Who knew that IBM's sales team was so bad? Or Oracle's? Or Tibco's? In a string of earnings calls, each of these titans of enterprise software put their respective sales teams to the sword, blaming them for the companies' poor earnings reports. 

If only it were that easy.

Shooting The Sales Messenger

While we've talked about the decline of legacy software vendors for years, it's only now that the rise of cloud and open source are showing up in the earnings reports of legacy IT vendors. First it was Oracle, signaling an end to the traditional enterprise software licensing model. Then Tibco. Now IBM.

As IBM chief financial officer Mark Loughridge argued,

We had solid profit performance in January, but as the quarter ended hundreds of millions of dollars of very profitable software and System z mainframe deals fell short of the goal line. On the software side of the house they had a very good listed deals and I think this was just pure execution. We should have closed those on a sales side.

It would be easier to believe this if similar results (and excuses) weren't popping up across the legacy IT vendor landscape, and this despite a flat to improving spending outlook by CIOs, according to recent Barclays survey data:

Perhaps the problem isn't the sales teams' execution - a "lack of urgency we sometimes see in the sales force" as Oracle president Safra Catz opined - but rather the very foundation for legacy enterprise software sales: the software license.

It's The Data, Stupid

As Redmonk analyst Stephen O'Grady persuasively argues, the value of software as software has been declining for years. Value has been shifting to data, and software has either become free (open source) or distributed services made available over the web (cloud). Software revenue growth for the big vendors, not surprisingly, has slowed to a trickle, according to IDC data.

This shifting emphasis away from software sales, toward data-based services, has crowned Google as the market capitalization leader among its "peers," a trend that will likely continue for many years:

In fact, as O'Grady highlights, among the PWC global top-100 software vendors, none of the top-20 was founded after 1989. He concludes: "The data is clear: while there is substantial money in software, the difficulty of employing it as a primary revenue mechanism is increasing."

A Flight From Software To Cloud

For this reason, we've seen IBM and others diversifying out of software, bulking up in services, differentiated hardware, and more, as PWC's segmentation of software revenue among the world's top-20 software vendors indicates:

Source: PWC, 2013.

Such a shift won't happen overnight, and will be painful along the way. Very painful.

For example, SAP has been struggling to become a cloud-friendly company, and it's having deleterious effects on its earnings. As Wells Fargo analyst Jason Maynard spotlighted in a recent SAP research note, "increasing demand for cloud solutions is creating a negative drag on software license revenue growth."

Having lived through this at Novell, when we had to replace super high-margin NetWare revenue with lower-margin, lower-priced SUSE Linux revenue, I can state with some certainty that it's a long, tough road (fortunately, one that SUSE seems finally to have completed). Still, some companies, IBM in particular, have managed to make the transition, though no legacy IT vendor has gone to the lengths that Google, Facebook, Salesforce and other new-breed "tech" companies have, essentially making the sales function an automated credit card transaction over the web.

This friction-free, license-free model is the future. 

In this new world, purchasing power moves away from CIOs to developers, in the case of open source, and to line of business executives, in the case of cloud. Where it's not moving, and likely never will again, is to the top lines of the legacy IT vendors. Software has become a service, not a big revenue driver. That fact won't change, and shooting the sales messenger won't help.

Image courtesy of Shutterstock.

Magicians work their performances with a combination of talent, slight-of-hand and a lot of misdirection. On stage, a well-orchestrated misdirect is enough to pull off the best illusions. In the corporate world, it can sometimes work well, too, as Oracle seems to have discovered with their school-yard baiting of IBM - a move that is distracting some away from Oracle's missed third-quarter earnings.

To see the misdirect in action, let's briefly look at the timeline of events:

• Mar. 20: On Oracle's third-quarter call, the company reports a significant earnings miss, which initially drove the company's stock down 8% in trading. Executives on the call noted a 2% drop in new software sales and Internet-based software subscriptions in the quarter, a problem they attributed to a rapidly expanding salesforce (i.e., blame it on the new sales folk).

(See also Oracle's Big Miss: The End Of An Enterprise Era?)

• Mar. 26: Oracle announces a new SPARC T5 line of mid-range servers (along with some mainframe M5 boxes), which starts yet-another line of questioning about the viability of using expensive multi-threaded servers in an age where Intel dominates single-threaded commodity servers and ARM-based servers are on the horizon. It's a familiar question, since some were asking it when Oracle pushed out its T4 line in 2011. But such questions are soon forgotten, because…

• Still Mar. 26: During the SPARC announcement, Oracle CEO Larry Ellison, well known for his genteel manners and discretion, throws down some smack talk on IBM's more expensive server line, with the stats to back up their claims, claims such as "[t]he SPARC T5-8 server delivers 1.4 times better performance than the next best single system result, the 32-processor IBM Power 595, at one-fifth the price/performance." Wait for it… wait…

• Mar. 27: IBM Marketing Manager Steve Sibley chomps at the bait, firing off a response to Business Insider that Oracle's comparisons are wildly off the mark, since they are comparing brand-new Oracle boxes to IBM setups that are completely different configurations and also three to five years old. Sibley also reminded BI that this isn't the first time IBM's had Oracle pull down wild claims in advertising and public statements about the performance of its servers.

