Nemertes Impact Analysis: February 8, 2008

Nemertes Impact Analysis

Expert Insight On How Recent News Affects You

Undersea Cables Cut: Where's Your Business-Continuity Plan?
By Andreas Antonopoulos,senior VP, and Ted Ritter, research analyst

Multiple undersea fiber outages in the past week highlight the importance of business-continuity planning. Service interruption on subcontinent or country-level connectivity can have dire consequences to any economy, as well as the outsourcing market,which depends on undersea cables to move voice and data between countries.

Enterprises must consider diverse routing to access their carrier. A lack of confidence in the carrier infrastructure supporting low-cost outsourcers, such as those in India and China, could become a significant reason for contract non-renewals.

Additionally, undersea cables may be vulnerable to deliberate disruption. (The United States, for example, has long had the capability to disrupt or wiretap such connection from submarines). It is conceivable that a few surgical attacks could disable rival nation's Internet connectivity more effectively than any cyberattack.

Impacts:

Enterprises: IT staffs must evaluate the vulnerability of their international branch offices and outsourcing partners to accidental and deliberate attacks against a limited number of undersea cables. Companies must implement business-continuity plans to accommodate the potential of multiple negative events – either deliberate or accidental - occurring, simultaneously.

Vendors: LEO satellites and land-based fiber could provide useful alternatives for backup to undersea fiber. Global carriers can offer emergency recovery services for such events. Software developers with distributed operations must have a backup plan if they don't want disruptions to their release cycles.

Investors: The Internet underpins globalization in many ways that are not obvious until it is no longer available. If a business plan depends on ubiquitous, reliable communications, review the impact of infrastructure degradation. –

http://www.arabianbusiness.com/510132-internet-problems-continue-with-fourth-cable-break?ln=en [3]

Faster DSL Speeds Can Address Potential Internet Access Shortage
By Ted Ritter, research analyst

A pair of announcements is targeted at squeezing more bandwidth out of last-mile copper. Alcatel-Lucent (NYSE:ALU) announced a new software upgrade for DSLAMs that enhances existing DSL performance by up to 30%. In a related announcement, RIM Semiconductor (OTC:RSMI) announced a new chip that supports up to 40 Mbps over last-mile copper lines.

In Nemertes' recent report, "The Internet Singularity Delayed: Why Limits in Internet Capacity Will Stifle Innovation on the Web," we found the U.S. is facing an impending access-line bandwidth mismatch between supply and demand.

Though a stopgap measure, any technology that can squeeze more bits out of the existing copper plant can help to delay a bandwidth shortage.

But these are only short-term solutions and implementing these technologies could divert money and focus from solving the underlying issue of replacing copper with fiber.

Impacts:

Enterprises: Companies are increasingly using DSL to support small branch offices and teleworkers. Any technology that increases DSL capacity will help application performance.

Vendors: The cost to upgrade U.S. last-mile copper is significant, so technologies that increase bandwidth on DSL will help address the impending shortage of access bandwidth. Vendors that make such technology will face growing market opportunities.

Investors: A mini-boom market could emerge if Congress and the private sector do not figure out how to roll out last-mile fiber. Demand for more bandwidth is growing. Companies with technology to address these issues will find success

http://www.lightreading.com/document.asp?doc_id=144551 [4]
http://www.informationweek.com/story/showArticle.jhtml?articleID=205921132&cid=RSSfeed_IWK_All
[5]
http://www.alcatel-lucent.com [6]

Manufacturers' Actions Presage Wireless Equipment Market Slowdown
By Mike Jude, senior analyst

Last week, Motorola (USE, MOT) announced it may spin off its mobile phone unit, and Ericsson (NASDAQ, ERIC) announced lower profits along with an intent to downsize and layoff at last 1,000 employees. These developments indicate the wireless market is shifting from equipment to services.

As Nemertes' research indicates, this is a trend that will likely continue as the wireless-infrastructure market evolves from a retail to a wholesale model. Margins increasingly will lie with value-added services built on the infrastructure.

Impacts:

Enterprises: Low-cost instruments will help decrease the operating expenses of wireless solutions,further encouraging the migration from wired to wireless infrastructure.

Vendors: Low-cost instruments will encourage marginal vendors out of the market and will precipitate restructuring for the rest.

Investors: Restructuring and downsizing can signal a reduction in profits. Wireless equipment manufacturers may be more risky as the market sorts itself out.

http://www.motorola.com [7]
http://www.ericsson.com [8]

Sprint's Slide Continues: Careful With Long-Term Contracts
By Mike Jude, senior analyst

Sprint (NYSE: S) wrote off nearly $31 billion in goodwill from its acquisition of Nextel last week. Combined with its previous announcements of force reductions and its often public hand-wringing over its deployment plans for WiMAX, this signals continuing woes for the wireless carrier.

