The year 2004 defied predictions: IBM sold its PC arm to a Chinese competitor, Oracle managed to swallow PeopleSoft, and -- perhaps the most dramatic of all -- Microsoft and Sun Microsystems aligned to make their products interoperate.
This year’s headlines also revealed plot twists that were not so surprising. The adoption of open source software continued unabated; Microsoft deferred its dream of a unified file system in Longhorn; Web services standardization extended its march; storage vendors offered intriguing designs to handle data; and Dell CEO Kevin Rollins said his company wants to add AMD chips to its product lineup.
Big Blue turns new leaf
The most noteworthy desktop computing story of the year was IBM unloading its PC division to Chinese PC manufacturer Lenovo. The deal, worth $1.75 billion, ended IBM’s decade-long internal debate as to whether it should remain in the thin-margin PC market.
What finally convinced IBM to get out of the PC business, which generated $11.5 billion in revenue for IBM in 2003 and was profitable during the past few quarters, was that it did not fit with the company’s higher-margin, server-based On Demand strategy and massive professional services business. IBM had already outsourced its manufacturing operations after it sold the last of its PC plants in 2003.
Some see the sale as expanding the size of the overall market for PCs through lower price points, with IBM picking up additional market share, although that expansion will benefit only a few vendors. In fact, the deal could foreshadow other PC vendors exiting the market by 2007, according to Gartner.
Oracle merges the market
The gobbling up of PeopleSoft was the applications sector’s biggest event, a landmark and controversial hostile takeover that saw PeopleSoft CEO Craig Conway ousted by the company’s board of directors. Oracle swallowed PeopleSoft officially in mid-December. Subsequently, Oracle President Charles Phillips said Oracle would work out its plans with PeopleSoft by the end of the year and hit the ground running by January 2005, but there is little question that integrating the two companies and cultures is a daunting task.
Open source surge
Open source software emerged as a significant protagonist in 2004.
“I’ve seen a tectonic shift in this area” of corporate attitudes toward open source, said Eric Friedman, infrastructure architecture team lead at Wells Fargo. Companies now are asking, “Why are we buying a vendor product when we could use open source?” Friedman said. “That’s become the default position -- to look for a free solution.”
Linux continued its march toward the upper reaches of the enterprise throughout 2004, aided by the delivery of the long-awaited 2.6 version of the Linux kernel, first by Novell Suse and then by Red Hat. The new kernel gives Linux distributors the ability to compete more effectively against Unix competitors such as Hewlett-Packard and Sun. It allows versions of Linux to handle significantly larger workloads, greater amounts of memory and storage, and more processors in a single box.
In response to Linux’s growing strength, Sun delivered Version 10 of its Unix-based Solaris operating system in mid-November and announced the much-anticipated update would be free of charge.
“If we look at operating systems, the areas of significant growth are Windows and Linux,” said Dan Kusnetzky, an analyst at IDC.