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The Almighty Buck

IT Trends In and Out of Downturn 190

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."
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IT Trends In and Out of Downturn

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  • subliminal message there guys?
  • Consulting good? (Score:5, Interesting)

    by AtariDatacenter (31657) on Monday October 07, 2002 @12:56PM (#4404334)
    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.)
  • by ErichTheRed (39327) on Monday October 07, 2002 @01:02PM (#4404383)
    The problem with outsourcing arrangements is that companies only see savings at the beginning of the arrangement. Sure, they get to fire their expensive permanent employees. But guess what happens when something breaks? You end up with people who don't know how that particular company does business. I've seen this happen in three places. Average problem resolution goes from hours to days as users and staff try to figure out which call center halfway across the country to address their problem to.
    • Know the business? (Score:4, Insightful)

      by nuggz (69912) on Monday October 07, 2002 @01:16PM (#4404489) Homepage
      The computer techs shouldn't need to know the business.

      The business or 'customer' should clearly specify their requirements. The techs should build it.
      If they just guess at your requirements they need to know the business to get a good guess, project takes too long, everything's a mess and the end solution sucks.

      Yes I work in design, yes I know nobody does it this way, but they should.
      • by sphealey (2855) on Monday October 07, 2002 @01:29PM (#4404603)
        The computer techs shouldn't need to know the business.
        If you are just talking about providing e-mail and a bog-standard Word and Excel install, with no support to any greater level than the included Help files, sure.

        But beyond that, thre is no such thing as a "computer tech without business knowledge". Even the lowest printer repair tech has to make decisions such as "respond to VP A's call or Executive VP B's call first?". Anc unless you are aware that although VP A is lower on the totem pole his team is working on a company-saving proposal and needs priority support, you aren't going to make the right choice.

        Then there is the simple 1st-level help desk call, "Why don't the numbers on my Crystal Report add up?" That one could take from 30 seconds of mouse training to 30 hours of analyzing the business rules behind the data to resolve. The outsourced provider will either refuse to answer the question, or will miss the deeper significance.

        Of course, the 1st year savings get booked and credited to the CxO who decided to outsource; the pain gets booked to the rest of the business units down the road. Oh well.


      • by Golias (176380) on Monday October 07, 2002 @01:34PM (#4404637)
        The people who only know the business are unaware of the potential savings, efficiencies, etc., that current technology solutions can offer their particular business.

        People who only know the tech are also unaware of how they can add value to a business, because they have no clue what that business does.

        Tech people who also master an executive level understanding of a particular field (insurance, financial planning, transportation, medical care, manufacturing, general accounting, etc.) are worth a fortune to their companies, as are business people who master technology. Not only do such people find ways to save costs or improve income to the tune of millions, but they are also few and far between, cranking up demand for their services even higher among those companies who are shrewd enough to hire them.

        Should the paper MCSE who runs your Exchange server be expected to know the business? No, I suppose not. Especially since you should probably lay him off as soon as your network administrators replace that server with a sendmail process on a spare UNIX box. But your development staff should know the company's business as well as any of the suits, if not better. I know you would probably rather pick up another programming language or some other skill that's easy to transplant between the jobs you change every two or three years (my attitude is very much the same) but sooner or later, you hit a salary ceiling as a general "hired gun" techie, and you need a deeper, more specialized knowledge of something before you are going to break past it.

        • If you're only running Exchange? Sure. But we used to use Lotus Notes, and it was used for several important applications. Our Notes admin knew a LOT about the business by the time we finished building it. I'd build the backend in SQL, he's build the front end in Notes, and we could move data either way.

          And, equally important - if he doesn't know the business, why the hell not? It'll make filtering spam easier, it'll let him know the best times to do maintenance on the servers (one of my Unix servers was turned off for 3 months out of the year!), etc, etc. It also helps the admin add value to what he does - "wouldn't it be handy if you were emailed every ?"
          • My point was that the low-end, disposable, grunt-work techs hired from Your Friendly Neighborhood Staff Agency probably don't need to know the business, because they won't be around long enough to learn it all, let alone use that knowledge.

            Companies that have MS Exchange servers for the company mail often hand the task of maintaining it to such low-level techs.

          • And, equally important - if he doesn't know the business, why the hell not? It'll make filtering spam easier[...]

            Absolutely. I wish our admin did something to Exchange to make it recognize that those flash ridden, animated gif infested, silly sound playing emails actually are internal and they simply come from marketing...

            • Joke if you must, but we did filter their stuff. Especially after they sent out a combined 1 gig of traffic, 77mb each, to our sales reps. Who dialed up on a 28.8 modem. On the plus side, that squashed quite a few marketing ideas, when the managers called up and started yelling (we thoughtfully pointed them towards marketing)
      • by legLess (127550) on Monday October 07, 2002 @01:37PM (#4404660) Journal
        Blockquothe the poster:
        The computer techs shouldn't need to know the business.
        Wrong, wrong, wrong. IT is a business problem: how do I get functionality X with resources Y? There are many aspects of any business which are not obvious to an outsider or quantifiable by an insider.

        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.
      • by mikey504 (464225)

        The customer doesn't understand the technology well enough to best determine how it meets their needs. We get into big trouble around here when our "power users" get ideas about how things should be done, sell them to management and their peers, and then come to us to "implement".

        It is vital that we understand the businees of the people we support, so we can determine how best to spend their limited resources. I find that people here sometimes understand how technology can be used, but they don't understand its limitations well enough to determine how best to use it. A recent example would be a construction manager here who tried to email a 37 MB word document to someone. He knows how to make complex documents, insert photos, and compose his message-- but he doesn't know he should compress his jpg images before he inserts them, and he doesn't know what a "reasonable" file size is.

        To narrow down the list of things that are possible to solutions that are practical and efficient, you have to know both the technology and the business it supports.
        • If an actual requirement is transfering 37 MB files this should be addressed.

          A shared directory or server of some sort is likely possible to solve that requirement.

          Or you should have them explain why this is a requirement and if modifying behaviour is the appropriate answer.

          Having some knowledge of what goes on is valuable, but not nearly as important as the design requirements themself.
      • by balamw (552275) on Monday October 07, 2002 @02:12PM (#4404941)

        IMHO knowing the business is key. I'm a scientist working in a small high-tech manufacturing company and don't do IT for a living, but I dabble. We have one in-house IT person to handle everything from help-desk to maintaining our ERP system for ~250 people. I take care of the linux boxen and generaly act as a sounding board for the IT guy when stuff ain't working...

