To print: Click here or Select File and then Print from your browser's menu

This story was printed from silicon.com, located at http://www.silicon.com/

Story URL: http://comment.silicon.com/0,39024711,10002804,00.htm

The Bloor Perspective: US telecoms, systems management newcomer and SAP
This week Robin Bloor and his team consider UK-US unbundling parallels, the creation of Itheon and the outlook for German giant SAP...

By Bloor Research

Published: Monday 10 February 2003

The US is looking into its telcos to ensure operations of independent carriers meet regulatory requirements. The bottom line is regulatory bodies are considering sweeping reform measures - predictably opposed by the local operators. It is comforting to know the UK isn't the only place where the maintenance of a telecoms monopoly is attempted. Under the proposed order, the Federal Communications Commission may introduce rules forcing local carriers to lease their equipment to rivals at reduced rates. Before it does so, the FCC has to agree whether or not state regulators should be allowed a strong oversight role. According to the independent carriers, they need to use the networks of the established Baby Bells to access customers. Rather predictably, the Baby Bells claim they are losing money on such an arrangement. The proposal suggests lifting network sharing requirements based on benchmarks being met, such as a competitor's market share or number of network switches they use in an area. Independent companies would be able to use the network from the customer's homes to network offices but beyond that would have to supply their own equipment, meaning the Baby Bells would not have share their precious, expensive high-speed networks.

The situation all has a certain familiar 'ring' to it as in the UK we continually see BT's reluctance to give up its infrastructure or provide others with access at competitive prices. It may not all be bad news for the telecoms sector, however, as the CEO of China Telecom, Edward Tian, has suggested carriers should follow the business models developed by the airlines. Tian claims deployment of broadband technologies will enable operators to segment customers into premium and economy classes where more would be paid for high quality broadband connections. Tian made the comments at the end of the recent World Economic Forum annual summit in Davos, Switzerland. His views were echoed by John Riordan, chairman and CEO of Dutch telecoms giant UPC, who stated non-paying services, such as email, do not boost profits. "One of the first things I did when I came to UPC was to abolish 'free' as a concept," he said.

So, as the incumbent carriers struggle to maintain their monopoly, other telecoms operators have been reduced to stating the obvious.

*Sys man newbie*

The systems management space boasts few products more widely recognised than RoboMon. As a result of a management buy out last week of Heroix Corporation in EMEA and AsiaPac, a new company, Itheon Limited, was launched with full development rights to RoboMon, RoboCentral and RoboER. The new organisation has been created with the objective of providing a wide range of application and infrastructure management solutions. Heroix Corporation Inc will continue to run its operations from its existing headquarters in the US.

While cosmetically Itheon has the appearance of a newcomer the company is packed with experience and its possession of full development rights to the 'Robo' products ensures that it is in a position to hit the market running. The new company also starts its operations with a large base of existing customers, many of them blue chip with extensive implementations of Itheon's tools.

Itheon's leading product is the recently developed TotalView, a management tool that provides business process state viewing capabilities. TotalView links physical components in the IT infrastructure to business objects, giving users the ability to relate the variation of system parameters and alarms to their effects on business processes.

A major quality of TotalView lies in its ability to function even with an incomplete service model that can be revised and progressively refined over time. In this way TotalView can be implemented very quickly and deliver rapid results.

TotalView provides full drill down problem location facilities and employs an advanced correlation engine to provide effective root cause analysis capabilities. Beyond its core systems management functionality, Itheon has developed an appliance-based network analysis tool that will be launched in the not too distant future. Itheon starts with a number of advantages including experience, good products and an eager user community. However as the company expands beyond systems management it will come into direct competition with the major 'framework' vendors: BMC, CA, HP and IBM/Tivoli. Itheon will have its work cut out to differentiate itself and show it can deliver solutions providing measurable business benefits quickly and cost effectively.

*A SAP* SAP is Europe's largest software vendor. Its financial results for 2002 show its financial performance has remained resilient in a depressed industry.

Its software revenues for 2002 were $7bn. It posted an operating profit of $1.7bn. This corresponded to a 22.7 per cent operating margin before a number of one-off charges. This was a 15 per cent year-on-year increase.

Some suggest closer inspection of the figures questions this apparently superficial improvement. Software licence revenues decreased by 11 per cent. This encompassed a 23 per cent fall in US licence sales, though performance here is no worse than that of rival organisations. Net profit was just under $500m, a decrease of 12 per cent, which is primarily attributed to increased taxes of 26 per cent. It has reduced expenditure on costs of products and services. These have fallen 21 per cent and 7 per cent on a year on year basis for 2001/2002. The group has avoided any substantial job cuts through redeployment within the group, in part by bringing in-house previously outsourced activities. However, like all competitors, it has stopped hiring.

So how has SAP managed to remain so robust in the current economic climate? It attributes this to the long-term relationships which it cultivates with its customer base. Its plans were never as large scale and ambitious as some of its rivals. This enables its revenues to be less susceptible to the economic vicissitudes. Its focus has been to deliver contracts and services in bite-size portions, which enable it to revert to its customer base and sell more even in difficult times. Its forecasts for 2003 are not optimistic. It expects to continue to gain market share, as smaller competitors shift or are shifted out of the market. Profitability will continue to grow but it warns - like its competitors - there is no change in view to the "unpredictable political and economic environment".

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.