Nemertes Impact Analysis

Expert Insight On How Recent News Affects You

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Net-Neutrality Comments Indicate Internet Saturation Requires Attention

Comcast ( NASDAQ: CMCSA ) responded formallyto complaints filed with the FCC that it has violated net-neutrality principles. Rather than purposefully discriminating against particular traffic types, Comcast says it instead managed traffic in a non-discriminatory way to protect the Internet from traffic overloads.

This is one of the first admissions by a service provider that the Internet is already saturating at the access and connectivity layers.

Nemertes predicted this issue would emerge in its Internet Singularity Delayed research project (available for complimentary download via the link below).

Impacts:

Enterprises: As we predicted, congestion may limit businesses' ability to utilize the Internet for business applications. Enterprises should evaluate their plans and, if necessary consider direct connections to the Internet backbone for data transport.

Carriers: Service providers must consider their dependence on access networks to drive demand on their long-haul transport. They may need to define value-added products and services that let customers bypass common-carriage access and acquire high-speed circuits to their networks.

Investors: Increasingly, the Internet will constrain demand and limit the services available. If net-neutrality rules continue to discourage access investment, avoid companies whose success depends on unlimited access.

--Mike Jude, Senior Research Analyst

http://www.nemertes.com/ii [3]
http://www.informationweek.com/news/showArticle.jhtml?articleID=206503693 [4]

Dell's Move Into Email Archive SaaS Targets Compliance Cost Concerns

Dell (NASDAQ:DELL) announced plans to acquire MessageOne, an email-archive Software as a Service (SaaS) provider. Simultaneously, MessageOne announced a rapid archiving service aimed at offering support for the Federal Rules of Civil Procedure (FRCP).

These announcements position Dell against Google (NASDAQ: GOOG) and its Postini offering.

These announcements address enterprise concerns about compliance costs. In Nemertes'Security and Information Protection benchmark, 60% of participants say their cost for compliance will increase in 2008. Dell and Google's low-cost options will appeal to those businesses.

Impacts:

Enterprise: By outsourcing email archive, businesses shift much of the cost and burden to service providers. Make sure the legal/audit department validates outsourcing doesn't impose an unacceptable risk level.

Vendors: The Google/Dell battle could be bloody. If your value proposition is low-cost, consider re-tooling to focus on enhanced features, including security.

Investors: With Google and Dell buying archive solutions, we expect additional consolidation. Vendors such as Fortiva and Webroot Systems are likely targets.

--Ted Ritter, Research Analyst

http://www.messageone.com/news/nws-2008-02-12-1 [5]
http://www.nemertes.com/products_services/research/benchmarks/nemertes_benchmark_security_and_information_protection [6]

Enterasys Shores Up VOIP Security With ShoreTel Certification

Enterasys Networks' ShoreTel certification means customers can get enhanced security services when they deploy ShoreTel's VOIP products on an Enterasys network.

Security for VOIP is a growing concern. In Nemertes' Building the Successful Virtual Workplace benchmark, participants said VOIP security concerns revolved around three issues: Data theft, ID theft and DDOS attacks. Multi-vendor solutions that address these issues are a step in the right direction.

Impacts:

Enterprise: "VOIP as an island" is not an effective VOIP security strategy. As convergence drives VOIP traffic into the mainstream datastream, organizations must look for close integration of their network security and VOIP solutions.

Vendors: As convergence and VOIP simultaneously expand on the enterprise
network, network security must be VOIP-aware. Pay particular attention to regulations for monitoring and safety such as CALEA and E911.

Investors: Look for other VOIP providers,such as Avaya and Mitel, to extend their own technology-alliance programs and partner with networking providers, including Foundry Networks (NASDAQ: FDRY), Extreme Networks (NASDAQ: EXTR) and Enterasys, as a means to better compete with Cisco (NASDAQ:CSCO), Juniper Networks (NASDAQ:JNPR) and Nortel Networks (NASD:NT).

