The year 2004 defied predictions: IBM Corp. sold its PC arm to a Chinese competitor, Oracle Corp. managed to swallow PeopleSoft Inc., and -- perhaps the most dramatic of all -- Microsoft Corp. and Sun Microsystems Inc. aligned to make their products interoperate.

This year"s headlines also revealed plot twists that were not so surprising. The adoption of open source software continued unabated; Microsoft deferred its dream of a unified file system in Longhorn; Web services standardization extended its march; storage vendors offered intriguing designs to handle data; and Dell Inc. CEO Kevin Rollins said his company wants to add Advanced Micro Devices Inc. chips to its product lineup.

Big Blue turns new leaf

The most noteworthy desktop computing story of the year was IBM unloading its PC division to Chinese PC manufacturer Lenovo Group Ltd. The deal, worth US$1.75 billion, ended IBM"s decade-long internal debate as to whether it should remain in the thin-margin PC market.

What finally convinced IBM to get out of the PC business, which generated $11.5 billion in revenue for IBM in 2003 and was profitable during the past few quarters, was that it did not fit with the company"s higher-margin, server-based On Demand strategy and massive professional services business. IBM had already outsourced its manufacturing operations after it sold the last of its PC plants in 2003.

Some see the sale as expanding the size of the overall market for PCs through lower price points, with IBM picking up additional market share, although that expansion will benefit only a few vendors. In fact, the deal could foreshadow other PC vendors exiting the market by 2007, according to Gartner Inc.

Oracle merges the market

The gobbling up of PeopleSoft was the applications sector"s biggest event, a landmark and controversial hostile takeover that saw PeopleSoft CEO Craig Conway ousted by the company"s board of directors. Oracle swallowed PeopleSoft officially in mid-December. Subsequently, Oracle President Charles Phillips said Oracle would work out its plans with PeopleSoft by the end of the year and hit the ground running by January 2005, but there is little question that integrating the two companies and cultures is a daunting task.

Open source surge

Open source software emerged as a significant protagonist in 2004.

"I"ve seen a tectonic shift in this area" of corporate attitudes toward open source, said Eric Friedman, infrastructure architecture team lead at Wells Fargo. Companies now are asking, "Why are we buying a vendor product when we could use open source?" Friedman said. "That"s become the default position -- to look for a free solution."

Linux continued its march toward the upper reaches of the enterprise throughout 2004, aided by the delivery of the long-awaited 2.6 version of the Linux kernel, first by Novell Suse and then by Red Hat Inc. The new kernel gives Linux distributors the ability to compete more effectively against Unix competitors such as Hewlett-Packard Co. and Sun. It allows versions of Linux to handle significantly larger workloads, greater amounts of memory and storage, and more processors in a single box.

In response to Linux"s growing strength, Sun delivered Version 10 of its Unix-based Solaris operating system in mid-November and announced the much-anticipated update would be free of charge.

"If we look at operating systems, the areas of significant growth are Windows and Linux," said Dan Kusnetzky, an analyst at IDC.

Longhorn falls short

Winning the General Francisco Franco-is-still-dead award for 2004 is Microsoft"s Longhorn. In August, the company announced it was taking one of the key components of the operating system, the WinFS file system, out of the first version, which is still not expected until late 2006 at the earliest. Without WinFS, the debut of Longhorn, which has been talked about for more than three years, will lose much of its shine. The first locked-down beta is now scheduled for the fourth quarter in 2005.

Microsoft officials reasoned that taking WinFS out will make it easier for users to transition from Windows XP, meanwhile still promising to deliver other critical components, including Avalon and Indigo. Some users were mildly disappointed but hardly surprised.

"We were never holding our breath waiting for this. (WinFS) eventually will be an important technology, but let"s just say we have more important issues to deal with for the next two years," said Ronald Dawkins, CIO of a financial services company in the Chicago area.

The great peacemaking

Previously bitter rivals, Microsoft and Sun forged a cooperative agreement on interoperability in several technology areas, including Web services and the deployment of Java on Windows. Both companies, however, share a competitive threat with Linux. Still, the possibilities intrigued IT leaders.

"We really are working toward a world where both Sun and Microsoft products coexist," said Greg Papadopoulas, CTO of Sun.

Tech trends of the year

In the applications field, companies are discovering that the customer matters. The vice president of marketing at nearly every major enterprise company now claims their company is customer-centric.

"CRM has had a rebirth as a strategic core of functionality in the enterprise," said Joshua Greenbaum, principal partner at Enterprise Applications Consulting.

BI software, for its part, had a banner year, and it looks even better for 2005. New regulatory requirements such as Sarbanes-Oxley are fueling the growth of BI.

This past year did not see any solutions to lingering security problems. Government regulations, worsening spam, and the escalating problem of e-mail-born virus attacks forced many enterprises to fortify messaging security and look for broader technology approaches to the problems. Messaging security tools that formerly zeroed in on the well-known spam plague expanded their arsenal to fend off messaging-born viruses, phishing scams, and compliance violations.

If there was one acronym in the application deployment space that highlighted 2004, it was SOA (service-oriented architecture). An SOA enables applications to be deployed loosely as services, with quick changes to the architecture a key benefit -- as opposed to traditional, unwieldy, monolithic deployments. Web services technologies are key in an SOA paradigm. Seemingly all the big players, from BEA Systems Inc. to IBM, Oracle, and Sun, seek a dominant role.

Web services standardization crept along in 2004, with BPEL (Business Process Execution Language) for Web Services, the BEA-, IBM-, and Microsoft-authored specification, being established as a de facto industry standard. Specifications such as Web Services-ReliableMessaging also gained traction.

For storage, 2004 was rife with activity as IT managers moved more and more storage onto networks, added tiered storage installations, and designed storage installations to better handle business continuity issues. Products of note ranged from Hitachi"s 32-petrabyte TagmaStore Universal Storage Platform to Dell"s AX100 that starts at 48GB. Storage vendors also began to embrace virtualization, with IBM shipping its storage virtualization product and EMC Corp. demonstrating a storage router planned for 2005.

A storage theme that could be applied throughout the datacenter in 2004 was ease in IT management. "Companies are looking to better control their data, whether it is in a centralized storage area or at a remote office," said Dianne McAdam, an analyst at Data Mobility Group.