyone was impressed by the announcement. Marshall Kirkpatrick posted a scorcher over at ReadWriteWeb, dunning Facebook's management for losing its grip. But if I read Marshall correctly, he's not slamming the company for its bid to be more transparent. Rather, he's arguing that Facebook still hasn't fully absorbed the real reason behind the flap.

What's delusional about the company's position? Multiple company officials on the call today said that the controversy showed how much of a sense of ownership users have over Facebook and that they wanted a sense of participation in its governing. (You complain about us because you love us!) We'd argue that it is pretty clear people have a sense of ownership instead over their content and want Facebook to keep its hands off. Ownership of content, not the lack of input on policy, was what people were upset about.

Fair enough. And voting may not be the best idea out there. Still, I think Facebook deserves credit for at least trying. Listening to the conference call on Thursday, I found myself wondering whether some of the very decades-old newspapers now going through a horrid time might have fared had they found a way to similarly engage their readers once the Internet went commercial. How long, for instance, has it taken for newspapers to let its reporters begin blogging? How about the inclusion of reader comments--let alone taking feedback on how to make coverage more relevant to the community's needs? Or reader blogs, for that matter? (There still aren't many of the latter.)

There are obvious differences between Facebook and a big city newspaper and I'm not suggesting that the cure here is simply to sprinkle some Web 2.0 fairy dust and everything will be as it was 25 years ago. But Facebook is also a media company and as Larry Magid smartly writes, its 175 million users are the ones who supply the content. Giving them a voice in policy making, whether to quell a brewing storm or to get out ahead of the next one--that's less interesting to me than Facebook's willingness to experiment.

It's not a perfect system and there doubtless are going to be rough spots ahead. Still, I'm going to cut them a break. It's easy to be cynical about the motivations but if Facebook has found a way to offer up more transparency and yes, even as Marshall suggests, participation over governing, then the company has hit upon a formula that will keep it relevant. Wish The Rocky Mountain News and its industry cohorts would be able to say the same. Sigh.

Update, 12:33 p.m. PST: A Brooklyn blog reports that The New York Times next week will begin neighborhood blogs. Thanks to a pointer from TechCrunch, where Jim Schachter, the editor for digital initiatives at the Times, confirms the pilot program. Schachter also asks the following:

Can we create a combination of journalism, technology and advertising that people who don't work for us can adopt? How much or how little oversight by us would be needed to keep the quality high? Would people pay to be associated with us? Would there be enough revenue that some split between us and a non-NYT blogger would work? I'd love to know what readers here think.

"Today, HP announced first quarter results amid one of most difficult economic downturns that any of us has ever faced. I am proud to say that we continue to execute well in this very challenging environment."

So began Mark Hurd's recent letter to Hewlett-Packard's employees. Hurd, who has earned a justifiable reputation for straight talk, did not mince words. Like every other tech company these days, he explained, HP is feeling the impact of slowing global demand for IT products.

Hewlett Packard CEO Mark Hurd

In black and white, here's what happened in HP's first fiscal quarter:

•  Personal System Group revenue down 19%
•  Imaging and Printing group revenue down 19%.
•  Enterprise Storage and Server revenue down 18%.

That's why Hurd ordered up an across-the-board pay cut, starting with the boss--he's taking a 20 percent salary reduction. Other execs are taking a 10 percent haircut, while the base pay for all other exempt employees will be reduced 5 percent. HP also announced changes to its U.S. 401(k) plan as well as its share ownership plan.

Tough news to deliver, but no CEO has yet been able to repeal the business cycle. The one upbeat tale to tell was in the services group, which accounted for more operating profit than any other segment of HP's business. In his note to employees, Hurd even likened HP to two different companies. Hyperbole? To be sure, but it's not that much of a stretch, really. There's a lot of experimentation going on in the IT world as companies struggle with how to make do with less. One increasingly pronounced trend: more IT departments are shifting their computing functions to the cloud. That means money in the bank for the services that can speed the transition.

Good enough. But if HP's going to weather this "econo-lypse," then services will have to grow even faster--and that's going to test even Hurd's formidable managerial talents.

After Carly Fiorina flamed out as CEO, Hurd stepped in and effectively refocused a company that was foundering. The timing of his arrival was propitious as it also coincided with a global IT boom. With the Dow heading for new records seemingly each month, what did it matter that HP still relied on a low-margin, commodity hardware business?

That seems like an eternity ago. The good times are over for now and the latest IDC report does not offer encouragement about near-term prospects for companies in the hardware business. Of course, Hurd still can count on services, but that's where HP squares off against IBM, which competes with a much deeper (and larger) bench. (Also, it appears that Big Blue is not feeling the same pain as HP. In an 8K filing on Thursday, the company confirmed its guidance for the year.)

