Is it now crazy to offshore IT to China?

Mandiant report citing Chinese government's role in cyberattacks might give more pause to some U.S. companies

China has for years been developing an IT outsourcing industry aimed at bringing in business from the U.S. and Europe. It has succeeded, but then again it hasn't thrived and now may face more barriers.

China's IT and BPO outsourcing market today is in the range of $4 to $5 billion.

The total outsourcing revenue there is about half that generated by just one India's largest IT firms, Tata Consultancy Services firms, said Jimit Arora, a vice president at Everest Group, a consulting and research firm.

China's IT service and BPO market is expected to grow annually by around 20% to 25%, but that growth is off a small base, says Arora.

Ten years ago, there was wide expectation that China would emerge as India's top threat in the IT services outsourcing business. Those expectations have been thwarted largely due to language issues and ongoing security concerns, say analysts.

China's job building an IT and BPO outsourcing industry may have just gotten harder.

The blow-by-blow details of Chinese government espionage that arrived this week in a report by security firm Mandiant, lay bare, in ways never seen before, the extent of the security risks of working with China.

The Mandiant report draws a straight line to the Chinese military as a main instigator of cyberattacks on U.S. firms.

Meanwhile, the White House this week released a report with details on trade secret theft that makes numerous references to China, amplifying the extent of this problem.

Andy Sealock, a partner at consulting firm Pace Harmon, says the concerns about the security risks of outsourcing to China are already "priced into" and considered in the decision making process of U.S. firms. The latest revelations just add more evidence to "what many people already assumed was happening," he said.

A potential wildcard is the U.S. response, if any, to the latest developments, analysts say.

"This onslaught of espionage targeting U.S. technologies is constant and unwavering," said the White House in its report on mitigating the theft of U.S. trade secrets. Such attacks are increasing, concludes the White House.

Sealock said the U.S. may feel pressure to make "to make a public response to the threats and institute policies and sanctions that will make it more difficult to do business with China."

Companies opposed to offshoring to China may now be less likely to change their minds. "This will just strengthen their resolve to stay away" from China, said Arora.

And for those companies considering China for outsourcing work, the "task has just become a bit harder," said Arora.

James Slaby, who directs the security practice at HFS Research, says companies aren't necessarily more at risk in China.

The security risks may be marginally greater there if the telecommunications equipment has been compromised with backdoors. How attacks on the equipment are mounted, though, is geographically independent, said Slaby.

The bottom line is that companies offshoring to China are "only embracing nominally more risks" as long as they are pursing best practices to protect corporate data, said Slaby.

Deploying basic security practices, "are more important than thinking about where you are physically located," said Slaby.

Daniel Castro, an analyst at the Information Technology & Innovation Foundation, does not believe that "businesses will rethink their off-shoring decisions because of the Mandiant report, but they should all be taking a close look at their risk exposure and mitigation measures for these types of threats."

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Cisco puts a huge value on the 'Internet of everything

More devices and people connecting to the Internet will create $14.4 trillion opportunity over the next decade, the company says


The so-called "Internet of everything," the rapidly approaching world where objects from refrigerators to factory robots can talk to people and other machines, will create a massive business opportunity worth $14.4 trillion over the next decade, according to a new study from Cisco Systems.

The Internet of everything, a phrase coined by Cisco to describe the networking of people, processes, data and objects, will encompass multiple industries, enabling customized online education, smart factories and the smart energy grid, Cisco officials said. Over the next decade, that connection of new objects and people to the Internet puts $14.4 trillion at stake, with the opportunity including new profits and cost savings, the company predicted in the white paper, released late Monday.



More than 99 percent of physical objects are not now connected to the Internet, but Cisco expects 50 billion objects to be connected by 2020, officials said. New objects and people coming online creates a big investment incentive for companies, said Cisco Chief Marketing Officer Blair Christie.

Companies should embrace this trend or risk being left behind, Cisco CEO John Chambers wrote in a blog post.

"I believe that businesses and industries that quickly harness the benefits of the Internet of Everything will be rewarded with a larger share of that increased profitability," he wrote. "This will happen at the expense of those that wait or don't adapt effectively. That's why the value is 'at stake' -- it's truly up for grabs."