--Ted Ritter, Research Analyst

http://www.enterasys.com/company/press-release-item.aspx?id=741 [7]
http://www.nemertes.com/issue_papers/nemertes_issue_paper_voip_security?# [8]

Speakeasy's Integrated Voice Offers SMBs More VOIP Options
Speakeasy, a Best Buy (NYSE:BBY)-owned company, launched Integrated Voice, a VOIP service for SMBs. Customers with a data connection over a T1 or high-speed DSL line connect to a Speakeasy appliance, which is then connected to the existing PBX, allowing voice and data services over that one connection.

Many VOIP solution providers are focusing on the SMB market, and for good reason. In the Nemertes' benchmark, Building the Successful Virtual Workplace, more than 90% of SMBs are planning, deploying or already using VOIP.

This nationwide offering can be managed through a Web portal, easing moves, adds and changes, while also giving the user a level of control, something that is essential for SMBs, which are often quite distributed.

Impacts:

Enterprises: This solution offers SMBs a choice between a service that works with existing phone equipment, or a full-featured hosted voice service. Best Buy For Business and Speakeasy's channel partners will sell the service directly.

Vendors/Partners: Resellers can generate added profit by offering professional services around this new solution, including consulting, design, certification, installation and ongoing support.

Investors: Look for other hosted/managed VOIP providers to offer low-cost, software-based solutions as an alternative to Vonage and Verizon. Only time will tell if another overlay VOIP service can be successful, as the road is littered with failed attempts such as SunRocket and Talkingnets.

--Katherine Trost, Research Analyst

http://www.crn.com/networking/206504547 [9]
http://www.nemertes.com/voice_over_ip [10]

Reliance ADA Group Formally Unveils Reliance Globalcom

Reliance Communications has formally unveiled Reliance Globalcom, which combines three companies: Flag Telecom, Yipes Communications, and Reliance Communications.

Flag Telecom brings its globe-spanning network of undersea optical cabling; Yipes provides managed carrier Ethernet services (including VPLS services) primarily in the U.S.; and Reliance Telecom brings its India-wide network of wireless and wired services, including MPLS.

Reliance Globalcom provides pan-European and AsiaPac connectivity via NNI agreements with providers such as Colt Telecom, HGC, and Pacnet.

Impacts:

Enterprises: IT executives now have a single point of contact for Ethernet and MPLS services across the U.S., AsiaPac, and EMEA, and should add Reliance Globalcom to RFP recipients.

Vendors and service providers: Carrier Ethernet continues to gather momentum
globally--make sure it's in your plans.

Investors: The market for global telecom services continues to expand. Don't think in terms of limited geographical plays.

--Johna Till Johnson, President & Senior
Founding Partner

Motorola Continues its Efforts to Find Fiscal Stability

In the face of degrading revenues, Motorola (NYSE: MOT) last month floated the idea of spinning off its mobile handset division. Now, various media outlets say it's in talks with Nortel (NYSE: NT) to combine wireless infrastructure units-indicating Motorola is still in trouble and searching for options that would provide for a graceful exit from the mobile handset market.

This further emphasizes the degree to which the handset market is becoming wholesale. As margins shrink, vendors increasingly will seek economies of scale to decrease the cost-per-unit produced.

Impacts:

Enterprises: This is yet another move that signals that mobile instruments prices will move to cost. Expect to pay less for mobile infrastructure.

Vendors: Bad news. Mobile handset margins only will decrease.

Investors: Consolidations and mergers will create some interesting opportunities for investment. There is still a lot of money to be made in handsets once the market settles down.

--Mike Jude, Senior Research Analyst

http://www.msnbc.msn.com/id/23108349/ [11]

Red Hat Expanding Open Source SOA Offerings

Red Hat (NYSE:RHT) has three new open-source projects for critical pieces of
service-oriented architecture (SOA)infrastructure in governance, management, and transaction processing.

It hopes to use JBoss's enterprise application server presence as a foundation for exploiting enterprise willingness to use open source in their SOAs.

Nemertes' Service Oriented Architectures and Applications benchmark found that 52% of enterprise participants were willing to evaluate open-source tools for any infrastructure role.

Impacts:

Enterprise: Vendor-backed open-source options will multiply as they discover a viable business model in selling services around open source. Evaluate supported open-source options for core components in SOA.

