Really, from an enterprise point of view, when running mission-critical applications that need security and reliability and are operating with service-level agreements (SLAs), etc., the cloud isn’t quite ready for prime time yet. There are both technical and business reasons why that’s the case.

As far as the idea of the cost savings, it’s good to look at why that is the case in a few certain areas, and then to think about how you can reduce the cost in your own infrastructure by using automation and virtualization technologies that are available today, and that are also used in the “cloud.†But, that doesn’t mean you have to go out to the cloud to automate and virtualize to reduce some cost in your infrastructure.

The cloud is an evolution of other ideas that have come before it, grid, and before that Web services. All these things combine to enable people to start thinking of this as delivering service with a different business model, where we are paying for it by the unit, or in advance, or after the fact.

Virtualization and these other approaches enable the cloud, but they aren’t necessarily the cloud. What IT departments have to do is start to think about what is it they’re trying to accomplish, what business problem they’re trying to address, as they look at cloud providers or cloud technologies to try and help solve those problems.

We’ve seen people do their own private utilities versus public utilities such as flexible computing services provide. The idea of a private utility is that, within an organization, they agree to share resources and allow the boundaries to slide back and forth to hit the best utilization out of the fixed set of assets or maybe a growing set of assets.

The same idea is in a public utility or a public cloud, except that now a third party is providing those assets and providing that as a service. It increases the concerns and considerations that you have to bring to the party. You have to think about problems that you didn’t have to think about when you had a private utility.

When you go to a public space, security is paramount. What do I do with my proprietary information and service levels? How certain can I get what I need when I need it? The promise with the cloud is great, but the uncertainty has caused people to come up short and decide maybe it’s better if I do it myself, versus utilizing an outside service.

We need to think in terms of which services provide what level of value, based on the complexion of that particular company — and it’s never going to be the same for all companies. Some companies can use Google Gmail as an email service. Other companies wouldn’t touch it with a 10-foot pole, maybe for reasons of security, data integrity, access rights, regulations, or what have you. So weighing the value is going to become the critical thing for IT.

In the longer term, the more overarching impact of cloud comes when your IT department can deliver value back to the business, rather than just taking cost out. Some examples of that are using aspects of social networking and other aspects of cloud computing, and the fact that cloud is delivered over ubiquitous media, the Internet, to increase share of wallet, increase market share, maybe bring higher margin to a business, and build ecosystems, and drive user communities for a business. That’s where cloud brings value to a business and that’s obviously important.

You can start to look around at your internal capabilities, versus external, and make some decisions as to how you want to solve that problem, whether buying an external service or creating a service internally and delivering it to your customers with your own internal utility. … This will force IT to come closer to the people in the business and really understand what is the business objective, and then find the right service that maps to the value of that objective. Again, we can’t emphasize it enough. This should really change behavioral dynamics in IT and how they think about what their job is.

Basically, within the spectrum of things that are cloud computing, you have everything from infrastructure as a service … all the way up through virtualized infrastructure, a platform on top of that, an application on top of that, or perhaps a completely re-architected true cloud-computing offering.

As you move up that spectrum, I think the benefits increase, but in not all cases are the application domains available in all of those environments. … What services are available through some cloud model, what model of availability, what are the characteristics of that model, what are the requirements for that particular service – and what are the security performance, continuity integration, and compliance requirements? Those all have to be taken in holistically and through a governance model to make the decision whether we are going to move from the traditional deployment model to a cloud-delivery model, and if so, which one.

In the process of getting to a service-centric IT governance model, they’re going to have to deal with the governance model for deploying new services. Again, I think risk is partly a function of benefit. So when there is a marginal benefit or when the stakes are very high, you would want to be very conservative in terms of your risk profile.

The tougher economic conditions would heighten the acceleration of cloud computing, and not just because of the opportunity to save cost. Reinforcing what we brought up earlier, there are some clear opportunities to bring value to your business.

Examples of that are things like being able to drive user communities, users and consumers of whatever it is your business produces, using techniques of social networking, and things like that.

There is the question of how to use the advantages you get from cloud computing to drive differentiation for your business versus your competitors, because they’re hesitating, or not using it, because they’re being risk-averse. In addition, that compliments the benefits you get from cost savings.