The Internet of everything represents the next stage of the Internet, Christie said. "We think it's as powerful as [the Internet] was in the very beginning, when a lot of industries won and a lot of industries lost," she said.

Cisco looked at several industries to come up with its money estimate. Among the industries: smart buildings, smart farming, investing, physical and IT security, connected payments, and connected gaming and entertainment. In addition, the company looked at a handful of cross-industry trends that the Internet of everything will affect, with telecommuting, travel avoidance and supply-chain efficiency among them.

Just under a third of the market opportunity for the Internet of everything will be in the U.S., with another 30 percent in Europe, Cisco predicted. Another 12 percent will be in China and 5 percent in Japan.

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Internet Explorer only? IE doubt it

Fewer businesses standardizing browser use on Internet Explorer, but the practice isn't gone yet.

Just as Internet users in general have defected in huge numbers from Microsoft Internet Explorer over the past several years, the business world, as well, is becoming less dependent on the venerable browser.

Companies that used to mandate the use of IE for access to web resources are beginning to embrace a far more heterodox attitude toward web browsers. While it hasn't gone away, the experience of having to use IE 6 to access some legacy in-house web app is becoming less common.

"Things have changed a lot in the last three years, and I think a lot of it has to do with the emergence of the modern web and the popularity of mobile. They have made it very different for companies to truly standardize on a browser," says Gartner Research analyst David Mitchell Smith.

One example of the changing face of business browser use is SquareTwo Financial, a Denver-based financial services company that works primarily in distressed asset management. The firm's 280 employees handle both consumer and commercial business, buying and selling debt, and a franchise program means that there are upwards of 1,500 more people working at SquareTwo affiliates. According to CTO Chris Reigrut, the company takes in roughly $280 million in annual revenue.

"In addition to buying and selling debt, we also provide a software-as-a-service platform that our franchises (and we) use to actually negotiate and litigate the debt," he tells Network World.

Square Two hasn't needed to standardize, he says, because keeping their offerings diverse is part of the idea - the company's various online resources all have differing requirements.

"We do distribute Firefox on Windows systems - however, Safari and IE are both frequently used. Our internal wiki is only officially supported on Firefox and Safari. Our SaaS 'client' is a pre-packaged Firefox install so that it looks more like a traditional thick-client application. Most of our employees use their browser for a couple of internal systems, as well as several external services (i.e. HR, training, etc)," says Reigrut (who, like the other IT pros quoted in this story is a member of the CIO Executive Council Pathways program for leadership development).

The Microsoft faithful, however, are still out there. Many businesses have chosen to remain standardized on IE, for several reasons. SickKids, a children's research hospital in Toronto, sticks with Microsoft's browser mostly for the ease of applying updates.

"We have more than 7,000 end-point devices. Most of those devices are Windows workstations and Internet Explorer is included as part of the Microsoft Windows operating system. As such, this makes it easier and integrates well with our solution to manage and deploy upgrades, patches and hotfixes to the OS including IE," says implementations director Peter Parsan.

"Internet Explorer is more than a browser, it is the foundation for Internet functionality in Windows," he adds.

The complexity of managing an ecosystem with more than 100 types of software - running the gamut from productivity applications to clinical programs - requires a heavily controlled approach, according to Parsan.

Smith agrees that IE still has its advantages for business users that want just such a strictly regimented technology infrastructure.

"If you want a managed, traditional IT environment ... really, your only option is Internet Explorer," he says, adding that both Firefox and Chrome lag behind IE in terms of effective centralized management tools.

Some companies, however, have gone a different way - standardizing not on IE, but on a competing browser.

Elliot Tally, senior director of enterprise apps for electronics manufacturer Sanmina, says his company's employees are highly dependent on browsers for business-critical activities. Everything from ERP to document control (which he notes is "big for a manufacturing company") to the supply chain is run from a web app.

Tally says Sanmina made the move to standardize on Chrome in 2009, in part because of a simultaneous switch to Gmail and Google Apps from IE and Microsoft products.

"It made sense to go with the browser created and supported by the company that created the apps we rely on. Also, Chrome installs in user space so it doesn't require admin privileges to auto-update," he says. "It also silently auto-updates, as opposed to Firefox, which requires a fresh install to update versions, or IE, which is similar. Chrome, over the last year or so, has supported web standards better than any other browser, and (until recently) has offered significantly better performance."

