2003: Back From the Brink

Two years after the dot-com fallout, IT began to claw its way back in 2003. Our editors present the Top 10 stories/trends that shaped the year and will influence the year to come.
Posted December 24, 2003

Colin C. Haley

After two years of a wrenching dot-com fallout and technology recession, 2003 marked a time when growth prospects for information technology improved, all while innovation kept marching on.

CIOs budgeted for hardware and software upgrades again. Sector leaders bought startups to attack new markets. And several technologies advanced on the 'early adopter' to 'mass market' continuum.

By the second half, industry executives struck an increasingly optimistic tone about the prospects for an IT recovery.

And judging by recent economic data and earnings reports, the industry appears poised for new growth in 2004. Before we flip the calendar, internetnews.com offers a look at its picks for the top 10 stories and trends of the year.

10) EMC's Buying Spree Fuels Storage Rivalry
Sure, EMC is a sector heavyweight, but it displayed unusual crossover potential by acquiring archiving specialist Legato Systems, enterprise content management (ECM) provider Documentum, and most recently, virtualization software maker VMware.

The Hopkinton, Mass., company's moves sent storage rivals into a furious scramble for similar assets. Hewlett Packard bought archiving specialist Persist Technologies, while Hitachi partnered with ECM specialist Ixos Software, which itself was acquired by content management play Open Text.

The merging of storage, archiving and content management assets gave rise to new enterprise category -- information lifecycle management (ILM).

As new federal regulations mandate that documents be stored for a decade or more, corporations increasingly indicated that they like the idea of getting all their systems from a single vendor.

9) Online Music: The Clash, The Cash
Since September, when the RIAA launched its legal campaign against individual file-swappers, the music industry has filed hundreds of legal actions. While some users, Internet service providers and colleges pushed back, the hardball tactics grabbed headlines.

Whether it was fear of being sued or simply a new willingness to pay, 2003 was a good year for digital music.

Apple's iTunes launch in October service exceeded almost everyone's expectations. Around the same time, Napster, the company credited, or blamed, with starting the craze re-emerged thanks to new owner Roxio.

And new digital music offerings, like those from Dell and Wal-Mart, promise to expand the market even further in the coming year. For IT managers, this was good news: the collapse of some peer-to-peer music networks was one less security problem to worry about.

8) RFID Finds its Place in a Wi-Fi world
Amid the continued growth of Wi-Fi hotspots in the world in 2003, radio frequency identification technology began to emerge as one of the most talked-about trends in technology's post-bubble era -- thanks to nudging and interest from a retail giant and the federal government.

Wal-Mart recently told its top 100 suppliers they would have to feature RFID on all cases and pallets of goods delivered to the chain by 2005. The Department of Defense is also setting deadlines for adoption of the technology.

Faced with the loss of huge accounts, suppliers are scrambling to honor the mandate. The result is a massive effort by IT firms including Sun Microsystems, IBM and Intel, along with dozens of startups to solve interference problems and other issues that could slow adoption.

But demand is building from a number of sectors, and 2003 will be remembered as the year RFID moved to the launch pad.

7) Giddy About Google, and an IPO
The search darling spent the year enjoying the trappings of life as a private company -- no known earnings targets to hit (at least, not publicly), no quarterly reports to file, no tangle of SEC regulations to navigate.

But with the Nasdaq and other major stock indices showing new vigor throughout the year, as the search space kept heating up, founders of the Mountain View, Calif., firm have apparently relented about floating a public offering (much to the delight of employees) and are shopping for investment banks to help underwrite the deal.

Why is the fact that Google is just thinking about an IPO make our list? In addition to the ubiquity of the site, IPO preparations come at a time when the search sector is more than just thriving, thanks to proven results of paid search in the ad sector, and amid rumblings from Microsoft about developing (or buying) its own competing search offering.

And based on early talk, Google's potential per share asking price could imply an overall value of up to $25 billion --- a figure that not only evokes nostalgia for the dot-com heyday, but could embolden more private companies to test the waters, reviving an important source of capital for R&D and mergers and acquisitions.

The big question is whether Google can retain its immense power over Internet traffic after it has to report to shareholders. Many competitors see this as a possible turning point.

6) IT Outsourcing
While IT manufacturers have been contracting work to Asia and other parts of the world for years, more programming jobs started flowing overseas in 2003, prompting jitters that higher paying, information economy jobs could erode the United States' global position as a technology leader.

