Will the enterprise infrastructure requirements be obsolete by fast moving consumer based cloud web service apps? Hmmmm. Will Microsoft lay down the UC market and cross subsidize their efforts to own Google and search services? Well maybe so? Unified Search sounds a lot like Unified Communications.

As speculated at Furrier.org first and confirmed by my sources Microsoft left the Yahoo bedroom with the intention of buying up the farm to get a foothold in search. Well folks… game is back on. Matt Marshall is reporting that Microsoft is paying north of $100 million for Powerset. .

I posted my editorial opinion on my personal opinion blog here.

UC Angle here?:

Microsoft is trying to unify the search market. What are the implications to Unified Communications?

I can’t tell you how many times I have the feeling that the search platform wars are related to Unified Communications. I just can’t put my finger on the overlap yet. But I do think that the search platform wars (which includes all consumers and advertisers requirements and dollars) will intersect with UC market. It has to. The line blurring between the enterprise and consumer has been going on for some time, but never this fast.

Will the enterprise infrastructure requirements be obsolete by fast moving consumer based cloud web service apps? Hmmmm

Anyway I knew Powerset was in discussion with Microsoft but I had no idea that this would go through this fast. Powerset is not even ready for prime time according to sources close to the company. The product barely works at scale and I’ve heard of some linguistic issues on their approach.

What does this mean?

This is all about Microsoft buying up the talent in search anything. Smart move. i think so. Overpriced: Yes. But if you think about the talent and the team it is justified.

Semantic search is a moving train. Cracking the code goes way beyond just software advances. Semantic search now intersects data, software, infrastructure, services, and devices. Wait that sounds like Unified Communications.

Will Microsoft change the game on Google in search by cross subsidizing one of their other business units in order to get a big advantage. Could it be UC?

I might consider “laying down” the UC platform to penetrate and dominate the consumer cloud business before Google does. This might give Microsoft to get rid of some of the UC baggage and start from a clean sheet and do it right in web cloud services. If the lines are truely blurring why not start from scratch.

Interesting possibility

Kara Swisher, AllThingsD.com, reported last night that Yahoo would announce the big reorg. Well she was correct. Yahoo announced the ReOrg today. Not much to say other than what is already being reported.

Here is the detail as of today (thanks Kara Swisher) .. the structure will pivot on several key execs, reporting to President Sue Decker.

EVP of Yahoo’s Platforms and Infrastructure division Ash Patel as head of a new Audience Products group (its name was changed from Global Products); Global Partner Solutions EVP Hilary Schneider as the head of a new U.S unit; various folks running around the rest of the globe.

There will also be another strategy team group with a new head, who has not yet been chosen.

And Yahoo will name Scott Dietzen (pictured, right) to take over the job of SVP Brad Garlinghouse, running all communications and community properties and products under Patel.

What All This Means?
To me the big area that is critical for Yahoo is corporate *and* competitive strategy. These variables are not mutually exclusive. Yahoo has some big weapons but under their current condition they have limited energy, time, and people resource (know-how) to execute. Therefore, it’s a chess game not a frontal brute force battle. Yahoo has to be smart and execute with precision. Every move needs to be calculated in context to their corporate and competitive plan. Yahoo has been winging it for years - relying on their massive pageviews and audience subscribers.

Yahoo needs to be “all in” and compete. I am in the camp of pro-Yahoo (always have been). I’m cheering for them to pour it on AND compete.

WARNING: Comedy IT Video - Language Not Suitable for Children

I ran into this funny video yesterday. It’s written by Josh Weinberg and his friends. It’s called “Web Site is Down” - a satire on IT tech support between a web guy and sales guy.

If you’ve worked in a datacenter or IT infrastructure support you can appreciate the humor with Josh’s video.

Alex Lewis points out on his Network World blog, that he expects Microsoft’s Hyper-V technology to dominate VMWare. Well let’s look at that, Alex.

We know survival moves are already being made by VMWare. According to Diane Greene, president, CEO, and co-founder of VMWare, VMWare’s revenue model has been shifted to account for Microsoft’s entrance into the market. VMWare is clearly the market leader and has a wealth of experience delivering an excellent product.

I have been a big VMWare fan for years now, having implemented it for clients and in numerous environments. It is stable and technologically advanced and is trusted in production environments the world over. A number of my colleagues are in the Xen camp or Virtual Iron followers. Let’s face it, those are great products, but they are niche offerings. VMWare is the current leader and you would be foolish to think Microsoft would fail on a castastrophic scale. I will come out and say right now that Microsoft will in fact dominate this market. Lewis and Vaughan-Nichols bring up some great points and I am in total agreement.

