Author Archive

Is Cloud Computing a Trap?

By Paul Vallee September 30th, 2008 at 12:48 pm
Posted in MySQLOracleSQL Server
Tags:

A short post to direct people’s attention to and solicit comments on the following from someone who is admittedly a hero of mine, Richard Stallman:


But Richard Stallman, founder of the Free Software Foundation and creator of the computer operating system GNU, said that cloud computing was simply a trap aimed at forcing more people to buy into locked, proprietary systems that would cost them more and more over time.

“It’s stupidity. It’s worse than stupidity: it’s a marketing hype campaign,” he told The Guardian.

“Somebody is saying this is inevitable – and whenever you hear somebody saying that, it’s very likely to be a set of businesses campaigning to make it true.”

The 55-year-old New Yorker said that computer users should be keen to keep their information in their own hands, rather than hand it over to a third party.

His comments echo those made last week by Larry Ellison, the founder of Oracle, who criticized the rash of cloud computing announcements as “fashion-driven” and “complete gibberish”.

“The interesting thing about cloud computing is that we’ve redefined cloud computing to include everything that we already do,” he said. “The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?”

That blockquote links to the article at the Guardian where Stallman is interviewed and quoted. Please follow it to read the article in its entirety.

What do you think?

Alex Gorbachev comments on Exadata & Oracle Database Machine

By Paul Vallee September 24th, 2008 at 8:59 pm
Posted in Oracle
Tags:

Here’s a cool video of Alex Gorbachev commenting on the Ellison announcements today to Oracle corporate communications, just moments after the end of the keynote:

Technical details on the Exadata Storage Server

By Paul Vallee September 24th, 2008 at 5:59 pm
Posted in Oracle
Tags:

On Darrin Leboeuf’s advice, I loaded Kevin Closson’s blog, and sure enough, he had something ready to publish.

It must have been KILLING Kevin to keep this a secret. It must be a huge load off to publish this thing.

Anyway, Christo has been assigned to study this in detail and digest it overnight. Expect some good analysis tomorrow.

So, here is Kevin’s post publishing some technical details.

Cheers,
Paul

P.S. I am sure this is the future direction of storage intelligence. The fact that Oracle is setting the bar to only formatting half the disks in order to satisfy the IO saturation of the bandwidth will set a new bar. Do you know how hard we work to convince customers to do this (and fail!?) That, and the connection to BAHD and the problems I laid out in that article are obvious, this approach sets a new bar and addresses all of those issues.

Christo, by the way, is willing to bet this is a full-blown Oracle instance running on each Exabyte Storage Server. Interesting idea. From a manageability point of view, this is mind-boggling but possible.

The Oracle Database Machine, In Partnership with HP.

By Paul Vallee September 24th, 2008 at 5:17 pm
Posted in Oracle
Tags:

Notice to readers:
This is an excerpt of my liveblogging of the Keynote where the Oracle Database Machine was announced.

It is a mix of my comments in real time, and my quotes from things Larry Ellison said that I felt were worthy of mention.

You may be interested in reading more about Oracle’s Exadata platform. I would suggest taking a gander at Oracle’s product page and also reading up on Christo Kutrovsky’s Analysis of the Exadata and Oracle Database Machine announcement from a different point of view.

Also, Alex Gorbachev posted his analysis of the Oracle Database Machine and that’s a worthy read with some new technical details.

You may also be interested in the complete liveblog transcript of the keynote which includes my liveblogging of the rather boring HP advertiseynote before the big show.

I also separated out the Oracle Exadata Storage Server liveblog if you just want to get to the rest of the juicy stuff.

On with the liveblogging!

Second product announcement: The Oracle Database Machine (in partnership with HP).

Specs slides.

8 64-bit servers, 14 exadata storage servers, tons of ram.

Larry: “It will hold really a lot of songs”.