Both HP and IBM have their strengths in services, but as Roger Kay writes, "for too long observers have been treating them like peas in a pod when, in fact, in many ways they are night and day."

Ready to rumble?

Under Lou Gerstner and now Sam Palmisano, IBM moved away from commodity businesses like personal computers and recast itself as a heavy-duty supplier of myriad services to IT customers. In its conversations with prospective customers, IBM never fails to draw the (invidious) comparison with HP, which it depicts as the relative newbie.

OK, all's fair in love, war, and marketing, but there's more than a grain of truth in a PR pitch. Charles King, of Pund-IT Inc., who writes an insightful newsletter on IT trends, puts a magnifying glass on the recent earnings reports turned in by IBM and HP. And he finds that the usual apples-to-apples comparisons between the two companies' services businesses is a flawed one.

There was a point a decade or so ago when side-by-side comparisons of the pair was reasonable. In the 1990s, system vendors including IBM and HP pursued "desktop to datacenter" strategies that included everything from PCs and workstations to enterprise-class servers and storage products. But since 2000, system vendors including IBM and HP have pursued highly individualistic paths that diverged significantly from that tradition.

By the numbers, IBM has become a company focused on the computing needs of businesses of every size, with the majority of revenues coming from enterprise services engagements bolstered by deep software and hardware portfolios. By contrast, the majority of HP's revenues come, as they have for years, from highly commoditized printer, PC and notebook products.

That was a prime reason behind HP's acquisition of EDS, which King correctly notes now accounts for a big part of HP's profits.The challenge is that "the size of HP's software revenues (less than 1/7 of IBM's) punctuates the stark differences existing between the pair."

Hurd obviously doesn't need me or any other outsider to remind him how his company's services arm stacks up against the competition. He knows his company has got to step up its game.

But in the absence of a U-shaped economic recovery--and few economists predict that--the pressure is on to give IBM a run for the money (literally) in an area where profit margins are still great. If Hurd is the superstar executive that his press clippings suggest, he'll do whatever is necessary to make sure HP gets its fair share. At this point, he doesn't have much choice.

About two years ago, Jeff Bezos used the occasion of his appearance at the Web 2.0 Summit to talk up the merits of EC2 and S3, Amazon's entries into the then-nascent area of cloud computing.

The predictably perky CEO was enthusiastically regaling a standing-room-only ballroom about a future in which his company would sell data storage infrastructure and server capacity by subscription: the idea being that customers of the new services could move quickly from idea conception to a successful product by farming out the infrastructure side for Web scale computing to Amazon.

Now, that's hardware!

(Credit: John Deere)

"We make muck so you don't have to," Bezos joked.

It was an interesting idea but a left turn for Amazon. I remember that the guys sitting next to me weren't equally impressed by the pitch. They joked among themselves that Amazon was a company that sold books. Who was Bezos kidding?

Well, we know how that story turned out. Bezos' timing was propitious. Amazon happened to go into Web-based services around the same time that customers had started to lose their fear of "the cloud." Not everyone, mind you. But increasing numbers of start-ups and small companies were receptive to the idea that they could increase their server and storage capacity on a subscription basis. With millions of people going online to store data, run applications, or communicate via Webmail services--and all that functionality stored on the cloud--now they could participate in that computing shift without breaking their budgets.

This all was proceeding apace. But it was a slow transition. Then came last fall's financial meltdown, and suddenly, cloud computing's proponents had a timely marketing message. On the "Charlie Rose" show Thursday night, tech pioneer-turned-prescient-doomsayer Mark Andreessen, took note of the impact this computing shift has had on the tech business.

"So you've got a whole generation of start-ups that are basically just a couple of programmers with a couple of laptops, and they upload everything into the Amazon cloud. It's pay-by-the-drink like utility. So all of a sudden, you have this whole new wave of Internet start-ups getting started for practically no money, right? So there is a level of innovation. Every kid coming out of Harvard, every kid coming out of school now thinks he can be the next Mark Zuckerberg, and with these new technologies like cloud computing, he actually has a shot."

That's the classic sales pitch on behalf of cloud computing but Andreessen basically has it right. What's new is that with the economy going through a rough patch, this is turning out to be one of the few bright spots in an otherwise gloomy tech landscape. IDC predicts that cloud computing will account for about 30 percent of new growth in the Internet over the next three years. Poor economy or not. "It's not a surprise," said Frank Gens, the firm's research chief, who contends that the financial crisis only magnifies the benefits of the economics behind this computing model.

