– Eric Auchard is a Reuters columnist. The views expressed are his own –

The Chinese government has backed away from mandating filtering software on all personal computers in China, in a move that averts a dangerous escalation in its censorship powers.

But however controversial and unworkable China’s plan to require Internet filters on PCs proved to be, Western firms have largely themselves to blame for creating and selling such filters in the first place.

The danger rears its head whenever technology created to solve some specific security problem is put to new and unintended use, not just in repressive regimes like China, Iran or Saudi Arabia, but professed freedom-loving countries in Europe or the USA.

“What is good and what is evil?” asks Mikko Hypponen, chief research officer at Finnish anti-virus software company F-Secure Corp. “It is really a very basic problem that security people face.”

A computer password cracker in the wrong hands is considered malicious, of course. But corporate network administrators rely on the same tools to recover lost documents when employees forget computer passwords. Voice recognition software used in corporate call centres to automate and improve customer service can be used by police to wiretap suspects on a grand scale.

On Tuesday, China’s official news agency reported that a government ministry had abruptly backed down from requiring that every PC sold in China include a censorship program called “Green Dam-Youth Escort”.

The software blocks web sites using a blacklist of keywords judged to be sexual or politically sensitive, or flesh-coloured images it assumes are naked bodies. But University of Michigan researchers found that the software developed by a Chinese firm had liberally borrowed the code of parental control software CyberSitter from the California-based firm Solid Oak.

Mobile network maker Nokia Siemens Networks was criticized last month after the Iran election protests for supplying “deep packet inspection” technology to mobile phone companies which Iran’s government allegedly used to track online dissidents. The same software for so-called “lawful intercepts” is widely used in phone networks around the world, be it Iran, China or the United States. The main differences are only how far network monitoring goes and to what uses such information is put.

These issues cannot be dismissed merely as unauthorized uses by bad cops in foreign lands. All the world’s biggest technology suppliers play some role in creating security tools that have Janus-like qualities, depending on the intentions of their users.

The dark side of the Internet is not some isolated corner. It is built with the same tools “good guys” use with the best of intentions, without considering their Orwellian surveillance potential. It is just the dual use of networked, interconnected technologies.

Companies such as IBM, Cisco, Intel and Dell are some of the dozens of vendors that market remote data recovery tools to police agencies that can be used to remotely monitor suspects. Once available commercially, it’s only a matter of time before such software is sold or copied for use by authorities in repressive regimes.

Canada’s Absolute Software sells such software for network administrators to track the location and use of all corporate laptops or Blackberries used in their organizations. If a computer is lost or stolen, it can be told to phone the factory every 15 minutes. Absolute then turns over the Internet address of the machine to police to recover the device. In countries with fewer safeguards, such tools can be used to snoop on or prosecute political dissidents.

Hypponen says computers have raised a host of issues that hardly existed in the Cold War era. “Monitoring traditional mail can be done, but takes a lot of manpower,” he says. “E-mail monitoring can be done which takes very little manpower.”

The very openness of the Internet has created a vast market for security tools used for Web filtering, network monitoring and text or video surveillance.

The power of technology to do good needs to be weighed against its powers to do evil. The many positive tasks computers perform for us need to be set against their growing powers as surveillance tools and mechanisms of repression. Just because a technology can be built, doesn’t mean it should be. As consumers, we need to be careful what we wish for in the way of modern conveniences.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. –

(Editing by Martin Langfield)

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Apple Inc is taking steps to make its computers run on corporate networks, but these moves fall far short of ensuring Mac users win equal standing in business.

Full corporate access for Apple computers inside businesses remains years away. If and when it comes, acceptance is more than likely to be the result of broad trends reshaping the office computer market, rather than Apple’s own product genius.

This week, the reigning consumer king of computers, music players and smartphones showed off a new operating system, dubbed Snow Leopard, with a handful of tantalizing features built for business.

