| Section 6.2: Full Text |
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INFRASTRUCTURE COMPONENTS
IT infrastructure today is composed of seven major components. Figure 6-11 illustrates
these different but related infrastructure components and the major vendors within each
component category. Table 6-3 describes the overall spending on each component in the
United States estimated for 2005. From the point of view of the firm, these components
constitute investments that must be coordinated with one another to provide the firm
with a coherent infrastructure.
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FIGURE 6-11 The IT infrastructure ecosystem
There are seven major components that must be coordinated to provide the firm with a coherent IT
infrastructure. Listed here are major technologies and suppliers for each component.
TABLE 6-3 Estimated Size of U.S. Infrastructure Marketplace Components  |
In the past, technology vendors were often in competition with one another, offering purchasing firms a mixture of incompatible, proprietary, partial solutions. But increasingly the vendor firms have been forced by large customers to cooperate in strategic partnerships with one another. For instance, a hardware and services provider such as IBM cooperates with all the major enterprise software providers, has strategic relationships with system integrators (often accounting firms), and promises to work with whichever database products its client firms wish to use (even though it sells its own database management software called DB2). Let’s examine the size and dynamics of each these infrastructure components and their markets.
Computer Hardware Platforms
U.S. firms will spend about $109 billion in 2005 on computer hardware. This component includes client machines (desktop PCs, mobile computing devices such as PDAs and laptops) and server machines. The client machines use primarily Intel or AMD microprocessors. In 2004, 150 million PCs were shipped to U.S. customers, and $30 billion was spent on clients (eMarketer, 2004).
The server market is more complex, using mostly Intel or AMD processors in the form of blade servers in racks, but also includes Sun SPARC microprocessors and IBM PowerPC chips specially designed for server use. Blade servers are ultrathin computers consisting of a circuit board with processors, memory, and network connections that are stored in racks. They take up less space than traditional box-based servers. Secondary storage may be provided by a hard drive in each blade server or by external mass-storage drives.
The marketplace for computer hardware has increasingly become concentrated in top firms such as IBM, HP, Dell, and Sun Microsystems, which produce 90 percent of the machines, and three chip producers, Intel, AMD, and IBM, which account for over 90 percent of the processors sold in 2004. The industry has collectively settled on Intel as the standard processor, with major exceptions in the server market for Unix and Linux machines, which might use SUN or IBM Unix processors.
Mainframes have not disappeared. The mainframe market has actually grown steadily over the last decade, although the number of providers has dwindled to one: IBM. IBM has also repurposed its mainframe systems so they can be used as giant servers for massive enterprise networks and corporate Web sites. A single IBM mainframe can run up to 17,000 instances of Linux or Windows server software and is capable of replacing thousands of smaller blade servers.
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A blade server is a thin, modular processing device that is intended for a single dedicated application (such as serving Web pages) and that can be easily inserted into a space-saving rack with many similar servers.
Internet ConnectionThe Internet Connection for this chapter will direct you to a series of Web sites where you can complete an exercise to survey the products and services of major computer hardware vendors and the use of Web sites in the computer hardware industry.
Operating System Platforms
In 2005, the U.S. market for operating systems, which manage the resources and activities of the computer, is expected to amount to $100 billion. At the client level, 95 percent of PCs and 45 percent of handheld devices use some form of Microsoft Windows operating system (such as Windows XP, Windows 2000, or Windows CE). In contrast, in the server marketplace, more than 85 percent of the corporate servers in the United States use some form of the Unix operating system or Linux, an inexpensive and robust open-source relative of Unix. Although Microsoft Windows Server 2003 is capable of providing enterprise-wide operating system and network services, it is generally not used when there are more than 3,000 client computers in a network.
Unix and Linux constitute the backbone of corporate infrastructure throughout much of the world because they are scalable, reliable, and much less expensive than mainframe operating systems. They can also run on many different types of processors. The major providers of Unix operating systems are IBM, HP, and Sun, each with slightly different and partially incompatible versions.
Although Windows continues to dominate the client marketplace, many corporations have begun to explore Linux as a low-cost desktop operating system provided by commercial vendors such as RedHat Linux and Linux-based desktop productivity suites such as Sun’s StarOffice.
Linux is also available in free versions downloadable from the Internet as open-source software. Open-source software is described more fully later, but in essence it is software created and updated by a worldwide community of programmers and available for free.
Enterprise Software Applications
In addition to software for applications used by specific groups or business units, U.S. firms will spend about $165 billion in 2005 on software for enterprise applications that are treated as components of IT infrastructure. The largest providers of enterprise application software are SAP, followed by Oracle and PeopleSoft. In December 2004 Oracle purchased PeopleSoft. SAP and PeopleSoft promise to provide software that works with any hardware or operating system; Oracle applications run only on Oracle databases (although they are compatible with all operating systems and hardware platforms). Also included in this category is middleware software supplied by vendors such as BEA for achieving firmwide integration by linking the firm’s existing application systems. We describe both types of software in detail in section 6.4.
Microsoft is attempting to move into the lower ends of this market by focusing on small and medium-sized businesses. (There are over 35 million such businesses in the United States, and most have not yet developed enterprise applications.) In general, most large firms already have implemented enterprise applications and have developed longterm relationships with their providers. Once a firm decides to work with an enterprise vendor, switching can be difficult and costly, though not impossible.
