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Cover story - 2005: Tech everywhere - but who will use it?

David Braue, Information Age

14/12/2005 12:39:36

It might have been called the year of wireless, the year of mobility or the year of VoIP (voice over IP) - but after the firestorm that Sol Trujillo's Telstra unleashed with the November release of its comprehensive strategic review, it would be simply inaccurate to say anything other than that 2005 was the year of Telstra.

Among other things, that review instructed that Telstra spend billions to build a new fibre-based local loop, discontinue its disproportionately expensive CDMA network, build a completely new nationwide 3G mobile network, rework its internal systems into a more integrated whole -- and lay off an estimated 12,000 employees in the process.

It was hardly a positive outcome for the Howard government, which would have felt the appointment of big-bucks American CEO Trujillo was buying Telstra legitimacy that would up its perceived value come time for its full sale towards the end of 2006. The government may have thought sky-high salaries would buy it a well-credentialled sycophant capable of guiding the company to a successful selloff, but Trujillo and his "amigos", as the ICT media dubbed them, have instead turned the company on its head.

The review was the 400,000km service that Telstra has needed for years, but it was also a double king-hit for John Howard, who spent years building up enough momentum to justify the full sale of Telstra and has more recently become embroiled in savage controversy over his reworked industrial relations laws. In one fell swoop, the review showed the world -- and Telstra's many potential investors -- both how absolutely rotten and commercially hobbled the company has become, and just what kind of employment environment Australia is likely to enjoy under the Coalition's increasingly business-focused IR climate.

Trujillo's spring clean shaved a significant amount of financial and political capital away from the company, guaranteeing that the Howard government will be fighting on several fronts throughout 2006 as it looks for a way out of this debacle.

In the meantime, Telstra is sure to continue pressuring Canberra for the billions, and the favourable legislation that would effectively tip the scales of competition unfairly in Telstra's favour. Trujillo and his mob are on the front foot and, as telecommunications providers revel in the opportunities the network buildout offers - Alcatel alone scored $3.5 billion worth of work; perhaps the only bright light is that the billions of work will provide massive amounts of work for the ICT industry.

The year of wireless With a moribund Optus looking increasingly like the lame duck of the telecommunications world and second-tier telcos waiting anxiously to see what will happen with their major supplier of bandwidth, the reinvention of Telstra could prove to be a shot in the arm for third-tier carriers, who made considerable progress in 2005 towards their long-running goal of building a wireless local loop that could free them of Telstra's clutches once and for all.

The runaway success of BlackBerry mobile e-mail terminals, and increasingly powerful smartphones combining PDA and mobile phone capabilities, has further reinforced this point. After years of relative apathy towards the PDA market, consumers and businesses began snapping up smartphones en masse during 2005, with Research In Motion's BlackBerry and O2's XDA smartphones dominating a market which, bolstered by improving bandwidth and the major platform refresh of Microsoft's Windows Mobile 5.0, seems poised to continue what has become a dream run.

With BlackBerry's success assured for the short term, it remains the company to beat for mobile e-mail, a fact to which look-alikes from HP and several other companies attest. Significantly, 2005 was the year in which the erstwhile Palm - which single-handedly created the PDA market more than five years ago - threw in the towel, announcing the first in what will be many Windows Mobile-based devices and selling the PalmSource operating systems business to Japanese company Access for $US324 million. PalmSource's growing involvement with the open-source community is likely to fuel a growing presence for Linux-based mobile devices, but for now the market belongs to RIM and Microsoft.

Perhaps the only bottleneck still remaining is in the wireless bandwidth - but this will rapidly be eroded by the rapid uptake of wireless broadband services. Unwired and Personal Broadband Australia (PBBA) now both offer wireless broadband services in Australia's major cities, with their respective wide-area wireless services making great progress during 2005. Using their respective Navini and ArrayComm technologies, both providers offer quite comfortable broadband services that are delivering Telstra-free local loops to tens of thousands of customers.

Wireless broadband's success in Australia this year proved that, despite several false starts, mobile data definitely has legs. The widely scrutinised experience of Unwired and PBBA will weigh heavily in discussions about the future of the WiMAX wide-area broadband standard, and it's safe to expect considerable movement from them and other market entrants as WiMAX technology rapidly enters the mainstream. Growing momentum behind WiMAX during 2005 saw its first public trials in Japan, Italy, the UK, and the US, while Unwired in particular has been making considerable noise about the technology's potential here.