(Check out Oracle Has Problems Telling The Truth In Its Advertising)

• Mar. 28: Oracle doesn't back down, as John Fowler, Oracle's executive vice president of systems, emails Business Insider: "IBM customers are being wildly over-charged for the performance they're getting."

Note, please, that in all of this hullaballoo, no one is talking much about Oracle's missed earnings, and any conversations about Oracle's hardware are in the context of comparing them to IBM's older hardware products - right where Oracle wants those conversations to be.

"A la peanut butter sandwiches!", as The Amazing Mumford would say.

If this were a one-time thing, it would be merely something of note. But a pattern seems to be forming with Oracle and their product announcements: it's not enough to just hold up their own hardware and software features, but they habitually have to take pot-shots at anyone else in the space as well. That's all part of doing business, of course, but Oracle appears to just make things up or cherry pick data to create a scenario that makes them look the best.

Sooner or later, though, such tactics may wear thin on potential customers and even existing customers. If you treat marketing as one big magic trick, how long before people start to wonder if what you have to offer is real, or an illusion?

For decades the enterprise software industry has grown fat on outsized, upfront license fees coupled with ongoing, high-margin maintenance streams. Cracks in the model have threatened  to dismantle the system for years, as reported by The Wall Street Journal back in 2009, with CIOs chafing at paying for low-value, high-cost maintenance.

But if Oracle's big earnings miss last week is any indication, one of three disappointing quarters over the past two years, the cracks have widened to a chasm. As bellwether for the enterprise software incumbents, Oracle's miss suggests that the legacy vendors may struggle to adapt to the world of open-source software and Software as a Service (SaaS) and, in particular, the subscription revenue models that drive both.

It isn't going to be pretty.

Changing How Vendors Get Paid

This isn't just a matter of improving legacy software products. It's a matter of fundamentally changing how these legacy vendors deploy and charge for software. For example, Oracle's entire cost structure is built around the premise of a hefty upfront license and high-margin maintenance (Over 20% of the license fee). Ever read The Innovator's Dilemma? Clayton Christensen's classic addresses just this sort of inability for established companies to change. It turns out to be brutally hard, and often impossible.

Small wonder, then, that SAP has been raising its maintenance fees, trying to milk more money from its customer base as it faces serious headwinds maintaining its license model against upstart competitors like Workday:

Such actions basically force customers to start looking elsewhere, if they weren't already.

If this were just a matter of technology, Oracle, Microsoft et al. would likely weather the storm quite well. Oracle makes great software. There's a reason it's the enterprise database leader, and by a wide margin (though smaller rivals are gaining in popularity).

But building great technology is not enough. Oracle's peers, from SAP to IBM to Microsoft, also charge for software in this way, and across the industry they've been taking a beating as enterprises look to the improved productivity and OpEx of open source and SaaS. Oracle, for its part, blamed its miss on "sales execution," but as Cowen & Co. analyst Peter Goldmacher points out,

...[W]e have a hard time believing that almost all the legacy software names are suffering from poor sales execution at the same time. We believe the primary issue is a fundamental shift in the technology landscape away from legacy systems towards a new breed of better products at a lower cost both in Apps and in Data Management. Virtually every emerging software trend is having a deflationary impact on spend.

Not everyone sees it this way. Wells Fargo senior analyst Jason Maynard urges investors in Oracle to "keep calm and carry on," and expects Oracle's license revenue to grow 5% year over year. 

Good luck with that. 

Developers Rise In Importance

The problem isn't that Oracle and the mega-vendors have lost their hold on CIO affections. They haven't. The problem is that they have little to offer enterprise developers, who increasingly are the gateway to software adoption. Explaining this shift in his excellent The New Kingmakers, Redmonk analyst Stephen O'Grady argues:

With the rise of open source...developers could for the first time assemble an infrastructure from the same pieces that industry titans like Google used to build their businesses -- only at no cost, without seeking permission from anyone. For the first time, developers could route around traditional procurement with ease. With usage thus effectively decoupled from commercial licensing, patterns of technology adoption began to shift....

Open source is increasingly the default mode of software development....In new market categories, open source is the rule, proprietary software the exception.

The top-down approach, in other words, is losing its currency within the enterprise, as both open source and cloud enable developers (not to mention line of business executives) to get work done without getting permission.

The effect on the mega-vendors is overwhelmingly negative, as Oppenheimer analyst Brian Schwartz posits:

We believe something more secular is occurring as cloud computing increasingly entices CIOs to refresh their legacy IT systems with cloud services rather than infrastructure. Additionally, software purchasing is becoming more decentralized with decision-making power shifting away from IT and weakening the selling advantage as a "one-shop supplier." These trends dampen big-ticket on-premise software purchasing and remain a headwind for the infrastructure vendors.

