Issue No. 02 - March/April (2006 vol. 8)
DOI Bookmark: http://doi.ieeecomputersociety.org/10.1109/MITP.2006.44
Analyst: More Vista Delays Would Sell 1 Million More PCs
Microsoft Corp. could help PC vendors sell an additional million machines if it intentionally delayed releasing its new Windows Vista operating system until July 2007, a Gartner analyst claimed last month.
But that is not going to happen.
The already-announced delay of Vista, which is now scheduled for general release in January 2007, won't materially affect the number of PCs sold during 2006 and 2007, said Charles Smulders, a Gartner vice president. Along with two other analysts—George Shiffler and Mikako Kitagawa—Smulders recently published a research briefing on Vista's push-back and the impact on PC sales.
"The impact will be relatively minor if Vista ships in January  as Microsoft has announced," said Smulders in Network Computing. "Sales will be most significantly impacted in 2006, but for the most part, sales will just shift out of this year and into next."
Some consumers and small businesses that might have popped for a new PC with Vista preinstalled during the fourth quarter will spend the money on other purchases, Smulders said, but they won't be in the majority.
"Actually, it might be better (for PC makers) if Microsoft waited until the second quarter of 2007 to release Vista," he said. "That would allow Vista to gain momentum through the educational back-to-school season and the fourth quarter of 2007."
Delaying Vista until, say, July, Smulders argued, would also boost PC sales this year. "With Vista further out in the future, sales are less likely to slow down now," Smulders said.
The total sales increase from another delay would be about a million units, the Gartner analysts estimated in their research report, a number Smulders called "a relatively small difference."
According to Gartner's most recent estimates, global PC sales will top 230 million in 2006, so 1 million more machines over a two-year period translates to an increase of about one-fifth of one percent.
Sun, EPA Seek Server Energy Spec
According to Information Week, Sun Microsystems and other electronics companies are working with the US Environmental Protection Agency (EPA) to define a standard metric to measure energy efficiency in server technology.
Similar to the miles-per-gallon metric for cars, this metric would enable those purchasing servers to evaluate energy consumption in a standard way, according to proponents of the standard.
Sun hosted a recent working group comprising AMD, the EPA, and Lawrence Berkeley Labs to begin hammering out a standard. Such a standard is critical as the move to more powerful servers raises concerns about rising heat and cooling expenses associated with these products.
Following the recent working group, Andrew Fanara, team lead for Energy Star Products at the EPA said, "The EPA is extremely happy to promote a dialogue around this topic with a broader array of stakeholders. The meeting went very well and was an important step toward the creation of an industry consensus benchmark for server energy efficiency. Furthermore, we're hearing a lot of positive interest on this topic from our counterparts in Europe where this issue is a growing concern."
The standard's proponents believe an energy metric would promote equitable equipment comparisons and enable businesses to make better-informed decisions about total cost of ownership. Edward Hunter, director for Sun's Eco Responsibility Initiative, added, "This is the right time for the industry to act on this important issue, and the impact will be felt for years to come. These critical issues of power and cooling in the data center are at the top of the agenda for our customers and other companies spanning multiple industries."
Deals Hint at Consolidation of IT Services Industry
According to Information Week, there's a deal making afoot in the highly fragmented IT and business services market. The catch for vendors looking for a suitor: If you're big in India, you're hot; if not, you might be on the sidelines for a while.
Last month, Electronic Data Systems Corp. (EDS) offered $380 million to acquire a 52 percent stake in Mphasis, a Bangalore provider of software and business process outsourcing services with $171.3 million in revenue in its most recent fiscal year. The offer represents a 30 percent premium above Mphasis' average share price over the past six months. Mphasis' directors are encouraging the company's shareholders to accept the deal, but some are holding out for a higher price.
They might get it. Acquiring an Indian services firm is a fast and relatively straightforward way for US vendors to quickly add workers and real estate in a country where programmers are paid as much as 80 percent less than what they would earn in the US. As a result, firms that already maintain a large stable of Indian IT talent—Mphasis employs 11,000 workers in the country—might command a premium. "They're overpriced, but people are willing to pay just to get fast growth in India," said Paul Hsi, an analyst at BlueMountain Capital Management, a hedge fund.
