Monthly Archives: November 2007

VMware Is Absolutely Not a Dead Duck!

I ran into an article on eWeek this morning by Steven J Vaughan-Nichols, entitled Is VMWare a Dead Duck? I feel the need to respond. It isn’t just that I disagree, it’s that the argument used to support the proposition merits discussion and analysis. This is the argument, summarised:

Many companies and Open Source development groups are now offering “free virtualization”. Products include Xen, Open VZ, KVM, Virtual Box, UML. Red Hat is entering the fray with Red Hat Enterprise Linux 5.1. So is Oracle, with a free Xen based offering. Dell is even bundling Xen with its PowerEdge servers and here comes Microsoft with Server 2008 which has its very own (bundled) hypervisor. So, as soon as the market understands that you can have virtualization for nothing, “VMWare est le canard mort”.

No, it’s not.

The problems with this line of reasoning are:

  1. The “apples v oranges” comparison. The confusion arises from the term “virtualization”. There are a whole variety of virtualizations – Dan Kusnetzky explains this well on ZDNet with a simple diagram. VMware is involved with only some of these. The original VMware proposition was to partition a server and run different instances of an OS in the partitions. Xen does this. IBM has been doing it for years on the zSeries. If that was all that VMware delivered then it would indeed be threatened by the rash of free capabilities that are emerging. VMware delivers more.
  2. Commodity Markets. Free software stands a better chance of dominating in a commdity market. Even so, Microsoft’s Windows OS and Office Software is surviving the attack of free products even though, in many circumstances, the products are close to commodity status. There is a whole crowd of free databases, including the ubiquitous MySQL. Neverthelss, Oracle, Microsoft and IBM still do very well out of database market. Virtualization is NOT a commodity.
  3. Free software isn’t exactly free. Free software is only free if it involves zero implementation effort and zero operational effort. Attacks on dominant vendors by free offerings rarely eliminate the value that large enterprises place in the dominant products. VMware’s primary market is the large enterprise, where the intelligent use of virtualization can save dramatic amounts of money over time. The savings dwarf the license costs of VMware’s software. Importantly, VMware’s value proposition scales. If you want to virtualize a handful of servers, then maybe the free products are competitive or even better. If you want to manage virtualization across a server farm, it’s VMware.
  4. VMware’s stock market value. VMware is on a roll. The stock market believes it’s worth $34.99billion even though it has revenues of just over a billion. That’s a huge multiple. The stock market gets things wrong sometimes, but there are reasons why the valuation is so high, beyond VMware’s growth rate of nearly 100%. Many observers see VMware as challenging both Linux and Windows on the server. After all it VMware not Linux or Windows that’s doing the job of using computer resources effectively.
  5. The Resource Space OS. VMware is gradually evolving from being a virtualization capability to being the Resource Space OS – in effect the strategic item of software that manages the whole resource space, including both clients and server, grids and partitions, storage and access. I know. It has a long way to go to do this, but it is streets ahead of the virtual competition. The way I see it, it will be difficult for any vendor to catch VMware and its core team of engineers.

VMware is neither dead, nor wounded, nor even out of breath. And a duck, it is not.

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An Awful Foreboding

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An Awful Foreboding (from the series: The Sky’s Opinion)

It has never been hard for me to understand the belief in omens. At times nature seems to offer you an opinion. It’s a conceit, I guess, to suggest that the sky would care communicate with us, even if it could. But sometimes it catches a mood.

This cloud formed over the mountains to the west of Las Vegas. I doubt if many people in Las Vegas noticed. Hell, I doubt if even one percent of them were even close to a window. They were all captured by slot machines and dice and cards. All intent and hell bent on losing money.

I’d never seen the Las Vegas mountains like this. They usually lie lazily beneath blue skies, bathed in scorching sunlight. I’d been 4 days in Vegas and I’d grown tired of its banal surreality. I looked out from my hotel room and saw the darkening clouds. It seemed like an awful foreboding, at the time.

But they never hung around – the wind blew them away. An hour later, the sky was clear.

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The EMC Paradox

EMC is among the top IT vendors, a fact that is reflected in its market value of $39.61bn (as on 28th November, 2007). It also holds 86% of VMware’s stock. The stock market values VMware at $31.89bn, believe it or not, so EMC’s share of that amounts to a cool $27.42bn. And that, in turn means that the rest of EMC; its storage business and its information management business and its security business and its system management business, and a lot more besides, is valued by the stock market at a mere $12.19bn.