None of which means the big vendors are going out of business anytime soon. In my years at Novell, for example, I witnessed a serious decline in the company's fortunes, even as revenue remained above $1 billion.

Time To Change?

In fact, Novell is a great example of what might happen to the mega-vendors. Ultimately, Novell had to be bought out and then split into pieces in order for its SUSE business unit, now an independent company, to thrive. SUSE can now support its subscription model without all the overhead Novell's legacy business imposed on it.

The same may well prove true for the other enterprise mega-vendors.

Not all enterprises will be affected equally, of course. Years ago IBM reshaped its business to be more services driven, which allows it to embrace new trends like open source enthusiastically. And even Oracle has built out a considerable cloud business (despite starting years later than it arguably should have), to which it can move current customers. Microsoft has been doing the same, transitioning customers to Office 365 rather than lose out on customers moving to Google Docs.

But the revenue profile for these businesses differs significantly from the traditional license/maintenance business, and it's an open question whether any of these companies will be able to turn the corner in their current form.

The Wall Street Journal echoed this sentiment, suggesting that Oracle's "business is being eroded at the edges by smaller, more focused companies offering newer technology," and, I would add, by the very different business models these firms employ. It's a great time to be in enterprise technology...so long as you're not selling a legacy business model. 

Image courtesy of Shutterstock.

Since 2002, when Microsoft launched its Trustworthy Computing initiative, security in the company's products have improved each year. But while the company has increasingly battened down Windows, Office and its other programs, the number of vulnerabilities in harder-to-patch third-party applications has grown dramatically, making overall security on the PC worse than ever.

More Risk In Third-Party Apps

Rather than go through the expense of battling Microsoft directly, many hackers now focus on low-hanging fruit, such as the Java and Adobe Flash browser plug-ins, which are often left un-patched even by users who conscientiously update Windows and Office. This trend was highlighted in a new study by Secunia.

The security vendor found Microsoft's highly effective automatic security updates now address only 8.5% of the vulnerabilities in a PC. The rest have to be patched through updates from various software developers, each with their own unique process. The complexity leads users who are not security savvy to forgo updates, vastly increasing their risk of infection.

"There is, to date, no one fix-it-all solution," warned Morten Stengaard, director of product management and quality assurance at Secunia, in the company's blog.

Theoretically, Microsoft could overhaul Windows to place each third-party application in its own container, making it more difficult for hackers to load malware in the operating system. However, such a massive change would require Windows software vendors to rebuild their own products, which would have a ripple affect on every corporate and consumer customer.

"Microsoft, to some extent, is hamstrung by legacy code and what they've done in the past," Jack Gold, analyst for J. Gold Associates, said. "They can't just rip everything up and start all over again very easily."

Fewer Flaws In Microsoft Apps

Ironically, the third-party threat is blossoming even as Microsoft continues to get its own house in order. In 2012, out of all the known vulnerabilities in the top-50 PC programs, Microsoft products accounted for only 14% of them, the study found. The rest were in other software. And the share of vulnerabilities on a Windows PC coming from third-party applications has been growing. In 2007, they accounted for 57% of the security flaws, compared to 86% last year, Secunia says.

"It's well known that they [Microsoft] have put great efforts into improving security of the operating system and the applications that they provide," Stengaard said in an interview. "What we're seeing is the long-term involvement and dedication is now paying off."

Windows, Office, Silverlight and other Microsoft products are not ironclad, of course. Given enough time, knowledgeable hackers can find their way in through these channels. But in the world of cybercrime, most hackers are not interested in a challenge. Instead, they look for the easiest way to break into as many PCs as possible, to enslave the machines into the many armies of remotely controlled botnets, or to steal credit-card numbers, social-security numbers and corporate intellectual property that will fetch a good price on the underground.

Including both Microsoft and third-party applications, the number of PC vulnerabilities has dropped by 5% since 2011, and by 10% among the top 50 applications. Since 2007, though, overall vulnerabilities are up 15%, Secunia found, and that jumps to a whopping 98% increase among the top 50 applications.

Where The Danger Lies

Applications most likely to provide an easy path into Windows machines include Java, Flash, Adobe Reader and Apple iTunes, according to Secunia. If these applications are not kept up to date, hackers can exploit known vulnerabilities that enable them to load their malware via the PC's system memory.

In addition, all these applications have very large user bases, which makes it easier for hackers to find targets.

Why PCs have so much outdated software varies. Sometimes it's because the update process is too cumbersome, so they don't bother. Other times, the vendor is slow in fixing flaws that hackers are already targeting. Updating Java, an open platform for running software on any operating, system has been a pain for a long time. However, Java steward Oracle is working to improve the process and is getting updates out quicker, most experts agree.

In 2012, Adobe had the worst record for updating applications, according to Secunia. The software maker released patches at a rate 80% slower than in 2011, based on the time it took the vendor to release updates of vulnerabilities reported by Secunia.

