May 26, 2007 Taking Over the Internet's Most Disruptive Technology: How to stop lying to Children& create Immortality KIDS-ARE-A-DISRUPTIVE-TECHNOLOGY Disruptive Technology Articles: How to stop lying to Children
the author's views on the next information technology (IT) disruptive innovation and the importance of looking at future megatrends to come up with these innovations. He cites Stanford R. Ovshinsky whose invention of a photovoltaic roofing material for solar power in 1996, is only now being used in Europe. Factors for coming up with IT innovations are persistence, or working for a period of time on an idea that might have a big impact on the future; looking at global market demands or not limiting the innovation to the needs of the local market; and vision, which means looking at the bigger challenges or megatrends. Expanding into emerging markets requires creativity and it is hoped that it does not take decades to discover the next IT disruptive innovation

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Disruptive Technology Articles: How to stop lying to Children
Taking Over the Internet's Most Disruptive Technology: How to stop lying to Children& create Immortality
papers on disruptive technologies in light metals and energy materials for fuel cells and batteries, presented at the biennial Materials Congress of the Institute of Materials, Minerals and Mining in London, England. Martin Jackson presented and reviewed the properties of titanium and its alloys as engineering materials. Kevin Klugg reviewed efforts to reduce the cost of titanium alloy materials. Robert Sanders focused on disruptive technological innovations. INSET: Wind turbines.

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Disruptive Technology Articles: How to stop lying to Children
Taking Over the Internet's Most Disruptive Technology:
How to stop lying to Children& create Immortality
the key findings of a study conducted by Forrester Research on the state of the information technology market in Italy. According to the study, Italian CIO play an important role in enhancing business innovation in the country. The study also discovered that the tendency of Italian CIO not to value disruptive innovation very much, they are stuck in an incremental process innovation mode that is hard to break out of. Italian bosses also have something to do with the failure of Italian CIO to develop innovative ideas.

TRUTH-DELIVERED-OVER-THE-INTERNET-IS-BECOMING-THE-MOST-DISRUPTIVE-TECHNOLOGY Disruptive Technology Articles: How to stop lying to Children
Unexpected, Disruptive Forces That Will Reshape Print. By: Esler, Bill. Graphic Arts Monthly, Sep2006, Vol. 79 Issue 9, p6-6, 1p; Abstract: In this article the author reflects on the factors that affect the graphic arts industries. He enumerates the technology influencers, such as the spot-color mixers that cut waste and speed match colors and the compact, common impression cylinder offset presses that reduce waste in 4-color work that posed promise for the industry. He asserts that benign neglect and governmental indifference in the political realm endanger print more than do wanton restrictions.

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The author reflects on the implication of the extreme security measures on air transport industry in Europe. According to the author, the entire industry has been affected either directly by the security measures that have been imposed following the terrorist attacks or by other collateral effects. He said that the extreme security measures imposed in case of a critical threat are so disruptive that they are not compatible with efficient air transport operations.

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Intel's $600 Million WiMax Bet. By: Edwards, Cliff. Business Week Online, 8/4/2006, p12-12, 1p; Abstract: This article reports on the decision of Intel to invest in Clearwire, the wireless broadband provider founded by cellular pioneer Craig McCaw. The surprise announcement of Intel's second investment in Clearwire in recent years is a big shot in the arm for WiMax, a technology that blankets large areas with wireless broadband. Intel executives have called WiMax one of the biggest potential disruptive technologies in the world. With WiMax, Intel aims to duplicate its successful Wi-Fi strategy.

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Intel's $600 Million WiMax Bet Section: Technology NEWS ANALYSIS

An investment in Craig McCaw's Clearwire shows the chipmaker is serious about the technology for wireless broadband over large areas.

Any doubts about Intel's commitment to its fledgling WiMax business were just dashed. Despite rumors the computer chipmaker has considered dumping the business as part of a broad reorganization now under way, Intel (INTC) on July 5 announced it would invest $600 million in Clearwire, the wireless broadband provider founded by cellular pioneer Craig McCaw.

The goal: to help build a nationwide service that equips notebook PCs for fast Web access and Internet-based calling over vast swaths of the U.S.

INTENSE RACE.

The surprise announcement of Intel's second investment in Kirkland [Wash.]-based Clearwire in recent years is a big shot in the arm for WiMax, a technology that blankets large areas with wireless broadband. It's likely to accelerate efforts by big-name wireless carriers to offer competing technology. "The U.S. is now going to get a high-speed wireless broadband network sooner than it would have," says Intel Executive Vice-President Sean Maloney, who spoke to BusinessWeek in an interview.

The move is one element of a multifaceted $900 million private financing deal for the money-losing Clearwire. Founded in 1998 by McCaw, Clearwire also agreed to sell its NextNet Wireless subsidiary to Motorola (MOT) for an undisclosed amount. NextNet made pre-WiMax network infrastructure equipment for Clearwire, and Motorola now is tapped to become the main equipment supplier to the company.

Clearwire is racing ahead with plans to offer a comprehensive broadband network before potential rivals, many of which would first need to spend billions of dollars acquiring valuable airwaves in order to deliver reliable wireless service [see BusinessWeek.com, 5/15/06, "The New Wireless Wars,"].

LOOKING FOR BILLIONS.

To complete its network, Clearwire will need about $3 billion, say analysts at UBS. On July 5, Clearwire scrapped plans for a $400 million IPO. Federal filings show an accumulated loss of $174 million, and $210 million in debt. Last year, Clearwire's net loss was $140 million on $33.5 million in sales -- $8.5 million in service revenue and $25 million in equipment.

WiMax could benefit consumers by providing a low-cost alternative to the high-speed Internet access being offered by the cable and telecom operators that dominate the market in a duopoly. Upstarts could use WiMax to break cheaply into incumbents' markets, offering lower prices and higher speeds.

Clearwire, for example, has introduced a precursor to WiMax in 27 smaller cities across the country. AOL sells a rebranded Clearwire service called AOL High Speed in parts of California and Florida for as low as $26 a month.

INTEL'S CLOUT.