        When stuff really hits the fan, everyone thinks that their particular issue is priority #1. One of the roles of a well-trained IT staff is to sort out those priorities and get the comapny back to business efficiently. You really need to know how the pieces are interconnected in order to do that effectively.

        Another example: my wife works for a large company that recently outsourced most, but not all, of their IT staff. Now, when she has issues with the PCs in her office/lab she no longer has a single point of contact to deal with recurring problems and ends up having to explain the issue from the beginning again with the tech-of-the-day (Can you close all your apps and reboot? Is it plugged in?)... So what happens? One of the people in her group who knows something about PCs ends up being the local "mr. fix it" and ends up doing that instead of his real job.

        Yet another example: She ordered a PC to drive a lab instrument since the old one died a horrible death. It took over two months for it to show up. Why? The only authorized PC for that purpose came with a "free" RAM upgrade and a 19" monitor, and even though the PC showed up within days the RAM was delayed. So the PC and, the >$100,000 piece of equipment was idled because it only had 128M of RAM and could not be delivered without the RAM upgrade. Never mind that the old PC that ran the machine had only 32M to begin with. Oh yeah, and that 19" monitor? It wouldn't fit in the equipment rack, so they ended up repurposing it as someone's desktop monitor. Of course the people in the lab knew it wan't going to fit, and mentioned this up front but the package deal could not be unbundled.

        The irony of the whole thing was that it later turned out that the PC was incompatible with the data aquistion board required to drive the instrument even though it met all the manufacturer's specifications.

        How did they find out? The in-house IT person from a neighboring department dropped by for something else and mentioned that they had found the same problem with their instruments. She found them an old clunker that was up to the job, and had them up and running the next day....

        So, if you add up all the time wasted in dealing with these consultants that don't know what the group does or how it fits into the big picture of the company's business, do they still save money over a dedicated in-house IT staff?

        You be the judge...

        • by King_TJ (85913) on Monday October 07, 2002 @03:37PM (#4405644) Journal
          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).
      • by jmertic (544942)

        The business or 'customer' should clearly specify their requirements. The techs should build it.

        Yes I work in design, yes I know nobody does it this way, but they should.

        If it worked this way, my job would be 50% easier ;->

        But seriously, the biggest issue IMHO is that users don't often know what they want. I've sat in and brainstormed to fix so many workflow issues that if I were to take thier requests verbatim, it would have been the most bizarre, kludged together POS that ever lived. Often times people don't see the bigger picture/problem and don't see how technology could improve it. Other people assume too much from technology (where Human intervention requirements are neccesary and AI won't suffice).

        The best solution is to have a group of the techies who know the business be the bridge between both parties since they can just about always come up with excellent solutions. Anymore we have IT people sit in on most meeting like this to help move things along and not get stuck on mundane issues.

        As always YMMV, but it seems to hold true most of the time

      • The business or 'customer' should clearly specify their requirements. The techs should build it.

        How will the customer know their requirements? Many times I've shown someone how to do something, and they're amazed, not because they didn't know how to do it, but because they didn't know it was even possible to do it. If you don't understand the technical side, you won't know it's possible. If you don't understand the business side, you won't know it's needed. The best people understand both, so they know what's needed and what's possible.

        • Process optimization is simple.

          1. Write down what you do.
          2. Remove wasteful steps.
          3. merge/automate redundant steps.
          4. Improved solution.

          Properly explaining what you want to have done helps. Looking at what you are doing step by step will give the best solution. Sometimes it isn't even a technological solution.
      • Taking over an existing contract is not the same as building someone from the ground up. The larger the business the more complex the systems and the more interaction between them. You are contracting out to save money, letting a contractor come in and replace everything to what they know or the current standard is not exactly going to reduce the bottom line. More so for a large world wide company.

        I worked for an airline that outsourced a majority of thier work in the mid 90's. Result? Enough of the employees whose job was working with all that equipment (ticket agents, gate agents and everyone in between) complained enough and three years later the company hired the IT staff back.

        The savings on paper was pretty good and most likely was the only thing that they really saw. The long term effect was very low quality work with response times that were not adequate for an airline. I'm sure these things could have been addressed better in the support contract for a price, but that price would have gone up and the deal would not have looked as good on paper.
    • A big problem is that the outsourcer becomes embedded into your day-to-day operations. You lose your in-house capabilities, are tied to the outsourcer's (proprietary) technology and methods, have no visibility to your IT operations, and worst yet, you are in a position where getting rid of the outsourcer becomes ungodly difficult. The biggest cost of outsourcing is the hidden cost of eliminating the outsourcer. Whatever financial benefit comes at the ocst of completely losing control and flexibility.

      Sort of like going through a divorce..

      Or maybe having a kidney removed

  • Oxymoron (Score:5, Insightful)

    by Andrewkov (140579) on Monday October 07, 2002 @01:06PM (#4404418)
    There's the oxymoron of the day: "Save as you spend". Wow.
    • Re:Oxymoron (Score:5, Funny)

      by Pedrito (94783) on Monday October 07, 2002 @01:18PM (#4404511)
      There's the oxymoron of the day: "Save as you spend". Wow.

      Wives have been using this one for decades. "Sure honey, I spent $500 on shoes, but they were on sale. I saved us tons of money."
    • Re:Oxymoron (Score:1, Interesting)

      by Anonymous Coward
      How is that an oxymoron (or insightful for that matter). I saved $15 at the grocery store yesterday having spent $50. One of the definitions of save is - "to spend less by." In order for the phrase to be an oxymoron it would have to have contradictory terms. Obviously spend and save are not contradictory. Perhaps next time you think you are making a witty remark you should spend some time doing something else and leave posting for the more intelligent of us.
  • My two thoughts (Score:5, Insightful)

    by nuggz (69912) on Monday October 07, 2002 @01:06PM (#4404420) Homepage
    1. You get what you pay for, and good help is hard to find. Getting good constant support coverage is expensive.

    2. Scale can help. Like insurance spreading the cost can help manage bumps, and smooth out the actual required resources.

