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IBM cutting up to 1500 jobs in Australia as cloud computing upsets server market (Caitlin Fitzsimmons/Business Review ...)

Thu, 20 Jun 2013 05:55:00 +0000

IBM has neither confirmed nor denied reports that it is laying off up to 1500 staff in Australia. Photo: Bloomberg

Updated | The 1500 jobs on the line at IBM’s Australian operation mirrors the decline in the server market as business customers shift to cloud computing and software-as-a-service.

The number of job cuts reportedly looming at IBM this year is 1200 to 1500 – greater than what car maker Ford Motor announced would occur as a result of its exit from Australian manufacturing in 2016.

The acceleration of the cloud trend, which changes the way corporate customers buy technology, has left IBM and other traditional vendors such as Hewlett-Packard and Dell scrambling to adapt.

IBM already has cloud computing services and has indicated it will focus on this as a growth area. IBM has neither confirmed nor denied the reported redundancy program, but a spokeswoman told BRW the business was repositioning.

“IBM is investing in growth areas for the future: Big Data, cloud computing, social business and the growing mobile computing opportunity,” she says. “The company has always invested in transformational areas, and as a result we need to remix our skills so IBM can lead in these higher-value segments in both emerging markets and in more mature economies.”

IBM’s Australian cloud customers are currently served by a regional data centre in Singapore, but competitors such as Microsoft and Oracle have moved to open Australian facilities to calm customer fears over data sovereignty.

Traditional vendors hit

Rodney Gedda, an analyst at technology firm Telsyte, says it is not easy to speculate on the rationale for the job cuts since the decision was made behind closed doors, but in general, traditional vendors like IBM have been hit by the trend for businesses to embrace cloud computing and software-as-a-service.

Gedda says IBM’s push into cloud services is the right move but the transformation would not be painless.

“While [the trend] opens up a whole new business of cloud services, inevitably when you’ve got a large company with a large installed based there’s going to be disruption from new technology and that’s possibly one reason why IBM needs to cut back,” Gedda says. “There’s possibly less need for these type of people if it’s moving to more of a cloud model and software-as-a-service model, perhaps it doesn’t need as many people supporting on-premise infrastructure.”

Hardware vendors typically describe cloud computing as a sales opportunity on the basis that they sell servers to data centres as well as end-users, but Gedda says this argument is overstated.

“The key difference is that cloud service providers tend to drive a lot of efficiency out of their systems and they even go to the trouble of engineering their own, as well, so they’ll go to OEMs [original equipment manufacturers] and purchase custom servers and they’ll go to manufacturers and get them to build uniquely specced servers for their environment,” Gedda says.

“These sort of activities happen in the cloud space and the traditional systems vendors have struggled to keep up with that delivery model. It doesn’t mean on-premise IT is dead, it just means it has to compete with another dynamic, and it has a flow-on with support and software sales and infrastructure management sales, the whole eco-system.”

Dramatic decline in hardware

The hardware market is declining rapidly and the falls are even more dramatic in Australia than elsewhere in the world, according to analyst firm Gartner.

In Australia, shipments of servers fell almost 4.5 per cent in the first quarter of 2013, compared with the same period in 2012, while revenue from server sales declined 20 per cent. In Australia, HP is the dominant player in terms of both number of machines and revenue. IBM is number one globally by revenue but second to HP in Australia, with a 20 per cent share of server revenue.

Worldwide server sales also declined in the first quarter but by a more modest 0.7 per cent year on year for shipments and 5 per cent year on year for revenue, according to Gartner.

Alongside the decline in hardware sales, Telsyte’s Gedda says the rise of cloud computing and software-as-a-service meant that modern businesses were much less likely to buy all their technology from a single vendor. Line-of-business managers and chief marketing officers were making software-as-a-service decisions on an ad hoc basis. This in turn hits traditional vendors in both the hardware and the software space, such as IBM, Dell, and HP.

Not coincidentally, HP has also announced a massive round of layoffs, telling analysts in May it would cut 8 per cent of its workforce worldwide. HP is the world’s largest vendor for both PCs and printers, so it is arguably even more product-focused than IBM.

Gartner figures suggest PC sales, including both desktop and mobile, are also in sharp decline, with an 18 per cent decline in shipments in Australia and an 11 per cent drop worldwide.

The travails of Dell and its journey in and out of public and private ownership are also well documented. However, Dell is encroaching on HP and IBM in the server space, increasing its worldwide market share by revenue from 14.9 per cent in first quarter 2012 to 18 per cent a year later, while its two bigger rivals dropped a few percentage points.

Gedda says it is possible the high Australian dollar and other economic forces were contributing factors. The SMH says that IBM will seek to send some jobs offshore to New Zealand or Asia because of the high cost of business in Australia.