Plainly, broad diversity exists both in the actual browsers used by workers and the approaches businesses have taken in managing their use.

That diversity, says Smith, is the reason Gartner has been advising clients against standardization from the outset.

"Standardize on standards, not browsers," he urges. "That was a controversial position for 10 years. People really didn't agree with it, they didn't listen to it, and they paid the price."

Microsoft, as well, has had to pay a price.

"[Standardization] hurts Microsoft's reputation as an innovator; as a forward-thinker," he says. "When people's impression of using Microsoft technology - whether it's a browser, whether it's an operating system - is something that is two or three versions old, because they're dealing with it through what enterprises want."

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Internet Explorer 10 Release Preview for Windows 7 first-impressions review

When Microsoft first announced that Internet Explorer 10 would be part of Windows 8 most users assumed that this would also mean a release of the browser for the version 7 operating system. The first version of Internet Explorer 10 was released publicly with Windows 8's Developer Preview back in 2011, and then updated whenever new versions of preview builds released. Microsoft at that time was tight lipped about the future of IE10 for Windows 7

October 2012 came and brought along Windows 8's launch. It was in the week prior to the release of Windows 8 that the company shed some light on the future of IE10 for Windows 7. A blog post indicated that Microsoft had plans to release a preview version for Windows 7 in November 2012.

Internet Explorer 10 Preview for Windows 7 released today for 32-bit and 64-bit editions of the operating system, and for 64-bit editions of Windows Server 2008 R2.

System Requirements
32-bit or 64-bit edition of Windows 7 SP1 or 64-bit edition of Windows Server 2008 R2 SP1
At least 512 Megabyte of RAM
At least 70 / 120 / 200 Megabyte of hard drive space
At least 1 GHz processor

Installation and uninstallation
The installation of Internet Explorer 10 Preview will replace the current version of the browser on the system. A restart is required before the new version becomes available.

Note that it is possible to uninstall IE10 again on a system it has been installed on. To uninstall the browser do the following:

Click on the Start button.
Type Programs and Features in the search box and select it from the results.
Select View installed updates from the sidebar.
Locate Windows Internet Explorer 10 under Microsoft Windows.
Right-click the entry and select uninstall.
Select Yes when prompted if you really want to uninstall the program.
Restart the PC right then or at a later point to complete the removal.

What's New
Internet Explorer 10 is nearly identical to the version of the browser that Microsoft released for Windows 8. The core difference: is: Adobe Flash is not natively integrated into the Windows 7 / Windows Server 2012 version.

Both Internet Explorer 10 versions on Windows 8 include a built-in version of Adobe Flash, which is especially important for the Modern UI version of the browser as it does not support browser plugins. Microsoft circumvented this restriction with the direct implementation of Flash in Internet Explorer 10.

Web standards support appears to be identical in both versions of IE10. The Internet Explorer blog notes that the following improvements have been made over previous versions of the browser:

Rich Visual Effects: CSS Text Shadow, CSS 3D Transforms, CSS3 Transitions and Animations, CSS3 Gradient, SVG Filter Effects

Sophisticated Page Layouts: CSS3 for publication quality page layouts and application UI (CSS3 grid, flexbox, multi-column, positioned floats, regions, and hyphenation), HTML5 Forms, input controls, and validation

Enhanced Web Programming Model: Better offline applications through local storage with IndexedDB and the HTML5 Application Cache; Web Sockets, HTML5 History, Async scripts, HTML5 File APIs, HTML5 Drag-drop, HTML5 Sandboxing, Web workers, ES5 Strict mode support.

The browser scores 320 and 6 points in the HTML5test, an indicator of how well browsers support the HTML5 standard. That's an increase of more than 200 points over Internet Explorer 9. IE10 is still trailing behind other browsers in the test. Google Chrome 23 for instance scores 448 + 13 points in the test, and Firefox 16 372 and 10.

Internet Explorer 10 is the first browser that ships with Do Not Track enabled by default. The feature informs websites and services the browser connects to that users do not want to be tracked. The default nature of the feature in IE10 has been controversially discussed as the Do No Track specification requires users to make the decision. Yahoo as a consequence announced that it would ignore Internet Explorer 10's Do Not Track header.

