TELECOM 99: Gerstner warns of proprietary "trap"

Without identifying Microsoft by name, IBM chairman Lou Gerstner yesterday warned a Telecom 99 audience against getting 'trapped' by the 'worst' elements of the computer industry.

Without identifying Microsoft by name, IBM chairman Lou Gerstner yesterday warned against getting "trapped" by the "worst" elements of the computer industry, and instead called on IT and telecommunications companies to merge the best of their respective industries to forge the emerging Internet economy.

In several thinly-veiled references to Microsoft during his keynote address at Telecom 99 here, Gerstner warned against efforts to dominate the Internet with proprietary technology and urged telecommunications companies and computer companies to work together to hasten the Internet "revolution" that promises "a fundamental transformation in the way that things are being done in the world."

"Going forward we have a great opportunity to bring forward the best of the telecommunications industry and the best of the computer industry, and we also have an opportunity to ensure that we don't drag the worst of our industries into this new world," Gerstner told the gathering. "Now the worst of my industry -- the element that we must leave behind -- is the mentality that seeks to own and dominate standards, and to establish a choke hold based on proprietary technology."

"There are a few companies that still don't get it," he added, "who are still trying to propagate proprietary computing and communications technology in order to exert control. I think their motives are obvious. But, in my view, they are standing on the wrong side of history."

Gerstner also seemed to take Microsoft to task for attempting to compete with telecommunications companies with its investments in the cable industry. IBM, in contrast, sold its digital network earlier this year and "does not want to be in the telecom business," he said.

The agenda for change in the telecommunication industry "is both remarkable and daunting, given the history of the industry as a regulated monopoly in most countries," Gerstner noted. "... And quite frankly outsiders like IBM have no business weighing in and adding to the confusion.

"However there are some in the computer industry who are intervening and making huge investments in infrastructure in cable to compete with telecommunications companies."

Gerstner also stressed the global and societal magnitude of the changes that the Internet is bringing, not just to commerce but to a wide range of human activities and institutions. Citing an estimate of 200 million Internet users worldwide, which is expected to grow to 500 million by the end of 2003, Gerstner maintained that it's not the number of users but the pervasive nature of the new medium that will define the "revolution."

"I don't believe the sheer scale and volume constitutes a revolution," Gerstner said. "I believe the real revolution lies in what all these connected people, businesses and institutions are doing.

"I believe we are witnessing the creation of a new kind of economy: the e-business economy," he continued. "And it isn't built just on online retail sales of books or airline tickets or securities."

The "network computing" model is the key to reaching the elusive goal of "universal access," Gerstner contended, and the PC will lose its pivotal role in the Internet's explosive growth.

"We know that the PC era is over," Gerstner said. "The PC itself is not dead. But it no longer occupies center stage and it is no longer the only available network access device."

Even if the installed base of PCs reaches 600 million worldwide by 2003, Gerstner predicted, the number of hand-held devices connected to the Internet will surpass 2 billion, plus there will be many billions of "everyday items," from television set-top boxes to automobiles to household appliances and vending machines, all embedded with computational capability and all connected to the Internet.

"In short, we're seeing a proliferation of millions and millions of new and much lower-cost, much easier-to-use access points, putting the net within reach of masses of people who could never ever afford a PC," Gerstner said.

"So when you couple this world of what we call pervasive computing with a pervasive network infrastructure," he added, "one very important effect will be that the oft-mentioned but elusive promise of universal access will be much closer to reality."

Gerstner described new opportunities for both computer and telecommunications companies to exploit this pervasive computing environment with new Internet-based "e-business network services."

"As computing workflow and applications and data shift from the PC to large server systems via the net, customers will have a new way to buy and drive computing. Increasingly we will deliver computing as a service over the net," Gerstner said. "We see this happening already, first with smaller businesses who buy computing and applications on a hosted model -- a utility model -- paying only for what they use and leaving the management of the systems and software to their provider."

Such "enhanced services" will require enormous computing power, database software, transaction processing and other applications from computer companies, as well as bandwidth from the telecommunications companies, Gerstner asserted.

"The e-business network services opportunity is huge and it means that more and more telecommunications providers and information technology companies like IBM will need to partner," Gerstner said. " We will need to work together. No single company will be able to provide all of the necessary skills and assets.

"Now I suppose the appetite and ambition of one or two will drive them to try and gobble up everything themselves," Gerstner said, in another apparent jab at Microsoft. "For the rest of us, we know we have to partner."

"The good news is that movements like Java and Linux are powerful reminders that those who bet on proprietary standards are not going to win in a heterogeneous, open, networked society," he added. "And any customer or nation who gets trapped by a closed architecture runs the very real risk of being left behind."

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