March, 2009

Intel’s Nehalem chip and the Sun/IBM dynamic

Sun’s relationship with Intel on the new generation of processors may bear fruit with Solaris support for the Intel “Nehalem” chip family. In fact, Solaris may have the first and best support for the new processor.

Sun is hoping that better support for the new multi-core chips with special power management capability will give it an edge in the server space, but of course the question of an IBM Sun acquisition still hangs over the vendor. So does the fact that the Intel chip competes with Sun’s own Sparc line.

Users aren’t concerned about the IBM deal; they feel that Sun under IBM would be an even stronger partner. The Intel Nehalem affinity for Solaris and an IBM Sun acquisition might put Linux under more pressure. IBM has been a Linux backer but might be less active should it have its own open-source UNIX-compatible OS.

The Nehalem chip is one of the most advanced and fastest available, outperforming (says Intel) both IBM and Sun/Sparc by a large margin and providing unparalleled power management, I/O handling, and virtualization support. The new chip (Xeon 5500 is the current instantiation) is already launching a major flush of new servers from IBM, Dell, and HP.

IETF “LISP” initiative could offer users “global” addresses

The new IETF activity aimed at supporting enterprise multi-homing of their Internet connections may be taking a step in a much more valuable direction in the long run. The Locator/Identifier Separation Protocol or LISP is a means of breaking the current link between identifying a user and identifying the user’s location.

LISP effectively provides a kind of hierarchical routing where the primary encapsulation of a packet gets it to the correct network, and from that network it’s then routed to the correct user address on that network. A user, under LISP, would be known by a global “address” independent of the network address, and one that wouldn’t even change if the user changed ISPs.

We believe this could have a profound impact on the way the Internet works and could make IP a more suitable protocol for “infrastructure” services, as well as making its operation less costly. However, it’s clear that there is a lot of opposition to LISP, even in the IETF, and so it’s not at all clear how soon it might be deployed beyond experiments.

TV interactivity: Hot trend or hot mess?

Interactivity in TV is being touted as being a plus for IPTV, or maybe it’s for True2Way, or maybe for digital TV. Any time you see this sort of “smearing the buzz” phenomena, you know something’s hot, and interactivity surely is.

True, there is a rush to make it a differentiator in the TV space (Verizon’s widget program is an example), but a bigger question might be whether this rush to interactive TV will have an impact on online advertising. Some interactive concepts, like Yahoo’s widgets, can be incorporated in a TV set (or set-top box, in theory) and provide a link between TV and online, which could be good.

Some interactivity could make television commercials interactive, which could be bad for online advertising because it could steal a differentiator. All this continues to point out that we have a game of musical chairs here, with a lot of applications and industry players looking to sit down on about $700 billion in total global adspend. No matter how many bottoms are involved in this game, the dollar size of the seats isn’t going to change.

EU telcos weigh economics of network management outsourcing

The EU says telcos there are weathering the economic storm so far, better in fact than most industry sectors. This contrasts with other stories that telcos are outsourcing network management to reduce costs.

We think that the truth of the situation is closer to the EU version. We’ve found no indication in our surveys that telcos see network management outsourcing as a major path to cost reduction, and if one thinks about the issue, it is clear that unless the outsourcer has better economy of scale than a telco, it’s doubtful that such a move could be a win-win.

What we think is happening is that telcos are realigning their business models based on their current conception of monetization opportunities and risks. In some cases, this demands focus on new areas, and in others it suggests that there are activities better outsourced to professionals. We think some of the big players making deals with Alcatel-Lucent and NSN fit this model. There simply is not enough money on the table to make an outsource-for-cost-reduction decision prudent. For Tier 2/3 providers, however, labor availability issues may make an outsource decision mandatory.

New cloud computing Advisor Planners’ Briefing available

CIMI Corp. has completed a new TMT Advisor Planners’ Briefing on the models (and illusions) associated with cloud computing. Those interested in receiving it, and subsequent briefings, should send an email to tmtadvisor@cimicorp.com that provides their name, title, company name, and company email address.

Amazon EC2, cloud computing and the enterprise

Amazon’s Elastic Cloud Computing (EC2) is gaining some traction as the framework for software vendors to offer software-as-a-service (SaaS). This is no surprise given that the value of cloud computing is most easily demonstrated for large-scale applications that could be highly variable in their requirements.