Compare Mphasis with Computer Sciences Corp. (CSC), which last month publicly placed itself on the block but which privately, and unsuccessfully, has been seeking a buyer for the past several months. CSC's government outsourcing division is attracting strong interest because of heavy spending on IT services by the US Department of Homeland Security and other federal agencies. However, its commercial division holds little appeal for most buyers, though Hewlett-Packard is said to have kicked the tires before taking a pass. CSC's problem: "Buyers are all looking at India," Hsi said.
CSC, with $14.6 billion in annual revenue, did try to spruce itself up in that regard last month when it unveiled its fourth Indian development center. It also promised to cut 500 expensive positions—mostly in Europe—over the next year. CSC plans to hire 5,000 to 7,000 workers in India over the next two years, the company says. Still, that pales compared with rivals such as IBM, which analysts expect to add more than 20,000 workers in India.
Some companies will acquire rather than hire. Printer R.R. Donnelley last month bought Indian business process outsourcer Office Tiger for $250 million, and Accenture acquired the back-office outsourcing arm of privately held software and services vendor Savista, which is based in Wichita, Kansas, and has operations in Brazil and India. About 400 Savista staffers have joined Accenture as part of the deal.
Indian firms are likely to receive the most looks from buyers, making it likely that EDS's grab at a stake in Mphasis could spark similar moves by competitors. "Absolutely, you're going to see more of it," said Ray Lane, former Oracle CEO and now a general partner at venture capital firm Kleiner, Perkins, Caufield & Byers. For EDS to compete with Cognizant, Satyam, and Tata Consultancy Services, it has to lower its cost structure, he said.
EDS says it's not just interested in cheap labor. The company sees in India an abundance of workers fluent in the technologies most relevant to today's business IT environments. "We're looking for .Net capabilities, Java capabilities, and Web capabilities," a company spokesman said. Mphasis would add 11,000 Indian employees to EDS's present complement of 3,000. By the end of 2008, EDS wants to have 28,000 IT and business services workers in the country, a 14,000-employee increase, even after the Mphasis deal. EDS plans to use both acquisitions and individual hirings to make this happen. EDS employs 51,000 workers in the US, or about 42 percent of its worldwide workforce.
Last month, IBM officials said the company would likely raise its Indian head count to 55,000 or more over the next year, a 40 percent increase over current levels. Dell said it might add 10,000 workers in India over the next three years, effectively doubling its presence there. If there is an IT services industry consolidation under way, it has a distinctly Indian flavor.
ITAA Urges US Government to Move Ahead with Western Hemisphere Travel System
The Information Technology Association of America (ITAA) recently urged the US Departments of State and Homeland Security to move ahead with plans to purchase a technology system that would help secure and expedite travel to and from Mexico, Canada, and other western hemisphere locations ( http://www.itaa.org/newsroom/release.cfm?ID=2292). The association said the government should issue a request for proposals to contractors that does not call for a specific technology, allowing the market-place to propose a variety of solutions.
"Privacy is a matter of the utmost priority, but the government will not meet that priority by choosing one technology over another at this stage," said ITAA senior vice president Joe Tasker. "With the right policies and procedures in place, more than one technology can authenticate a person's identity and keep personal information secure at the same time. We are sure that the government recognizes the importance of this mission. The time has come for an informed review of concrete proposals. ITAA urges the departments to issue appropriate requests for proposals and let responders offer technology solutions that can be considered and ultimately selected."
The association's letter followed a debate over whether radio frequency identification or smartcard technology would better protect personal information while helping to implement the Western Hemisphere Travel Initiative. The initiative will for the first time require everyone to present a passport or other accepted document (one that establishes a bearer's identity and nationality) when traveling to and from the Caribbean, Bermuda, Panama, Mexico, and Canada.
"ITAA believes the current debate should focus less on the relative merits of different technologies and more on the performance requirements necessary for a successful program," the association wrote. "We would urge DHS and State to provide performance objectives for this program that are technology-neutral, ensure program efficiency, and which provide appropriate privacy measures."