Three year development program.
Custormers:
Amazon, Yahoo, Countrywide, NPD, Quelle

M-Tel: a Bulgarian company, 10-72 times speedup. The worst speedup was 10x.

Alex G: “It’s mainframes!”

Larry: “Next slide”. Martin W: “why doesn’t he have the clicker himself!?”

Christo (a bulgarian) “I can’t believe M-Tel had this and managed to keep it a secret. That’s funny.”

28x P-Series competitive advantage at M-Tel. For half of one.

Darrin L: “Yeah but what’s the price difference. How do you license this!?”

Good questions IMHO. Oracle licenses based on server performance. There is a major problem to be solved there.

TPC-H query set. 30x average speed-up.

They have a paper describing it. Will be intersting to read it.

Christo: “This seems to be parallel-query only! It might be only for data warehouses!”

Larry: “With a conventional array, when you add storage, you don’t add data bandwidth. With this solution, every time you add storage server, you are adding not just disk capacity, but two infiniband pipes, two processors, and more cache”.

Makes Sense. Refer to BAHD again. Man I feel a bit smart right now.

Now bashing Teradata. I guess we’re into the advertising section.

Now Larry is saying how similar this is to Netezza. One processor per disk drive. Christo is saying it’s very similar.

Larry: two big differences:
1. our database machine runs oracle, theirs does not.
2. we lose a drive, ours keeps running, theirs does, their queries stop.
Christo “umm no they don’t they have three way mirroring”.

Great quip: “even I studied about B-Tree indexes in School!” LOL LOL

Slide - comparing vs. Netezza. Clearly this is the company they are targeting.
Oracle’s stuff is bigger and faster and has more cores and faster bandwidth.

Christo: “The question is, does that CPU sort.”

HP Oracle … 650,000 vs. 1.500,000 for Teradata system with less spec.

In the Oracle column, you need to pay the 1.7 mm software license.

Software license for Oracle though… 1.7mm. There is something interesting going on here.

“Even if you pay list for Teradata, it’s cheaper for capacity.”

Next slide……..

Will speed up OLTP as well as data warehousing.

Available today, 10-50x faster than current (in small type) oracle data warehouses”

I must have missed something. How is this not costing more than Teradata?

OK Christo explained, the Oracle system had triple the storage for modestly more cost.

Mark Hurd talking again. Can HP please hire somebody exciting? Maybe exciting is just not what they do.

Adds the fact that these storage servers are “completely open, proliant-based servers”.

I wonder how long this will be HP-only.

Next, I think you’ve listened to me for long enough, now take a moment and listen to this advertising interlude.

More to come.

The Exadata Storage Server

By Paul Vallee September 24th, 2008 at 5:09 pm
Posted in Group Blog PostsOracle
Tags:

Notice to readers:
This is an excerpt of my liveblogging of the Keynote where the Exadata Storage Server was announced.

It is a mix of my comments in real time, and my quotes from things Larry Ellison said that I felt were worthy of mention.

You may be interested in reading more about Oracle’s Exadata platform. I would suggest taking a gander at Oracle’s product page and also reading up on Christo Kutrovsky’s Analysis of the Exadata and Oracle Database Machine announcement from a different point of view.

You may also be interested in the complete liveblog transcript of the keynote which includes my liveblogging of the rather boring HP advertiseynote before the big show.

I also separated out the Oracle Database Machine liveblog if you just want to get to the rest of the juicy stuff.

So here goes with the liveblogging transcript:

Announcing Oracle’s first ever hardware product.

The exadata programmable storage server.

Building intelligence into the storage server.

Allows us to reduce the amount of data.

Confirming HP is the partner.

Storage server does not pass disk blocks back to the database server, it actually passes query results.

Note: A few startups are doing this sort of thing already. They should be totally freaking out right now.

Slide explaining how query processing works in traditional storage.

Stark contrast to a grid of exadata storage servers, with processing ability local to each and every disk drive.

“We actually pass the query from the database server directly into the storage servers.”

Explaining how this works.

