This year has been a time of realignment and redefinition, as Apple launched its second zeitgeist-defining product of the new century, Dell and Intel battled to regain their former dominance, the software sector consolidated, Google rallied industry heavyweights around a common mobile device platform, and major vendors scrambled to embrace social networking. These, not necessarily in order of importance, are the IDG News Service picks for the top 10 stories of the year:
Software consolidation: The big fish get bigger
While globalization has fueled IT mergers and acquisitions for several years, consolidation in 2007 fundamentally reshaped the software industry. Facing saturated markets and nimble, innovative rivals, SAP, IBM and Oracle have snapped up competitors and partners in order to expand customer lists and acquire expertise and technology in hot areas such as business intelligence and software as a service. Some of the bigger deals this year included: SAP’s US$6.8 billion acquisition of Business Objects, IBM’s $5 billion deal for Cognos, and Oracle’s $3 billion buyout of Hyperion. As usual, Oracle provided the most drama, with a $6.7 billion offer for BEA, which was successfully rebuffed — at least, for now. While innovative entrepreneurs are bound to continue bringing startups to market, it’s getting harder for medium-size vendors to refuse deals with the giants.
Dell reinvents itself
For years, Dell remained the world’s number-one vendor in the cutthroat PC business by exercising unmatched control over logistics and sticking to its direct-sales model. But by 2006 HP unseated Dell as global PC leader. Dell seemed to lose its way as rivals adopted better supply-chain management techniques, and inquiries into accounting practices forced the company to delay earnings reports. In January, founder Michael Dell took back the CEO reins and the company expanded offerings for the enterprise, increased services for medium-size businesses, and departed from its traditional business model to start selling products in stores. Dell also plans to expand in growth markets globally. Early results are promising: Dell had record revenue growth for the third quarter, fueled by an increase in worldwide notebook sales.
The iPhone: Apple redefines a market, again
Some companies reinvent themselves. Apple, under the guidance of the mercurial Steve Jobs, reinvents markets. After redefining IT in the 1970s with the Apple II and then pushing the envelope in personal computing with the Mac in the 1980s, Apple stalled when its business model ended up giving the company a loyal — but tiny — user base. The company started to ride high in 2001 after launching the iPod, and in 2006 breathed new life into the Mac by moving to Intel-architecture chips. Before the iPhone, there were many multifunction phones. But amid a June launch that had people lined up at stores from Tokyo to San Francisco, Apple proved its design mojo still works. The iPhone combination of cool design, phone functions, Internet connectivity and multimedia features has raised the bar for any manufacturer of connected handheld devices. Apple’s revenue and share price have never looked better.
The Rise of the botnets: Software as a service … for criminals
What do U.S. presidential candidate Ron Paul, the “Storm Worm,” e-card invitations, and the country of Estonia have in common? They’ve all been associated with botnets — groups of compromised computers, often numbering thousands or tens of thousands, that are remotely controlled by criminals. The scammers use the so-called “zombie machines” to pitch hot stocks or male-enhancement products, or simply to do damage, as when Estonian government Web sites were crippled in April. Botnets are now getting so sophisticated that they’re being offered as software as a service products to scammers. That’s what happened in November, when nearly 200 million spam messages supporting Paul for president were sent without permission from the campaign.
OLPC and the era of cheap laptops
The grand — some might say grandiose — plan of former MIT Media Lab chief Nick Negroponte to sell as many as 150 million $100 laptops by 2009, getting them to poor children around the world, this year looked more like a pipe dream. Production of the laptops, under the aegis of the One Laptop Per Child project, was delayed, promised government deals fell through, and the price of the XO “hundred-dollar laptops” turned out to be closer to $200. Current plans call for production of only about 300,000 laptops this year. But Negroponte’s dream may not be permanently deferred, just co-opted by commercial vendors, which simultaneously face a slowdown in growth in mature markets and increasing pressure to cut prices and power consumption. For example, Intel has sold $200 Classmate laptops in Mexico, Brazil, Nigeria, Pakistan and Libya, and in November, Everex announced it would sell Linux-based PCs with x86 processors for less than $300.
Google’s “Gphone” morphs into Android
Google’s anticipated “Gphone” announcement in November was both less, and more, than what had been long expected. For almost a year, rumors circulated that the online search giant was going to offer an actual phone. Google and its partners ended up unveiling not a device but a Linux-based open software platform, called Android, upon which mobile phones can be built. The idea is that a common platform will allow developers to build applications that can run on devices from many manufacturers on many networks, reducing complexity for both developers and consumers alike. Skeptics were quick to point out that Android might instead add complexity, since developers will have to build applications for it as well as existing platforms. Android-based phones, due out in mid-2008, will face entrenched platforms such as Symbian and Windows Mobile.
Viacom vs. YouTube: User-generated content hits speed bump
When media giant Viacom sued Google in March for $1 billion, citing unauthorized uploading of TV and movie clips to Google’s YouTube site, it underscored a fundamental problem for user-generated content on the Web: How do sites ensure that submissions meet certain standards, or are in fact legal? The dilemma is a problem of scale: Viacom charged that as of March, YouTube users uploaded nearly 160,000 video clips for which it owned copyrights, and that these clips had been viewed more than 1.5 billion times. One answer to the problem may be systems like Video Identification, which Google unveiled in October. It matches user-uploaded clips with a repository of legitimate videos, allowing the company to flag and remove, if necessary, copyright-infringing material. With the cost of legal wrangling and monitoring systems growing, it is clear that user-generated content is not truly “free” after all.
Facebook controversy: Social networking hits prime time
Facebook’s decision in October to sell a $240 million minority stake to Microsoft, which had been battling Google for the prize, solidified social networking’s central place in technology. The stake values Facebook at $15 billion total, even before it has truly figured out how to monetize its traffic. While social networking has been a growing trend for years, Facebook offers interactive features and a development platform that has Google, the social networking site MySpace and others playing catch-up. But the problem of monetization has been compounded by privacy issues. The ability of Facebook’s Beacon ad system to track user actions has whipped up a controversy that won’t go away soon.
Barcelona: AMD’s Waterloo?
AMD was hoping that the launch of its Barcelona quad-core chips would press a perceived technology advantage it had built up against archrival Intel beginning in 2003, the year the smaller company launched Opteron chips for 64-bit applications. As Intel stumbled, AMD gained market share. But Intel cut prices and launched new 64-bit and quad-core processors. The release of Barcelona, delayed until September, may end up being a counterpunch that was too little, too late. Dragged down by shrinking margins and costs from last year’s acquisition of ATI, AMD in October announced its fourth-straight quarter of losses and this month said it has delayed volume shipments of Barcelona to fine-tune the chip.
Vista hoopla fizzles: Death of the big-bang upgrade?
Microsoft launched the consumer version of Vista in January after making it available to businesses last November. Microsoft officials hyped it as the biggest launch in the company’s history and now say adoption is on a normal trajectory for new operating systems. In November it said that 88 million copies have been sold. But a range of market-analysis reports show that users, especially corporate professionals, have concerns about stability and compatibility and hesitate to upgrade. Though Bill Gates has said that big marketing events most likely will always accompany major product releases, Vista may yet prove to be the last of the old-school upgrades in a world where users, on their own timetable, download incremental updates.