The indications are that Sprint is retrenching and re-evaluating its portfolio of solutions. Ultimately, this could be a good thing as Sprint articulates a solid value proposition for its customers; one that can compete with the No. 1 and No. 2 wireless carriers, AT&T (NYSE: T) and Verizon (NYSE: VZ)

Impacts:

Enterprises: Sprint is still the No. 3 wireless carrier with wide coverage area and competitive technology. But if Sprint continues to focus internally, rather than on its customers, there may be risk involved in long-term contracts.

Vendors: WiMAX vendors especially should be take note of Sprint's problems. If Sprint does pull out of WiMAX, this would significantly degrade the potential for a viable WiMAX market.

Investors: Sprint's stock price continues to slide. Until it has sorted out its financial, organizational and market issues, it will be a stock to watch, but perhaps not one in which to invest heavily.

http://www.sprint.com [9]
http://www.lightreading.com/document.asp?doc_id=144551 [10]
http://www.informationweek.com/story/showArticle.jhtml?articleID=205921132&cid=RSSfeed_IWK_All [11]

Microsoft's Windows Server 2008: Server Virtualization is Key
By Andreas M. Antonopoulos, senior VP

After several delays, Microsoft (NASDAQ: MSFT) is releasing the latest version of Windows Server 2008-the server counterpart to the desktop Windows Vista. On the heels of disappointing desktop sales, Microsoft's server product will underpin much of the company's data-center strategy for years to come.

The new OS includes some key features, such as like Hyper-V virtualization and Server Core, a minimal installation option, highlighting the importance of server virtualization.

Impacts:

Enterprises: Microsoft Server 2008 with built-in virtualization is a good upgrade option for existing "Microsoft shops," allowing consolidation and power savings without extra expenditure on virtualization software. Companies running other operating systems should compare all options.

Vendors: As Microsoft's next-generation server OS, this will affect vendor roadmaps for all software development. Vendors also must carefully evaluate Hyper-V against other virtualization options to see how to implement software that is portable to multiple formats.

Investors: Microsoft's server and desktop are mutually reinforcing oligopolies. Vista's stumbling sales should be cautionary. Follow Server 2008 sales carefully to evaluate Microsoft's continued OS dominance especially as SOA gains ground.

Virtualization Competition Begins to Affect Market
By John Burke, principal analyst

VMware (NYSE: VMW) stock dropped more than 30% on lower-than-expected earnings. And, Rackspace has done a quick about-face since its August condemnation of virtualization as not ready for primetime-and it has begun to deploy it.

Both developments underscore the increased competition in virtualization. The reality of Citrix+XenSource (NASDAQ: CTXS) and the ever-nearer promise of Microsoft HyperV (NASDAQ: MSFT)taking some of the wind out of VMWare's sales. The faster maturing of technologies to support robust deployment of virtualization changed Rackspace's strategy.

Impacts:

Enterprises: Expect better pricing from VMware as competition grows. Expect outsourced data-center offerings to get more flexible and less expensive.

Vendors: Citrix, VirtualIron, Parallels, and others will reap the benefits of VMware weakening and also will benefit from service providers using virtualization more broadly.

Investors: Makes smaller virtualization companies look like better investments, plays up importance of vendors like FastScale that couple utility thinking at the OS level with virtualization.

http://www.nemertes.com/servers_systems [12]

Using IBM's MDM Software? Don't Overlook SOA
By Ted Ritter, research analyst

IBM (NYSE:IBM) , this past week, announced a new Master Data Management (MDM) Software solution for WebSphere. The IBM InfoSphere Master Data Management Server is integrated with the IBM WebSphere environment and provides centralized data management for the enterprise.

In the Nemertes Research recent benchmark, "Service Oriented Architectures and Applications (SOAA)," 25% of participants use an MDM tool (and 80% have linked to their SOA), 53% plan to use an MDM tool, and another 17% are evaluating the problem and their options.

The growing use of MDM tools concurrent with SOA deployment is not a coincidence. SOA, through abstraction and loose coupling, dramatically complicates tracking, categorizing, accessing, restricting and retaining data.

IBM's aligning master data management with a SOA development platform is a move in the right direction, to address these challenges.

Impacts:

Enterprises: Seriously look at MDM, concurrent with SOA deployment. Implementing MDM too late may be much tougher than building it into the plans up front.

Vendors: If you are developing SOA tools, you should consider adding MDM capabilities, or at least MDM hooks.