    By outsourcing you could save money by not buying more service then you need, and even lower your support if all you need is someone 'on call' incase "something happens".
    But like any pooled asset, there will be times it isn't available, and it isn't like having a dedicated team to take care of stuff
    • This idea of pooled assets is only effective if the pool of assests is accessable to everyone on a fair baisis. Many insuriance companies don't save people money they just make sure one day of bad luck (lightning strike) doesn't kill the company. But this is not always true. Example: I worked at a computer repair location and most home owners insurance would only cover lighting strikes on computers if it could be positively known that it was lightning that did the damage and they wanted my company to sign off on the cause of damage. Of course we can't say that it was lightning so... "sorry mam it could have been your negligence that cause the damage so there's nothing we can do"
  • by nogoodmonkey (614350) on Monday October 07, 2002 @01:06PM (#4404421)
    "I don't think the computer industry will truly mature until 2015, 2020," he said. I don't understand where this comment fit into that article. BUT - I do not believe this at all. The technology industry changes each and every day, I don't believe that it will "mature" at any time, if at all.
    • Heck, I'm 27 now -- at 40yrs of age, I should definitely be considered mature by then. Does that mean my mom can still tell me to act my age?
    • It has already matured and will continue to do so. IT does not change every day, in fact since I started working in the industry very little has changed. There has been no ground breaking discoveries in a long time, say 15+ years. What has happened is that IT staff are becoming more aware that they have to provide working systems not flashy technology. My employer cares not that we have a character based system but that we never have an unplanned outage.

      As a side, and this is /., I see more and more IT shops moving to linux. If Linux gets some half decent Open Source vertical applications then companies will flock to it. Why pay $2,500,000 for an ERP package that you have to tailor?

      • It takes more than half decent open source apps to make companies migrate to GNU/Linux. What about all the money the company spent sending an employee to get their MSCE (or equivalent certification)? And for a lot of server administrators, ease of maintaining a server will probably come before security and reliability.
      • As a side, and this is /., I see more and more IT shops moving to linux. If Linux gets some half decent Open Source vertical applications then companies will flock to it. Why pay $2,500,000 for an ERP package that you have to tailor?

        There is NEVER going to be a piece of open source software that can compete with SAP, BAAN, JD Edwards, or Peoplesoft. No matter what, it will NEVER happen. These products are too extensive to be created in the open source world.

        This means I'm still paying $2.5m for a piece of software that I can run on Linux or Solaris (let's assume they all get ported to Linux). So I can run them on Linux on Intel hardware or Solaris on Sun hardware. Which choice do you think the technical architects and executives are going to make? What Linux system is going to compete with a Sun 6800 for these software packages?

        Open source is NOT ALWAYS the answer.
        • Never say never!

          When did SAP, BANN et al get created? Did they come ready formed at their present huge size? No, they started off as small packages satisfying one or two areas of need. They then grew to encompass other areas.

          No Linux system currently has the name brand of Sun, but what about Linux/390? or whatever the mainframe version is called. Sun has an uphill battle to keep intel out of the high end server market.

          Both of the preceeding points are really the same one.

          A very common exaample of the same things is that of steel mills. When the US ruled the world of steel there was massive plants churning out steel. Then someone developed the mini mill. These mills did not produce as good steel as the big plants but their steel was cheap. So companies that needed cheap steel and did not need the quality bought steel from the mini mills. The large plants discovered the demand for their low end steel was diminishing so they started to withdraw from the low margin market. All the while mini mills researched how to make better steel cheaply. Thus they started enchroaching on the next level of steel quality and so on and so forth.

          Digital cameras are another example. Kodak dismissed digital cameras because the quality was so poor. Pity they didn't understand Moores law exponential growth in digital quality?

          I forsee the day when most vertical software is Open Source. Someone or some company decides that it needs an accounting system and decides to write one. They release the code because one of their developers convinces the board that like most companies software is not an asset but a liability to them. Another developer sees this accounting package and thinks it's a good fit for his company if only he can change a few things. So he releases his fixes etc etc. Now this accounting package is rolling along and everything is gelling, hell they even get a mention on /. Another company needs inventory control, they have this accounting package and they decide to write inventory control, they might even solicite other companies to see if they need inventry control.

          An added bonus for companies that decide to implement this package is that upgrades are free, the demand for expensive developers decreases.

          There are already Open Source projects dealing with ERP/CRM.
      • It has already matured and will continue to do so. IT does not change every day, in fact since I started working in the industry very little has changed.

        Put it this way: innovations in civil engineering happen over decades. Bridges almost never fall down because bridge building is well understood. Innovations in IT happen on timescales of years or even months. Software frequently crashes or fails to meet its requirements because software is poorly understood. How often do you get a new version of a piece of software? (Hint: a lot more often than you need to change the gauge of a railway bridge).

        Until software applications can be built with the reliability and repeatability associated with bridges, dams, power stations, airliners et al, the software industry will remain immature.

        As a side, and this is /., I see more and more IT shops moving to linux. If Linux gets some half decent Open Source vertical applications then companies will flock to it. Why pay $2,500,000 for an ERP package that you have to tailor?

        SAP R/3 et al already are "Open Source" - you get reams and reams of ABAP and can rewrite bits of it however you want (or pay Accenture to do it for you). The thing is that ERP systems are very boring to write and require immense amounts of manpower and industry experience. There is no way there will ever be a free ERP system capable of competing with the big players, because getting paid is the only possible motivation anyone could have to do it. Not only that, what company is going to want to give away the secrets of their best practices to their competitors? You are far more likely to see SAP R/3 running on Linux with Oracle 9i RAC on Linux at the back end.

        In a way, you've proved my point. Companies in mature industries don't "flock" to things because they are already at best practices and have been for a long time, and are willing to wait for a new idea to prove itself, which may take years.
    • This is a business technical term, it means that revenue growth slows, but in a secular pattern not just a cyclical downturn. He isn't arguing that the products we have now will be with us forever, but that the total revenue pie will decelerate and eventually decrease in size for all IT products. It all comes from a model businesspeople use to show how new companies/products/industries behave over time. They are introduced and only a few early adopters use their products. New features are added regularly. Plasma screens are a pretty good example of a product in this statge. Then growth begins to take off, as many people decide to start using the product. DVD players are in a growth stage. After enough people switch to the new product, fewer people are adopting it, and maturity sets in, new variations are introduced, but they don't usually spark the same excitement and rarely get new users, just people switching within the product. Televisions and PCs are here. Finally, decline sets in as everyone has begun using the product and they simply replace broken products. Washing machines stoves and other things are in this stage. New produducts are introduced in all of thes industry groups, but mature industries usually cannot grow as quickly because most people already have their product and don't want or need additional products.
    • In the MBA world mature means the industry has stopped growing in sales volume (read $$$$), it has nothing to do with technology. It also means whoever is left is just slugging it out for market share. Think laundry soap or soda crackers for examples of mature industries.
      • In the MBA world mature means the industry has stopped growing in sales volume (read $$$$),

        That's compensated for inflation *and* population growth, right? I'm no MBA, but I don't see hown crackers and soap meet your definition otherwise....

    • "I don't think the computer industry will truly mature until 2015, 2020," he said. I don't understand where this comment fit into that article. BUT - I do not believe this at all.