Overall, though, patch speed for third-party apps is increasing, Secunia said:

In fact, in 2012, 84% of vulnerabilities had patches available on the day of disclosure. In 2011, the number was only 72%. The most likely explanation for this improvement in ‘time-to-patch’ is that more researchers coordinate their vulnerability reports with vendors.

Patching Is Critical

The vendor based its study on 6 million PCs, mostly in the U.S. and Europe, running its freeware called Personal Software Inspector, which checks for application vulnerabilities. Microsoft products accounted for 35% of the programs on the PCs.

If you take Secunia's study seriously, then the takeaway is clear. Even if patching all your software is getting more complicated,  making sure everything is always up to date is more important than ever.

Image by Fredric Paul.

The technology industry has been excluded from the government's definition of what constitutes the nation's critical infrastructure, giving them a free pass from regulations. While this may be good for IT businesses, telecom companies like AT&T and Verizon Communications are crying foul.

Information technology is crucial to business, and according to these telecom companies, IT is just as important in securing power plants, telecommunications and water filtration systems. Which is why they want IT companies to be listed as part of the nation's critical infrastructure, something IT vendors are resisting because they don't want to be saddled with more government regulation.

The very political situation raises many questions, and has few answers.

Obama's Executive Order

Currently, IT - think companies like Microsoft, IBM, Apple, Oracle, Cisco and more - is excluded from the government's definition of critical infrastructure, as defined by President Obama in an executive order issued last month. In directing the Secretary of Homeland Security to identify critical infrastructure at the greatest risk of attack, the order says the Secretary "shall not identify any commercial information technology products or consumer information technology services under this section."

This exclusion, the result of heavy lobbying by the IT industry, is not sitting well with telecom companies, such as AT&T and Verizon. They believe technology vendors are as important as the network operator in building adequate security to fend off cyberattacks from terrorists.

"The Internet ecosystem is far more interconnected and dependent on a host of players than it was even five years ago," a Verizon spokesman said.

Fighting Regulations

While the government battles terrorism, telecom and IT companies are trying to fend off regulations. The executive order sets the groundwork for cybersecurity legislation from Congress. So far, the IT industry has been excused, and the telecom industry wants it to share whatever regulatory burden results from current negotiations between the White House and Congress.

"The telecom community is concerned the tech industry is going to get a free pass here," David Kaut, a Washington analyst with Stifel Nicolaus & Co. told Bloomberg. "You have an ecosystem and only the network guys are going to get submitted to government scrutiny."

Telecom companies have a point when it comes to critical infrastructure. Hackers who break into the Windows computer of a telecommunications company could wind their way into control systems and shutdown wireless or landline service for hundreds of thousands of people. But is regulating IT security directly the best way to prevent such a breach? I don't believe so.

Instead of more regulations, the government should focus on requirements for companies directly involved with maintaining the nation's critical infrastructure. As IT customers, these companies, which include utilities, financial institutions, defense contractors and manufacturers, are in a much better position to get the security they need built into the products they agree to buy. If an IT company such as Microsoft, Oracle or IBM cannot meet the requirements, than another one will.

"Commercial products and services often are the weakest link, but regulating them directly means imposing costs that many users won’t be able to shoulder," Stewart Baker, a partner at law firm Steptoe & Johnson and a former assistant secretary for policy at DHS, said. "So you end up imposing costs on everyone to protect a portion of the economy."

Political Talks

This issue is sure to come up during negotiations underway between the White House and congressmen supporting a cybersecurity bill introduced in the U.S. House Intelligence Committee. The bill emphasizes sharing threat information between businesses and government, while the Obama administration also wants minimum security standards set for the most critical companies.

For telecom companies to get what they want, they will have to convince the Republican majority in the House, which adamantly opposes more government regulation, to broaden the cybersecurity bill to include the IT industry. That's unlikely, so telecom and other critical infrastructure companies should be prepared to take full responsibility for securing their systems.

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Oracle Chief Executive Larry Ellison seldom shies away from a fight, so it's no surprise his company came out swinging over an unfavorable Forrester Research report.

Forrester certainly struck a nerve when it released a survey on Wednesday that found a majority of customers using Oracle's e-Business Suite, PeopleSoft and Siebel business applications had no interest in switching to the company's next-generation Fusion Applications. Those laggards are complicating Oracle's efforts to reverse a slowdown in application revenue, Forrester said.

Oracle's Response

In a three-page counterattack, Oracle tore into the market-research firm. "This is a speculative note based on misconceptions and wrong hypotheses," the company thundered.

(See also "Why Oracle Fusion Doesn't Excite Customers")

Despite Oracle's ostensible outrage, its counterattack is unconvincing. The company claims Forrester did not talk to enough of its customers to back its claims, as if the firm was doing a random survey of all of Oracle's customers.