What I really meant is that, if you are an IT shop and you are trying to decide what to move to a cloud paradigm or a cloud model, you’re likely to really focus on the places where either you can get that big win — because moving this particular service to a cloud paradigm is going to bring you some positive differentiation, some value to your company.

Or, you are going to get that big cost savings from the places where it’s the most mission-critical — the place where you have the least tolerance for downtime, and you have the greatest continuity requirements, or where the performance SLA has been most stringent. The thinking may be, “Well, we’ll tackle that later. We’re not going to take a risk on something like that right now.â€

In the places where the risk is not as great — and the reward either in terms of cost or value looks good — the current economic conditions are just going to accelerate the adoption of cloud computing in enterprises for those areas. And they definitely do exist.

On SOA governance …

Biske: The reason that I decided to write a book on this is actually two-fold. First, in my work, both as a consultant, and now as a corporate practitioner, I’m trying to see SOA adoption be successful. The one key thing I always kept coming back to, which would influence the success of the effort the most, was governance. So, I definitely felt that this was a key part of adopting SOA, and if you don’t do it right, your chances of success were greatly diminished.

The second part of it was when the publisher actually contacted me about it. I went out and looked and I was shocked to find that there weren’t any books on SOA governance. For as long as the SOA trend has been going on now, you would have thought someone would have already written a book on it. I said, “Well, here’s an opportunity, and given that it’s not really a technology book, it’s more of a technology process book, it actually might have some shelf life behind it.” So I decided, why not, give a try.

The reason companies should be adopting SOA is that something has to change. There is something about the way IT is working with the rest of the business that isn’t operating as efficiently and as productively as it could. And, if there is a change that has to go on, how do you manage that change and how do you make sure it happens? It’s not just buying a tool, or applying some new technology. There has to be a more systematic process for how we manage that change, and to me that’s all about governance.

If I just blindly say, “We’re going to adopt SOA,” and I tell all the masses, “Go adopt SOA,” and everybody starts building services, I still haven’t answered the question, “Why I am doing this, and what do I hope to achieve out of it.”

If I don’t make that clear, I could easily wind up with a whole bunch of services and building a whole bunch of solutions. I’ll have far more moving parts, which are far more difficult to maintain. As a result, I actually go in the opposite direction from where I needed to go. If you don’t clearly articulate, “This is the desired behavior. This is why we’re adopting SOA,” and then let all of the policy decisions start to push that forward, you really are taking a big risk. It’s an unknown risk. You’re not managing it appropriately if you don’t have an end state in mind.

If you look at traditional IT governance, it is more about what projects we execute, how do we fund them, and structuring them appropriately, and that has a relationship to SOA governance. It doesn’t go into the deep levels of decisions that are made within those projects.

If you were to try to set up a relationship, I would put IT governance, and even corporate governance, over the SOA governance aspects, at least, the technical side of it. The other piece of that is, when we talk about runtime governance, IT governance probably is focused on the runtime aspects of it. That’s really a key part of this, making sure that our systems stay operational and that the operational behavior of the organization is the way we want it to be. So there is a relationship between them.

Baer: My sense is that, given the current economic environment, you’re going to see a lot more in the way of tactical projects. … We need to look at some jump-starts in a sensible, sort of “lite,” like, L-I-T-E governance. That’s governance that basically federates, or is compatible with, the software-delivery lifecycle. And, when we get to runtime, it’s compatible with whatever governance we have at runtime.

The objective of SOA is to achieve reuse, but it’s really to achieve business agility. Therefore, whether we shoot for reuse, initially or not, it will not necessarily be the ultimate measure of success for a SOA initiative. SOA Governance Lite would not emphasize very heavily the reuse angle to start off with. You may get to that at Stage 2 in your maturity cycle.

Koblielus: The flip side right now is that you can look at it as a survivor-oriented architecture. You have a survival imperative in tough times. Do you know if your company is going to be around in a year’s time? The issue right now in terms of SOA is, “You want to hold on and you want to batten down the hatches. You want to be as efficient as possible. You want to consolidate what you can consolidate in terms of hardware, software, licenses, competency centers, and so forth. And, you’re probably going to hold the line on investment, further applications, and so forth.”

For SOA, in this survival oriented climate that we’re in right now, the issue is not so much reusing what you already have, but holding on to it, so that you are well positioned for the next growth spurt for your business and for the economy, assuming that you will survive long enough. Essentially, SOA Governance Lite uses governance as a throttle, throttling down investments right now to only those that are critical to survive, so that you can throttle up those investments in the future.