Vendor: Enterprises will try open source, and competitors will embrace it. That will increase pressure on all vendors for inexpensive try-before-you-buy tactics and affordable scaling strategies.

Investor: Small open-source companies, such as MuleSource and WSO2, have a big potential market, so consider investment or merger/acquisition.
--John Burke, Principal Research Analyst

http://www.redhat.com/about/news/prarchive/2008/community.html [12]

http://www.nemertes.com/open_source [13]
http://www.nemertes.com/impact_analyses/nemertes_impact_analysis_oracle_buys_bea_builds_soa_success_core_vendors_0
[14]

Changing the Game on Cellular Pricing

Verizon Wireless (NYSE:VZ), AT&T (NYSE:T) and T-Mobile (NYSE:DT) introduced new flat-rate pricing for mobile voice and data services. All are offering price points around $100 per month for unlimited local/long distance
calling within the United States. Sprint is testing flat-rate pricing in a limited service area.

These new rate plans require enterprises to revisit their mobility strategies as they look to potentially reduce costs and provide broader wireless options to their virtual workers.

In the Nemertes' benchmark, Building the Successful Virtual Workplace, about 60% of IT executives had or were developing a mobility strategy, but only 20% said their mobility strategies were "extremely
successful."

Given the increasing number of options for high-speed mobile access to enterprise applications, IT managers must develop a mobility strategy that lets them rapidly evaluate new opportunities to improve application delivery and/or reduce costs.

Impacts:

Enterprises: Develop a mobility strategy if you don't have one already. Evaluate new pricing plans from Verizon for potential to reduce costs, or deliver data-access capabilities. If you aren't a Verizon or Sprint customer, pressure your provider to deliver similar flat-rate pricing models.

Vendors: Flat-rate pricing lets virtual workers stay connected without worrying about exceeding limitations in minute or data allocation.Make sure you have a plan to deliver flat rate pricing to your customers.

Investors: Be wary about investing in companies whose business model is based on getting around per-minute pricing models, especially if flat-rate pricing is expanded to cover international services. Flat-rate pricing will undercut emerging services designed to get around per-minute rate plans,
including start-ups such as Raketu and JahJah.

--Irwin Lazar, Principal Research Analyst
and Program Director

http://www.nemertes.com/nemertes_benchmark_building_a_successful_virtual_workplace [15]
http://www.bloomberg.com/apps/news?pid=20601087&sid=a50MvOfUJccc&refer=home [16]

Microsoft Office Move Shows Need For Openness

Microsoft (NASDAQ:MSFT) answered growing demand to open its Office file formats. It's now opened code for developers to create translations between older Office formats and XML formats used in Office 2007.

Microsoft faced pressure to open up its file formats, especially as the OASIS group, backed by Sun and IBM, push an open-source alternative file format known as Open Document Format (ODF).

Microsoft's hope in opening Office translators is to grow third-party support for its own alternative to ODF known as Open XML.

In the Nemertes' Building the Successful Virtual Workplace, benchmark, open source was of limited interest in the collaboration
space, with only 26% of businesses considering it. But with the growth of open file formats, adoption of open-source applications should increase as they worry less about file-formatting incompatibilities and being locked in to a vendor-proprietary file format.

Impacts:

Enterprises: Plan to adopt open file formats in the near future to avoid having your document repositories tied to a single vendor's file format. Plan to support both ODF and Open XML

Vendors: Microsoft will aggressively push Open XML to avoid concerns over documents locked into proprietary file formats. Plan to add Open XML support to your collaboration and content management offerings.

Investors: Watch regulatory developments around ODF and Open XML carefully. At this point there is no winner. But if one format should emerge due to government mandates, look for opportunities to invest content-management vendors poised to help transition document repositories from closed to open file formats. Examples include EMC Documentum and even Microsoft.

--Irwin Lazar, Principal Research Analyst
and Program Director

http://www.nemertes.com/nemertes_benchmark_building_a_successful_virtual_workplace [17]

http://www.microsoft.com/interop/letters/choice.mspx
[18]