The Bloor Perspective: CMG and Logica, Novell pushes on and early Xmas e-tail

This week Robin Bloor and his colleagues analyse a potential European services consolidation, Novell's latest strategy and what's in store for Christmas shoppers...

IT services firms CMG and Logica are in discussion regarding a potential merger, according to a rather hearty scoop in the Times newspaper. The pair look set to follow in the footsteps of the current consolidation trend that is spreading across the services landscape. The merger talks were confirmed by Logica, a statement talking about cost savings of which there would be plenty available given the pair's overlap in service offerings. As we've noted, both had a fairly promising couple of years digging themselves into a nice entrenchment within the wireless services sphere. Of particular focus was the technology behind SMS messaging which, it appears, delivered both some sizeable revenues in the past. As time and technology has progressed however, SMS technology has moved on and so, it seems, has the wireless operators choice of services firm - both Logica and CMG are losing contracts for the advanced MMS services soon to hit the market. That means a combined force would almost inevitably lead to mass redundancies. The investors must hope it will lead to something of a diversification too. Wireless may have paid off in the past but over the last 12 months this pair have talked of nothing but misery and pain as their services have failed to garner the support they once had. Whether or not a combined CMG/Logica would be a good thing is a debatable point. Certainly they'd be able to reduce costs. And it would be another feather in the cap towards tackling, or at least competing with, the services giants that are emerging: EDS, IBM Global Services, and even local specialists like Atos Origin. That's all speculation of course given that this is still early days. If it does go ahead, Logica will be the one wearing the trousers, with its shareholders having 60 per cent of the business while CMG would hold the rest. It's also expected that Martin Read, CEO of Logica, would take the helm. *Novell develops plans* After the acquisition of SilverStream, Novell gave the first showing of its new development environment for web services at last week's Gartner Symposium. The product itself won't have moved on far from the SilverStream offering but this is a big step for Novell as it comes out of the infrastructure space. This is very much a branding exercise for Novell that signals its intention to give its customers the opportunity to build applications on top of the NetWare environment. It's a bit sad but quite a lot of that rebranding effort has gone into the changing of one letter. SilverStream called its product 'eXtend' (note the capital X). Unsurprisingly, Novell's version is called 'exteNd' (capital N instead, probably red). Not much else has changed. This move goes a long way towards the creation of a complete web services infrastructure. NetWare 6 brought the idea that the internet can really provide the low-cost transport mechanism that was promised. The eDirectory ensures that any authorised user can connect to the corporate applications safely and securely from any location in the world. This environment provided a portal mechanism but no mechanisms for creating and consuming web services. This is what the exteNd product set achieves. There is the Composer tool for pulling together logic and a Process Designer that allows the development of end-to-end solutions based on web services. These services can be consumed using any client-side development tool although Novell exteNd also has its own in Director. All of this sits above a J2EE engine - where SilverStream made its original market. There is no doubt Novell has made a worthwhile acquisition with SilverStream. It has acquired some very strong web services development tools and it will fill a gaping hole that existed in Novell's previous web services offerings. The question, however, is whether Novell will actually make something of the opportunity that is presenting itself. This is a company that does not have a reputation for being strong when it comes to product marketing, and it is up against the likes of IBM, Microsoft and Oracle. This takes us back to the good old days when Novell took on these giants in the operating and network systems spaces. Let's hope that it fares a little better this time - the technology certainly deserves it. *Christmas already* The US has seen a healthy third quarter online with $10bn spent - a 37 per cent jump on this time last year - and so expectations are high for the coming holiday season. BizRate is currently predicting sales to peak at $8bn, a 24 per cent increase over last year - giving a total fourth quarter close to $17bn, a 35 per cent increase over last year. So, are these figures overly optimistic given the current world economic and political situation? Well perhaps not, as the increased business is coming as more people get comfortable with shopping online, so while the online spend is expected to increase, overall spend may be static. The growing popularity of shopping online has come from the maturing of customers and the sites they use. When ecommerce first started there was a great deal of reluctance to enter credit card details into a system of which the user had little confidence. Since then we've all become far more internet-savvy and although scare stories involving disclosure of personal details continue, confidence in online operations is far higher. Customer expectations have also matured. We understand that an order placed on 23 December is not going to arrive in time for the big day. From the retailer's side, the systems have become far more reliable and customer focused. Shipping details and cost are easier to access too, so there is no shock at the end of a shopping trip. The only oddity, as far as the US is concerned, in this year's shopping season is that Thanksgiving falls in the last weekend of November, which means a shortened shopping period on the run up to Christmas. Just what the final results will be has yet to be seen - but in a world so full of bad news, it is heartening to know that no one is losing the Christmas spirit. **Bloor Research is a leading independent analyst organisation in Europe. You can find out more at http://www.bloor-research.com or by emailing mail@bloor-research.com .