Information Technology

August 20, 2013

Is Cisco shrinking?

What was once one of California’s brightest stars seems to be having a diminishing impact on the California economy. Cisco recently announced that is will be firing 4,000 employees, even though it has been growing at a good clip and seems financially healthy. As reported by Business Insider, with this most recent announcement, the company has shed 12,000 jobs in just the past two years alone:

“This isn’t the first layoff that Cisco announced this year. In March, a mere five months ago, Cisco said it was firing 500 people. Prior to this new round of 4,000 firings, Cisco had cut 8,000 jobs. So that’s 12,000 jobs gone in the two years since Cisco’s CEO John Chambers began his turnaround”

Cisco employs 74,135 employees worldwide with about 17,496 work in California – mostly in the company’s Bay Area headquarters in San Jose, so this “workforce reduction” represents about five percent of Cisco employees. Little explanation was given, According to a statement given to a Business Insider reporter by a Cisco spokesperson:

“During the earnings call on Aug 14th, Cisco announced actions to align resources to our top opportunities, balance expenses to revenue, drive efficiencies in the business, and invest in growth. These actions include prioritizing R&D, aligning new and existing talent to growth areas and a workforce reduction impacting approximately 4,000 employees, or ~5% of our workforce.”

They also quoted CEO John Chambers as giving the reason for the move in a call with analysts. “We just have too much in the middle of the organization,” he told them.

While this is obviously not good news for the California economy or for the Cisco employees, in financial terms the company is doing quite well. For the fourth quarter, Cisco reported $2.27 billion in profit, up from $1.92 billion, for the year-earlier quarter and revenue was up 6% to $12.42 billion from $11.69 billion.

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July 30, 2013

Cisco buys Sourcefire for 2.7 billion in cash

Cisco Systems, the worlds biggest maker of networking equipment has agreed to acquire Sourcefire Inc., a cybersecurity firm, for about $2.7 billion in cash.

Sourcefire, based in Columbia, Maryland, builds security platforms including firewalls, intrusion detectors and malware protection that is used extensively by the U.S. Government and major corporations. The company was founded in 2001 and has grown into a major cybersecurity provider – last year it had revenue of over $200 million.

According to a report in Bloomberg Markets Watchlist, many of Sourcefire’s products are built on Snort, an open-source program developed by Sourcefire founder Martin Roesch. The system is used by most Fortune 100 companies and 30 of the largest U.S. government agencies to detect attempted attacks on their networks. Sourcefire’s business with the U.S. government is a “very valuable” part of the deal and will give Cisco more access to key federal cybersecurity decision-makers, according to Christopher Young, senior vice president of Cisco’s security group.

The deal is Cisco’s biggest since its $5 billion acquisition of NDS Group Ltd. last year and is thought to reflect a growing interest for companies that can help guard against computer-based attacks by governments and corporations.

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February 2, 2010

Google and Apple at War?

Two of California’s biggest technology giants are increasingly at odds and it looks more and more like they are turning into fierce competitors.

Google CEO Eric Schmidt was on the board of Apple for three years and at one time it was said that they had a pact not to poach each other’s employees. They were always thought to be united in fighting a bigger enemy – Microsoft.

In 2007, however, Google released Android, a mobile phone operating system; while the iPhone runs on a propitiatory operating system developed by Apple. At first, this was was seen as primarily an attack on Microsoft and its Windows OS. Still, the handwriting was on the wall, and Schmidt resigned from the board of Apple a month later.

Then, in the July 2009 Google announced the Google’s Chrome OS, a web-based operating system meant for netbooks, and has more recently even announced its own “app store” that would directly compete with the Apple app store. With the launch last week of the iPad – essentially a high end netbook – it seems Apple now considers the Chrome OS a direct threat.