This reminds me hugely of kickfire for mysql, but for Oracle.

Cool, they’re provisioning two infiniband pipes per storage server. Nice. 40gbps.

Marc Fielding: “The problem is still the disk drives.”

Larry: 1gb/s per exadata storage server, you can have dozens working in parallel.

Christo: 1gb/s??? that’s not that good.

Immediately available for Linux., will work with any Oracle database.
Available for x86. Christo: “not 64 bit???????”

By the way, I made a bet with Paul Cunningham that Kickfire would fail because of Moore’s law. I wonder if I should bet against this tech too.

More details to come…

Liveblogging Larry Ellison’s Keynote

By Paul Vallee September 24th, 2008 at 4:32 pm
Posted in Group Blog PostsOracle
Tags:

I’ll be liveblogging the keynote here along with Marc Fielding, Christo Kutrovsky, Darrin Leboeuf and Luke Davies and Martin Wisniewski.

First observation: I can not believe I can not make this video full screen.

Even Pythian’s flash video player can go full screen.

Introduction time. Safra Katz.

Confirming HP is here as part of the announcement.

So presentation from HP is here first. Weird. Maybe this is a megabucks commercial keynote. Introducting Exec VP Anne Livermore.

“Very very very very very important event for HP. 100000 joint customers.”

Show of hands for HP adoption. A bit lame, she seems disappointed with how many hands are raised. :-)

The video stream is super saturated, the video is super skippy. Hopefully I can understand what’s going on well enough to do this liveblog.

So far it’s completely a vendor advertisement keynote.

“By 2010, more than 1/3 of CEOs and CIOs realize their datacenters will not meet their demand”.

This is not that big a deal according to Marc Fielding. Basically, Duh, 2/3 of datacenter CEOs do not need to invest further to make it through two years, 1/3 does. I agree.

Ugh another advertising slide. I hope there’s something meaty here.

One in six HP servers runs Linux. That’s interesting.

Bragging about HP winning vs. EMC.

HP would be the sixth largest software company in the world if you looked at only software revenue (interesting)

“Transforming the data center”

“True 24×7 lights out automated and energy efficient data center”

I am IMing with Alex Gorbachev who is at the keynote floor.

I asked him:

Paul Vallee
5:44
do you think HP is only going to advertise here?
5:41 PM

or are they part of this x

oracloid11g
5:44
I think they are

I think it’s crazy for Larry to allow HP to announce it then. He will come onstage with them?

Oh my god she’s actually playing an advertisement.

“next generation data center”

Christo: “I think we were too optimistic, thinking it was going to some amazingly cool piece of Oracle software. I’m starting to think we will be disappointed and it will be hardware.”

Alex Gorbachev is twittering live: http://twitter.com/alexgorbachev.

Darrin Leboeuf: “Maybe Oracle bought HP’s services arm!!! LOL”

HP spends 2% of revenue on IT. Interesting. Consolidated 60+ datacenters into 6.
BTW among Pythian’s customers that share such data, I am aware of one large company spending 1.4%.
Not as large as HP though. :-) Maybe there is a cost to scale.

Talking about virtualization now. Still completely unrelated to X as far as I can see.

So far this looks like one of those million dollar advertising keynotes.

29 minutes of this and I’m still awake. I’m pretty proud.

LOL silence…. then “can i have the next chart please”

Christo Kutrovsky: “Can we have the big news now?”
Darrin Leboeuf: “Can we have the next slide please??? please? Next?”

Now she’s talking about EDS. I missed the point as to why?

I guess they’re partnering with EDS on services. All-righty then. This is also not keynote-worthy material.

OK I get it thanks to Martin. HP bought EDS. How did I miss this news? :-)

17:56 Shilling for EDS’ outsourcing. Here’s a tip, choose Pythian instead.

“Performance Optimized Datacenters, our PODs”. Clever.

So HP is following Sun’s lead in container-based datacenters. Way to go.

