Win 7 business sales weak, but uptick expected

Microsoft Thursday said 60 million Windows 7 licenses have been sold in the past six months, but most of those have been from the consumer side and business uptake has been flat. The shrink-wrap sales represent the fact that users are able to update existing machines with the new operating system, which shipped in October 2009. Klein said there has been "way more business activity" around Windows 7 than in previous releases of Windows operating systems. The news came as Microsoft reported record quarterly revenue of $19.02 billion and $6.6 billion in profits for the second quarter of fiscal 2010. Seven tips to migrate and manage Windows 7 On the company's quarterly earnings call, Peter Klein, Microsoft's new CFO, says the company posted $500 million in revenue from retail sales of shrink-wrapped Windows 7 software, but Klein did not give specific numbers for business sales.

But he again did not provide any specifics. During the call, Microsoft admitted that it has not seen a return of enterprise spending growth. He did say that users are not waiting for service pack 1, which Microsoft so far has refused to discuss. But Klein says the expectation is that it will begin to pick up later this year and continue for the next two to three years. The EAs include Microsoft's Software Assurance maintenance program.

In addition, the company said enterprise agreement renewals are taking longer to complete, but Klein said when they do get done, users are not dropping products "and in most cases we are actually adding products on the EAs." Enterprise agreements provide Microsoft customers from corporations to governments with a comprehensive volume licensing program that covers all their Microsoft software. In addition, Microsoft said sales of SharePoint Server, Office Communications Server and Dynamics continue to see double-digit growth. Follow John on Twitter: twitter.com/johnfontana Microsoft also reported that it eliminated 800 jobs during the quarter and paid out $59 million in severance.

One by one, carriers succumb to Google Voice

Ever since its launch this summer, Google Voice has presented carriers with some potentially thorny issues. Google Voice was designed in part to make it easier for users to change mobile carriers without sacrificing their phone numbers and also to give users several add-on features that are not offered by carriers. The biggest potential pitfall for carriers is that widespread adoption of Google Voice could render their networks "dumb pipes" that don't offer users any value-added services. For example, Google Voice can provide simultaneous ringing for both landline and wireless devices using the same phone number and it can serve as a hub for SMS as it lets users send text messages from any of their devices or even right over the Web on their computer.

However, America's top two wireless telcos this week indicated that they had no problem supporting Google Voice on their networks. Net neutrality proponents such as the media advocacy group Free Press have met Google Voice with enthusiasm, as they think it could give users the ability to seamlessly switch carriers if their current carrier is too restrictive of what they can and cannot use on their mobile devices. During a joint press conference with Google on Tuesday, Verizon CEO Lowell McAdam said that all Verizon phones based on the open-source Android platform would give users access to the Google Voice application. How Google Voice could change the wireless industry Although AT&T didn't mention Google Voice specifically as an application that it would allow onto its network, it's very likely that Google Voice will soon be available to iPhone users since it doesn't present the direct threat to cellular service revenues that other VoIP applications and services do. AT&T, meanwhile, said Tuesday that it was changing its tune and allowing iPhone users to utilize VoIP applications such as Skype on the AT&T 3G network. The reason for this is that when you make a call using Google Voice, it initially goes through the standard public switch telephone network to the Google cloud, where it is then sent out as a VoIP call.

But even if Google Voice won't harm carriers' ability to charge users for cell phone minutes, Gartner analyst Peggy Schoener does think it could harm carriers' profitability if users come to rely upon it for services. "It is a threat to their business model to some degree," she says. "But right now the demand for openness is trumping that. So while Google Voice will enable users to save money on typically expensive long-distance calls, it won't be an alternative to using up minutes from your standard wireless carrier in the way that Skype is. Carriers are looking at how the world is shaping up and they have to demonstrate openness and cooperation with industry newcomers." FCC action in the background While neither Verizon nor AT&T will say it out loud, one factor in their decision to allow Google Voice onto their networks could be the more active approach that the Federal Communications Commission has taken this year under new chairman Julius Genachowski. More recently, Genachowski has also proposed new network neutrality rules that would bar carriers from blocking or degrading lawful Web traffic and that would force carriers to be more open about their traffic management practices. For example, this summer the FCC asked Google, Apple and AT&T to explain why the Google Voice application was not yet been made available for the iPhone.

