FT : Buffett’s IBM Move

Monday, November 21, 2011

Warren Buffett has famously steered clear of the tech sector on the grounds that he is ill-equipped to assess the periodic disruptions that sweep through the industry. Yet with the $10.7bn bet he has just placed on IBM , he has stepped into the middle of the biggest disruption since the emergence of the PC.  The rise of cloud computing is exactly the sort of secular tech shift that has kept the Sage of Omaha on the sidelines in the past. That he has invested regardless is a testament to the fortress IBM has constructed around its business. It also represents a bet that the cloud disruption will be different, and that old names like IBM are in a position to manage this one to their advantage.  In many ways, the surprise is not that Mr Buffett has finally taken the plunge in tech, but why it took him so long.  It’s not just that IBM has been a fixture of the US business establishment for decades. As an executive at one of the company’s biggest competitors ruefully admits, IBM is exactly the kind of business that Mr Buffett loves. Its relationships with its customers are the most durable in tech and its single-minded mission – to win a progressively bigger “share of wallet” from the chief information officers who have come to rely on it – has been remorselessly effective.

With its push into services and business consulting, IBM has cemented those relationships in a way that no rival has been able to match. There is no surprise here: IBM’s approach has long been seen as the model to copy in tech. But its rivals have been either too slow or have mishandled their response, with HP’s belated acquisition of services company EDS – and troubles integrating the business with the rest of its salesforce – just the most visible example.  Behind the giant services division, meanwhile, lies Big Blue’s real secret weapon: a software business that has been the main driver of its earnings and margin growth. There is little natural operating leverage in services, which relies on hiring more people the more work there is to do. But software has given IBM a way to enshrine repeatable processes in code, increasing the bang for the buck it gets from its services engagements.  Perfecting this approach to services and using it to drive hardware and software sales also accounts for Sam Palmisano’s success in defusing the threat from low-margin Indian IT services companies during his decade as IBM’s chief executive.

While fine-tuning this business model, Mr Palmisano has also made IBM a machine for delivering higher shareholder returns. There has been little overall growth: revenues, which hit $88bn in 2000, were still under $100bn last year. But as Mr Palmisano has shuffled IBM’s portfolio of businesses, the net profit margin has climbed from 9 per cent to 15 per cent.   Also, aided by the buy-backs and other shareholder-friendly actions so praised by Mr Buffett, earnings per share have risen from $4.44 to $11.52.  With his five-year “roadmaps” laying out detailed financial targets, Mr Palmisano, who retires at the end of this year, has left an unrivalled process for holding his successors accountable. With IBM, he promises, what you see is what you get.  How defensible will IBM’s high-margin citadel be in the cloud disruption that lies ahead? The centralisation of computing resources in larger data centres, along with the transformation of the output of IT into easily consumable services, promise to bring massive reductions to unit costs in computing.  IBM has stood partly aloof from this. Rather than bet on the shared “public clouds” that will have the biggest economies of scale, it is betting that it can bring ingredients of the technology to bear in company-specific “private clouds”. The pay off will be smaller, but the upheaval to IT functions less. The natural conservatism of IT managers suggests that this is a solid bet.

Yet most corporate IT departments are also under pressure. Departmental business managers are impatient: they want to equip their workers with the latest smartphones and tablets. Rather than wait for the IT department to allocate the resources to back their latest projects, they would rather tap into the new online services that public clouds are starting to foment.  These forces will create dynamic new businesses with growth rates that far exceed the plodding progress of IBM. From the makers of new cloud-connected devices to software-as-a-service providers and suppliers of the technology infrastructure to support the public cloud platforms, there will be many hotter stocks in the tech world.  Mr Buffett is prepared to let such opportunities pass by. His bet is that Big Blue’s brand will remain the gold standard in corporate IT, and that generations of CIOs to come will grow up repeating the mantra of their forebears: You can’t get fired buying from IBM.

