This has been quite a year in the information technology industry as the emergence of cloud computing continued to threaten existing business models, ongoing weakness in Europe and the United States drove a flurry of billion-dollar acquisitions and consumer technology trends imposed themselves on the enterprise. The "consumerisation" of technology has accelerated during the past year with smartphones and tablet-style computing devices sending shock waves through the corporate world.
This shifting dynamic was perhaps best illustrated in May when Apple passed Microsoft as the world's biggest technology company in terms of market capitalisation, fuelled largely by the success of its iPods, iPhones and recently launched iPads. This change at the very top of the industry pecking order was unthinkable a decade ago when Microsoft was worth 20 times as much as Apple.
Fast-forward to this year and the advance of consumer trends in the business world has convinced a growing number of information chiefs to examine the possibility of letting staff bring their own technology to work, with even the biggest of public and private sector organisations – including the Department of Defence and Commonwealth Bank of Australia – mulling over "BYO" plans. One logistics CIO told MIS recently that he would never buy another corporate laptop for his sales force because tablets were cheaper, more portable and reduced the threat of lost corporate information given that data was accessed remotely in what is essentially a cloud computing model. Things are changing, and that shift is happening quickly.
In the smartphone market, BlackBerry, once the undisputed king of enterprise communications, has come under threat from Apple's iPhone. At the other end of the market, Apple's dominance of the ¬consumer space faces its first genuine threat from an army of devices based on Google's Android operating system.
Nowhere have the shifting smartphone sands been felt more acutely than in Finland, where the world's leading handset maker Nokia finally lost patience with chief executive officer Olli-Pekka Kallasvuo in September and replaced him with former Microsoft business executive Stephen Elop. Elop's software background is likely to be crucial as he attempts to arrest Nokia's slide but research suggests he has his work cut out if the company is to retain its market-leading position beyond the next three or so years.
For its part, Microsoft is re-entering the smartphone fray with its long-awaited Windows Phone 7 software but wooing handset makers that have gone gaga for Android will be difficult from its increasingly weak market position. Winning the hearts and minds of business buyers and consumers will be an even tougher challenge – particularly the latter, where Microsoft phones have not previously been considered an option.
Early reviews have been promising but the Microsoft marketing machine has a long road ahead as it attempts to get back in the game. Microsoft chief executive Steve Ballmer admitted as much when he told the software giant's global partner conference in July that it had "missed a generation" of phones.
Gartner research analysts say about 2.5 million devices running on Microsoft Windows Mobile were sold in the third quarter of 2010, down from 3.3 million in the same period a year earlier. Market share fell from 7.9 per cent to 2.8 per cent.
During the same period, sales of Apple's iPhone grew from 7 million in the three months to September 2009 to 13.5 million by September 2010, giving it a 16.7 per cent market share. Research In Motion's BlackBerry jumped from 8.5 million to 11.9 million but its share of the market still fell from 20.7 to 14.8 per cent.
The real story, however, was the huge explosion of devices running Google's Android operating system, which went from 1.4 million to 20.5 million and grabbed a 25.5 per cent share of sales. From nowhere, Android had quickly become the second biggest smartphone operating system behind the market leader, Nokia's ¬Symbian, which saw its previous market dominance continue to crumble. Its 44.6 per cent market share a year ago was down to 36.6 per cent.
And yet if Android has been an overwhelming success for Google, there has been plenty to forget this year. The Google-branded Nexus One smartphone was well received by analysts and journalists but failed to generate the same level of buzz among consumers.
Spying allegations have been made by governments around the world after the global internet giant admitted to capturing Wi-Fi data while collecting images for its Street View ¬mapping service. A privacy storm also erupted over its attempts to establish Buzz social networking, and high-minded threats to quit China over a censorship row ended with a proverbial tail between the legs.
There has been plenty of movement in the Australian CIO ranks during 2010. John McInerney left Telstra, one of the hottest CIO chairs in the country, after less than two years in the role. Tom Lamming, one of Sol Trujillo's amigos, had previously been in charge of the telco's $12 billion transformation program following the departure of former CIO Fiona Balfour, who lasted less than a year after replacing Vish Padmanabhan. He had led Telstra's IP operations for two years before departing in 2006.
Optus CIO Lawrie Turner also left at the end of July to take up the vacant post at QR National, while Chris Ford was flown in from Britain to fill the gap at Sydney Water after the departure of Tim Catley, who joined listed radio and outdoor advertising company APN News & Media.