Biske: I’m not a believer in the term “lite” governance. I’m of the opinion that you have governance, whether you admit it or not. An alternative view of governance is that it is a decision-rights structure. Someone is always making decision on projects.

The notion of Governance Lite is that we’re saying, “Okay, keep those decisions local to the project as much as possible. Don’t bubble them up to the big government up there and have all the decisions made in a more centralized fashion.” But, no matter what, you always have governance on projects. Whether it’s done more at the grassroots level on projects, or by some centralized organization through a more rigid process, it still comes back to having an understanding of what’s the desired behavior that we are trying to achieve.

Where you run into problems is when you don’t have agreement on what that desired behavior is. If you have that clearly stated, you can have an approach where the project teams are fully enabled to make those decisions on their own, because they put the emphasis on educating them on, “This is what we are trying to achieve, both from a project perspective, as well as from an enterprise perspective, and we expect you to meet both of those goals. And if you run into a problem where you are unsure on priorities, bubble that decision up, but we have given you all the power, all the information you need. So, you’re empowered to make those decisions locally, and keep things executing quickly.”

Another parallel we can draw to this is the current economic crisis. The risk you have in becoming too federated, and getting too many decisions made locally, is that you lose sight of the bigger picture. You can look at all of these financial institutions that got into the mortgage-backed securities and argue that their main focus was not the stability of the banking system, it was their bottom line and their stock price.

They lost sight of, “We have to keep the financial system stable.” There was a risk in pushing too much down to the individual groups without keeping that higher vision and that balance between them. You can get yourself in a lot of trouble. The same thing holds true in [SOA] development.

On PE Obama’s technology leader …

Baer: Obviously, you need somebody who is going to … think outside the box. Basically, the government has long been a series of lots of boxes or silos, where you have these various fiefdoms. Previous attempts to unify architectures at the agency levels have not always been terribly successful.

The chief priority for anybody who is … in a CIO-type of role at the cabinet level is … to look for getting more out of less. That’s essential, because there are going to be so many competing needs for so many limited resources. We have to look for someone who can formulate strategic goals — and I’m going to have to use the term reuse — to reuse what is there now, and federate what is there now, and federate with as light a touch as possible.

Kobielus: it comes down to the fact that they’re driving at many of the same overall objectives that also drive SOA initiatives. One initiative is to breakdown silos in terms of information sharing between the government and the citizenship, but also silos internally within the government, between the various agencies to help them better exchange information, share expertise, and so forth. In fact, if we look at their position statement called “Bring government into the 21st century,” it really seems that it’s part of the overall modernization push for IT and the government. They’re talking really about a federated SOA governance infrastructure or a set of best practices.

Tech modernization in the government is absolutely essential. Reuse and breaking down silos between agencies is critically important. Brokering best practices across the agencies, specific silo IT and CTO organizations, is critically important. It sounds to me as if Obama will be an SOA President, although he doesn’t realize it yet, if he puts in place the approach that he laid out about a year ago, considering that the IT infrastructure in the government is probably right now the least of his concerns.

Biske: [Obama] definitely has a challenge, and I am thinking from a governance perspective. He has taken step one, in that the paragraph that Jim just mentioned, of bringing government into the 21st Century. He has articulated that this is the way that he wants our systems to interact and share information with the constituents.

The next step is the policies that are going to get us there, and obviously he’s time-boxed by the terms of his presidency. He’s got a big challenge ahead of him, or at least the CTO that gets appointed has a huge challenge. Somehow, you have to break it down into what goals are going to be achievable in that timeframe.

We’re once again facing a similar situation now where enterprises are taking a very tough look at their data center expenditures and expansions that they’re planning for the data center. … The [economic downturn] is going to have folks looking very hard at large-scale outlays of capital for data centers.

I believe that will be a catalyst for folks to consider a variable-cost approach to using infrastructures or service, perhaps platform as a service (PaaS). All these things roll up under the notion of cloud.

Virtualization provides isolation for applications running their own logical server, their own virtual server. … Virtualization gives you — from a business perspective — an opportunity to decouple the definition of the application from the system that it runs on. … Then, at run-time, you can decide where you have capacity that best meets needs of the profile of an application.