Forrester never said it was doing that kind of survey. Instead, the respondents came from 180 of the firm's contacts that were responsible for choosing IT products and had knowledge of Oracle applications. "While nonrandom, the survey is still a valuable tool for understanding where users are today and where the industry is headed," the report says.

Commonsense would tell you that there are more reasons for Oracle customers to stay with the applications they have than to move to Fusion, which has a different code base. Such an undertaking is expensive, takes a long time and draws IT staff away from other pressing projects. With the older applications still being upgraded and working just fine, why would anyone want to make a major change?

(See the full text of its rebuttal below.)

The most damaging part of the survey was Forrester's finding that 65% of customers using the older business applications had no plans to switch to Fusion. Another 24% were on the fence.

Oracle complained that the survey only covered U.S. and European customers. Likewise, it noted that more than 40% of the respondents were in manufacturing, government, education and healthcare – industries it claims aren't representative of Oracle's overall customer base. For instance, Oracle cited an IDC report noting that Fusion doesn't yet fully support manufacturing operations, implying that manufacturers might reasonably be less than interested in making the switch to immature applications.

Ellison and company also moaned that many questions were phrased in a "negative way," as if that somehow disqualified the responses. Such questions included "What do you dislike most about your firm's most important Oracle applications?" and "Why doesn't your firm plan to use Oracle Fusion Applications?"

Who Do You Believe?

The report also claimed that Oracle has no clear strategy for migrating customers to Fusion. The company disagreed, saying it has always told customers they could adopt pieces of the product portfolio at their own pace and that everything – old and new – would work together.

Forrester also said that customers staying with the older applications were missing out on innovation. Again Oracle cried foul, saying that at Oracle OpenWorld last year, the company discussed future releases for E-Business Suite and PeopleSoft, as well as roadmaps for all its applications. Examples of innovation include iPad certification in PeopleSoft and new mobile capabilities in Siebel, Oracle said.

Despite Oracle's protestations, Forrester is not budging. "We stand by the report," spokesman Phil LeClare said. So, readers will have to decide whom they believe. Personally, given Oracle's recent lack of truth in advertising and its tendency to pretend to have cloud technology when it doesn't, I'll lean toward Forrester.

Here's the full Oracle rebuttal:

Image courtesy of drserg/Shutterstock.

In 2006, Oracle promised customers it would always support and update its growing portfolio of business applications. By then it had swallowed PeopleSoft and Siebel Systems and it had to reassure customers that their investments were secure. Fast-forward seven years, and Oracle's promise, which it called Applications Unlimited, is coming back to haunt the software maker.

While trying to hold on to PeopleSoft and Siebel customers, Oracle was just getting started on its own Fusion Applications. The company marketed Fusion as its next-generation application suite that would bring together the best of its e-Business Suite and the software it had acquired for billions of dollars. Oracle believed Fusion would eventually spark a mass migration from the older applications to the latest and greatest from its own stable. But a new survey from Forrester Research has found Oracle was wrong, and customers are holding the company to its word and sticking with the older software with which they're familiar.

Oracle's Dilemma

By refusing to switch to the more expensive Fusion apps, Oracle customers are making it difficult for the company to grow application revenue, according to Forrester. "In recent years, Oracle's application revenue growth has underperformed both the overall software market and SAP, resulting from slowing growth in existing apps and too little revenue from its Oracle Fusion Applications," according to the report, entitled "Oracle's Dilemma: Applications Unlimited Versus Oracle Fusion Applications."

Forrester's numbers are sobering. The survey of Oracle clients found 65% had no plans to move to Fusion Applications and another 24% were on the fence. The biggest barriers were Oracle's muddled application strategy and the immaturity of Fusion, which became generally available in November 2011.

At the same time, recent acquisitions of software-as-a-service companies, such as Taleo and RightNow Technologies, are not bringing in enough revenue to take up the slack, according to Forrester. Oracle customers show little interest in trying the SaaS products, with only 11% of survey respondents interested in making the move.

Making matters worse, Oracle is in danger of losing business from some of its customers. Forrester found 29% of the companies it polled were planning to move to another vendor's SaaS product or packaged application. The main reasons for their unhappiness with Oracle were high licensing costs, high maintenance costs and difficulty in upgrading.

Impact on Oracle Customers

Oracle's lackluster revenue growth could eventually have an impact on customers. When revenue from a vendor's products are flat or declining, the company often treats the software as a "cash cow, milking maintenance revenues and cutting back in its investment in enhancing and supporting them," Forrester says.

While there are no signs that Oracle is heading down that path, the company is unlikely to let Applications Unlimited customers stay where they are forever. Oracle has sunk too much money and resources in Fusion Applications to let customers ignore them, Forrester says.

Oracle is expected to step up efforts to get customers to move to Fusion or its cloud infrastructure products. How the company will do that is not known, but it could decide to make life harder for companies that stay with the older technology. Forrester is advising companies to start preparing for the added pressure they will be feeling from Oracle.