But here's the rub: While many executives responsible for their companies' IT operations grok the vision, they still refuse to make the switch. More than 60 percent of the companies surveyed recently by Kelton Research reported they did not use cloud-computing technologies, and most of them have no plans to use them anytime soon.

Chalk up their lingering resistance to a couple of old bugaboos which have been around since the days when "MIS directors," pressed to decentralize their computer operations, ruled the tech roost: security and fear of loss of control. If past is prologue, those issues will get sorted out over time--the same way that the sundry issues surrounding client-server and Internet-based computing models ultimately got resolved.

Capacity on demand is a big deal, especially for start-ups that are in no position to be buying servers. With API deployment, you say "launch" on these virtual servers and you're off to the races. It's just a lot more convenient to have an Internet-based data center.

Not long ago, Sun Microsystems' Dave Douglas told me that "every one" of his conversations with customers ultimately comes around to a discussion of where the cloud is heading. That pretty much jibes with what I've heard from executives at other hardware and software companies. Pay attention to this trend because it's taking place in real time, away from the media's glare. In an age where Twitter, Facebook, and a laundry list of forgettable social network doo-dads have dominated our attention, all of a sudden, infrastructure has become cool again.

Who woulda thunk it?

Wanted: Experienced online executive not afraid of challenges. Must be self-starter. Ideal candidate a glutton for punishment, willing to deal with stress, as well as excitable CEO prone to throwing chairs when in foul mood. Huge payout if successful; ritual defenestration if a failure. No phone calls. Send all e-mails to sballmer@microsoft.com.

Now that Kevin Johnson has gone the path of all upwardly mobile executives aching to become CEOs--in his case becoming the next boss at Juniper Networks--who is Microsoft likely to appoint as its next online chief?

Not to get melodramatic on you, but this may rank as Microsoft's most important decision since anointing Steve Ballmer as Bill Gates' replacement in 2000.

Send those resumes my way, folks

(Credit: CNET News)

That's because Microsoft's online-services business has been, um, well, a work in progress for far too long. (I recently returned from a vacation abroad, and the glow hasn't fully worn off yet.) While Google extends its domination in search advertising, Microsoft is conceding defeat. The company's CFO said last week during a conference call that Microsoft expected to lose money in online services for the foreseeable future.

Mary Jo Foley says Brian McAndrews, who arrived at Microsoft via its acquisition of Aquantive, is expected to emerge as a "strong candidate." Kara Swisher over at All Things Digital writes that her sources put McAndrews as the leading candidate, while company veteran Yusuf Mehdi is also in the running.

I've seen McAndrews speak on several occasions--the latest being yesterday, during a conference organized by Fortune magazine--and he is impressive in person.

Swisher also suggests that an outsider has a shot.

"More interesting, perhaps, is one of the top outside candidates on the list, former AOL head Jon Miller, who is poised to be added to the--wait for it--Yahoo board, as part of its recent proxy fight settlement (with) activist investor Carl Icahn."

I like the idea of bringing in an outsider, someone presumably with a fresh perspective. In that sense, McAndrews might qualify, albeit with an asterisk. Microsoft acquired his company months ago, and it takes at least a year for the corporate Kool-Aid to have its true effect.

More seriously, McAndrews is just one among many capable online executives with the right resume for this job. Microsoft can afford to be picky. The last thing that Ballmer needs is a reprise of the Michael Hallman affair. (Hallman was hired away from Boeing to become company president, only to get the boot two years later.)

But perhaps holding off on naming an immediate replacement is the more prudent strategy. With six months' worth of Yahoo-yes, Yahoo-no, Yahoo-maybe, this company still seems confused about what its online strategy ought to be.

Update at 7:00 a.m. July 19: Typo fixed in the senator's last name.

Illinois Sen. Everett Dirksen is remembered for the quip, "A billion here, a billion there, pretty soon, you're talking real money." (Truth be told, it's unclear whether those were his exact words, but he's got that tagline for posterity.)

I was thinking of the former senator after listening to Microsoft's chief financial officer explain to analysts why the company intends to continue to pour hundreds of millions of dollars into a business which still isn't producing much of a return. But the online advertising business is just too important to Microsoft's future to be penny wise and pound foolish. Of course, it helps when you're the CFO of a company with tens of billions of dollars in cash and marketable securities. For more, check out the conversation I had with my CNET News colleague, Ina Fried, earlier Friday.

Earlier Tuesday, a Google executive by the name of Rishi Chandra made the argument that the move to cloud computing was just a matter of time.

""The next 10 years of innovations are going to be in the cloud. Enterprise software is not going away, but there is a transition taking place," he said during a conference taking place in Boston.

