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2006: the summer of our content

David Braue, Information Age

15/12/2006 13:58:21

Temperatures may be generally rising the world over, but down in Hell things must be getting positively wintry given the consummation of what was the most surprising deal of a year full of many surprises. With the stroke of a pen and a $US300 million cash injection, Microsoft hitched its fortunes with those of longtime nemesis Linux in a move whose practical effects are second only to their profound philosophical meaning. The deal, which brought into force previously unthinkable collaboration between Redmond and new SuSE Linux owner Novell, came as a complete surprise to an IT industry that had spent most of the year picking apart successive builds of Microsoft's Vista operating system and, in some cases, heralding the opportunity for Linux to seize market share through the defection of Vista malcontents.

For Microsoft, a formal partnership with Linux represents the grudging acceptance that Linux is here to stay - and that customers will no longer be bullied into building all-Microsoft environments just because Microsoft wants them to. The move was also seen as a slap in the face for longtime enterprise de facto distribution Red Hat which, now that SuSE Enterprise Linux has the seal of approval from Microsoft, could well lose customers to Novell as enterprises succumb to the appeal of a jointly backed Windows Server and Linux back end.

Red Hat, which was also dealt a blow in 2006 when Oracle launched a full-fledged Red Hat Linux support operation and vowed to create its own Linux distribution, now faces dilution of its market stranglehold that should make for a very interesting 2007 in the Linux world. It's not the first time Microsoft has cozied up to rivals (its $100m truce and development deal with Apple was another major such example) but it's perhaps the most significant step for the software giant - apart from, of course, sending first Office 2007 and then Vista to manufacturing in time to meet its promised end-of-2006 launch date.

Years in development, Vista is likely to spur a new round of desktop upgrades - eventually, once corporate customers give in to the temptation and inevitable discounting that PC makers will use to get them to upgrade. Yet if Office 2007 is the carrot for upgrading, Vista is the stick - and there is speculation that the cost of upgrading will drive many customers towards never-better Linux desktop distributions and open-source applications like Novell's SuSE Linux Enterprise Desktop 10 and OpenOffice. Whether or not that wholesale shift eventuates remains to be seen, but such a wealth of new options is likely to spur strategic reviews if nothing else.

The year of content While it represented a watershed year in terms of operating systems, 2006 was also extremely significant for Microsoft for another reason: the continuing success of Google, which saw repeated double-digit quarterly profit gains strong enough to make even the most battle-scarred investment banker swoon. With the launch of first stand-alone online calendar, word processing, spreadsheet and other applications - and, later, the first efforts to deliver an integrated suite - Google has made its intention of dominating the online applications space clearer than ever. The purchase of wiki collaboration developer JotSpot only strengthens this trend, helping Google tick the boxes in its quest to have one of every major type of productivity application.

To say Google will supplant Office any time soon would be folly, but the company's aggressive expansion - symbolised by inordinately large amounts of attention for its top-secret new data centre megaplex at The Dalles, Oregon - has rapidly changed the agenda for the online services industry. This was nowhere more evident than in the company's $US1.65 billion purchase of YouTube, the viral video sensation that sold out to Google after just 18 months in existence.

YouTube's meteoric rise - some 100 million videos are viewed every day - has made it the stuff of legend, not in the least from people wondering how such a small startup could ever afford such a massive bandwidth bill. In the longer term, however, the site will join MySpace, the other big newsmaker of the year, as one of the Web Services That Changed Everything.

The success of YouTube and MySpace, which was bought by News Limited for $US580 million in 2005 and is reportedly welcoming 230,000 new members per day, has redrawn the battle lines in the fight for Internet eyeballs - and taught tomorrow's media masters a thing or two about what it takes to succeed online. That painfully simple lesson, which was anathema to the Web's first decade, could not be clearer: people certainly do want online content - but the content that succeeds most will be that which they create themselves. The Web, it seems, is less like the theatre and more like an open mic night.

The shift in mindshare towards online content giants reflects the new challenges faced by a conventional publishing industry that has tried various ways of keeping itself relevant in the Web age. Sceptics may well argue they're fighting a losing battle, if Jupiter Research findings released in October are any indication. In 2006, the survey of 5000 Europeans found, the amount of time spent using the Internet surpassed that spent watching TV for the first time. That's a humbling result for traditional broadcasters, and a note of encouragement for those trying to bring data-based IPTV services to fruition.