17:57 Alex Gorbachev: “So boring.”

(Christo suggested I timestamp. All times EST.)

HP working on eliminating copper in computers, replacing with laser+optical, as a power-saving play. Interesting.

18:00 “to wrap up…” woo hoo

Everyone here in my office left except Christo and I. That should paint a picture.

Polite applause.

OK, Larry’s sailboat is on the screen.

“Extreme Performance” . It’s showtime.

Lots of sailboat visuals. Larry loves his sailboat. He seriously loves it. We get it.

18:03 “Ladies and gentlemen, Larry Ellison”

Wow now he’s talking about sailing. Incredible.

OK I’m giving up the sarcasm. The commercial is over and I’m getting ready to get excited.

“next slide please” wow this has not been rehearsed much. Probably because of the secrecy.

Looks like this will be about VLDB. Databases are tripling in size every two years.

“Disk systems today simply can not cope with the amount of data that has to be moved off those drives. We have a huge bandwidth problem”.

“You don’t have to have a 200tb db to start experiencing the slowdowns. 1tb is the elbow of the curve [pretty graph]”

Darrin and Marc are back. I guess it’s getting interesting again.

Two possible solutions:
1. reduce data going through to the storage systems.
2. wider, faster pipes, and more of them.

(reminds me of the bahd).

Announcing Oracle’s first ever hardware product.

The exadata programmable storage server.

Building intelligence into the storage server.

Allows us to reduce the amount of data.

Confirming HP is the partner.

Storage server does not pass disk blocks back to the database server, it actually passes query results.

Note: A few startups are doing this sort of thing already. They should be totally freaking out right now.

Slide explaining how query processing works in traditional storage.

Stark contrast to a grid of exadata storage servers, with processing ability local to each and every disk drive.

“We actually pass the query from the database server directly into the storage servers.”

Explaining how this works.

This reminds me hugely of kickfire for mysql, but for Oracle.

Cool, they’re provisioning two infiniband pipes per storage server. Nice. 40gbps.

Marc Fielding: “The problem is still the disk drives.”

Larry: 1gb/s per exadata storage server, you can have dozens working in parallel.

Christo: 1gb/s??? that’s not that good.

Immediately available for Linux., will work with any Oracle database.
Available for x86. Christo: “not 64 bit???????”

By the way, I made a bit with Paul Cunningham that Kickfire would fail because of Moore’s law. I wonder if I should bet against this tech too.

Second product announcement: The Oracle Database Machine (in partnership with HP).

Specs slides.

8 64-bit servers, 14 exadata storage servers, tons of ram.

Larry: “It will hold really a lot of songs”.

Three year development program.
Custormers:
Amazon, Yahoo, Countrywide, NPD, Quelle

M-Tel: a Bulgarian company, 10-72 times speedup. The worst speedup was 10x.

Alex G: “It’s mainframes!”

Larry: “Next slide”. Martin W: “why doesn’t he have the clicker himself!?”

Christo (a bulgarian) “I can’t believe M-Tel had this and managed to keep it a secret. That’s funny.”

28x P-Series competitive advantage at M-Tel. For half of one.

Darrin L: “Yeah but what’s the price difference. How do you license this!?”

Good questions IMHO. Oracle licenses based on server performance. There is a major problem to be solved there.

TPC-H query set. 30x average speed-up.

They have a paper describing it. Will be intersting to read it.

Christo: “This seems to be parallel-query only! It might be only for data warehouses!”

Larry: “With a conventional array, when you add storage, you don’t add data bandwidth. With this solution, every time you add storage server, you are adding not just disk capacity, but two infiniband pipes, two processors, and more cache”.

Makes Sense. Refer to BAHD again. Man I feel a bit smart right now.

Now bashing Teradata. I guess we’re into the advertising section.

Now Larry is saying how similar this is to Netezza. One processor per disk drive. Christo is saying it’s very similar.