Now it has really come to a head. Apple Inc. CEO Steve Jobs reportedly verbally attacked Google Inc. at an employee meeting after rolling out the new iPad tablet computer last week. Wired reported that Google’s entry into the phone business with its Nexus One drew the ire of Apple CEO. They quoted attendees of the meeting in which Jobs reportedly let loose a tirade where he called Google’s “Don’t Be Evil” motto “bullshit” “We did not enter the search business, they entered the phone business,” it reported Jobs told his employees. “Make no mistake they want to kill the iPhone. We won’t let them.”

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January 18, 2010

China’s Alibaba attacks Yahoo for Google Support

Talk about biting the hand that feeds you.  The Alibaba group – owners of the Chinese trade portal Alibaba has strongly criticized Yahoo – its largest shareholder, for siding with Google after a cyber attack on that company.  

As reported in the New York Times, a spokesman for Alibaba, said executives at the company were “angry” because Yahoo appeared to follow Google in suggesting the Chinese government was behind the cyberattacks.  They issued a statement saying that Yahoo was “reckless” in supporting Google because they believed there was a lack of evidence that the attacks were supported by the Chinese government. 

Yahoo is one of the companies that was targeted in the attacks but the company declined to confirm that it was a victim. “The people with knowledge of the situation said that Google contacted Yahoo about the attacks before it publicized them. Google executives were dismayed that other companies were unwilling to publicly acknowledge the attacks, and they were particularly frustrated by Yahoo’s silence” the Times reported. 

Yahoo paid Alibaba $1 billion in 2005 and gave Alibaba control of Yahoo China in exchange for a 40 percent stake in the Chinese company. Yahoo’s investment in Alibaba has paid off in a big way for that company. Alibaba.com, a unit of Alibaba, went public in 2007 with a huge stock offering in Hong Kong and is now valued at $12.5 billion.  Jack Ma, the founder of Alibaba is a celebrity in China because of his success in forcing California’s Ebay to leave the Chinese market, and for taking over Yahoo’s China operations, as part of their billion dollar investment in his company. 

This was a huge amount of capital from a California company that was used to make Alibaba fantastically successful. Now that company is turning on very the people who helped it become what it is.  Is this a simple case of “sucking up” to the Chinese authorities?  Jack Ma is said to be famous for that, and some people even believe he is now milking the resources out of Yahoo so it eventually fails in that country. 

In any event, a consensus seems to be forming that this is a free trade issue.  If the Chinese government blocks Google or other American Internet firms – or forces them to leave that country, the the American Goverment should take the same action with Chinese Internet firms – and it seems like a good place to start would be Alibaba.

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January 12, 2010

Is Google’s relationship with China turning sour?

Google Inc. will stop censoring its search results in China and may pull out of the country after experiencing an attack on the email accounts of human rights activists, according to a report in the San Francisco Chronicle:

Google disclosed in a blog post that it had detected a “highly sophisticated and targeted attack on our corporate infrastructure originating from China.” Further investigation revealed that “a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists,” Google said in the post written by Chief Legal Officer David Drummond.

Google did not specifically accuse the Chinese government. But the company added that it is “no longer willing to continue censoring our results” on its Chinese search engine, as the government requires. Google says the decision could force it to shut down its Chinese site and its offices in the country.

It’s unclear how much of a blow to its business Google would suffer by pulling out of China. The country has the world’s largest population of Internet users but research firm Analysys International said last year that Baidu.com handled 62 percent of Web searches in China compared with 29 percent for Google.

Update, according to the New York TimesGoogle linked its decision to sophisticated cyberattacks on its computer systems that it suspected originated in China :

Those attacks, which Google said took place last week, were directed at some 34 companies or entities, most of them in Silicon Valley, California, according to people with knowledge of Google’s investigation into the matter. The attackers may have succeeded in penetrating elaborate computer security systems and obtaining crucial corporate data and software source codes, though Google said it did not itself suffer losses of that kind.