Reference : http://www.ft.com/intl/cms/s/2/fd27b166-106b-11e1-8298-00144feabdc0.html

Voodoo Calls

Tuesday, November 8, 2011

I awoke a few seconds before the phone rang.  I had not at all anticipated that I would wake 4 hours after having falling asleep almost involuntarily at 930.  It was an elderly lady at the other end who opened with a friendly and very drawn out “Helllllllo”, before plunging into rushed Mandarin.  It was my Singapore cell and the only reason I had picked it up was that I wasn’t sure whether it was some payment I had forgotten about again.  It wasn’t and, in my relief, I was unable to get angry at the old lady.  “Wrong number”, I had interupted.  “O”, she said, sadly.  “Wrong number uh ?”.  I shared her feeling of disappointment, of having missed a cue, cause I was after all awake at 1:42am.  I had added 3 hours to compute alternate times based on what both my phones were indicating, as my travels have left me unable to trust atomic time synced miraculously on my phones.  A long time ago I once turned off the sync option and had had to add hours and do the whole am/pm thing before my heart had picked up where my calculations left off, as I had realized I was horribly late.  It is amazing how debilitating technology dependence can make you.  Anyway, I was wide awake and it was 142 am local time indeed.  I decided to listen to “Big Two Hearted River” so I could waft off into sleep again.  I almost had until the vivid descriptions of coffee and sweet cake and canned apricots that “tasted better than fresh ones” got me hungry.  I tossed around several options and decided that I ought to at least get up and shave and then maybe do yoga.  Getting up made me even hungrier and I decided that I’d head out to Denny’s for breakfast.  Many a times when I have found myself away from home and hungry at this hour, Denny’s has come instantly to mind as the first and only option.  A fat omelette with grilled tomatoes and sizzling hashed browns and a tall orange juice was just what I needed. I knew there was one near my office but that was a cab ride away.  I postponed thinking up an answer to the question of how I would get a cab.  Something would happen and I’d be all Denny’ed up shortly, I was sure.  My trusty warm North Face and yesterdays clothes and I was all ready.  Sonia at the front desk was very pleasant.  Her hair was slightly dishevelled but I cut her some slack as it was 230 after all.  I was pleasantly surprised when she told me that Roxy’s would be the only place I could get breakfast.  “It’s like Denny’s, just not a chain”.   “Wait, it isn’t Monday is it ? ” to which I had replied confidently based on my recent time and date calculations – “No, it is Tuesday”.  To Stark between 11th and 12th I was soon headed.  The thought of Denny’s and all my cab issues disappeared.

The coolness was most pleasant.  Lucky I was to have Gurbani streaming live to me as I walked totally deserted streets.  A homeless guy crossed and I crossed over to the other side to keep my distance from his likely unpleasant odors and criminal intent.  I walked on the streets and kept to the opposite side from where I saw any wanderers in the distance.  I felt very smart that I had almost no cash on me and was therefore not likely to lose much in case of a stick up.  I saw the large lighted sign on Stark that didn’t say Roxy so I decided to cross over to where 4 young men were huddled.  This seemed perfectly safe at the time especially since I didn’t have much cash.  3 doors down I was told.  Another similarly dressed man about my age approached the door and we both reached the locked door almost simultaneously.  “How can they close a 24 hour restaurant” he said, trying too hard to be funny.  “Do you know of any other ?” I asked.  He mentioned some other name that he said he was going to.  Unstated in his response was an invitation.  It must have been paranoia brought on by lack of sleep, as I walked rapidly away from him saying I’d go back to my hotel.  Visions of a gay serial killer came flooding to mind.  I looked over my shoulder several times on my way back.  I would be stern but not rude with Sonia for sending me off to a closed restaurant, and would ask her to get me a cab.  The cleaning lady gave me a “you’re not welcome here” look mixed with a “you’re weird to be here at 3AM” look as I entered the lobby.  I guess I was stepping on her freshly swept and still damp floor and she resented my presence.  I paced in front of the front desk but Sonia was nowhere to be seen.  Something would happen, I thought, as I headed back out. No cab out front – come to think of it, it would have been very weird if  there had been one.