Larry: two big differences:
1. our database machine runs oracle, theirs does not.
2. we lose a drive, ours keeps running, theirs does, their queries stop.
Christo “umm no they don’t they have three way mirroring”.

Great quip: “even I studied about B-Tree indexes in School!” LOL LOL

Slide - comparing vs. Netezza. Clearly this is the company they are targeting.
Oracle’s stuff is bigger and faster and has more cores and faster bandwidth.

Christo: “The question is, does that CPU sort.”

HP Oracle … 650,000 vs. 1.500,000 for Teradata system with less spec.

In the Oracle column, you need to pay the 1.7 mm software license.

Software license for Oracle though… 1.7mm. There is something interesting going on here.

“Even if you pay list for Teradata, it’s cheaper for capacity.”

Next slide……..

Will speed up OLTP as well as data warehousing.

Available today, 10-50x faster than current (in small type) oracle data warehouses”

I must have missed something. How is this not costing more than Teradata?

OK Christo explained, the Oracle system had triple the storage for modestly more cost.

Mark Hurd talking again. Can HP please hire somebody exciting? Maybe exciting is just not what they do.

Adds the fact that these storage servers are “completely open, proliant-based servers”.

I wonder how long this will be HP-only.

Next, I think you’ve listened to me for long enough, now take a moment and listen to this advertising interlude.

My comments: This is definitely a premium play. It will be interesting to follow the developments. It is not at all what I thought it would be, but it is fascinating.

I bet against Kickfire with Paul McCullagh because of Moore’s Law limiting the long-term value of the speed-up. Maybe I was wrong, Larry is betting a lot more money that I am.

Christo: Let me sum it up: This is parallel query being pushed down to the disk.

Christo: I have two words for you: Object Checkpoint.
Basically before you run a parallel query on any object, you have to checkpoint it. This is already there in 10g and is an enabling technology.

Darrin: When you start up an instance, does it start up an instance on the disk server?
Christo: Doesn’t need it, just needs a filter server.

Christo: The question is, does it sort???????? This is extremely important.

Christo: My first guess was a SAN. But I never imagined Oracle would start having a hardware play. (Or two).

Christo: They got tired of people not buying bandwidth, so they’re forcing people to buy it now. Smart.

Looks like Larry will be talking about X with HP

By Paul Vallee September 24th, 2008 at 3:39 pm
Posted in Oracle
Tags:

I’m sorry if everyone else knew this already, but I just noticed the following from the Live Keynote page (click on Larry’s keynote to see it):

Larry with HP about X

So Larry will be joined on stage by bigwigs from HP.

You will remember that HP bought Polyserve, Kevin Closson’s clustered file systems company, a little while back.

No coincidence, I think, but as we know from multiple sources, Kevin is now at Oracle as an Architect on this new technology that Larry is announcing.

At first I thought the HP keynote was one of those big-pay vendor closers. But now, with it being one session in the Live View, and what we’re starting to learn about the likely nature (storage) of the innovation, the following snippet can easily be re-interpreted (interesting bit in my bold):

Transforming Business and Technology Today and Tomorrow
Innovation is the lifeblood of information technology, but businesses are far more selective today in the kinds of technology they will buy and deploy to ensure they remain competitive. They’re looking for practical innovation that will optimize business results such as lowering IT costs, reducing risk and improving growth and profitability. Come learn about HP’s customer-focused innovation, including investments in research, product development and advanced services that have increased energy efficiency, provided new approaches to datacenter transformation, and also given us new advances in internet technology that are shaping the future of enterprise IT. Also highlighted: the joint innovation that HP and Oracle are delivering to their customers around the world.

Ann Livermore | Executive Vice President, Technology Solutions Group, HP | Biography [+/-]
Mark Hurd | Chairman of the Board and CEO, HP

The pieces are coming together. Stay tuned as I will be writing further about this as the keynote begins.