While the scope of the hacking and the motivations and identities of the hackers remained uncertain, Google’s response amounted to an unambiguous repudiation of its own five-year courtship of the vast China market, which most major multinational companies consider crucial to their growth prospects. It is also likely to enrage the Chinese authorities, who deny that they censor the Internet and are accustomed to having major foreign companies adapt their practices to Chinese norms.

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March 3, 2009

Chancellor Merkel and Governor Schwarzenegger open German trade show

Chancellor Angela Merkel of Germany and California Governor Arnold Schwarzenegger jointly inaugurated CeBIT, one of the top annual fairs in the technology industry. CeBIT exhibits computers, software and communications products, mainly for corporate and manufacturing buyers. At the event this year, California has been declared ‘partner,’ an honorary status usually awarded to entire nations.  Schwarzenegger, speaking in both English and German to an invited audience, highlighted California’s advanced computer technology.  “Technology is really our great hope for creating extra revenues and stimulating the economy — especially green technology is where the action is,” said Schwarzenegger.  Speaking in English, our Austrian-born governor said environmental-technology companies represent the only sector of California’s economy that is creating jobs.  Schwarzenegger praised Germany’s commitment to renewable energy and the reduction of greenhouse gas emissions, and attacked economic protectionism. “The world is the marketplace … and the only way we can protect the consumer is if we let the consumer choose from products all over the world no matter where they come from,” he said. The Governor also tried to encourage the executives attending to be more upbeat, “”Losers whine but winners move forward in a strong and powerful way and I know that everyone who is here at the CeBIT is a winner!” In spite of the upbeat speeches, to mood at CeBIT was reported to be gloomy as a result of the worldwide economic slowdown and slump in the computer industry.  This year’s CeBIT has suffered a 25-per-cent slump in exhibitor numbers to 4,300.

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February 3, 2009

NASA and Google will form Singularity University at Moffett Field

A technology-focused school called Singularity University will open on the Moffett Field campus of the National Aeronautics and Space Administration this summer, the San Jose Business Journal has reported. 
The Mountain View school will focus on coordinating the latest advances in a number of fields to help solve problems such as global warning and energy needs along with famine and disease.  The school’s chancellor is Ray Kurzweil who wrote “The Singularity Is Near” in 2005.  The first session will be limited to 30 students but will then expand to 120 in the following year, the school said. In addition Singularity University plans to offer three-day and 10-day programs.  Peter Diamandis, CEO of the X Prize Foundation — which gives $10 million awards for scientific breakthroughs — will be vice chancellor and trustee. Executive director will be former Yahoo Inc. executive Salim Ismail.

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November 14, 2008

Massive layoffs planned at Sun Microsystems

Sun Microsystems of Santa Clara has announced plans to shed as many as 6,000 workers in the hopes of returning the company to profitability. The software and server maker has struggled to maintain sales of its servers, which has hurt its stock price and undercut plans of a larger comeback. According to a report in the San Francisco Chronicle, the company’s plan to jettison between 5,000 and 6,000 employees represents a reduction of between 15 and 18 percent of Sun’s global workforce, which should reduce costs by $700- to $800 million annually. Sun will take a one-time charge of between $500- and $600 million as part of the layoffs and restructuring.

In light of the shifting economic landscape, Sun said, the company is realigning its operations to put more emphasis on open source computing. Toward that end, Sun is reconfiguring its software business into three groups: applications platform software, systems platforms and cloud computing and developer platforms. “Today, we have taken decisive actions to align Sun’s business with global economic realities and accelerate our delivery of key open source platform innovations – from MySQL to Sun’s latest Open Storage offerings,” said Jonathan Schwartz, Sun Microsystems’ chief executive. Schwartz said in interviews that the credit crunch has delivered a blow to Sun’s business because customers are unable to secure loans for Sun’s premium servers. In addition, a quarter of Sun’s customers come from the financial services sector, which is reeling from the meltdown on Wall Street. Sun’s stock price has plummeted to a dangerous low, reflecting a dour outlook by investors for the company. Sun shares were trading at $4.11 at mid-day, putting the market value of the company at about $3 billion, a little less than what Sun has in cash on hand. The stock is well off its 52-week high of $21.55 a share and its historic high in 2000 of more than $250 at the height of the dot-com boom.