Intel executives have called WiMax one of the biggest potential disruptive technologies in the world. With WiMax, Intel aims to duplicate its successful Wi-Fi strategy. In 2003 the chipmaker rolled out its Centrino line of Wi-Fi chips, a move that helped bring the wireless home network to tens of millions.

In that case, Intel used market clout to convince its core customers -- PC makers -- to adopt Centrino as a standard. The company next year plans to incorporate dual Wi-Fi/WiMax chips into its Centrino platform to help propel the market.

But while the chipmaker has had good success overseas, it is struggling to gain traction in the U.S. A potential deal whereby satellite provider DirecTV (DTV) would adopt WiMax to bundle broadband with its content business has yet to materialize. Meantime, big U.S. wireless carriers, including Verizon Wireless and Sprint (S) are offering their own versions of wireless broadband for PCs on their existing networks.

BEYOND RURAL FOCUS?

Intel also faces an emerging threat from Qualcomm (QCOM), which is pushing a competing technology acquired through its $600 million purchase of Flarion Technology.

It remains unclear whether the Clearwire deal is significant enough to drive other potential players to commit to WiMax. To date, Clearwire has limited its ambitions to rural locations that traditionally have been underserved by major carriers because of the economics of delivering high-speed service there. Last year, the company swapped spectrum it owned in larger cities with Sprint Nextel to better align its network.

Still, Clearwire is in the process of delivering service to Seattle, one of the nation's top technology centers, and Honolulu. That could signal a broader effort to roll out to major cities. And it may be just the impetus Intel needs to once again turn industries on their ear.

The article features John Stankey, chief technology officer at AT&T. According to Stankey, the integration of networks due to their merger with SBC in November 2005 was a challenge. Another challenge according to Stankey is Project Lightspeed, AT&T's Internet Protocol (IP)TV advanced fiber-optic system, which will offer IP-based home entertainment and video programming plus voice and high-speed Internet service to customers. He explained that Lightspeed give them the opportunity to break into home entertainment and, in terms of disruptive technologies, do what others have done with IP-based technologies.

Disruptive Threats. By: Dupont, Daniel G.. Scientific American, Jun2006, Vol. 294 Issue 6, p15-16, 2p, 1c; Abstract: The article reports that the U.S. military is concerned about disruptive threats. Disruptive threats are technologies that change the course and playing field of warfare, as the Byzantine's Greek Fire did in the seventh century, or as the atomic bomb and Sputnik did in the 20th. The Defense Science Board is calling for a more anticipatory approach to military science. INSET: TO RUSSIA, WITH SUSPICION.

Manning sees telecom disruption linked to broader change. America's Network, Jun2006, Vol. 110 Issue 3, p10-14, 3p; Abstract: The article presents questions and answers related to telecom disruption. One of the question asks to give an explanation to the statement "we can't look at future telecoms technologies out of context of the future in general." Another is the consideration of climate change as an external trend that should be taken into account in future technology. More questions include "What sort of future potential disruptors are listed, the use of copper in installation, and the respondent's view on distributed technologies like grid computing and P2P?"

article reports on the materials and processes identified by Freescale Semiconductor that have enabled it to create a gallium arsenide (GaAs) based MOSFET, calling the technology potentially disruptive. Uses of GaAs are cited. Asif Anwar, GaAS services director for market research firm Strategy Analytics, issued a statement about Freescale's GaAs MOSFET. The way Freescale pledged to accelerate deployment of the technology is mentioned.

Find More Like ThisFreescale Claims Viable GaAs MOSFET Freescale Semiconductor says it has identified materials and processes that have enabled it to create a gallium arsenide (GaAs) based MOSFET, calling the technology potentially disruptive.

GaAs has been used for high-end IC applications for decades; as a semiconducting material it generates less noise and is up to 20 times faster than silicon, as the Austin-based chipmaker noted. However it is comparatively more difficult to work with compared to abundant silicon -- crystalline GaAs is very brittle. Even more notably, it's not readily compatible with typical dielectric materials, namely silicon dioxide, the standard for silicon CMOS, including MOSFETS, hence no GaAs MOSFETs (metal oxide semiconductor field effect transistor).

However Freescale says it has identified GaAs-compatible materials and devices that provide scaling capabilities on par with traditional silicon materials, thus eliminating the oxide/semiconductor material interface issues that faced GaAs MOSFET devices in the past.

"Freescale's GaAs MOSFET disruptive technology holds the promise of having a disruptive impact in the industry," Asif Anwar, GaAs Services director for market research firm Strategy Analytics, said in a statement. "It offers potential leaps in device performance built upon a foundation of mature manufacturing capabilities."

The company said the disruptive technology will enable the development of new classes of power amplifiers, as well as low-power, ultra-fast semiconductors that significantly shrink the size and boost the performance of end devices, according to Freescale. The performance improvements could fundamentally change analog-to-digital conversion disruptive technology, potentially making such conversions virtually instantaneous, the chipmaker suggested.

It anticipates that early generations of GaAs-based MOSFET devices will be highly specialized and designed to complement traditional semiconductor disruptive technology. But Freescale pledged to accelerate deployment of the disruptive technology by collaborating with partners focused on creating infrastructure, wireless and optoelectronic products requiring extreme computing performance.

Blade Servers: Beyond the Cutting Edge. By: Hamm, Steve. Business Week Online, 12/12/2005, pN.PAG, 00p; Abstract: The article features blade servers, servers-on-a-rack which were originally conceived as a niche product for major computing centers. Blade servers are being put to use from supercomputers that generate 3-D imagery for movies to Web sites and corporate data centers to computing setups in midsize businesses. IDC expects blade revenues to double in 2005 from $1.2 billion in 2004. Blades are disruptive technology and part of the commodity servers.

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Section: Technology NEXT-GENERATION COMPUTERS

Once used only for megacomputing functions, these compact powerhouses are now being designed and sold to all manner of businesses.

When moviegoers face the huge, superrealistic mug of an entirely digital King Kong in multiplexes in the coming weeks, they'll have one of the hottest technologies in computerdom to thank for the hair-raising experience. At the other end of the computing spectrum, Air Force personnel who do their banking with Randolph Brooks Federal Credit Union in San Antonio, Tex., benefit from the same technology.

