Download Week in Review - Robert Frances Group

April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
Experture
/ RFG
Weekly IT News Snapshots
…experts on demand
Cal Braunstein, Chief Research Officer
ETS 11-04-01
Week in Review
This Week the following topics are highlighted:
Attacks and Clouds - IBM Corp. released its update to its yearly security trend
and risk report, accounting that while security attacks are becoming more
sophisticated, the vulnerabilities targeted remain largely the same. Elsewhere, a
newly released survey by a data center management association finds that cloud
computing adoption is on most data centers' hot lists for 2011 and beyond.
Lastly, a recent security attack has exposed customers' names and e-mail
addresses for some of the top institutions.
RFG believes security vulnerabilities and exploits should remain atop IT
executives' list of concerns as attacks become more automated and pervasive.
IBM's X-Force 2010 Trend and Risk Report demonstrates that the majority of
attacks are Web and e-mail related, and that a majority of the holes found remain
unpatched. This suggests that security policies and procedures at enterprises are
secondary to ongoing operations and that many administrators are failing to
maintain what should be the minimum in security upkeep. While attacks are
getting more sophisticated, the majority of the vulnerabilities referenced could be
easily plugged with patching and regular maintenance. These problems will
exacerbate as cloud computing continues to flourish exponentially. Companies
that flock to outsourcers in droves to solve problems – security or otherwise – will
be sorely disappointed despite whatever best practices, service level agreements
(SLAs), and other promises for improvement are bandied about without first
getting their own homes in order. Cloud computing strategies aim to optimize
computing efficiencies and leverage applications irrespective of their geolocation; however, complex systems and architectures are breeding grounds for
complex security and integration problems. As with all large problems, sound
planning and holistic views of processes and problems are required to minimize
risk and maximize return. The Epsilon data breach, one of the largest recorded,
should serve as a reminder and call-to-action for IT executives to revisit security
policies and enforcement across the enterprise. No panacea exists to replace
rigorous and repeated revisiting, updating, enforcement, and additions to a
centralized set of security rules governed using strong applications and repeated
testing.
A Financial Transformation - IBM Corp. released its findings from its 2011
banking study. The study concludes banks globally need to invest in insights that
will enable the institutions to become more client centric, reduce complexity, and
optimize risk.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01
RFG believes banks, as well as other businesses, need to develop pricing
methodologies that are client centric and map well with the new, and multiple,
ways in which customers prefer to work with their providers. Banking institutions,
especially those that are the product of multiple mergers, tend to have excess
and overlapping applications, processes, and infrastructure. RFG finds that the
simplicity savings on the IT side easily matches the 20 – 30 percent range that
could be achieved by reducing bank operational complexity. The systemic risk
exposures have not diminished and may not improve much over the next five
years. IT executives should expect the requirement for banks to reduce their
operational risks to cause continued tightening of funds and capital constraints.
Thus, IT executives should be looking at alternative methods of financing, such
as leasing, rather than use of corporate capital or lines of credit. Moreover, IT
executives should be concerned with the rise in fraud attempts and should,
therefore, ensure their organizations have eliminated siloed risk and compliance
processes and installed advanced analytics that can detect and prevent fraud
attempts in real-time.
TI Acquires Natsemi To Widen Analog Lead - Two of the oldest names in the
semiconductor business, Texas Instruments and National Semiconductor, are to
merge to create a powerhouse in analog chips.
In the semiconductor market as a whole, the acquisition will allow TI to overtake
Toshiba as the world's third largest player after Intel and Samsung, according to
IHS iSuppli.
Google To Pay $900m For Nortel's Huge Patent Hoard - Google has kicked
off the battle for Nortel's last remaining major asset, its hoard of patents. Industry
giants from Apple to Ericsson to ZTE are said to be interested in the portfolio,
which some analyst expect to fetch over $1bn. Google has agreed to pay $900m,
but as a 'stalking horse' buyer, its bid could be topped by a rival.
Also on the patents front, HTC has acquired a rather smaller group from ADC
Telecommunications, now a subsidiary of Tyco Electronics. HTC will pay $75m
for 82 patents, including 14 that are still pending. Most are reported to relate to
unspecified 4G technology developments.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01
Attacks and Clouds
Lead Analyst: Cal Braunstein
IBM Corp. released its update to its yearly security trend and risk report, accounting that while
security attacks are becoming more sophisticated, the vulnerabilities targeted remain largely the
same. Elsewhere, a newly released survey by a data center management association finds that
cloud computing adoption is on most data centers' hot lists for 2011 and beyond. Lastly, a recent
security attack has exposed customers' names and e-mail addresses for some of the top
institutions.
Focal Points:

IBM released its annual X-Force 2010 Trend and Risk Report this week, detailing the
computing-related security risks faced by public and private organizations worldwide
last year. IBM gathered the data using intelligence sources, a global Web crawler,
real-time monitoring for nearly 4,000 clients in 130 countries, and its large
vulnerability database to monitor more than 150,000 events per second. Rising 27
percent from 2009, the company identified more than 8,000 new vulnerabilities but
noted that spam had growth flattened by the end of the year. Fewer phishing attacks
were reported, though more targeted "spear phishing" became more prominent in
usage as targeted e-mails with malicious attachments and/or links grew. Not
surprisingly, Web applications vulnerabilities, led by cross site scripting and SQL
injection issues, numbered nearly half of all vulnerabilities during the year.
Additionally, almost half of all vulnerabilities remain unpatched. Stuxnet ranked as
one of the most notable of the year's attacks, demonstrating that specialized exploits
for complex, proprietary control systems was possible.

A new survey by AFCOM, an association for data center management professionals,
found that 70 percent of the 358 data center managers surveyed have or are seriously
considering adopting cloud computing technologies. Their 2010 survey found that
only 14.9 percent of surveyed managers had clouds implemented, while the responses
to the 2011 survey indicated that more-than-double growth rate to 36.6 percent.
Additionally, 35.1 percent of respondents were seriously considering moving to the
cloud. Other notable findings included that data center expansion is on the rise as 44.2
percent of participants have more floor space than three years ago and another 49.4
percent are planning to build or acquire more room. Data backup and recovery plans
were not in place at more than 15 percent of respondents' data centers and a whopping
50 percent lack strategies to replace equipment damaged by a disaster.

Epsilon Data Management, LLC., a permission-based e-mail marketer and unit of
Alliance Data Systems Corp., announced a breach of its customer files used to send email marketing campaigns to customers banking institutions and retailers. Customer
names and e-mails were exposed when an attack allowed entry into Epsilon's e-mail
system, which is used to send more than 40 billion e-mails annually. The company
handles online marketing and outreach for customers including Citigroup, Inc., L.L.
Bean., JPMorgan Chase Bank, NA, Marriott International Corp., and other big
brands. The attack was detected on March 30, and is claimed to only affect "a subset'
of clients' databases and that financial information was not leaked.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01
RFG believes security vulnerabilities and exploits should remain atop IT executives' list of
concerns as attacks become more automated and pervasive. IBM's X-Force 2010 Trend
and Risk Report demonstrates that the majority of attacks are Web and e-mail related, and
that a majority of the holes found remain unpatched. This suggests that security policies
and procedures at enterprises are secondary to ongoing operations and that many
administrators are failing to maintain what should be the minimum in security upkeep.
While attacks are getting more sophisticated, the majority of the vulnerabilities referenced
could be easily plugged with patching and regular maintenance. These problems will
exacerbate as cloud computing continues to flourish exponentially. Companies that flock
to outsourcers in droves to solve problems – security or otherwise – will be sorely
disappointed despite whatever best practices, service level agreements (SLAs), and other
promises for improvement are bandied about without first getting their own homes in
order. Cloud computing strategies aim to optimize computing efficiencies and leverage
applications irrespective of their geo-location; however, complex systems and
architectures are breeding grounds for complex security and integration problems. As
with all large problems, sound planning and holistic views of processes and problems are
required to minimize risk and maximize return. The Epsilon data breach, one of the largest
recorded, should serve as a reminder and call-to-action for IT executives to revisit security
policies and enforcement across the enterprise. No panacea exists to replace rigorous and
repeated revisiting, updating, enforcement, and additions to a centralized set of security
rules governed using strong applications and repeated testing.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01
A Financial Transformation
Lead Analyst: Cal Braunstein
IBM Corp. released its findings from its 2011 banking study. The study concludes banks globally
need to invest in insights that will enable the institutions to become more client centric, reduce
complexity, and optimize risk.
Focal Points:

The IBM Institute for Business Value and The Economist Intelligence Unit surveyed
the top 200 banks across the Americas, Asia, Australia, and Europe. Globally, 90
percent of the bankers believe they need to transform their firms to survive and
prosper. Banks in mature markets need to reduce operational complexity that is
costing the industry nearly $200 billion annually. The potential extra profit that could
be derived from reducing complexity is in the 20 – 30 percent range depending upon
the size of the enterprise.