IE10 on Windows 7 may run faster than comparable web browsers in select benchmarks. Microsoft claims for instance that Internet Explorer 10 is two times as fast as Google Chrome 23 and 20 percent faster than Firefox 16 in the Mandelbrot benchmark available on Microsoft's Test Drive website.

The browser does not perform as well in other benchmarks. Its score of 5134 in Google's Octane benchmark is beaten by Firefox 19's 9031, and Google Chrome 23's 12975. Mozilla's Kraken benchmark paints a similar picture. Firefox and Google Chrome need roughly the same execution time of around 2200ms, while Internet Explorer 10 three times at much with 6800ms.

IE10 performs better when running applications and demos on Microsoft's Internet Explorer Test Drive site. It is somewhat surprising that Google Chrome usually comes in last in these benchmarks, while Internet Explorer 10 and Firefox finish in close proximity to each other.

Closing Words
Microsoft released Internet Explorer 10 as a preview version and it should be handled as such. While it is possible to uninstall the browser on the system to revert to the previous version of Internet Explorer, it is not suited for production environments, even though there does not appear to be any -- visible -- difference between the preview version for Windows 7 and the final version on Windows 8.

Microsoft managed to close a large part of the performance and web standards support gap between previous versions of Internet Explorer and third-party browsers such as Chrome, Firefox or Opera with the release of IE10.

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Internet Explorer flaws fixed by Microsoft Patch Tuesday updates

IE vulnerabilities offered hackers a one-two punch, expert says.

Microsoft says Internet Explorer versions 6 through 10 are subjects of two critical Patch Tuesday updates for February that could address recent Java woes.

Both critical patches address vulnerabilities that could give attackers access to client browsers and from there access to the underlying host, says Alex Horan a senior product manager at CORE Security. "Bulletins 1 and 2 target all versions of Internet Explorer on essentially all versions of Windows platforms, so it's pretty much one-hack fits all in the Windows environment for attackers," he says. "I expect a lot of interest in developing a working exploit for this vulnerability."

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Three less urgent patches ranked important could address flaws that enable the takeover of machines accessed via the Internet Explorer vulnerabilities, he says. "Bulletins 7, 8 and 9 seem to target the same underlying systems as Bulletins 1 and 2, which means hackers could phish users and then leverage 7, 8 and 9 to get system level control of their machines. That is essentially a worst case scenario and knockout punch for security personnel," Horan says.

Another security expert Paul Henry, a security and forensic analyst for Lumension, says the two critical Internet Explorer problems could be linked to Java. "It's possible that this is related to the recent and ongoing Java issues," he says. "Microsoft has a very close relationship with Oracle, so it wouldn't surprise me if these bulletins include Java patches."

Regardless, they put unpatched machines in danger of falling to remote code execution exploits, Microsoft says, and may require restarting affected machines, something that will make installing the patches a longer exercise.

There are 12 patches in all this month, an uptick from the past few months, and they affect a wide range of Windows platforms from Windows XP to Windows RT, the new Windows 8 tablet operating system that runs on ARM processors. "It's never a good sign when your current code base is impacted," Henry says. This month's 12 patches is the highest number since June 2011 when there were 16.

One remaining patch ranked important affects the FAST indexing server for SharePoint and is caused by an update to some Oracle libraries used for document conversion by Microsoft, says

The remaining bulletins are all rated important and are mostly "Local Elevation of Privilege" type of vulnerabilities, meaning that one already has to be on the targeted computer to be able to attack them. One exception is Bulletin 5, which can be used for Remote Code Execution. It affects the FAST Indexing server for SharePoint and it is also caused by Oracle's update of the Outside In libraries that are used by Microsoft for document conversion processes, says Wolfgang Kandek, CTO for Qualys.

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Microsoft Surface sales suck

Or do they? If you listen to some analysts, Surface, and other slates running Windows 8 or RT, started slow out of the gate. Considering how much tablets sapped PC shipments in Q4, slow forebodes trouble ahead. Or does it?