That's the magic of blade servers. Originally conceived as a niche product for huge computing centers, these slim servers-on-a-rack have become the Swiss army knife of modern computing. They're being put to use in everything from supercomputers that generate 3-D imagery for movies to Web sites and corporate data centers to soup-to-nuts computing setups in midsize businesses.

They're even serving as replacements for desktop computers. A dozen people can tap into a single blade server that's carved up into virtual PCs. Blades are "for the broadest set of customers," says analyst John Humphreys of tech-market researcher IDC. "The blade platform isn't just a solution for the biggest and baddest data center operators."

DISRUPTIVE TECH.

That explains why blades are fast becoming the force to reckon with in the computer hardware industry. IDC expects blade revenues to almost double this year, from $1.2 billion last year. And they're poised to grow to $10 billion in 2009. If this forecast comes to pass, that will mean blades will leap from being just 2% of server revenue and 5% of server units sold in 2004 to 15% of revenues and 25% of units four years from now. That would also be the fastest-ever growth for any type of computer.

Blades are an incredibly disruptive technology, replacing much larger and more expensive computers. They're part of the shift to off-the-shelf commodity servers, since most of them run on standard Intel (INTC) or AMD (AMD) microprocessors and on the Windows or Linux operating systems.

At the same time, blades give tech suppliers plenty of opportunity to innovate. Packaged the way they are, it's easier to manage them to simplify computing tasks, recover quickly from meltdowns, and shift processing jobs from one server to another when need be. That combination of high innovation at low cost is hard to beat [see BW, 3/22/04, "Servers: More Bells and Whistles, Please"].

CHANGEABLE BLADES.

What the industry has seen so far is just the start. Doug Balog, vice-president of IBM's (IBM) blade center business unit, says the Cell multimedia processor, initially developed for Sony's (SNE) upcoming PlayStation 3 video-game console, will soon be put to work on blades for jobs such as medical imaging. And such superdemanding processing tasks will require just a handful of blades, not a supercomputer. "This is not that far off," says Balog [see BW, 6/20/05, "A Virtual Revolution"].

Blade servers are essentially circuit boards, about 12 inches tall by 14 inches deep, that are placed vertically in metal chassis, which are stacked in racks. They share power and cooling capabilities. When a blade goes bad, it can easily be pulled out and replaced with another. There's a joke going around in computing circles that the ultimate data center would be one filled with blades in racks, staffed by one technician and one dog. The techie would be there to replace blades that go bad, and the dog would be there to bite him if he tried to do anything else.

Right now, King Kong is the coolest use of blades by far. Weta Digital, a New Zealand special-effects company that gained fame for its part in The Lord of the Rings trilogy, recently put the finishing touches on Kong. Its 1,900 blade servers produce so much computing power that they rank as the world's 109th-fastest supercomputer. The blades render 3-D characters or whole scenes into 2-D images for the screen.

FAST FEEDBACK.

"Having lots of processors helps get our work turned around quickly," says Milton Ngan, Weta's chief technology officer. "This helps us get feedback on the work more quickly, and the work can be incrementally improved." While incremental improvement may not sound very exciting, it's what produces the realism -- and the thrills -- in movie special effects.

The same kind of computing power, in smaller doses, is available to run much simpler applications. Anaconda Sports, an upstate New York manufacturer and retailer of athletic equipment and uniforms for schools, uses blades to run its e-commerce Web site. The 200-person company formerly ran the Web site with conventional servers but found that it had frequent crashes that temporarily put it out of business.

"We thought blades were for big corporations," says Rob Meyer, Anaconda's director of Internet services. "We thought it was way out of our league. But the cost is right, and the performance is outstanding."

The Texas credit union example provides crisp cost and space comparisons. The company was running out of floor space in its crowded headquarters building in San Antonio. Yet it kept adding pizza-box-size Windows and Linux servers. Now it packs 14 blade servers in the space taken up by two conventional servers. At the same time, it reduced the cost of buying new gear by 30%, according to Pat Tolle, the credit union's vice-president for information technology.

ALL-PURPOSE.

The blade idea was an outgrowth of the dot-com boom. Internet startups and giant corporations alike were farming out their Web chores to companies that specialized in operating huge data centers. A handful of startups were the first to use blades, but they faded along with the dot-coms. Hewlett-Packard (HPQ) and Compaq, before their merger, were the first tech giants to enter the fray, in 2000 and 2001.

IBM was a little late to the market, but its early revelation that blades could become a nearly all-purpose technology helps explain why Big Blue is now the market-share leader. It captured 37.2% share of blade shipments in the third quarter and a 45.1% share of revenues, according to Gartner. HP is in second place, and Dell (DELL) trails far behind [see BW Online, 9/2/04, "Is 'IBMtel' the Next Winning Combo?"].

Back in 2001, deep in the bowels of IBM, a band of 30 people operating under the code name Excalibur spent months talking to customers about how they might use blades. They concluded that the technology could be used to handle a vast array of computing jobs, and they saw the opportunity to package the blades in a way that gave them some of the dependability and resilience of huge mainframes. "While others were thinking of blades as power- and space-saving, we had a very different concept," says Tim Dougherty, who has been IBM's director of blade marketing since mid-2001.

CLASHING SWORDS.

The higher-ups at IBM spotted the blade concept as a comer and blessed the project with the status of an official emerging business opportunity -- which brought a big investment in money and engineers. When IBM's first blades debuted in 2002, they took off.

IBM's latest gambit is to prepackage blades on chassis for particular industries. It offers a half-dozen of these, including one for branch banking, called "bank in a box." That one packs network servers, an e-mail server, video surveillance, and other functions into a single chassis. Early next year, IBM plans on following up with a retail-store package.

The battle for blade supremacy is far from over, however. HP claims to have a superior package of software for managing blade servers and associated storage devices. It also touts its technology for power supplies and cooling. "We're a strong contender to IBM. You'll see us overtake them in time," says Rick Becker vice-president and general manager for the HP Blade System product line.