For Oracle, Forrester believes it's "make-or-break time" for its applications business. The company's Fusion Applications are its main strategy for growing software revenue and defending against a number of fast-growing SaaS competitors.

Forrester believes that won't be enough.

Oracle is likely to kick-start its growth strategy with more acquisitions, and the likeliest candidates will be fast-growing SaaS companies. In the meantime, Applications Unlimited customers should ponder their next move.

Oracle did not respond to multiple requests for comment.

Image courtesy of Shutterstock.

On Wednesday, Bloomberg released a new website for its Bloomberg Billionaires Index, complete with some snappy data visualization tools. While we'd like to see a few more features added to the mix (a year-by-year progression of adds and drops would be great), it's a fun tool, and it makes certain trends easy to spot. For those of us who watch the tech community, the list provides a quick gut-check about where the tech sector fits into the larger world's priorities.

Technology Isn't Everything

Technology is important, but don't forget that people need to build things, buy things and pay for them, and those industries generate revenue, too. Only 12 of the world's 100 richest hail from the tech industry, so it's far from a dominating presence. The tech billionaires are well distributed throughout the list, with only Bill Gates and Larry Ellison in the top 10, and half the techies landing the bottom 50. Tech has a significant showing on the list, but its not as strong as retail (17 total, with 9 in the top 20). Overall, technology seems to be about as lucrative as mining or finance. It's still a much better bet than newspapers, though. Only three of the top 100 hail from the media world.

Almost All-American - For Now

All but two of the tech 12 are Americans. The others – Wipro CEO Azim Premji, (India, #49) and Samsung Chairman Lee Kun Hee (South Korea, #91) – are the first of what is likely to be many more future overseas members of the club. The U.S .list is still weighted pretty heavily toward the heavy hitters of the 1990s. SAS, Microsoft, Oracle, and Dell are solid companies, but most people wouldn't consider them the future of tech. Yet these "legacy" companies account for 6 of the 10 Americans on the list. It's a pretty sure bet that 5 to 10 years from now, we'll see a lot more members from South Korea, China, India and Russia.

$10 Billion Takes Time

Becoming an overnight millionaire in the tech industry is no big deal, but there's no shortcut to the top 100 billionairs. Well, there might be just one. Mark Zuckerberg. Zuck is the only person under 30 in any industry to make the list. Even stepping up to the sub-40 bracket, there are only three more additions: Larry Page, Sergey Brin, and Colombia's Alejandro Santo Domingo, who manages a collection of media companies and SABMiller. Technology can certainly make you rich in a hurry, but to join the ranks of the mega-mega-rich, even geeks have to work at it for a while.

Family Planning

One bonus for the children of tech billionaires is inheritance. While many of the more traditional industries seem to favor having lots of children, the tech industry tends toward a more reasonable family size. The sweet spot seems to be 2-3 children - which leaves lots more cash for each offspring. Zuckerberg and Paul Allen have no children (yet), while Jeff Bezos and Michael Dell each have 4. On the rest of the list, 21 have 5 or more kids, and Malaysia's Robert Kuok has 8! Of course, since many of the techies on the list have already signed Bill Gates' Giving Pledge to donate the bulk of their fortunes to charity, those kids might have to settle for measly single-digit billions, anyway.

Ruthless competitiveness is what Oracle Chief Executive Larry Ellison uses to win in business. So no one should be surprised that how he defines the cloud depends on what's needed at the time. Inevitably, this sometimes shows the emperor has no clothes, or at least is down to his Armani skivvies.

While something in Oracle's massive portfolio may fit the industry definition of a cloud service, it is not the company's new integrated hardware and software bundle that's meant to provide the infrastructure for private clouds, according to David Linthicum, chief technology officer and co-founder of cloud consultancy Blue Mountain Labs. What Oracle is really selling, or in this case renting, is preconfigured application servers for the data center.

"Now we know how Oracle is addressing this shift in the market: by renting its stuff and calling it a cloud," Linthicum says.

Oracle's Cloud Strategy

Oracle's cloud strategy has been challenged before. Charles Babcock, who has covered the cloud for years for IT trade magazine InformationWeek, named Oracle the number one "cloud washer" of 2011. That term refers to companies whose cloud products are mostly old technology with the word cloud added to the name.

At the time, Babcock took aim at the Oracle Exalogic Elastic Cloud, "a name that contains so many contradictions of the definition of cloud computing that it threatens to render the term meaningless."

"It's an old-fashioned appliance that's been renamed 'a cloud in a box,'" he wrote.

Oracle Can't Move Fast Enough

Multi-billion-dollar companies like Oracle can't simply turn a switch and re-architect their technology to meet customer demand for something so dramatically different as cloud computing. This is why Ellison refused to acknowledge the cloud even existed until Oracle OpenWorld in September 2010. With startups eating away at his software business, Ellison needed to do something fast. Confusing customers with verbiage was the quickest way to buy time.