I can begin sourcing infrastructure a little more dynamically, based upon the load that I see. Maybe I can spend less on the capital associated with my own data center, because with my application defined as this independent unit, separate from the physical infrastructure I’ll be able to buy infrastructure on demand from Amazon, Rackspace, GoGrid, these folks who are now offering up these virtualized clouds of servers.

That’s the architecture we’re evolving toward. … For legacy applications, there’s not going to be much opportunity. [But] they may actually consider this for new applications that would get some level of benefit by being close to other services.

[If] I can define my application as a working unit, I may be able to choose between Amazon or my internal architecture that perhaps has a VMware basis, or a Rackspace, GoGrid, or BlueLock offering.

Another big consideration for these enterprises now is do I have workloads that I’m comfortable running on Linux right now, and so can I a take a step forward and bind Linux to the workload in order to take it to wherever I want it to go.

rPath brings a capability around defining applications as virtual machines (VMs), going through a process whereby you release those VMs to run on whichever cloud of your choosing, whether a hypervisor virtualized cloud of machines, such as what’s provided by Amazon, or what you can build internally using Citrix XenSource or something like VMware’s virtual infrastructure.

It then provides an infrastructure for managing those VMs through their lifecycle for things such as updates for backup and for configuration of certain services on the machines in a way that’s optimized to run a virtualized cloud of systems. We specialize in optimizing applications to run as VMs on a cloud or virtualized infrastructure.

With our technology, we enforce a set of policies that we learned were best practices during our days at Red Hat when constructing an operating system. We’ve got some 50 to 60 policies that get enforced at build time, when you are building the VM. They’re things like don’t allow any dangling symlinks, and closing the dependency loop around all of the binary packages to get included. There could be other more corporate-specific policies that need to be included, and you would write those policies into the build system in order to build these VMs.

It’s very similar to the way you put policies into your application lifecycle management (ALM) build system when you were building the application binary. You would enforce policy at build time to build the binary. We’re simply suggesting that you extend that discipline of ALM to include policies associated with building VMs. There’s a real opportunity here to close the gap between applications and operations by having much of what is typically been done in installing an application and taking it through Dev, QA and Test, and having that be part of an automated build system for creating VMs.

People are still thinking about the operating system as something that they bind to the infrastructure. In the new case, they’re binding the operating system to the hypervisor and then installing the application on top of it. If the hypervisor is now this bottom layer, and if it provides all the management utilities associated with managing the physical infrastructure, you now get an opportunity to rethink the operating system as something that you bind to the application.

When you bind an operating system to an application, you’re able to eliminate anything that is not relevant to that application. Typically, we see a surface area shrinking to about 10 percent of what is typically deployed as a standard operating system. So, the first thing is to package the application in a way that is optimized to run in a VM. We offer a product called rBuilder that enables just that functionality.

If you prove to yourself that you can do this, that you can run [applications] in both places (cloud and on-premises), you’ve architected correctly. … That puts you in a position where eventually you could run that application on your local cloud or virtualized environment and then, for those lumpy demand periods — when you need that exterior scale and capacity — you might just look to that cloud provider to support that application [at scale].

There’s a trap here. If you become dependent on something associated with a particular infrastructure set or a particular hypervisor, you preclude any use in the future of things that don’t have that hypervisor involved. … The real opportunity here is to separate the application-virtualization approach from the actual virtualization technology to avoid the lock-in, the lack of choice.

If you do it right, and if you think about application virtualization as an approach that frees your application from the infrastructure, there is a ton of benefit in terms of dynamic business capability that is going to be available to your organization.

Kobielus: There’s some validity to the viewpoint that Microsoft’s growth potential has capped on the business side, when you consider packaged applications, and software- and application-development tools, in the sense that the entire product niche of the service-oriented architecture (SOA) universe is rapidly maturing.

The vendors in this space — the SOA vendors, the business-intelligence (BI) vendors, the master data management (MDM) vendors — are going to realize revenue growth and profitability. Those who survive this economic downturn and thrive in the next uptick, will be those who very much focus on providing verticalized and customized applications on a consulting or professional services basis.

In that regard, Microsoft is a bit behind the eight ball. They don’t really have the strength on the consulting, professional services, and verticalization side, that an SAP, Oracle, or an IBM can bring to the table.