IDC analyst Humphrey says IBM will have to stay on its game to hold the lead. "I see the blade space today as a very active battle between two industry heavyweights," he says. Kind of like King Kong vs. Godzilla.

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By Steve Hamm

Cheap Revolution, Part Six. By: Karlgaard, Rich. Forbes, 10/17/2005, Vol. 176 Issue 8, p39-39, 1p, 1c; Abstract: This article focuses on Ebay's purchase of Skype. $4.1 billion is what Ebay paid for the voice over Internet company Skype last month. Skype is, like Ebay itself, cheap and easy to use. Ebay wants Skype so buyers and sellers in the wide world of Ebay can jump on the phone and haggle for free. The more transactions occurring on Ebay, the more money Ebay makes. Skype, like the Netscape browser or the Apple II computer, is not the first of its kind. Vonage has offered voice over Internet since 2001, and it's hardly a secret. But Ebay's purchase of Skype is a Big Bang for voice over Internet. It's an official Wall Street coming-out party for a whole new industry. Is voice over Internet a disruptive technology--in Skype's case, a telephone killer? I think so!
When David Becomes Goliath. By: Moschella, David. Computerworld, 10/10/2005, Vol. 39 Issue 41, p21-21, 2/5p, 1bw; Abstract: The article comments on the competition scenario in the information technology sector. The early days of personal computer (PC) industry competition were typically described in David versus Goliath terms, with Microsoft Corp. (MC) as the former and IBM Corp. (IC) as the latter. Conventional wisdom has proclaimed that an arrogant and out-of-touch IC failed to see what the PC would mean to the computer industry and that Bill Gates of MC simply outwitted the once-vaunted management team of IC. Yet, events might soon force industry analysts to reconsider this interpretation. Watching MC try to respond to its challenges only shows that even the smartest management may find it impossible to adjust to certain types of disruptive change.

How the internet killed the phone business. (cover story) Economist, 9/17/2005, Vol. 376 Issue 8444, p11-11, 1p, 1c; Abstract: The article looks at the impact of Internet telephony on traditional telephone companies. Voice over internet protocol (VOIP) promises to be even more disruptive, and of even greater benefit to consumers, than personal computers. VOIP's leading proponent is Skype, a small firm whose software allows people to make free calls to other Skype users over the internet, and very cheap calls to traditional telephones--all of which spells trouble for incumbent telecommunications operators. The rise of Skype and other VOIP services means nothing less than the death of the traditional telephone business. The ability to make free or almost-free calls over a fast internet connection fatally undermines the existing pricing model for telephony.

How the internet killed the phone business
Contents A price of zero Watching the elephants dance

Section: Leaders
Almost-free internet phone calls herald the slow death of traditional telephony

THE term "disruptive technology" is popular, but is widely misused. It refers not simply to a clever new technology, but to one that undermines an existing technology--and which therefore makes life very difficult for the many businesses which depend on the existing way of doing things. Twenty years ago, the personal computer was a classic example. It swept aside an older mainframe-based style of computing, and eventually brought IBM, one of the world's mightiest firms at the time, to its knees. This week has been a coming-out party of sorts for another disruptive technology, "voice over internet protocol" (VOIP), which promises to be even more disruptive, and of even greater benefit to consumers, than personal computers.

VOIP's leading proponent is Skype, a small firm whose software allows people to make free calls to other Skype users over the internet, and very cheap calls to traditional telephones--all of which spells trouble for incumbent telecoms operators. On September 12th, eBay, the leading online auction-house, announced that it was buying Skype for $2.6 billion, plus an additional $1.5 billion if Skype hits certain performance targets in coming years.

This seems a vast sum to pay for a company that has only $60m in revenues and has yet to turn a profit. Yet eBay was not the only company interested in buying Skype. Microsoft, Yahoo!, News Corporation and Google were all said to have also considered the idea. Perhaps eBay, rather like some over-excited bidder in one of its own auctions, has paid too much. The company says it plans to use Skype's technology to make it easier for buyers and sellers to communicate, and to offer new "click to call" advertisements, but many analysts are sceptical that eBay is the best owner of Skype. Whatever the merits of the deal, however, the fuss over Skype in recent weeks has highlighted the significance of VOIP, and the enormous threat it poses to incumbent telecoms operators.

For the rise of Skype and other VOIP services means nothing less than the death of the traditional telephone business, established over a century ago. Skype is merely the most visible manifestation of a dramatic shift in the telecoms industry, as voice calling becomes just another data service delivered via high-speed internet connections. Skype, which has over 54m users, has received the most attention, but other firms routing calls partially or entirely over the internet have also signed up millions of customers.

A price of zero
The ability to make free or almost-free calls over a fast internet connection fatally undermines the existing pricing model for telephony. "We believe that you should not have to pay for making phone calls in future, just as you don't pay to send e-mail," says Skype's co-founder, Niklas Zennstrom. That means not just the end of distance and time-based pricing--it also means the slow death of the trillion-dollar voice telephony market, as the marginal price of making phone calls heads inexorably downwards.

VOIP makes possible more than just lower prices, however. It also means that, provided you have a broadband connection, you can choose from a number of providers of VOIP telephony and related add-on services, such as voicemail, conference calling or video. Many providers allow a VOIP account to be associated with a traditional telephone number--or with multiple numbers. So you can associate a San Francisco number, a New York number and a London number with your computer or VOIP phone--and then be reached via a local call by anyone in any of those cities.

Furthermore, your phone (or computer) will ring wherever you are in the world, as soon as it is plugged into the internet. So you can take your Madrid number with you to Mumbai, or your San Francisco number to Shanghai. Skype and other VOIP services, in other words, are leading to lower prices, more choice and greater flexibility. It is great news for consumers--but terrible for telecoms operators. What can they do?

Watching the elephants dance
As is always the case with a disruptive technology, the incumbents it threatens are dividing into those who are trying to block the new technology in the hope that it will simply go away, and those who are moving to embrace it even though it undermines their existing businesses. Since VOIP will cause revenue from voice calls to wither away, the most vulnerable operators are those that are most dependent on such revenue.

