The 10 Biggest Software Stories Of 2011

Anytime an industry undergoes a paradigm shift, there are bound to be winners and losers. As the software industry's evolution toward cloud computing accelerated in 2011, no one wanted to be a loser. That would explain the industry's hyper-competitive tone this year. Whether it was the Google-Microsoft battle for cloud leadership, the legal sniping between Hewlett-Packard and Oracle over the future of Itanium, or the wave of patent-related lawsuits, software vendors this year seemed to be in a constant state of conflict.

SAP and HP both made what they hope will be transformative acquisitions (SuccessFactors and Autonomy, respectively), although HP's experience with WebOS illustrated how difficult that can be. Microsoft is counting on Windows 8 to make a splash in the tablet market while preserving its desktop PC dominance.

These were the 10 most important software stories in 2011.

In early December application giant SAP struck a deal to acquire SuccessFactors, a developer of Software-as-a-Service human capital management applications, for $3.4 billion.

It was certainly one of the larger tech acquisitions in 2011 from a cost point of view -- and some questioned whether SAP had overpaid for the cloud software vendor, given that in the first nine months of 2011 SuccessFactors reported a loss of $30.7 million on sales of $231.7 million.

While SuccessFactors has growth potential, SAP CEO Bill McDermott said an equally compelling reason for buying it was SuccessFactor's expertise in developing and deploying cloud-based software -- something that SAP, whose roots are in selling big software to big companies, has been trying to do on its own. What SAP is buying is a change agent. "We'll take the [cloud] DNA from SuccessFactors and bring that to the SAP cloud," McDermott said.

2011 marked the 20th anniversary of the Linux operating system. The year also saw a wave of new, innovative open-source technology that should erase any doubts that open-source software is ready for prime time.

The lineup of notable open-source products released this year includes Ubuntu's Unity user interface for the desktop, the LibreOffice application suite, the OpenStack cloud platform (the result of a partnership between Rackspace and NASA), the Asterisk 10 VoIP platform, and new releases of the Firefox browser and MySQL database.

The irony is that the open-source model seemed to hit its stride in 2011, a year in which Microsoft, Apple, Google and other vendors were engaged in ever-more acrimonious rounds of patent acquisitions and litigation, noted Ed Moltzen, managing editor of the CRN Test Center, in a blog.

Oracle was already a major -- if not dominant -- player in most every area of software, from database software to middleware and applications. The acquisition of Sun Microsystems in 2010 made it a force in the server and storage system markets as well.

So it really shouldn't have been any surprise when Oracle CEO Larry Ellison announced at Oracle OpenWorld in October that the company was getting into the public cloud service business. And yet few were prepared when Ellison, after debuting the company's new cloud-based Fusion applications, said: "I guess if we have new applications to run in the cloud, I guess we need a cloud."

When it's fully available in 2012 the Oracle Public Cloud, combining Platform-as-a-Service and Software-as-a-Service capabilities, will compete with other cloud service offerings such as the Amazon Elastic Compute Cloud, the Rackspace Cloud Computing Service and Salesforce.com's Force.com service.

On August 18 Hewlett-Packard disclosed a plan to acquire Autonomy, a developer of information management and infrastructure software, for a whopping $10.3 billion.

The deal, seen as a bold move by some and an expensive mistake by others, was CEO Leo Apotheker's first major step toward boosting HP's software sales from a paltry 3 percent of total revenues. It was HP's biggest software deal ever and one of the biggest tech acquisitions this year.

Trouble was, Apotheker got the boot just one month later and some predicted HP wouldn't go through with the deal. But HP wrapped up the acquisition in October and customers and partners await detailed plans for how Autonomy will be integrated with the rest of the company.

Software companies have been using patents for competitive advantage for years, either to boost sales by generating license revenue or intimidating competitors with infringement lawsuits. But in 2011 there was a noticeable spike in patent-acquisition activity.

Take Google's $12.5 billion acquisition of Motorola Mobility. Google stands to gain more than 17,000 issued patents and 7,500 pending patents. Google also purchased more than 2,000 patents from IBM and apparently intends to use the patents as defensive weapons for its Android mobile OS. Google, however, was outbid by an Apple-led consortium when it tried to acquire more than 6,000 patents in the Nortel Networks fire sale.