Beyond the talk of free beer and shifting sales offerings, there is the undeniable factor of Microsoft’s presence. Most organizations have readily available skilled personnel available in Windows technology. Many organizations will definitely prefer the “all-in-one” approach and be attracted to the Microsoft offerings. When value, hardware support, cost, usability, licensing, support and ROI are considered with the multitude of other factors, there is no doubt that VMWare has to deal with a very legitimate contender. At the very least, VMWare’s percentage will shrink. Significantly. This will be the fight of their lives.

Now I don’t think they will ever go away, this is a great product and company. The juggernaut that is Microsoft will make its presence felt right away however and in fact, smother VMWare. So most certainly look for a fight, brief as it may be.

On that note, look for more press thunder as Microsoft shifts in the wake of the departure of Mr. William Henry Gates III. This is a company eager to erase the problems that the Vista launch has caused. Windows 7 already has a slated date of release in January 2010. The Hyper-V release will certainly be accompanied by waves of press. The hype is just beginning and this is where I start believing it.

My colleague Alex Lewis posted some interesting thoughts on Microsoft’s upcoming Hyper-V release in comparison to VMWare, the current market leader.

Market leader is a bit of an understatement at 85%. Everyone I know uses VMWare in some capacity. What makes Hyper-V a giant killer? It’s free. That carries a lot of weight in perceived uncertain economic times. It’s also a familiar interface and experience for for IT departments looking like any other Microsoft MMC or console.

Expect Microsoft to release decent code but they will innovate fast on next rev (that’s their playbook). Classic embrace and extend and in today’s market free software is the model. Nice move.

Alex writes the following.. “Microsoft’s Hyper-V (still in public beta/RC1) has some issues. The NetworkWorld Microsoft Subnet folks posted their thoughts yesterday. The most glaring is the inability to move VMs while active between hosts. Depending on your needs that may or may not be a deal breaker for you. Regardless I’m confident it’s something that will be addressed in a future release. Microsoft knows they need to equal/exceed VMWare’s offering to dominate the market. That said, Hyper-V is a LOT more friendly for Windows admins and it doesn’t require any of the core Linux skills that installing and tuning an ESX server does. The combination of easy to use and free has been Google’s trademark strategy. Microsoft may have taken a page from their book on this one and I think it’s very likely to succeed.”

Alex brings up a great point about MSFT killing Netscape in the browser market and IBM in email, however Microsoft hasn’t been perfect. Look at the mess they’ve made of Search. VMWare has such a head start they won’t just rollover at the sabre-rattling of Redmond.

A battle’s coming and we’ve got front row seats. VMWare what say you?

Update: Cnet is now just getting this story up. Ian Fried who wrote the Cnet post has good quotes from Microsoft.

Microsoft Corporate Vice President Bill Laing told me that he understands his company faces an uphill battle in trying to win over customers that have been using VMware and Xen, in some cases for many years.

“I think we’ll do best initially in ‘green field’ opportunities,” Laing said. “Small business, I think, is a completely green field. In the enterprise, where customers haven’t deployed (another virtualization technology), I think we’ll do well.”

Over time, Laing said he wants Microsoft find its way into data centers that already use VMware.

“I think it will take longer to rip and replace, but that’s certainly our ambition,” Laing said

Google has made some interesting moves lately that point to a move into the unified communications arena. Today Google named Patrick Pichette CFO. Pichette’s experience at BCE in Canada could be a boon for Google as it explands its offering and possibly peers with service providers for a UC offering. Picture this, a merge of GTalk, GMail and the power of the Google Apps and Gadgets APIs with the installed base and technology of Skype.

Skype has underperformed since being purchased by ebay. I can’t say I’m surprised. That acquisition always puzzled me from a business integration perspective. Ebay could offload Skype to Google which would make ebay’s shareholders happy. Google would likely pick up Skype for a song and it could provide a lot of value as the core to an “all-google” unified communications offering. It’s another area where Google could compete with Microsoft coming from the grassroots users upward and challenging in the enterprise applications arena.

Cisco Security Advisory: Cisco Unified Communications Manager Denial
of Service and Authentication Bypass Vulnerabilities

Cisco Unified Communications Manager (CUCM), formerly Cisco
CallManager, contains a denial of service (DoS) vulnerability in the
Computer Telephony Integration (CTI) Manager service that may cause
an interruption in voice services and an authentication bypass
vulnerability in the Real-Time Information Server (RIS) Data
Collector that may expose information that is useful for
reconnaissance.

Cisco has released free software updates that address these
vulnerabilities. There are no workarounds for these vulnerabilities.

This advisory is posted at
http://www.cisco.com/warp/public/707/cisco-sa-20080625-cucm.shtml.