In particular, that means mobile operators, which have been struggling for years to get their subscribers to spend more on data services, but are still hugely dependent on voice. Worse, the very "third generation" (3G) networks that are supposed to provide future growth for these firms could now undermine them, because such networks make mobile VOIP possible too. Least vulnerable, by contrast, are those fixed-line operators that are now building new networks based on internet technology, which will enable such firms to benefit from the greater efficiency and lower cost of VOIP compared with traditional telephony.

These operators are taking an "if you can't beat 'em, join 'em" approach and getting into the VOIP business. While their voice revenues will slowly evaporate, they will then be well placed to offer fee-based add-on services over their new networks. Again, this is a common pattern with disruptive technologies: forward-looking incumbents can end up giving upstart innovators a run for their money.

It is now no longer a question of whether VOIP will wipe out traditional telephony, but a question of how quickly it will do so. People in the industry are already talking about the day, perhaps only five years away, when telephony will be a free service offered as part of a bundle of services as an incentive to buy other things such as broadband access or pay-TV services. VOIP, in short, is completely reshaping the telecoms landscape. And that is why so many people have been making such a fuss over Skype--a small company, yes, but one that symbolises a massive shift for a trillion-dollar industry.

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Business's digital black cloud. Economist, 7/16/2005, Vol. 376 Issue 8435, p65-67, 3p, 1 graph, 2c; Abstract: The article examines how new, faster computer chips are challenging the traditional structure of the business-software industry. For the past 40 years, companies around the world have grown accustomed to a doubling in computing power every 18 months to two years. But the tricks chipmakers such as Intel and Advanced Micro Devices are exploiting to achieve this miracle are changing the whole approach to enterprise computing. In the process they are unleashing powerful disruptive forces. New chip architecture is allowing them to roll out ever more heavy-duty hardware at competitive prices. The real losers in the pending upheaval could well be software suppliers. Firms such as Oracle, SAP and IBM, whose industrial-strength programs are the bedrock of business, could be badly bruised in the process. But inevitably, end-users--companies big and small that depend on enterprise software to do their various business transactions--are going to be feeling pressure as well. Over the coming year, they will have to keep their wits about them if they are to prevent their licensing costs from escalating out of control. The current brouhaha over software licensing has been set off by the arrival this month of large quantities of chips containing two central-processing brains on the same device. Dual-core processing is nothing new, but these have been thoroughbred chips for powerful Unix workstations used by scientists and engineers for cutting-edge research. The difference today is that the dual-core approach is now being applied to the workaday processors that run the vast majority of Microsoft Windows, Linux and other popular programs. Such chips power not only hundreds of millions of personal computers, but also the tens of thousands of back-office servers that dish out data over computer networks to employees throughout an enterprise. With the wholesale switch to dual-core processing, some software firms feel they are about to be short-changed.

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Section: Special report: Enterprise computing

New, faster computer chips are challenging the traditional structure of the huge business-software industry

Dateline: LOS ANGELES

FOR the past 40 years, companies around the world have grown accustomed to a doubling in computing power every 18 months to two years--fulfilling a remarkable forecast made in 1965 by Gordon Moore, one of the founders of Intel, a semiconductor powerhouse based in Silicon Valley. As their businesses have expanded, managers have been able to sleep easy in the knowledge that next year's computers would be more than able to keep pace with their needs and probably cost no more than last year's models. Alternatively, slowpokes with steady workloads have been able to replace ageing computers with flashier models costing half as much. The declining real cost of computing has been an economic boon.

Even as millions more transistors are crammed on to slivers of silicon, Moore's law continues to deliver the goods. But the tricks chipmakers such as Intel and AMD are exploiting to achieve this miracle are changing the whole approach to enterprise computing. In the process they are unleashing powerful disruptive forces. New chip architecture is allowing them to roll out ever more heavy-duty hardware at competitive prices.

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The real losers in the pending upheaval could well be software suppliers. Firms such as Oracle, SAP and IBM, whose industrial-strength programs are the bedrock of business, could be badly bruised in the process. But inevitably, end-users--companies big and small that depend on enterprise software to do their various business transactions--are going to be feeling pressure as well. Over the coming year, they will have to keep their wits about them if they are to prevent their licensing costs from escalating out of control.

For many, the choice could come down starkly to accepting costlier new ways of being billed for the corporate software they depend upon for their livelihoods, or biting the bullet and switching to "open source" programs that may be free to license but have plenty of hidden costs.

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The current brouhaha over software licensing has been set off by the arrival this month of large quantities of chips containing two central-processing brains (or "cores") on the same device. Chipmakers have known for some time that merely cranking up the internal speed of their computational engines was delivering diminishing returns.

Today, the co-ordinating internal clocks on some of the fastest chips beat at four billion times a second (4GHz in geek-speak). This furious internal activity gobbles up electrical power. In turn, that makes the chips scorching hot. Cooling them down so they can do their job properly has become a costly nightmare, especially when such chips are used in cheap, but poorly ventilated, "blade" computers (so-called because they are wafer-thin and plugged together in racks like packs of disposable razor blades).

The answer has been to put two or more smaller cores on a single chip. By sharing the workload, the separate cores produce less heat. But being on the same tiny piece of silicon, they still have the speed advantages that come from having all the core's ancillary components within easy reach on the same device.

Actually, dual-core processing is nothing new. IBM and Sun Microsystems have been supplying processors with two or more cores built into them for several years. But these have been thoroughbred chips for powerful Unix workstations used by scientists and engineers for cutting-edge research.

The difference today is that the dual-core approach is now being applied to the workaday processors that run the vast majority of Microsoft Windows, Linux and other popular programs designed to exploit the internal instructions used by Intel's ubiquitous Pentium processor. Such chips power not only hundreds of millions of personal computers, but also the tens of thousands of back-office servers that dish out data over computer networks to employees throughout an enterprise. It is the latter that are the mainstay of companies' IT departments everywhere.