Log Buffer #114: A Carnival of the Vanities for DBAs

By Paul Vallee September 12th, 2008 at 1:12 pm
Posted in Log BufferMySQLNon-Tech ArticlesOraclePostgreSQLSQL Server
Tags:

This is the 114th edition of Log Buffer, the weekly review of database blogs.

I am sorry to say that this log buffer was supposed to be edited by Dave Edwards, but he’s suffering from severe and long-lasting tooth pain and until his root canal is done he’s KO’d by a killer combo of painkillers and the pain that the painkillers can’t kill. I’ve been there myself, twice, and here’s a tip Dave. It hurts until the dentist takes out the needle. Then the pain goes away while he digs. The pain comes back that night. The next morning it’s worse than ever, unbelievably, writhingly bad. But later that afternoon, blisssssssssssss. :-) Good luck man.

This Log Buffer has been generated in a completely automated way with the help of the incredibly awesome AideRSS.

To give you an idea of just how awesome it is, I was able to load up Dave’s complete OPML file of all the blogs he monitors for Log Buffer. And AideRSS applied it’s magical PostRank algorithm which scores blog posts based on how many comments, del.icio.us bookmarks, blog links from other blogs, etc. that it received, along with some more secret sauce they don’t publicly tell us about (kind of like Google with their Pagerank equivalent). The number to the left of each headline represents the linked item’s AideRSS PostRank.

It did a great job of automatically selecting the best posts from the last week.

To give you an idea of AideRSS’s helpfulness, here are a couple useful feeds I suggest you subscribe to:

1. PlanetMySQL, but only with posts that rank “Best”
2. OraNA.info, again only the posts that rank “Best”. Note that there is a bug in Eddie’s feed that makes it impossible to use all possible information on the ranking.
3. SQLBlogs.com processed by AideRSS to show only the best posts.

While I have no idea how AideRSS plans to make moolah, I think we can agree that is some kind of awesome if you’re like me and can’t afford to miss a big story, but can’t afford the time you would need to read it all. Many thanks to Andrew Baldwin and although that’s the AideRSS about page there there’s a good pic of Andrew on that page. I first met Andrew at MySQLConf 2008 this spring and he’s a great guy and a great advocate for this service.

With no further ado or free advertising for AideRSS, here’s this week’s fully automated Log Buffer. We do not plan a fully automated Log Buffer to become routine but depending on the feedback we might adopt this approach whenever we have a last minute cancellation due to illness or what have you. So your feedback would definitely be appreciated, thanks.

10.0 - Random selection, with a bias ..

Say you want to randomly select your employee of the month, but not so randomly, better, you’ d like to give your best employees a bigger chance to be selected based on their rating. This is just an example, you could be randomly displaying ads from your customers, but giving an higher chance to be displayed to […]

(more…)

Critical security vulnerability in SQL Server 2005 announced

By Paul Vallee September 10th, 2008 at 3:45 pm
Posted in SQL Server
Tags:

All,

I’m writing to help get the word out that Microsoft announced a major security vulnerability in GDI+, a component that is included and vulnerable to remote code execution exploits in every supported release of SQL Server 2005.

You can find our more about the vulnerabilities and affected products (there’s a long list, not just SQL 2005) at the Microsoft announcement here.

There is an update already available, so you probably want to evaluate an accelerated deployment of that. If you are a current Pythian client, we’ll be reviewing this patch for you. If you are not, now would be a good time to sign up, and Michelle will take care of you. :-)

Snippet from the announcement:

Executive Summary

This security update resolves several privately reported vulnerabilities in Microsoft Windows GDI+. These vulnerabilities could allow remote code execution if a user viewed a specially crafted image file using affected software or browsed a Web site that contains specially crafted content. Users whose accounts are configured to have fewer user rights on the system could be less impacted than users who operate with administrative user rights.

