IBM has been a longtime Linux proponent, supporting industry standard distributions like Red Hat Enterprise Linux (RHEL) and SUSE Linux Enterprise – on its Power Systems line for the last 12 years. This week’s announcement reaffirms Big Blue’s commitment to Linux and broadens its scope with offerings designed to drive more growth for the Power platform in the lucrative x86 arena. IBM will fuel this growth via its mantra, “Tuned to the task,” which emphasizes delivering higher quality and superior economics than rivals.

According to Scott Handy, vice president of IBM’s PowerLinux Strategy and Business Development, “This is an extension to our overall Power strategy to address the Linux x86 space and drive more growth for our Power Systems servers.”

IBM is betting that will change citing data from Framingham, MA-based research firm International Data Corp. (IDC) that indicates worldwide Linux revenues are currently $9 billion annually and are expected to grow to $16 billion by 2015. IBM’s own Linux sales on Power servers grew an impressive 29% during 2011 and IBM wants to “dramatically expand this growth” by up selling its existing customer base and luring first-time buyers away from rivals like HP and Oracle, which sells the former Sun Microsystems Solaris-based SPARC Servers. In the past year, IBM has scored over 1,000 new customer wins from HP and Oracle, Handy said.

IBM’s strategy for attracting new business is to offer premier performance at a cost-competitive price point.

The first server is a compute node in the new IBM PureFlex system, IBM’s new Expert Integrated System announced on April 11th. In the express or standard configurations the Flex Systems p24L is a 2-socket server with 12 or 16 cores and up to 256BM of memory and includes PowerVM virtualization.

The new PowerLinux 7R2 rack server runs multiple, industry standard Linux workloads and is virtualized with IBM’s PowerVM. In a standard configuration it is a two-socket machine outfitted with eight POWER7 cores per socket. The system supports up to 16 cores in 3.55 and 3.3 GHz options with 256 GB maximum memory with 8, 16 and 32 GB DIMMs.

The new solution is also optimized for virtualized environments: PowerVM is an integrated hypervisor that supports up to 10 VMs per core and 160 VMs per server. Organizations can install up to 20 PowerLinux 7R2s in a single 42U rack.

IBM Focuses on Total Cost of Acquisition

Historically, the IBM brand has been synonymous with high performance, high end systems for elite enterprises who are willing to pay a price premium to get the best in class product and technical service and support. While IBM will not cede anything in the performance realm to its competitors, it has adjusted its strategy to offer what it claims is “a 33% lower Total Cost of Acquisition (TCA) for a virtualized infrastructure than VMware and comparable pricing to x86-based Linux offerings from Dell and HP, among others,” Handy said.

IBM will initially focus on three solution segments and grow to six by the end of 2012. They are:

• Big Data Analytics: The Power7 series servers have four (4) threads per core versus rival Intel’s two (2) threads per core and can optimize workload performance for platform-kernel, tool chains and libraries. IBM research claims PowerLinux is 42% faster with InfoSphere BigInsights, powered by Apache Hadoop, for sorting a terabyte of data, vs. x86 benchmark publishes.
• Open Source Infrastructure Services – like web, email, social networks faster and improve economics with PowerLinux & PowerVM
• Industry Application Solutions: The PowerVM Integration Virtualization manager simplifies and eases deployment and automates most routine daily tasks by providing businesses and their IT departments with a single system to address multiple virtual application and database servers.

Each of these segments offers tangible performance and cost benefits to corporations in a wide variety of vertical markets, including IBM’s traditional bailiwicks in government, finance and healthcare.

Distinguishing PowerLinux from PowerAIX

IBM, Handy said, intends to accelerate growth by addressing the needs of two distinct and unique sets of customers: Linux and UNIX/RISC buyers. And this may be the most formidable challenge Big Blue faces in its quest for success. At first glance, it would seem that the company is cannibalizing its own customer base or even diminishing the importance of the PowerAIX offerings. Not so, said Handy. Both platforms serve a purpose and are crucial to IBM, he said.

IBM analyzed the performance needs and buying patterns of both customer bases to ensure that PowerLinux won’t cause confusion in among corporate customers.

Mainstream Linux buyers tend to focus on lower Total Cost of Acquisition (TCA) – in other words an aggressively affordable entry-level price that allows IT departments to convince C-level executives that it won’t break the capital expenditure budget. They also require:

• Rapid time to value
• Decentralized procurement
• Ease of use, deployment and management
• Scale-out workloads
• A well-developed ISV and community ecosystem

By contrast, traditional higher end enterprise UNIX/RISC buyers are more focused on Total Cost of Ownership (TCO) over the entire product lifecycle and are not as price sensitive. From a technology standpoint the UNIX/AIX/RISC customer is more concerned with large scale consolidation, scalable system pools and enhanced resiliency and security to minimize business risk than their Linux counterparts.

“The users who run RHEL and SUSE Linux Enterprise on IBM Power are much more focused on an affordable TCA. We recognize that we have to take price off the table [as a barrier to selling] to get in the door. And we’re very focused on companies that use virtualization and we can use this to compete more effectively. IBM’s PowerVM for example, lists for 16% below the retail price for VMware’s comparable offering,” Handy claimed.

In order to avoid confusing PowerAIX customers with its new PowerLinux lineup, IBM chose Linux specific workloads and applications to attract partners, resellers and ISVs.

“Big Data Hadoop only runs on x86 systems so by definition, there can be no cannibalization with AIX/UNIX systems,” Handy said. “We have a ton of benchmarks and in general the two operating systems are very close in terms of performance. Because our hypervisor is underneath both UNIX and Linux they are pretty comparable,” he added.

At the same time, Handy emphasized that IBM is not trying to provoke a price war with rivals like Intel, VMware and others but to “compete on hardware and superior client value on Big Data and other higher value solutions like virtualization.

“We’re offering more VMs per server at a list price of 30 percent below competitors. That price differential in this space is enough for organizations that want to move. And there’s no re-training required, which makes it all the more attractive,” Handy said.

To underscore this point, Handy pointed to “preview” sales of PowerLinus systems which generated several new customer wins in five countries and 118 potential opportunities.

Analysis

IBM’s latest PowerLinux servers and strategy are clearly well thought-out from a price, performance and business standpoint. IBM has clearly covered all its bases and done its homework in terms of market research in sizing the current and future market for industry standard Red Hat and SUSE Linux distributions on its Power servers. It has also polled customers on requirements for workloads and TCA pricing. IBM’s announcement has all the elements: brand recognition and respect; demonstrable experience in performance, technical service and support and a new pricing model to up sell current customers and drive new wins, to make the PowerLinux platform a success.

The biggest challenges IBM faces in the near term are:

• To distinguish and differentiate the PowerLinux solutions from its PowerAIX offerings
• To challenge VMware’s dominance in the server virtualization market.

IBM is is aggressively addressing the challenges via marketing, high performance and price leadership. IBM will emphasize the differences between the AIX and Linux customers from both a technology and cost standpoint to both existing customers as well as potential new customers. Handy noted that presently, 66% of IBM’s potential PowerLinux opportunities have no IBM Power servers in use at their organizations. Additionally, IBM will not recommend that current PowerAIX customers migrate to PowerLinux, Handy said.

