Virtualization: In Search of IT Infrastructure El Dorado (from 'The Virtualizer' in Red Herring, Dec 2002)

Following two actions can help corporates cost-effectively manage their investments in IT infrastructure

a) Maximizing the utilization: Server utilization is only 40% of the total installed capacity - in other words, upto 60% of an email server's total power can potentially be exploited to perform other tasks, like intranet hosting or even printing. (IBM study)

b) Minimizing the maintenance cost: A company pays $1 per megabyte to acquire hard disk storage, but must cough up an additional $8 per megabyte each year to manage that storage (a study by Strategic Research, a tech research firm)

The concept of 'Virtualization', a partitioning technique that enables multiple and independednt operating systems to use a single set of resources, can be a powerful solution to address these issues. Based on this concept, a 'Technology Management System' console can be developed which will, for example, allow High-end Sun servers to co-exist with low-cost blade servers from Egenera and both types of servers to be called upon for computational tasks.

Virtualization appeared in 2000 in Storage industry to meet the need of companies to add new storage systems to their exiting systems while treating them as one virtual unit. As a concept encompassing servers, storage, networks and software, Virtualization can allow a coporation's IT infrastructure to exist as one seamless unit. In the words of Steve Duplessie, analyst with the Enterprise Storage Group, "Virtualization enables the infrastructure to become 'liquid'--able to react to unknown requirements."

Some IT companies' initiatives to leverage upon this opportunity -
Sun - NI
IBM - Projects eLiza and Oceana

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Sarbanes-Oxley law and Non-US Companies listed on American bourses
(Q&A: Will Overseas Boards Play by American Rules? in Business Week, Dec 16, 2002)

The law, signed by President Bush on July 30, 2002 aims at addressing the corporate governance and accounting issues raised by the likes of Enron, WorldCom and Tyco.

The law prescribes, among other things that
* CEOs are required to vouch for financial statements
* Boards must have audit committees drawn from independent directors
* Companies can no longer make loans to corporate directors
SEC is the regulatory body that is responsible for interpretation (to a certain extent) and enforcement of these provisions.

Such provisions of the law conflict with the laws of other countries. For example:
* In Germany, supervisory board audit committees must include employee representatives; by definition, they aren't independent
* In Europe and Japan, outside auditors are chosen by shareholders, not the audit panel, as required by Sarbanes-Oxley

Faced with such conflicting requirements, in the worst case, some non-US companies may reconsider their listing on US bourses if they are already listed there or may cancel/ delay their decision to list if they are considering one. This will adversely impact the free flow of capital and will make the optimal allocation of capital (and resulting benefits such as wealth and productivity) increasingly difficult to achieve. On NYSE, the non-US companies account for about 30% of the market cap that represents a huge pool of capital.

Though not all the non-US companies face these potential legal problems, this law really demonstrates the fine balance that capital markets regulators in US, or for that matter any country, have to maintain: the extent to which the foreign corporates are required to take-on the additional burden of complying with their laws vs. discriminating between the domestic and foreign companies when it comes to accessing the same capital markets.

SEC has already taken certain steps to exempt the foreign companies such as
* The ban on insider trading during 401(k) blackout periods would apply to foreign companies only when the blackout affects U.S. employees, and
* Restrictions on use of pro forma financial figures wouldn't be enforced when foreign companies are communicating with their non-U.S. shareholders.
Sarbanes-Oxley also gives the SEC some wiggle room to interpret how "independent" directors must be to serve on audit committees.

Corporates try their best to minimize their regulatory and economic costs - an excellent example is companies registering at tax-havens such as Bermuda. Regulators have to ensure that they are cautious enough for the sake of their investors as well as attractive enough for the corporates. As the impacts of Sarbanes-Oxley unfold, they will make a very interesting case study of this trade-off.

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Tablet's Journey (Is the Pen Finally Mightier Than the Keyboard? in Business Week, Nov 11, 2002)
A quick look at the history of touch-screen/ stylus equipped computers:

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Economics of Peace (by Moshe Alamaro in Harvard Business Review, Nov 1 2002)

This article gives an interesting perspective to the current Palestine-Israel conflict. According to the author, this conflict in not only a political probelm but also is driven by the economic differences between these two areas. For a sustainable peace, he recommends an approach similar to the one taken by Japan after World War II in which Japan consciously undertook efforts to help improve the economy of its neighboring South Korea. Japanese firms acted as the buyers as well as investors in South Korean enterprises, gradually the market forces recognised South Korea's competitive strengths and the its economy flourished. Making economic differences insignificant improves the chances of a peaceful co-existence of various groups and the same observation could be applied to the Middle Eastern strife.

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