And that makes no sense at all.

EMC will do more than $12.19bn in revenues this year (the estimate is $12.9bn) and it’s been growing at about 15%. So, EMC exhibits a strange kind of paradox. One of two things are true; either EMC is undervalued or VMware is overvalued – and both may be true.

EMC’s Business

EMC’s storage business is healthy and the storage market is continuing to grow dramatically – as usual. At the recent EMC analyst event, CEO Joe Tucci, put up a graph which showed the storage market averaging about 60% growth over the last ten years. At the same time, of course, the cost of storage is falling, but it nets out positively for EMC. At a compound growth rate of 60%, the world data will amount to one zetabyte by 2010.

What’s a zetabyte?

Well 1000 terabytes are a petabyte and 1000 petabytes are an exabyte and, finally, a zetabyte is 1000 exabytes. A terabyte is the size of the disk drive you’ll be buying next year to store your videos on. For all I know, the zetabyte was named for Catherine Zeta-Jones to commemorate her excellent performance in the musical Chicago. And what comes after a zetabyte? I’ve no idea, but my suggestion is that it should be called a “scuzzibyte”.

Back to EMC: It’s not just the storage business that’s doing well – EMC is now deeply into the virtualization of storage, courtesy of VMWare, and, by the way, they’re about to enter the consumer market with multi-terabyte devices. EMC is doing well on multiple fronts.

You may remember that EMC bought RSA, the “encryption company”. Actually RSA was a little more than that, because it did and does Identity Management rather well. EMC has managed to widen RSA’s horizons and grow its revenues. It’s now focussed on the whole area of data security (RSA’s view of data security will be the subject of a later posting on this blog – it clarifies the problem very well).

You will remember that EMC bought Documentum and has since grown it into an information management business that touches on enterprise content management, collaboration, information policy and Digital Rights Management.

You may also have noticed that EMC recently bought Mozy and thus is getting itself into the SaaS business through on-line back-up.

EMC and Acquisitions

In general EMC appears to be good at making acquisitions work. Their handling of the VMware acquisition was beyond good. VMware operates as a completely separate company – by mutual agreement between executive boards. VMware provides no technical advantage to EMC over and above other technology partners it has (such as IBM, HP, etc.) EMC managed to acquire VMware without damaging its business at all. Indeed it managed the acquisition so well that it was able to take VMware to market in an IPO and subsequently watch its value rocket to the point where it has created a strange paradox of value.

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Apple Winning in Japan, iPhone in Europe and Apple TV(?)

Apple Winning in Japan

Something odd has been happening in Japan. First of all, PC sales are in decline, by about 5% right now, and Leopard sales are taking off. These two things may not be unrelated. The PC is yesterday’s gadget, but the MAC (iTunes, photos, video) is not.

Apple took 53.9% of the Japanese OS market in October, with the launch of Leopard. If you look at the graphs you see OS X sales increase from 15.5% to 60.5% over the year while Windows drops from 75.3% to 28.7% in the same period. Now we know these are transient figures, due to the Leopard launch, but they are much bigger than they should be. It’s quite possible that a significant market shift is happening here. If so, it will infect the rest of Asia.

The iPhone in Europe

My US associates, who subscribe to the “cult of Apple”, seem a little bewildered by its reception in Europe. First of all, sales in the UK are underwhelming to say the least. It doesn’t surprise any Brits that I talk to. The iPhone has an interesting touch interface, costs lots and you get hit with an expensive phone deal. Friends of mine in the Telecomms business predicted that the iPhone reception would be like that: more of a yawn than a cheer. Right they were. And as for Germany. Well T-Mobile had its “iPhone monopoly” broken in days, by legal action. My US friends aren’t familiar with the idea of a regulated market, which takes note of the interests of the consumer. What a crazy concept!

I doubt if any of this will worry Apple too much. Volume sales are guaranteed in the US. It can bide its time in its approach to the rest of the world.

It’s All Apple All The Time!

Imagine a TV channel that is devoted to Apple; Apple history, Apple news, Apple rumors (there’s more Apple rumors than news), Apple design, Apple personalities, Apple podcasts, YouTube snippets concerning Apple and Apple adverts, I guess. Well there isn’t one, but the Digital Lifestyle just launched the Internet equivalent – a new 24-hour online network dedicated to the Cult of Mac.