Virtualization is a key part of IBM’s latest PowerLinux initiative. Big Blue will contest VMware on experience, price and performance. IBM actually developed virtualization for its mainframes and cluster servers in the 1970s. It will also use its economies of scale to undercut VMware pricing. According to Handy, the PowerLinux solutions will list for 16% less than VMware pricing and offer customers 30% better TCA. Specifically the IBM PowerVM for PowerLinux retails for $7,840 which includes licenses and a 3 year 9×5 SWMA agreement. By contrast, Handy claimed VMware’s comparable vSphere 5.0 Enterprise lists for $9,374.

PowerVM delivers scale-up efficiency that outperforms VMware’s vSphere 5.0 by up to 131%, running the same workloads across virtualized resources, according to IBM’s own internal benchmark tests. The IBM benchmark results also found that PowerVM performed 120% better than vSphere 5.0 on 16 vcpus (virtual CPUs) and 131% better on 32 vcpus.

ITIC recognizes that all vendors showcase benchmark test results that favor their products. Corporations ultimately must perform their own comparative due diligence under workload conditions that closely replicate their individual infrastructures. Based on the breadth and depth of IBM’s technical expertise with highly efficient, scalable and reliable hardware, IBM’s claims are credible. Additionally, IBM Power servers regularly register the least amount of downtime in ITIC’s Global Server Hardware and Server OS Reliability surveys. The survey data showed that IBM leads all vendors for both server hardware and server OS reliability as well as the fewest number of overall Tier 1, Tier 2 and Tier 3 unplanned server outages per year. Some 75% of survey respondents said they experienced less than one of the minor Tier 1 outages on the IBM AIX v7.1. And 78% of IBM AIX on Power Systems customers experience less than one unplanned outage per server, per year. Finally, 61% of IBM Power Systems users experience less than 10 minutes of unplanned server downtime annually or 99.99% and 99.999% availability.

From a competitive standpoint, IBM has scored impressive new customer wins – particularly from among legacy Sun Microsystems customers who are disaffected over the changes Oracle has made to pricing, licensing and support contracts since 2010. IBM will have to work harder though to lure customers away from other server rivals like HP and Dell and VMware, Microsoft, Citrix and other x86 vendors in the virtualization space. All of these competitors have extremely, loyal committed customers who are generally very satisfied with pricing, service and support.

IBM does have a clear cut advantage when it comes to the intelligence that powers its systems. The much heralded Watson is leagues ahead of all comers in intelligent data analytics and is at the heart of IBM’s “Smarter Planet” initiative. IBM is adapting Watson for all of its servers to perform accelerated, predictive analysis. The fact that IBM is now harnessing the power of Watson and making it available to the masses at an affordable price point augurs well for the mainstream success of its PowerLinux strategy.

NAD, a division of the Council of Better Business Bureaus, based in New York City recommended that Oracle discontinue “certain comparative performance and pricing claims” in the national newspaper ads and on the www.Oracle.com website. Specifically, the NAD took exception to Oracle advertisements claim that “Oracle’s SPARC SuperCluster T4-4 system retails for $1.2 million whereas IBM’s P795 high end server costs $4.5 million – an improbable $3.3 million price discrepancy.

The NAD functions as an objective and impartial self-regulatory forum for the advertising industry. In its official determination, the NAD took pains to remain objective. It noted that both the advertiser (Oracle) and the challenger (IBM) produce high quality computer systems.

It’s par for the course for all vendors to claim that their products are bigger, better, faster and cheaper than competitors’ offerings. But what got the NAD’s attention and sparked the investigation was whether or not Oracle’s “…superior comparative performance and pricing claims conveyed a truthful, accurate and on-misleading message regarding the performance and price of the Oracle SPARC SuperCluser T4-4 compared to the featured IBM computer system,” the NAD said in an April 11 press release recommending that Oracle discontinue making the comparative price and performance claims against IBM.

Specifically, the NAD recommended that Oracle expressly inform consumers, in the main body of its advertisements that IBM included a separate storage unit as part of the overall price. The NAD also concluded that Oracle’s superior performance claims were “not supported by the advertiser’s evidence and could not be cured by the disclosure at the advertiser’s website.” The NAD specifically recommended that Oracle “permanently discontinue” claiming that “the SPARC SuperCluster T4-4 runs Oracle and Java twice as fast as IBM’s fastest computer.”

Additionally, the NAD advised that in order to “avoid consumer confusion regarding price comparisons for the Oracle SSC T4-4 and the IBM Power 795, that Oracle disclose the following information:

• The specific model and configuration of the IBM Power 795
• The Specific storage unit included in the price comparison
• The assumed prices for both units

In its own advertiser’s statement, Oracle said it disagreed with “certain of NAD’s findings.” “Nevertheless,” Oracle said, “it wishes to inform the NAD that the advertisement at issue in this proceeding has been discontinued and Oracle does not intend to disseminate it in that form in the future…”

What it All Means: Caveat Emptor

Although the current Oracle vs. IBM NAD inquiry seems settled for now, customers haven’t seen the last of confusing, misleading hyperbole-filled vendor ads touting the superior price/performance of a particular high technology maker’s product over rival offerings. The ongoing rivalries between competitors like Oracle and IBM will only intensify. Users should read the fine print and not accept claims from any vendor at face value.

The continuing economic crunch, puts users in a position of power and lots of leverage to negotiate better deals. Vendors are more willing than ever to offer many types of incentives from deeper discounts, better licensing terms and conditions and extras that may include items like: free or discounted training, technical service and support, price caps or even some free products or inclusion into select alpha or beta test programs.

The moral of the NAD’s investigation into Oracle’s price/performance claim against rival IBM is “Caveat Emptor” Latin for “Buyer Beware.”

There are good deals to be had but customers must fight for them. That means wading through the vendor hype, perform due diligence and do an apples-to-apples comparison of the specific features, functions and capabilities of their intended infrastructure purchases including servers, desktops, storage, virtualization and cloud as well as doing a thorough review of the Terms and Conditions of your current licensing agreements.

Businesses are also advised to do perform their own price/performance comparisons and challenge vendors to back up their claims. In order to get the best deals, organizations should:

• Regularly review the performance and after-market technical service and support they receive from their vendors and provide the vendors with constructive feedback – both good and bad.
• Challenge all vendors to match or better pricing on specific products. While it may be difficult to get a big discount on a hot item like an Apple iPad, that’s an exception. Corporations – from the smallest SMBs to the largest enterprises – can almost always negotiate a better deal. This assumes that the business is in compliance with their current licensing T&Cs.
• Familiarize yourself with the standard list prices and discounted street pricing of all computer equipment. This will make it difficult for a less than reputable sales person to oversell an item that could cost your firm thousands or millions.
• Conduct an itemized list of everything that’s included in the Total Cost of Acquisition (TCA). Organizations should involve all pertinent parties in purchasing decisions, including the C-level executives such as chief executive officers (CEOs), chief technology officers (CTOs); VP of IT, IT managers and network administrators. It’s crucial to perform a head-to-head comparison of everything that’s included in the purchase price, so your firm won’t be duped by misleading ads and get a nasty surprise when presented with the bill.

Finally, if something looks too good to be true, it probably is. Or if a vendor claims to be undercutting the competition by vast amount — such as Oracle selling its’ SSC T4-4 server for over $3 million less than IBM’s competing Power 795 Server, then it is most likely specious.