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October 7, 2008

EBay Inc. to eliminate 1,600 jobs

EBay Inc. plans to eliminate 1,600 jobs, or 10 percent of its workforce, to reduce costs as the company tries to revive its slowing growth, according to a report in the San Francisco Chronicle:

The staff cuts include 1,000 full-time, temporary and part-time workers, plus some open positions that will be left unfilled. They come on top of 125 dismissals earlier this year by the San Jose company, whose core online marketplace is slumping in the face of stiff competition from Amazon.com and users’ growing preference for shopping for products at a fixed price rather than by auction.

John Donahoe, eBay’s chief executive, said that reducing staff will “make us a nimbler, more efficient organization.” He acknowledged that the economy and an unfavorable foreign exchange rate are hurting the company’s finances, although the cuts largely are prompted by internal problems.

Imran Kahn, an analyst with JPMorgan, said in a note to investors, “We believe the cuts could help position eBay to more efficiently weather the current challenging economic environment.” EBay expects upfront the job reductions to will cost $70 million to $80 million, which it plans to record in the fourth quarter.

Investors have been pessimistic about eBay for some time, driving its shares down and prompting calls for management to make cuts. Executives have launched a plan to revive the business by emphasizing bigger retailers in the marketplace along with changes to search and user feedback that have proved unpopular with many sellers.

EBay’s acquisition of Bill Me Later of Timonium, Md., is for $820 million in cash and $125 million in outstanding options. By combining forces, eBay is hoping to bolster its PayPal online payments service, which already dominates the industry. Bill Me Now allows users to buy online, but bills them up to 30 days later. At that time, they can pay immediately or take a loan… In addition, eBay plans to pay $390 million in cash to expand its online classifieds business by buying Danish classified site dba.dk and auto site bilbasen.dk.

Donahoe acknowledged that, given the bleak global environment, it might seem counter-intuitive to make major acquisitions. But he emphasized that eBay’s strong cash reserves – it has nearly $4 billion in cash and short-term investments in June – puts it in a position of strength. “In times like this, stronger companies get stronger, and that’s exactly what these acquisitions will help us do,” Donahoe said.

The cutbacks, the biggest ever at eBay, are yet another example of Silicon Valley giants shedding workers amid the economic slump and potentially foretell a stark job environment in the technology industry. Hewlett-Packard and Nvidia both have recently said they plan to pare their workforces, and Yahoo is in the process of reviewing its organization to make it more “fit,” as CEO Jerry Yang put it.

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October 2, 2008

California to attend CeBIT and launch Germany-California ICT Summit

California will be officially represented at CeBIT, a trade show for information and communications
technology (ICT) that will take place in March 2009 in Hannover, Germany.  According to Governor Schwarzenegger’s press release:

Governor Arnold Schwarzenegger today announced California will be the first state to be the official partner of CeBIT, the world’s largest trade fair for digital business solutions and information and communications technology (ICT). In previous years, CeBIT has partnered with other nations
including the United States, France, Russia, India and Canada. As the Partner State, California businesses will be highlighted above all others, providing a great opportunity for business matchmaking and networking for California businesses “I am excited to officially announce that California will be the 2009 CeBIT partner state, a role previously reserved only for nations, and we look forward to demonstrating California’s global leadership in information communications technology,” said Governor Schwarzenegger. “Not only does CeBIT provide California with a venue to showcase our innovative spirit, it is a tremendous opportunity for California companies looking to promote their
products in the global marketplace. I urge businesses across California to showcase
their innovation at CeBIT 2009.”

