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Volume 2, Issue 6: Friday, January 14, 2000

  • "Gates Quits as Microsoft's CEO"
    Washington Post (01/14/00) P. A1; Streitfeld, David; Leibovich, Mark

    Bill Gates resigned yesterday as Microsoft's CEO, handing the role over to the company's President Steve Ballmer. Gates will remain chairman, and will fill the new position of chief software architect. The announcement comes shortly after reports that the Justice Department is seeking to divide Microsoft into three separate companies, as well as the recently announced AOL-Time Warner merger. Gates and Ballmer both emphasized that the recent events are not related to the management shift, but people close to Gates think otherwise. "Bill didn't have the heart to preside over the breakup of his own company," says Paul Saffo, director of the Institute for the Future in Silicon Valley, in respect to the federal government's antitrust suit against Microsoft. Saffo adds, "Bill has to be looking at the Time Warner-AOL deal with great anguish, realizing if he had just been a little more cooperative earlier in his career he would be the guy leading the charge into the future." In addition to the lawsuit and AOL's announcement, Microsoft is facing competition in the Internet services market, and will have trouble controlling the software standards for online services, analysts say. Meanwhile, Microsoft CTO Nathan Myhrvold says Gates "has always been the business genius and the technology genius who runs the company," but notes that administrative skills are not Gates' main strength. Discussing his decision and his accomplishments at Microsoft, Gates said at a news conference that he has "no regrets at all." Gates says he will remain as dedicated to Microsoft in his new role as he has been over the past 25 years as CEO.

  • "Justice Said to Be Seeking Breakup of Microsoft Empire"
    Los Angeles Times (01/13/00) P. C1; Bridis, Ted

    The Justice Department plans to seek a Microsoft breakup as a solution to its antitrust suit against the software giant, and will outline the plan in next week's settlement talks, according to people close to the case. Government lawyers want to split Microsoft into three separate companies, although it is unclear at this point how they wish to restructure the company. One source says lawyers do not want separate companies for the areas of Windows, software applications, and Internet content. Another solution that had been suggested is splitting Microsoft into several "Baby Bills" that would offer the same products and compete with one another. State attorneys general from the 19 states that sued Microsoft are now considering whether to support the breakup or pursue a different solution, but sources say they seem to favor the breakup. However, at least one state warned that dividing Microsoft would be disruptive to consumers. The Justice Department believes that lesser sanctions against Microsoft would be inadequate, while Microsoft's Jim Cullinan calls the breakup proposal "extreme and radical." The Justice Department proposal could cause Microsoft to seek milder solutions in the settlement talks, which have made little progress so far, or the proposal could cause Microsoft to fight the case in courts for years.

  • "As Linux Gains Acceptance; Banks Still Slow to Adopt It"
    American Banker (01/13/00) P. 12; Power, Carol

    Although the financial services industry is adopting Linux more slowly than other industries, banks are beginning to look into the open source operating system, says research firm Tower Group. Banks still prefer Microsoft's Windows NT, IBM's AIX, Sun's Solaris, and Unix, but the top 100 banks worldwide are expected to increase Linux spending 32 percent annually through 2003, Tower says. Linux has not caught on quickly at banks because banks tend to be conservative and require security and reliability, according to Tower. However, increasing vendor support for Linux, especially from IBM, will push Linux into financial services, says Tower analyst Rajeev Agarwal. Linux continues to gain mainstream support; IBM this week announced plans to modify all of its software to run on Linux, and Sun last month announced that it will release a version of Linux compatible with its workstations and servers. The number of Linux users jumped to about 9 million last year, up from about 1,000 in 1992, Tower says. In addition, Linux deployments are growing twice as fast as Windows NT, its closest rival, experts say.

  • "White House Proposes Liberalized Rules For Export Sales of Encryption Software"
    Wall Street Journal (01/13/00) P. A4; Simpson, Glenn R.

