SCO restructure signals trend to smaller, more focused IT suppliers

Santa Cruz Operations (SCO)'s recent decision to restructure globally is the latest example of a growing trend amongst vendors to weed out nonperforming product lines and focus on core competencies.

These smaller, more focused entities should make dealing with the companies more seamless for users, according to Rolf Jester, senior analyst at Gartner Group.

"However, there is a risk that the customer can be exposed to behind-the-scenes wrangling if it is not done well," he added.

Hot on the heels of similar decisions by Cabletron and 3Com, SCO will split its organisation into three lines of business: servers, Tarantella and professional services.

Like Cabletron and 3Com, SCO's announcement was made to arrest a decline in the company's financial performance; a profit warning for its Q2 ended March 31 was the impetus for SCO's restructuring.

"As companies are forced to grow larger to become global players, there is a slow early trend to ‘virtualise'," Jester said.

Virtualising, he explained, is where companies figure out core competencies and focus on relationships with customers and partners rather than attempting to deliver a full range of products.

In particular, Jester commended SCO's decision to focus on professional services as a "smart move.

"Services is where the action is, with the Asia-Pacific market growing at 30 per cent compounded," he said.

Mike Orr, who will serve as president of SCO's Tarantella division, claimed the move would also allow Tarantella to be marketed and sold more effectively, commenting the product "needed more attention" than it was getting in the old structure.

Tarantella is a server product that allows browser-based clients to access applications running on Unix servers, NT servers and mainframes. It competes with Citrix Systems' MetaFrame.

Orr also claimed the new structure would make it easier for each division to leverage the growth of Linux.

The company has already announced significant steps in the Linux market, including professional services and a version of Tarantella for Linux.

Orr said the company now intends to take portions of its UnixWare operating system and market them as layered products on top of other Unix versions and Linux.

"That way, we get a bigger market for each product individually," Orr said. Programming interfaces for SCO UnixWare and Linux will be "virtually identical", he said, and "increasingly, we will not care which one you use".

SCO will report its quarterly results at the end of the month. The company now expects that revenue for its fiscal year will be "significantly lower" than the original estimates of $US250 million in revenue and 60 cents earnings per share.

SCO is blaming Y2K-related delays "and other effects" for the shortfall.

"I am disappointed that the market for our Unix server software has not recovered as quickly as we expected following the Y2K period," Doug Michels, SCO's president and chief executive officer, said.

The restructuring and drop in revenues is also expected to affect the local operations, according to Patrick Lin, SCO Australia's acting managing director.

He was unable to provide specific details by press time, but said: "The channel will see no significant changes to business and customers will continue to see the same technology and products from SCO."

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