ABI Research analyst Jeff Orr thinks that the government's more aggressive stance toward regulating the wireless industry has been a key factor in the telcos' decision to allow Google Voice on their networks despite whatever misgivings about the application they may have. "I think that they're looking at the talk going around at the FCC looking for net neutrality, and they figure that they'll need to back off and pick the battles they want to fight," he says. "By allowing Google Voice and other VoIP applications onto their networks they say to the FCC that they can monitor their own practices and that there's not a need for legislation mandating net neutrality." Schoener agrees that FCC action is part of the reason why carriers are showing more openness on their networks right now, but she also thinks that carriers are being forced by market trends to embrace more openness as well. For instance, the past decade has seen large Internet companies such as Google and Skype become major market players with the clout to push for net neutrality regulations. "There's not a direct cause and effect between the FCC's actions and the carriers' decisions," she says. "But the FCC's stance is a part of the current trend that openness is better, and the telcos figure they can be better off in the long run if they embrace it rather than playing hardball."

Taiwan lawmakers reject funds for memory chip makers

A committee of Taiwanese lawmakers rejected requests for funding by Taiwanese memory chip companies on Wednesday and asked the executive branch to stop promoting the DRAM revitalization plan. That committee reviews applications before they are passed to the legislative body for a vote. The economics committee of the Taiwan legislature rejected requests by Powerchip Semiconductor and the government-led Taiwan Memory Company (TMC), a legislative aide confirmed.

Lawmakers in the group believe the worst of the global economic crisis has passed and that DRAM makers should be able to fend for themselves considering the rebound in DRAM prices this year, the aide said. The legislature usually follows committee recommendations when voting. The executive branch can work with lawmakers on a more palatable plan, but convincing the economics committee is vital. The rejection throws a wrench into the government's plan to restructure Taiwan's DRAM industry. The plan was the result of a crisis among DRAM makers caused by excessive debt and an inability to raise new funds amid the global recession.

In March, Taiwan's Ministry of Economic Affairs unveiled a plan to build TMC as a means for industry consolidation and DRAM technology development. Taiwanese DRAM makers built too many new factories during good times, leading to a glut of DRAM chips and a collapse in global DRAM prices. The Taiwan government first stepped in to ask banks on the island to give companies more time to repay loans and extensions were granted until Dec. 31. A government report argued the amount of money DRAM makers on the island owed Taiwanese banks could cause problems if not repaid. Most Taiwanese DRAM makers have not posted a net profit since the middle of 2007 due to the chip downturn.

Gartner: Server virtualization now at 18% of server workload

How fast is the shift to server virtualization happening? There are about 5.8 million virtual machines (VM) believed to be in use today, said Gartner analyst Thomas Bittman, speaking on the topic Monday at Gartner's Symposium ITExpo 2009 attended by thousands of high-tech managers from around the world. According to Gartner, 18% of server workloads this year run on virtualized servers; that share will grow to 28% next year and reach almost half by 2012. Large enterprises have driven server virtualization over the last four years or so, and VMware holds an 89% market share against a handful of competitors that include Microsoft, Citrix, Red Hat and others.

But growth is anticipated among the small-to-midsize businesses (SMB), and it's in this segment that Microsoft has a good chance to build a customer base. By that time, Gartner believes, Microsoft will hold 27% share, Citrix 6%, Red Hat 2% and others about 1%. Small enterprises will be "looking at a much more level playing field," Bittman said. By 2012, VMware's share is expected to shrink to 65% but the base of VMs will have grown to 58 million, a 10-fold leap. He said each of the VM software providers have ways to distinguish themselves in both features and prices, but for many the big question will likely be, "Should I choose VMware or Microsoft?" VMware, which can boast higher density and a mix of operating systems support and maturity in features, costs more than other offerings, such as Microsoft's HyperV. As it begins to release improved VM software, Microsoft seems poised to achieve growth in the SMB market, Gartner believes. The choices for an in-house virtualization platform that enterprises make now and in the near future are likely to influence their cloud-computing choices, too, Bittman pointed out. Bittman said the migration from physical servers to virtualized ones is also tied to the revolution in cloud computing, where enterprises will be considering various strategies from private clouds to public cloud services and a hybrid model.