(Credit: CNET Networks)

I don't know whether it will be 10 years or not, but that's the trend. Nobody still seriously argues that it won't be easier to run word processors or spreadsheets off a central network of remote servers. The tech world has been inching that way in fits and starts for the last couple of years. And nowadays, there is a roster of big-name companies delivering business applications via the cloud. Besides Google, the list includes the likes of Microsoft, Amazon.com, and Salesforce.com.

But the IT industry has more tempered expectations for the likely timetable. Earlier in the year, Richard Jones of the Burton Group told IT BusinessEdge that "organizations have to move from traditional client/server and SOA-based applications" that are dependent on static allocation of resources. He went on to explain that:

There has been a political and attitude change with CIOs. Some was forced on them. The CFO has gained more power and the business metrics were pushed on (IT). And so some of them have gone to the model grudgingly. They can't argue against numbers. Some see the economies of scale. That's a good trend. Now instead of static services, you can go out over the Internet, where essentially any service you need to run can be found. You can look at the cloud as a timeshare. Politically, the boundaries have broken down a bit faster.

As always, the reliability of the underlying network is the biggest uncertainty. The infrastructure remains under construction. As a reminder, the real world recently reminded everyone that crystal balls don't always account for the unexpected.

On both Friday and Monday, Amazon was up and down--a source of no small annoyance for customers such as yours truly looking to buy stuff. Also, in February, Amazon's S3 storage service experienced a major outage. A couple of months later, the company's CTO offered the brilliant insight that "everything fails all the time." Now, that's helpful. True to form, during this latest brown-out Amazon hid from the press, leaving customers and outsiders to speculate about what caused the glitch.

I'm not trying to dump on Amazon. but IT directors are the epitome of creatures of habit. If they are going to participate in this grand cloud computing transition envisioned by Google, Amazon, and others, they'll need a lot more assurance--especially when it comes to privacy, security, and scalability--before venturing into uncharted territory.

An unexpected bump in the head landed yours truly in the emergency ward recently, and when they wheeled me up to the CAT scan, I handed over my cell phone.

"Oh, we don't need that," the attendant told me. "We only take iPhones."

Wow, I thought. Of all places to land a scoop!

"You mean there's something about the device that interferes with the picture process?"

"No," the attendant laughed. "We're just looking for iPhones, not that other stuff."

Just around the same time, Consumer Reports announced the results of its findings that Apple had the best technical support in the computer industry. Talk about the rich getting richer.

These are obviously boom times for Apple. But fortunes are fleeting in the computer business and it wasn't so long ago that Dell was the PC maker with all the sizzle. In fact, in October 1997, Michael Dell was at a Gartner symposium, and he was asked what he would do if he owned Apple (which then was struggling). "I'd shut it down and give the money back to the shareholders," he said. (Dell was responding to a verbal pot shot from Steve Jobs, who was quoted previously saying that Dell makes "un-innovative beige boxes.")

With the benefit of 20/20 hindsight, Jobs wasn't entirely wrong. Dell's bigger problem wasn't that it was unexciting. Rather, the company got sloppy as it grew into the world's biggest PC manufacturer (nowadays, it's No. 2). Jobs had no way of knowing that Dell would fumble its once brilliant advantage over rivals when it came to price and delivery. Up until then, the fact that its machines were, well, boring, wasn't a handicap. In fact, corporate IT types actually prefer boring--as long as it's dependable and backed up by solid service. That was the key because complaints about Dell's once highly regarded online support also mounted. The company's reputation took a high-profile hit after blogger Jeff Jarvis chronicled his tech support woes on his popular personal site.

CNET News.com reporter Erica Ogg has a great take on Dell's customer service today. The company says it's worked hard to repair any lingering problems. Still, you have to wonder after reading the comments in the Talkback section responding to Erica's piece.

Of course, take the anecdotal evidence with a big grain of salt. Still, there are a lot of aggrieved customers who remain furious at the company. They can't all be flamers when you consider that in the same Consumer Reports survey, Dell finished behind Apple both in notebook support and desktop support.

But times change and today's top dog could easily become tomorrow's top dog in a blink of time. Just ask the folks who have worked at Apple or IBM or Compaq or Hewlett-Packard. When he stepped in for his second tour of duty at Apple, Steve Jobs inherited a royal mess. Back then, Michael Dell could dismiss Apple and not give it a second thought. A lot of people felt the same way. Smart product design and better management execution ultimately changed the critics' minds.

Now that he's the company founder returning to a troubled company as CEO, Dell obviously has a very personal stake in getting things right. It's hardly mission impossible. Dell has bounced back from previous stumbles so who knows? With a bit of luck, maybe the next time I get wheeled into to the radiology department, they'll be asking whether I've brought a Dell laptop with me.