At CeBIT 2009, California will spotlight the state’s innovative ICT technologies in several key industries including green IT, entertainment, Internet-based services, TeleHealth, security, consumer
electronics, digital content generation and distribution, aerospace, and research and technology. The star attraction of the Partner State program will be the Germany-California ICT Summit. The two entities will use this opportunity to step-up collaboration and stimulate more bilateral business. “It is fitting that we are in the Silicon Valley today since it is a major source of global information, communications technology and venture capital. The region has garnered a lot of well-deserved attention over the years,” said Dale E. Bonner, Secretary of California’s Business, Transportation & Housing Agency. “But there are also many other innovative information and technology companies located in places like Los Angeles, San Diego and regions throughout California
that will play an important role in CeBIT 2009.”

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April 8, 2008

Google to help United Nations track refugees

Mountain View-based Google is working with the U.N. High Commissioner for Refugees on a mapping service that tracks the movement of refugees. The project is expected to help humanitarian work by focusing attention on millions of refugees who have been forced from their homes because of hardship or violence. “All of the things that we do for refugees in the refugee camps around the world will become more visible,” U.N. Deputy High Commissioner for Refugees L. Craig Johnstone said. Google Earth can be focused on areas such as Darfur, Iraq and Colombia, and the U.N. will provide information on the problems faced by refugees.

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February 13, 2008

EU raids Intel’s German office

European regulators raided the German office of Intel Corp. as part of antitrust investigation into possible anticompetitive practices, according to a report in Silicon Valley / San Jose Business Journal. Santa Clara-based Intel said the EU raided its offices in Munich, and said it is cooperating with the investigation. The Wall Street Journal reported that German conglomerate Metro AG confirmed that the EU also raided its computer sales businesses Media Markt and Saturn Holding GmbH. In July, the EU charged Intel with conducting illegal competition against rival Sunnyvale-based Advanced Micro Devices Inc. by offering computer hardware manufacturers rebates, discounts and cash. The Journal said AMD has a separate case against Media Markt that accuses the retailer of only selling Intel-based PCs. Intel is due to appear in Brussels for a hearing on the issue in March, and the company also faces a similar probe in New York by the State Attorney General’s office.

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January 21, 2008

Sun buys open source MySQL for $1 billion

Sun Microsystems Inc.has agreed to buy software company MySQL AB for $1 billion, a move that is expected to bolster their position with database technology and make them more competitive with Oracle Corporation: As reported in the San Francisco Chronicle:

The MySQL deal lets Sun – the third-largest maker of server computers – enter the $15 billion market for database software, challenging Oracle Corp. and adding a source of service revenue. Closely held MySQL develops databases and lets customers such as Google Inc. and the Chicago Mercantile Exchange use them for free, making money from maintenance.

Sun is bolstering its software unit to offer more programs that businesses need to build Web-based systems, Chief Executive Officer Jonathan Schwartz said. Schwartz, who became CEO in April 2006, restored Sun to profit after five years of losses by cutting jobs and adding products.

“MySQL gives Sun a flagship product, the most popular open-source database technology,” said Raven Zachary, an analyst with research firm 451 Group in Portland, Ore. The purchase “offers a model for Sun to follow as it tries to sell other open-source software products

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January 2, 2008

Applied Materials sues Chinese chip-equipment maker

InfoWorld reports:

Advanced Micro-Fabrication Equipment (AMEC), of Shanghai, was sued in California by Applied Materials, which claims the company misappropriated its trade secrets. But lawyers for the Chinese company asked the judge to dismiss the suit, arguing the U.S. court has no jurisdiction over AMEC’s activities. AMEC’s motion for dismissal will be heard by Judge James Ware of the U.S. District Court for the Northern District of California, on Feb. 11.

Applied’s lawsuit, filed in October and amended last month, claims AMEC used its trade secrets to develop etch and CVD (Chemical Vapor Deposit) tools that are used to make chips. AMEC’s tools will compete against similar products from Applied, which cost millions of dollars each. Applied is seeking an injunction from the court to prevent the misappropriation of its trade secrets and wants punitive damages as well as a declaration that it owns patent applications recently filed by AMEC….