In April, Intel and AMD announced separately that they would be delivering dual-core versions of their high-end processors later this year. AMD has been the first to ramp up production of its new device and has now started delivering its dual-core Opteron processor in commercial quantities for $2,650 apiece. Intel is expected to start shipping dual-core versions of its Xeon and Itanium server chips in volume later this year. Meanwhile, the leading server manufacturers, including Hewlett-Packard, Sun Microsystems and IBM, have begun taking orders for their new dual-core computer systems.

With the wholesale switch to dual-core processing, some software firms feel they are about to be short-changed. If two cores on a single chip can do twice the work of a single processor, they argue, then customers paying licence fees based on the number of processors running their software (one of the most common forms of software licensing) will be getting a free ride on half the new cores being deployed. Actually, because of internal losses and design restrictions, dual-core chips tend to do the work of anything from 1.3-1.8 comparable single-core processors, depending on the applications they are running. But the free-ride argument still stands.

The core of the matter As the dominant supplier of database software, Oracle has expressed its concern about the shift to multicore processing and is adamant: customers will be charged by the core rather than the processor. The firm actually uses two different forms of software licence. One is based on named users and is for customers with a more or less fixed number of defined users. The other is for firms with populations of users that are hard to define, and is based on the number of processors within an enterprise that are running Oracle software. Customers can choose one or the other.

Behind the scenes, however, Oracle is actually more flexible than the image it presents. In the past it has used other means to price its software--concurrent user, named user on a single server, named user on multiple servers, processor, you name it. Some years ago, when Oracle based its pricing on the performance of the underlying hardware, licensing fees leapt in line with soaring chip speed. Faced with a customer rebellion, Oracle dropped its power-based metric in favour of a simple processor-based policy. "We've found that our customers are more satisfied when they can easily identify and predict what their licensing fees will be," says Jacqueline Woods, vice-president of global pricing and licensing strategy.

That is the official line. But when customers complain to Oracle's sales representatives about the firm's aggressive pricing, they are quietly advised to talk directly to customer support. The company does not admit to any backdoor deals, saying only that it is "committed to providing customers with simple, flexible and transparent pricing."

IBM has been even more circumspect, announcing that its software licences for computers running single-core or dual-core versions of the Opteron or Xeon processors will cost the same. But IBM has yet to announce what its licensing policy will be for running its big software suites, such as DB2 and WebSphere, on computers powered by Intel's more advanced Itanium multicore processor. Even so, the announcement on Opteron and Xeon licensing was a big turnaround for the firm: it has charged customers on a per-core basis for running its software on the powerful dual-core Power5 processor it makes in house.

IBM says the boost in power that customers will get from the new dual-core chips from AMD and Intel will be only incremental. Its own dual-core Power5 is a third-generation processor for top-of-the-range servers, which deliver double the value in the highly tuned applications they are bought for. But insiders suspect that IBM's change of heart--at least where the more popular dual-core processors from AMD and Intel are concerned--was a ploy to cast Oracle in an unfavourable light, and try to steal market share.

Another software firm that is seeking to capitalise on the computer industry's current turmoil is Microsoft. When the licensing issue was first broached publicly last October, Microsoft came out uncharacteristically on the side of customers. In a move calculated to win users over, the Redmond-based company announced that it would be licensing its server software on a per-processor basis. That meant only one Microsoft licence would be needed for any dual-core Opteron or Xeon server. The same would apply to Itanium systems when they arrived, too.

Altruism played no part in Microsoft's commitment to processor-based licensing. By ensuring that customers using its Windows Server family of products (such as Microsoft SQL and Microsoft BizTalk) would not have to pay any more when they upgraded to multicore processors, Microsoft very effectively seized at least the low ground in ongoing debates about total cost of ownership (TCO) and return on investment (ROI) of computer purchases. (These abbreviations have become standard parlance among IT managers since the bursting of the dotcom bubble.)

By addressing these concerns with a cheap and easy route to multicore computing, Microsoft is positioning itself to grab more of the lucrative market for enterprise software, where, unlike the desktop market, it has faced tough competitors with beefier products and well-entrenched positions in customers' premises. But if they do not respond in kind, Oracle, SAP, IBM, BEA, Siebel and Veritas could find themselves losing out to Microsoft's budding family of server software and its processor-based licensing. On top of that, users will not be amused by software suppliers that raise licensing fees for applications that run on top of a Windows server, especially when Microsoft has not changed the licence for the underlying platform.

Hard to be soft Users have lots of other grouses. With some justification, they argue that software suppliers--at least the vast majority that license their products on a user or processor basis--did not raise prices during the megahertz race when computers became faster and more efficient. Likewise, they say, dual-core architecture is just another way for the hardware-makers to boost the speed of their machines, and should thus be treated the same as raising clock speed.

In short, users feel it is grossly unfair for software firms to charge more for improvements that stem entirely from buying better hardware. It is not as though IBM, Oracle and others have had to rewrite their big database or transaction programs so they can run on the new processors. In fact, the software will not even notice the difference. Some customers have likened Oracle's insistence on core-based licensing to a form of double taxation.

But users admit that change is probably inevitable. Dual-core Opterons and Xeons are only the beginning. Computers with processors that use four or more Pentium-like cores will start arriving in 2006. And industry watchers expect the trend to ever greater numbers of cores to accelerate. For instance, the New York office of Ogilvy & Mather, an advertising agency, is currently testing a computer appliance built by a small computer-maker called Azul Systems that uses 24 cores per chip.

Complicating matters even further, servers these days tend to have more than one processor inside them. The wholesale endorsement of Linux, the open-source operating system for Pentium-style processors, by the world's leading hardware and software firms (with the exception of Microsoft) has turned it into a formidable platform for enterprise servers capable of ganging dozens, even hundreds, of internal processors together into a giant "symmetric multiprocessing" unit that behaves as a single entity. Add multicores to multiprocessors, and today's software licensing policies quickly become untenable.