I saw a couple of normal looking but obviously homeless men chatting on a street bench – again, weird but not scary.  I waved to a cab which was standing with lights on near the Marriott.  It was a toasty 73 degrees in there and my glasses fogged up as I asked him to take me to Denny’s.  We pulled up and the place looked closed but my mind would not process this.  I gave him a handsome tip and pulled at the locked door as he pulled around the corner.  This is the first Denny’s I have ever seen that closes at 1AM.  Now I was in a proper jam, I thought, with no cab in sight to get me back to my hotel.  Something would happen, I thought, as I started walking and followed the train track route that I was familiar with.  The freeway traffic was very loud as I crossed under the bridge.  I reassured myself that this was safe as it would have to be a pretty incompetent thug to wait for his victims at this place at this hour.  A cyclist in front of me stopped and seemed to circle around waiting for me.  I was alarmed but then I realized he was circling back to get on the sidewalk of the bridge and onto his bike path.  I followed.  A young woman with a babbling old man passed close by me on the narrow shoulder.  She smiled a little too friendly and I disconnected eye contact as I hurried past, sensing an imminent indecent proposal.  I snapped several looks over my shoulder to ensure that they were receding away from me.  A seemingly full moon was hidden behind thin cloud cover and the river water sparkled in the soft light. Eternity was docked absolutely motionless and the darker tone on her lower half had seemed like a water reflection of the upper half until I passed closer.  The Gurbani stream disconnected at what seemed like precisely halfway across the bridge and I momentarily panicked.  A few paces ahead and I was back online.

As I entered the city, I heard the loud street cleaner truck and tried to avoid it by progressing up more Y-coordinates instead of the X’s that intersected it’s path.  It is a grid, and like most cities, much easier to walk than drive on because you don’t have to worry about the one way streets.  A cop car slowed a half block behind me and then sped off.  My X-Y meanderings brought me to the corner of the famous Voodoo Doughnut shop.  I had heard that on weekends, lines allegedly snaked for blocks around the place as tourists and locals alike queued for it’s crazy good doughnuts.  As I had crossed the bridge and now felt I was almost home, I decided to peek a look.  Truly astounded I was to find the place open.  Although sweet doughnuts were not exactly what I had in mind, I thought this might be a good starvation blocker.  I had walked about 2 miles and my face was quite cold although my hands and neck and the rest of me were nice and warm in my trusty North Face.  The relative frozenness of my face made me even harder to comprehend.  So the lady behind the counter dismissed my small talk with un-rude unfriendliness.  “Roxy’s would be your best bet”, she said as I inquired about breakfast places nearby.  “O that’s right they’re closed on Mondays” she had said when I told her it was closed.  I raised no objection to her calling a Tuesday a Monday.  It was Monday indeed as it was too early on Tuesday to be Tuesday.  My faith in atomic time got a lot weaker right at that moment.  I asked to eat in but then changed my mind.  No cards, cash only – which I had, just not in excess.  2 takeaway in a small white unmarked bag.  I saw cabs, which had alluded me on the other side of the bridge when my need for one was at its zenith, wandering uselessly all over the place.  The Westin lights never looked better.  I saw Sonia at the counter as I entered the hotel lobby.  It must have been the cold or maybe the jet lag or maybe the whole experience of wandering around the city at such an hour – “Roxy’s was closed, Denny’s was closed.  I got you doughnuts.”  I placed the white unmarked bag on the desk.  “Thank you.  That is so nice of you”, she said.

It is 524 now and I think I will go down and get some breakfast.

The Economist : Cuckoo Clouds

Tuesday, May 3, 2011

IT COULD turn out to be the biggest breach of data privacy since the advent of the internet. Sony admitted this week that hackers had stolen personal information, possibly including credit-card details, of many of the 77m-plus users of its online-gaming and entertainment networks. The Japanese company did not admit the full extent of the potential risks to its customers until nearly a week after it had taken its PlayStation Network off air, though it insisted that it had done so as soon as it realised how serious the intrusion into its systems had been. Amazon, an American online retailer and provider of “cloud computing” services, has also suffered a lengthy breakdown at one of the giant server farms whose storage and processing facilities it rents to other companies. The two lapses, though unconnected and different in nature, have raised the question of whether customers can really trust the basic idea behind the cloud—that you can buy computing services from the internet, just like gas or water from a utility.