To become more client centric the financial firms need to create innovative pricing
models that are more closely aligned with client segments. Moreover, pricing needs to
reflect client holdings across multiple deposit and loan products. Furthermore, the
study finds that for many banks client satisfaction in the channels is at best mediocre.
Banks currently have insufficient client information and poor risk data, which
handicap their ability to modernize and establish good pricing models, IBM notes.

The most disconcerting findings IBM noted were in the area of risk and compliance.
The study finds systemic risk is on the rise. The top 30 banks are bigger now than
before the financial crisis. In many countries bank assets are about 200 percent their
national GDP. Moreover, 90 percent of organizations have experienced a rise in fraud
attempts. Lastly, 80 percent of financial services firms state that their risk and
compliance platforms and processes are not integrated across the business.
Meanwhile, hundreds of new regulations in different jurisdictions are on the way
while 240 new rule making processes are underway in the USA alone.
RFG believes banks, as well as other businesses, need to develop pricing methodologies
that are client centric and map well with the new, and multiple, ways in which customers
prefer to work with their providers. Banking institutions, especially those that are the
product of multiple mergers, tend to have excess and overlapping applications,
processes, and infrastructure. RFG finds that the simplicity savings on the IT side easily
matches the 20 – 30 percent range that could be achieved by reducing bank operational
complexity. The systemic risk exposures have not diminished and may not improve much
over the next five years. IT executives should expect the requirement for banks to reduce
their operational risks to cause continued tightening of funds and capital constraints.
Thus, IT executives should be looking at alternative methods of financing, such as leasing,
rather than use of corporate capital or lines of credit. Moreover, IT executives should be
concerned with the rise in fraud attempts and should, therefore, ensure their organizations
have eliminated siloed risk and compliance processes and installed advanced analytics
that can detect and prevent fraud attempts in real-time.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01
TI Acquires Natsemi To Widen Analog Lead
Two of the oldest names in the semiconductor business, Texas Instruments and
National Semiconductor, are to merge to create a powerhouse in analog chips.
Focal Points:

Analog products are rarely given any prominence in smartphone teardowns,
overshadowed by the more glamorous and expensive digital processors and displays,
but a high end handset usually has about 30 of these chips, which are also important
in sectors such as auto, medical and industrial. Analog chips feature passive elements
that are used for mixed signal processing in electronic devices.

This is a growth market and one on which TI has focused much of its attention in
recent years, especially since moving out of mobile basebands. Its product balance
has shifted to analog from the DSPs for which it is best known, and now it has
acquired NatSemi in a move to consolidate a fragmented sector. The $6.5bn deal will
spark further M&A, suspects Glen Yeung, an analyst at Citigroup, as companies look
for scale. "We suspect other analog companies will be forced to consider
complementary portfolios, combined salesforces, and eventually 300mm capacity,"
he said.

With the NatSemi purchase, TI gains a largely complementary product range and the
ability to put greater resource behind its new unit's sales. TI said in a statement:
"National has a rich line-up of high voltage power management products that are well
suited to industrial power applications, while our power management product
offerings are more oriented towards portable devices. There are plenty of examples
like this but the bottom line is that the combination of TI and National means we can
engage with customers and an application segment where we have no or minimal
engagement today."

In 2008, when TI left behind its merchant cellphone baseband business, CEO Rich
Templeton said he was targeting increased business outside mobile and in the growth
markets of medical, energy and public safety systems, and that the main products to
take TI further into these sectors would be low power processing and analog/mixed
signal building blocks. His theme since then has been that TI focuses on digital signal
"processing" rather than simply digital signal "processors".