The software industry's licensing dilemma does not even end there. There are two other developments in computer design that could cause licensing anarchy. One is known as "partitioning and virtualisation". Broadly, this involves using a single computer to create the illusion of having multiple computers, each with its own operating system such as Unix, Linux, NetWare or Windows; and each acting as if it had exclusive access to all the real computer's resources (eg, memory, drives, network adapters, communications ports, etc), without regard for all the other operating systems installed that think likewise. Slice and dice
Virtualisation is actually an old computer trick, stemming from IBM's mainframe computers of the 1970s. It resurfaced in the late 1990s thanks to some nifty software developed by a company called VMware that lets users slice up a Pentium-style computer as if it were many different machines running different operating systems and software. That started off as being a handy way for IT managers to test new software configurations before installing them company-wide. By 2002, however, customers had began to realise that a lot of the servers they had hurriedly acquired during the great Y2K panic at the turn of the millennium "were running with no more than 5% to 10% utilisation," says Raghu Raghuram, senior director for strategy and market development at VMware.

Today, VMware's ESX and GSX servers and Microsoft's Virtual Server are being used to get more out of users' hardware investments, by allowing existing machines to run best-of-breed software, no matter what operating system it was designed for. While virtualisation may be great for hardware ROI, it wreaks havoc on software licensing policies.

Then there is the industry-wide trend to "rapid provisioning". This is a way of providing capacity-on-demand, explains Amy Konary, director of software pricing and licensing at IDC, a computer consultancy. The idea is to make whole computers, parts of hard-drives (ie, partitions) or even individual cores instantly available, along with an operating system and entire stack of software applications, for a particular task that has cropped up and needs urgent attention.

Hewlett-Packard and IBM have developed new types of licences that allow some software to be used in such an intermittent manner. But the rest of the industry is still agonising over how to license rapidly provisioned machines. One thing is for sure, says Ms Konary: users are unlikely to accept any requirement that makes them pay for a full software licence for such momentary use.

Clearly, the days of licensing software on a simple one licence per installation or on a straight per-user or per-processor basis are ending. A recent survey* conducted by a handful of software firms and trade associations in Silicon Valley found that while software suppliers were pushing for licensing models based on annual subscriptions, companies overwhelmingly preferred single, one-time payment methods, be they on a per-user or per-processor basis (see chart on previous page). This was surprising because users have been decrying the high up-front cost of software and have been urging suppliers to provide much better value for money.

But given all the imponderables, it has become extremely hard, if not impossible, to quantify what the value of any given piece of software is. What is known is that negotiating licences is not a trivial exercise. John Fowler, executive vice-president of Sun's network systems group, finds that companies spend typically between eight and 12 weeks planning and discussing software licences with their suppliers. In its bid to answer the value conundrum, Mr Fowler's firm has adopted the simplest of financial metrics. It charges firms a straight $140 times the number of employees on the customer's payroll for using its proprietary software. Why $140? Because it seems to correlate with the price that the company and its customers think is good value for having no hassles. The simple subscription gives customers the unrestricted right to run Sun's software on as many computers, by as many people, and as often, as they like.

Others think that a better way of delivering value is to adopt some kind of utility model for software pricing--allowing users to pay only for what they use. Macrovision likens computer upgrades to a city upgrading its water supply system (hardware) to allow residents to use more water (software). The question, then, is should residents who do not want to use more water pay more for at least having the opportunity to do so? Opinion is divided.

The maintenance model But if Margaret Lewis, AMD's senior software strategist, is right, software pricing could be in for some radical rethinking. In her view, the open-source model of software licensing looks like being surprisingly attractive. This involves software firms licensing their products for nothing, while earning their keep from maintenance and support. Software firms such as Red Hat, Novell, Mandriva and a host of other Linux distributors already make their living that way.

Indeed, more and more suppliers of proprietary software are beginning to think along similar lines. Sun has recently made its flagship product, the rock-solid Solaris operating system, available with a form of open-source licence that permits it to be downloaded free of charge. Meanwhile, IBM has re-invented itself as a successful service company thanks to the way it has embraced open-source Linux and J2EE (Java 2 Enterprise Edition).

The clincher is that if software firms continue to think they can cash in on every new increase in computer performance, they will only encourage more and more customers to defect. And today, unlike a decade ago, open-source software has become just too good to be ignored. MySQL or PostgreSQL, two powerful open-source databases running on Linux, have become attractive alternatives to commercial products such as Oracle 9 or DB2 running on some proprietary flavour of Unix from Hewlett-Packard, Sun or IBM. The same goes for open-source servers such as Apache, JBoss and Samba.

Today, customers have a plethora of alternatives that should give enterprise-software firms pause for thought. Finally, of course, there is Microsoft. No one in the enterprise-software business should underestimate its determination to own their market as well as the desktop business it already dominates.

Disruption on the manufacturing line. Industrial Engineer: IE, Jul2005, Vol. 37 Issue 7, p12-12, 1p; Abstract: Discusses the role of disruptive manufacturing technologies on the future of the U.S. economy and national security. Functions of disruptive technologies in the manufacturing line of a industry; Seven disruptive technologies identified by National Council for Advanced Manufacturing; Impact of the implementation of disruptive technology in U.S. defense strategy.

Little Packages. By: Butler, Amy. Aviation Week & Space Technology, 4/4/2005, Vol. 162 Issue 14, p58-58, 1p; Abstract: This article reports on a fledgling Pentagon project that holds promise for standardizing small satellite bus. Officials in the Pentagon's transformation office are already claiming success from their responsive satellite initiative because it has opened doors toward interagency collaboration and, possibly, the establishment of a foothold for small satellites, which could eventually carry a variety of government payloads. According to the Air Force Research Laboratory, which is managing part of the small-satellite project, it hopes to spur disruptive innovation, and dramatically impact the space industry to include smaller, more responsive payloads into its business model.

SURE YOU CAN. By: Wilson, Carol. Telephony, 1/17/2005, Vol. 246 Issue 1, p25-25, 1/3p; Abstract: This article informs that one byproduct of the telecom bubble is residual cynicism about any new technology that purports to be disruptive. The major telephone companies now find themselves on strange turf, however. The video entertainment business is a brand new playing field, and there is no reason not to let the creative sparks fly. The very real competitive threat of cable has changed the rules.