In response, AMEC’s motion to dismiss argues that the U.S. court has no jurisdiction over the Chinese company. “In this case, there is no jurisdiction over AMEC Inc., because the allegations of the (amended complaint) relate exclusively to actions that took place in China. None of Applied’s claims arises out of allegations concerning contact with California,” the motion said, adding any legal action by Applied against AMEC should be heard in a Chinese court instead.

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December 14, 2007

Oracle acquires Netherlands-based Moniforce

Redwood City-based Oracle Corp. has announced that it has acquired Moniforce, a Netherlands-based software vendor whose products monitor the availability and performance of any Web application. Oracle said the acquisition “significantly broadens the scope of business exceptions addressed by Oracle Enterprise Manager, allowing administrators to proactively monitor and analyze the application experience from a user’s standpoint.” Terms of the deal were not disclosed.

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December 13, 2007

UPEK to invest $100 million for “Center of Excellence” in Singapore

Emeryville, California -based biometric technology firm UPEK is committing some S$100 million to strengthen its presence in Singapore. According to ChannelNews Asia, it plans to build a centre of excellence here and use its base in Singapore to drive global growth.

UPEK was awarded the International Headquarters Award by the Economic Development Board on Wednesday. The International Headquarters Award is given to foreign companies in recognition of their contributions and commitment to Singapore. UPEK has been in Singapore for more than two years, and it is pumping $100 million over the next 10 years to grow its presence here. This includes building a centre of excellence. Alan Kramer, President and CEO, UPEK, said: “The other thing that will be new for us is, because of our plan with the new IHQ, we will be establishing our first offshore hardware R&D and IC design teams here in Singapore. “And we see Singapore (as) being an increasingly important area for us here and in the future (in terms of) research and development programmes…” Singapore currently accounts for 25 percent of UPEK’s headcount, but this is expected to increase. The company has 120 employees worldwide, with offices in California, Prague, Beijing, Taipei and Singapore. UPEK is seeking to tap into the booming biometrics industry.

Mr Kramer said: “The overall biometrics business continues to be a very high growth market. I think there are forecasts that indicate that it is growing at roughly 40 percent year over year, and is expected to continue (at) that level of growth at least till the end of the decade. “And that growth has been very much part of the success that UPEK has enjoyed since we formed the company a little less than four years ago.” The global biometrics market is projected to almost triple over the next three years to US$5.7 billion in 2010.

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October 15, 2007

Wikimedia is moving to San Francisco

The Wikimedia Foundation, the force behind the popular online encyclopedia Wikipedia, is moving from Florida to a new headquarters in San Francisco. According to a report in the San Francisco Chronicle, Founder Jimmy Wales said that the small operation is packing up its office in St. Petersburg, Fla., and moving to San Francisco in an attempt to create a larger brand, attract more talent and make better inroads in developing countries, particularly in Asia. Wikipedia, which is edited largely by volunteers, is among the 10-most-visited Internet sites in the world. “San Francisco won out for all the obvious reasons; the Internet culture, the great developers and potential partners. It’s really the place to be,” said Wales. “We’re a major Internet brand and this is where a lot of the major brands are located.” San Francisco Mayor Gavin Newsom welcomed the nonprofit to town in a statement. “Wikimedia will be an illustrious addition to our thriving information technology hub,” he said. “They represent the cutting edge of Internet-based innovation and will contribute greatly to the atmosphere of creativity that flourishes in San Francisco.”

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October 9, 2007

SAP to acquire Business Objects for $6.8 billion

SAP AG announced that it will buy Business Objects SA for an eye-popping $6.8 billion. SAP is an enterprise software firm based in Germany with it U.S. headquarters in Palo Alto. Business Objects is based in Paris and San Jose. Acquiring Business Objects is seen helping SAP compete with Oracle in the area of business Intelligence software that is used for risk management and corporate management.

