If 2004 was the year of merger mania, then 2005 will be remembered as the year a great many things were rent asunder.
Mired in a bogged-down technology economy, the industry continued to struggle for purchase, and so began the year with major executive shake-ups that would eventually rock the corner offices of Hewlett-Packard Co., PalmSource Inc. and Siebel Systems Inc.
But by far the greatest upheaval was felt in August, when Hurricane Katrina tore the heart out of the Gulf Coast and tested backup, recovery and communications systems to their very limit. Even as we move into 2006, the cleanup goes on, and the damage estimates—and the death toll—continue to rise.
In the rest of the war-weary nation, IT professionals continued to battle security threats and manage compliance requirements even as more and more of their jobs were shipped overseas in the persistent trend toward outsourcing. Despite the forces of God and man, we spent 2005 trying to hold it all together. Here now is eWEEKs take on the top stories that shaped 2005.
Wave of destruction
Massive and deadly, Hurricane Katrina dealt Florida a glancing blow on Aug. 25 before heading into the Gulf of Mexico and targeting New Orleans. To date, the storm is blamed for taking 1,400 lives—the third-deadliest storm in U.S. history—and is expected to cost upward of $300 billion, making it, by far, the most expensive hurricane ever.
The storm was a sobering lesson in business continuity plans, many of which wilted when data was saved and servers were mirrored but buildings and people were swept away. Still, those businesses that planned better—and got a bit of luck—fared better relatively.
The lasting damage of Katrina is evident in the communications infrastructure as well. Some 3 million telephone lines in Louisiana, Mississippi and Alabama were knocked out by the storm, which caused severe damage to cables, terminals, poles and wireless facilities. More than 1,000 cell phone sites had to be restored.
Nearly four months after Katrina, much of New Orleans, including extensive parts of Orleans Parish and St. Bernard Parish, remain without telephone and Internet service, although services to the French Quarter and Central Business District are back up. Late last month, in a show of resilience, the mayor of New Orleans announced that the city will deploy and operate its own wireless Internet system, which will be free for all users.
Packing it in
The year began with restructuring at HP when CEO Carly Fiorina united the vendors printing and PC units in January, despite persistent calls from analysts for HP to spin off its lucrative printing business. It would turn out to be her last significant official act.
In February, Fiorina was ousted by HPs board of directors after several quarters of inconsistent financial results. Though the directors said they agreed with Fiorinas overall strategy, they no longer were confident she was the right person to carry it out.
In March, the HP board surprised many in the industry by bringing in a relative unknown, NCR Corp.s CEO and president, Mark Hurd. In his first nine months with the company, Hurd has focused as much energy on getting HPs house in order as he has with bringing out new products and technologies. In July, Hurd, saying he was looking for “a simpler and nimbler HP,” announced a massive restructuring that included 14,500 job cuts and a redistribution of the global sales force.
HP wasnt alone this year in shaking up its executive ranks. David Nagel, a beloved veteran of the handheld industry, was forced out as president, CEO and director of Palm operating system maker PalmSource Inc. in May, shortly before the company was sold to Access Co. Ltd., of Tokyo.
The story was similar at Siebel, where CEO Mike Lawrie was shown the door in April, just five months before the CRM (customer relationship management) software maker was purchased by Oracle Corp.
Spam was the menace in 2004, but in security circles, 2005 will be remembered as the year of the data breach. Prodded by new legislation in California and other states, companies from LexisNexis to ChoicePoint Inc. to Bank of America N.A. were forced to go public with news of massive data breaches. The scandals turned obscure payment companies such as Atlanta-based CardSystems Inc., which coughed up data on approximately 200,000 credit card accounts, into household names.
The lapses also shone a light on an ugly problem that many experts believe has been hidden from public view for years: porous corporate and public-sector networks that are brimming with sensitive information on ordinary citizens.
Coupled with reports of a burgeoning online market for stolen identities and compromised computers, the data breaches recast the problem facing most companies. Long focused on the threat posed by bored teenagers and misanthropes who write and release worms and viruses, enterprise IT managers must now contend with organized, well-funded criminal groups determined to attract little attention and cause little noticeable damage while netting maximum profit.
Government is trying to do its part. In the U.S. Senate, committees approved two bills, the Personal Data Privacy and Security Act and the Identity Theft Protection Act, while a third committee was expected to take up a separate bill of its own. More than a dozen similar measures have been introduced in the House.