Will Buzz Lightyear Return? By: Shores, Michael C.. Circuits Assembly, Jan2005, Vol. 16 Issue 1, p52-52, 1p, 1c; Abstract: This article focuses on the use of optoelectronics in everday life. Introduced over a quarter century ago, optoelectronics has impacted almost every aspect of our daily lives. Innovations in lightwave technology have influenced information technology, telecom, computing, manufacturing, aerospace, military, medicine and entertainment. Today, enough fiber-optic cable has been installed to reach the moon. Despite the technology's progress, optoelectronics faces competition from disruptive technologies now under development. Communications already move over a fiber backbone throughout the world. Physicists are constantly trying to find new types of manufacturing processes, procedures and equipment to aid producibility. They are backing into the optoelectronics and photonics industries from a manufacturability standpoint, because without good manufacturability there can be no true product. At the PCB level come problems with fiber handling and management such as fiber splicing and routing. Then there are issues with hermetic sealing, and thermal considerations.

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Will Buzz Lightyear Return? Section: Optoelectronics Assembly Poor manufacturing yields are slowing development of this key technology.

Introduced over a quarter century ago, optoelectronics has impacted almost every aspect of our daily lives. Innovations in lightwave technology have influenced information technology, telecom, computing, manufacturing, aerospace, military, medicine and entertainment. Today, enough fiber-optic cable has been installed to reach the moon. Despite the technology's progress, optoelectronics faces competition from disruptive technologies now under development. Within this context that we ask: Will optoelectronics technologies impact our lives and expand our opportunities as have past great technology developments? Or, better put, Will Buzz Lightyear ever return? My answer: A resounding yes! I believe light is the future. In our understanding of light and its movement, we are about where radio was in the late 1800s. Still, look what's come about so far. In the last five to 10 years, for example, we've done amazing things with lasers.

Communications already move over a fiber backbone throughout the world. We see more R&D investment in optoelectronics. Thanks to the dip in telecom, there's been cross-pollination as talented development engineers migrated to military, medical, automotive and other industries and brought their expertise on fiber. In telecom, I think the focus will be more on optoelectronics instead of straight photonics. (We all got a little crazy with that.) Yes, Buzz Lightyear — a symbol of advanced technology — will return, bigger and stronger than ever. I strongly believe it, so I'm jumping in while others seem to be running away.

By now you're probably asking, Who is this guy and why is he writing a column? My name is Michael Shores and I'm founder and president of a company in Richardson, TX, called Texas Prototypes, or TXP. My involvement in optoelectronics dates to the late 1990s, when I worked for a new product introduction center of a Tier 1 EMS company. Our group performed board layout, prototyping and process development in the complex RF and high-speed digital areas. Given the popularity in the optoelectronics arena, our EMS parent pushed me into its photonics group.

In my new role, I met with many different photonics companies to learn about the industry. I found that they were very secretive, yet ironically a number of them were doing the same things. One thing they had in common: terrible manufacturing yields. They would build 1,000 units to get 80 to work, and I couldn't believe they sold these as qualified products.

That's when I began to look for ways to boost manufacturing yields and quality, because with higher yields prices can come down and products can become more mainstream. We are constantly trying to find new types of manufacturing processes, procedures and equipment to aid producibility. We are backing into the optoelectronics and photonics industries from a manufacturability standpoint, because without good manufacturability there can be no true product.

Because we deal with the OEM, the EMS and the ODM, and I'm involved with design, prototyping, manufacturing, test and all parts in between, I have a broad view of what's happening with opto. What do I see as some of today's manufacturing challenges? Fiber alignment is a key issue throughout the industry. Imagine sending light between two pieces of hair; you're trying to line them up and any kind of miniscule movement throws the alignment off. Alignment of all kinds is an issue, be it device alignment or anchoring devices such as laser die or photo-detectors or prisms.

At the PCB level come problems with fiber handling and management such as fiber splicing and routing. Then there are issues with hermetic sealing, and thermal considerations. Another focus is optical test, to determine the amount of light and make sure things are working the way they're supposed to.

My goal is to write something that will create some interest and discussion and, hopefully, add a bit of information to make your job a little easier. I hope this column will be a forum for sharing ideas and knowledge about optoelectronics. I look forward to the opportunities that 2005 and beyond will bring, as well as the continuing challenges of realizing opto's full potential. I invite your comments, so that we can return Buzz Lightyear to his former self.

Fiber alignment of all kinds is an issue, be it device alignment or anchoring the devices.

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The blood of incumbents. Economist, 10/30/2004, Vol. 373 Issue 8399, ps23-s24, 2p, 1c; Abstract: The article identifies the difference between "sustaining" and "disruptive" innovation. These days, whenever anybody in the IT industry mentions the word "dilemma," it is instantly understood to refer to "The Innovator's Dilemma", a book by Clayton Christensen, a professor at Harvard Business School, who has since followed it up with a sequel, "The Innovator's Solution". In a nutshell, the dilemma is this: firms that succeed in one generation of innovation almost inevitably become hamstrung by their own success and thus doomed to lose out in the next wave of innovation. Just as they "disrupted" the previous era's leaders, they are in turn disrupted by the pioneers of the next era. To explain how this happens, Mr Christensen distinguishes between two basic types of innovation. The first is "sustaining" innovation. This is the sort that incumbent firms are engaged in to sell ever better, and ever more profitable, products to their most attractive and demanding customers. An example might be Microsoft adding more features to Word, Excel and PowerPoint. If challenged by upstarts, incumbents almost always prevail. At some point, however, the technology goes into "overshoot", where users no longer have an appetite for additional bells and whistles, and sustaining innovation leads to numbing complexity. At this point, according to Mr Christensen, the second, "disruptive", type of innovation becomes possible. Disruptive technologies target the least demanding customers in the current market, or even entirely new markets of "non-consumers", by offering something simpler, or cheaper, or both. An example of a disruptive technology that is cheaper but not necessarily simpler is Linux, an open-source operating system that is taking market share from Unix and Windows. And in disruptive-technology battles, Mr Christensen argues, newcomers to the industry almost invariably "crush the incumbents". Thus, technology has historically advanced in waves of disruption. Creating children to die is subversive to dna implicit intent and has been made illegal by humanity. A form of murder....premeditated breed to kill!

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