    The Clinton administration recently proposed relaxing rules governing the sale of encryption technology to foreign governments and companies after months of lobbying pressure from the high-tech industry. The new rules would allow the devices to be sold without a license to virtually all foreign governments as well as foreign companies that are partly or wholly owned by those governments. The changes are significant, as the previous regulations forbid the sale of encryption products to huge telecommunications companies, especially in Europe, that are partially state-owned. However, the new regulations still mandate that companies selling directly to foreign governments have a license. The new rules also liberalize restrictions on the publishing of encryption research. American high-tech firms have applauded the proposed changes, saying that the relaxed rules will help them keep their position as leaders in the encryption field.

  • "Taking a Whack at Hackers"
    Washington Post (01/13/00) P. E1; Walker, Leslie

    Many companies, seeking to avoid negative publicity, are now bypassing the FBI and employing private security consultants when they find themselves victims of a cyber attack. Several of these security firms hire hacking experts, many who are former hackers themselves, to fight the problem. Some employees of startup Para-Protect join hacker organizations undercover in order to obtain insider knowledge and to get access to clandestine Web sites. In fact, another recent startup, AtStake, hired eight well-known hackers as consultants, justifying the move by claiming that only hackers know how hackers operate. Some security experts say that hacking incidents are increasing three- or four-fold every year, and that virus incidents are doubling in that same period. Experts claim that part of the reason for such a precipitous rise in incidents is the availability of hacking tools for free on the Internet. These tools allow even the most computer-illiterate person the option of launching their own cyber attack. Experts say that another trend in hacking is taking the domain names (Internet addresses) of various Web sites and renaming them, thus causing those attempting to access the sites to be shut out. Security firms say that they expect hacking incidents to also increase once broadband Internet access becomes widespread.

  • "GE Joining Effort on 'Smart' Appliances"
    New York Times (01/14/00) P. C17

    General Electric announced a joint venture with Microsoft to facilitate a technological link between smart appliances with more traditional home appliances. GE, already in a deal with Sun Microsystems, will join Intel, Sony, and IBM in the Universal Plug and Play Forum as part of the deal with Microsoft. The conglomerate announced the deal at the National Association of Home Builders trade show in Dallas; however, GE was unable to reveal when the appliances would be available for consumers.

  • "Riding the Mobile Internet Wave"
    International Herald Tribune (01/13/00) P. 11; Buerkle, Tome

    Both England and Spain are holding auctions to sell wireless spectrum licenses. In the United Kingdom, 13 firms or consortiums bid for five licenses yesterday, the first ever in Europe. The licenses are intended to allow 3G mobile services such as high-speed voice, data, and video transmissions to cell phones. All four of the United Kingdom's wireless carriers as well as the U.S. companies MCI WorldCom and Global Crossing submitted bids for the licenses. A group called Spectrum, consisting of such diverse companies as Virgin, Sonera, Nextel, EMI, and Tesco also bid for the British licenses. The fierce competition could propel the price of each license to 500 pounds a piece, and the license owners would then have to pay an additional three billion pounds to establish a wireless infrastructure in England. Spain, likewise, has been receiving offers for four 3G wireless licenses. The competing firms must prove viability by displaying merits in service and technology. The winners will pay a one-time fee of 130 million euros ($134.4 million).

  • "Informix Settles Allegations by SEC of Accounting Fraud Tied to Deficits"
    Wall Street Journal (01/12/00) P. B6; Schroeder, Michael

    The Securities and Exchange Commission's allegations against Informix have been settled with no fines, but with a cease-and-desist order banning future violations. Informix was accused of accounting fraud for understating $244 million worth of losses between 1994 and 1997. Informix management and employees allegedly engaged in fraudulent practices to inflate revenue and earnings such as back-dating sale agreements and recognizing revenue on disputed claims against customers. Informix has neither denied nor admitted the allegations. Informix Chairman Robert J. Finocchio says, "The resolution of the investigation and the recently announced settlements of the private securities litigation mean that the company has closed the book on the past and now can concentrate on the future."