To view the full NAD findings on the Oracle SSC T4-4 versus IBM Power 795 Server price/comparison go to: http://www.narcpartners.org/DocView.aspx?DocumentID=9053&DocType=1. You can also go to the NAD’s website for more information about the organization as well as to view other advertising disputes at: http://www.nadreview.org/start.aspx

The STG conference, led by Rod Adkins, Senior Vice President of the STG Group, showcased the division’s solid accomplishments over the last several years and detailed the current and future product roadmap and investment strategy. Investments focused around three major areas: Systems, growth markets and strategic acquisitions. Adkins could have easily added a fourth category: patents. The U.S. Patent Office granted IBM’s STG division 2,680 patents in 2010 and it could exceed that number in 2011. One only has to scan the headlines and peruse the ongoing patent purchasing frenzy and the plethora of lawsuits involving all of the major vendors to realize the pivotal role patents play as both and offensive and defensive weapon. IBM, in its Centenary year, holds more patents than any other U.S. technology vendor.

STG 2011 Milestones

Noting that STG is aligned with IBM’s overall growth strategy, Adkins detailed the division’s milestones throughout the first three quarters in 2011. They included:

• Seven consecutive quarters of growth: Much of the increase was directly attributable to the high end systems such as the System z platform, enterprise storage and high end tower servers.
• The Power Systems platform has won over 2,400 competitive displacements since the 2009 first quarter contributing $2.4 billion in revenue to IBM’s bottom line in the last 36 months.
• The Power Systems momentum continued through Q3 2011, when it won 250 competitive displacements in the quarter and 750 displacements year-to-date, Adkins said. Those new customers netted IBM $740 million in revenue so far this year and boosted Power Systems sales by 15 percent.
• System x server revenue is up 9 percent through the first three quarters of 2011 high end revenue growth of 33% YTD and eight consecutive quarters of double digit growth
• Storage up 12% YTD including storage software over 2,100 new storage customers on the XIV platform.
• Analytics 35% quarterly growth through 3Q11 via Watson, optimized Smart Analytics
• Cloud: revenue thru 3Q more than double same period in 2010; introduced Smart Cloud Entry; cross IBM integrated cloud offerings and new business partner enablement
• Overall, STG represented 27 percent of IBM’s growth markets revenue in 2010.

STG Bolstered by Product Performance, Management Stability

STG’s strong performance, helped boost the company’s stock which is now trading at $194.50, very close to a 52-week high. Big Blue’s across-the-board strong performance got a further lift when it was revealed in November that Warren Buffet, invested $10.7 billion, equal to a 5 percent stake in IBM. Buffet’s investment was no doubt sparked at least in part, by the fact that IBM’s Return on Equity to shareholders is 69.84 percent, according to Capital IQ.

While both IBM and STG’s financials tell a compelling tale, they are not the whole story. IBM in general and STG in particular, clearly owe their strong showing to the features and performance of the products. However, IBM’s ability to deliver strong after-market technical service and support, the stability of its business and its’ ability to steer clear of the management tumult that has plagued rivals like Hewlett-Packard also play a large part in its success.

For the past three consecutive years, IBM AIX and Power Systems have recorded the highest uptime and reliability ratings in ITIC’s annual Server Hardware and Server OS Reliability Surveys. In the latest updated ITIC October 2011 poll, IBM’s AIX v7.1 UNIX OS running on the company’s Power System servers scored the highest reliability ratings and recorded the least amount of overall downtime from Tier 1, Tier 2 and Tier 3 outages among 18 different server OS platforms. Reliability is key metric that contributes to lowering or raising total cost of ownership (TCO).

Corporate customers interviewed by ITIC say they are equally impressed with the quality and celerity of IBM service, support and documentation when IT staff lodge technical support calls.

The stability of IBM’s upper management and its ability to provide smooth, orderly leadership transitions resonates well with customers, Wall Street, press and industry analysts. After a decade as Chief Executive Officer Sam Palmisano will step down and will be replaced by Ginni Rometty, IBM’s senior vice president for sales, marketing and strategy, overseeing IBM’s Global Business Services unit, on January 1.

The solid management also extends to STG. Adkins, a 30 year IBM veteran, has successfully headed the group since 2005 and this plays a key role in customer retention. The STG management team has consistently delivered a clear message that includes tactical product launches and long-term strategic direction. This is stark contrast to the upheavals at competitors like HP and Oracle where tumultuous management changes occur with alarming frequency (HP) and large, often hostile mergers and acquisitions and nebulous product roadmaps (Oracle) have left customers scratching their heads regarding future product directions and undermines confidence.

Nowhere is this more evident than in the well documented and highly publicized disaffection of the Oracle (former Sun Microsystems) SPARC server installed base. IBM’s STG group has been able to exploit that dissatisfaction which accounted for a large portion of the Power Systems and System x’ competitive wins during 2010 and 2011.

Adkins and Steve Mills, Senior VP and Group Executive, in STG Software and Systems also outlined the group’s strategy for gaining new business in the ongoing tough economic climate where IT budgets are static. STG continues to invest heavily in research and development (R&D) to drive efficiencies and economies of scale to assist organizations in reducing IT management and labor costs and to cut power and energy consumption. Depending on the size and scope of the individual customer’s infrastructure and workload, Adkins claims that Power Systems servers running IBM’s DB2 are one-third the cost of Oracle DB. Similarly, he says, the System x can lower management costs by up to 50 percent and IBM’s storage platforms can assist businesses in lowering powering and operating cooling costs by as much as 60 percent.

Analysis

In order to maintain and extend STG’s current level of success through 2012 and beyond, IBM is now tasked with topping itself.
STG executives should continue to focus on:

• Differentiating the products: STG is a large group that encompasses servers, storage, cloud computing, software and systems offerings. It’s easy for even stalwart IBM customers to be overwhelmed by the sheer number of products and announcements. The STG Group must strive to highlight the most important product updates and announcements to customers. C-level executives and IT departments are overwhelmed by too much information. IBM’s STG group should emphasize the two or three most crucial products and services per quarter and communicate that via their sales and reseller channels and user groups. IBM has always been good about providing guidance but it must do even better.
• Delivering competitive acquisition, licensing and technical support costs: The biggest singular criticism leveled at IBM is the high cost of its after-market technical service and support. No one expects IBM to offer superior services at Flea Market prices. However, IBM has one of the largest service and support organizations in the world. IT could and should build goodwill in 2012 by offering special promotions, discounts and bundled incentives to loyal STG customers and prospective customers. A sizeable segment of the end user population is currently and will be strapped for capital expenditure funds for the foreseeable future.
• Appeal to Small and midsized businesses: IBM is well entrenched among large enterprises in high profile verticals like financial services, healthcare and government, to name just a few. Small and midsized businesses however account for nearly 60 percent of all businesses. SMBs with fewer than 300 users lack the clout and deep pockets of their enterprise peers. Nonetheless, their numbers and capital and operational expenditure power are enormous – particularly in emerging geographical regions like Africa, which is a big focus for IBM’s STG group. Indeed there are many SMBs in IBM’s vertical bailiwicks. IBM, its current and potential customers would all be well served by the availability of specific purchasing and licensing programs that provide aggressive entry-level price points and value-added licensing deals for SMBs.