Affected Products

Vulnerable Products
The following products are vulnerable:

* Cisco Unified CallManager 4.1 versions
* Cisco Unified Communications Manager 4.2 versions prior to 4.2(3)SR4
* Cisco Unified Communications Manager 4.3 versions prior to 4.3(2)SR1
* Cisco Unified Communications Manager 5.x versions prior to 5.1(3c)
* Cisco Unified Communications Manager 6.x versions prior to 6.1(2)

Administrators of systems running Cisco Unified Communications
Manager (CUCM) version 4.x can determine the software version by
navigating to Help > About Cisco Unified CallManager and selecting
the Details button via the CUCM administration interface.

Administrators of systems that are running CUCM versions 5.x and 6.x
can determine the software version by viewing the main page of the
CUCM administration interface. The software version can also be
determined by running the command show version active via the command
line interface (CLI).

Today Yahoo sent a letter to their shareholders talking about the latest developments (wow what an understatment). I originally blogged that the Google deal was a ‘white knight’ deal for Yahoo. It forced Microsoft to run out on the deal. It was a godfather deal that allowed Yahoo to cover their ass against lawsuits (I’m sure they are coming).

Here is the letter that Yahoo sent out.

My take: Yahoo will keep Jerry Yang and put a new team together. I’d love to fly that ship for a day. I think that Yahoo has some big guns it could bring out. They need guts and a maverick management team.

Dear Fellow Stockholders:

We are writing to update you on the latest developments here at Yahoo!, including our recently announced commercial agreement with Google and the outcome of our discussions with Microsoft regarding a potential transaction.

On June 12, we announced a non-exclusive agreement with Google that we expect will generate approximately $250 to $450 million in incremental operating cash flow for Yahoo! in the first twelve months following implementation. This cash flow will enhance our profitability as well as help support achievement of our key strategic objectives. Combined with continuing advances in our own search capability, the agreement is an important step in our efforts to capitalize on the high-growth online advertising opportunities where we are best positioned to compete successfully and create more value.

Let us explain why we find this new agreement so exciting.

The Yahoo!-Google Agreement is Financially Attractive and Strikes the Right Strategic Balance.

Under the agreement with Google, Yahoo! will continue to provide algorithmic and sponsored search results, but now will also have the ability to run sponsored search ads supplied by Google alongside Yahoo!’s search results. Advertisers will pay Google directly for each click on Google paid search results appearing on Yahoo!. Google will then pay us a fee (in industry jargon, traffic acquisition cost) based on revenue realized from click-throughs on ads supplied to Yahoo! by Google.

This carefully structured agreement strikes the right strategic balance, enhancing our financial results while advancing our strategic objectives of being the “starting point” for the most users on the Internet and offering such compelling value that advertisers will see us as the “must buy” in online advertising.

One of our key strategies for achieving these objectives is to capitalize on the increasing convergence of search and display advertising, where we are especially well positioned to compete and succeed. We have already accelerated our efforts to strengthen our presence in display through a variety of initiatives and acquisitions in recent months. Our new commercial agreement with Google enhances our ability to pursue this strategy.

Another key strategy is to open our platform to other developers to optimize monetization for our advertisers and publishers and provide the best experience for our users. We see this agreement as a natural extension of the efforts we have already made toward an open marketplace.

The Google agreement is non-exclusive and provides strategic and operational flexibility for Yahoo!. It allows Yahoo! to use Google’s services in those areas where Google monetizes our inventory more effectively but also permits us to continue to use our own search technology in areas where we believe we are most competitive. The net result is that the agreement helps us accelerate one of our strategic aims–closing the monetization gap. At the same time, it allows Yahoo! to continue to compete aggressively in search and display advertising.

Importantly, the agreement does not prevent Yahoo! from pursuing other alternatives that could increase stockholder value. Because the agreement can be terminated by either party upon a change in control, it would not preclude a transaction with Microsoft or any other potential acquiror in the future.

The Yahoo!-Google Agreement Does More for Stockholder Value than Microsoft’s Search-Only Hybrid Proposal.

We also want to update you on the conclusion to our discussions with Microsoft regarding a potential transaction. As we explained in our last letter, our board and management held numerous meetings and conversations with Microsoft about its proposal to acquire Yahoo!, both before and after Microsoft withdrew that proposal on May 3. On June 8, our Chairman, Roy Bostock, other independent board members, and members of Yahoo!’s management team again met in person with Microsoft representatives. At that meeting, Microsoft stated unequivocally that it has no interest in acquiring all of Yahoo!, even at the price range Microsoft had previously suggested.

