IDEAS Insights

Why IBM Will Continue to Pursue Sun

Although IBM appears to have called off talks to acquire Sun, a review of various paths that are available to IBM indicates that there are significant advantages for it to continue its pursuit and re-negotiate. The decisions that IBM makes next will depend on how it tackles some tough strategic questions. For example, how willing is IBM to fully pursue market opportunities with its industry-standard x86 hardware, instead of favoring its own System z and Power Systems platforms for the most lucrative high-end opportunities? How committed is IBM to delivering an end-to-end software platform hosted on multi-vendor hardware, rather than concentrating on its own tightly-integrated hardware stack?

The choices that IBM makes now will be steered by many internal and external forces, some of which are orthogonal or opposed. Depending on which forces prevail over others, their effect will fundamentally influence IBM’s decision whether to continue pursuing Sun or not, and how to integrate Sun’s systems technology if it does succeed with the acquisition. If IBM ultimately succeeds in acquiring Sun, and takes on the burden of consolidating seemingly incompatible platform hardware and competing software, it will benefit from an unprecedented range of virtualization tools for helping customers migrate between hardware platforms with the least possible disruption. If IBM does not acquire Sun in the end, it will face renewed challenges to develop a software stack that can both help secure the profits of its proprietary systems, and extend them to the increasingly critical x86 server market.

IDEAS has developed a few scenarios for how IBM might evolve its systems strategy with or without Sun. After analyzing these scenarios, it appears likely that IBM will proceed with the acquisition. Whether future negotiations will reach a price (and terms/conditions) that each side can agree to is not something we can predict. However, assuming such business obstacles can be overcome, the result will be that IBM adopts Sun's Solaris operating system on its own processors for business critical workloads, while promoting the open source version of Solaris, OpenSolaris, on x86 to build a community. If the majority of the market eventually accepts x86 systems for the most critical workloads, Solaris on x86 will provide IBM with a crucial foothold. Once IBM has fully exploited all possible opportunities for vertical integration with System z and Power Systems, it can fully shift its strategic focus to x86 and deliver a version of Solaris optimized specifically for its System x servers. Until then, Solaris and Sun's users will help to strengthen IBM's most profitable systems based on its own processors.

For more detail on these scenarios, download the complete analysis: The Mating Ritual of IBM and Sun: Some Outcome Scenarios (free registration required)

Big Changes for IT Industry in the Year Ahead

The recent IDEAS newsletter summarized some predictions made by IDEAS analysts for the coming year (see PDF). In the current economic climate, it initially appeared hard to avoid a gloomy outlook. The ability for organizations to make major investments in new technology could be dampened in the short term. But while times are tough, some possible technology investments promise benefits that are too good to pass up, and customers will be implementing many of those in 2009. The driving force for making those investments will be cost savings. The major vendors, including IBM, HP, Unisys, Fujitsu, and Sun, recognize this opportunity, and they will be launching a variety of new products and services to help their customers reduce costs.

Indeed, whenever the economic recovery begins, it is quite possible that it will be led by technology firms. Many new ideas will emerge and mature in 2009, which could become a defining year for IT. For example, with storage systems, Disk-Array Processor Enclosures (DPEs) will increasingly be based on industry-standard hardware running various storage-optimized operating systems. In the area of server hardware, we expect to see increased competition among traditional UNIX-based midrange and high-end servers. At the same time, improvements in x86-based multiprocessing and virtualization will allow massive consolidation of industry-standard servers. The environmental cost savings (power and cooling) alone are making this type of redeployment an attractive choice, even in a down economy. In many cases, payback can be achieved in as little time as 6-9 months.

Significant improvements will continue to be made in the environmental sustainability of IT products, as customers demand easily accessible and usable information on product environmental data in a non-competitive and environmentally conscious manner. Virtualization technology is clearly thriving as it becomes a standard part of IT infrastructures, not just in servers, but also in storage, networks, and desktops. One area to watch particularly closely this year is increasing virtualization of the desktop. As the trends of desktop virtualization, mobile computing, and telecommuting converge, the traditional desktop PC form factor could near extinction.

Businesses that survive the recession will look quite different than they look today, and firms that do not embrace IT change in the next year may be out of business. When the recovery starts, those who are nimble will be able to invest and out-maneuver their competition. This notion applies to users of IT, as well as the hardware and software vendors themselves. The trick of course is timing: investing too early may deplete funds needed to hunker-down and survive, while investing too late risks someone else becoming the leader. In any event, the world of IT will look totally different in 2010 than it did in 2007. The changes will be profound, possibly having a similar impact on the IT industry to the introduction of the original PC nearly 30 years ago.

Software Licensing Can Be a Virtual Minefield

Yesterday, as part of IDEAS ongoing research into the key industry players, I attended the annual Unisys Asia Pacific Analyst day held in Sydney Australia. Unisys in the Asia Pacific region is into the third year of a three year plan to turnaround the operation, based on consolidating activities, getting some focus and beginning to grow profitability. The reports cards were all good and the message is that the company is on track to achieve its goals.