Sony’s security breach is particularly embarrassing because it wants to position its PlayStation console as an entertainment hub capable of delivering films and music over the internet, in addition to video games. An entertainment one-stop-shop of this nature will appeal to consumers only if it is secure and reliable; a DVD, after all, does not suddenly refuse to play for a week. Sony also failed to encrypt some of the personal details of its customers—an elementary error for a company that prides itself on its technological prowess. In Amazon’s case, the problems were caused by a glitch that took longer than expected to resolve, affecting the operations of several internet firms (including Reddit, Quora, HootSuite and Foursquare) that use its services, and denting the reputations of all concerned—as well as that of the cloud itself. But building a totally secure and reliable cloud-based system, or indeed any other kind of computer system, is impossible. More break-ins and breakdowns are inevitable. What matters is that service-providers, consumers and corporate clients all learn the right lessons from the events of the past week.

For providers of online services, the main lesson, beyond the obvious need to adhere to basic principles of computer security, is the importance of being open with customers when things go wrong. This seems to be something that is particularly difficult for Japanese firms, with their consensus-based decision-making and a reluctance to tell superiors when problems arise. Sony remained tight-lipped when it should have been forthcoming. Amazon has also been criticised for providing only a small amount of rather vague information about the outage. One user gave the company an “F” for communication this week; another complained that its updates seemed to have been written by its lawyers rather than its engineers. Consumers, meanwhile, should ensure that they do not use the same passwords on multiple online systems, which exposes them to the danger that a compromise in one system will enable the same credentials to be used to access another. Being able to manage passwords and spot “phishing” e-mails that try to trick recipients into revealing bank details and other information are now important life skills, like it or not. The lesson for companies let down by Amazon’s outage is that they need to be aware of the risks of being too reliant on a single supplier, with cloud computing as with anything else. Firms that use cloud-based systems should be looking at ways to distribute work across multiple providers. Although the cloud has many benefits and is generally quite reliable, it is clearly bound to produce the odd thunderstorm.

Reference : http://www.economist.com/node/18620774?story_id=18620774A

Federated Identity Paper

Wednesday, March 30, 2011

Worth a read.

Reference : http://www.schneier.com/blog/archives/2011/03/federated_authe.html

The Economist : NCLB Version 2

Thursday, March 24, 2011

…..Ten years ago Congress passed the No Child Left Behind Act (NCLB), a bold effort to improve America’s schools. On March 14th Mr Obama announced that he wants to pass a new version by August. It could be one of his most important feats. But it will not be easy. The main problem is that politicians still disagree on Washington’s role in education. The federal government provides less than 10% of the money schools spend. But NCLB, the most recent incarnation of the 1965 Elementary and Secondary Education Act, gave the federal government unprecedented influence. States must set standards of achievement. Schools that fail to make progress face sanctions. NCLB exposed the dismal performance of schools. But it has also demonstrated how clumsy Washington’s hand can be. A requirement for “highly qualified” teachers turns out to have helped keep states from hiring good ones. State standards diverge wildly. NCLB’s main goal, for all pupils to be proficient in reading and maths by 2014, is unrealistic. And thanks to an odd way of judging schools, more than 80% may be labelled as “failing” this year.