      Well, that is about the time that computers are scheduled to become smarter than humans: []

  • by jmcnamera (519408) on Monday October 07, 2002 @01:10PM (#4404440) Homepage
    I'm in a services organization and business is poor right now.

    Yes, service orgs make lots of PR for each signed deal, but they are over many years and sometimes they get cancelled in advance of completion.

    Also, services have more costs associated with them than do software or hardware sales.

    To some extent, accounting of service contracts can be misleading by both front-ending the benefits and by buying other service orgs to obtain their profits but spreading out the acquisition costs.

    It's not a comfortable business to be in right now.
  • by davidsheckler (45018) on Monday October 07, 2002 @01:16PM (#4404492) Homepage
    Companies outsource because they don't have the political will to control costs themselves. So they pass it off to another company like IBM.

    The result is usually the reduced cost you were looking for and severely reduced service levels.

    I once consulted for a very large Insurance company, which decided to outsource it's legacy IT staff, approximatly 300 people.

    About a third of them left and they were the most knowledgable, each averaging 20 years experience on the systems they maintained.

    A small modification that might take any of them a day to build, test and install would take me three weeks. (it's hard to compete with 20 years of domain knowledge).

    Skilled IT workers are not assembly line workers. Outsourcing should be for easily replaced resources.
    • by ngoy (551435)
      I don't believe outsourcing is foolish (of course I work for an outsourcing company). It depends on what the motives are and as you said, because the company does not have the will to control costs themselves. If you have let your company grow too big for it's britches, as an example, for the company we do break/fix outsourcing for (a large 5 letter chip-making company), outsourcing is a great way to save money on things you really shouldn't have been wasting your time doing in the first place. There is a point where there is so much bureaucracy that you have whole divisions dedicated to supporting your own business, and people collecting compensation based on generous stock/comp plans, who should really be making much less than they are. There are divisions here that charge $120 an hour to their own coworkers! For programming! It costs over $1000/month to have a server hosted internally. And that does not include the price of the server! These are all internal chargebacks. If I was a stockholder I would be pissed that they didn't outsource, or at least get rid of half of their IT staff. The larger a company gets, the more it operates and wastes money like our government. shango
      • >It costs over $1000/month to have a server hosted
        >internally. And that does not include the price of
        >the server! These are all internal chargebacks. If
        >I was a stockholder I would be pissed that they
        >didn't outsource, or at least get rid of half of
        >their IT staff.

        That $1K/month is monopoly money, i.e. it does not leave the company.

        If they outsource that function, the money they pay actually leaves the company.
      • In other words, outsourcing is great if your organization is so screwed up that it is costing you money.

    • Economics tells us that when an entity chooses to specialize and excel at a particular thing, not only does it maximize its own profit potential, but it also makes the competitive environment better through comparative advantage. Why should a widget company develop or even maintain its own technology staff when there are companies out there (pick one, IBM, HP, Microsoft, etc) who produce products and service offerings that will do it better than that company will ever be able to. All the technologists out there I am sure have seen this. Ever worked for or with companies that are out of their league, hire or maintain a technology staff, and almost ALWAYS outsource to consultants in the end because they don't know what they are doing? What the big players are doing is commodotizing this need by providing software packages that don't require ground-up programming. The consultant is still needed to implement and customize, but the "employee" or the "Dilbert" in-house shlep's days are numbered.
      • It also tells us that it maximizes it's own benefits, not yours. After you are on the hook, and the contract is signed, you can expect you service calls to take longer to be answered, to be answered by cheaper people, and to take longer to upgrade to a higher level tech. But you don't find this out until after the contract is signed. What you find out before then is whether they could provide good service if they tried.

        Before you sign into any agreement like that, be sure you have you path out carefully mapped, and that it doesn't depend on the cooperation of the people you're planning to depend on (after all, if they were dependable you wouldn't need to get out). --- Now, what's the cost to get out without killing your company? (figure both time and money). How much can the service degrade before you will pay that cost? Expect it to degrade almost that much.

    • Outsourcing should be for easily replaced resources.
      Best sentence on the thread.
    • What I don't get about outsourcing is how its less expensive, especially at the operational level.

      Based on the zillions of meetings we've had with the honchos, on-site help desk functionality is manditory. OK, how is it *cheaper* to have someone else come in and piss of the users than to hire someone to do it as an employee?

      An outsourced employee's wage is likely on par with their niche, so you're paying that *AND* you're paying the rather large markup that the outsourcing company charges.

      I can believe that an outsourced employee might in special circumstances bring higher level of technical knowledge, but that's seldom valuable in an operational situation, usually in a planning or roll-out situation.

      My understanding from the conversations I've had with PHBs is that outsourcing was a big deal in the mid-90s, but a lot of places got burned. The savings weren't that great and the opportunity costs were high. Has that kind of thinking changed?

      • Its not that its cheaper to outsource, but rather that outsourcing expenses show up on a different financial table than regular employees. You can claim alot of cost cutting/employee reductions and boost your image to Wall St. Of course, you spend more and get less service. But hey, we cut our medical costs!
        One of the reasons outsourcing companies are having it rough right now is because they are thinking of closing that loophole. Outsourcing expenses would have to be reported right with employee expenses. Businesses are waiting to see how that shakes out before spending more in this little accounting scam.
  • Wait a Minute (Score:4, Interesting)

    by malloci (467466) on Monday October 07, 2002 @01:21PM (#4404536)
    Steven Milunovich, an analyst at Merrill Lynch & Co., views the recent technology bust as the latest wave in a series for the industry. The first wave was the boom and bust of the mainframe computer in the early '70s. The second was that of the PC in the '90s. The third wave, as he sees it, will be the rise of more networked computing, in which, for example, applications will be used via the Internet.

    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 [])?
    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 .NET propaganda. Oh wait, I suppose that Merril Lynch is in bed with Microsoft too.

    • It's a classic case of "20-20 hindsight", coupled with a desire to sound like a prophet on the future of computing.

      In reality, the "boom and bust" of the mainframe computer was much more of an obvious evolution. It simply started becoming technologically feasible to pack computing power into smaller and cheaper cases. Today, people are doing quite a bit of the computing model traditionally reserved for "mainframes" using software packages like Citrix on Windows servers (or even Tarantella on Unix boxes), coupled with PC workstations as the "dumb terminals" to them.

      There would have been no "mainframe bust" if the manufacturers of the "big iron" were aggressive at switching to building high-powered microcomputer servers, and tried selling their customer base on them. Instead, others stepped up to that plate and "ate their lunch".