Virtualization is "not a commodity," Bittman noted. But he noted virtualization provides dynamic provisioning, potential for disaster-recovery support, as well server consolidation, and "it's becoming the default" for the enterprise over the next few years. There's no commonality in the switching or management at this point, and mixing and matching among VM vendors is not a likely choice at this point.

Net neutrality could lead to inexpensive, high-quality broadband services for businesses

Federal Communication Commission net neutrality rules have the potential to save businesses money in ways that range from heading off potential new Internet access charges to opening up low-cost, high-bandwidth services distinguished by superior quality of service. FAQ: What's the FCC vote on network neutrality all about? While the FCC won't make final decisions until next spring at the earliest, its rule-making agenda that was approved Friday  prompts speculation on what the outcome might yield, and that includes the possibility of high-quality access at a low price.

The agenda includes examination of managed or specialized services such as IP TV that run over the same networks as general broadband Internet services. This was formerly the practice with information services, but the FCC changed its mind several years ago. If the FCC decides to formally classify these specialized services as information services, existing communications law would allow for a rule requiring providers to wholesale the component parts of the service to competitors, says Tom Nolle, president and CEO of tech consultancy CIMI Corp. But language in the proposed rule suggests the commission might revisit the old regulation. "It could be the start of a regulatory reversal," Nolle says, which might work this way: If a service provider sold IP TV for $60 per month to customers - made up of the TV content and the high-speed delivery network - it would have to sell just the network portion of the service for less, Nolle says. Even paying the full consumer price for the service would be a good deal. "I could save a ton of money on this if I'm a business," Nolle says.

That would drastically undercut the price of traditional network services with good enough QoS to support high-definition video, he says. That is an unlikely scenario based on a reading of the FCC proceeding, says Colleen Boothby, a partner at Washington, D.C.,  telecom law firm Levine, Blaszak, Block & Boothby. Rather, it seems more likely the commission will prevent service providers from discriminating about what services and content they will carry over their networks and under what circumstances, she says. The FCC would have to reverse an earlier decision, which is possible, but doesn't seem to be the main thrust of the FCC rule making. By banning such discrimination, the FCC could prevent a host of unnamed new charges against businesses depending on the type of content they move over their Internet access lines, she says. "All enterprise customers are content providers," Boothby says, so they stand to face new fees if providers are allowed to charge more for certain types. So the customer's ISP would charge the bank's ISP for allowing the account data to reach the customer.

Hypothetically, a bank could be charged for supplying account balance data to its customers who happen to access the bank's online services from a different ISP than the bank uses. There is no such proposal, but without a regulation this type of fee would not be prohibited, Boothby says. "It doesn't exist yet, but the models are there," she says. They both need to recover the enormous amounts they've spent on network fiber upgrades. This could help explain AT&T's and Verizon's lobbying efforts to prevent the rule making. So far they charge for Internet access, TV and phone services over them, but they are involved in price wars on all three fronts with cable operators.

And that could influence the costs of supporting corporate work-at-home programs. "Do not continue to assume that your employees will always have cheap access to high-speed residential services," Lazar says in his blog. "Develop contingency plans that include purchasing of business class services, use of optimization, and/or desktop virtualization to guarantee application performance." So in order to preserve application performance, it may become necessary to buy service-level agreements from providers or alter corporate infrastructure to squeeze better performance out of lower quality broadband services, he says. This predicament the providers find themselves in could result in higher general Internet access fees or a fee structure where customers pay by the byte, according to Irwin Lazar, an analyst for Nemertes Research. Likely additions to corporate networks are WAN optimization gear that reduces the volume of Internet traffic as well as gear that boosts the performance of Web applications, he says.

No app store for make-or-break ZuneHD

Microsoft's ZuneHD, set to go on sale Tuesday, will not feature an open application store like its competitor the iPod Touch. Those capabilities will determine whether the ZuneHD sells well - and whether Microsoft decides to keep selling its own music player, said Matt Rosoff, an analyst at Directions on Microsoft. It will come with some unique features, though, like an HD radio tuner, and with software that has been well-received by users.