WiMAX's potential as a last-mile substitute is undeniable, but the window of opportunity for the still-coming WiMAX Mobile standard was slammed shut this year as Telstra, Optus and Vodafone - wallflowers at a 3G mobile dance at which Hutchison Telecommunications' Three was the only company on the floor - finally entered the market.

The services were all launched in the fourth quarter of the year, so it's still too early to see how popular they'll be. However, by offering a healthy 384Kbps of wireless bandwidth, they should hasten the introduction of a broad range of wireless applications that were previously impossible using the limited bandwidth of GPRS. Optus, for one, has positioned its MyZooNow content service as a business delivery terminal complete with RSS-style news feeds and Microsoft MSN Messenger-compatible instant messaging services.

Although their technologies are different, the major telcos now join Unwired and PBBA in being able to offer comfortable broadband connections anywhere within their coverage areas. Combined with the successful if limited rollout of landline-based 24Mbps ADSL2+ technology in a number of cities, 2005 represented a major step forward in connectivity terms. For customers, this spells a virtual explosion in available bandwidth that should soon be well serviced by a rapid stream of innovative applications.

Merger mania, yet again One major trend during 2005 was the consolidation of large industry players. After an extended courtship that would have made even Victorian-era suitors yawn with impatience, Oracle finally tied the knot with PeopleSoft, snapping up the last major ERP competitor apart from SAP. For a well-earned dessert, Oracle then bid $US5.85 billion for Siebel Systems, the last major, independent enterprise point solution software vendor and a longtime survivor of industry consolidation.

Other Oracle acquisitions included logistics specialist G-Log, retail specialist ReTek, and identity management companies OctetString and Thor Technologies brought to 10 the number of Oracle acquisitions this year and $US19 billion its acquisition bill in two years -- leaving no question that the company is aggressively moving to dominate its market. Apart from steadily expanding contender SSA Global, Oracle and SAP now face little threat in ERP systems - except, perhaps, from Microsoft, which in 2005 released its CRM 3.0 application and continues to attack the market from the bottom up rather than the top down.

The rest of 2005's acquisition roll was characterised by intense consolidation between major players, reflecting an overriding business strategy that is once again recognising the importance of market bulk and product diversification.

HP, which ousted makeover CEO Carly Fiorina early in the year, bought application monitoring specialist Peregrine Systems for $US425 million, and blade server pioneer RLX. Sun Microsystems laid out $US4.1 billion on storage giant StorageTek, then spent $US387 million for application integration firm SeeBeyond Systems and spent $US25 million for thin-client company Tarantella for good measure.

Reflecting the growing understanding that storage for storage's sake is no longer a valid business model, EMC, which continues to set the pace in the storage industry's move to content-intelligent storage, spent $US275 million on document imaging specialist Captiva Software. Storage management giant VERITAS took an interesting turn by selling out to security giant Symantec for $US10.5 billion,

Confirming the importance of multimedia to major enterprise players, Cisco Systems spent $US6.9 billion to buy set top box giant Scientific Atlanta, while eBay spent $US2.6 billion to buy VoIP success story Skype. Microsoft responded by buying Media-Streams.com and Teleo, two minnows whose combined staff numbers might approach the size of the valet parking crew at Microsoft's Redmond headquarters.

While Australian telcos took advantage of the chaos surrounding Telstra, US carriers saw major changes as SBC bought telecoms pioneer AT&T for $US16 billion and Verizon spent $US6.7 billion on MCI - two moves that may have implications on long-haul services for Australian customers.

Other interesting mergers during 2005 included the private-investor purchase of Canadian government-software giant Geac for $US1 billion; Nokia's $US430 million play for Intellisync in an obvious strategy to take on Research In Motion's BlackBerry mobile e-mail solution; and even InterActiveCorp's $US1.85 billion purchase of dotcom holdover Ask Jeeves, which surprisingly enough proved there's still life in the dotcom model.