Over three-quarters or 78% of survey respondents indicated they experienced less than one of the most prevalent, minor Tier 1 incidents per server, per annum on IBM’s AIX v. 5.3 and AIX v 7.1 distributions. An 83% majority of IBM AIX v 7.1 and Novell SUSE Enterprise Linux Server 11 and 82% of Windows Server 2008 R2 survey respondents indicated their organizations experienced less than one unplanned, severe/lengthy Tier 3 outage per server, per annum (See Exhibit 1).

Microsoft’s Windows Server 2008 R2 (which scored the biggest year-over-year reliability gains), and Novell’s SUSE Enterprise Linux Server 11 closely challenged IBM’s AIX v 7.1 server OS reliability and uptime – particularly with respect to the most severe and costly Tier 3 outages. Unplanned Tier 3 outages – whether manmade or as the result of a disaster — typically cause downtime in excess of four hours. There is widespread disruption of applications and network operations; customers and business partners are frequently impacted and Tier 3 incidents will almost always require remediation by a significant portion of the IT staff.

Those are the results of the ITIC 2011 Global Server Hardware and OS Reliability Survey. ITIC partnered with GFI Software (formerly Sunbelt Software) to conduct this independent Web-based survey. It polled C-level executives and IT managers at over 500 corporations from 23 countries worldwide from November 2010 through April 2011. ITIC updated and revised the survey in October 2011. And while the results of this latest survey were very similar, they also reflect the turmoil and controversy surrounding some of the vendors – most notably Hewlett-Packard and Oracle – that have the potential to impact reliability in the future.

On the server hardware side, IBM, Stratus Technologies, Fujitsu and Hewlett-Packard servers (in that order) were the four most reliable platforms, achieving an average 99.99% or 99.999% uptime per server, per annum. That equates to 5.25 minutes (99.999%) to 52 minutes (99.99%) of unplanned per server annual downtime.

The survey data indicated that the inherent reliability and uptime of all the major server OS and server hardware distributions has improved significantly over the past several years. In particular, IBM AIX and Novell SUSE Linux Enterprise Server consistently have maintained the highest reliability scores their platforms recorded in the prior ITIC 2008 and 2009 Global Server Hardware and Server Operating System surveys. IBM AIX and Novell SUSE users also praised the manageability and technical service and support available for those server operating systems.

Microsoft’s Windows Server 2008 and Windows Server 2008 R2 scored impressive reliability gains in the 2011 survey compared to the prior 2008 and 2009 polls. Survey respondents now rank Windows Server 2008 R2 as among the top three most reliable, mainstream server operating systems. Windows Server 2008 R2’s reliability renaissance is especially impressive since Microsoft’s Windows Server OS noticeably lagged behind the majority of the UNIX, Linux and Open Source distributions in the ITIC/Sunbelt Software (now GFI Software) 2008 and 2009 Server Reliability surveys. Among the other survey highlights:

• Security: The biggest surprise of the survey was the strong security showing by Windows Server 2008 R2
• Highest Percentage of Severe Tier 3 Outages: Oracle’s Solaris 10 running on SPARC hardware had the highest percentage of survey respondents — 16% – who said they experienced at least three and more than 12 unplanned per server, per annum prolonged Tier 3 outages lasting more than four hours.
• Lowest Percent of Severe Tier 3 Outages: By contrast just 5% of both IBM AIX v 7.1 and Microsoft Windows Server 2008 R2 survey participants reported experiencing at least three and more than 12 unplanned per server, per annum Tier 3 outages of more than four hours duration.
• Integration and interoperability issues: (e.g., incompatible drivers) and problems applying patches are the most common culprits of protracted, unplanned downtime. These problems are exacerbated when IT managers are forced to spend valuable time searching for fixes, or if the vendor has not yet recognized the issue and there is no fix.
• Server Age: A 57% majority of respondents said their servers – particularly the critical main line of business servers — are between one and three years old. Keeping the server hardware updated has a major impact on reliability. One-in-five survey respondents – 20% – said their servers were three-to-four years old.
• Server Refresh Rates: One-quarter – 25% — of businesses refresh their main line of business server hardware “as needed” and 10% said they upgrade a portion of their servers annually. However, 17% of survey participants said their organizations refreshed their main line of business server hardware every five-to-six years and another 15% indicated they had no specific timetable.

The survey results showed that nearly three-quarters – 74% — of companies are currently using a CRM solution and 57% of survey participants revealed that interest in CRM is increasing significantly. And perhaps most surprising, a 52% majority of survey respondents said they use more than 51% of their CRM solution’s functionality; of that number 18% utilize over 75% of CRM features.

CRM Usage Soars Among SMBs and SMEs

Customer relationship management (CRM) solutions long a staple in large enterprises are now also being widely embraced and deployed by small and mid-sized businesses to more efficiently track and manage businesses’ interactions with customers and partners.

The survey addressed broad ranging issues including CRM deployment trends, timetables and specific vendor products; the issues that propel and/or impede CRM deployment and usage; the types of CRM deployed: On-premise, SaaS, cloud or a combination and the benefits derived from a CRM solution by the company as well as the company’s customers

Overall, the survey results indicate that there is continued widespread support for and adoption of, CRM solutions. Half of the survey respondents – 50% — said they are analyzing or evaluating CRM solutions with an eye towards adoption while another 20% indicated they plan to install a CRM solution within the next six to 12 months. Interestingly, 26% of the survey participants indicated they’ve used a CRM solution for over 10 years. Ironically, an equal 26% of respondents revealed they do not currently use CRM.

Nearly three-quarters or 73% of the 74% of businesses that currently utilize a CRM solution reported that deployment and maintenance generally been smooth and free of any major deployment and maintenance problems. Some 26% of survey participants said they encountered “no problems” while another 47% of participants said they encountered only the “usual migration issues associated with new deployments.”

Survey Highlights

Among the other survey highlights:

• Among the 26% of respondents who are not currently using a CRM solution, the main impediments are:
• Cost – 57%
• No compelling business reason – 50%
• Unsure of what value it would provide – 50%
• Complexity – 43%
• Salesforce.com; Sage, Microsoft Dynamics, Sugar CRM and Oracle/Siebel were the most popular CRMs
• A 57% majority of participants said they are using or plan to deploy an on-premise CRM. This was followed by 18% of firms that indicated they are or will deploy a cloud-based CRM solution; 10% who say they are using or will implement a SaaS CRM and 15% who will use a combination of on-premises, cloud or SaaS CRM solution.
• An 86% majority of respondents cited Features/performance as the factor that most influenced their CRM purchasing decision. This was followed by 74% of respondents who checked off cost; while 71% said Ease of Use influenced their purchasing decision.
• Six out of 10 companies – 60% use only internal IT resources to deploy their CRMs; 31% use a combination of internal resources and external consultants or Systems Integrators
• A 52% majority of survey participants said they use >51% of their CRM solution’s functionality; of that number 18% utilize >75% of CRM features
• Nearly two-thirds of respondents – 62% — say that “upper management leads by example, using CRM, touting its benefits” in order to encourage employee usage
• On-premise CRM is the most popular choice among 57% of respondents

As with any poll, the survey did elicit some surprises. Foremost among these was the fact that organizations utilize a higher percentage of the inherent CRM solution’s functionality than previously thought. There is a long held perception that a significant portion of corporate end users find CRM packages too complex and fail to take full advantage of their features or avoid using them altogether. Failure to use a CRM solution not only squanders the corporation’s investment in the technology but it can also result in less efficiencies in tracking and managing customer relationships, with the unhappy consequence of making the end users less productive and their companies less competitive.

