Dell agrees to buy Perot Systems for $3.9B

Dell has agreed to buy Perot Systems for around US$3.9 billion in cash, and intends to make the company its global services delivery division, the companies said Monday. It will also allow Dell, in the future, to address customer demand for next-generation services including cloud computing, said CEO Michael Dell in a conference call with analysts. The deal will allow Dell to expand its range of IT services, and potentially allow it to sell more hardware to existing Perot customers, it said. Dell is counting on its international reach to turn Perot into a global services company, Dell CFO Brian Gladden said during the call.

Around 25 percent of revenue comes from government customers, he said. Perot Systems is one of the largest services companies serving the health-care sector, from which it derives about 48 percent of its revenue, its CEO Peter Altabef said during the call. Perot is already working at increasing its international revenue: on Friday it announced a 10-year deal to outsource IT operations for Indian hospital group Max Healthcare. Over the last four quarters, Dell and Perot together had revenue of $16 billion from enterprise hardware and IT services, with $8 billion coming from enhanced services and support, Dell said. Dell's rival Hewlett-Packard expanded its own global services unit with the acquisition of EDS for $13.9 billion in May 2008. EDS was founded by H. Ross Perot, who sold the company to General Motors before going on to found Perot Systems, of which his son is now chairman. Perot's contribution to that is relatively small: In 2008, the company reported total revenue of $2.78 billion.

In after-hours trading, the stock traded at $29.70 early on Monday morning. At $30 per share, Dell's offer represented a significant premium over Friday's closing price of $17.91 for Perot Systems shares. The boards of Dell and Perot agreed to the terms of the transaction on Sunday, they said. Dell expects that overlaps between the two companies will allow it to cut Perot's costs by between 6 percent and 8 percent, Gladden said during the conference call. Dell expects to complete the deal in its November-to-January fiscal quarter.

Upon completion of the acquisition, Dell plans to make Perot Systems its services unit, and will put Altabef in charge of the unit. The services unit will fit alongside Dell's existing divisions for selling to large enterprises, government customers and small and medium-size businesses. It also expects Ross Perot Jr., chairman of the Perot Systems board, to be invited to join the Dell board of directors. Dell created the three divisions in a major reorganization of its business sales teams last December, shifting from a geographic structure to one aligned with customer types.

Will security concerns darken Google's government cloud?

When Google Inc. launches its cloud computing services for federal government agencies next year, one of its biggest challenges will be to overcome concerns related to data privacy and security in cloud environments. A FISMA certification is required for a service provider, such as Google, to sell to federal agencies. Google earlier this week said that it was planning on offering cloud services such as Google Apps to federal agencies starting in 2010. Google said it is speaking with several federal agencies about its offerings, which the company has assured will be fully compliant with the requirements of the Federal Information Security Management Act. Google announced its plans to deliver a government cloud at a cloud computing event in California.

The government cloud service will also be operated by individuals with the appropriate security clearances, and all data that is part of a government cloud service would remain in the U.S, the executive said. At the event, a company executive noted that the government services would be hosted on Google's data centers, but on systems that are compliant with government regulations. How far such assurances will go in assuaging concerns related to cloud computing service, especially in a government setting, remains unclear. But for many "the biggest concern is going to be the security and information assurance associated with a cloud service." A lot will depend on the kind of FISMA certification and accreditation that Google's cloud services receive, she said. Karen Evans, former de facto federal CIO under the Bush administration, said that using cloud services such as Google's could help federal agencies significantly reduce IT costs.

Under FISMA, federal systems are classified into three risk categories: low, medium and high. Then it's just a matter of agencies working out a service level agreement that spells out their security requirements. Each level has its own requirements, Evans said, adding that she hoped that Google will be certified and accredited at the highest risk levels. She added that agencies interested in using cloud services will probably be best served moving their external, Web facing applications first before considering more sensitive applications. Of the 312 respondents, about 51% cited security and data privacy concerns as the biggest impediment to adopting cloud services.

Meanwhile, Unisys Corp., a major provider of IT services to the government, Wednesday released the results of an online survey that looked at the issues affecting adoption of cloud computing. The next highest barrier was integration of cloud-based applications with existing systems. The results are consistent with previous Unisys surveys on the same topic and with what the company has been hearing from clients, said Sam Gross, vice president, global IT outsourcing at the company. "For us [the results] are not surprising," Gross said. "We have been surveying our customer base and doing quick polls for a long time. Concerns about the ability to bring applications back in-house ranked third. The numbers are always different, but never the ranking," Gross said. "Security continues to be the number one concern for cloud computing." Many of the concerns are related to issues such as inadvertent access to enterprise resources in a shared cloud infrastructure and accidental release of protected data.