While it doesn't involve an acquisition, one other major technology trend came with Apple's shock announcement that it would abandon IBM-manufactured G5 processors in favour of chips from Intel. Models featuring the new chip will emerge throughout 2006, starting with the low-end iBook but eventually extending throughout the company's entire product line.

That's a major change for Apple, which has always prided itself on thinking differently but has been forced to concede the difficulty of hardware differentiation as successive generations of Apple product quietly dispatched with its proprietary system bus, video interface, and even FireWire, which has lost its appeal in favour of industry-standard USB 2.0. Even Apple's long-running single-button mouse finally got a makeover during 2005, when the company's Mighty Mouse gave in to the Wintel trend of squeezing an ever-increasing number of buttons onto pointing devices.

Back to business The prevalence of big-bucks mergers during 2005 make it stand as a year in which many remaining competitors were mopped up, consolidating market power in a smaller number of increasingly large firms. Whether this trend has a deleterious effect on choice for enterprise customers has yet to be seen, although it should certainly simplify decision making by allowing those major providers - rather than customers themselves - to take on the burden of integrating what were previously poorly connected capabilities from different companies. Merger-driven consolidation also reflects the changing dynamic of the vendor-customer relationship. Customers are no longer really interested in technology as much as solutions, and a trend towards single-vendor solutions means that vendors need to be able to offer a low-risk solution combining a broad product portfolio with single-vendor responsibility.

Vendors will of course do whatever it takes to sell their products, but at least they're not battling the apathy of years ago. With issues like compliance and the obsolescence of Y2K-era upgrades now renewing the focus on core business change, companies of all sizes are continuing to invest in radical change across their ICT infrastructures.

Enterprise ICT spending continued its steady recovery after the budgetary doldrums of just a few years ago, with Gartner pegging ICT industry growth at 5.4 per cent in 2005 and budgets increasing by 2.5 per cent during the same year. In 2006, Gartner predicts these numbers will grow to 5.6 per cent and 3 per cent, respectively.

There is one important difference, however: many companies' budget increases are focused not on operational expenses, but on capital reconstruction designed to minimise ongoing expenses. This has lent tremendous momentum to the trend towards consolidation, which has become a major buzzword as the haphazard expansion of the past few years comes back to bite companies who are finding their ICT too complicated and expensive to manage.

Consolidation of under-utilised storage area networks (SANs) remains a popular pastime for many companies, who are using that consolidation to drive new disaster recovery scenarios in which data is regularly moved between two major sites over increasingly inexpensive telecommunications links. New snapshot-based backup solutions, combined with a marked trend towards disk-based backup that reflects acceptance of the information lifecycle management (ILM) philosophy, are allowing companies to back up data numerous times throughout the day and, in 2006, this will eventually lead to effective continuous data protection (CDP), which logs all disk writes and allows rollback of enterprise data to any point in time.

Just as storage is getting smarter and denser, servers too are being re-architected. During 2005, improving virtualisation technology gained major attention by providing an extremely workable and cost-effective way of server consolidation, with market leader VMWare maintaining its dominance despite new competitors like Microsoft's Virtual Server and the open-source Xen effort. By allowing companies to combine many under-utilised servers onto a small number of highly utilised systems, virtualisation has become a hot-button topic and will remain so through 2006. Also popular around boardroom tables is the shift towards service-oriented architecture (SOA), which represents an evolution of the Web services concept as ICT environments are increasingly engineered to meet business needs rather than technological objectives. SOA necessarily involves both technological and business change, which should make it a major strategic focus for all kinds of companies during 2006 and beyond.

Another major focus will be open source, with Linux continuing to explode into the data centre but continuing its quiet struggle to win relevance on the desktop. Major vendors like Oracle, IBM, HP and Novell (now a major Linux vendor with its purchase of SuSE in 2003) have continued and strengthened their commitment to open source, which has gained growing support from high-profile decisions such as Massachusetts' decision to abandon proprietary (read: Microsoft) solutions for open-source alternatives.

Ironically, the move towards open-source desktops may be driven not by Linux, but by OpenDocument - an increasingly popular, open document format that is gaining currency because its offers future-proofing that Microsoft Office does not. OpenDocument, supported by applications including the recently updated OpenOffice 2, could provide impetus for a move away from Office and, in many companies, likely experimentation with Linux desktops to complete the trifecta.

