Daily Archives: October 2, 2009

So That’s Where Martin Taylor Wound Up

Looking back at some of my earliest posts, I wondered about the professional fate of Martin Taylor, former corporate vice president of Windows Live and MSN at Microsoft.

A protege of Microsoft CEO Steve Ballmer, Taylor left he company under mysterious circumstances that were never explained, at least publicly. One day he was there, seemingly entrenched and scheduled to make speeches on the company’s behalf, then suddenly he wasn’t. It was a situation that begged for clarification, but nobody who knew what happened was willing to provide enlightenment.

Anyway, I did a bit of digging and discovered Taylor’s current whereabouts.

For the last few years, starting about six months after he left Microsoft, Taylor has been with Vista Equity Partners, a San Francisco-based private-equity firm with more than $2 billion in committed capital. Taylor’s title at Vista is operating principal. I can’t resist mentioning — though perhaps I should — the irony implicit in an erstwhile Microsoft executive, who left Redmond under a cloud, now working for a company named Vista.

Reality writes a good script.

Avaya Instructs Channel that Nortel Remains a Competitor

Avaya has advised its resellers to continue treating Nortel as a competitor until its deal to buy the insolvent Canadian company’s enterprise business is formally approved, according to a report in ChannelWeb.co.uk.

Combining the two companies’ channels will not be easy, and many of Nortel’s current channel partners might choose to leave the fold if it is acquired by Avaya. The product portfolios of Avaya and Nortel also conflict and overlap in key areas, and Nortel products will be on the losing end of most decisions involving which to keep and which to jettison.

All of this is occurring against the backdrop of a review by the Canadian government into Avaya’s $900-million acquisition of Nortel’s enterprise assets in a bankruptcy auction. The Canadian federal government is considering whether the acquisition is of net benefit to the country.

Siemens Enterprise Communications was the runner-up in the auction. If it had won, it would have agreed to keep the business’ headquarters in Toronto. Siemens also would have been more likely than Avaya to retain Canadian jobs and research and development.

As for Avaya’s channel decree that Nortel is to be treated as a competitor until further notice, it’s a prudent move. The acquisition won’t be a done deal until it fully navigates the approvals process, and it still has a major obstacle to clear.

IBM’s LotusLive iNotes More Defensive than Offensive

IBM is getting into the web-based email and collaboration game, but I wonder how dedicated the company will be to seeing the effort through.

While Microsoft is merely using its web-based Exchange Online and Office Web Apps as complements and cloud-based extensions to its Exchange and Office franchises, Google has no desktop-software empire to defend. As such, Google has been more aggressive, packing together more features and functionality and being more ambitious in its online-collaboration aspirations.

IBM is likely to follow Microsoft’s lead, doing enough to staunch Google’s incursions onto its turf, but not doing enough to prevent Google from winning customers that are enthusiastically committed to the web-based model. How many customers there are in that category remains to be seen, but IBM has lost an account or two to Google — Fairchild Semiconductor is one — and Google touts Genentech Inc. and Salesforce.com as customers.

All of which explains the motivation and reasoning behind LotusLive iNotes, which includes web-based email, calendar, and contact-management services. IBM says LotusLive iNotes is ideal for employees that don’t “require all the capabilities of full-featured email and collaboration software, or for employees that currently have no access to company email.”

IBM has limited the market reach of the product, however, by skimping on features and functionality and by limiting the amount of storage allocated to each user. IBM expects LotusLive iNotes to find patronage at small- and medium-sized businesses and at some larger companies whose employees are often on the go and away from their desks.

There’s no question that Google Apps is a fuller collaboration suite. In addition to providing web-based email, calendar, and contact-management capabilities, Google also supplies word processing, spreadsheet, and presentation applications, plus a video channel. There’s a price differential, though. Google Apps Premier Edition is priced at $50 per user annually; IBM’s LotusLive iNotes starts at $36 per user annually.

Google’s service outages are another factor in the equation. IBM timed this announcement well, just after some notable Google availability issues that could discourage enterprise customers from taking the company seriously as a messaging alternative to IBM or Microsoft. In announcing LotusLive iNotes, IBM took every opportunity to highlight Google’s recent foibles.

I see the IBM move as more defensive than offensive. IBM is taking technology it purchased from Outblaze, a Hong Kong-based company, and using it to extend (but not to replace) its Lotus Notes franchise. Like Microsoft, IBM won’t be in a rush to cannibalize a profitable franchise in email and collaboration.

With web-based technologies, IBM will do what it must do to repel Google, but it will refrain from pushing too far, too fast. The margins on Lotus Notes are better than anything IBM could sustain with web-based services. That is why IBM is touting a hybrid approach that incorporates both server-based and web-based elements.