The survey findings contradicted those perceptions. A 52% majority of participants said that their businesses used 50% or more of their CRM’s functionality. However none of the respondents said they utilized “all” of the CRM’s functions. And nearly two-thirds or 60% of survey respondents indicated that in order to maximize CRM usage within the organization, senior executives lead by example and use it themselves.

As with any technology, CRM does present some challenges for would-be adopters. Foremost among these are: cost, complexity, ease of use and ease of manageability. Over half of the respondents revealed that they were using the “CRM-like” capabilities within Microsoft Office to achieve baseline CRM functions.

RSA Security: On April 1, in a move akin to raiding Fort Knox, RSA’s Secure ID technology (one of the industry’s gold standards in security software) was hacked. RSA executives described the hack as “very sophisticated.” They characterized it as an advanced persistent threat (APT)-type targeted attack. It used a routine tactic – a phishing Email that contained an infected attachment that was triggered when opened.

Epsilon:  This Irving, TX –based company handles customer email messaging for over 150 firms, including large banks and retailers like Best Buy, JPMorgan Chase, Citigroup and L.L.Bean. In April, millions of consumers learned that Epsilon’s networks were breached when they received Emails from their banks and credit card companies informing them that the hack might have exposed their names and Email addresses to the hackers. Epsilon released a statement assuring consumers that only Email addresses and names were compromised and that no sensitive data was disclosed.

Sony: Sony’s PlayStation gaming network suffered a series of massive security attacks in April/May that affected more than 100 million online accounts and shuttered the site for days. Sony executives estimate the hacks cost the Japanese electronics firm $170 million.

Lockheed Martin: On May 21, the aerospace giant released a statement saying its internal information systems network had been penetrated by what it called a “significant and tenacious” attack. The company declined to divulge details other than stating that “no customer, program or employee personal data had been compromised.”

Public Broadcasting System: the PBS website was hacked in mid-May and the perpetrators planted an erroneous story stating that deceased rapper Tupac Shakur was alive in New Zealand. The group that claimed credit for the hacking was apparently unhappy about PBS’ recent “Frontline” investigative news program on WikiLeaks.

Google: At least 84 instances of malware have been discovered in the company’s Android Market app store in the last three months. In March Google removed 50 applications from the store that contained malicious code embedded in legitimate applications. Over the Memorial Day weekend Google was forced to pull an additional 34 smart phone applications off Android Market because of suspected malware infections. Google’s security woes don’t stop there. In early June, Google disclosed that Chinese hackers targeted the email accounts of top U.S. officials and hundreds of other prominent people in a fresh computer attack certain to intensify growing concern about the security of the Internet. The victims, including government and military personnel, Asian officials, Chinese activists and journalists, were tricked into sharing their Gmail passwords with “bad actors” based in China, according to a Google blog post. The attack’s goal was to read and forward the victims’ email.

Apple (yes, Apple!): The Mac OX X 10.x OS has been under attack for the last month from the malicious Mac Defender/Mac Guard malware. A few days ago, Apple engineers released a fix and 24 hours later the hackers struck again with a new virus variant called Mindinstall.pkg which is specifically designed to bypass Apple security.

High tech devices, software applications, Emails, user accounts, social media and networks – even those presumed safe — are being hacked with alarming alacrity and ease.

Security tools, encryption and updating your networks with the latest patches are certainly necessary, but they are not enough. Corporations must arm themselves with the latest security tools and devices in order to effectively combat the new breed of malware, malicious code and ever more proficient hackers. I’m referring to the new breed of continuous monitoring tools that identify, detect and shut down vulnerabilities before hackers can find and exploit them.

In the late 1980s – the “early days” of computer networking hacking was a means to an end. The modus operandi of hackers, (usually white males in their teens and twenties) was to perfect their skills, perform a high profile penetration, claim it was a mistake and then land a well paying job with a legitimate security company. Many of today’s hackers are professionals who operate within an organized ring. Hacking is the means and the end. It’s an extremely lucrative business.

“The hackers have upped their game,” says Stu Sjouwerman, founder and CEO of KnowBe4, a Clearwater, FL company that trains corporate knowledge workers on how to avoid spam, phishing, spear phishing and social engineering hacks. “Hackers have gone completely professional. They’ve graduated from identity theft to full-fledged Internet bank robbery or cyber heists. There are now highly organized computer security “Mafias” in Eastern Europe, Russia, the Ukraine and Romania that employ highly qualified computer science majors who do nothing but hack. Most companies are woefully ignorant and unprepared to deal with the new threats,” Sjouwerman asserts.

On June 1, 2010 The National Institutes of Standards and Technologies (NIST) published new guidelines that require enterprises to engage in continuous monitoring of their networks. These guidelines are based on a wealth of real-world experience, and highlight the necessity of using new tools to facilitate implementation, says Major General John P. Casciano, USAF-Retired served as director of intelligence, surveillance and reconnaissance, deputy chief of staff, air and space operations, Headquarters U.S. Air Force, Washington, D.C. He is currently President and CEO of GrayStar Associates LLC, and consults on Cyber Security issues.

“In the dynamic and ever- changing network, continuous monitoring simply can’t be performed manually; it must be supported by software that provides powerful new weapons with which to successfully defend and thwart attacks,” Casciano says.

Continuous monitoring encompasses both a new approach as well as new products and tools is a preventive and prescriptive measure. It Continuous monitoring enables organizations to detect threats as they occur, and most importantly to identify vulnerabilities that can be mitigated or plugged in advance of a cyber “intrusion” or “attack.” The NIST guidelines are based on a wealth of real-world experiences. These include “routine” attacks launched on individuals’ online social media accounts like Facebook and Twitter. Each day the headlines deliver yet another sobering call for corporations and consumers alike to wise up and defend their data.

We all know that there is no such thing as a 100% hack proof network, application or device. Hacks from malware (phishing, Trojans, bots, worms, zombies et al) to exploits that result in forgotten back doors to targeted corporate espionage are facts of 21st Century computing life.

Hackers are more organized and the attacks themselves are becoming more sophisticated and more pernicious. They use the Internet as a superhighway to circumnavigate the globe faster than you can say “Magellan.” What’s worse, the hackers are aided and abetted by corporations with lax, porous and often outdated computer security measures. Consumers too, are often the hackers’ best helpmates particularly when they don’t keep their anti-virus and firewalls up-to-date and don’t check the privacy settings on the many social networking sites they frequent!

Security experts warn that malware is proliferating at the astounding rate of 73,000 new threats cropping up on a daily basis; a 26% increase over the 2010 statistics. Even if we apply the 10/90 rule: 10% of all malware and rogue code is responsible for 90% of the damage, the upswing in security threats is alarming.

Unfortunately, corporations and consumers tend to get complacent in the absence of a data breach that directly impacts them or their organizations. It’s easier to rationalize and downplay the very real security threats and delay implementing the necessary proactive measures. It takes headlines or more recently those messages appearing with alarming regularity in our personal Email boxes to give us all a much needed jolt. Computer, cell phone/smart phone, notebook, tablet and networking security are fragile, ephemeral and fluid. Meaning the risks are always present and exploits are always lurking and waiting to happen.