The SMH report suggests that IBM was cutting 10 per cent of its workforce in Australia, but only 2 per cent globally, in the wake of disappointing first-quarter 2013 results.

Digging into finances

Worldwide, IBM reported $US3.03 billion in net profit off the back of $US23.41 billion in revenue for the three months ended March 31, 2013. This was a fall from $3.07 billion in net income and $24.67 billion in revenue for the same period in 2012.

In the IBM 2012 annual report, the company reported that Asia Pacific revenue grew 2.6 per cent year on year to $25.94 billion for full-year 2012. Growth markets, which includes Australia, grew 4.2 per cent year on year, while major markets declined 3.5 per cent.

The biggest part of IBM’s business globally is its consulting division, IBM Global Services. The 2012 annual report reports $US58.8 billion in Global Services revenue for 2012, when technology services and business services are combined, down 2.3 per cent on 2011.

Revenue from hardware sales also fell, with $US17.67 billion in reported revenue for the Systems and Technology division, down 6.9 per cent.

The bright spot was the software division with revenue of $US25.45 billion for the year, up 2 per cent.

Measuring the iTunes video store (Horace Dediu/asymco)

Thu, 20 Jun 2013 05:40:02 +0000

Author Horace Dediu Categories Market

It’s been five years since we had an update on TV show downloads and six years since we’ve had an update on movie downloads from Apple. In Q3 2008 Apple announced 200 million TV show downloads and in Q2 2007 2 million movies. That’s a long period with no information making a tough extrapolation to the present.

Nevertheless, I tried. My estimates for these two quantities were 963 million TV Shows and 108.2 million movies to date.

So I was quite surprised to see that figures for both TV show downloads and Movie downloads were published today. The figures were 1 billion and 380 million respectively.

My TV show forecast has proven to be very accurate but I severely underestimated movie download rates. Apple states that the movie download rate is 350k/day. My estimate was only about 126k/day.

After adjusting for the new data, the picture of downloads that emerges looks like this:

The overall iTunes gross revenues by sub-component becomes:

As a result, my new estimate for the rate of spending on iTunes video is about $1.75 billion/yr. This is much more substantial than prior estimates mainly because movies are much more valuable. A tripling of the download rate shows up as a significant rise in the profile of video vis-à-vis the other media types.

Apps and software are firmly defined and music was somewhat clear. The upward adjustment in Video means that I have to reduce either Music or services. I presently am reducing service revenues but might adjust music as well.

The overall picture of iTunes is becoming clearer every day. We have more information about number of users (575 million), what they spend on media and software and services ($20 billion/yr.) and, increasingly what they spend on each media type (about $9/yr on Software, $2/yr on books, $16/yr on apps $12/yr on music and $4/yr on video.)

Yahoo rejects fears hackers will exploit old user IDs (Alexei Oreskovic/Reuters)

Thu, 20 Jun 2013 05:25:01 +0000

The Yahoo logo is shown at the company's headquarters in Sunnyvale, California April 16, 2013.

Credit: Reuters/Robert Galbraith

By Alexei Oreskovic

SAN FRANCISCO | Wed Jun 19, 2013 8:49pm EDT

SAN FRANCISCO (Reuters) - Yahoo Inc on Wednesday downplayed concerns that its plans to recycle inactive user IDs could leave users exposed to hackers, saying only 7 percent of those IDs are tied to actual Yahoo email accounts.

The Internet company, which announced last week it would release user IDs that have been inactive for more than 12 months so that other people can claim them, was pressed to defend the plan after critics warned that hackers who take control of inactive accounts could also assume the identities of the accounts' previous owners.

Yahoo hopes the plan will spark fresh interest in its Web products like Mail, where users prefer individualized user IDs often derived from common names. But criticism of the plan comes at a time when fears over the security of personal information on the Internet have been heightened by revelations of massive U.S. government snooping and international online crime.

Yahoo stressed that it has put in place various safeguards, such as coordinating with other major Web companies including Google Inc and Amazon Inc to minimize the risk of identity theft.

The possibility of identity theft is "something we are aware of and we've gone through a bunch of different steps to mitigate that concern," said Dylan Casey, a senior director for consumer platforms. "We put a lot of thought, a lot of resources dedicated to this project."

Critics say hackers could claim inactive accounts for identity theft. If a Yahoo email is associated with a Google account, for instance, an identity thief with access to the Yahoo email account could use it to reset the Google account password and assume control.

Mat Honan, a Wired magazine writer who has previously written about being the victim of a devastating hacker attack, on Wednesday slammed Yahoo's plan as a "spectacularly bad idea."

"This is going to lead to a social engineering gold rush come mid-July," Honan wrote, referring to hacker tactic of obtaining passwords by deceiving people rather than cracking codes.