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October 4, 2007

U.S. “deletes” California government domains

The U.S. General Services Administration accidentally “deleted” government website addresses for entire State of California yesterday. As a result, state government websites were unavailable to the public for most of the day until the system was restored late Tuesday. As explained in Network World:

Even the government shudders when someone says they’re from the government and they’re here to help. Case in point: A hacker’s diversion of traffic from a California county government Web site to a porn purveyor spiraled into IT chaos yesterday after a countermeasure applied from Washington essentially “deleted the ca.gov domain.”

Order was restored only after seven hours of frenzied coast-to-coast communications and a “forced propagation” of ca.gov network systems, according to Jim Hanacek, public information officer for the California Department of Technology Services.

“We don’t for sure have the whole picture, but as we understand it, there was some event at the Transportation Authority of Marin Country where their site got hacked,” Hanacek told me this afternoon. Traffic was being redirected from that site to one featuring pornography.

A department within the U.S. General Services Administration in Washington oversees and polices the .gov domain. “The federal government saw this incorrect use of ca.gov and they made a change at a much more global level than probably was necessary and it started taking down all of our ca.gov domain,” says Hanacek. “That impacted Web access and e-mail services.”

A Network World reader whose brother works for a California state agency forwarded me an e-mail alert that his brother received: “The Department of Technology Services (DTS) has notified us that the Federal Government inadvertently deleted the CA.GOV domain. As the evening progresses you may experience an impact in your ability to access some Web sites and exchange e-mail. DTS is working with their federal counterparts to restore service as quickly as possible but service may not be restored until tomorrow morning.”

The change from Washington was made around noontime yesterday on the West Coast … and things quickly got worse. “Unfortunately there was no prior notification, they just made the change and sent us an e-mail to one of our administrators who wouldn’t be a normal contact,” Hanacek says. “Once that person saw the e-mail and started looking we determined how serious this could be and we opened our emergency operations center. Unfortunately that was about 3 in the afternoon and folks back East were already going home, so it took us some time to get hold of the right people in the General Service Administration to get this address reinstated.”

Those corrections began between 4 and 5 p.m. PT but didn’t restore full normalcy until about 7:30 p.m. Hanacek indicated that California’s IT people will be having a chat with their Washington counterparts: “We’ll certainly be discussing how we should be notified of a change of this magnitude.”

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October 2, 2007

Falling dollar pushing up India outsourcing costs

Interesting article in the San Francisco Chronicle:

Around the globe, the falling dollar is touching everyone in the business world, from Saudi oil princes to U.S. computer-makers, making American goods and services cheaper while raising the cost of foreign products.

One effect that hasn’t received much attention is how the dollar’s relentless drop is throwing a bit of sand into the gears of India’s vaunted technology machine. That movement of technology operations to India is a trend that has emerged as a prime symbol of globalization in recent years.

The reason U.S. companies went to India for technology in the first place was to save money. Workers there in the outsourcing sector earn roughly one-eighth as much as their American counterparts, according to experts on India business. And software development services that might cost $200 to $275 per person per hour in the United States can be purchased from an Indian company for $25 an hour or less, those experts note.

The past year, the dollar has fallen from about 45 rupees to about 39. That 13 percent drop, on top of significant pay increases there, has shaved part of the Indian cost advantage, forcing both buyers and sellers of technology services to adapt. And economists expect the rupee to strengthen over the long term as India’s economy matures.

“We are facing some tough questions. It’s not an easy process,” said GK Murthy, senior vice president with Sierra Atlantic, a Fremont business software services company that does most of its programming in India.

One ironic bit of fallout from the falling dollar: Big Indian software companies are stepping up their hiring of American tech workers, who have suddenly become a lot cheaper to employ. For example, Bangalore technology giant Wipro Technologies recently unveiled a plan for a software development center in the Atlanta area that ultimately could hire 500 programmers.

Full article: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/10/01/BU6USGDH9.DTL&feed=rss.business

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