Fast-forward two years to this year's Oracle's OpenWord conference in San Francisco, and cloud became Ellison's favorite word to essentially describe renting Oracle data center technology, and letting the company handle the maintenance. Instead of real cloud computing, Ellison introduced what was mostly a new way of buying last-generation technology.

What's In Store

This year should get really interesting. Oracle is expected to start feeling even more pressure from true public cloud providers, such as Amazon Web Services, Google, Microsoft and Rackspace, as well as private cloud providers like Eucalyptus. If history is an indicator, then Ellison is likely to release the attack dogs in his marketing department to try to discredit rivals and confuse customers, while the company plays catch up.

For example, Oracle responded last year to tough competition from IBM in the hardware business by releasing ads with unsubstantiated claims that Oracle servers were much better. Three times the National Advertising Division of the Better Business Bureau pressured Oracle into removing the ads that appeared as full-page spreads in The Wall Street Journal and other publications.

The last ad, pulled in November, claimed Oracle's Exadata server would run five times faster than IBM's Power Server "or you win $10,000,000." The NAD found that the ad did not provide "any speed performance tests, examples of comparative system speed superiority or any other data to substantiate the message."

Ellison is sure to use this kind of bare-knuckles competitiveness in battling cloud rivals. It's in his DNA. Let's not forget that in January, Oracle Team USA, the America's Cup champion team owned by Ellison, was fined more than $15,000 for spying on the Italian team.

So cloud watchers should sit back and get comfortable. Ellison is likely to provide quite a show and a lot more smoke and mirrors.

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SAP has taken a big step ahead of rivals IBM, Microsoft and Oracle with the announcement on Thursday that its in-memory database called HANA is now ready to power the German software maker's business applications. The pronouncement is sure to darken the mood of competitors, who one analyst says will need several years to match what SAP has accomplished.

What SAP has done is to provide one database that can perform both business analysis and transactions, something its rivals are able to provide only by using two databases, according to Gartner analyst Donald Feinberg. "It's the only in-memory DBMS (database management system) that can do data warehousing and transactions in the same database. That's where it's unique."

For SAP customers, HANA-powered applications can speed up the sales process dramatically. For example, today when salespeople for a large manufacturer takes a large order from a customer, they may not be to say on the spot exactly when the order will be fulfilled. That information often comes hours later after the numbers are run separately through forecasting applications.

HANA To Power SAP's Business Suite

With HANA running SAP's enterprise resource planning applications - called Business Suite - salespeople will be able to take the order and get forecasting information in seconds. "This changes the way they do business. It really does," Feinberg said. "And that's the kind of value proposition that HANA brings to the table because of the fact that it's an in-memory database."

During a multi-site news conference in New York, Palo Alto Calif., and Frankfurt, Germany, SAP demonstrated HANA's speed using its manufacturing resource planning software. In Palo Alto, Hasso Plattner, SAP co-founder and board chairman, said the database will eventually be available in all products, whether on-premise or in the cloud. "All SAP products will go HANA," he claimed.

Competitors Racing To Catch Up

Oracle and IBM are expected to match SAP in time. Microsoft has announced that it is working on the same technology for the next version of MS SQL. "I do believe that every other vendor is going to go in that direction, but it's going to take them two to five years to do it, which gives SAP a huge head start," Feinberg said.

SAP is expected to make HANA generally available for business Suite over the next six months to a year. In the meantime, the technology will be available through what SAP calls "Ramp Up." That means customers can get the new product if they agree to put it into production with SAP's help. This gives the vendor the opportunity to work out any kinks and to establish a number of customer references.

HANA, was first made generally available as a standalone database in mid-2011, and SAP now claims to have almost 1,000 customers. The company believes those numbers can rise even faster once HANA powers all of its products.

At the same time, SAP promises to support customers that stick with the traditional databases currently running SAP applications, whether the databases are from competitors or the company's own Adaptive Server Enterprise (ASE).

In-Memory Databases

Many companies today offer in-memory databases for a variety of tasks. The databases are much faster than traditional technology because all data is stored in system memory where it can be accessed quickly. Standard relational databases write and read to disks, which is a much slower process. (http://www.mcobject.com/in_memory_database)

In unveiling HANA for Business Suite, Plattner took a dig at Oracle Chief Executive Larry Ellison, who predicted SAP's six-year effort to power its business applications with HANA would fail.

"I have to admit. I enjoy that he is not smiling," Plattner crowed. "And I know that there is a weekly meeting [at Oracle] which has the word HANA in it."

Those meetings are likely to go on for a while as Oracle and other vendors race to catch up.

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While Hewlett-Packard says it "continues to evaluate" the sale of underperforming businesses, the company's cash flow problem will make the shedding of assets unavoidable. So what's likely to head to the auction block? Everything from notebooks and desktop PCs to Itanium servers and tape drives that have been draining assets could be on the market.

