The digital business week

27 Sep 2010

A digest of the top business and technology news stories from the past week.

IT debt costing businesses billions

Global IT debt could reach $500bn (around €373bn) this year, with the potential to reach $1trn (around €746bn) by 2015, recent research conducted by IT specialists Gartner Inc. suggests.

According to the research ‘Measure and Manage Your IT Debt’, IT debt can be “a hidden risk” and as businesses continue to invest and expand, the size of the IT debt grows; with additional functionality and complexity that has to be maintained and upgraded to a more reliable state at some point in the future.

IT debt as the cost of clearing the backlog of maintenance required to bring the corporate applications portfolio to a fully supported current release state and the scale of the maintenance backlog has created a systemic risk, according to the research.

“Over the last decade, CIOs have frequently seen IT budgets held tight or even reduced. The reaction has been to still deliver quality of service for operational services and to use any potential project spend to deliver new functionality to the rest of the business,” said Andy Kyte, vice-president and Gartner fellow.

“The bulk of the budget cut has fallen disproportionately on maintenance activities – the upgrades that keep the application portfolio up-to-date and fully supported. There is little problem if this is done in one year, or even in two years, but year after year of deferred maintenance means that the application portfolio risks getting dangerously out of date.”

Conditions for venture capitalists to relocate to Ireland ‘top class’

It’s a “great time for international venture capitalists to locate in Ireland”, according to director general of the Irish Venture Capital Association (IVCA) Regina Breheny.

The IVCA welcomed the announcement by the Minister for Enterprise, Trade and Innovation Batt O’Keeffe to draw top investors to Ireland under a €500m venture capital fund.

“Innovation is at the top of the Irish Government’s agenda, as evidenced by the willingness to provide additional capital through the Innovation Fund Ireland,” said Breheny.

“The venture capital infrastructure in Ireland is top class.

“Since 2003, Ireland has consistently been in the top three rankings in Europe as measured by the tax and legal environment favouring the development of venture capital and entrepreneurship. It’s the ideal location for a European base,” she said.

Breheny added that IVCA members already co-invest with many international venture capitalists.

“We will be very happy to deepen this relationship to complement the existing ecosystem and to attract further funding into the indigenous Irish economy,” she said.

Bill Gates still the richest person in America

Bill Gates, co-founder of Microsoft, remains the richest American, according to Forbes magazine’s annual 400 Richest People in America.

Gates’ estimated assets are of $54bn, thus holding his position of wealthiest man in America.

Oracle’s CEO Larry Ellison came in at No 3, with wealth of $27bn.

Google founders Larry Page and Sergey Brin shared 11th place, with a net worth of $15bn each.

Steve Ballmer of Microsoft was 15th with $14bn and Michael Dell of Dell was 16th at $13.1bn, both slipping two places each.

Facebook CEO Mark Zuckerberg tied for No 35. His wealth rose by 245pc to $6.9bn.

Bullish Adobe’s revenues up 42pc despite Apple snub

Apple CEO Steve Jobs’ best efforts to throw a spanner in Adobe’s works over Flash have so far come to nought as the scrappy design and content software firm reported record revenues of USUS$990.3m for its third quarter, up 42pc on last year.

Adobe’s third-quarter revenue target range was US$950m to US$1bn. Adobe brought home a profit of US$230.1m for the third quarter of fiscal 2010, compared to US$136.0m last year.

“Strong performance in each of our major businesses contributed to record revenue and strong earnings in Q3,” said Shantanu Narayen, president and CEO of Adobe.

“We remain bullish about Adobe’s long-term role in enabling the transformation of content and applications across industries.”

Profits surge at Google Ireland

Google’s main Irish subsidiary has seen an almost five-fold in increase in profits to €47.5m last year. The search giant attributes the rise in turnover, revenue and number of employees to strong growth in the online advertising market.

Google Ireland Ltd’s turnover increased to €7.9bn in 2009, up from €6.7bn the previous year, according to accounts filed at the Companies Registration Office.

The growth had continued into 2010, said John Herlihy, Google’s vice-president of online sales and operations.

IBM acquires analytics firm Netezza for US$1.7bn

IBM has vowed to bring analytics to the masses and has acquired Netazza, a company that helps businesses analyse data, for US$1.7bn in cash. This brings to US$12bn the amount IBM has invested in 23 analytics-related acquisitions in the last four years.

The acquisition of Netezza at US$27 a share will expand IBM’s business analytics initiatives to help clients gain faster insights into their business information, with increased performance at a lower cost.

The acquisition, which is subject to Netezza shareholder and regulatory approval, is expected to close in the fourth quarter of 2010.

In the last four years, IBM has invested more than US$12bn in 23 analytics-related acquisitions. In IBM’s second quarter of 2010, IBM’s analytics business grew 14pc.

Netezza currently designs and develops its appliances on IBM systems technology and combined with IBM software powers many applications within organisations. The two companies have been strategic partners for many years, focused on workload optimised systems that deliver integrated systems, software and storage for analysing vast amounts of complex data.

HP and Oracle reach an agreement over Mark Hurd

The way is now clear for former HP CEO Mark Hurd to take on his new role at Oracle. As part of a deal brokered between Larry Ellison and Marc Andreessen, Hurd will have to part with the US$14m in stock that was part of his severance package.

Hurd stepped down as HP CEO over questions about his expenses. This came after an allegation of sexual harassment by a female consultant, which HP found did not break its policy on the subject.

A fortnight ago, Oracle confirmed that Hurd, a friend of its CEO Larry Ellison, was to take up the role of co-president of the company, reporting to Ellison. It is speculated that Hurd could help Oracle continue the integration of Sun Microsystems, after its purchase of the company for US$7bn in 2009.

However, HP decided to sue over Hurd’s appointment as co-president of Oracle, citing serious “strategic advantages” it would have and knowledge of HP’s strengths and weaknesses. In its suit, HP said Oracle would gain a strategic advantage in terms of where to allocate resources and exploit knowledge of HP’s weaknesses.

But now both companies have reached an agreement whereby Hurd will adhere to obligations to protect HP’s confidential information.