In a report issued earlier this year the World Privacy Forum raised other privacy issues that can arise when a government agency outsources to a cloud provider. Another big concern has to do with the level of access that a cloud provider might have to an enterprise's systems and data, Gross said. "They want to know how a cloud provider can assure that an administrator within a shared cloud infrastructure cannot gain access to or view their data," Gross said. For example, a federal agency that uses a cloud service to host personal data could violate certain provisions of Privacy Act of 1974 , especially if it doesn't have provisions for protecting the data in its contract with the cloud provider. The location of a cloud provider's operations may also have a significant bearing on the privacy laws that apply to the data it hosts, the report noted. In addition, federal records management and disposal laws may limit the ability of agencies to store official records in the cloud. Such security concerns bubbled to the surface recently, when several groups protested a $7.25 million plan by the city of Los Angeles to replace its Novell GroupWise e-mail and Microsoft Office applications with Google Apps.

Though city IT officials reiterated their plans to go ahead with the project, and Google itself has vigorously defended its security controls, the incident highlighted the continuing concerns with cloud computing.

China's Alibaba expects India joint venture this year

Top Chinese e-commerce site Alibaba.com aims to announce an Indian joint venture this year as the company expands its global footprint, it said Friday. A deal in India, where Alibaba.com recently surpassed 1 million registered members, would be the latest in the site's efforts to grow abroad. "I've got a lot of confidence in India," said Jack Ma, CEO of Alibaba Group, the parent company of Alibaba.com. Alibaba.com is in talks with an Indian reseller about forming a joint venture, CEO David Wei told reporters at a briefing.

Alibaba.com is a platform for small and medium businesses to trade everything from lumber and clothes to iPods and PC components. Alibaba.com already works with Indian publishing company Infomedia 18, its likely joint venture partner, to promote its platform in the country. Its main member base is in China, but the site also has 9.5 million registered users in other countries and facilitates many cross-border trades. The site also has a joint venture in Japan and recently launched a major U.S. advertising campaign to attract more users there. Ma said Alibaba knows it needs to "do something" in Latin America as well. Ma and other top Alibaba executives visited the U.S. early this year for meetings with potential partners including Amazon.com, eBay and Google.

When asked if the company would also seek to expand in Eastern Europe, Ma said, "I will be there." Alibaba will not hold a majority stake in joint ventures it forms, instead taking a share similar to the 35 percent it has in its Japan operation. "Our global strategy means partner with local people," Ma said. "We want partners and we want partners to control their business." Users place total orders of more than US$200 million each day on the Alibaba.com international platform, Wei said. About 50 percent of those orders go to Chinese exporters, he said.

Linux driver chief calls out Microsoft over code submission

After a kick in the pants from the leader of the Linux driver project, Microsoft has resumed work on its historic driver code submission to the Linux kernel and avoided having the code pulled from the open source operating system. The submission was greeted with astonishment in July when Microsoft made the announcement, which included releasing the code under a GPLv2 license Microsoft had criticized in the past. Microsoft's submission includes 20,000 lines of code that once added to the Linux kernel will provide the hooks for any distribution of Linux to run on Windows Server 2008 and its Hyper-V hypervisor technology. Greg Kroah-Hartman, the Linux driver project lead who accepted the code from Microsoft in July, Wednesday called out Microsoft on the linux-kernel and driver-devel mailing lists saying the company was not actively developing its hv drivers.

If they do not show back up to claim this driver soon, it will be removed in the 2.6.33 [kernel] release. HV refers to Microsoft Hyper-V. He also posted the message to his blog. "Unfortunately the Microsoft developers seem to have disappeared, and no one is answering my emails. So sad...," he wrote. They are not the only company." Also new: Microsoft forms, funds open source foundation Kroah-Hartman said calling out specific projects on the mailing list is a technique he uses all the time to jump start those that are falling behind. Thursday, however, in an interview with Network World, Kroah-Hartman said Microsoft got the message. "They have responded since I posted," he said, and Microsoft is now back at work on the code they pledged to maintain. "This is a normal part of the development process. In all, Kroah-Hartman specifically mentioned 25 driver projects that were not being actively developed and faced being dropped from the main kernel release 2.6.33, which is due in March.

On top of chiding Microsoft for not keeping up with code development, Kroah-Hartman took the company to task for the state of its original code submission. "Over 200 patches make up the massive cleanup effort needed to just get this code into a semi-sane kernel coding style (someone owes me a big bottle of rum for that work!)," he wrote. He said the driver project was not a "dumping ground for dead code." However, the nearly 40 projects Kroah-Hartman detailed in his mailing list submission, including the Microsoft drivers, will all be included in the 2.6.32 main kernel release slated for December. Kroah-Hartman says there are coding style guidelines and that Microsoft's code did not match those. "That's normal and not a big deal. But the large number of patches did turn out to be quite a bit of work, he noted. It happens with a lot of companies," he said.

He said Thursday that Microsoft still has not contributed any patches around the drivers. "They say they are going to contribute, but all they have submitted is changes to update the to-do list." Kroah-Hartman says he has seen this all before and seemed to chalk it up to the ebbs and flows of the development process. The submission was greeted with astonishment in July when Microsoft made the announcement, which included releasing the code under a GPLv2 license Microsoft had criticized in the past. Microsoft's submission includes 20,000 lines of code that once added to the Linux kernel will provide the hooks for any distribution of Linux to run on Windows Server 2008 and its Hyper-V hypervisor technology. Follow John on Twitter