Microsoft, if they want to continue to grow in the whole platform and application space and in the whole SOA universe, needs to put a greater focus on consulting services.

McKendrick: Microsoft has its own economy. No matter what happens to the economy at large, Microsoft has its own economy going, and just seems to get through all this.

What’s driven Microsoft from day one, and continues to do so, is that Microsoft is the software company for Joe the Plumber. That’s their constituency, not necessarily Joe the Developer. They cater to Joe the Developer, Joe the CIO, and Joe the Analyst certainly likes to check in on what they are doing. It’s this whole idea of disruptive technology. They have always targeted the under-served and un-served parts of the marketplace and move up from there.

… The base of Microsoft, these companies that are using Microsoft technology, don’t necessarily get virtualization or cloud computing. They just want a solution installed on their premises and want it to work.

Linthicum: I think they are behind the eight ball. A lot of the strategy I’ve seen coming out of Microsoft over the last few years, especially as it relates to cloud computing, SOA, and virtualization, has been inherently flawed. They get into very proprietary things very quickly. It really comes down to how are they going to sell an additional million desktop operating systems.

Ultimately, they just don’t get where this whole area is going. … We’re heading into an area where they may not be as influential as they think they should be. They may be not only behind the eight ball, but lots of other organizations that are better at doing cloud computing, virtualization, and things like that, and have a good track record there, are going to end up owning a lot of the space.

Microsoft isn’t going to go away, but I think they’re going to find that their market has changed around them. The desktop isn’t as significant as it once was. People aren’t going to want to upgrade Office every year. They’re not going to want to upgrade their desktop operating systems every year. Apple Macs are making big inroads into their market space, and it’s going to be a very tough fight for them. I think they’re going to be a lot smaller company in five years than they are today.

Meehan: Dave is absolutely right in that the one area that Microsoft never really conquered that it needed to conquer, given its strength in the desktop, is the handheld. If they are not going to be there with the handheld long-term, that’s a major growth area that they are going to miss out on. That’s where a lot of the business is going to shift to. … On the SOA side, as I said before, Microsoft is just trying to be as service-oriented as they can for users who are trying to be not SOA-driven, but “As Service-Oriented As Possible” (ASOAP).

In fact, make that an acronym, ASOAP. There are going to be a number of users who are not going to go fully into SOA, because they have an enterprise architecture. It’s too hard to do, too hard to maintain. They’re never going to quite figure that out. They are just going to try to be tactical and ASOAP. Microsoft will try to service them and hold that part of their business.

What’s the next big thing they’re going to do? Joe referred to Microsoft having come up with that in previous downturns. I don’t see where they have got that right yet, and so I think that leads to them being smaller long-term.

Shimmin: [Microsoft is going to have an opportunity to change this perception] and simply because they don’t have to. I think back to a number of points that’s been made here that to be successful Microsoft doesn’t need to convince the world. It just needs to convince the people that attend the PDC. They have such an expansive and well-established channel, with all the little plumber-developers running around building software with their code, that just as 40 is the new 30, Microsoft is really kind of the new Apple, in a way.

They don’t need to be Oracle to succeed, they really need to have control over their environment and provide the best sort of tooling, management, deployment, and execution software that they can for those people who have signed on to the Microsoft bandwagon and are taking the ride with them. … (Microsoft) is kind of capped out in many ways relative to the consumer market. But, gosh, they have shown that with things like SharePoint, for example, Microsoft is able to virally infest an organization successfully with their software without having to even lift a finger.

They’ll continue to do that, because they have this Visual Basic mentality. I hate to say it, but they have the mentality of “Let’s make it as simple as possible†for the people that are doing ASOAP, as Mike said, that don’t need to go all the way, but really just need to get the job done. I think they’ll be successful at that.

Kobielus: I think Microsoft will be larger, and they will be larger for the simple reason that they do own the desktop, but the desktop is becoming less relevant. But now, what’s new is that they do own the browser, in terms of predominant market share or installed base. They do own the spreadsheet. They do own the portal. As Brad indicated, SharePoint is everywhere.

One of the issues that many of our customers at Forrester have hit on — CIO, CTO, that level — is that SharePoint is everywhere. How do they manage SharePoint? It’s a fait accompli, and enterprises have to somehow deal with it. It’s the de-facto standard portal for a large swath of the corporate world. Microsoft, to a great degree, owns the mid-market database with SQL Server.