Microsoft did propose an alternative transaction. Rather than acquire our whole company as it had been proposing for months, Microsoft now proposed to acquire only our search business for $1 billion and a share of future search advertising revenue. This proposal also included an $8 billion investment in Yahoo! but required Yahoo! to commit to a 10-year exclusive arrangement that would have made us dependent on Microsoft for all of our search business. It would also have given Microsoft veto rights on certain future Yahoo! actions, including a sale of Yahoo!. Our board of directors and management made a great effort–and conducted in depth negotiations–to elicit a feasible proposal from Microsoft that made strategic and financial sense for Yahoo!, but without success.

While Microsoft’s search-only hybrid proposal may have been helpful to Microsoft, our board and management concluded it would have had a significant adverse impact on Yahoo! strategically, leaving the Company without the operational control of search assets and technology we view as critical to our objective of becoming a leader in the converging search and display advertising business. The board and its advisers also carefully studied the financial impact of Microsoft’s proposal and concluded that it would have provided no meaningful improvement to our operating cash flow. In short, this proposal would have generated substantially less value for Yahoo! stockholders than Microsoft has suggested.

Based on all the key factors–strengthening our competitiveness, protecting our strategic position, generating attractive financial returns–the Google agreement is far better than Microsoft’s search-only hybrid proposal. That’s why we moved forward with it.

Your Current Board of Directors Has the Knowledge, Experience and Commitment to Best Represent Your Interests and Maximize Stockholder Value.

The events of recent weeks underscore the fact that your board of directors is far better qualified to represent your interests in the effort to maximize stockholder value than the slate put forward by Carl Icahn.

Based on Mr. Icahn’s narrow agenda, it seems highly unlikely that either he or his slate would bring added value to Yahoo!. Consider the following:

– Mr. Icahn put forward his slate so as to sell Yahoo! to Microsoft, even though he had no knowledge of the sustained efforts made by your current board and management to determine whether Microsoft was willing to engage in a transaction that would provide appropriate value and certainty of achieving that value. On June 8, Microsoft once again made it perfectly clear that it is not currently interested in acquiring Yahoo!.
— Mr. Icahn publicly opposed any alternative form of transaction with Microsoft. Your board and management, after thorough and deliberate negotiations and evaluation, separately concluded on its own that the alternative hybrid deal proposed by Microsoft was, indeed, not in the best interests of the Company or its stockholders.
— Mr. Icahn urged, as an alternative to a Microsoft transaction, that Yahoo! find a way to partner with Google that would not preclude a transaction with Microsoft in the future. We have done exactly that through the commercial agreement with Google we announced on June 12.

Simply put, you can choose to vote for a slate of nominees with no articulated plan for the future of Yahoo!–and who now have essentially no alternative agenda to offer you–or you can choose to vote for your existing board of directors which has the independence, experience, knowledge and commitment to navigate the Company through the rapidly-changing Internet environment, execute on our strategic objectives and deliver value for Yahoo! and its stockholders.

It is time for Yahoo! to turn its undivided attention to implementing its key strategies, and we therefore urge you to reject Mr. Icahn’s slate and his ill-defined agenda.

We strongly urge you to vote your WHITE Proxy Card today for your current board of directors.

We look forward to sharing our progress with you as we move forward and we thank you for your support.

Sincerely,

Roy Bostock Jerry Yang
Chairman of the Board Chief Executive Officer

John Furrier’s video in his earlier post raises some great questions. Yes, it seems Google is slipping into this Unified Communications market. And I agree with John on his point that Microsoft is just too strong a presence in the enterprise for Google to be a real force on its own.

I think Google knows this, so look for continued alliances and strategic moves by Google as their plan evolves. The question is when Google makes those moves, which ones would they make? Is there any one strategic alliance that will give them that foothold they would need to creep into the enterprise? There is much to be seen and this will be interesting to say the least to observe as it unfolds. They are certainly a dark horse at this point, but it’s early in the game..

So Cisco is looking to partner with IBM, according to Jim Duffy in a Network World article posted today. According to the article, IBM has been resistant thus far. John Chambers is scheduled to deliver a keynote at Cisco Live! today.

It will be interesting to see if anything else gets revealed. My feeling is that we are seeing some tactical comments and we may get some more before the day is through. Note that Cisco’s approach to Unified Communications is very much a network model and a partnership with IBM would somehow put them in line with IBM’s Lotus-based software model. In Duffy’s article it is mentioned that Cisco is looking at EMC and VMWare for deeper relationships. Cisco Systems is clearly looking at some heavyweights here and trying to break away with the lead.

Cisco has been in the business of delivering VOIP and Unified Communications for a while now. This is an interesting battle brewing here. I believe that Microsoft’s product will eventually come out on top as some of its main advantages include leveraging interoperability with existing PBX hardware, in addition to their existing desktop and enterprise presence. This integration allows for flexibility in adoption of Unified Communications technologies, so we will likely see more alliances with Microsoft as well from many sectors.

However, there is no doubt Cisco is a big player in the game so keep watching out for news.