Yes, it’s all Apple, all the time. This is a bad idea, a very bad idea. Actually, it’s a terrible idea. I can’t believe this is happening.

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Symantec's Security Trends 2007

Symantec regularly produces security trends reports; a useful service in my view, because it’s backed by a good deal of data gathering. Yesterday I discussed the End of Year 2007 Summary Report, with Alfred Huger, Symantec’s VP of Software Development. His first comment on the summary was “there’s not much that’s particularly surprising here”.

Not for him or me perhaps, but maybe there will be for you. Here’s a quick summary, interlaced with our comments and observations.

  1. Data Breaches. Yes, TJX dominated this area of irresponsibility with a record breaking 45.7 million identities compromised, although the UK’s HMRC (Her Majesty’s Revenues and Customs) put in a spirited showing late in the year by losing 25 million records, which included bank account details. It was the worst year ever. Alfred remarked that the educational sector is actually the worst for data loss (if you count number of incidents).
  2. Spam. Let’s hear it for the spammers, because 2007 was yet another record year for spam. And the spammers didn’t sit back on their laurels, either, they innovated with the introduction of PDF spam. There was also the nuance of using greeting-card spam to deliver the Storm Worm. It’s always nice when someone puts something a little special “just for you” in a greeting card.
  3. Phishing. Phishing continued to be a popular sport in 2007. Symantec detected an 18 percent increase in unique phishing sites during the first half of the year. Phishing tookits contributed to the phenomenon (read on).
  4. Professional Attack Kits. If you want a comprehensive run down of hacker tools and technology read 10 Reasons Why The Black Hats Have Us Outgunned. Now, add in the fact that MPack, a Russian malware kit was released in December 2006. It costs $500 to $1,000, which sounds expensive, unless you think of it as just 25 – 50 stolen identities. MPack is known to have been used in an attack on the Bank of India web site and it is estimated to have infected over 100,000 PCs with keyloggers. In the first half of the year, Symantec observed that 42 percent of phishing Web sites were produced by just 3 phishing toolkits. Inferior phishing software just can’t get traction any more.
  5. Vulnerabilities for Sale. WabiSabi Labi opened an auction-style system for selling vulnerability information to the highest bidder, sparking controversy and discussion about “responsible” versus “full” disclosure. Vulnerabilities were already for sale in private. It isn’t yet known whether this initiative is helping, hindering or making no difference.
  6. Bots. The extent of the botnets is unknown and can only be estimated. However, the very successful Storm Worm was specifically designed to create botnets, it has created thousands and, actually, it’s still doing the rounds. A Russian botnet was responsible for the attempt to disconnect Estonia from the Internet earlier this year. (And all because Estonia moved a statue – I kid you not). Botnets have become rented resources in the Black Hat market.
  7. Exploitation of Trusted Brands. The bad guys exploit trusted Web environments. Alfred and I had a long conversation about this. The sad truth is that only 18 percent of attacks now happen through the use of exploits (that’s Symantec’s figure). It’s just a lot easier and more effective to use social engineering techniques. The spoofing of trusted web sites can be thought of as part of this game. Despite the fact that some technical tricks may be employed, the point is that the user’s trust in the brand is exploited. Alfred tells me that the Black Hats are now devoting much more time to gathering specific data on people in order to prey on their trust. He expects that soon scams using social networking sites will become common. I’m inclined to agree. Why wouldn’t it happen?
  8. Web Plug-in Vulnerabilities. Web plug-in vulnerabilities and exploits are becoming more common. Exploits using ActiveX controls, comprise the majority of plug-in vulnerabilities. Alfred points out that hackers are now building plug-ins that run in the browser only. Some are only there to steel CPU cycles. Symantec has detected well engineered malware that limits its use of CPU and bandwidth so that the user will never detect that his/her resources are being used.
  9. Vista. Attackers quickly found holes in Microsoft Vista, with Microsoft releasing 16 security patches so far in 2007. Symantec is not impressed with Vista, even though it admits it is less vulnerable than XP. Alfred agreed with me that Microsoft could have done more.
  10. Virtual Machines. Symantec has noted the rise and prevalence of virtual machines and sees this as a future source of security pain. Alfred and I found ourselves in violent agreement about this. As usual, security is an after-thought. So far though there have been no direct attacks on hypervisors (to anyone’s knowledge).

So there you have it. It has been a disappointing year, except for the Black Hats, who are increasingly well organized and better armed. If you want more details, you can go direct to Symantec for it.

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