This is War: Continuous Monitoring, the Latest Weapon in the Ongoing Security Battle

In response to the growing cyber-threat, United States Senators John Kerry and John McCain have introduced a bi-partisan online privacy bill designed to protect and control personal information. If the legislation passes it will prohibit the collection and sharing of private data by businesses that have no relationship to the consumer for purposes other than advertising and marketing.

The 2010 Verizon Data Breach Investigations Report, released last July and based on a first-of-its kind collaboration with the U.S. Secret Service, found that breaches of electronic records last year involved more insider threats, greater use of social engineering and the continued strong involvement of organized criminal groups.

The report cited stolen credentials as the most common way of gaining unauthorized access into organizations in 2009, pointing once again to the importance of strong security practices both for individuals and organizations. Organized criminal groups were responsible for 85 percent of all stolen data last year, the report said.

The stories behind the statistics are even more alarming. Hackers collaborating via the Web and forming their own online communities to exchange data and perfect hacks, And now they’re moving from V2P: virtual to physical, with entire communities – most prominently in Eastern Europe devoted to the pursuit of career cracking. The city of Râmnicu Vâlcea, population 120,000 and located three hours outside of Bucharest in the Transylvania Alps has been dubbed “Hackerville” by global law enforcement agencies. The town is brimming with cyber crooks that specialize in targeted corporate malware attacks and Ecommerce scams. Business is so profitable that the town is home to luxury car dealerships and apartment buildings and upscale restaurants, shops and nightclubs. The town’s reputation as a malware maelstrom has become so notorious that it was the subject of a feature article in the March issue of Wired Magazine.

The real lesson of the Verizon Business Data Breach Report and even Hackerville is that the overwhelming majority of data breaches can be thwarted if companies establish and follow good computer security practices and back these up with the latest technical weapons. Astoundingly, only four percent of breaches assessed in the Verizon Business Data Breach report required difficult and expensive protective measures. The report further claimed that 87% of attacks could be prevented using simple, proactive measures.

The 2010 Verizon report concluded that being prepared remains the best defense against security breaches. For the most part, organizations still remain sluggish in detecting and responding to incidents. Nearly two-thirds of breaches — 60% — continue to be uncovered by external parties and then only after a considerable amount of time. And while most victimized organizations have evidence of a breach in their security logs, they often overlook them due to a lack of staff, tools or processes.

Casciano maintains that any corporation that is serious about creating and maintaining a secure environment needs to deploy continuous monitoring tools. Right now there are two types of continuous monitoring devices: “those that address what’s going on in the enterprise and identify vulnerabilities and those that enable companies to plug holes and correct vulnerabilities in advance so the attack is not effective,” Casciano says. There are several companies that address this emerging market segment. Veteran security firm ArcSight which was acquired in 2010 by Hewlett-Packard Co. and the Einstein Program developed by the Dept. of Homeland Security produce products that enable businesses to identify the potential weak spots in their networks. Other companies like RedSeal in San Mateo, CA and the Security Content Automation Protocol (SCAP) address the rapidly emerging secure product class of both identifying and closing the holes in the network.

RedSeal’s Systems Network Advisor v4.1 and Vulnerability Advisor v4.1, for example, are near real-time risk management solutions that use network and vulnerability data to determine risk and provide prioritized remediation recommendations. RedSeal security packages allow organizations to assess and strengthen their cyber defenses. Unlike systems that detect attacks once they occur, RedSeal identifies holes in the security infrastructure that create risk – before they are discovered by hackers.

Casciano says organizations must utilize both types of continuous monitoring. The products in the first group (HP’s ArcSight and the Einstein Program) provide business with “tactical warnings and a snapshot in time of the activities within the IT enterprise” so that management can react to specific events. The second class of products (RedSeal and SCP) “exposes the strengths and weaknesses of the entire IT enterprise, identifies potential avenues of attack and enables management to take defensive actions well in advance of an attack,” Casciano notes.

Ultimately though, computer security products represent only half the solution. The other 50% is human element. Companies and their IT departments must construct strong computer security policies and procedures, disseminate them to the entire staff and employee population and enforce them. In an age where hackers’ ranks are swelling and successful penetrations are increasing, corporations would be wise to arm themselves with the continuous monitoring tools to thwart cyber terrorists.

Ask yourself: “What have you got to lose?”

Following two consecutive fiscal quarters, Cisco Systems shocked the industry three weeks ago with the news that it will cease to manufacture its popular Flip video camera and will lay off the division’s 550 workers, substantially reducing its consumer businesses.

Also within the past two weeks, Cisco unveiled a voluntary retirement program aimed at workers 50 years old whose age plus tenure at the company equals 60; these workers have from May 10 through June 24 to opt in. This is the first time in two years that Cisco instituted such a cost cutting policy.

Cisco recently hired Gary Moore as Chief Operating Officer to fine tune its re-focused initiatives.

Then yesterday (May 5) Cisco, headquartered in San Jose, CA announced more dramatic actions to get back on track. With its heretofore unchallenged dominance in networking switches and routers, now under attack by Arista, Hewlett-Packard, Juniper Networks and others, Cisco announced it is reorganizing and streamlining its management operations and structure. In the past year, Cisco (like many high tech Titans) has seen a number of key executives defect to rivals. Longtime CEO John Chambers acknowledged in an April memo that the departures had slowed decision-making and caused lapses in operational execution. The net result: confusion among customers, dissension among company investors and lots of worry on Wall Street.

Yesterday’s initiatives are aimed at simplifying and re-focusing the company’s focus around its core competencies in switches and routers, even as Cisco eyes transitioning those products to the cloud. Going forward, Cisco will re-organize operations around specific geographic areas and customer segments. Chambers believes this will enable mid and lower level managers to make decisions autonomously and respond more swiftly to customers and changing market dynamics.

“It’s time to simplify the way we execute our strategy, and today’s announcement is a key step forward,” Chambers said in a prepared statement.

Cisco identified five areas of growth that are crucial to its success. They include: routing, switching and services; video; collaboration and Web-conferencing offerings; data-center virtualization and cloud computing, which are technologies that help companies outsource and streamline computing operations; and architectures for business transformation.

Cisco also unveiled some management changes. Senior vice presidents Pankaj Patel and Padmasree Warrior—who is also Cisco’s chief technology officer—were named to co-lead Cisco’s engineering group.

What the Moves Mean

Cisco has grown rapidly in the past decade, in large part through a flurry of well timed and targeted acquisitions. Unlike HP and Oracle, which are known for gobbling up very large competitors, Cisco’s Chambers prefers to acquire small and midsized firms that can boost Cisco’s presence in a particular market arena. This strategy has served Cisco well. It’s issued far fewer pink slips to employees than either HP or Oracle who have cut tens of thousands of workers in the past several years as they’ve absorbed industry giants. At the same time though, Cisco’s stock has been stagnant. As of today Cisco’s stock is at $17.62 which is at the bottom of its 52-week range of $16.52 to $26.80. On the plus side its profit margin is still a healthy 17.89% and its operating margin is a robust 21%. However, return on assets is only 7%, although return on equity is a respectable 17.38%. Chambers has always been fiscally responsible and it shows in the balance sheet. Cisco has $40.23 billion in cash and just $15.24 billion in debt.