The need to play patent defense was obvious in 2011. Google was locked in a nasty lawsuit with Oracle, which charged that Google's use of Java in Android violated seven Oracle patents. And Microsoft targeted Samsung and other manufacturers of Android devices, charging them with patent infringement.

While there were many vendors jostling for position in the cloud in 2011, Google and Microsoft were locked in a pitched battle for the right to claim the title of cloud computing king.

Microsoft launched Office 365 in June, posing a direct challenge to Google Apps. The two fought endlessly over government contracts, with Google even clashing with the U.S. Department of the Interior. The companies frequently exchanged marketing taunts, such as Microsoft's series of blog posts during Google's Atmosphere 2011 conference, charging the online search giant with being more focused on advertising than business customers.

At year's end Google's Chrome browser surpassed Firefox to become the Number-Two browser behind Microsoft's Internet Explorer, establishing yet another battlefield where the two giants will go head-to-head in 2012.

Oracle announced in March that it was halting software development for Intel's Itanium processor. Given that other software vendors, including Red Hat and Microsoft, had done the same in recent years, Oracle's move seemed to be a straightforward business decision.

Trouble was, the only real hardware vendor still building Itanium-based servers is HP. And relations between HP and Oracle had been on a downward spiral. So Oracle's announcement produced howls of indignation from HP execs, followed by a breach of contract suit against Oracle which argued that CEO Larry Ellison & Co. are contractually committed to supporting Itanium -- a claim Oracle has denied. The legal back-and-forth has dragged on all year. Last month Oracle charged in a court filing that HP has been "secretly" paying Intel to keep producing the Itanium line of processors "so that HP can maintain the appearance that a dead microprocessor is still alive. The whole thing is a remake of 'Weekend at Bernie's.'"

It would be hard to find a software product whose fortunes have fallen so far, so fast as HP's WebOS mobile OS. When HP bought Palm last year for $1.2 billion, WebOS was widely seen as the jewel in the crown. In MarchHP unveiled an ambitious plan to use WebOS to link devices such as PCs, tablets, printers and smartphones. And HP resellers and ISV partners were heavily lobbied to jump on the WebOS bandwagon. Less than six months later, HP announced that it was killing its WebOS-based Touchpad tablet because of slow sales and the company was "exploring options" for the future of WebOS.

Finally, just last week, HP announced it would continue to distribute WebOS under an open-source license. But it wasn't at all clear whether that project could attract enough developers to keep WebOS a viable product. It may be that HP has simply decided to let WebOS fade out of the picture rather than make the tough choice to shut down the last remnant of its $1.2 billion investment.

One of the biggest dustups in the software industry in 2011 began in July when VMware announced that it was changing the licensing terms for its vSphere 5 software. The new vRAM plan pegged licensing costs to the amount of physical memory customers allocate to VMs on a host rather than basing it on the number of server cores.

VMware partners and customers went ballistic. The change, many argued, would result in a significant price hike. After several tumultuous weeks VMware relented, making changes to its vSphere licensing model it said would allay customer concerns over higher costs.

VMware archrival Microsoft, meanwhile, took every opportunity to portray its Hyper-V virtualization software as a more cost-effective option. At Microsoft's Worldwide Partner Conference executives pounded home the message that Microsoft's technology was one-fourth the cost of VMware software – presenting Microsoft resellers with a competitive opportunity.

Speaking at the Microsoft Developer Forum in Tokyo, CEO Steve Ballmer made an offhand reference to "Windows 8," the first time anyone at Microsoft had mentioned by name the next generation of the company's flagship software. And so began a series of announcements, previews and speculation that made Windows 8 one of the most important software stories in 2011 -- even though it won't appear until 2012.

Microsoft launched the "Building Windows 8" blog to keep customers, channel partners and developers informed about the software's progress. Developers also got their hands on a "developer preview" release in September at the Microsoft Build conference.

Most important was Microsoft's plans to design Windows 8 and its "metro" user interface to run on both desktop PCs and tablets. That would make Microsoft a player in the tablet market where it has been a no-show. But some question whether Microsoft -- and Windows -- might be too late to the tablet party.