      The predicted "rise in network computing" seems, once again, like more of an evolution than a "cycle". As Internet broadband becomes cheaper and more prevalent, naturally, more people will try serving their applications remotely over it. (Why not?) To say it'll be a "revolution" in software design is a bit much, IMHO. Many people want to ensure that their important data doesn't leak outside their business. Why pay for someone else to store it all for you, when you have much less control over what they might do with it? (EG. Perhaps their employees will sell your sales info to competitors for cash on the side, and you'll have a really tough time stopping it. You can't just fire the responsible party if they're not one of your own employees to start with.)
  • But what if some one leaked some important data to rivals ?.

    What if M$ uses all data to their operations.

  • Sun support weak ? (Score:2, Interesting)

    by Archfeld (6757)
    From my experience Sun does excellent support. Not that they can touch IBM, but who can ? But both SUN and IBM are miles above HP/COMPAQ in terms of onsite technical expertise, and documentation. Rarely does IBM or SUN ever call in 2nd level, and I've never had them need a 3rd person, the 'NEW' HP guys need an assistant to call in help...It has been a LONG while since I dealt with an HP Unix system so I can't comment on support there.
    • by qurob (543434)

      Most HP/Dell/Compaq guys that come out to replace our components are exactly that, parts pullers.

      You pay big $$$ from IBM/Sun/SGI for service contracts, and you get what you pay for.

      But the Compaq and Dell techs come out and have no clue what's going on, and they get parts Fed-ex'd to their moms house and bring them out. When there's a REAL problem (read: more than a bad power supply) you're in trouble.
      • How do you tell the field circus guy with a flat tire? He's the guy randomly changing tires till he finds the one that's flat.

        How do you tell the field circus guy with a flat battery? He's the guy randomly changing tires till he finds the one that's flat.

    • Sun/IBM field support is good, but I believe that the article is referring to IBM Global Services/Sun Microsystems Professional Services, when they were referring to the "services" aspect. IBM GS is the 400lb gorrilla in that space, while SunPS is a much smaller organization. They both employ skilled professionals, but IBM GS gets much more play because IBM realizes that hardware is commoditized (sic) and that services are the future.

  • by ShannonClark (18497) on Monday October 07, 2002 @01:29PM (#4404601) Homepage Journal
    Generalizing somewhat, there are FOUR options for a company currently in "high tech".

    One - Sell hardware. Generally billed once, though often financed and perhaps with a "support package" attached

    Two - Sell "software". Usually licensed with an annual "maintance" agreement in addition (speaking of enterprise software - in consumer terms this is the annual or bi-annual upgrades/updates that you have to pay for)

    Three - Sell a "service" (think ASP's, telcos, ISPs - generally billed on a periodic basis - often monthly, but also quarterly or yearly plans exist).

    Four - sell "consulting" or services. This is further subdivided into "project work" or "outsourcing". Projects are generally of a limited duration and for a specific purpose, outsourcing usually involves the takeing over a company's IT staff, equipment, and processes - and is generally of a very long term duration.

    There are, of course, variations to all of the above - but these are a basic choices that a company today faces - and all of these are driven in tandem by corporate needs.

    New software usually meant new hardware, plenty of services needs, and lots of projects and outsource contracts to go around.

    However, we are still suffering from the combination of Y2K, the "dotcom bust", and diminishing returns on technology investment (or at least the PERCEPTION of diminishing returns).

    Y2K caused many large corporations to move up spending - which they had planned to do in the past two-three years, to 1999 so as to put new software and systems in place in advance of Y2K. In the course of doing this major corporations also steamlined and simplified their internal systems - often reducing by 50% or more the number of applications they supported internally.

    Further, many corporations standardized on fewer platforms - and reduced variation within their corporations.

    In 2000 it appeared that perhaps the "Internet boom" would be the driver of future investment in a post-y2k world - and indeed many corporations spent a lot of money on Internet/e-commerce projects - however though a lot of money was spent on these projects, and some companies did see big gains - far less money was spent on Internet projects than had been spent on ERP or other similar enterprise wide projects.

    Further, as a new field - most of this money was spent on consultants and projects. Some was spent on services (hosting packages, additional T1s etc) - but less spent on software packages or additional hardware.

    Software companies and hardware companies alike have not, in general, offered compelling new systems that provide powerful reasons for additional investment - corporations look at the desktops and servers that they have, note that most of their systems are underutilized, and see little reason to return to regular upgrade cycles - rather they see little to be gained from expensive upgrades - and much to be said for focusing their resources on using what they already own.

    So, this in turn, means that corporate internal resources are increasingly available for internal projects - reducing still further the need for outside consultants on a project basis.

    What then is the solution?

    First - technology is driven by providing VALUE - i.e. providing systems that help people make money (by saving them money or making people more productive). Software vendors should focus on what their tools "really" need to do - and make compelling enhancements in those areas.

    Second - We may be seeing a transition from a mostly growth industry to one that will be more stable - there is still money to be made, but annual growth rates of 30+% are probably a thing of the past.

    Third - companies should focus on building long term value added relationships with their customers - if you make your client money on an ongoing basis, that is generally a recipe for continued and mutually profitable business - in the "internet boom" many service/consulting firms forgot this - they made money, but their clients just lost money - now those clients are often reluctant to spend further funds with those firms (if the firms are even still around).

    So what do I suggest - focus on value added, focus on building systems that customers want, and offer them in a model that both you and your customers gain value (i.e. don't price in such a manner than it is impossible for your client to make money, or conversely don't price your products, services, software, or consulting below what you need to make profit - neither route leads to long term success.

    As the president and founder of a software and consulting firm started in 2000 I have observed this up close and personally - at present, my firm is focused on out consulting practice - looking at how we can continually add value to our clients - and still make money doing so.
  • by Boss, Pointy Haired (537010) on Monday October 07, 2002 @01:31PM (#4404611)
    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.
    • 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, two and a half years isn't enough? I first encountered XML in 1999.

    • You are 100% correct, and the responses you got from your post prove that too many tech people just don't get it. They whine when they get laid off, or they're projects get cut, but as soon as you suggest ANY form of business structure or development PR, you get rants.
      The tech industry cranks out new versions and thinks they are "progressing"...but usually, all they have done is generate more bugs, move features, or re-write internal code. It's pure bunk to think that what you want to do as a programmer ( which is write new code ) is always best for the business ( which is to find stable products to make money ).