"There is no question that Microsoft is in this tablet race to compete for the long haul", Ryan Reith, IDC program manager, says. "However, devices based upon its new Windows 8 and Windows RT operating systems failed to gain much ground during their launch quarter, and reaction to the company’s Surface with Windows RT tablet was muted at best". He estimates that Microsoft shipped just 900,000 Surfaces during fourth quarter, which means to stores and not actual sales to customers.

That number sure looks low compared to any manufacturer in the top 5. Even lowly ASUS shipped 3.1 million units. But sell-through matters more. Except for about 10 days of the quarter, at retail, Surface sold exclusively through 66 retail shops in Canada and the United States. Apple offered iPad through an average 390 shops -- 150 outside the United States. Accounting for online sales and doing some best guesstimates, I get 14,680 iPads sold per Apple Store and (assuming 600,000 units) 9,090 Surfaces per Microsoft shop.

However, when adjusting for actual sales days (Microsoft's slate was available for only about two-thirds of the quarter), Surface-sell through averages out a little higher than iPad on a per-store basis. Meaning: Given limited distribution, Microsoft's tablet sells better than IDC shipments suggest.

Size Matters
Microsoft's problem is something else: Size. "We believe that Microsoft and its partners need to quickly adjust to the market realities of smaller screens and lower prices", Reith emphasizes. That's a polite way of saying Surface RT costs too much at $499 and Pro, for sale starting February 9, is already overpriced. But are they? Really?

According to NPD DisplaySearch, market demand shifts towards smaller, and lower-cost models. The firm forecasts that slates with 7-7.9-inch displays will account for 45 percent of shipments this year. By contrast, 9.7-inchers will fall to 17 percent -- that's the size of iPad, the category leader. But Apple offers the 7.9-inch iPad mini, whereas Microsoft and its partners offer nothing in this rapidly exploding size segment.

Apple tablets are pricey, too. Starting February 5, one iPad 4 will sell for $929. But fruit-logo pricing starts lower, at $329 for 16GB iPad with WiFi. Microsoft is locked lowest at $499 with a 10.6-inch slate. What the company needs more is a broader range of sizes and prices, the strategy competitors like Apple, ASUS and Samsung pursue. That would preserve current Surface pricing.

Such an approach doesn't easily fit Microsoft's current tablet strategy, which is all about making a traditional desktop operating system available on more form factors. But that's not what the market wants today, when tablets displace some computer sales rather than replace PCs altogether.

Reith warns: "In the long run, consumers may grow to believe that high-end computing tablets with desktop operating systems are worth a higher premium than other tablets, but until then ASPs on Windows 8 and Windows RT devices need to come down to drive higher volumes".

Give a Little
Simply stated: Working with partners, Microsoft must make gaining market share the top priority. Tablet shipments grew about 75 percent year over year and quarter on quarter to 52.5 million in Q4. Laptops lead the PC category, but NPD DislaySearch predicts that tablet shipments will exceed notebooks this year. Again, that's not so much slates replacing PCs as displacing new sales, as capabilities overlap. Microsoft doesn't want to be left behind Android and iOS slates. This is a platform war that nobody wants to lose.

 

ASUS tablet shipments grew 402.3 percent year over year and Samsung's by 263 percent, according to IDC. These are phenomenal gains, and both companies offer models running Windows 8 or RT alongside Android. Something else: They also sell what Microsoft doesn't -- smaller slates with screens 7-7.9 inches. Short term, Microsoft's options are limited with Surface. But working with partners, Microsoft could bring Windows RT to smaller screens. Such a strategy would preserve Surface pricing and Microsoft's strategy around bringing desktop Windows to new devices.

But there's a wrinkle. Android costs ASUS and Samsung nothing, and Apple realizes the cost of iOS through research and development. Whereas, Microsoft partners pay to license Windows RT. I wouldn't recommend that Microsoft give tablet OEMs Windows for free, but co-marketing contributions and other incentives could temporarily make the fees essentially zero -- on smaller slates.

Already Apple feels the pinch. In Q4, iPad shipment share fell to 43.6 percent from 51.7 percent a year earlier, even as volumes increased (22.9 million from 15.1 million), according to IDC. However, for the second quarter in a row, iPad share declined.

Apple's falling tablet fortunes show just how dynamic is the segment, and that competitors can and will gain share. But for which platform? Android or Windows RT? Microsoft can answer the question, even in part, by adjusting its tablet strategy.

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