Unisys Asia Pacific (not including Japan) now accounts for around 14% of the revenue for Unisys Corporation overall. And it was reported that services revenues are approaching 95% of the overall revenue take in the region, which is a key indicator that the company has transformed from a product, to a predominantly services, based organization.

Analyst events often include guests, such as customer case studies and Unisys had a session with the CIO of Investec in Australia, Ric Modesto. Investec is a specialist banking group, headquartered in South Africa and also operating in the UK and Australia. Investec has been using Unisys in all three countries for some years with its consolidation activities.

Such sessions have the expected pro hosting vendor messaging, but I like them because they can also reveal interesting and sometimes unexpected perspectives in the often unscripted question and answer part of the presentation.  When asked about his experiences with virtualization and issues around software licensing, Mr. Modesto noted that in his opinion the licensing agreements in general don’t successfully address usage of the operating system and subsequent applications in the virtualized delivery on demand space and can be a minefield where one needs to be very careful.

He went on to say that even though you can legitimately deliver an application on demand, the issue of the identity of an end user can sometimes get caught up in the detail of the license agreement. For example the difference between five concurrent and five end users, is a subtlety that can make a big difference.

When asked if that had limited Investec’s virtualization rollout Mr. Modesto commented that it didn’t because the company had taken the approach of licensing everyone to avoid this issue.

What is your view? Is the lack of suitable licensing arrangements, especially in the application on demand space, an impediment for you when considering virtualization in your organization?

HP File System Technology to Help Drive Linux into Open Storage

HP announced that it is releasing the source code for its Tru64 UNIX Advanced File System (AdvFS) under a license that will allow it to be integrated deeply into the Linux kernel. AdvFS is one of the most proven 64-bit system software technologies in the industry. It offers a number of powerful storage features, including the ability to configure flexible storage pools that can be shared by multiple file systems without needing to add a volume manager; the ability to expand, shrink or reconfigure file systems without taking them offline; flexible transaction log management, including the ability to log both metadata and data asynchronously or synchronously; availability features such as snapshots for consistent backups and support for recovering deleted files; and performance features such as online rebalancing of files and free space across storage pools. Moreover, these advanced features have proven in production for 16 years as a key component of Tru64 UNIX, which itself was one of the most advanced UNIX implementations on the market, before becoming retired in the fallout of HP's acquisition of Compaq.

HP emphasizes that its release of the AdvFS code into open source represents a technology contribution, and is not simply a port that will result in another competing file system for Linux, alongside ReiserFS or Global File System (GFS). The AdvFS code is being released under the same GPL Version 2 license used for the Linux kernel, which means that developers will be able to drive its features as deeply into the kernel as necessary to make them work effectively. HP is actually providing two generations of the AdvFS source code: the existing code taken from Tru64 UNIX, and work-in-progress code that HP produced during its abandoned effort to port AdvFS to its HP-UX operating system. HP is also providing an extensive set of design documentation, test suites and engineering resource related to the code. Linux programmers will be able to refer to this broad base of knowledge as they work on the next-generation Linux file systems currently under development, such as ext4 or BTRFS.

Indeed, it will take several years before the results of HP's AdvFS offering show up in mainstream Linux distributions. Aside from sheer altruism on HP's part, though, the contribution has several implications, both for HP and its customers, as well as the industry at large. First, the availability of proven AdvFS technology on a Linux foundation will make that OS more attractive to any remaining Tru64 UNIX users who may still be resisting HP's recommended migration to HP-UX (even if HP decided to offer innovative migration technology such as Transitive QuickTransit). If these users move to Linux, HP could still retain some as customers, which they could not if the users migrate to a competing UNIX system.

Further, by strengthening Linux storage management functions at the kernel level, HP will help to qualify Linux as a foundation for Open Storage, allowing it to serve as the core software for scalable and reliable network storage solutions that are based on standard hardware. The Open Storage concept has been promoted heavily by Sun with its OpenSolaris initiative, which allows users to couple the advanced storage functions in Solaris, i.e. the ZFS file system, with inexpensive, industry-standard hardware components. As the storage management function in standard operating systems become more powerful, such solutions could start to disrupt traditional enterprise storage systems, most of which are based on proprietary hardware. It is not possible to add ZFS technology into Linux, because it is licensed under Sun's Common Development and Distribution License (CDDL), which is incompatible with GPL v2. AdvFS matches several key ZFS features, and as Linux developers embrace AdvFS technology, it will become more feasible to offer Open Storage solutions based on standard Linux distributions, whereby solution providers add value with various data services (copy, replication, de-duplication, thin provisioning) on top of standard interfaces in the Linux kernel. By becoming fully engaged with efforts to enable Linux for open storage at the earliest stages, HP can start to position itself in a leadership role should open storage solutions start to generate serious momentum in the market.