So owning so many important components of the SOA stack, in terms of predominant market share, means that Microsoft has great clout to go in any number of directions. One direction in which they’re clearly going in a very forceful way that brings all this together is in BI and online analytical processing (OLAP). The announcements they made a few weeks ago at the BI conferenceshow where Microsoft clearly is heading. They very much want to become and remain a predominant BI vendor in the long run.

Gardner: … On the total cost perspective, I think what I am hearing from you is that if you go all Microsoft all the time, there are going to be efficiencies, productivity, and cost savings. Is that the mantra? Is that the vision?

Shimmin: That‘s exactly right, Dana. That’s what they’re banking on, and that’s why I think they are the next Apple, in a way, because they are downtrodden, compared to some of the other big guns we’re talking about with Oracle, SAP, and IBM inside the middleware space. But that doesn’t matter, because they have a loyal following, which, if you guys have ever attended these shows of theirs, you’d see that they are just as rabid as Mac fans in many ways.

Microsoft is going to do their best job to make their customers lives as easy as possible, so that they remain loyal subjects. That’s a key to success. That’s how you succeed in keeping your customers.

Linthicum: Ultimately, people are looking for open solutions that are a lot more scalable than this stuff that Microsoft has to offer. The point that was just made, there are a bunch of huge Microsoft fans that will buy anything that they sell, that’s the way the shops are. But the number of companies that are doing that right now are shrinking.

People are looking for open, scalable, enterprise-ready solutions, they understand that Microsoft is going to own the desktop, at least for the time being, and they are going to keep them there. But, as far as their back office things and some of the things that Microsoft has put up as these huge enterprise class solutions, people are going to opt for other things right now.

It’s just a buying pattern. It may be a perception issue or a technological issue. I think it’s a matter of openness or their insistence that everything be proprietary and come back to them. I heard the previous comment that looking at all Microsoft all the time will provide the best bang for the buck. I think people are very suspicious of that.

Gardner: We’ve heard quite a bit on this cloud operating system from Red Hat, Citrix, VMware, IBM, and HP talked it up a little bit. No one’s really come out with a lot of detail, but clearly this seems to be of interest to some of the major vendors. What is the nature of this operating system for the cloud, and does it have the same winner-take-all advantage for a vendor that the operating system on the desktop and departmental server had?

Linthicum: I think it does in virtualization. Once one vendor gets that right, people understand it, there are good standards around it, there are good use cases around it, and there’s a good business case around it, that particular vendor is going to own that space.

I’m not sure it’s going to be Microsoft. They’re very good about building operating systems, but in understanding my Vista crashes that are happening once a day, they are not that good.

Also, there are lots of guys out there who understand the virtualization space and the patterns for use there. The technology they’re going to use, the enabling standards, are going to be very different than what you are going to use on a desktop or even a small enterprise departmental kind of problem domain. Ultimately, a large player is going to step into this game and get a large share of this marketplace pretty quickly, because the cost and ease of moving to that particular vendor is very low.

… These virtualization operating systems that are enterprise bound or even in a gray area with the cloud are going to come from somebody else besides Microsoft.

On the IT Winners

Baer: … The winners are those who are likely to be more diversified into services, services that can help companies harvest more of what they already have. … The fact is that in an economic situation like this, especially where there are a lot of known unknowns, having a services business is a good way of helping clients to discover new economies. And it’s also potentially a much more flexible arrangement than having to put in an upgrade of a new version of SAP software.

Gardner: My first take on this is that the government vertical is actually going to explode and might even start going down this road towards transformation in a much more significant way.

Linthicum: People are going to look to government to solve some of these issues and bureaucratic changes are going to be built here in different divisions, and people are going to have oversight of the financial industry.

If the Democratic administration comes in, there is going to be more civilian spending, and there is going to be probably a little shift from the spending in the Department of Defense on the military side.

So, this area is going to be explosive yet again, based on some things that are occurring and based on the government taking power in particular industries.

… I think healthcare is going to remain fairly static, and I think some of their costs maybe reduced. As they start moving into more of a socialized medicine, if the Democrats take it there, there is going to be some big shifts there.