Hanging up on Ma Bell
Federal regulators this year approved the acquisition of the nations two largest long-distance companies—AT&T Corp. and MCI Inc.—by the two largest local exchange carriers—SBC Communications Inc. and Verizon Communications Inc.—opening the floodgates for consolidation in telecommunications.
To protect SMB (small and midsize business) customers, the U.S. Department of Justice required that SBC and Verizon divest lines to several hundred buildings in 19 cities where they otherwise would not face competition following the mergers.
The Federal Communications Commission required that the merged companies provide stand-alone DSL service, retain the rates they charge businesses for high-capacity communications and continue to provide peering with other ISPs for specified time periods. However, two FCC commissioners, Jonathan Adelstein and Michael Copps, cautioned that the conditions may not go far enough to prevent rising prices and diminishing choices. Following its acquisition of AT&T, SBC changed its name to AT&T Inc.
Facing the expiration at years end of more than a dozen police powers enacted in the USA Patriot Act, Congress began debating an extension of the law early in the year but found itself at a standoff as the sessions adjournment approached. In the fall, the Senate passed a bill to protect civil rights while extending certain surveillance powers, but the House of Representatives passed a measure without such protections.
With urging from the White House, lawmakers participating in a conference to reconcile the two bills eliminated the protections. However, a bipartisan group of senators vowed to block passage of the bill if the protections were not included.
More at the core
Both IBM and Sun Microsystems Inc. have had dual-core processing in their respective Power and UltraSPARC chips for several years, but in 2005, Advanced Micro Devices Inc. and Intel Corp. introduced the feature in their x86 server and PC chips.
The moves brought the technology—which offers two processing cores on a single piece of silicon—to a new customer base and kicked off the rush to multicore processors. It also was the latest example of AMD beating its larger rival to the technological punch. Just as with 64-bit computing in the x86 world, AMD was several months ahead of Intel in introducing dual-core processors and has seen its share of the server market climb as a result.
Both companies enter 2006 promising to quickly add other features, such as virtualization, to their processors and to introduce four-core capabilities in 2007. Theyll have a way to go to beat Sun, though, which, in November, unveiled its new UltraSPARC T1 processor—formerly code-named Niagara—which offers up to eight cores on a single chip.
In the networking arena, Cisco Systems Inc. dominated the news with continued expansion. The company this year launched what could be its boldest bet yet with its AON (Application-Oriented Networking) initiative. AON represents Ciscos first bid to perform preprocessing on applications traffic in the network fabric. The technology is designed to read application-to-application messages and allows users to apply policy rules to the traffic.
Cisco also bookended the year with significant acquisitions. In January, Cisco announced the $450 million acquisition of Wi-Fi switching startup Airespace Inc., whose centrally managed wireless LAN products flew in the face of Ciscos traditional distributed WLAN strategy.
It became clear quickly that Airespace would be a force within Ciscos wireless division. In March, Bill Rossi, vice president and general manager of Ciscos Wireless Networking Business Unit, took a leave of absence—and never returned. By years end, the unit was led by former Airespace CEO Brett Galloway. On the product side, Cisco introduced software that let its access points work with Airespace switches. The company also entered the mesh-networking space using technology gained in the Airespace acquisition.
Late last month, Cisco leapt into home video equipment, acquiring cable set-top box maker Scientific-Atlanta Inc. for $6.9 billion.
Theyre feeling lucky
Last year at this time, the buzz was about Google Inc.s public stock offering. Despite persistent predictions that the search company would stumble, 2005 proved to be another heady period for Google. The stock finished last year at $170 per share, and it looks like it will exit this year at more than $400 per share.
Throughout the year, Google has rapidly expanded its efforts to woo the enterprise with the launch of a new partner program for enterprise integrators and ISVs, a partnership with IBM on enterprise search tools, and a slew of price reductions on its search and Web analytics tools aimed for businesses.
Under increasing pressure to counter Googles moves in Web services, Microsoft Corp. finished the year by trotting out extensions to its Windows and Office products that will be delivered over the Internet. The so-called Windows Live and Office Live services wont replace the traditional software but rather are MSN services rebranded to allow users to connect from anywhere.
Microsoft also made a splash in 2005 by restructuring into three new business units and tasking IT industry luminary and Lotus Notes creator Ray Ozzie with heading the companys software-as-a-services strategy, a world in which Microsoft is playing catch-up with the likes of IBM, Oracle and Salesforce.com Inc.