Desktop personal computer

Where have all the white boxes gone? If global tech giants get their way, those cranky personal computers and racks of humming servers that have defined business computing for the past decade could evaporate--and quickly.

A host of companies in the hardware and software business--IBM, Microsoft, HP, Sun and others--want to move from selling the nuts and bolts of tech into a long-hyped world where business computing comes out of a socket in the wall, via the Internet. Instant computing, just add employees.

The idea of renting software over the Net for periods of time--rather than licensing it and installing it permanently on local servers and workstations--is not new. A raft of long-gone dot-coms proposed to replace e-mail and organizational software like calendars and to-do lists online.

What Big Tech wants now is more radical still: Give us the keys to your computer rooms and most of your tech employees and we'll give you everything you need, from e-mail to complex back office record-keeping on demand, all run from servers far, far away, cheaper, faster and better.

So far, IBM has inked multimillion dollar deals with Spanish-owned telecom Telefonica in Chile and Argentina and formed an alliance with Italy's Grupo Fiat to oversee the car maker's tech operations in Brazil. It also signed a seven-year, US$4 billion deal to provide information technology services for financial services company American Express. "They will be managing our mainframe, our desktop and our midrange system," says Tony Mitchell, spokesperson for the Latin American division of American Express. "We are beginning to see some progress as IBM gets in there and gets to understand our system."

The move to so-called utility computing is well timed. Big tech spenders around the region, particularly in Mexico, Brazil and Chile, are awash in underused hardware. Personal computer sales in the first quarter of 2002 declined 2.7% from the same period last year; server sales fell 10.4%, according to Gartner Dataquest.

Meanwhile, the services business--the consulting and labor involved in moving companies from disconnected systems to the newer, integrated form, usually through internal data connections and the Internet--is blossoming. Integrated application sales, the core of the new computing model, are expected to grow to $10.5 billion by 2006 from $5.1 billion in 2001, says Gartner.

Hooking up. The services market will grow at a compound annual rate of 9% through 2006, from $8.7 billion in 2001 to $13.4 billion by 2006, says IDC Latin America. IBM leads Latin America's information technology services market at nearly 10%, followed by HP, Unisys, EDS, Inesa and Accenture, averaging 4% each, says IDC.

Medium-sized businesses, common to the region, have had a hard time adopting Web-based software because they haven't had enough programmers to develop applications, says Marc Lautenbach, IBM's general manager for global small and medium business. The move to the Internet allows businesses to spread the development costs over many companies, he says, reducing risk. Ultimately, Lautenbach says, industry will move toward the Internet as the source of computing power, although rich devices like souped-up mobile computers and phones will continue to matter.

Global software giant Microsoft, meanwhile, wants to scrap its old business model--boxed software--for Web-based computing services metered over the Internet. The idea is to create a digital lingua franca then use that single language to connect business operations over the Web.

Microsoft will do this through aggregators--companies that have relationships with telecommunications companies--which send information to corporate users in the form of alerts that can be seen on any device, a standard called extensible markup language, or XML. The idea is to cut: time from managerial, administrative or customer service functions.

Making the Internet the center means companies can link their units and avoid forming "islands of information," says Alexandre Pombo, Net program manager for Microsoft Latin America. "It allows companies to go beyond their own organization, using Internet in a secure way.

To further the technology, Microsoft has opened XML training centers in Rio de Janeiro and Curitiba, Brazil, specifically targeted to teach software developers at corporations how to build applications in the XML platform. "Microsoft is investing $20 million in the next three years [in Latin America] in creating more people that are able to develop XML services," says Pombo. "It's going to be the great secret weapon to gain more customers in this new world,"

Companies like SAP, PeopleSoft and J.D. Edwards occupy the middle ground. Their back-office automation software, such as personnel, payroll and invoicing modules, are being made to work over the Web. Microsoft, too, wants a piece of this market: It recently bought Danish software firm Navision and Great Plains Software of the United States, both of which sell accounting, payroll and inventory-management software to small and medium-sized businesses.

Cost cutter. Until now, U.S. companies have spent 80% of their software budget on boxed software and just 20% on custom-written code for solving their unique business problems, says Enrique Perezyera, senior vice president for PeopleSoft in Latin America. Latin America has been the reverse, taking advantage of cheap programming talent to spend 70% on custom code; saving money up front to invest, instead, in other areas of business.

As software goes mostly to the Web, keeping costs down becomes a natural part of the equation, says Perezyera, as the need to update machinery and all that code decreases. "Just to send someone out there to touch a PC in the PC-server environment, without doing anything to the PC, costs you at least $200," he says. "The Web architecture, in terms of cost, offers a tremendous benefit."

Most companies initially are afraid to expose their internal data to the wild, wild West atmosphere of the Web, says Brent Carlson, vice president of software supplier LogicLibrary, which has partnered with IBM and Microsoft in the Web service invasion. "It involves change," Carlson says, "and organizations may not be willing to give up total control."

Companies in Latin America are, nevertheless, starting to use Web services for internal software needs, getting a feel for the system first, Carlson says. "The real benefit in the next year will be for organizations to get a handle on what their internal processes and applications should be, and selectively use them for external capabilities," he says.

Latin American businesses are playing catch-up, but they could leapfrog their way to Web services quickly--if only because it's cheaper. "Latin American IT markets have been very intelligent to wait and see how it works in the United States," says Mauricio Gonzalez, vice president of Latin American sales for Citrix, a Florida software company long focused on server-based computing and a Microsoft partner in Net development.

They might not be able to wait much longer. At press time, Dutch bank ABN AMBO--among the top 10 foreign banks in Latin America with branches from Mexico to Chile--was close to signing a $1.5 billion info-tech services deal with Electronic Data Systems of Plano, Texas.

Sooner or later, fear of change is overcome by fear of competition. Then things really get into gear.

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