Who Needs Software?

Over the course of this decade, Hewlett-Packard Co. and IBM have been locked in a battle for the title of world's largest computer company. Only over the last couple of years has HP has managed to put some space between itself and Big Blue, with both companies reporting total revenues of $104 billion and $98 billion, respectively, for fiscal 2007.

And if HP's deal to acquire Electronic Data Systems (EDS) -- a company with revenues of over $20 billion -- goes through, that gap significantly widens further. (If IBM decided to hold on to its PC business instead of selling it off to Lenovo a few years ago, each company might be still leapfrogging the other for the title.)

Each company competes against each other ferociously in several core product categories such as servers and, increasingly, in services. But what continues to surprise me is HP's sustained growth despite the lack of a dedicated software business. When IBM was in the process of reinventing itself in 1993 and 1994, the company decided to unbundle much of the system and other software it included with servers and PCs. While many were skeptical that IBM could establish a separate software identity, the company proved them quite wrong. As of the end of 2007 software revenues were well over $20 billion and account for over 20 percent of the company's overall revenues.

In contrast, HP has had an on-again-off-again interest in establishing a separate software identity, but has never seemed to muster the commitment to do so. Dell is another company that has made a healthy living with only a little bit of help from software sales -- but then, it's only a little more than half of HP's size.

In an era where software has been so glorified by the financial successes of companies like Microsoft, Oracle and now Google, HP apparently doesn't have to worry about covering itself in software glory. In its quarterly report this week, HP reported that laptop sales were up a whopping 31 percent, its printing and imaging business up a steady 6 percent, and its enterprise storage and server business up 4 percent (a number that could go higher with the help of the proposed EDS acquisition). Desktop sales were relatively unchanged but HP is still No. 1 in sales there, which represents a very nice hunk of change.

Microsoft Now Wants a Piece of Yahoo, But Which One?
Since last Sunday, we've all known that Microsoft just can't get let go of this Yahoo thing. While Redmond says it's no longer interested in buying the whole company -- and we'll see how genuine that sentiment is over the next couple of months -- it is interested in buying some piece of it and/or otherwise establishing closer business relationship.

The latest rumors have Microsoft proposing to buy Yahoo's search engine business along with taking a minority stake in the company. The thought there, of course, would be to combine the strengths of both companies in search, allowing it to be more competitive against Google in the search-based online advertising market.

Call me crazy -- and believe me, many people do -- but Microsoft is putting way, way too much emphasis on online advertising revenues as part of this would-be deal. In fact, it puts too much emphasis on it, period. I mean, first, how much more hockey-stick growth can there be left in online advertising? Some market researchers' recent findings show that market to be slowing down, with some advertisers questioning the business worth of online ads.

Second, Microsoft should spend a lot more time and money fixing up "non-online" products like Vista and getting more aggressive about moving its multibillion dollar server-based software to the online world. (To be fair, I have heard nothing but good things about Redmond's CRM Online product; one developer called it the best thing Microsoft has done in years.) In fact, if Microsoft did refocus a bit more on improving these products, it could actually serve to make its existing and upcoming online offerings that work with its core products more attractive.

But Microsoft doesn't seem to tire of the chase for online advertising dollars. Just yesterday, the company offered a program that would give people a rebate whenever they use Microsoft's search engine it to locate and then buy products (something Google has also tried). Not sure how much this will boost Microsoft's fortunes given that the company has a little less than 10 percent of the search market in this country, compared to just under 60 percent for Google.

Microsoft refers to its online initiative as Software Plus Services. Going forward, I think it should emphasize the first word in that initiative and not so much the third.

No Good Deed Goes Unpunished
Most observers viewed Microsoft's decision yesterday to finally include native support for the ODF and PDF file formats in the next service pack of Office 2007 as a step toward the light of open standards and away from the darkness of its proprietary standards.

Well, maybe not everyone. The European Commission the same day was quick to release a statement that indicated its intent to "investigate whether Microsoft's decision to add support for the Open Document Format for Office will rely in greater consumer choice." It seems the EU will be specifically focusing on whether Service Pack 2 for Office offers the kind of interoperability that allows users to cleanly exchange documents with whatever application they want, with no hidden strings attached.

The EU can't be blamed for this, of course. It's merely doing its job, and Microsoft in the past has given it reasons to be skeptical. But given Microsoft's statements earlier this year about how it would pursue a less competitive and more cooperative strategy with the open source world, I think there's reason to believe Microsoft will continue moving toward the light.

Of course, Microsoft isn't moving toward that light at lightning speed. As part of its announcement yesterday, company officials did point out that, curiously, Microsoft wouldn't be supporting its very own OOXML file format until Office 14, which may not be out until 2010 or 2011.

A statement issued by Erich Anderson, Microsoft's vice president and general counsel for Europe, said that Redmond would support "three new file formats directly in the Office product" as well as become a member of a technical committee that's crafting an updated version of ODF.