Amazon is also more of a “true cloud,” in that it offers greater flexibility and elasticity and imposes no major restrictions on applications (an x86 image is required). SaaS is also likely an early market for cloud computing because by nature it is incremental to current IT plans.

For cloud computing to be successful, though, it will have to move outside of these simple sideline and overflow missions and take on more mainstream applications. We believe that this can happen only by having enterprises adopt private cloud architectures for their own data centers, which would facilitate integration of public cloud resources.

Skype and the enterprise voice connection

Skype is testing a new client that will allow Skype calls to be made from corporate phone systems using, we’re told, a SIP-to-Skype gateway that would be compatible with the VoIP used by most businesses.

This would let businesses bypass traditional telephony for expensive calls, especially international ones, and it would also put further pressure on the more traditional VoIP/IMS model for next-gen voice services by setting a very low floor price.

At some point, telcos will have to face the fact that net calling may not be perfect, but the price is right, and users will take time to try a couple of cheap options before they fall back to more expensive service options. Thus, telco long-distance voice at a premium may be the choice only if nothing cheaper works, and that will erode the value proposition considerably.

Internet free ride wins “unrealistic” prize

The Economist is sounding a warning that we’re resonating with (because we’ve sounded it too). The most recent issue points out that Internet companies and consumers have been vying for the crown of “most unrealistic.” Consumers want free services; Internet companies want a free ride on infrastructure, and nobody wants to acknowledge that advertising budgets worldwide for all ad forms wouldn’t pay the capex bill of network operators.

The tragedy of the current situation is multi-faceted. Silicon Valley is threatened with an unnecessary recession because it wants to pursue vacuous flips instead of more useful and thus eventually more sustainable models. The Internet companies are likely doomed to 50% or more attrition. The telcos are increasingly likely to throw in the towel on monetization and hunker down with bandwidth caps and tiered pricing that will stifle new applications and also stifle investment in equipment.

There is still time (through the end of this year, says our model) for radical action to save the industry from a drudge future. Media outlets are predicting a subscription model for content, and if over-the-top (OTT) players finally realize someone has to pay for stuff, the future for all will be rosier. But with all of this, there’s still a new study that says cloud computing needs open non-discriminatory access to universal communications. Sure, and we all need to win the lottery.

Cisco does some risky business with latest purchase of Pure Digital

Cisco has acquired a consumer video recorder company called Pure Digital, taking another step that is either incredibly bold or just incredibly risky.

Pure Digital is a consumer device, something like you’d expect to see Apple put out. The product could be used to pump additional traffic onto the Internet, but it’s not clear whether Cisco sees this as an opportunity — their operator customers would see it only as more unrewarded traffic. It’s also possible that Cisco is just doing in the consumer space what it did in the UCS blade server announcement, which is to try to ramp up its total addressable market by entering new areas.

Some have suggested Cisco wants it for mobile video conferencing (which we seriously doubt!) All this makes it really tough to read what’s going on at Cisco. Do they plan to be some sort of network-integrated conglomerate, a new Internet-centric IBM or Microsoft? The big question is whether they can go off in all these directions at once when they’ve had succession and senior management issues for almost two years. If they can, they could truly transform the industry. You can never count Cisco out in bold moves, but if they can’t pull all these threads together they risk a major slip.

US RBOCs: Just how open is open?

The US RBOCs are concerned about applying for aid under the broadband stimulus package because it may force them to open their networks to competitors. The provision in the rural broadband aid portion of the stimulus requires the grantees to adhere to FCC principles of open interconnection, but it is not clear just what those principles are. The fear is that the interpretation given to this requirement would force the RBOCs who apply to open the networks, and just how far that “open-ness” might extend (to the grant-funded lines or to all lines) is also open to debate.

This issue has received a bit of negative publicity, but from what we hear the issue is simply one of clarification. One RBOC executive told us that if the use of grant money on a single hypothetical line were to create a broadband unbundling obligation through their whole region, they’d surely not be interested. We doubt, and most RBOCs doubt, that is the interpretation intended, but they want to be sure before moving forward. This demonstrates how vulnerable broadband investment is to the issues of wholesaling, and clearly that should be considered in any rules and legislation involving broadband deployment.