Like your average NBA game, 2004 came down to the last 2 minutes before things really got interesting. Following the resurgent growth that capped 2003, 2004 opened with the promise of a banner year. But the technology industry spent most of the year going sideways.
But what a finish: IBM sold its PC business to Lenovo Group Ltd.; Oracle Corp. consummated its 18-month fight to own PeopleSoft Inc. and become the worlds second-largest software company; Symantec Corp. snapped up Veritas Software Corp. to create the fourth-largest software company; and Sprint Corp. acquired Nextel Communications Inc. to jump to No. 3 in the wireless-carrier standings.
The impact of the merger mania will take months to sort out completely. But, near term, they signal a new wave of technology-industry consolidations, which should continue into the new year. And they signal, once again, a new year full of promise. But before we get there, heres eWeeks take on the biggest stories that shaped 2004:
Larry, are you happy now?
Year-in-review writers and editors rejoiced Dec. 13 when news came that the Oracle versus PeopleSoft hostile-takeover siege finally came to fruition. Our story was almost to press at the time, tempered to allow for a late-year resolution. Just in time, however, Oracle CEO Larry Ellison got off the dime and raised his bid to $10.3 billion and won the company hes been after for a year and a half. No word yet on how the poison pill will be dealt with or how many PeopleSoft customers will be left in the lurch. Along the way in 2004, PeopleSofts energetic CEO, Craig Conway, who brought the company back from the brink in the late 90s, was fired in October and replaced by founder Dave Duffield, ostensibly to smooth the path toward PeopleSofts eventual assimilation into Oracle.
Out, damned spam!
Internet e-mail spam officially became its own plague in 2004. It steadily got worse, and there still is no end in sight. Spam volume was expected to hit 90 percent of all e-mail traffic this month, according to FrontBridge Technologies Inc. No word on how much productivity is lost deleting spam from in-boxes.
Some attempts were made to stem the tide. In February, the grass-roots movement SMTP+SPF (SMTP-Sender Policy Framework) published a plan to improve the SMTP protocol that governs e-mail traffic. In May, the group announced a proposal to merge SPF with Microsoft Corp.s Sender ID specification. By fall, those efforts had fallen apart. Last month, Yahoo Inc. put its DomainKeys cryptographic solution to the test in Yahoo Mail to help filter out the most insidious form of spam …
Weve noticed that your account needs updating. Please follow this link to update your information.
Before this year, if you asked anyone what a “phish” was, they might say a legendary rock band. There are few IT managers who can now plead ignorance, and no frequent user of e-mail has been immune to the hooks, lines and sinkers of the biggest wave of malware since the worm. The Information Systems Security Association reported that Visa and MasterCard issuers lost $820 million in 2003 to phishing. That number will increase for 2004. Worse, the criminals are starting to get more sophisticated, and theyre also starting to work together to swap ideas and methods.
“These worlds are starting to collide. The code behind these newer attacks is very polished,” Dan Maier, a member of the Anti-Phishing Working Group, in Redwood City, Calif., told eWeeks Dennis Fisher in May. “Theyre sharing code with crackers, using spamming techniques. Its a scary combination.”
In other security news, the nations top cyber-security official resigned in October, saying he had done all he could with the resources provided. The departure of Amit Yoran from the Department of Homeland Security after just one year on the job has several branches of the U.S. government scrambling to strengthen the position to ensure that Yorans successor is equipped for the long haul.
The day the PC died
A long time ago, in a galaxy far, far away—no, wait, thats another fairy tale. Once upon a time (1981), the largest computer company in the world (IBM) started building small computers (PCs) that were easy enough for one person to operate, and they were good. The giant company teamed with a spunky upstart (Microsoft) to build software for the small computers. New magazines (PC Week, PC Magazine) sprouted up to cover the phenomenon.
Over the next 20-odd years, PCs and their software made IBM, Microsoft and many others lots and lots of money. And it was good. But it turned out that the giant computer maker couldnt produce the small computers cheap enough or quickly enough—or, well, good enough—while others (Dell Inc.) could. So on Dec. 8, the giant computer company said goodbye to the small computers forever, selling its PC business to a Chinese company (Lenovo Group Ltd.) that is trying to become the next IBM. The end.
A lot of industry columnists, including this writer, predicted that the Google Inc. initial public offering would be a bust, an opinion that had nothing to do with the companys excellent search engine and more to do with things such as finance and the vagaries of the stock market. We were wrong. Google, offered at $85 Aug. 19, topped $200 briefly this fall before settling to approximately $170.
That success was just one of many for the Internet search leader. It introduced a free e-mail service, Gmail; launched a desktop search service; and started hiring the brightest minds in the industry. This month, Google announced plans to create a searchable index of more than 15 million books from major libraries around the world. In addition, along the way, it became what most highflying companies become: a target—first of litigation in a battle over keywords and then with competition on its own turf as Yahoo and Microsoft each beefed up their services in response to Google, which was then a target for crackers seeking to expose holes in its service.
INS and outsourcing
Nobody knows for sure how many jobs have been lost to the latest cost-cutting measure: offshoring work. The AFL-CIO quotes The Goldman Sachs Group Inc. estimates of 400,000 to 600,000 professional services and information-sector jobs that have moved overseas in the past few years.