This security update is rated Critical for all supported editions of Windows XP, Windows Server 2003, Windows Vista, and Windows Server 2008, Microsoft Internet Explorer 6 Service Pack 1 when installed on Microsoft Windows 2000 Service Pack 4, Microsoft Digital Image Suite 2006, SQL Server 2000 Reporting Services Service Pack 2, all supported editions of SQL Server 2005, Microsoft Report Viewer 2005 Service Pack 1 Redistributable Package, and Microsoft Report Viewer 2008 Redistributable Package.

This security update is rated Important for all supported editions of Microsoft Office XP, Microsoft Office 2003, 2007 Microsoft Office System, Microsoft Visio 2002, Microsoft Office PowerPoint Viewer 2003, Microsoft Works 8, and Microsoft Forefront Client Security 1.0. For more information, see the subsection, Affected and Non-Affected Software, in this section.

The security update addresses the vulnerabilities by modifying the way that GDI+ handles viewing malformed images. For more information about the vulnerabilities, see the Frequently Asked Questions (FAQ) subsection for the specific vulnerability entry under the next section, Vulnerability Information.

Recommendation. Microsoft recommends that customers apply the update immediately.

Known Issues. Microsoft Knowledge Base Article 954593 documents the currently known issues that customers may experience when installing this security update. The article also documents recommended solutions for these issues.

Outsourcing vs. Offshoring

By Paul Vallee August 20th, 2008 at 11:51 am
Posted in Non-Tech ArticlesPythian
Tags:

I tripped over an old oracle-l exchange (not that old, from March of this year) and I thought it would make good content for a blog post on the critical difference between outsourcing and offshoring.

It started when Ethan Post posted a link to this fascinating story at the Ludwig von Mises Institute about how the U.S. dollar’s collapse affects the outsourcing industry. As many of these posts do, the idea of outsourcing gets conflated with that of offshoring. What the author really means to say is that the “downward dollar delivers a blow to offshoring“, not outsourcing.

Let me explain further. I am now cribbing shamelessly from my oracle-l post and so if you read this already this spring, my apologies.

Ethan had posed the following question:

Interesting article on the effects of the dollar’s fall on outsourcing. Would be interesting to hear a few of you who are perhaps feeling these effects to comment.

To which I replied:

Our margins were definitely squeezed painfully from April 07 until late last year (follow that link to see a 20% or so decline in the USD/CAD exchange, and remember that a substantial chunk of Pythian’s costs are in CAD and about 70% of our income is in USD). So it hasn’t been really that much fun adjusting to our new currency realities. That being said, I think there is a meaningful difference between offshorers and outsourcers and that these different ideas get conflated a lot, including in this case.

If your company’s entire business model is simply shifting work from a country where wages are high to a country where wages are lower, you have two problems. First, you are very vulnerable to this type of currency shift because it is at the core of your profit model. This is called labour arbitrage. Second, as time marches on and we continue our trend to a global rate for any given IT service, your company will cease to have any reason to exist. This article from the Economist covers general India inflation, trust me focus on labour inflation in the information technology sector and the situation is much, much worse.

However, outsourcing properly conceived can be highly successful even when the resources are hired locally to the market being targeted; meaning without relying on exchange rate differences nor differences in global payscales. These companies are successful because by concentrating expertise, adopting best practices, innovating and reusing work they have found efficiencies that add up to more than their direct costs of services delivery + overhead (meaning, that profit model has nothing to do with currency or wage geography).

I would count Pythian among companies conceived along those lines, we are far from alone, certainly our direct competitors based only in the U.S. dbaDirect, Contemporary and DCC (hi guys! well done!) do not rely to any degree on wage differences or exchange rates as parts of their profit models. To put things into perspective, although Pythian has a presence in 10 countries now (including four U.S. cities), our profit model also has innovation, expertise, scale and re-use as it’s heart and soul, not labour arbitrage.

So anyway, we’ve successfully adjusted over here and I think offshoring will lose a lot from the collapse of the USD, but these companies that are offshorers only will be forced to morph into something better to survive, which is good for everyone.