  • "Surfing From Behind the Wheel"
    C|Net (01/12/00); Wilcox, Joe

    IBM and Motorola have formed a partnership to develop wireless Internet technology for cars that could be available as soon as 2002. IBM will provide a number of back-end systems and services for Motorola's iRadio, which will let drivers access real-time traffic updates, digital music, and voice and email via the Internet. IBM's Jon Prial says the number of functions related to such a device revolve around the server, and IBM makes them all work through synchronization, database messaging, and voice technology. Beyond offering information to customers, Motorola also plans to foster e-commerce. "There is also an e-commerce angle that will let people buy things from their car," says Motorola's Mike Bordelon. "But to offer that and other features across that space we need one end-to-end solution, and that's where IBM comes in."

  • "Reinventing the CIO"
    InformationWeek (01/10/00) No. 768, P. 48; Murphy, Chris

    CIOs need to change their roles to accommodate the changes e-business is making in order to succeed in the next several years. E-business is increasingly drawing more of a company's employees into IT, as separate departments embark on their own Internet initiatives. E-business efforts at most companies lack a central vision, and CIOs need to step in and guide the overall direction of these projects. Traditionally, businesses have not looked to CIOs to revolutionize the way business is done, but CIOs now need to change what is expected of them, experts say. CIOs should develop leadership and business skills, and make business goals a top priority. Ideally, CIOs should have business managers bringing them ideas about how to use technology, and CIOs can then foster the best ideas. In addition, CIOs should take a broad view of technology, pointing out opportunities that individual departments miss, says components distributor Avnet CEO Roy Vallee. E-business leadership is lacking at most companies, according to recent studies from KPMG and Benchmarking Partners. The study found that just 26 percent of large companies have a single person who is responsible for leading e-business projects across the enterprise. These fragmented IT projects allow divisional managers to move far along on projects before they are ever evaluated from a central perspective. CIOs should become more like CEOs, providing an overall vision, forming goals and standards, and motivating skilled workers behind unified initiatives. In order to succeed in their changing role, CIOs should develop people skills and business skills, while also maintaining technical expertise. Lower level IT workers should follow the same advice, as the career path for IT workers is widening.

  • "A Thousand Ills Require a Thousand Cures"
    Economist (01/08/00) Vol. 354, No. 8150, P. 77

    Computer viruses cost businesses worldwide billions of dollars every year, and separating an infected network from the Internet until a problem has been cleared up only adds to the cost. However, researchers have developed a more biological approach to computer security by basing their programs on immunology and creating digital immune systems. IBM and Symantec recently developed a software program called the Digital Immune System, which is designed to increase the speed at which a virus is identified and disabled. Unlike normal antivirus software, which alerts humans to an unknown virus that it cannot take care of itself, a computer equipped with a Digital Immune System automatically transfers the contaminated file to a central area to be studied. The file is then placed into a network of PCs that are isolated and self-contained, and the computers are toyed with in an effort to get the virus to emerge--if the problem is truly a virus. Once a virus has been activated, the sickly PCs are then watched for certain tell-tale signs so that the virus can be identified in the future, and also so that a cure can be created to destroy it. Copies of the identifying signature of the virus and the cure are placed on the Internet so they can be downloaded fast enough to stop a virus in its tracks. All of this is done without any human involvement and should be completely automated in a few months. Another similar software program called Artificial Immune System, created by Stephanie Forrest, a researcher at the University of New Mexico, makes even greater use of biology. This software pinpoints strange behavior on a network by employing software "antibodies" that connect to anything out of the ordinary. Ultimately, a human operator decides whether the suspicious behavior discovered by the software is acceptable. Computer security experts say they will increasingly use biology as a tool to develop software, as it becomes increasingly complex, and that they will start viewing software and networks as ecosystems.