The lesson from all this is clear: rather than delivering content from on high, tomorrow's media giants will succeed by facilitating communication between people. Even Microsoft has learned this, launching its wirelessly enabled iPod-rival Zune to mixed reviews and beta-testing its copycat Soapbox site. There are other contenders in the content-enabled online community space, but for the near future Google and MySpace will continue at the vanguard of this brave new world of content.

Also headlining in the brave new world was Universal Music, the world's largest music publisher, which announced a partnership with US company SpiralFrog including plans to allow users to download any of its songs for free as long as visitors agree to watch a 90-second advertisement beforehand. This experiment marks a significant step away from the tightly controlled digital rights management (DRM) of other music downloading services, and is certain to be closely watched during 2007.

Yahoo! launched a project to develop a digital time capsule, which had received over 150,000 submissions before being sealed for opening in 2020. Given the rapid turnover in content standards, Yahoo! has not clarified how the content it has compressed in the time capsule will be able to be read, but the project nonetheless grabbed countless headlines for its sheer novelty value.

It's not fair to move on from the topic of content without mentioning Apple Computer, whose iPod continues from success to success. This saw the addition of downloadable feature-length films in September, which will next year be complemented by Apple's upcoming iTV device (sure to be released under a different name) for streaming those films to big-screen TVs. Amazon, of all companies, beat Apple to the punch with its own critically panned Unbox service - also a curiosity for Australians, since neither service is available Down Under - but both companies face even more intense competition from Microsoft and Sony. Their Xbox 360 and PlayStation 3 gaming consoles will set both the video-game and, increasingly, the home entertainment agenda in 2007 as they duke it out for gaming dominance as well as a position as the home media centre of the future.

That battle will reflect the broader battle between high-definition HD-DVD and Blu-ray content, but will also hinge on the eventual success or failure of the downloadable-content model. Throw in the fact that Nintendo's new Wii console is all about gaming and Apple's iPod is all about content, and consumers will have unprecedented choice during 2007 about how and when they want their entertainment and information. That should make 2007 a watershed year in the long-fought battle for consumer eyeballs.

Bigger, better, faster, more Seismic shifts in the content industry weren't the only thing making this a brave new world during 2006: nuclear testing in North Korea, the defanging of US president George Bush in the November elections, the demotion of Pluto from planetary status and Sony's disruptive worldwide notebook battery recall all led the headlines in what turned out to be an extremely busy news year.

Special mention goes to HP, which fell into a significant boardroom reshuffle after the discovery its board had overseen an illegal investigation into several online journalists. The ensuing firestorm claimed the scalp of HP chair of the board Patricia Dunn, saw several HP board members called to explain themselves to the US Congress, and led to a significant State of California investigation that could well result in criminal charges. HP's boardroom dramas kept the company at the front of the news for several months, but other companies were quietly getting on with some pretty significant changes. Server virtualisation evolved from revolutionary idea into mainstream IT strategy, voice over IP (VoIP) became the standard for new phone systems, Apple transitioned its entire product line to Intel processors, and Sun Microsystems finally completed its efforts at openness by open-sourcing most of its Java development environment under the widely accepted GPL licence.

Functional integration was the name of the game in the mergers and acquisitions space as major vendors sought to round out their enterprise offerings. Excited by having a new three-letter acronym to sell to clients, major players IBM, HP, BEA, Sun Microsystems and others pushed hard to mould their idea of the service oriented architecture (SOA) into something that could make sense to customers. That process, fuelled by similar convergence in other key IT industries, finally saw the assimilation of some of the industry's most successful brands - many of them into the rapidly expanding software portfolio of IBM. That company bought security pioneer Internet Security Systems (ISS) for $US1.3 billion, software testing giant Mercury Interactive for $US2 billion, records management giant FileNet for $US1.6 billion, and asset management giant MRO Software for $US740 million.