Mr Obama has already offered one new model: dangle carrots for reform and hope that states bite. The stimulus offered more than $4 billion in grants for states that made certain changes, such as lifting caps on the number of charter schools and devising new ways to evaluate teachers. No state had to apply for the grant programme, Race to the Top, but 46 did. With the new version of NCLB, Mr Obama can go further. He wants to set clear goals but give states more flexibility in meeting them. His plan would fix NCLB’s most obvious failings, such as neglecting to track the progress of individual pupils. Only the worst schools would face dramatic intervention. Districts would evaluate teachers on a range of factors, including pupil performance. Such plans would seem ripe for bipartisan compromise. Gene Wilhoit, director of the Council of Chief State School Officers, thinks that Mr Obama has moved in the right direction. Many of the president’s priorities, such as improving teaching, overlap with those of conservatives. But Republicans are wary. John Kline, the chairman of the House education committee, frets that states spend too much time complying with federal rules. Race to the Top had good goals, but poor implementation. He is dubious about the proposed interventions for failing schools—a concern he shares with the teachers’ unions. Mr Kline’s party now faces an awkward choice. If the Republicans pass a new version of NCLB, they will give Mr Obama a victory. But if they do nothing, Democrats will blame them for failing to fix a law that voters have come to hate.

Reference : http://www.economist.com/node/18396095/print

Facebook is bucking the trend toward server virtualization and is interested in microservers for inexpensive growth and quick failover, the company’s lab director said Tuesday.  The social networking giant came out in support of Intel’s plans for an expanded lineup of processors for microservers, as Gio Coglitore, director of Facebook labs, spoke at an Intel press briefing in San Francisco. At the event, Intel said it would introduce four new chips for microservers this year and in 2012, ranging from a 45-watt Xeon to an Atom-based processor with less than 10 watts of power consumption. All will have server-class features, such as 64-bit compatibility and ECC (Error-Correcting Code) memory. Facebook has tested microservers in production and is interested in the architecture for its massive data centers, Coglitore said. The inclusion of those server features is key for the company to be able to use microservers, he said.  Microservers, a concept that Intel introduced in 2009, are small, low-power, one-processor servers that can be packed into a data center more densely than rack or blade servers. The microservers in a rack typically share power and cooling and may also share storage and network connections, said Boyd Davis, vice president of the Intel Architecture Group and general manager of data center group marketing.  Manufacturers including Dell, Seamicro and Tyan have adopted the architecture, which has been most popular among large cloud service providers for large-scale, low-end hosting and Web serving, according to Intel. The company expects microservers to remain about 10 percent of its server processor market.

Front-end Web servers are where Facebook is nearly ready to start using microservers, according to Coglitore. “With Intel’s announcement, it’s just about to happen,” he said. Facebook will probably start implementing microservers on a large scale beginning late this year or early next year.  Facebook uses a variety of server types across different parts of its data centers, but the company’s aversion to virtualization extends throughout its infrastructure, Coglitore said.  “We find in our testing that a realized environment brings efficiencies and brings the ability to scale more effectively,” Coglitore said. “If virtualization was the right approach, we would be a virtualized environment.”  Facebook wants to be able to balance its computing load across many systems and potentially lose a server without degrading the user experience. “As you start to virtualize, the importance of that individual server is greatly enhanced, and when you have that at scale, it becomes very difficult,” Coglitore said. He prefers to think of computing units as faceless, interchangeable “foot soldiers.” Virtualization makes it harder to treat hardware resources that way, Coglitore said. Using a virtualization software layer also tends to create lock-in, he said.  In addition, though Facebook could take advantage of more powerful server platforms for some functions, it sometimes turns to lower end systems for budgetary reasons. Facebook prefers to change servers every two to three years, following the chip refresh cycles of Intel and other processor makers, Coglitore said.  Intel currently ships a 45-watt Xeon and a 30-watt Xeon processor for microservers. Upcoming microserver chips include the 45-watt E3-1260L and 20-watt E3-1220L, which are already shipping to server makers, and a unnamed 15-watt part based on the new Sandy Bridge architecture. The Atom-based, sub-10-watt microserver processor coming next year also does not yet have a name, Intel’s Davis said.