A Breakup Alternative

For Chief Executive Meg Whitman, selling off pieces of the crippled tech giant would be a much better alternative to breaking up the company. Whitman has opposed the latter option, starting with her decision in 2011 to nix a proposal by her predecessor, Leo Apotheker, to spin off the company's personal computer unit.

Since then, Whitman has ignored Wall Street analysts who say shareholders would be better off if the company spun off the division that sells PCs and printers from the one that sells software, hardware and services to companies.

As a less dramatic alternative, getting rid of businesses draining the company's limited resources, would help HP make better use of limited cash. In fiscal 2012, HP's free cash flow dropped to $6.9 billion from $8.1 billion the previous fiscal year, according to The Wall Street Journal. That's a trend that could spell trouble if not stopped. Without cash, a company will find it difficult to develop new products, make acquisitions, pay dividends and reduce debt.

Getting rid of underperforming businesses is one way to improve cash flow and avoid splitting the company. "Everybody zeroes in on printers and PCs as the things they should potentially sell, and quite frankly, there's not really a logical buyer for either of those businesses," Crawford Del Prete, analyst for International Data Corp., said. "And, those businesses generate a significant amount of cash, which Hewlett-Packard needs right now."

HP-UX And More Must Go

A more logical sale would be the Itanium server business. HP has spent a lot of money trying to drive sales of its HP-UX Unix server that runs on that chip architecture, while the business continues to shrink. In 2010, Microsoft said it would drop support for Itanium and Oracle said a year later it wants to do the same.

Another candidate for jettisoning is HP's low-end IT outsourcing business, which was included in the 2008 acquisition of Electronic Data Systems. Earnings from the services business has been falling, and last August, HP said it would write off $8 billion in goodwill from the EDS purchase.

Last year, General Motors, a major HP customer, said it would move away from outsourcing IT and take some work in-house. The announcement made industry observers wonder whether HP can handle those large-scale deals, Del Prete said.

Within HP's Personal Systems Group that makes PCs, workstations, tablets and printers, the company could sell the low-performing notebook and desktop PC businesses, which have been trumped in the market by tablets.

The low-end printer business that primarily serves consumers and small businesses could also be sold. However, printers are still used in emerging markets, so HP would be just as likely to hold off to see how profitable those markets become. "HP has a plan to drive those businesses, so I'd be surprised to see them get out," Del Prete said.

Finally, tape drives used for long-term data storage is a candidate within the company's enterprise servers, storage and networking division. Such a low-margin business would be best left to IBM and others with larger stakes in the market.

HP likely has other losers within its product lines that it would be better off without. Whitman should act quickly to get rid of the chaff and focus resources only on the profit generators.

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Now that Oracle plans to gobble up yet another company for its growing portfolio of cloud-based software, the question is whether the company can chew everything it puts in its mouth.

The business applications maker said Thursday that it would buy Eloqua for $871 million. Eloqua's apps measure the effectiveness of marketing and sales projects. Oracle plans to make the company's software the centerpiece of its "Marketing Cloud" product line.

The acquisition will fill out the cloud-based services offering Oracle hopes will grab business from rival Salesforce.com. Earlier this year, Oracle closed a $1.9 billion deal for Taleo, a maker of online human-resource management software, and a $1.5 billion purchase of RightNow Technologies, which makes software for managing customer service.

Oracle's Challenge

Oracle suddenly has a lot of cloud software to make work well together if it wants to give customers a reason to lease multiple applications. The task won't be easy, given that the multi-vendor software was never designed "to fit together like Legos," said Andrew Frank, analyst for Gartner, said.

Taleo is a customer of Eloqua, so that portion of the integration challenge may be easier. But the extent of Oracle's success will be determined when its services go up against products from Salesforce.com, IBM and SAP. "Whether it fits together well is a question for the market to determine," Frank said.

On paper, the acquisition gives Oracle an apples-to-apples comparison with Salesforce.com, which provides integrated marketing, sales and service management applications. Oracle needs the same all-in-one portfolio, because its rival "continues to have a strong win rate against Oracle in CRM (customer relationship management)," said Richard Sherlund, a managing director of equity research for investment bank Nomura, in The Wall Street Journal.

Oracle is certainly willing to pay for what it wants. The company offered Eloqua shareholders a 31% premium over the Wednesday closing price. The transaction is expected to close in the first half of 2013.

Based in Vienna, Va., Eloqua was founded in 2000 and went public in August. Customers include Sony, Johnson & Johnson, VMware and Siemens.

Cloud-Based Marketing Apps Are Hot

Marketing applications are favorites of vendors building out cloud-based services, because the data-intensive software is a good fit for cloud deployments, Frank said. Data centers that run cloud services are built to handle lots of data and to provide the computational power needed to analyze that data.

In addition, marketing software needs to be integrated with other cloud services, such as social media. An added value is the fact that the applications are accessible to the mobile devices now expanding in the enterprise.

As a result, researchers like Gartner see an increase in spending on cloud-based marketing services, and Oracle doesn't plan to be left behind in the race to grab those dollars.

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