But Casey said that the vast majority of inactive accounts were more limited, used for services such as Yahoo's Fantasy Sports that are not tied to an email address and therefore not susceptible to identity theft.

Yahoo will also unsubscribe its inactive email accounts from mailing lists so that their new owners will not receive unwanted mail, Casey said.

"Can I tell you with 100 percent certainty that it's absolutely impossible for anything to happen? No. But we're going to extraordinary lengths to ensure that nothing bad happens to our users," Casey said.

Since the company announced its plans on June 12, users have 30 days to claim their inactive accounts before they are released, Yahoo said.

(Reporting by Alexei Oreskovic; Editing by Stephen Coates)

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LinkedIn suffers site outage due to 'DNS issue' (Steven Musil/CNET)

Thu, 20 Jun 2013 04:40:04 +0000

The business networking site's home page is replaced by a domain sales page for about an hour.

June 19, 2013 9:35 PM PDT

(Credit: LinkedIn)

LinkedIn is battling a DNS issue that took the business social networking site offline for an hour Wednesday night.

The outage, which appears to be over for most of LinkedIn's members, began when the site's homepage was replaced by a domain sales page. The site's operators explained via Twitter that the outage was caused by a "DNS issue" but did not elaborate.

Meanwhile, App.net co-founder Bryan Berg claimed that LinkedIn's DNS was "hijacked," and that all its traffic was sent to a network hosted by Confluence Networks.

"They don't require SSL, so if you tried to visit, your browser sent your long-lived session cookies in plaintext," he wrote.

CNET has contacted Confluence Networks for comment and will update this report when we learn more.

Security has been a sticky situation of late for LinkedIn. The DNS issue emerges a little more than a year after the business networking site confirmed that some 6.5 million of its members' passwords had been stolen and uploaded to a Russian hacker server.

CNET has contacted LinkedIn for more information and will update this report when we learn more.

A startup looks to stop fraud with a new method for 'fingerprinting' phone calls (Joshua Kopstein/The Verge)

Thu, 20 Jun 2013 03:45:00 +0000

One of the most cherished and time-honored traditions of computer security conferences like Def Con has been the Social Engineering contest. It's a simple but satisfying hacker bloodsport — contestants sit inside a glass isolation booth in front of a live audience and call up companies to see how many passwords, addresses, and other secret information they can coax from clueless customer service representatives.

Of course, the reason it's so effective — and thus, entertaining — is because social engineering bypasses firewalls and encryption to attack the most vulnerable component of any security system: humans.

Georgia-based startup Pindrop Security isn't releasing a patch for human gullibility, but it is getting $11 million of venture funding for a novel fraud detection technology which could give human operators a much-needed edge against clever con artists with far more nefarious motives than those at Def Con.

Social engineering attacks the most vulnerable part of a security system: humans

It's a bit like a re-tooled version of Caller ID, but instead of phone directories, it uses audio signal processing to authenticate calls by analyzing their acoustic properties in real time. Over time, the system builds a database of audio "fingerprints" based around those properties. The creators say it can determine a caller's location down to an area roughly the size of France, even when they're using VoIP services like Skype, with 90 percent accuracy.

The project came from the PhD thesis of Pindrop's CEO and founder, Vijay Balasubramaniyan, who realized something useful about the subtle differences in audio quality and other attributes of various countries' phone lines. For example, you can measure things that differ from country to country, like the audio cutoff frequency, to compare the declared origin of the call against audio profiles stored in the database. Vijay says those profiles are built using 147 different audio signatures across the categories of loss, noise, and spectrum, allowing the system to create a unique fingerprint for specific handsets, applications, and regions.

That means you'd be able to tell the difference between, say, a Blackberry calling from Nevada and a Skype call coming from Nigeria.

The system can create a unique fingerprint for specific handsets, applications, and regions

Pioneered by legendary phone phreaks like Kevin Mitnick, social engineering is one of the oldest strategies in the hacker playbook, yet it remains one of the most effective. Last year, Wired writer Mat Honan had his iPad remotely wiped after an attacker with just a few points of personal data was able to trick an Apple customer support representative into giving them access to his iCloud account. Even when it doesn't get results immediately, a good social engineering call can produce other useful information that hackers can utilize to get access elsewhere.

Knowing roughly where those calls originate can be useful, since fraudsters usually lie about where they're calling from, says Scott Weiss, a former Cisco security manager currently with tech incubator Andreessen Horowitz, who just took a board seat at Pindrop after its latest funding round. "Most of this phone call fraud is coming from spook numbers out of places like Pakistan or Russia, and to know that the call is coming from one of those countries can cut down fraud almost by 75 percent," he claims. "Anytime you're calling in about a password or an ID, this technology should be applied."

Related Items security fraud social engineering telephony