Multi-billion dollar takeovers were in plentiful supply, particularly as the promise of new technologies like WiMAX and pervasive 3G mobile networks fuelled interest in the telecommunications space. Motorola bought applied wireless technology giant Symbol Technologies for $US3.9 billion, then capped off the year with the purchase of push e-mail provider Good Technology, which puts Motorola in direct competition with Blackberry creator Research In Motion.

Highlighting the growing trend to combine networking elements with security, storage giant EMC spent $US2.1 billion for encryption and authentication giant RSA Security, while Seagate released a range of hard drives with built-in encryption and security vendor Symantec partnered with network switch vendor Juniper Networks to bring their technologies closer together.

Brocade laid plans to buy rival storage switch vendor McData, Infor bought aspiring enterprise resource player SSA Global, Red Hat bought open-source application server outfit JBoss, and Adobe tightened its domination of Web multimedia with its purchase of Flash and Shockwave maker Macromedia.

The hardware sector saw other significant change - not the least of which was the positive news about Sun Microsystems, which proved that it still has life in the server market by significantly cutting its most recent quarterly as revenues grew 17 percent.

For its part, AMD spent $US5.4 billion on graphics chip vendor ATI Technologies, which will allow AMD to offer computer makers complete CPU-and-video chipsets that should add further momentum to its recent success wooing PC vendors like Dell and HP.

While those large enterprise players were rounding out their product sets, microchip maker Intel was working fast and furiously to outdo rival AMD through a rapid-fire series of product launches that propelled computing density to new heights during 2006.

Whereas dual-core desktops were a novelty in the beginning of the year, by mid year they had become standard in most new PCs (including, significantly, those of Apple Computer) through the launch of Intel's new Core Duo product line. Soon afterwards, Intel - which suffered a crushing round of layoffs as nearly 10,000 jobs were slashed during its latest efficiency exercise - made its own new products obsolete by launching its Core 2 Duo chips, which boost performance a reported 40 per cent on top of the new Core Duos.

Intel also launched dual-core Xeon server processors, improved on these with its "Woodcrest" dual-core chips that use the company's new Core micro-architecture to put the performance boot to rival AMD, and then one-upped itself with the November debut of its "Clovertown" processors, its first quad-core server processors. The inevitable response from AMD suggests that x86 compatible chips with eight or more cores should debut in 2007, finally giving enterprise users access to high-end parallel computing capabilities that will remove data centre performance logjams for several years to come.

Meanwhile, back in Australia... While the global IT industry enjoyed buoyant activity, news in Australian IT during 2006 was all about broadband, which spent months languishing as a political football in the leadup to the much-vaunted T3 share selloff. T3 had yet to happen as of press time, but the Telstra board wasn't delivering too much good news for would-be shareholders as its persistent stubbornness on the topic kept pressure on ineffectual regulatory authorities.

The result: yet more delays in the rollout of next-generation broadband services to Australians. Telstra, which in 2005 promised to have a significant ADSL2+ presence across Australia by 2006, cancelled those plans after it couldn't extricate a promise from regulators that it would not have to share the network with rivals.

The situation echoed Telstra's fight against ADSL five years ago - but this time rivals were ready, with companies like iiNet, Internode, PowerTel and Optus rolling out their own ADSL2+ services to fill the broadband vacuum. It was only in November that Telstra finally backed down, saying that it would roll out ADSL2+ services - but only in exchanges where its competitors were already active. T3 not having happened yet, it's hard to tell what effect this had on would-be shareholders, but this chain of events certainly set the tone for the rollout of Australia's next-generation broadband.

Where Telstra did score some points was in the launch of its Next G mobile network, which is now offering healthy wireless download speeds with extensive coverage across most populated areas. The selection of Next G phones is still very limited, but companies requiring a decently large data dialtone can do a lot worse than plan their migration onto the network, which will hasten the decommissioning of the extant CDMA wireless network.

While Telstra's board of executives was busy stonewalling against government regulators - and even dedicated a whole section of the company's T3 prospectus to the evils of regulation - the rest of the industry was getting on with business.

A high-speed 3G HSDPA service from Vodafone took some of the wind out of Telstra's sails, with rivals 3 and Optus likely to follow suit. Also newsworthy in the wireless space was 802.11n wireless LAN technology, which is supported extensively in pre-standard equipment but won't be ratified until mid 2007 - around the same time WiMAX is expected to be in large-scale deployments.