The new software, due out later this year, will connect Macs to Outlook e-mail systems running Microsoft Exchange — the way that most office workers manage their e-mail, calendars and contacts.

In doing so, Apple is addressing a key issue in the classic Mac vs PC debate over whether its machines are practical for office tasks.

Of course, multimedia-rich Macs already predominate among graphic artists and many Web software designers. And Apple computers are popular with small and medium-sized businesses with skeletal technical staffs.

However, in large organizations, personal computers running Microsoft Windows software remain, by and large, the only option. This is primarily due to cost: Business PCs are half the cost of any Apple machines.

Any notion that Apple can dance its way into offices ignores the fact that corporate technology adoption is not a matter of individual choice but under the rather rigid control of technical administrators. This power extends not just to networks or computers but down to the programs staff use or even what Web sites they see.

Macs, which provide great consumer security protections, lack essential features corporations demand. Nothing Apple has said suggests the company is going to address these vulnerabilities soon.

Beyond the cost of the machine, the network tools for managing complex combinations of servers, desktops and notebooks and storage devices often are kept track of using technologies such as Microsoft’s Active Directory. In hundreds of unseen ways, Apple Macs remain a far cry from standard corporate issue.

But there are other factors that may work in Apple’s favor. Office workers increasingly spend more of their time working on the Web searching for information, checking e-mail, ordering products, watching corporate training videos or listening to Webcasts. Instead of using standard desktop applications, this activity all happens inside browsers and is delivered via network servers rather than being powered by local machines.

Apple machines, with easy-to-use software, slick audio and video features and simple wireless access, have many advantages in this emerging way of working.

Another technology known as visualization gives corporate managers the ability to treat every contact that computers have with their networks as discrete events that can be far more precisely managed. It matters less and less what brand of notebook, Blackberry or other computer device is connecting.

Many companies are moving to a model where they no longer expect only company-purchased devices on their networks. There are too many different work roles requiring too many devices to keep up with it all.

Instead, using a mix of software security techniques, they can grant employees specific access to their office network data from a range of locations and devices, in the office, on the road and at home.

There is growing acceptance that office employees may be working on their own computers, from home or wherever else they may be. This is in part because companies want to save money on providing PCs. It is another potential opening for Apple.

Twenty years after Apple largely conceded the business computing market to Microsoft Windows and PCs, Apple is making tentative steps to once again win acceptance for its machines in corporate offices. Whether or not Mac users win equal footing in business will depend less on Apple’s own initiatives than on management choices that companies are already making.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. –

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

No one can easily define it.

But the next phase of the computer revolution is busy being born out of the ashes of the current economic crisis. The new approach delivers computing power as a service over the Web, like an electric utility, instead of making customers buy computers they manage themselves.

It goes by the hazy term of “cloud computing.”

Forget your tidy distinctions between hardware and software, networking and storage, the Web and the desktop. Most disappear as they merge into the cloud.

Clouds are located in centralized data centers that can house thousands of pizza-sized boxes, networked computers that can each process millions of transactions. They take advantage of the latest software that go by buzzwords like Web 2.0, virtualization and open source.

Always in search of the next big idea, the technology industry has latched onto the cloud as its big new organizing principle, once more normal corporate spending patterns return.

“Compelling economics will ultimately force you to move to clouds,” Erich Clementi, IBM’s general manager of cloud computing, told a Dublin conference last week. IBM is setting up centralized cloud computing centers across the globe.

Six months into a financial crisis that has stifled most corporate initiative, two of the world’s largest technology companies are taking the offensive.

Network gear leader Cisco has jumped into the market for big business computers called servers, while computer maker IBM is in talks to buy Sun Microsystems, another server maker, in its biggest merger deal ever, sources say. The value of the deal could run up to $8 billion.

Both Cisco and IBM aim to capitalize on the emerging shift to cloud computing, in particular by grabbing bigger slices of the data center supply market. They are looking to turn vast farms of server hardware and software into utility services that customers can rent.