After observers noticed a Marketplace folder during earlier demos of the ZuneHD, many had hoped the new device would feature an open application store like the one accessible from the iPhone and the iPod Touch. But the Zune Marketplace will be a closed store, meaning third-party developers won't be able to easily build applications for it. Marketplace is the name of the open app store that will be available on Windows Mobile 6.5 phones, to be released in early October. The new device will include the same casual games that came with earlier Zunes, plus a few other applications like an MSN weather application and a calculator, said Brian Seitz, group marketing manager for Zune. Zune customers will be able to download the applications they like for free. In November, Twitter and Facebook applications will become available, as well as a "Project Gotham" racing game, he added.

Seitz said the timing wasn't right to include the Windows Mobile Marketplace application, which isn't due out until next month, with the ZuneHD, but he also said it's not certain that a similar open Marketplace will come to the Zune in the future. "Down the line, if there's an opportunity for us to snap into what they're doing from a mobile application perspective, I'm sure it's something we'll look at," he said. He acknowledged that people are likely to criticize the decision. "I'm not saying we won't get dinged for that because I know we will," he said. However, Microsoft may decide it makes more sense to limit the applications in the Zune market and offer them all free, he said. That's for good reason, Rosoff said. "When you look at it as a head-to-head comparison with the iPod Touch, people will see it as a shortcoming," he said. It will feature the "smart DJ," which allows the user to pick an artist and then automatically creates a playlist of similar songs.

Microsoft will also debut new Zune software on Tuesday that customers use on their PCs to manage their music. Microsoft will also start offering people who subscribe to Zune Pass a way to access the Zune music collection from a browser. A Zune Pass subscription lets users stream any song from the entire Zune catalog and download 10 songs each month. That means subscribers will be able to listen to music from the entire catalog from any PC, including one at work, rather than only from a PC running the Zune software. Microsoft also revealed a few more details about a Zune feature that will start showing up in Xbox Live later this year.

That's part of a strategy to move the Zune software experience into other products from Microsoft, Seitz said. "Going forward, we hope more people think of a 'holistic Zune business,' as opposed to how many of these things we sell," he said, pointing to the Zune hardware. Xbox users will be able to buy or rent movies from a new Zune store that will be featured in Xbox Live. The most important upcoming product that will include Zune software will be Windows Mobile phones, Rosoff said. "The Zune interface will show up in Windows Mobile," he said. Rosoff suspects that Microsoft will eventually get out of the MP3 player market altogether. "We'll just see the Zune as a consumer component of Windows Mobile," he said. "This is sort of the last [Zune], if it doesn't sell." Even Zune hardware elements, like the touch screen and the form factor of the device, will likely make it into Windows Mobile phones, he said.

Lotus user wary of social networking tool rollout

As IBM moves to upgrade its cache of social networking tools, some users are taking a cautious approach to the technology while figuring out where it will apply and how to measure its effectiveness. The new 2.5 version software includes micro-blogging, file sharing and new mobile capabilities. Where IT pros do their social networking IBM Tuesday unveiled Lotus Connections 2.5, its upgraded lineup of social networking tools that are a major expansion to the company's suite of collaboration software. But some of the features are expanding faster than users' plans to utilize the software.

The company's manager of messaging and collaboration asked for anonymity because he was not authorized to speak on the record. One Connections 2.5 beta tester, a global consumer product corporation, is taking a deliberately slow approach to rolling out the social collaboration tools. The company started slow with a few hundred users who were only allowed to communicate with each other. At that point, the manager says, the number of users exploded by 650% to a few thousand. The group's size was eventually doubled and then the tools were opened up companywide. Despite the growth, the company is still "seeding the environment," said the manager, but a broader rollout is planned.

We will likely "wind up doing it anecdotally," said the manager. "The things we're struggling with there is that this doesn't match the ROI [metrics that executives] are used to looking at. The harder part to plan is the expected results because the company has yet to figure out how to measure its return on investment. How do you measure, 'we recruited this person because of the [collaboration tool]?'" While results are hard to gauge, the broader, anticipated benefits are being defined in the context of capturing and recording corporate knowledge. The worker could develop a how-to guide for use by others, he said. For example, a certain administrative assistant may routinely be tasked with booking a certain type of event, said the manager. The manager said it is a good time to ramp up internal communities and knowledge-sharing because as the economy and job markets rebound, workers who may have suffered pay or benefit cuts amid the recession will be looking to move on. "Now is the time to get people to put information in, so you're not losing it on the back of a Post-it note." Follow John on Twitter. -Kanaracus is with the IDG News Service Follow Chris on Twitter.