The top 10 IT stories of 2008: Not business as usual

Recession's impact on IT spending dominates headlines — but there was other news, too

What started out as a banking crisis this year ended up becoming a story for everyone: retailers, consumers, auto workers — and IT professionals. Although it hasn't been business as usual in the tech industry for much of 2008 because of the economic crisis, other noteworthy news happened as well.

Some big mergers took place — HP buying EDS, for one. Long-awaited products such as the Android-based G1 "Google phone" were launched. Standards wars involving the Office Open XML file format and the Blu-ray and HD DVD video disc technologies concluded. The battle against spam purveyors went on ... and on. The most influential entrepreneur of our time, Bill Gates, moved on from his full-time job at Microsoft Corp. to focus on philanthropy. And that was just one of several big stories that Microsoft was involved in as it moves into corporate middle age and struggles to gain ascendance on the Web.

Here, not necessarily in order of importance, is the IDG News Service's list of the year's top 10 technology stories:

The recession pulls the plug on IT spending

On Dec. 1, the National Bureau of Economic Research, a nonprofit organization in Cambridge, Mass., made it official: The American economy has been in a recession since last December. The tech sector isn't immune to the downturn, although the conventional wisdom in some quarters until late in the year was that since corporate IT budgets were slashed after the dot-com bust, there wasn't much left to cut now. Therefore, such thinking went, the tech sector would suffer a sales-growth slowdown but not an actual decline.

But now market watchers are hedging their bets, lowering their spending forecasts for next year and predicting global revenue declines in segments such as PCs and mobile devices. In the latest example, Forrester Research Inc. last week slashed its 2009 growth forecast for total purchases of IT goods and services in the U.S. from 6.1% to 1.6%.

Analysts at Forrester, IDC and Gartner Inc. still think overall IT spending will end up in positive territory next year, because of expectations that an economic recovery will begin within another quarter or two. But if that doesn't happen, look for some IT vendors to go the way of the now-defunct investment banks.

HP gobbles up EDS

Hewlett-Packard Co.'s announcement in May that it would acquire IT outsourcer Electronic Data Systems Corp. for $13.9 billion was a big deal not just because large acquisitions became relatively scarce in a year of economic contraction. With the acquisition, HP positioned itself to challenge IBM in services and consolidate its standing as the world's largest IT company.

HP's pre-EDS services business accounted for 16% of the company's 2007 revenue total of $104 billion. By comparison, IBM generates more than half of its revenue from services. Adding EDS more than doubled HP's annual consulting and outsourcing revenue to $38 billion, and the company expects to report revenue of between $127.5 billion and $130 billion for the fiscal year that started Nov. 1. That likely will put it ahead of IBM, which is expected to finish 2008 with about $105 billion in revenue.

Microsoft chases Yahoo, and no one wins

Microsoft's protracted attempt to buy Yahoo Inc. generated more speculation, leaks and punditry than any other story in the tech industry this year. Microsoft officially withdrew its bid in early May after failing to agree on a price with Yahoo, which turned instead to Google Inc. — only to see Google call off a proposed online advertising deal in the face of a threatened antitrust action by federal officials.

In the aftermath, Yahoo CEO Jerry Yang reached out to Microsoft again and then stepped down from the top job at Yahoo just a week later; shortly afterward, the company's stock price sank to less than $9 per share. After declaring that he was no longer interested in buying Yahoo, Microsoft CEO Steve Ballmer said early this month that the two companies should agree on a search deal "as soon as possible."

Yahoo last week removed a controversial severance plan that Yang had erected as an impediment to a possible deal with Microsoft. Ultimately, much more than a price tag is at stake. Google is using the cash generated by its dominance in Internet search and advertising to develop new services and applications that diminish Yahoo's importance and challenge Microsoft in the market for software as a service.

Open XML scores a controversial victory

On April 1, Microsoft declared victory in its fight within the ISO standards body to win fast-track approval for Open Office XML as a global file format standard. Some critics said it was ironic that the software giant crowed about its success on April Fools' Day, given that a vocal group of ISO members had complained about irregularities in the voting process.

Others said that the approval of Open XML as a standard would make things more difficult for IT managers who want to deploy desktop applications incorporating the Open Document Format for Office Applications, a rival technology that was ratified as an ISO standard in May 2006. On the other hand, Microsoft and its supporters said that software developers and business users now have a choice of file format standards.

The ultimate significance of the standards battle may be that in its effort to get Open XML accepted by ISO, and its subsequent promise to add support for ODF and Adobe Systems Inc.'s PDF to Office, Microsoft has signaled its understanding of the fact that the software market has changed. As Web and open-source applications become increasingly important, even a software vendor of Microsoft's size and clout needs to make sure its APIs and file formats are transparent and can connect to the wider world of software.