Sun's Two-Tier OS Support Targets Next Wave of IT Infrastructure

Much of the discussion around Sun's OpenSolaris operating system has focused on comparing it with Linux in terms of open source development communities and processes. Indeed, the relationship between OpenSolaris and Solaris somewhat parallels the segmentation of leading Linux distributions into "development" and "production" releases, i.e. Red Hat Fedora and Red Hat Enterprise Linux, and Novell’s OpenSUSE and SUSE Linux Enterprise Server. But the key development of this announcement is Sun’s introduction of robust support offerings for its dynamic, rapidly evolving operating environment. Neither Red Hat nor Novell offer formal support for Fedora or OpenSUSE (although Novell does provide free installation support for OpenSUSE). Thus, Sun has broken new ground in the open source OS business model by arriving at a solution that envisions the long-term needs of web-centric enterprises.

It is clear that much of the growth in the market is increasingly being driven by a new class of customer with a set of needs that diverge considerably from those of traditional commercial server environments. Users in this class consider massive levels of scale-out computing to be the normal way to grow capacity, and they rely heavily on proprietary software that is developed internally, which represents the “secret sauce” of their operations. Currently, the leading-edge proponents of this approach are predominantly in high-performance computing (HPC) environments; entertainment and media companies delivering content over the web; firms with web 2.0 business models; and some financial services organizations. Over time, though, their style of computing could impact a variety of organizations, as the lines between software and services start to blur, and end-users become more comfortable relying on remote computing resources that are accessed over the web.

As this segment of the market matures and gears up for operations, its customers are introducing new requirements for how systems should be designed in order to best meet their needs, some of which could send vendors back to the drawing board (as shown by IBM’s introduction of its iDataPlex architecture). Among other demands, these customers are creating a new set of rules for operating systems that will play a central role in their infrastructure. To be relevant in the rising wave of web-based computing, an OS should have the following characteristics:

• Support for industry-standard hardware based on x86/x64 processors, which are taking on ever more demanding workloads as a result of their continuously growing performance;
• Integrated support for virtualization, which is becoming a standard part of IT infrastructures both in hardware and software;
• Support for cloud/grid/utility computing, i.e. the ability for organizations to achieve optimal utilization of computing resources, regardless of their source or physical location;
• Real-time computing capabilities, in which services are performed within a guaranteed time span;
• Open source business models, whereby the OS supplier offers value based on service and support, rather than licensing;
• Choice of release streams, including a relatively fluid version with frequent updates and rapid functional improvements, as well as a more stable version suitable for critical production workloads.

Sun has addressed this last requirement with the first commercial release of OpenSolaris. While OpenSolaris has been available for some time, Sun announced that it will now provide support for the binary distribution of the OpenSolaris code. As a result, Sun now effectively offers its customers a choice of two supported operating systems: Solaris and OpenSolaris. Sun positions Solaris for “high speed developers and development teams”, as well as users who treat the operating system as a source of competitive advantage for applications such as high performance computing and social networking. By contrast, the traditional version of Solaris is intended for IT departments that value stability over rapid innovation.

At the front line of the largest web-based applications, resiliency is typically built into the user's software, so that few reliability features are needed at the level of individual servers. These applications are usually designed to continue processing in the event that servers fail due to outages in hardware or OS software. Thus, Sun’s offering of support for OpenSolaris may not be relevant for many of the cutting-edge web applications that might be deployed on it today. However, today’s web 2.0 workloads are tomorrow’s enterprise workloads representing the corporate backbone. As individual nodes in the cloud are used to host ever more critical workloads that are sensitive to critical points of failure at the level of individual systems, and thus require higher levels of uptime in the OS, OpenSolaris users may start to take Sun’s support offerings more seriously.

Sun offers two levels of support for OpenSolaris: "Essential" and "Production". While the pricing of these offerings has not yet been announced, based on their description, the Production level of support for OpenSolaris appears to be nearly identical to the "Premium" level of support for Solaris (except OpenSolaris Production promises one hour response time for Priority 1 calls, as opposed to immediate transfer for Solaris Premium). Therefore, the pricing of OpenSolaris Production compared to Solaris Premium will determine whether it makes more sense to deploy Solaris (which is free to deploy as well) or OpenSolaris. Compatibility between OpenSolaris and Solaris will also be a critical factor in determining which path customers take as they upgrade, thus controlling the flow of users from OpenSolaris to classic Solaris.

The ability for Sun to drive Solaris into IT infrastructures that are central to customers’ businesses remains a key milestone on its path to long-term success. Although Sun is aggressively optimizing its systems for web-based workloads, software serves as a much "stickier" bond with customers than most hardware, which can be swapped out relatively easy. As Scott McNealy was fond of saying, “users date their hardware, but marry their operating systems”. In the bigger picture, as more and more new businesses are seeded with infrastructures that are based on the web and scaling out, a requirement is emerging for new class of OS with a specific set of attributes, only one of which is an open source development model. Solaris and the leading Linux distributions are all well positioned to deliver these attributes, but Sun’s innovation in the business of operating systems could allow it to leap ahead of others in defining how this critical software component becomes integrated to customers’ organizations.