The promise of the cloud is to do away with the need of organizations and individuals to maintain their own computer hardware, software, storage and network gear. The cloud metaphor is used to disguise the complexity of bringing all these pieces together. It’s the difference between owning and repairing a car yourself or leasing one with a mechanic to keep it running.

These actions, as they play out in coming years, have hundreds of companies large and small reassessing their strategies ahead of what Wall Street analysts are predicting will be a wave of mergers in the tech world. This consolidation could sweep up not only hardware makers, but software, networking, data storage and semiconductor suppliers as well as Web services.

CUMULO-NEBULOUS

There is no agreement on how to define the cloud. There are complicated academic definitions and others full of self-serving marketing spin. Computer maker Dell, created an industry uproar by trying to trademark “cloud computing” last year, but has retreated after widespread criticism they were claiming ownership for a generically accepted phrase.

The notion of centralized utility-scale computing dates is decades-old, dating back to the 1960s when corporations rented time slots on mainframes. Web hosting services proliferated during the 1990s. The term “cloud” to describe the inner workings of the Internet-at-large date back to the 1970s.

This is all part of a long shift from hardware-based computing to software and now Web-based computing. Clouds allow unused computing resources to be shared, or “virtualized,” and reused by other customers, improving efficiency. To further cut costs, most rely on inexpensive open-source software.

But unlike these earlier forms of managing dedicated machines on behalf of individual clients, cloud computing takes advantage of virtualization technology to reuse the same computing capacity again and again. Online retailer Amazon.com has dubbed this approach as “elastic” computing capacity and is making inroads with the idea.

The dominant players include not just hardware makers like Cisco and IBM and computer rival Hewlett-Packard. There are big name Internet services or software providers such as Amazon, Google and Microsoft, which deliver a range of pre-packaged software services to both start-ups and established businesses. Hot Web companies like Facebook use cloud computing to deliver thousands of different services to tens of millions of users everyday.

Earlier this month, the Financial Times quoted Microsoft research head Rick Rashid as estimating that 20 percent of all the computer servers in the world are now sold each year to a small number of Internet companies — Microsoft, Google, Yahoo and Amazon were ones he named. Computer industry margins, long in decline, stand to benefit as cloud services are sold as packages rather as boxes. Selling the same capacity repeatedly has benefits.

ELASTIC CAPACITY

Growth in computer servers used to run business operations has flattened out from their spending heyday in the 1990s. Computing is undergoing a transformation as entrenched ways of selling hardware and software as separate products are under attack. Customers are fed up running complicated systems without clear payback, especially as they look to slash costs in the downturn.

The industry is now plowing most of their new investments into cloud services rather than separate computer products. Start-up promoter and conference organizer Dealmaker Media says the cloud is one of the categories still getting funding by Silicon Valley venture capitalists. It charts $150 million invested in 25 firms in 2008 and so far in 2009.

Some clouds will be hosted by established systems integrators, Internet or telecom service operators ranging from EDS, now a unit of HP, to Amazon to BT or AT&T. Other clouds will be built to sit in-house by big companies to maintain complete control of how they work. Hybrids are emerging that mix private data centers with public cloud services to provide spare computing capacity only when needed.

Market research firm Gartner Inc estimates that cloud services revenue should top $56 billion this year, growing 21 percent from 2008, despite the credit crunch. It forecasts the market to reach $150 billion in 2013.

Wall Street is eagerly handicapping the takeout potential of dozens of downstream technology companies that will need to seek allies in the land of giants.

Possible targets range from equipment makers Network Appliance, Brocade or Juniper to storage/virtualization company EMC/VMware to consulting services such as Accenture or CapGemini. Holdouts are likely to be forced to make partnerships with Cisco, IBM or HP, to survive.