Android and the opening of the mobile world

When executives from T-Mobile USA Inc., Google and Taiwan-based HTC Corp. took the stage at a sleek Manhattan restaurant in September to unveil the G1 — probably the most anticipated new product of the year — the event marked a milestone in a changing mobile market. Although the design of Apple Inc.'s iPhone still ranks No. 1 among phone aficionados, the G1 introduces a new, more open business model — though not an entirely open one.

Google has said that the open-source Android platform will let developers build applications to run on multiple devices and networks. There's no assurance that this will actually happen, but the Android developer kit is free, and any application can be added to Google's Android application store. Mobile communications will never be the same. For example, in advance of the G1's rollout, Nokia Corp. announced plans to make Symbian, the mobile operating system with the largest market share, an open platform.

Format wars revisited: Blu-ray beats HD DVD

Toshiba Corp. announced in February that it would discontinue its HD DVD products, handing victory to Sony Corp. and other backers of the rival Blu-ray high-definition video disc format. The final blows were dealt by Warner Bros. Entertainment Inc., which said it would stop issuing movies on HD DVD, and Wal-Mart Stores Inc., which announced it would phase out HD DVD products from its shelves.

Both camps sunk hundreds of millions of dollars into the format war, and as with many such fights, even the winners have battle scars. Sony, for example, has conceded that it won't make its sales goals for Blu-ray players this year. Part of the problem is the price of Blu-ray movies, but the battle with HD DVD supporters confused consumers and made logistics more complicated for retailers.

McColo, king of spam, falls — but the fight against spam goes on

In November, McColo Corp., a Web hosting firm in San Jose that allegedly hosted a range of spamming and cybercrime operations, was disconnected from the Internet after information gathered by security researchers was presented to the company's upstream ISPs by a Washington Post reporter. About half of the spam on the Internet disappeared along with McColo.

The problem is, there's no way to ensure that the spammers and cybercrooks allegedly harbored by McColo will be put out of business permanently. McColo itself briefly came back online last month, courtesy of an ISP in Sweden. And some security researchers are saying that spam volumes already are rising again, as spam and malware purveyors rebuild their crippled botnets.

XP is dead, long live XP

At the end of June, a long-feared deadline arrived: PCs loaded with Windows XP would no longer be sold by the major hardware vendors. Many IT managers had braced themselves because of the initial performance glitches and driver incompatibility problems with XP's successor, Windows Vista. Although Microsoft has cleared up many of those problems, Vista has yet to win the respect of many IT pros.

However, Microsoft left ways for people to continue getting their hands on XP. Business users can exercise rights to downgrade new PCs from Vista to XP, and many appear to be doing so. In addition, low-cost notebooks such as the Asus Eee can continue to be shipped with XP through June 2010, as can low-end desktop systems referred to by Microsoft as "net-tops."

Many users hope to continue running XP until the release of Windows 7, a new version of the operating system that is due late next year or in early 2010. Microsoft officials vow that they've learned their lessons and that Windows 7 won't have the same kind of problems that plagued Vista. Stay tuned.

Politics 2.0: Obama taps tech to clinch victory

President-elect Barack Obama arguably ran the most efficient, organized presidential campaign of all time. Among the keys to his victory were computing power, database technology, social networking, e-mail list management and some form of automated business intelligence. (The campaign has been reluctant to reveal the exact ingredients of its BI secret sauce.)

For instance, campaign canvassers were given computer printouts zeroing in on key characteristics of swing voters; supporters were able to create personal online dashboards that made it easier to coordinate their volunteer activities; and mobile communications were tapped to pique the interest of young and tech-savvy citizens. Cutting-edge IT likely will become de rigueur for future campaigns.

The end of an era: Gates retires from Microsoft

When Bill Gates gave up his day-to-day role at Microsoft in June, it was a milestone not only in his own career but for the IT industry as whole. Gates didn't invent the PC, but he took the lead role in inventing the PC business and putting personal computers at center stage within IT departments.

As Gates steps away from business life, PCs have become just one of many devices that can be used to connect to the Internet. But even though the classic PC form factor may not be as central to IT as it once was, personal computing software has morphed and found its way into billions of devices of all shapes and sizes. Meanwhile, Gates now has the opportunity to make as much of an impact in philanthropy as he did in technology, via his work at the Bill & Melinda Gates Foundation.

Copyright © 2008 IDG Communications, Inc.

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