Kevin McIsaac

Kevin McIsaac

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Most of the advice offered in research on the IT aspects of mergers and acquisitions has focused on the acquiring organisation. Last month I wrote about the actions required in divesting part of your organisation; this month we have a review of what to do when you are subject to a takeover. IT organisations in a company being acquired have considerations and responsibilities of their own to address, and they are quite different to those of the acquiring company.

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Conclusion: IT organisations are aware of the impending release of Windows Vista; however in a recent surveyi less than 20% of those with more than 100 desktops have a formal strategy for dealing with it. The most common driver for using Vista on the desktop is the need to keep current, so as to ensure long term support from both Microsoft and ISVs. None of the people interviewed anticipated any business benefit from upgrading and did not consider it an important or urgent project; instead they saw it as a necessary evil that must be dealt with.


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Conclusion: The last 3 months have seen two significant announcements from Sun. Firstly the resignation of iconic CEO Scott McNealy in favour of Jonathan Schwartz, followed by an announcement of a planned 10%-13% reduction in workforce. Unfortunately Sun’s malaise has no quick fix and like notable IT giants before it (e.g., Digital Equipment, IBM) its problems are due to the commoditisation of its core value propositions, SPARC and Solaris.

As customers have increasingly adopted “good enough” Wintel/Lintel systems, Sun’s revenues have remained flat for the last 3 years and Sun has consistently posted losses since 2002. Sun has not yet established new value propositions that will return it to its former glory and the most likely outcome is a continued slide into irrelevance.


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In a 2003 Accenture study, 73 percent of the Fortune 1000 executives surveyed found company acquisitions easier than divesting part of their company, while 11 percent thought the opposite. This statistic is important, as many acquisitions involve divesting some part of a business entity prior to the M&A event by the seller, or afterward by the seller or buyer, depending on how the deal is structured. Divestiture brings a range of issues for the CIO to address, and the divestiture process can be quiet different to the acquisition process.

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Conclusion: Inexperienced organisations often see benchmarking as the process of measuring best performance and fail to achieve the real value of benchmarking which is the discovery and adoption of best practices that drive best performance. Done appropriately benchmarking can yield unexpected and significant benefits, but done inappropriately it wastes considerable time and money1.


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Utility Computing is gaining higher levels of customer interest and acceptance, amid significant investments by systems vendors to build on their individual "brand" (e.g., Adaptive Enterprise, On Demand, Real Time Infrastructure) and the resulting cacophony of terms, definitions, and strategic directions. However, there still remain several crucial "missing-technology-links" in the evolutionary chain -- these will be addressed by both traditional software and systems vendors, as well as Open Source providers.

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IT managers need to be aware that their software environments will dramatically change between now and 2010. The expected broad and rapid adoption of varying types and levels of software-as-a-service (SaaS), multiple "flavours" of services-oriented architectures (SOA), and open source-based software should be expected to increase an organisation’s IT and business complexity, and management costs.

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Conclusions: Due to a lack of transparency in the relationship between the demand for IT services and the cost of service delivery, most IT departments find themselves constantly justifying their IT budget to the CFO while simultaneously fighting with business units about additional demand for services. The major source of this dysfunction is the typical IT cost allocation, e.g., overhead or chargeback based on technical measures, which do not create the sufficient transparency to show the real cost drivers and incents undesirable behaviours.

Leading IT organisations are resolving this by recreating IT as an internal service provider with a formal IT Services Catalogue. This makes clear the relationship between demand and cost and uses economic incentives to drive the desired behaviours. It also has the benefit of aligning the service delivery expectations of the business unit and the IT organisation, thus reducing frustration.


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Users are demanding, and gaining, more IT flexibility in order to attain greater business flexibility. It''s not yet clear in many industries how and where users will require such flexibility, but buying behaviour is usually an indicator of emerging business strategy. However, it is clear that flexibility is the strategy du jour. In this environment, users are adapting their business and IT investment behaviours to enable flexibility, and to pay for it. The move to tactically strategic IT and business change is a direct response to the desire for flexibility, and its inherently higher investment costs to achieve.

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Conclusion: By the end of this decade, blade servers will have become the standard form factor within most datacentres. Driven by convenience, manageability and price/performance, most IT organisations will choose blades over rack-optimised to build out a low cost, highly flexible computing infrastructure. Over 90% of these systems will be based on industry standard servers (i.e. x32/64 based systems) running Windows or Linux.

As the existing IT infrastructure begins to reach the end of its economic life IT organisations should re-examine their architectural standards and evaluate the benefits of bladed based computing. They should start by first understanding the new trends in server infrastructure (see, “Refreshing IT Infrastructure? First Break All the Rules!” Feb-2006) and then comparing the value proposition of blades compared to traditional rack-optimised servers.


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With the release of Microsoft Vista and Microsoft Office 2007 early next year IT organisations should take this opportunity to review their desktop strategy. Early indications are that both products are significantly different from the current versions and, as with the prior major releases, will involve significant time, effort and money to implement.

While Microsoft assures us there is significant new value in these new products, particularly from “integrated innovation”, none of the IT managers I’ve spoken to were able to translate this into business value. In a recent interview with Peter Quinn, former CIO of the State of Massachusetts, he said when they looked at how staff actually used their desktops “most of the people don’t use all those advanced features [of MS Office] so it begs the question as to why I would spend all that money”. With the trend to web services (i.e., services delivered over the internet) and the availability of MS Office alternatives such as OpenOffice, he seriously questioned the value of remaining on the Microsoft upgrade treadmill.


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Though the costs of acquiring storage hardware will continue to decline during the next five years, any savings for users will be exceeded by the additional costs that will be incurred in the ongoing management of increasingly large disk farms. Storage will require significant investment in tools, development of processes and retraining and recruitment of specialist staff. New models for procurement of storage capacity and storage management will become a viable alternative to in-house management of storage.

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Conclusion: After 5 years of tight IT budgets many IT infrastructure components are reaching the end of their economic life and recent surveys suggest IT organisations intend to begin refreshing key systems this year. The path of least resistance is to replace these components with new items, staying with the “status quo”. However this may not be the best strategy!

Due to significant changes in technologies over the last 7 years we recommend IT organisations challenge their existing infrastructure assumptions (formal or informal) and create new rules to guide construction for the next 7 years. The greatest obstacle is not changing technologies but overcoming people’s resistance to changes in their environment.


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In February 2006 Oracle announced its intention to buy California-based Sleepycat Software, a leading provider of embedded open source database products, for an undisclosed sum. While this acquisition marks another signpost on Oracle''s broader acquisition binge, it also signals a deeper and more aggressive strategy to leverage and co-opt the growing open source movement to its advantage.

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