Another company, Global Insight Inc., figures that 104,000 IT jobs moved offshore between 2000 and 2003. HireAmerica.us cites a Frost & Sullivan Inc. study that says 826,540 IT jobs are expected to be moved by France, Germany, Hong Kong, Japan, the United Kingdom and the United States to lower-cost countries. The figures will no doubt rise in the coming years. The effects of this job migration will be felt for years to come. Meanwhile, long-term outsourcing services contracts continue to be the bane of many companies. In September, J.P. Morgan Chase & Co. dumped its seven-year, $5 billion contract with IBM Global Services signed only two years ago, choosing to move IT operations back in-house.
Linux: 2.6 and counting
The first Linux distributions with the newest kernel, Version 2.6, started appearing in April, with new enterprise scalability and performance features that put Linux squarely in competition with Unix and Windows Server.
Potentially more damaging to Windows, however, is that while Microsoft hurries to get its next server, code-named Longhorn, ready for a 2006 release, Linux will gain more market share. Linux director Linus Torvalds said last month that hes satisfied for now with 2.6 and is pushing any new development tree for a 2.7 kernel well into next year. Meanwhile, the Free Software Foundation is starting the process of reviewing and updating the GNU General Public License—the most widely used open-source license and the license under which Linux is released—with the goal of tailoring it for 21st-century issues such as copyrights, intellectual property and patents. That process will likely climax around the time Longhorn ships.
Comply, comply, comply
Public companies got a reprieve this year and didnt have to comply with the Sarbanes-Oxley Act until Nov. 15, rather than the original June 15 deadline. That gave technology vendors time to get more SarbOx solutions in the pipeline.
Regardless, IT organizations around the country spent much of their time getting ready for Sarbox—when they were not fighting off spam and phishing attacks, that is. According to a CIO Insight survey in May, 88 percent of CIOs reported their IT departments were “very involved” in compliance projects, and 67 percent said their companies were investing in new financial systems to aid in compliance projects.
No one knows for sure if all this compliance will prevent more Enron Corp.- or WorldCom Inc.-style accounting scandals, but at least a lot of old accounting systems are getting updated.
CA under fire
CA and Sanjay Kumar made us get misty and nostalgic for 2001. In April, Kumar resigned as chairman and CEO and put himself in limbo as CAs new chief software architect, only to leave the company for good in June, citing ongoing investigations by the U.S. Department of Justice and the Securities and Exchange Commission. Kumar was then indicted on fraud and obstruction charges in September. Lewis Ranieri, of Liars Poker and Salomon Brothers fame, was elected chairman of the board. Last month, CA tapped longtime IBM software executive John Swainson as CEO over interim chief executive Ken Cron.
Meanwhile, Ranger Governance Ltd., led by Texas billionaire Sam Wyly, a major CA shareholder, moved to reopen a class action suit against the company because it is not satisfied that stiff fines, executive indictments and a deal with the government to settle fraud charges have cured what ails CA. Strangely, the company performed well amid the chaos, with its stock up about 15 percent for the year.
VOIP at your service
You could call it a quiet revolution.
Voice-over-IP services, which have been around for years but only in niches, broke through in 2004, and it suddenly doesnt seem so far-fetched anymore that VOIP could displace traditional plain old telephone service. Last month, Vonage Holdings Corp., a broadband phone company, won a Federal Communications Commission ruling, 5-0, that its VOIP service was exempt from state and local regulation and tariffs. The FCC backed a petition from Vonage that its communications business was interstate in nature and insulated from regulation by individual states.
And another thing …
No year in review would be complete without a check on Microsoft, whose biggest news this year was its $3-per-share, or $30 billion, dividend windfall awarded this month. The company also patched things up with Sun Microsystems Inc. in April but had to scramble to deal with a Windows 2000 source code leak in February.
For its part, Sun continued to struggle, outside of the $1.6 billion settlement with Microsoft. The company made strides with its Open Solaris initiative, but its proposed license has some developers worried. … The presidential election last month delivered a mandate of sorts but not on the future of electronic voting, which was plagued by bugs and security flaws. … Bloggers crawled out into the sunshine and became a force in technological and political discourse, even earning press credentials at both presidential conventions for the first time. … For the first fall since 1979, there was no Comdex, which had long lost its luster but remained the premier annual gathering for the industry. Still, there were reports of techies wandering around Las Vegas in search of the Katt party. …
The browser wars are back as The Mozilla Foundations Firefox emerged as a legitimate alternative to hole-ridden Internet Explorer. The issue was highlighted this month when Pennsylvania State University asked its 80,000 students to refrain from using IE and switch to Firefox or the open-source Opera browser. … Hewlett-Packard Co. stumbled in the middle of the year due to “poor execution” in its storage division, said CEO Carly Fiorina, but rebounded in the second half of the year. … RFID (radio-frequency identification) was on everybodys lips, but 2005 will likely be its breakout year. …
After multiple delays, Salesforce.com Inc. finally went public in June; meanwhile, in May, former IBM executive Michael Lawrie replaced Tom Siebel as CEO of Siebel Systems Inc. … The SCO Group Inc. battled on in its fight for intellectual property rights, as Linux vendors took measures to indemnify its customers from liabilities. … The iPod became the apple of millions of music lovers eyes as Apple Computer Inc. shipped more than 2 million units in its fourth fiscal quarter alone. … And, finally, the 86-year-old “curse” against the Boston Red Sox came to a dramatic end in October with a little help from the teams investment in technology. As Stan Gibson reported in his Nov. 29 story, the Soxs Dave Roberts used the teams digital video system to help spark the epic comeback against the New York Yankees. May all technology investments pay such dividends for everybody in 2005.