  • "Avoid the Pitfalls of Going From Bricks to Clicks"
    InternetWeek Online (01/10/00); Berry, John

    Although traditional companies recognize the need to integrate e-commerce into brick-and-mortar operations, many Web efforts are hindered by a lack of strategic vision, skilled IT workers, and proper infrastructure, according to a recent KPMG report. KPMG says the issues facing these companies are external, executional, and organizational. External challenges include channel issues, such as whether a firm should partner with middlemen or sell direct. Executional challenges include the shortage of IT workers, which leads to problems with upgrading systems to carry out e-business. Finally, organizational challenges include the lack of a unified Web strategy across the enterprise. In the survey, 75 percent of respondents had no central e-commerce decision maker, and many companies have fragmented, departmental strategies. One company adept at handling e-commerce challenges is Armadillo.com, a startup outsourcer that helps manufacturers and retailers automate back-end processes. Armadillo plans to host back-end applications for a monthly fee, and believes its business will flourish since few companies have been able to afford EDI or organize their e-business efforts. In addition, Armadillo helps retailers with e-commerce challenges such as a lack of IT talent by building consumer-facing sites. Another company that is dealing admirably with e-commerce issues is GE's Power Systems business unit, which sells turbines. Although turbines, some of which cost $35 million, are poorly suited to online sales, GE uses the Web to facilitate the purchase of aftermarket parts and to offer services and consulting to turbine buyers. In carrying out its Web strategy, GE handpicked employees from across the enterprise to form a cross-functional team dedicated to the effort. The company expects to move $1.5 billion in annualized parts and services sales to the Internet in 2000, says GE Power Systems general manager of e-business Jose Lopez.

  • "No Rest for the Weary"
    InfoWorld (01/10/00) Vol. 22, No. 2, P. 26; Leon, Mark

    IT workers are likely to find 2000 will be a challenging year with issues such as e-business,Windows 2000, and outsourcing to consider. IT has become a muchlarger part of core businesses, and companies will now expect more from information systems. As a result, IT budgets will be examined more closely than ever before, even while new IT projects abound. IT implementations will be driven by new Internet applications as well as the need to use enhanced infrastructure to move more information, says JK&B Capital partner Richard Finkelstein. ASP business models will also change the role of IT, analysts say. "The notion that the IT department is primarily a services organization just won't fly anymore," says Giga Information Group analyst Chip Gliedman. IT professionals will face many issues involving business-to-business e-commerce, such as XML decisions and other infrastructure questions, says Finkelstein. Also this year, many IT departments will have to determine the degree to which they will adopt Linux, Finkelstein says.

  • "Outrageous Fortune"
    Computerworld (01/10/00) Vol. 34, No. 2, P. 70; Vijayan, Jaikumar

    Mainframe users are growing increasingly annoyed with software costs, as vendors charge on capacity-based models that become more costly as users install more powerful hardware. Meanwhile, hardware costs are falling, making software account for a growing percentage of data center budgets. Mainframe software costs between two and four times as much as hardware at most corporations, according to Meta Group analyst Carl Greiner. Customers particularly take issue with capacity-based licenses and maintenance fees that make software prices rise as hardware power increases, without taking usage into consideration. Mainframe hardware is now sufficiently powerful and inexpensive to allow users to consolidate applications and data in order to lower costs and boost performance and manageability, an important step toward moving online. However, software costs are making this process much more costly than it needs to be, customers say. Mainframe software vendors such as Computer Associates, Compuware, BMC Software, Candle, and Sterling Software have little motivation to change their billing models, says IT Centrix analyst David Floyer. The mainframe market is mature, competition is minimal, and few new markets or new users exist. Furthermore, most users lack the resources needed to move off of mainframes. One solution to high software costs is usage-based pricing, in which users pay by how often they use the software or by how many workers use the software. Still, usage-based models have been held back by the management problems involved as well as the shortage of products that monitor usage. Another possible solution is a long-term enterprise-wide or site licensing model. For example, users could pay vendors up front to use software however they want on any type of systems as long as the total hardware capacity stays within a limit both sides agree on. Some software vendors that also sell hardware, such as IBM, have already altered software pricing so potential hardware customers will not be deterred by expensive software.

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