The most high-profile departure in the public sector was of NSW Department of Education and Training CIO Stephen ¬Wilson, who decided against renewing his five-year contract in favour of a new ¬challenge as head of technology at Qantas. The department had not replaced Wilson at the time of writing.
Peter Woods ended 35 years of public service, the last seven as CIO at the Department of the Environment, Water, Heritage and the Arts (now the Department of Sustainability, Environment, Water, Population and Communities).
Former PwC partner Ken Gallacher was unveiled as CIO at the Australian Broadcasting Corporation. He replaced long-time incumbent Colin Knowles, who launched his own broadcast strategy and engineering consultancy, Colin Knowles and Associates
David Hackshall was announced as the new CIO at customer contact company ¬Salmat, Peter Bourke swapped Austereo for Amalgamated Holdings, Craig Ward was named CIO at Western Australia Police, a role that had been vacant for 18 months, and David Kennedy left the NSW Office of State Revenue for a new gig with Communities NSW.
In vendor land, the highest profile chief executive to walk the plank in the past year was Hewlett-Packard's Mark Hurd in the US, who left with a $US12 million handshake after a sexual harassment claim revealed inconsistencies in his expense reports designed to cover up an affair with a marketing contractor.
Hurd is widely credited with turning HP around through a mixture of ruthless cost-cutting and successful acquisitions. He has since re-emerged at Oracle, while HP has hired former SAP chief Leo Apotheker as his replacement.
There is plenty left to run in this story. A Massachusetts-based pension fund sued Hurd and the HP board for the impact his exit had on the share price, while HP sued Hurd after it was announced that he would be joining the senior management ranks at Oracle. You can bet this is going to get uglier before it gets resolved.
Flash the cash
HP has led the pack in 2010 when it comes to mergers and acquisitions, breaking the billion-dollar mark three times: snapping up troubled smartphone maker Palm ($US1.2 billion), high-end storage specialist 3Par ($US2.4 billion) and data security company ArcSight ($US1.5 billion).
The purchase of 3Par followed a very public bidding war with key market rival Dell that offered further proof of how big hardware suppliers are working to diversify into new areas with higher profit margins. It was very similar to last year's open spat between storage rivals EMC and NetApp over Data Domain.
The $US2.1 billion HP paid for Palm is expected to help it differentiate in a ¬burgeoning tablet computer market that has been dominated by Apple's iPad. A growing number of PC and smartphone makers have announced competing tablets that run on Google's Android operating system or Windows 7 but HP will also develop a device on Palm's webOS in an attempt to stand out from the crowd. This will become a fiercely competitive market and these devices are already starting to find their way into the enterprise.
Even networking powerhouse Cisco Systems has entered the tablet market with a collaboration and communications device aimed squarely at business users. It too has been diversifying in recent times, announcing last year that it would compete against traditional business partners like Dell, HP and IBM in the server market.
Intel, the world's largest maker of computer chips, closed a couple of major deals in 2010. First up was a $US7.7 billion agreement in August, the biggest in the IT industry so far this year, to buy security software company McAfee.
Intel plans to integrate security technology into its chips as a way of gaining an edge on rivals including Advanced Micro Devices. Security is likely to become increasingly important as a broader range of products including cars and domestic appliances access the internet.
Just two weeks after the McAfee announcement, Intel was back in the news with a $US1.4 billion deal to acquire the wireless division of German group Infineon, which makes the chips used in Apple's iPhone and other smartphones. Intel dominates the global computer chip market, with a share of more than 80 per cent, but is exposed to the advance of smartphones, which look increasingly likely to become the primary way of accessing the internet in the next few years.
The other billion-dollar IT deals this year were German giant SAP's purchase of enterprise software maker Sybase for $US5.25 billion, announced in May, and Oracle's protracted $US7.4 billion buyout of Sun Microsystems, which finally closed in January after getting EU clearance.
The biggest technology trend in corporate IT this year has been the continued shift to cloud computing. While plenty of CIOs remain sceptical, even suspicious, about vendor hype, most have started looking for more flexible ways of accessing resources without paying upfront for costly new IT resources.
That trend has been driven by the global downturn but the reluctance of major players like Amazon and Google to build infrastructure in Australia has left the door open for others, including ¬Telstra and Optus, which can provide services without sending customer data offshore. This has been important for government departments but many corporate CIOs also remain reluctant to play until they can be assured that data is housed in Australia.
Infrastructure as a service looks to be the easiest story for CIOs to sell to their boards right now, especially if they have ageing data centres that need a significant upgrade, but it is likely to be some time yet before this industry shift truly breaks down enterprise licensing models. MIS Australia
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