Believe it or not, even though you are moving into a healthcare-for-everyone kind of an environment, you are going to see that actually [IT] cost probably will go up, as a bureaucracy is put in place to maintain and administer that.

Baer: I hate to use the ‘D’ word but back in the depression, and I hope we are not heading into one, what area boomed during that era? Hollywood, the film industry. People were going out to the movies for cheap thrills. In today’s environment, the equivalent of that is, if you already have an Xbox 360 out there, you are going to be buying more games. Those are cheap thrills.

Gardner: We haven’t talked about one sector, and that is the Entertainment/Web 2.0/Internet. We’ve seen some downturn in advertising, including Internet advertising, but is there an opportunity for buying $3 movie and downloading it, a $2 song, a $3 game.

On the IT Losers

Koblielus: … Those who will get hurt are those vendors who rely on new-product sales, especially new product sales that are very much hardware-centric. … In any economic downturn, the things that get cut from corporate budgets, for example, are large capital expenditure (CAPEX) projects. That’s going to hurt a number of IT vendors in particular niches, for example the hardware vendors, and also where it’s a discretionary software upgrade purchase. Those are also going to feel the crunch.

In any downturn, users, large corporate IT, look to rationalize and streamline their vendor commitments. In other words, they consolidate to a few very large, very strategic vendors. So, the big guys will get bigger and the small, pure-play data-warehousing appliance vendors will be acquired or will vanish.

Gardner: On the other hand some, verticals that don’t look good include retail and manufacturing. The auto industry is getting whacked.

Linthicum: The retail space is going to suffer tremendously. They already have very narrow razor-thin margins. I think we are going to see a lot of the larger retailers suffer and perhaps go away. … Finance is obviously going to be killed for a long time, especially the banking industry. That’s going to be an area that isn’t going to recover very quickly from what’s going on right now, but I think that manufacturing ultimately will recover and we are going to see some good growth in the year 2009-2010.

Kobielus: … It basically supplements the fact that there is going to be a decline in the journalist population, essentially a migration towards the extremes, which is on one hand journalism and this is not a development.

I’m very happy to see is that, as the financial base and the business model for journalism businesses is evaporating at this point, you are seeing more-and-more citizen journalists taking up more of the load. People are reading more blogs. They are not buying newspapers.

On the Consequences

Linthicum: [IT buyers] are looking to morph the way in which they consume IT. … They plan to implement strategic technology into their enterprise [in a way that] increases in interest but decreases in cost. In other words, people are going to move into more efficient technologies. They are going to look at a little bit more at cloud computing and other ways to save money and start moving aggressively in those directions.

… Instead of having a huge Microsoft infrastructure just for e-mail and calendar-sharing in groupware, and those sorts of things, moving to things that are in the cloud. This is obviously Google, but there is also a ton of other guys that are offering some pretty good technology — information-sharing using similar infrastructure. They’ll start outsourcing that, versus maintaining all these data centers that are just dealing with e-mail and communication between people within the company.

Gardner: Where does this put Microsoft?

Bear: … They are in a transition. … In the short-term, I think it’s going to hurt their business, because clearly take-up of Vista has pretty well-flagged, especially on the corporate side. Obviously they are trying to cultivate the Software Plus Services side, but that business is still very much in its early in its cycle.

Linthicum: You can go off-premises with lots of stuff and the cost is always cheaper, and also it allows you to upgrade and innovate into new technological areas you haven’t driven before.

Next, would be tactical, software-as-a-service (SaaS) applications. Take some of the HR processing, which is driven by some kind of in-house system in the data center, and outsource that to the dozen or so SaaS vendors who are offering HR processing. That’s kind of a light-weight business process.

Then, the next generation is even more risky, and I don’t see a ton of guys doing that initially. It involves some of the core business processes, and getting into an SOA kind of an initiative. Re-automating those, but also outsourcing a tremendous number that haven’t been done before for the primary reason of cost saving.

Kobielus: I see definitely the economic downturn is going to expand the footprint, as it were, for the cloud in data warehousing, where data warehouses are becoming ever larger in the hundreds of terabytes and now into the petabyte.

I’m seeing an upsurge in the number of start-ups and data warehousing vendors that now have cloud based offerings. … In other words, where there is a capital expenditure crunch or a budget crunch, and users can’t afford to pay the millions of dollars to bring one of these petabyte-scale data warehouses in house, they are going to go outside to the likes of a 1010data or using Amazon EC2 to aggregate, persist these huge datasets.