Reference : http://www.cio.com/article/print/677076

The Iraq war hawks urging intervention in Libya are confident that there’s no way Libya could ever be another Iraq. Of course, they never thought Iraq would be Iraq, either. All President Obama needs to do, Paul Wolfowitz asserts, is man up, arm the Libyan rebels, support setting up a no-fly zone and wait for instant democracy. It’s a cakewalk. Didn’t we arm the rebels in Afghanistan in the ’80s? And didn’t many become Taliban and end up turning our own weapons on us? And didn’t one mujahadeen from Saudi Arabia, Osama bin Laden, go on to lead Al Qaeda? So that worked out well. Even now, with our deficit and military groaning from two wars in Muslim countries, interventionists on the left and the right insist it’s our duty to join the battle in a third Muslim country. “It is both morally right and in America’s strategic interest to enable the Libyans to fight for themselves,” Wolfowitz wrote in a Wall Street Journal op-ed piece.  You would think that a major architect of the disastrous wars and interminable occupations in Afghanistan and Iraq would have the good manners to shut up and take up horticulture. But the neo-con naif has no shame. After all, as Defense Secretary Robert Gates told West Point cadets last month, “In my opinion, any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should ‘have his head examined,’ as General MacArthur so delicately put it.” Gates boldly batted back the Cakewalk Brigade — which includes John McCain, Joe Lieberman and John Kerry — bluntly telling Congress last week: “Let’s just call a spade a spade. A no-fly zone begins with an attack on Libya to destroy the air defenses. That’s the way you do a no-fly zone. And then you can fly planes around the country and not worry about our guys being shot down. But that’s the way it starts.”

Wolfowitz, Rummy’s No. 2 in W.’s War Department, pushed to divert attention from Afghanistan and move on to Iraq; he pressed the canards that Saddam and Osama were linked and that we were in danger from Saddam’s phantom W.M.D.s; he promised that the Iraq invasion would end quickly and gleefully; he slapped back Gen. Eric Shinseki when he said securing Iraq would require several hundred thousand troops; and he claimed that rebuilding Iraq would be paid for with Iraqi oil revenues. How wrong, deceptive and deadly can you be and still get to lecture President Obama on his moral obligations? Wolfowitz was driven to invade Iraq and proselytize for the Libyan rebels partly because of his guilt over how the Bush I administration coldly deserted the Shiites and Kurds who were urged to rise up against Saddam at the end of the 1991 gulf war. Saddam sent out helicopters to slaughter thousands. (A NATO no-fly zone did not stop that.) Col. Muammar el-Qaddafi is also monstrous, slaughtering civilians and hiring mercenaries to kill rebels.

It’s hard to know how to proceed, but in his rush, Wolfowitz never even seems to have a good understanding of the tribal thickets he wants America to wade into. In Foreign Affairs, Frederic Wehrey notes that “for four decades Libya has been largely terra incognita … ‘like throwing darts at balloons in a dark room,’ as one senior Western diplomat put it to me.” Leslie Gelb warns in The Daily Beast that no doubt some rebels are noble fighters, but some “could turn out to be thugs, thieves, and would-be new dictators. Surely, some will be Islamic extremists. One or more might turn into another Col. Qaddafi after gaining power. Indeed, when the good colonel led the Libyan coup in 1969, many right-thinking Westerners thought him to be a modernizing democrat.” Reformed interventionist David Rieff, who wrote the book “At the Point of a Gun,” which criticizes “the messianic dream of remaking the world in either the image of American democracy or of the legal utopias of international human rights law,” told me that after Iraq: “America doesn’t have the credibility to make war in the Arab world. Our touch in this is actually counterproductive.” He continued: “Qaddafi is a terrible man, but I don’t think it’s the business of the United States to overthrow him. Those who want America to support democratic movements and insurrections by force if necessary wherever there’s a chance of them succeeding are committing the United States to endless wars of altruism. And that’s folly.” He quotes John Quincy Adams about America: “Wherever the standard of freedom and independence has been or shall be unfurled, there will her heart, her benedictions and her prayers be. But she goes not abroad, in search of monsters to destroy … she is the champion and vindicator only of her own.” As for Wolfowitz, Rieff notes drily, “He should have stayed a mathematician.”

Reference : http://www.nytimes.com/2011/03/13/opinion/13dowd.html


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