      Hey, next time you buy a new car, what about if the manufacturer shows up every two weeks and wants you to buy a COMPLETELY NEW CAR for the same price you just paid but with a bunch of features you don't really know about ( say, winshield wiper warmers, and then windshield wiper warmers 2.0, and then winsheild wiper wiper warmers "plus"...buinesses are just like you, they can't afford to constantly pay for new features they can't use, and then scrap that right away just becuase the software industry wants them to.
  • Outsourcing (Score:4, Interesting)

    by Anonymous Coward on Monday October 07, 2002 @01:32PM (#4404620)
    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.
    • Re:Outsourcing (Score:2, Interesting)

      by scottme (584888)
      I can see why you think this based on the job you must have had in IBM, but sorry, I think you're wrong. You're thinking of services as the classic Customer Engineering discipline within IBM and yes, that is tied to hardware (not just IBM's hardware these days, by the way), but that's not the services that IBM sees as driving its future existence and (they hope) growth.

      The services Sam Palmisano & Co are depending on range from business consulting (hence the PWCC merger), through all flavors of systems design, implementation and operations. IBM wants to be the full-service information systems provider of choice, all the way from business analysis through to running the backups.

      And for the majority of that, hardware is a sideshow. It may be easier for IBM if you use their kit, and if you outsource your entire operation to them you should not be surprised to discover the machine rooms full of IBM boxes, but hardware is a commodity, and there's not enough revenue in it alone to sustain IBM or anyone else these days, so is no longer central to their plans.
  • Outsourcing strong? (Score:5, Interesting)

    by dcavanaugh (248349) on Monday October 07, 2002 @01:35PM (#4404643) Homepage
    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?
  • All my laid off IT buddies lamented the no support after you buy the box phenomiumum and resorted to charging []Grandma for her middle of the night tech support calls. Not much help for the linux crowd unless Grandma calls you at 2 am to ask for (eek) -WINDOW$- tech support

  • by calib0r (546092) <backpacker@hik[ ].net ['ers' in gap]> on Monday October 07, 2002 @01:48PM (#4404742) Homepage
    Having worked for both a company that outsourced services and a company that handled outsourced services, I've seen both sides of the spectrum.

    Companies need to learn what to outsource and what not to outsource. My personal opinion is that large scale projects need to be internal, with only small, specialized sections outsourced to the appropriate firm.

    Small business can benefit immensely from handing off, for example, their websites and design services instead of bringing those services in-house. But does a large, multinational firm really benefit from turning these services out to another company? More than likely not, and in the long run it will cost them more.

    The last company I worked for handled the website and design services for several large companies, on top of many smaller businesses. The large companies spent, on average, $300-400k per yer for web management and design, whereas the smaller firms only maxed out at around 12-40k per year. Proportionally these services where the same. The larger firms would have benefited from hiring and keeping internal these services.
    Just my $0.02.
    • Companies need to learn what to outsource and what not to outsource. My personal opinion is that large scale projects need to be internal, with only small, specialized sections outsourced to the appropriate firm.

      In my experience the best way to do it is to split the IT function off into a separate business unit with it's own P&L. Other business units are billed for the services that the IT unit provides to them. This has the added benefit of forcing other departments not to make frivolous use of IT. Once the new organization is up and running, then you can really get the benefits of outsourcing: external outsourcers can bid against the IT unit for provision of particular services, and it is very easy to see what would truly benefit from outsourcing and what would not. For example, you might see that it is cheaper (in real money) to keep desktop support internal, but cheaper to outsource printer maintenance. And if your IT unit is really good, they can sell services themselves to other companies, and become a profit rather than a cost center. I could name a couple of major banks who operate this way (but I won't).
  • by FJ (18034) on Monday October 07, 2002 @01:49PM (#4404746)
    You'll know when the software industry matures. It is when the next release of a product introduces more new features than new bugs.
  • by airrage (514164) on Monday October 07, 2002 @01:59PM (#4404823) Homepage Journal
    There will be no IT turnaround in 2003. Let me repeat that: THERE WILL BE NO IT TURNAROUND in 2003. So what your telling me is that if the economy rebounds in 2003 that suddenly the IT spending floodgates will open wide? All the .commers can come back? I think it will be even worse that that: companies are currently learning that they can live without the latest and greatest. Which means, of course, that when the economy does come back, that big companies (HP, SUN, IBM) aren't going to get the big IT paychecks they think they're going to get. Which means of course, that all these layoffs are more or less permanent.
    • However, we're going to be seeing changes in data transport technology that will require major improvements in IT infrastructure by 2010.

      First, we have begun the process to the switch to 3G cellular telephones. This next-generation cellphone will require a lot of infrastructure changes to implement, and we'll need to a lot of new hardware to implement 3G cellular service.

      Second, we may see very soon the beginning of the switch from IPv4 to IPv6. This will also require a lot of new hardware since a large fraction of today's telecommunications network aren't designed to handle IPv6; that means a lot of software upgrades and a lot of upgrades of actual network hardware itself to support IPv6.

      Third, the imposition of digital television in the USA to comply with the ATSC standards will also require a lot of upgrades to our whole broadcast infrastructure.

      We may be in an economic slump right now, but by mid-decade the technological developments I mentioned will need hardware upgrades on a scale that will make the 1990's tech boom seem like a minor even in comparison, since these technological changes will affect everyone.
      • Second, we may see very soon the beginning of the switch from IPv4 to IPv6. This will also require a lot of new hardware since a large fraction of today's telecommunications network aren't designed to handle IPv6; that means a lot of software upgrades and a lot of upgrades of actual network hardware itself to support IPv6.

        You really don't get it, do you?

        You won't see a switch en masse to IPv6 or any other such new technology until two things happen:

        1. The current technology no longer actually serves the current needs of most corporations.

        2. The new technology has been deployed and in the field long enough to prove that it can handle the current and likely future needs of most corporations.

        Neither of those is true for the IPv6 cutover right now, and I doubt the first one will ever really be true, thanks to NAT and VPNs.

        You may see some IPv4 over IPv6 on some of the backbone, but for that to happen routing of IPv6 has to be much easier than routing of IPv4 (or IPv6 has to offer other very compelling advantages over IPv4), and I seriously doubt that's the case.

      • Third, the imposition of digital television in the USA to comply with the ATSC standards will also require a lot of upgrades to our whole broadcast infrastructure.

        This is called the "broken window fallacy" by economists. Intuition suggests that all economic activity adds value, which leads to people saying silly things like war is a boost to the economy. It is not, because it consumes resources that could more profitably be used elsewhere. Will the switchover to digital television result in an increase in the value of television to the consumer (i.e. will it make more people watch more television)? Probably not... so spending money on digital TVs might be nice for TV manufacturers, but will have a negative effect on the economy as a whole.

        If the broken window fallacy was not one, then you could get out of any economic slump by destroying buildings and rebuilding them, and you could repeat this as often as you liked to produce economic growth. This clearly is not the case.