Mailbag: Google Health Is Bad for You, More
Yesterday, Lafe wrote about Google's just-launched health records service, which would let people store their medical records online. Most of you don't think this is such a good idea:

Are you crazy? Let's see here: Google already has my Internet surfing history, sends me focused adverts and now wants my medical history. NO WAY!

Talk about overlords -- this is ridiculous. Google should stick with the slimy advertising business.
-Anonymous

I have to err on the side of caution with the launch of Google's health app. Web application security is still in its infancy, and Google is not fully immune to attacks. I have also noticed that Google's system analyzes my Gmail e-mail and targets ads accordingly. Would it also do that in the health app? I'd have to say that it would, indeed, since it is another possible channel for revenue-generation. To me, that means that it is not merely storing the health information for the users, but "analyzing" it for its benefit.

What level of trust do we place in Google's staff to ensure that that personally identifiable information is not mishandled? Will they be subjected to HIPAA compliance standards and audits as are medical professionals? In reality, it comes down to personal choice and acceptance of risk on the user's part. For me, it's too much risk to accept at this point in Web security.
-Jeff

This leaves way too much room for dishonesty. Insurance companies subscribing to it (legally or illegally), hackers stealing records and blackmailing patients with their personal information, the Google employees having a field day browsing through the records...Lawyers will have a field day with that database.

Once it's there, there is no going back. Once it's there, you have lost control of your records. I don't care how secure you say it is. You can bet your ass if the federal government wants in your file, you can't stop it. No way would I make my health records accessible to everyone.
-Jeb

Do you really trust a company whose main income is ad revenue NOT to take a peek at those records? Even if it did do data mining anonymously, that means someone besides me has the keys to that database. No thanks.
-Russ

Can we really trust Google? It already looks into our e-mails to determine which advertising to attach to our e-mails. Can medical providers trust what is entered in these records? Can patients forge their history?

I know of another Web site that does show providers what has been entered by licensed medical providers. However, it still doesn't tell what type of medical provider made the diagnosis. A foot doctor could easily say that a patient has a heart condition. The only way that I can see this working is if vendors like Google make a Web site that queries the actual medical providers' records. Only then will you know for sure that a physician is actively and correctly treating the patient, and there would be no way for a patient to enter wrong information.
-Daryl

I do not think this is good idea. Medical records should be available to all clinics but not worldwide. How safe will Google keep the service? Once in a while, hackers will break it like they did with credit card records. Imagine what happens when this information becomes public or, much worse, becomes available to terrorists.

However, this concern is wider. When a company which is involved in statewide security looks for outsourcing, it becomes dangerous for the state.
-Aleks

It seems that throughout history, when something is created, the good people will use it for good and the misguided people will use it maliciously. The answer then seems to be to try to create things that have the most potential for good and build in as many safeguards as reasonably possible to prevent malicious use.
-Craig

And on the heels of some negative Vista letters we've received lately, here are two that look at the bright side:

I would like to voice a different opinion of Vista. I have been using Vista Business for over a year. On the laptop that I run Vista on, I had to make one upgrade for it to run fully. I went to 1MB of memory -- only hardware improvement needed. The laptop is almost five years old now. I am running it as an individual and not in an enterprise environment. I have had zero problems with the OS. I ran the compatibility tool before I loaded it. The only problem I had was when I was running Windows Live OneCare. Once I removed OneCare, problem solved. I now use AVG on my system which runs flawlessly.

The biggest complaints I personally hear in the field are from the people that do not use the compatibility tools provided and want to cheap-out on hardware. Oh, yeah, and those people that have NEVER tried to use Vista but have only read a review somewhere. I use XP, as well. I remember when we upgraded to XP at a previous job. Same whining and complaining from all of the above. As with all things new, you do have to spend some time LEARNING how to use it and how to implement it successfully in your environment.
-G.C.

Maybe we've got it all wrong. It is possible that developing Vista and pushing everyone to use it is a stroke of marketing genius. Way back when Lotus misread the reason Lotus 1-2-3 was so popular, it came out with Symphony, a software package that integrated everything. To promote upgrading from 1-2-3 to Symphony, Lotus offered a trade-in deal. Give Lotus your 1-2-3 and $100 and they would give you Symphony. Soon, the standing joke in the user community revolved around the 'new' upgrade offer from Lotus. Give them your copy of Symphony and $100 and they would give you your 1-2-3 back.

Could it be that Microsoft is turning this joke into reality? Is it possible that, after a large number of people have been coerced into using Vista, Microsoft will release an upgrade program that, for a substantial fee, "upgrades" your operating system to XP Pro? Hey, it could happen.
-Dave

Tell us what you think! Send an e-mail to escannell@redmondmag.com or leave a comment below.

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