The cloud concept has emerged as the best hope for a maturing computer industry. The hope is this will create conditions for a yet to be fully imagined wave of new businesses, run from the clouds.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. For previous columns, Reuters’ customers can click on — – Eric Auchard is a Reuters columnist. The opinions expressed are his own –

– Wei Gu is a Reuters columnist. The opinions expressed are her own –

Abundant liquidity, government support and a strong yuan fueled Chinese companies’ overseas buying spree.

But since they went out at the peak of the market and did not have a clear strategy for acquisitions, it should come as no surprise that most of those deals have turned sour. Once bitten, twice shy.

Crisis-ridden companies around the world are hoping that cash-rich Chinese buyers will come to their rescue, but the Chinese are not eager after getting their fingers burnt.

Chinese regulators are now giving more scrutiny to foreign deals, forcing interested buyers to lay out the most pessimistic scenario when seeking their approval.

Bankers said Beijing is skeptical about buying everything except resources, which is seen as important to China’s strategic interest and involves few integration challenges.

BUYING THE BRAND

Chinese manufacturers thought they had found a winning strategy by making goods cheaply in China and slapping a prestigious Western brand on it.

But the strategy hit a wall as companies such as TCL struggled for years to turn around businesses it bought in North America and Europe.

Lenovo’s purchase of IBM’s PC unit was widely lauded as a rare success until it announced a broad restructuring and profit shortfall earlier this month.

The acquired unit has a high exposure to large enterprises in developed markets, a segment that was hit hardest by the economic downturn, said Xin Zhao, an analyst at Cazenove.

“Before China caught the globalization wave our teachers in the West ran into problems,” said Yang Mianmian, president of China’s electronic appliance giant Haier, which last year spurned an offer to buy GE’s electronics unit.

“The financial crisis has changed our thinking and now we are looking more at rural demand.”

One of the potential pitfalls has been overpaying. Chinese buyers lack experience in valuation methodology and are at risk of paying too much. Moreover, they often do not have a strong understanding of the target experience, and tend to underestimate culture differences and powerful unions.

Some deals have not only incurred hefty losses but turned into a public relations nightmare as the crisis bites harder.

Take the example of Ssangyong Motor Co, South Korea’s No. 5 automaker, which filed for bankruptcy on Jan. 9 after getting hit by the global slump in car sales.

Analysts reckon SAIC Motor Corp, which owns 51 percent of Ssangyong, would be prepared to let the sport utility vehicle maker fail.

Some South Korean media have accused SAIC of all along planning to strip Ssangyong’s technology and dump it afterwards.

“Chinese companies have now realized there are many pitfalls on the road abroad and are learning from their experience,” said David Yu, partner at Llinks Law Offices, who advised SAIC on the deal.

FINANCIALLY SOUND

Chinese companies are financially sound — three state-owned banks trail only Warren Buffett’s Berkshire Hathaway on the global cash-rich groups list. But they’d better not try to bottom fish now.
The temptations are great — many Western brands long seen as out of Beijing’s reach are now fighting for Chinese attention.

Ford, for example, is looking for buyers to take up Volvo and a bank representing it has pitched it to at least three Chinese automakers.

“Chinese automakers need to be extremely cautious about those seemingly once-in-100-years opportunities to avoid failures which will not be recovered in many decades,” said Yankun Hou, an analyst with Nomura Securities.

To avoid more big losses, Chinese companies should cut their teeth on smaller deals in growing industries and markets, mindful that acquiring technology is much easier to manage than buying brands because it doesn’t involve taking over the whole operation.

“It is not clear that all the bad news is yet out, so assessing a target bank’s exposure is still challenging for any investor,” said Holger Michaelis, a partner with The Boston Consulting Group in Beijing.

“The timing however appears good for screening potential targets, but with a focus on smaller deals in less risky segments, like wealth management and asset management.”

– At the time of publication Wei Gu did not own any direct investments in securities mentioned in this article. She may be an owner indirectly as an investor in a fund –