Investors: MDM is a solution that is enterprise-wide. There are opportunities for niche players, including
Kalido, Zoomix, and Zynapse and specialized application-architecture providers, such as TIBCO (NASDAQ:TIBX). It's likely, these niche players will be consumed by the big enterprise software framework vendors, IBM, Oracle (NASDAQ:ORCL), and Microsoft (NASDAQ:MSFT).

http://www.nemertes.com/benchmarks/nemertes_benchmarks [13]
http://webservices.sys-con.com/read/493308.htm [14]
http://www.ibm.com
http://www.kalido.com [15]
http://www.microsoft.com [16]
http://www.oracle.com
[17]
http://www.tibco.com [18]
http://www.zoomix.com [19]
http://www.zynapse.com [20]

Cisco Finally Releases Mobile-Acceleration Client
By Robin Gareiss, Executive VP

IT staffs have been clamoring for acceleration clients, which boost traffic to mobile devices just as appliances do between data centers and branch offices. Cisco (NASDAQ: CSCO) recently announced its WAAS mobile client, following the lead of companies such as Blue Coat (NASDAQ: BCSI), Packeteer (NASDAQ: PKTR), and Riverbed (NASDAQ: RVBD).

Nemertes' research indicates 88% of organizations are centralizing applications in the data center. Further, a growing number of employees use mobile devices. Employee productivity depends on fast application performance.

Impacts:

Enterprises: Cisco customers can extend their acceleration capabilities to mobile workers. It also makes Cisco more competitive with other optimization vendors.

Vendors: Cisco has addressed its weakness with mobile optimization. Vendors must clearly differentiate their features and capabilities from Cisco's. Juniper (NASDAQ: JNPR) must respond quickly with its offering.

Investors: Mobile optimization capabilities will become more important with the increase in data-intensive and real-time mobile apps. Any investment in this space should be with vendors who address mobile workers.

http://www.nemertes.com/virtual_workers_branch_offices
[21]
http://www.cisco.com/en/US/products/ps5680/Products_Sub_Category_Home.html [22]
http://www.news.com/Cisco-speeds-up-mobile-workers-application-access/2100-1012_3-6227140.html?tag=cd.hed [23]
http://www.networkworld.com/net.worker/newsletters/net/index.html [24]

CounterPath Acquisition of Firsthand Drives Mobile Unified Communications
By Irwin Lazar, principal analyst & program director

Counterpath completed its acquisition of FirstHand Technologies, a developer of unified-communications clients for mobile devices. FirstHand's products are OEM'd by vendors including Nortel and NEC to deliver telephony feature control, presence, and address-book integration to a variety of mobile operating systems.

This acquisition shows the growing importance of incorporating the mobile user into UC plans. In Nemertes' 2007 "Building the Successful Virtual Workplace" benchmark, we found enterprises planned to grow their mobile-device deployments by 421% in the next year.

Impacts:

Enterprises: Don't forget the mobile worker in UC plans. Incorporate mobile UC services as part of your mobility architecture

Vendors: The ability to integrate mobile workers will continue to be a strong competitive differentiator, don't ignore this segment of the market.

Investors: Mobile UC vendors have been snapped up in recent years (Orative, Traverse Networks, and Ascendant Systems to name a few). Keep your eyes on the remaining independent players in this space including Raketu, ConnectMe Mobile, and Trolltech

http://www.nemertes.com/benchmarks/nemertes_benchmarks [25]

CloudShield /IBM Partner on Service and Security Enhancements For Carriers
By Katherine Trost, research analyst

Demand for advanced carrier services is increasing, especially among small and midsized businesses. The carrier networks infrastructure must meet today's security requirements and easily scale for future demands.

CloudShield Technologies Inc. and IBM (NYSE:IBM) announced plans to develop the first carrier-class Deep Packet Inspection (DPI) solution for the IBM BladeCenter family.

This partnership will provide CloudShield's DPI solution to IBM's growing telecommunications BladeCenter customer base, allowing deployment to the core networks of Tier One service providers.

Nemertes research shows growing interest in moving to advanced carrier services, such as VOIP, unified communications, and online backup services. Nearly two-thirds of organizations use SaaS for full applications, such as CRM or accounting applications.

One way for service providers to differentiate will be to offer enhanced security services, such as the DPI that IBM/CloudShield integration provides.

Impacts:

Enterprises: Evaluate options for more secure carrier services, though be prepared to pay.

Carriers: As more customers implement hosted solutions, it could open their networks to attack. IT staffs will expect carriers to offer enhanced security services, so be prepared to deliver.

Investors: Look for companies whose products will help power smarter pipes from the carriers, whether it is performance management and monitoring, or security and compliance.

http://www.cloudshield.com/news_events/2008_Releases/CloudShield_IBM_FINALPressRelease2_4_2008.pdf [26]