Indeed, the growing viability of open-source desktop solutions, combined with the paradigm-altering Windows Vista launch late in the year, is likely to make 2006 the year of the desktop. Almost every company (except the National Australia Bank, which recently gave in and decided to move its 33,000 desktops to Windows XP) will be considering the potential value of Vista, which will certainly require new desktop hardware and may also raise compatibility issues with current applications. Paired with the potentially dramatic change that would be wrought by Microsoft's completely overhauled Office 12, companies will do well to consider whether open-source desktops - in particular, commercial offerings from the likes of Red Hat, Debian and Novell - may suit their needs better in the long term.

The path to growth Changing market dynamics drive ever-present change in the skill sets required to capitalise upon them, and the changes in the industry during 2005 have done little to ameliorate that crisis. Layoffs like those at Telstra are likely to put hundreds of skilled technicians and ICT employees into the market, but they and their thousands of unemployed peers will need reskilling to keep up with the changing trends in the industry.

The talent pool in Australia, after all, is only so deep - a point that was recently made by South Australian chief information officer Grantly Mailes, who lamented that the state's now expired outsourcing deal with EDS left the state fundamentally "deskilled" when it comes to ICT. Mailes' comments echo statements by federal CIO Ann Steward, who told attendees at September's SEARCC conference in Sydney that government bodies needed to fundamentally revisit their staffing strategies to minimise inter-agency poaching and encourage a spirit of collaborative skills development. The Government is facing its own skills crisis, with an estimated 1000 positions still unfilled as agencies struggle to fill out their rosters to execute the ICT behind a range of major policy initiatives.

Deficiencies in Australia's ICT skills base have been an ongoing concern for the Australian Computer Society (ACS), which at the end of 2005 released a survey of member organisations that president Edward Mandla said confirmed that Australia's IT workers were "hideously undertrained". Respondents believed IT staff should be allocated five to 10 days of training annually, while ACS believes more like 20 days should be set aside for training. In either case, the current situation is far from optimum: the actual number of training days is more like one to five days. The appointment of peak CIOs in NSW, Victoria, South Australia and at the Commonwealth level - an important change in government ICT - may help coordinate a more appropriate skilling strategy at both government and industry levels. For Mandla, however, the Government's panic is hardly surprising: ICT enrolments are plummeting nationwide, and a long-running government focus on ICT penny-pinching has done little to fix the situation.

"Today our governments are discontented to the industry," Mandla says. "They think ICT is all about buying and cutting cost, and they are proud of their purchasing accomplishments and what great users of ICT they are. But we all know the result of this quest: no agency savings were ever achieved; agency innovation was stifled; little or no ICT was created in conjunction with government; and the real talent in government was not harnessed. No wonder tomorrow's panic is staff retention."

Mandla laments the Australian ICT industry's focus on "left brain service industries", whose routine tasks are rapidly being offshored to less-expensive overseas destinations, and argues for a renewed focus on the right-brain creative work that will help Australian ICT innovators resolve the skills gap. He was encouraged by ICT Minister Helen Coonan's recent trade delegation to India, where she pushed for partnerships between process-oriented Indian companies and creative Australian companies, rather than adding to Australia's ICT imbalance through additional consumption of Indian services. This sort of thinking, however, will remain difficult unless Australia's government funds - and parents encourage - the ongoing development of ICT skills among our workforce. This, Mandla argues, remains the biggest challenge facing Australia's ICT industry - just as it has been through much of the 10 years since the launch of the mainstream World Wide Web. More than anything else, the dramas with Telstra during 2005 echo this issue, highlighting the need for both infrastructure efficiency and effective management of skills and technology.

The Web's 10th birthday was acknowledged during 2005 in many different ways, but the overriding consensus sounds much like it ever has. Technology continues to present striking new opportunities to reinvent business, but no change can be about technology alone. Even with 2006 shaping up to be a year of considerable technological progress and reinvention - particularly in areas such as wireless communications and mobility, ICT resource consolidation, the repercussions of Telstra's earth-shattering change, and the push to business-focused information architectures - without a comprehensive skills strategy, Australia will continue to struggle to keep up.