Most recently IBM is said to be considering a plan to move almost 5,000 to China, India and other countries with high-technical skills and lower wages than the United States.

IBM is not alone in moving, or creating, jobs abroad. IT consultant Accenture is doubling its Indian workforce to 10,000. And HP also recently increased its stake in the Indian market, buying the remaining public shares in Digital GlobalSoft.

Depending on whose argument you buy, this is the start of a trend that is: a) necessary to insure that tech firms stay competitive; or b) a greedy turn that could have disastrous effects on the U.S. economy.

5) Calling on VoIP
When it comes to regulating new technologies nothing is forever. Economic conditions, legal challenges and data about policy impacts often cause rules to be rewritten.

But so far, the Federal Communications Commission is taking a hands-off approach to Voice over Internet protocol . This posture, combined with improvements in the technology and pricing, sparked interest from consumers and businesses toward the end of the year.

Most major service providers -- including AT&T, Time Warner Cable and Qwest -- are testing or rolling out VoIP phone service that promises to be cheaper than traditional networks and could add services.

And telecom equipment makers, who have been battered for more than two years, believe the switch to VoIP could cause IT managers to consider other network upgrades at the same time.

4) Spam, Spam, Eggs and Spam
The flow of unsolicited, unwanted e-mails -- from get-rich-quick schemes to pornographic overtures -- escalated from annoying to crippling in 2003, clogging in-boxes and corporate networks like never before.

In response, Congress passed the Can Spam Act. The bill, signed last week by President Bush, establishes the first national standards for commercial e-mail and charges the Federal Trade Commission (FTC) with enforcing the Act.

Supporters hailed the passage, while critics claimed the law is riddled with loopholes and lacks teeth.

Complaints about spam also prompted Internet service providers and Web mail providers to upgrade spam filters. And on the corporate side, software developers pushed better spam defense as enterprises looked to limit network strain and increase worker productivity.

The jury will be out on the new spam bill at least until next summer when the law's penalties formally kick in.

3) The Year of the Bug
This was more than a bad year for computer and network security. Experts now call 2003 the worst on record. In August alone, the 'Blaster' worm, also referred to as the 'Lovesan' or 'MSBlaster' worm, wreaked havoc with Microsoft powered PCs.

Besides opening the door for remote code execution on infected systems, the worm and its variants probed for additional computers to infect. One even orchestrated attacks on windowsupdate.com, the very site that hosts patches that correct vulnerability.

At the same time, a slew of other security issues bedeviled enterprise networks, diverting IT managers' time and energy and sapping productivity with a seemingly endless cycle of warn and patch.

Anger over flaws in Microsoft code may be one factor leading to new openness by the software maker (others being pressure from European Union regulators and momentum in the open source community).

2) Oracle Bids for PeopleSoft
There's nothing like a good fight between two heavyweight software providers. In one corner, database software giant Oracle , which sees itself as the conqueror in a consolidating software sector. In the other corner, applications vendor PeopleSoft , whose own enterprise software merger with J.D. Edwards Oracle tried to thwart with its hostile bid.

But a number of roadblocks have arisen in front of the $7 billion-plus deal -- not the least of which is PeopleSoft's determination to rebuff the offer.

The company refused several bids, and went ahead with its own billion-dollar acquisition of J.D. Edwards, forcing Oracle to boost its offer. And, worthy of a bout arranged by Don King, there's no lack of tough talk on both sides.

Meanwhile, the Department of Justice, keeping an eye out for kidney punches in the tussle, is talking with other vendors in the space to gauge whether a merger would elbow out all competition in the space. If the deal does close, Oracle would become the second largest enterprise software company in the world behind Germany's SAP.

1) A Case to Crystallize Open Source Debates: SCO vs. IBM
In March, SCO Group sued IBM for allegedly misusing a Unix software license, a move it claims cost the software development company billions of dollars in lost revenues.

What began as an intellectual property spat in the first quarter of the year has now helped crystallize debate lines between fans of free, open source software and those who claim intellectual property is under assault.

IBM counter sued in August, claiming that SCO's case breaches its own contract with the software company, and infringes on its patents and signifies unfair competition, among other things.

In addition to prompting the esoteric question, "Can anyone own open-source?" the suit, and the increasing scope of claims and counterclaims by Linux distributors, has steadily raised the profile of open source and Linux in the enterprise across the entire IT industry, and promises to keep the technology world watching -- and debating -- in the year to come.

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