Also gaining traction was broadband over powerlines (BPL), which is increasingly being trialled by power authorities across the country as a means of delivering pervasive broadband.

Generally, enterprise spending was healthy, with global IT spending pegged to increase at over 6 per cent by research firm IDC, there was plenty of enthusiasm for new initiatives. Much of the news was focused on government, where projects such as the NSW Government's massive desktop replacement project and the Victoria Department of Education and Training's 10,000-strong wireless LAN access point deployment confirmed continuing interest in technology updates.

There were new CIOs at ASIO and Telstra, where the appointment of ex-Qantas IT head Fiona Balfour will stand as one of the final senior executive appointments before T3. The National e-Health Transition Authority, working to bring the electronic health record (EHR) to fruition, embraced the new SNOMED standard for records interoperability, while the Howard Government has moved ahead with plans to issue a smartcard-based national identity card.

The push for open standards also got more strength behind it as the National Archives of Australia announced plans to move its Xena archive to the completely OpenDocument Format, which was recently ratified as an ISO standard. The Asterisk open-source PABX brought open-source to IP telephony with deployments at the University of Queensland and numerous corporations, while gradual takeup of software-as-a-service (SaaS) offerings confirmed the acceptability of selectively outsourcing online business functions.

Feeding the machine With so much buzz about both new technology and new online strategies, it was easy to forget that the success of the local ICT industry still depends on the people having the expertise to implement these changes. Demand for skilled IT people was understandably buoyant during 2006, with one survey showing fully half of all Australian employers planning to take on new ICT staff and another, US survey, revealing that more than 140,000 ICT jobs were created in the first half of the year alone in that country. That's the highest increase since 2002, reflecting the increasing investment in ICT that has was seen throughout 2005 and 2006 and should continue into 2007.

Better news still: IT executives like their work, with a Computerworld survey finding good morale, moderate stress levels, and general optimism amongst IT managers, who were earning an average $98K annual salary. Such findings certainly increase the appeal of ICT as a career choice, but the fact that ICT is appealing still has yet to make a significant dent in Australia's chronic undersupply of skilled ICT people. One worrying trend is the resistance within the ICT industry to hiring mature-age workers, with recruitment firm Hudson reporting in April that only 32.3 percent of IT companies and 23.8 percent of telecommunications firms (8345 companies were surveyed all told) actively recruiting mature workers.

That's far less than the 46.9 percent of financial services, 45.1 percent of professional services, and 44.3 percent of government organisations seeking to do so - yet is doubly ironic because it is often older workers that have the ICT skills that large enterprises need. The ongoing ICT skills shortage - which, ironically, has persisted despite Australia's unemployment being at a 30-year low - was the main issue at the ICT Skills Summit, which was held in Queensland during the year to get eminent ICT figures working together to resolve the problem. Noting reports that suggest crucial university students are turning their backs on ICT careers altogether, Queensland launched a $500,000 funding program to promote the industry, which was a small but useful step to resolving the issue.

A much bigger step was taken in October, when the Commonwealth government kicked off its most ambitious commitment yet to skills development with an $837 million program to encourage students at the end of their schooling to take up additional vocational courses in areas including ICT.

Whether or not the funding produces strong results remains to be seen, but the Australian Computer Society has been resolute on what it sees as necessary to improve Australia's dearth of skilled ICT workers. "Australia needs a more coherent plan to satisfy medium to long-term skill shortages in ICT," says ACS president Philip Argy.

"Today, employers want graduates ready to go with hard skills such as security, Web services, voice over IP and others. Unfortunately, our universities and migration programs are producing programmers in bulk. We need a far greater focus on reskilling ICT workers as well as increased resources to be devoted to forecasting skilled labour force needs; closer work within industry and the tertiary sector; and greater representation by technology professionals in the corporate boardrooms of Australia."

As it has for many years, the challenge of closing the ICT skills gap will offer continued frustration for an ICT industry that has proven itself once again willing to spend, and spend big, on strategic ICT. The industry is well past the doldrums of previous years, and expected Big Things in 2007 should keep that growth alive - as long as ICT can strengthen its image with the public and feed our small part of what has become a world once again propelled by visions of ICT's grand possibilities.