The Bloor Perspective: Going private, nano-disks and CA's new flexibility

There was a time, barely three years ago, when the advantages of a public offering and listing of shares in a company were trumpeted by exchanges, banks and financial advisors. Even relatively new companies could participate in the raising of external equity capital. Equity was an efficient and cheap form of capital raising, listings provided ready market value to the company, and there was a ready market for purchase and sale of the shares.

The time, pressure and cost of managing external shareholder and stakeholder interests exist in both good and bad times. Shareholders, especially institutional shareholders, wish to be continually advised and consulted on the performance of a company. Substantial volumes of information have to be disclosed, often to the advantage of competitors.

When there is an economic or sector downturn, the pressure from institutional shareholders can become a form of tyranny. Institutional shareholders, frequently under pressure to perform from their clients and to maintain their own performance rankings, seek short-term performance from their investments, not always to the longer term strategic advantage.

While a private company may not enjoy the glamour, profile and focus of a publicly listed company, there are advantages. Shareholder management and accountability is easier to discharge. Shareholders are less sensitive and nervous of the financial markets. Less time, effort and resource is required for reporting and accountability.

Competitors have less access to information about the company. The company and its management have less requirement to take on board someone else's views and opinions. Of course, there are some financial disadvantages. Funding, other than selected private equity investment, tends to come from the bank and, if the company is large enough, bond funding. But is there not more satisfaction in running a business than running a company?

*Small big storage*

There is currently a race to commercialise nanotechnology disk drives. Disk technology based on a moving head that hovers over a spinning disk is reaching its physical limits and if greater density of storage is to be achieved a different mechanism is required. Nanotechnology research has unearthed a mechanism that fits the bill.

The nano-solution still involves a moving head but no spinning surface. The data is written by making a dent (or not) on a polymer surface. The dent is made by passing a current through a lever (the write head) causing its tip to heat up and the lever to bend into the polymer medium. The dent is removed by heating up the polymer surface to the point where it becomes liquid. The levers do not have a large scope for movement, so it is necessary to have lots of write heads.

The whole mechanism depends upon a good deal of micro-circuitry and at the moment read speeds are not fast but a point in the development has been reached where working prototypes exist and some of those involved are predicting industrial production somewhere between 2004 and 2006.

The reason for excitement is that the experts believe they will be able to miniaturise the whole mechanism as time passes and thus 'Moore's Law for disks' will continue to apply for five or six generations of the technology (between 32 and 64 times smaller than current prototypes). As the technology shrinks, the read speeds will increase.

Another point to note is that this technology is more like a chip than a mechanical device and indeed it will be the size of a chip. So it will fit happily into mobile devices or indeed any kind of device chips currently goes into. As for capacity, the early nano-drives will be a gigabyte, at least, which means they will compete directly with flash memory.

It looks like the day is arriving where we can wave goodbye to the disk as we know it. I personally will not be sorry to see this but then I'm old enough to have had to recover from head-crashes on 8-inch disks that held a mere 12 megabytes.

*CA - your flexible friend*

In 2002 Computer Associates was sometimes criticised for not communicating well with its user community. The New Year, however, has seen the software giant going all out to tell the world about its flexible licensing offerings and, at the same time, being less concerned with explaining its financial position.

The company has kicked off 2003 with a global advertising campaign focusing on its new software licensing, FlexSelect, a model designed to be customer-centric. CA describes FlexSelect as providing a method of licensing software that accurately reflects the way a customer's business operates and that allows users to map software costs more accurately to the business processes that it is installed to support.

Indeed, the scheme does supply levels of flexibility not usually available to customers. For example, FlexSelect supports much shorter contracts than those traditionally supplied by vendors. This approach allows users, for example, to license the software required during migration projects with a subsequent reduction in cost and therefore risk. Operating in month-to-month and metric-based usage modes enhances the flexibility of the scheme further.

The new advertising campaign will be the third in a series that seeks to articulate the company's focus on helping customers address real business issues. In fact the company has taken some effort to stress the ability of its licensing terms to supply customers with greater levels of control, while CA remains accountable for the both the software's smooth installation and, more importantly, customer satisfaction.

It is interesting to see the effort that CA is taking to communicate with its customer base on the potential inherent in the FlexSelect model. Whilst the company still offers traditional term-based licenses, the fact that the licensing scheme is available to operate over short time frames provides significant freedom not usually found in software contracts. CA also claims the legal and financial departments of customers find these contracts straightforward to understand.

CA is to be praised for its efforts to offer licensing alternatives that are more applicable to the dynamic, rapidly changing environment in which many businesses now operate. The efforts of organisations to take advantage of 'utility' computing architectures that can be turned on and off with user demand requires flexible licensing offerings in order to allow the exploitation of rapidly scalable IT infrastructures. CA's FlexSelect is a positive move in this direction. It will be interesting to monitor the take up of these offerings and to see how CA's competitors react.

**Bloor Research is a leading independent analyst organisation in Europe. You can find out more at www.bloor-research.com or by emailing mail@bloor-research.com.