At that time, analog and DSP accounted for about the same percentages of TI's
revenue - around 40% each - but Templeton estimated analog to be 5-7 times the size
of DSP, and with more new business available to TI (which then had 13% share,
compared to 50% for mobile DSPs, and more in infrastructure). After the closure of
the NatSemi acquisition, analog will rise from 43% of TI's revenue to 50% and
Templeton says he will target 18% analog market share (up from 14.6% in 2010). The
purchase will add 12,000 products to TI's existing catalog of 30,000.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011

EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01
NatSemi has been struggling over the past year, dropping from fifth to seventh place
in the market in 2010 even as TI has gained ground. In 2010, it had 14.6% share of
the analog sector by revenue, according to Electronics.ca, widening its lead over
STMicro on 10.1% and Infineon on 7.9%. After these three, the main rivals were
Analog Devices, Maxim, Linear Technology, Intersil and Freescale.
In the semiconductor market as a whole, the acquisition will allow TI to overtake Toshiba
as the world's third largest player after Intel and Samsung, according to IHS iSuppli.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01
Google To Pay $900m For Nortel's Huge Patent Hoard
Lead Analyst: Caroline Gabriel
Google has kicked off the battle for Nortel's last remaining major asset, its hoard of
patents. Industry giants from Apple to Ericsson to ZTE are said to be interested in the
portfolio, which some analyst expect to fetch over $1bn. Google has agreed to pay
$900m, but as a 'stalking horse' buyer, its bid could be topped by a rival.
Focal Points:

If the sale goes Google's way, the search giant will become a far more serious
wireless patent holder overnight, gaining over 6,000 items, many of them considered
important IPR in new technologies like LTE and OFDMA. According to Reuters,
Nortel owns seven of the 105 patent families likely to be essential to LTE. By
comparison, Nokia holds 57 and Ericsson 14. Some of the assets could be harnessed
directly for Android, Google applications frameworks or cloud networks, but others
will be valuable mainly to give it a stronger negotiating position against rival IPR
majors like Oracle or Microsoft.

Google wrote in a recent corporate blog posting referring to its legal battle with
Oracle over Java patents in Android: "One of a company's best defenses against …
litigation is (ironically) to have a formidable patent portfolio, as this helps maintain
your freedom to develop new products and services. Google is a relatively young
company, and although we have a growing number of patents, many of our
competitors have larger portfolios given their longer histories."

Nortel's statement describes its patent mountain as touching "nearly every aspect of
telecommunications and additional markets as well, including internet search and
social networking." It said the $900m offer had been the result of multiple rounds of
bidding from several interested parties.

Sale of its patents is the last major step to completing Nortel's exit from bankruptcy
protection, which has been delayed several times. At one time there was speculation
that it might emerge from Chapter X1 as a rump company focused on IPR licensing,
but it seems there is better value for its creditors in making a sale.

Nortel's patent portfolio is sufficiently large and valuable to make a material
difference to the IPR balance of power in 4G - a balance that is already the subject of
intensive legal activity, most recently with Ericsson's decision to sue ZTE over
licensing. Success for a non-traditional mobile player on the LTE front, such as
Google, could be a catalyst for a change in 4G licensing norms. Google, like Intel, is
likely to be more interested in opening up patents to stimulate a massive base of
devices that could use its services, rather than becoming a royalty business in its own
right.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]
April 6, 2011
EXECUTIVE TECHNOLOGY STRATEGIES
ETS 11-04-01

The other main bidders for the assets were said to be Apple and Nokia, though as in
previous Nortel sell-offs, some players may wait to show their hands once the
stalking horse bid has set the base price. RIM has previously expressed interest in
Nortel's IPR, but is unlikely to be able to fend off the giants.

Nortel separated many of its formidable pile of intellectual property assets from the
sale of other units, notably its 4G, CDMA and GSM businesses to Ericsson. It then
divided these into six groups in different technology areas, which could have been
sold separately had a single buyer not been found.
Also on the patents front, HTC has acquired a rather smaller group from ADC
Telecommunications, now a subsidiary of Tyco Electronics. HTC will pay $75m for
82 patents, including 14 that are still pending. Most are reported to relate to
unspecified 4G technology developments.
Copyright © 2004-2011 Experture and Robert Frances Group, all rights reserved
649 Fairfield Beach Road, Fairfield, CT. 06824; (203) 557-0856;
http://www.experture.com/; Contact: [email protected]