Oracle’s Evil Genius in MySQL Play

We knew before that Larry Ellison and Oracle intend to keep MySQL. Now we know precisely why they want to keep it. What we don’t know is how the European Commission, which is involved in an extended review of Oracle’s pending $7.4-billion acquisition of MySQL’s owner Sun Microsystems, will respond to Oracle’s position.

Oracle has indicated that it sees MySQL primarily as a database for small- to mid-size enterprises (SMEs) and for developing markets. That’s how it intends to position and sell MySQL.

Interestingly, those are the same markets where Microsoft SQL Server enjoys its greatest success. In that regard, Oracle isn’t being coy. In fact, it wants to keep MySQL for the express purpose of competing against Microsoft.

A recent study by Evans Data suggests what’s at stake. According to the study, Microsoft SQL Server is the most popular database in the emerging markets of China, India, Eastern Europe, and Latin America, but MySQL isn’t far behind. Evans says more than 50 percent of developers in the emerging market countries said they are using Microsoft’s SQL Server, but 46 percent said they are using MySQL. Microsoft’s SQL Server leads in China and Latin America, and MySQL is slightly stronger in India and Latin America.

Emerging markets, such as those above, aren’t nearly as receptive to Oracle’s database products. A relatively high percentage of database buyers in emerging markets are sensitive to price, and they get toxic sticker shock dealing with Oracle sales representatives. That means Oracle is failing to capture critical share in some of the fastest-growing IT markets in the world. Meanwhile, Oracle’s arch-nemesis from the days of yore, Microsoft, is taking a market-leading position.

MySQL gives Ellison a cudgel with which to beat Microsoft. It also gives Oracle an opportunity to win business and generate revenue from accounts it would have lost otherwise.

One can see now that MySQL, far from being something Oracle didn’t want, might actually have been a critical draw in Oracle’s attraction to Sun.

With this in mind, let’s get back to the European Commission and its antitrust review of Oracle’s Sun acquisition. The EC held up the acquisition because of concerns about reduced competition in the database market. The European regulators were worried that Oracle might discontinue or otherwise sabotage MySQL to eliminate a competitor from the market.

Oracle has signaled that it has no intention of killing MySQL. Instead, it wishes to target MySQL at smaller enterprises and developing markets, where it will compete directly against Microsoft SQL Server.

Moreover, Oracle is claiming that MySQL never was a meaningful rival to its own database products. As such, Oracle is saying that there is no possibility of reduced competition in the database market. In fact, Oracle seems to suggest that competition will intensify because it will be in a stronger position than Sun to market and sell MySQL effectively against Microsoft.

Strictly speaking, Oracle isn’t lying, but it is leaving out a large part of the story.

Before Oracle made its move to buy Sun, the latter had been committing resources to bolster and scale MySQL so that it could compete for high-end enterprise accounts against databases from Oracle, IBM, and Microsoft. I have no doubt Oracle noticed those efforts before it made the Sun takeover bid.

Actually, this is the sort of shrewd, if somewhat malevolent, brilliance that has made Oracle the software colossus it is today. By gaining possession of MySQL, Oracle both preemptively eliminates an incipient enterprise competitor while gaining new products that can go up against Microsoft in burgeoning emerging markets. That’s evil-genius stuff, killing two birds with one huge, multibillion-dollar stone.

I don’t expect the EC to figure it out, though. The wait might be uncomfortable for Oracle, but I suspect it will receive clearance to proceed with the Sun acquisition on or before the EC’s self-imposed deadline of January 19.

Additional Observations in Wake of Cisco’s Tandberg Buy

A couple observations surfaced as I read a Wall Street Journal piece today on the deepening competition between HP and Cisco in the wake of the latter’s $3-billion acquisition of Tandberg.

First, as I mentioned in my previous post regarding Polycom’s near-term prospects, Polycom is well placed to benefit from alliances in the videoconferencing-systems market. Companies that had reseller relationships and technology partnerships with Tandberg will reassess those alliances in the aftermath of the Cisco acquisition. Polycom is well positioned to benefit.

Said Polycom CEO Bob Hagerty:

“It’s a great opportunity to get in there and talk to HP.”

Indeed. Even though HP has indicated that it will continue reselling Tandberg gear “for the foreseeable future,” it’s worth noting that HP moved its telepresence operations into its ProCurve Networking business, where there is no love lost for Cisco. I would wager that the ProCurve strategists are spending some cycles thinking about how they transition away from Tandberg.

Something else that caught my eye is the geographic distribution of Cisco’s cash hoard. Cisco has $35 billion in cash, but $29 billion is overseas and can’t be spent in the US without a large tax penalty. Ned Hooper, Cisco’s chief strategy officer, noted that the Tandberg deal was made with overseas cash reserves.

Given the disposition of Cisco’s cash stash and its stated intention to get back on the acquisitions trail, we should look for Cisco to continue shopping for deals outside the US. Perhaps a future post will be devoted to Cisco acquisition candidates in Europe.