They can do very complex analyses and also run a greater degree of their data mining and predictive analytics algorithms in that very cloud. It just saves them money, and it’s not a huge capital expenditure. It’s a pay-as-you-go kind of thing. I think that’s going to be the trend and those vendors who are already out there could be the major beneficiaries of this current economic crunch.

Baer: … In times like these, obviously you have changing economic conditions, changing in a very unpredictable manner. On the other hand, the financial crunch and the credit crunch is going to restrict the amount of resources you have at your disposal. So, you’re basically going to look very opportunistically. You are going to look at, let’s say, the low-hanging fruit that will give you the greatest gain in savings or a way to respond to the market in a more agile manner.

… You won’t necessarily do a global top down or enterprise-architectural SOA transformation, if you haven’t done SOA already. But, opportunistically, if you are trying to take advantage of some of these cloud-based services to start doing mining on a more massive scale, at the same time trying to lower your risk, it will require certain applications or data source that you may have. You may need to conduct a transformation, where you will implement, more flexible architectures, data SOA architecture.

But you will do it opportunistically in these tactical areas, where you can take advantage of services in the cloud that give you the advantages of the transformation to solve the problem you need to deal with, and at the same time, minimizing your risk.

Kobielus: … The financial vertical and the government vertical are becoming overlapped. There is a degree of nationalization already that’s taking place. The government is taking back Fannie Mae and Freddie Mac. I think they have taken over AIG, but all around the world, you hear governments, especially in Europe saying, “Hey, we need to re-nationalize or, to some degree, exert tighter control over the financial vertica., I think this is everywhere in the world.

What we’re already seeing is that the government vertical, as they have indicated, will continue to grow, because it’s going to exercise much greater oversight and equity positions within the financial vertical. I think the early part of this decade is a prelude to what we’re going to see in even greater abundance in the next 10 years.

After the whole Enron fiasco, with Sarbanes-Oxley and so forth, we saw the growth of this market and this technology called governance, risk management, and compliance (GRC) to exert tighter control over the financials of private enterprise, and bring greater transparency.

I think we are going to see now, the government exert ever tighter GRC reigns over the financial sector, to a degree unprecedented, because we now have government actually owning or controlling a number of the key firms in that space. So, the whole GRC sector is in an embryonic stage. There are a number of vendors like SAP and Oracle who have taken sort of a leading-edge position in that area. That will expand greatly, and we are going to see more of these risk dashboards and controls being implemented in the context of BI and the data warehousing investments that enterprises have already made.

In terms of the horizontals, the GRC sector will come into its own, and it will be primarily the driver. There will be the financials, and then it will be around the world. All governments will enforce the use of this kind of technology.

Baer: … In the case of governance, I don’t know if I would call it “opportunistic,†but it is an area in which you do not have an option as to whether you comply or not. Therefore, the only economic way to provide all the information and to do all the audits without having to rip apart all of your existing back-end infrastructure is through a service’s layer on top of all that.

Maybe I can come up with a cheap buzzword here, a buzz-line or a tag-line, such as “Son of SOX,†for what’s going to become a changing regulatory environment. You’ll need a governance layer that can contend with changes in this moving target. Obviously, the only feasible way, from an architectural standpoint, to deal with that is do a flexible architecture, and that’s essentially what a SOA is.

Linthicum: I think this is a great time to do a startup. Number one, VCs be damned at this point. You don’t need their money at all, just some angel investors to invest in some very minute infrastructure. With cloud computing out there and the number of things you can do from a marketing, application developer’s, and outsourcing perspective, you can basically get a technology company up and running — and profitable — probably for the least real cost we’ve seen in years. It’s a great time for people who are innovative, able, and resourceful to get out there and start technology companies.

… Now is a great time for small innovative new startups to get out there and help create new spaces, such as Web 2.0, and I think there are a number of SOA problems that needs solving as well. I’d love to see some startups get out there and take those problems on.

Oracle announced the release, in partnership with HP, of a very high-end data warehousing appliance. They may not use the word “appliance,” but that’s in fact what it is. It’s called the HP Oracle Database Machine. It encompasses and includes the Oracle Exadata Storage Server, which is a grid storage level server.

What Oracle and HP have essentially done is take a page from the