Cisco will report its fiscal third-quarter earnings report next week. Wall Street, investors and competitors will be watching closely. It is imperative that Cisco jumpstart its momentum in switches and routers and repel rivals. Cisco must also score a big win with its cloud initiative. It’s no secret that nearly all the top tier high tech vendors are aiming for a dominant position in this emerging market. Financial analysts are openly wondering how long Chambers can hold out before he’s forced to lower prices on Cisco’s networking gear. Cisco must also executive and defend its position in its stated five core product/technology priorities: switches and routers; cloud computing and data centers; “architectures” (network design) and video.

As we said at the beginning of this article, all of the executive personnel and product changes underscore increasingly cutthroat, competitive market conditions. To stand still and do nothing is to fall by the wayside and effectively be shut out of the race.

In contrast to Apple’s stunning success, the first calendar quarter of 2011 was a revolving door for other Silicon Valley companies and executives. There were management shifts, shakeups and ousters at Advanced Micro Devices (AMD), Google, Hewlett-Packard (HP) and Microsoft. They were variously aimed at jumpstarting product momentum (AMD, Microsoft), polishing a tarnished image and placating stockholders (HP) and providing an orderly transition of power (Google).

You need a scorecard to keep up with all the comings and goings.

AMD’s board ousted chief executive Dirk Meyer in mid-January after only 18 months on the job. It then appointed Senior Vice President and CFO Thomas Seifert, as interim CEO while the search goes on for a permanent chief executive. Siefert continues as chief financial officer and says he does not want to be considered for the permanent CEO position. This is probably a smart move. AMD’s flamboyant co-founder Jerry Sanders spent 33 years as CEO (1969 to 2002), but everyone who’s followed has had a short tenure.

The challenge for any AMD chief executive is to jumpstart momentum and somehow find a way to gain ground on perennial logic chip front runner Intel and Nvidia which dominates the mobile (Tegra 2) and graphics chip market. AMD’s Opteron dual and quad-core processors and the mobile and graphic chips which it acquired in its 2006 purchase of ATI are all solid offerings. However, AMD’s former CEO Hector Ruiz and Meyer elected to focus on optimizing their chips for traditional notebooks instead of the lightweight mobile devices and tablets that are stars in today’s markets. According to statistics published by International Data Corp., Intel’s share of the PC and server chip market is approximately 81% compared with AMD’s 19%.

AMD continues to shuffle its executive ranks. In February, two senior executives, Bob Rivet, executive vice president and chief operations and administrative officer, and Marty Seyer, senior vice president of corporate strategy, also resigned. In late March the company named former HP executive Mike Wolfe as its new chief information officer. Prior to joining AMD, Wolfe served as vice president of information technology for product development and engineering at HP. Wolfe is now responsible for managing AMD’s global technology infrastructure. Ironically, AMD’s former CIO Ahmed Mahmoud, who departed in 2010, went to HP where he is currently the Senior Vice President of the global information technology group.

HP Still Hurting from Hurd Scandal

HP has also had its share of executive shakeups in 2011. All of them stem from the continuing fallout from former CEO Mark Hurd’s exit last summer. The reverberations have tainted the company’s once pristine image and they are as toxic to HP as the radiation leaking from Japan’s Fukushima nuclear power plant. Hurd left under a cloud of scandal amidst charges of sexual harassment and dodgy expense accounting related to an undefined but inappropriate relationship with a female contract employee. A scant week after Hurd’s departure which included a platinum severance package worth $44M — a group of HP shareholders filed suit. The suit alleges that HP board members are guilty of “gross mismanagement and waste of corporate assets.” They claimed the board put the shareholders’ finances at risk by failing to disclose the charges of sexual harassment against Hurd. It sounds reasonable. What’s particularly galling to shareholders and rank and file employees is that Hurd got rewarded for his bad behavior after he spent the last several years cutting tens of thousands of workers from HP’s payroll.

In January, HP replaced four of its board members and added an additional director to the board. The departing HP board members are Joel Hyatt, John Joyce, Robert Ryan and Lucille Salhany. They are replaced by Shumeet Banerji, chief executive officer of Booz & Company; Patricia Russo, former CEO of Alcatel-Lucent; Gary Reiner, former CIO at GE; Dominique Senequier, CEO of AXA Private Equity and Meg Whitman, former president and CEO of eBay Inc.

The new board members provide HP with diversity and wide ranging experience. By overhauling its board, HP seeks to mollify outraged shareholders and distance itself from the Mark Hurd debacle. This is no easy task. HP launched its own investigation of Hurd’s departure. It will be conducted by CEO Leo Apotheker, the new board members and outside legal counsel. Apotheker has wasted no time assembling his team. On April 18, HP announced that Thomas Hogan, who headed the company’s enterprise business sales and marketing, will leave on May 31 to “pursue other interests.” Hogan’s replacement is Jan Zadak (a former Compaq executive). Zadak is presently the managing director for HP’s Europe, Middle East and Africa (EMEA) operations. In mid-April, HP also appointed Marty Homlish as executive VP and chief marketing officer. Homlish will be responsible for overseeing and leading marketing across the company and will become a member of the company’s Executive Council, reporting directly to Leo Apotheker. Homlish and Apotheker worked together before at SAP AG, where the latter was CEO. Prior to joining HP, Homlish spent 10 years at SAP AG, where he served as the global chief marketing officer and corporate officer, as well as president and CEO of SAP Global Marketing, Inc.

There was also a seismic (though amicable) shift at search engine market leader Google. The company announced in January that Eric Schmidt would relinquish his CEO post in April in favor of company co-founder Larry Page. Page took over in early April and immediately reshuffled managers and the reporting structure.

The CEO change at Google is prompted by the desire to aggressively expand into new markets. Page is going to have to prove himself. Wall Street is nervous. In the wake of continuing skirmishes with leading vendors including Microsoft and Apple and latest and somewhat disappointing financials reported on April 14, many on Wall Street are concerned about Google’s prospects. They question the company’s aggressive spending spree. Months ago Google announced plans to hire 7,000 to 10,000 new workers; hand out 10% company-wide salary increases and aggressively pursue new business. That includes technology expansion into everything from smart phones to social networking to mobile and expensive marketing campaigns.

In its latest quarter, Google reported expenses of $2.84 billion; a 54% increase from the prior year. While revenues in the latest quarter ended March 31 rose by 29%, Google’s stock price has decline by nearly 9% since January when it announced that Schmidt was stepping down as CEO. The decrease has wiped out roughly $12.5 billion from Google’s market capitalization which now stands at $173.09 billion (still one of the best in the industry). Google remains the dominant player in the search engine arena with a commanding 65% market share. Its next closest competitor is Microsoft’s Bing which has about 14% and Bing is linked to Yahoo which has another 16% for a combined share of 30%. Google’s Android mobile operating system meanwhile remains the undisputed market leader with a solid 45% market share; twice that of its nearest rival Apple’s iOS.

“Dog Wars” Android App Bites Google’s Image

Meanwhile, Google faces growing and well deserved criticism by the Humane Society, the ASPCA and animal rights activists who are outraged over an Android application called “Dog Wars.” The video game built by Kage Games glorifies dog fighting and depicts a bloodied pit bull next to the game’s logo on Kage’s website. Humane Society President Wayne Pacelle said in a prepared statement that “Dog Wars” could be used as virtual training ground for would-be dogfighters. Even Philadelphia Eagles quarterback Michael Vick who spent 18 months in prison after being convicted of illegal dogfighting, condemned the Android application. “I’ve come to learn the hard way that dogfighting is a dead-end street,” Vick said in a statement posted on the Humane Society’s website. “Now, I am on the right side of this issue, and I think it’s important to send the smart message to kids, and not glorify this form of animal cruelty, even in an Android app.”

