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Tech Firms Plug Into 'Appliances'

Quoting Investor's Business Daily

Just as household appliances reduce the drudgery of housework, emerging "software appliances" are cutting down on the cost and complexity of business chores.

Software appliances refers to a new method of delivering business software that helps corporate tech managers do such tasks as manage data and secure e-mail.

Some of the biggest tech companies, including Hewlett-Packard (NYSE:HPQ) HPQ, IBM (NYSE:IBM) IBM and even Google GOOG, have jumped on the software appliances bandwagon, though the leaders of the movement have been small startups. One of these, data warehouse appliances maker Netezza NZ, made its initial public offering Thursday. The company sold 9 million shares at $12 a share, when it had been expected to price at $9 to $11 a share. And the stock soared in its first day of trading, rising 44% to 17.24.

Eliminates Much Of 'Cost Of IT'

Software appliances "eliminate much of the cost of IT (information technology) and enable the business to be more agile," said Netezza co-founder Foster Hinshaw, who's now chief executive of appliance firm Dataupia.

The appliance format is especially appealing, he says, because it requires less software integration. The approach is ideal for smaller companies that have scant resources for IT, he says.

The software appliances trend likely will have a strong impact on both the software and hardware sectors over the next five years, says IDC analyst Brett Waldman.

"This is a very disruptive technology," Waldman said. "We think long term this is definitely going to be a big market."

A software appliance is a chunk of software that is unusual because it comes integrated with its own operating system, usually open-source Linux. Appliances also can come bundled with a database and other middleware. The idea is to give users complete functionality in one product.

Some appliances come packaged in an actual hardware box that's physically attached to a server. But in most cases the appliance is simply some software code that gets downloaded to what's called a hypervisor. This software is a virtual platform that lets multiple software systems run on a single computer.

Appliances are simpler to implement than standard software because they come with an OS and more. And appliances cost less because users don't have to buy more servers, operating systems and other items, says Todd Rowe, head of the Business Objects (NASDAQ:BOBJ) BOBJ mid-market unit.

"This is not just a niche, it's a real growth area," he said.

Business Objects, a maker of business intelligence software that helps companies glean more information from their stores of data, in March launched what it calls the Open Appliance Initiative. The initiative is a partner network that includes IBM, HP and Teradata.

The group's goal is to offer simple, low-cost appliances for business intelligence and data warehousing, says Rowe. "This is an easier form factor for many customers," he said.

Market trackers haven't yet forecast growth rates for the appliance market because it's so new. But most major tech vendors have started to pursue this emerging trend. For instance, Google sells a search appliance designed to help smaller businesses find data in their corporate networks.

Ingres makes an appliance for business intelligence that's based on open-source software. Microsoft (NASDAQ:MSFT) MSFT and SAP SAP have teamed up to sell a Duet appliance on HP servers. Duet lets software users run SAP applications through their Microsoft Office suite.

Oracle ORCL has forged its own initiative for data warehousing appliances. Its partners include HP, IBM and EMC EMC .

Among startups, Purisma sells appliances for master data management. It helps clients get a clearer picture of their customers.

Similar To On-Demand

The appliance approach lets Purisma offer simplicity similar to on-demand software-as-a-service, yet also provides the control and security of on-premises software, says Bob Hagenau, Purisma co-founder.

"We package a solution that doesn't require any software configuration, installation or implementation by the user," said Hagenau.

Another prominent startup is rPath rPath, which makes kits to help software firms develop their products as appliances.

Appliances are gaining traction because the software industry has created too much complexity for users, says rPath CEO Billy Marshall. He says appliances are a great way for software firms to attract clients.

"Over time, most application vendors will start using this model to become more efficient, because the software market is broken," he said.

To repair what's broken, traditional software firms need to streamline how they package and sell their products, says Simon Peel, senior vice president of marketing and strategy for Cast Iron Systems. Cast Iron makes appliances to integrate software from SAP, Oracle, CA CA, Salesforce.com (NYSE:CRM) CRM and others. "The key to a good appliance solution is to deliver simplicity out of the box," Peel said.

Check out the source, here.

Published Friday, July 20, 2007 5:53 AM by David Marshall
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