        We may be in an economic slump right now, but by mid-decade the technological developments I mentioned will need hardware upgrades on a scale that will make the 1990's tech boom seem like a minor even in comparison, since these technological changes will affect everyone.

        Same goes for IPv6 and 3G - if it is rolled out by mandate without adding value (not the same thing as having the potential to add value, which is all it is because there's no pressing need), then it's wasted money, because it's costing money that could be invested elsewhere.
    • I would say a turnaround is quite possible. A lot of companies are in a holding pattern on many fronts. People were pissing the money away and when the shareholders/VCs money got, on the whole, dangerously low with no sign of return on investment, they throw everything they've got into more conservative approaches, waiting and seeing while their captial slowly rebuilds.

      Same as in the industry, things are kinda coasting on the whole at a constant rate of minimal maintenance, but once funding returns, companies will be looking to implement potentially profitable changes and taking risks again.

      While it is true that the industry as a whole has a more realistic view of what can and cannot work, as well as what is and is not needed than it did in the .com days, I think on the whole companies do not feel they have sufficient IT/Developers to do anything sufficiently drastic that could turn a huge advantage for them. They will be looking to hire more in order to do the things they've been waiting on without sacrificing resources needed to maintain/return to the status quo if things go wrong. Not all the layoffs will be made up, but a great deal will be.... I'm hoping so at least, being the only IT guy left after layoffs is rough, and I know here with one IT guy they are not about to risk any more of my time on anything unnecessarily..
  • by vtlidl (558929) on Monday October 07, 2002 @02:02PM (#4404858)
    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.

    • Buckle up Dorethy.. (Score:3, Interesting)

      by spinlocked (462072)
      ..cos Kansas is going bye-bye.

      As a reseller you are a middleman, Sun spends the billions on research and development, you reap a large share of the rewards when times are good. During the inflation of the dot-com bubble you helped Sun to keep headcount and warehouse space to a minimum - and your price was a generous discount on Sun hardware and software. Now you are a waste of space. I know of 2 decent Sun resellers in my old vertical market (both of which covered many other markets as well) they provided a tangible value-add - both in terms of technical pre-sales skills, benchmarking facilities and post sales consultancy services. I'm sure they're feeling the pinch at the moment, but I think their customers will return.

      If I were running the partner programme at Sun, I would certainly want to weed out the underperforming resellers, especially those who complain about mandatory training sessions. You are a cost of sale and even during the good times your performance was often embarrasing. It's all about value-add, if you're not adding anything other than a customer base for Sun, prepare for those customers to cut out out of the loop and deal direct with Sun.
  • Out sourcing, consulting, internal hiring, whatever, I don't care what works as long as it gets me a developer job so that I can be like the guy in the commercial sniffing my business card all hard when no one is looking.
  • may sound trollish (Score:2, Informative)

    by SupahVee (146778)
    This may sound a bit trollish, but I mean it more in a Devil's Advocate sort of way... Could the fact that this 'downturn' is lasting so long have anything to do with the majority of tech writers/industry pundits/whatever continuously writing articles of doom for the tech industry? I mean come on, anyone that is reading a column like that on a regular basis already KNOWS it's going to take a while for IT spending to pick back up, for companies to rediscover the value of their IT dept, from the PC techs to the UNIX security admins. It's almost like these writers are practically trolling for hits themselves, isn't it? Let's face it, reading the tech news online is just as monotonous as watching eMpTyVee or CNN.
  • by xyote (598794) on Monday October 07, 2002 @02:22PM (#4405025)
    I used to work for a dot com with a business model based on outsourcing, "managed care". It doesn't work. Customers' expectations are too high. You can't possibly provide those kind of service levels economically.

    I think, however, that you could do something like that on a ala cart basis. Outsource stuff piecemeal. Remote 3rd party backup, remote 3rd party network monitoring, etc... The customer expectations are different that level. The interface issues are smaller and more manageable. And in more narrow specialties, you have a better chance at getting ecnonomy of scale.

    • Very good point. I currently work at a 13 person company.
      1) I am the only IT they have, in addition to being a front-level programmer. I take care of about 8 Sun/Linux boxes, and about 4 test Win2K boxes.
      2) We currently oursource our laptops/mail/network support, which I think is absolutely great. That company does what I wouldn't want to touch, nor have the expertise for (firewall, main file server, exchange, remote backups, laptop hardware support, recovering crashed hard drives, stuff like that).
      While they cost us about $6000/month, their role is clearly defined, they are very responsive, and do what we would need at least a two-three people here full time to do. (and we didn't even have to buy all that equipment, the $6000 amount covers leasing the hardware, and pretty much unlimited support).
      For a company like ours, there just isn't the need to hire two more people who are just going to sit around. As the parent mod suggested, the economy of scale is certainly there.
  • by MtViewGuy (197597) on Monday October 07, 2002 @03:16PM (#4405481)

    While we may be in an economic slump right now, we are forgetting that there are upcoming technologies that will likely drive a second tech boom in the second half of this decade.

    I cite the following:

    1. Cellular phone companies have started on the road to 3G cellular phone technology, technology that could completely transform the way people use cellphones. Imagine bi-directional 384 kilobits/second data transfer, about the same as low-end SDSL, but operating in a wireless fashion and well beyond the reach of 802.11b Wi-Fi; this could allow people to upload and download data fast enough that even high-resolution digital photographs or circa VHS quality video can be transferred quickly. To keep up with the competition from Europe and Japan, expect major rollouts of 3G cellular technology by middle of this decade. Because of the bandwidth requirements of 3G, this will need massive investments in infrastructure to support these new phones.

    2. The mandatory imposition of digital television in the USA in accordance to the Advanced Television Standards Committee (ATSC) standards by late this decade. This will mean a lot of new investments in television broadcasting hardware, especially when you have to implement these standards for both over-air and cable broadcasting on a scale far beyond what we've seen so far.

    3. The beginning of the switch from IPv4 to IPv6 addressing. Much of our current Internet hardware infrastructure is not yet suited to support IPv6, and many of today's computer operating systems don't yet support IPv6, either. As the switch to IPv6 accelerates there will be considerable investments needed in both software upgrades and network infrastructure upgrades to be IPv6 compatible. Yes, I know network hardware built within the last two years are IPv6 compatible but there is still a huge fraction of installed hardware that is not IPv6 compatible yet.