Data Management and Storage
There are few choices for enterprise database management software, which is responsible for organizing and managing the firm’s data so that it can be efficiently accessed and used. Chapter 7 describes this software in detail. The leading database software providers are IBM (DB2), Oracle, Microsoft (SQL Server), and Sybase (Adaptive Server Enterprise), which supply more than 90 percent of the estimated $70 billion U.S. database software marketplace. A growing new entrant is MySQL, a Linux open-source relational database product available for free on the Internet and increasingly supported by HP and others in a move designed to prevent Microsoft from monopolizing the small and medium-sized firm database market with its SQL Server product.
The physical data storage market (about $35 billion in 2004) is dominated by EMC Corporation for large-scale systems, and a small number of PC hard disk manufacturers led by Seagate, Maxtor, and Western Digital. In addition to traditional disk arrays and tape libraries, large firms are turning to network-based storage technologies. Storage area networks (SANs) connect multiple storage devices on a separate high-speed network dedicated to storage. The SAN creates a large central pool of storage that can be rapidly accessed and shared by multiple servers.
The amount of new digital information in the world is doubling every three years, driven in part by e-commerce and e-business and by statutes and regulations requiring firms to invest in extensive data storage and management facilities (such as the Sarbanes-Oxley Act of 2002 and the Health Insurance Portability and Accountability Act, or HIPAA). Consequently, the market for digital data storage devices has been growing at more than 15 percent annually over the last five years.
Networking/Telecommunications Platforms
U.S. firms spend about $150 billon a year on networking and telecommunications hardware and nearly $700 billion on networking services (consisting mainly of telecommunications and telephone company charges for voice lines and Internet access; these are not included in this discussion). Chapter 8 is devoted to an in-depth description of the enterprise networking environment, including the Internet. Windows Server 2003, Windows 2000 Server, and Windows NT are predominantly used as local area network operating systems, followed by Novell, Linux, and Unix. Large enterprise wide area networks primarily use some variant of Unix. Nearly all local area networks, as well as wide area enterprise networks, use the TCP/IP protocol suite as a standard (see Chapter 8).
The leading networking hardware providers are Cisco, Lucent, Nortel, and Juniper Networks. Telecommunications platforms are typically provided by telecommunications/telephone services companies that offer voice and data connectivity, wide area networking, and Internet access. Leading telecommunications service vendors include MCI, AT&T, and regional telephone companies such as Verizon. As noted in Chapter 8, this market is exploding with new providers of cellular wireless, Wi-Fi, and Internet telephone services.
Internet Platforms
Internet platforms overlap with, and must relate to, the firm’s general networking infrastructure and hardware and software platforms. Nevertheless, in most corporations, Internet expenditures are separated out from general IT infrastructure expenditures.
U.S. firms spent an estimated $32 billion annually on Internet-related infrastructure. These expenditures were for hardware, software, and management services to support a firm’s Web site, including Web hosting services, and for intranets and extranets. A Web hosting service maintains a large Web server, or series of servers, and provides fee-paying subscribers with space to maintain their Web sites. This category of technology expenditures is growing by approximately 10 percent per year.
The Internet revolution of the late 1990s led to a veritable explosion in server computers, with many firms collecting thousands of small servers to run their Internet operations. Since then there has been a steady push toward server consolidation, reducing the number of server computers by increasing the size and power of each. The Internet hardware server market has become increasingly concentrated in the hands of Dell, HP/Compaq, and IBM as prices have fallen dramatically.
The major Web software application development tools and suites are supplied by Microsoft (FrontPage and the Microsoft .NET family of development tools used to create Web sites using Active Server Pages for dynamic content), Sun (Sun’s Java is the most widely used tool for developing interactive Web applications on both the server and client sides), and a host of independent software developers, including Macromedia (Flash), media software (Real Media), and text tools (Adobe Acrobat). Chapter 8 describes the components of the firm’s Internet platform in greater detail.
Consulting and System Integration Services
Although 20 years ago it might have been possible for a large firm to implement all its own IT infrastructure, today this is far less common simply because even large firms do not have the staff, the skills, the budget, or the necessary experience to do so. Implementing new infrastructure requires (as noted in Chapters 1 through 3) significant changes in business processes and procedures, training and education, and software integration.
Software integration means ensuring the new infrastructure works with the firm’s older, so-called legacy systems and ensuring the new elements of the infrastructure work with one another. Legacy systems are generally older transaction processing systems created for mainframe computers that continue to be used to avoid the high cost of replacing or redesigning them. Replacing these systems is cost prohibitive and generally not necessary if these older systems can be integrated into a contemporary infrastructure.
Most companies in the past relied on their accounting firms to provide consulting and system integration services simply because the accounting firms were the only ones that truly understood a company’s business processes and had the expertise to change its software. However, in the United States accounting firms have been prohibited by law from providing these services and as a result have split off consulting services into separate entities, such as Accenture (formerly part of Arthur Andersen) and KPMG Consulting (split off from the KPMG accounting firm and now part of IBM).
Consulting and system integration have become a lucrative market that can greatly expand the revenues of computer hardware and enterprise software vendors. IBM’s consulting services revenues now equal its hardware revenues, and for enterprise software firms such as Oracle and SAP, consulting, integration, and maintenance revenue exceed the revenues from software sales.