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2007: The year in software

This year software companies achieved some very successful stock-market flotations, Microsoft finally made peace with the EC, and virtualisation became the latest buzzword

After 2006 finished with a big software splash, as Microsoft launched its long-awaited Vista operating system, it seemed inevitable that 2007 would be a quiet year by comparison. But instead the activity shifted away from launches to re-launches and IPOs.

Windows Vista was launched in November 2006, along with major new versions of Office and Exchange Server. Microsoft often runs into teething problems with revisions of its software and, in 2007, Vista proved no exception. Word soon spread that Vista caused a heavy impact on resources, as Microsoft admitted when it shifted its recommendation on the basic memory needed to run Vista from 512MB to 1GB. A year after launch, while many companies had bought Vista licences, many had still not deployed it.

Meanwhile, in the Apple camp, October 2007 saw the launch of the Mac maker's latest Vista competitor, the much-previewed OS 10.5, which had been code-named Leopard. Like Vista, the OS had not exactly been trouble-free, with some of the issues meaning that Leopard could struggle to run on machines that had processors of 800MHz or slower. But Mac users rightly pointed out that, in comparison to Microsoft's high-profile problems, Leopard was relatively well-behaved.

Virtualisation catches on
One of the main themes in the software market in 2007 was virtualisation. This technique of turning clunky hardware-based systems, such as servers and storage, into virtualised systems that can be moved around and allocated at-will started to catch on with all kinds of companies, from banks to internet firms.

Shifting resources into software through virtualisation could, in theory at least, make them much more efficient in their use of resources. With a growing interest from many companies in green IT, virtualisation has become a hot topic.

Virtualisation specialist VMware, which had been acquired by storage company EMC in 2003, was one of the beneficiaries of this interest. The company's IPO in August was a spectacular success as the company saw its share price double as soon as the shares became available.

NetSuite, the online customer relationship management (CRM) vendor, also finished the year on a high, as its share price was doubled by its IPO. NetSuite's owner, Oracle chief executive Larry Ellison, had expected to raise $75m (£38m) from the sale, but instead he made more than double that sum, with $161m (£80.5m).

NetSuite and its rival Salesforce.com are two of the major players in the software-as-a-service (SaaS) market, which has also been growing rapidly. Now they will be waiting to see what Microsoft, a small but growing force in SaaS, will have to offer after the launch of its Dynamics CRM 3.0 in January 2008.

Microsoft vs the EC: Peace in our time
If virtualisation and SaaS were major technology trends, one of the major stories of 2007 will be the one that marks it as the year Microsoft finally made peace with the European Commission and, after years of wrangling, came up with a compromise.

Microsoft eventually agreed to obey the Commission's ruling that forced the company to open up some of its crucial application programme interfaces (APIs) that would allow competitors' software to work effectively with its own./>

The company had fought tooth and nail to avoid handing over the APIs but finally had to if it wanted to avoid the risk of tougher fines and further, unspecified, stricture. Some had even speculated that it could it be banned from selling its software in Europe completely.

"The Commission's 2004 decision set a clear precedent against which Microsoft's anti-competitive behaviour could be judged," said Neelie Kroes, European commissioner for competition policy, in October. The judgement will have a "profound effect on the software industry", she claimed.

Microsoft's competitors such as Sun, IBM and Oracle no doubt raised a glass or two in celebration.

If you can't beat them, buy them
2007 was also a year of consolidation. Instead of trying to beat up competitors on price to win market share, software companies decided to buy them instead. HP's $1.6bn (£800m) takeover of Opsware, a specialist in automating data centres, typified that trend.

Oracle also weighed in, having snapped up PeopleSoft in 2004 and Siebel Systems in 2006. In March it turned its attention to Hyperion, which it bought for $3.3bn (£1.7bn). And the acquisition activity may not stop there for the database giant, which still has an ongoing interest in BEA.

And what of 2008?
Microsoft, for so long the dominant software supplier, looks set to continue to dominate in 2008, but many of the news headlines it is likely to generate will concern the major changes it is going through. First, it seems unlikely that the European Commission's judgment will be the last it casts on the software giant.

Then there is open source, which has also been concerning Microsoft for some time now. With the Christmas success of inexpensive mobile computers such as the Asus Eee PC — which comes with open-source software, and none from Microsoft — and the early successes of Linux distributions such as Ubuntu, Steve Ballmer will have much to think about.

In application software, the accent will be on mobility. Talk to global companies such as Intel and mobility is at the forefront of their minds. Small, fast and mobile. That is IT in 2008 in a nutshell.