    I would not be surprised there will be a surge in demand for IT hardware and services as these three technologies rapidly rise in usage by the end of 2010.
    • 1. Despite the proliferation of broadband, the vast majority of internet users are still using dial-up? Why? Broadband costs more! While I'd love to be able to surf the net wireless, I don't see any killer application that will convince people to pay the extra money for 3G. And no, mobile movies can't possible beat the price/performance of a DVD. Instant messaging and email don't really require 384 Kbits. Videoconferencing? Nobody's using that over land lines, what makes you think they'll use it over wireless? That leaves file transfer as the only real application of the technology -- how many people actually need that? (Imaging counts as a special case if file transfer.)

      2. I agree for the most part: conversion to digital HDTV will trigger an upswing in both consumer and professional electronics. The question is: when? I beleive we will see continued pushing-back of the deadlines.

      3. The beginning of the switch from IPv4 to IPv6 addressing.
      Wanna explain to me why this requires new hardware? Seems to me this just requires a patch to the software in the existing routers, which shouldn't really generate a lot of revenue. Also, it seems like the imminent switch to IPV6 has been predicted for the last 10 years; as it turns out, with IPMasq and NAT, it's not really necessary. (Ok, I've heard rumors that it helps in routing IP over wireless, so that might be a compelling reason to switch.)

      • Also, it seems like the imminent switch to IPV6 has been predicted for the last 10 years; as it turns out, with IPMasq and NAT, it's not really necessary.

        But that is still essentially a band-aid solution of not enough IP addresses for everyone out there, and it adds serious complications for network admins juggling available IP addresses. Given the number of IP addresses available under IPv6, you can do things like assign every Net-enabled device its own IP address, which makes for much easier setup of routers, switches, hubs, and so on.
        • Well, yes and no. Do you really want every net-enabled device on your network directly addressable from the internet? Any sane person would put in a least one firewall. And as long as the firewall is examining every packet, it's not that much more additional overhead to have it do NAT. Certainly controlling network security at the firewall is easier than securing every device separately. Also, when using IPMasq, you can use default settings of the non-routable IP address ranges for your DHCP server rather than configuring your assigned IP addresses, so it is actually LESS work.
  • by wytcld (179112) on Monday October 07, 2002 @03:22PM (#4405526) Homepage
    Given that computing is an area where your best programmer or sysadmin is worth ten of your average programmers or sysadmins (at least), the question for success isn't "Should company A outsource or handle function X inhouse?" but "Under what arrangement can company A get the most best programmers and sysadmins stroking its systems?"

    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.

  • by eander315 (448340) on Monday October 07, 2002 @03:35PM (#4405624)
    Standard Oil, US Steel, and several other huge companies have proved that vertical integration* is definitely the way to run a business. As far as I can tell, outsourcing IT is in direct opposition to this practice. It seems to me there are a few CIOs and CEOs who need to retake their intro to history/business classes. IT should be an integral part of any business that uses computers, not a bolt-on afterthought with a big pricetag.

    * 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.

    • by Anonymous Coward
      Nike and couple of others got succesful by doing exactly the opposite - they outsourced everything function except the marketing and branding.

      Vertical integration is not the only way...
  • by hackus (159037) on Monday October 07, 2002 @03:53PM (#4405751) Homepage
    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:

    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.


    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 .Net applications and ship huge amounts of money to Redmond.

    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 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.



    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.

    • Most of the Linux work that I've observed is being implemented by hacks and amateurs in a hurry and trying to save a buck.

      This will turn around and bite the Linux community pretty hard. Be prepared for a major backlash as companies start getting burned by poor implementations...

      I do not believe in general, in a T.C.O. (total cost of ownership) savings by going to Linux. The true cost is in systems administration, intellectual property, and data. Hardware, OS, and COTS Apps are not significant by comparison.

      So now we have amateur hack systems which aren't realizing significant cost savings.

      This spells trouble brewing for Linux.


      ps - I am a professional linux system administration consultant. I am trying my dangdest to keep the above predictions from coming true - but I fear the worst.

      • Hacks (Score:3, Interesting)

        by hackus (159037)
        I guess that is what you see. It exists, I don't dispute that. But in quantity as compared to hacks I have seen in the Windows world, it occurs far more often, with much more devastating results for IT organizations with windows for the following reason:

        Linux intrinisically requires a person to have a greater understanding of the science and operational aspects of a computer than Windows does.

        What we have to think about here is that a BAD thing?

        This requires a greater energy input to learn, and as a result, most Linux people usually come with a greater understanding automatically of the hows and whys of not how to do certain things a particular way.

        Windows XP makes things so simple, that most people can setup services and do things easily, without understanding WHY they shouldn't.

        This is because Redmond is attempting to put every single possibility of building IT systems into a bunch of dialog boxes built as part of a two directional decision tree governed by OK and CANCEL buttons and anything else the OS makes the decision GRATIS.

        Linux has a very different approach and it DOES require a greater input of time and energy.

        Is this bad? I am not sure, you decide but here is why:

        It doesn't attempt to make anything easy or hard.

        What Linux attempts to do, is make the person administrating the server directly responsible for its operational aspects/details, far more so than Windows.

        This philosophy embodies 2 things:

        1) The person can make the decisions much better than the OS.

        2) Give the person the tools to enable his decisions via computer programming or systems language to manage his enterprise.

        Very very different philosophy. I like this one better. Primarily because these program snippets can be contributed back into the user community as part of a "Best Administrative Practices" and can be refined by the Admins of Linux as well, because they get access to the source.

        So, I guess I see poorly designed systems on the Windows side of things much more than the Linux side.

        Except that, with Windows, the poor designs are primarily a result of Windows software, because of the fact that Windows tries to do everything for you, and as such must make a large number of Admin decisions for you.

        The result is bad decisions and poor implementations, not just in Administrative side of the Windows OS but also in the software side as well.

        What is ironic is the fact that high performance systems as defined by most Windows Admins is expense and security.

        For Linux Admins it is speed and uptime.

        At least that is what I get when I ask respective Admins what is most important.

        So I think you can put your mind at ease and that hacks should be few and far between in our field.
        (But don't quote me on that...stupid people do what stupid people can do.) :-)

        • Re:Hacks (Score:2, Interesting)

          I dunno

          Think about television. Back in the day you would have to mess with the settings- horizontal hold, vertical hold etc. Now TV's are idiot-proof, they autodetect everything.
  • by Anonymous Coward on Monday October 07, 2002 @04:29PM (#4406072)
    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.
  • by anthony_dipierro (543308) on Monday October 07, 2002 @07:56PM (#4407276) Journal

    It might explain why IBM will benefit and other vendors like Sun Microsystem which don't have a strong service arm will suffer

    At first I thought "Huh? Sun has a strong service arm..." Then I saw the Big Fucking IBM ad and realized what was going on.

1000 pains = 1 Megahertz