Google ducked the issue for two weeks before it was finally pulled from Android Marketplace. on April 28. This incident also shines the spotlight on a larger issue: as Google further expands into the gaming industry via the number one Android operating system, will profits win out over principles and ethics? To further extend the Android mobile OS and solidify its lead, Google launched the new “Games at Google” gaming unit and they are seeking a Product Manager to fill the post. Let’s hope it top management provides some much needed ethical oversight.

Changes are also afoot at Microsoft. In late January CEO Steve Ballmer announced the departure of 23 year veteran Bob Muglia who successfully ran the company’s very profitable Server and Tools business. Under Muglia’s direction, STB recorded a $1.63 billion operating profit on sales of $3.96 billion in the prior fiscal quarter. Muglia will leave sometime this summer. To date, Microsoft has been mum about his replacement and while the company isn’t saying anything publicly word inside the company is that Ballmer forced Muglia out to accelerate Microsoft’s cloud strategy.

Whether or not that’s the case, Ballmer should speed up the search for Muglia’s successor and plug the gaping holes left by other very visible departures. They include: Brad Brooks, a corporate vice president in the Windows consumer marketing group who left to work for Juniper Networks; Matt Miszewski, the general manager of Microsoft’s government business who is taking an executive post Salesforce.com and Johnny Chung Lee, the infamous Wii hacker who partnered with engineers in Microsoft’s Applied Sciences group to develop the Kinect for the Xbox 360. Lee is defecting to Google. Ouch! The Kinect motion camera has been an unqualified success for Microsoft. It sold eight million units in the first 60 day. Microsoft is also betting heavily on its Windows Phone 7, which has garnered generally positive reviews. Microsoft says it has sold over two million units to date but it isn’t clear how many of those units (which have been shipped to partners) have actually been sold. Microsoft will have to bring its “A” game to challenge Android-based smart phones, Apple’s iPhone 4 and RIM’s Blackberry.

In the first four months of the year high tech vendors moved quickly and decisively to seize opportunities in established sectors (smart phones, virtualization, back-up and disaster recovery) and emerging markets (cloud computing, tablet devices and unified storage management). As 2011 unfolds, it’s apparent that high technology vendors are willing to shift strategies and shed executives in order to stay one step ahead of or keep pace with competitors. The competition is cutthroat and unrelenting. No vendor, no matter how dominant its market share, how pristine its balance sheet or how deep its order backlog and book to bill ratio dares relax or rest on its laurels for even a nanosecond.

Recaps of some of the year’s highlights thus far are very revealing.

January lived up to its reputation for sweeping out the old and ushering in the new. The first four weeks of the year were hell on top executives. Advanced Micro Devices (AMD), Apple, Google, Hewlett-Packard and Microsoft all had shake-ups in their management ranks, albeit for very different reasons.

Apple delivered the first jolt early in the month. In a well orchestrated announcement (on the Martin Luther King holiday, a slow news day, and just in advance of its second quarter earnings release) the company said founder and chief executive Steve Jobs, the architect of Apple’s renaissance, would take a leave of absence for an undisclosed period of time to focus on his health. Tim Cook, Apple’s chief operating officer will serve as the interim CEO and he is most likely to inherit the top spot if Jobs doesn’t return.

News of Jobs’ departure was not entirely unexpected. He’s battled serious health problems for the past several years which necessitated a prior medical leave. Industry watchers greeted the news with gloom and dire prognostications. The fears were assuaged somewhat when Jobs made two high profile appearances. He was among a select group of Silicon Valley luminaries who dined with President Barack Obama in mid-February. More importantly though Jobs was on hand to launch the iPad 2 at Apple’s March 2nd press conference. This was an encouraging sign for Wall Street and industry watchers. They constantly wonder: can Apple continue to maintain its incredible momentum and success absent Jobs’ leadership, creative genius and vision with “just” an ops guy (Tim Cook), no matter how smart and accomplished? The answer for the first fourth months of 2011 is a resounding “Yes.”

The fears concerning Jobs are not wholly unreasonable. However, based on Apple’s continuing strong performance across all market sectors in which it participates, it would take freight train to blunt the Cupertino firm’s momentum. Apple’s iPhone powered by the iOS mobile operating system is one of the top three smart phone platforms along with devices powered by Google’s Android and Research In Motion’s BlackBerry. On the tablet front, Apple is the preeminent vendor with a dominant 65%+ market share. This won’t change anytime soon. Despite some early problems with light leakage on its displays, demand for the iPad 2 is robust – outpacing even its predecessor, the original iPad. The first shipment of iPad 2s sold out within the first 24 hours of its availability on March 11 at all of the 220 Apple stores in the U.S. Over a month later, the current order backlog for online sales stands at one to two weeks.

At press time, Apple’s stock was hovering at about $347 – which is on the high end of its 52-week range of $199.25 – 364.90. Apple’s sales for its last fiscal year, ended Sept. 30 2010, were $65.2 billion a little more than half of the $126 billion in annual revenues that HP recorded in its most recent fiscal year and approximately two-thirds of IBM’s revenues of $99.9 billion in FY 2010, while. A recent survey of financial and industry analysts conducted by Thomson Reuters forecasts that Apple’s fiscal 2011 revenues could rise by over 30% to $99.94 billion and reach $117.77 billion in fiscal 2012 for a very impressive two-year compound annual growth rate of 34.4%.

Location, Location, Location

Apple’s sales are on fire because their products are cool.

This is a big reason why Apple’s reputation hasn’t suffered much from the so-called “Locationgate” flap that cropped up in the last two weeks. The core issue is that unbeknownst to users Apple’s iOS was recording and storing all the details of all the places they visited via their iPhones and iPads. Apple was mum for a couple of weeks and then finally on April 27 the company issued a statement clarifying the situation.

First, Apple acknowledged that this was a bug and would be rectified. Next Apple said that the devices were not tracking the users’ movements but rather “maintaining a database of Wi-Fi hotspots and cell towers around your current location that is then used by your iPhone to rapidly and accurately calculate its location when requested.” The data is then downloaded by the user’s iPhone or iPad. The bug occurs because the iPhone continues to maintain the cache of data even after the iOS Location Services are switched off. Apple will rectify the matter by deleting the cache when Location Services is switched off.

To drive home the point even further, Steve Jobs did telephone interviews with several reporters. The better late than never explanation has satisfied most users although some in the blogsphere and forums say that Apple is doing little more than engaging in spin control because it got caught. Should Apple have said something sooner? In a perfect world, yes. Apple’s products are not perfect. They do experience problems. ITIC’s latest 2010 Apple Consumer and Enterprise Survey, which polled nearly 800 users last November/December found that Apple has an excellent track record with respect to addressing and fixing technical issues and performance problems. Eight-out-of 10 or 82% of respondents said they “never”, “rarely” or only “occasionally” encounter difficulties with Apple products/devices. Only a 7% minority indicated they experience weekly or daily issues. But whether you believe Apple’s statement is a ploy or a sincere public mea culpa, Apple is fixing the problem and that’s what counts.

For future reference though, Apple and all high tech vendors would do well to respond to these issues as they occur and not wait days or weeks.