CHANNELS
HP could dramatically cut the rebates it pays to distributors and resellers on enterprise accounts next year. HP is said to be planning the injection of extra complexity into the fee calculation, because it believes it is not getting value for money from duplicate payments for both partners and its own staff. In the past HP has liked to think of itself as easy to work with, but this move could result in a backlash, with resellers no longer taking HP into their accounts. [1]
Dell has lowered the deal registration threshold to include server and storage technologies aimed at SMEs. Previously under Partner Direct, only orders starting at £30,000 that involved PCs, servers or printers could be registered by certified resellers, but that minimum value has now fallen to £20,000 and for EqualLogic and PowerVault storage it is £10,000. Virtualisation has skewed the market somewhat as customers can now virtualise 15 servers on one physical box, meaning that lower value orders have become more prevalent. Previously partners competing for deals that fell below the threshold were invariably given different prices from different Dell staff. Dell will increase headcount in anticipation of a significant rise in the number of deals being logged through the registration tool. The online process enables Dell’s sales staff to see partners’ deals in the pipeline. It should encourage them to collaborate, as the direct sales teams are now compensated on targets that include reseller business. [2]
Cash-rich resellers have been likened to "kids in a sweet shop" due to the high number of distressed competitors available at bargain-basement prices. Research from Plimsoll identified 189 UK resellers which have built up sizeable cash piles that, due to the record low interest rates, are generating nothing. The ICT reseller market is widely regarded as one of the UK’s most fragmented sectors. [3]
PCs and MICROSOFT
According to IDC, total UK PC sales fell 7% to 2.5m units in 2Q09. And HP lost its No. 1 position in the UK PC market to Dell and Acer, after a terrible quarter in which its sales fell 20% in desktops and 29% in notebooks. During the quarter, HP merged its professional and consumer PC businesses to cut costs, which may have resulted in lost sales across EMEA. HP was not actively pushing its netbooks, which is the highest-growth segment of the PC market.[4]
BT is to deliver Microsoft's online Office services to its own customers, and will provide unified communications by integrating these with its Global Onevoice service. BT said that, by integrating Microsoft's product suite into its 21CN network, it can provide integrated cloud-based business collaboration tools and ensure higher quality-of-service levels and guaranteed network performance. [5]
Microsoft posted dismal financial results last week. Revenues of $13bn for the quarter were down 17%, and $58bn for the full year were down 3%. The Windows client division was down 29% for the quarter, the Business division (which includes the Office cash cow and the Dynamics family of ERP and CRM applications, and is the company’s largest segment) was down 13%, and the Entertainment and Devices division was down 25%. Only the Server and Tools segment, was relatively unscathed: down 6%, all the more remarkable given a server hardware market that is down more than 20%. [6]
IDC forecasts that, by the end of 2010, 177 million units of Windows 7 will have been shipped accounting for 1% of worldwide IT spending. Amazon has reported more pre-orders for the operating system in eight hours than Vista achieved in its entire 17-week pre-order period. In its paean to the product, IDC went on to claim that 'The advent of Windows 7 will bring related and cascading economic benefits, from new employment to increased revenues and investments made in local country economies'. [7]
SERVICES
Despite customers hanging onto their hardware well beyond the warranty period, and therefore likely to face more costly down-time, the support services business is not booming. The reasons:
- greater competition. Almost every vendor offers heterogeneous systems support.
- Resellers are desperate to increase their support services businesses to make up for faltering equipment sales.
- customers are choosing different service levels for different types of system. The age of the one-size-fits-all SLA is long gone.
- the cost of maintaining a support field force is increasing.
- warranty upgrades purchased with new systems are in decline because the IT hardware market is declining.
So vendors are increasingly offering a managed services approach to support. These proactive services go beyond the individual boxes to provide integrated hardware and system-level software support, a focus on performance and availability, and a more customised approach to support. The key for the vendor is to be able to offer managed support services across the whole of the customer’s IT infrastructure: PCs, servers, routers, storage, system software and even middleware. The benefit to the customer is that the single ‘managed support services’ contract offers simplicity: one vendor to deal with; one contract; lower cost. The benefit for the vendor comes with increased deal sizes and the ability to upsell additional managed services to offset declining revenues from ‘commodity’ technical support.
The support services race favours the larger players with a global delivery capability and a local presence for on-site technical assistance (to serve the enterprise market), and strong partner programmes (to take their services to the mid-market). [8]
EDB Business Partner declared 2Q09 revenues down 5% to NOK 1.9bn. The fall was blamed on the Easter Holiday and low utilization rates in its application services business.
OUTSOURCING
Capita's revenues climbed to £1.3bn in 1H09 from £1.2bn last year. Although Capita has been a supporter of the Labour government, its CEO believes it will benefit if the Conservative party win the next general election. The company believes it is relatively underweight in central government work because there have been fewer opportunities for outsourcing, due to less severe cash constraints than those imposed on local government. [9] [10] [11]
US outsourcing giant ACS aims to grow significantly in Europe, according to its CEO. In recent years, ACS has added $200m in revenues through acquisitions: small local providers such as UK infrastructure outsourcers Syan and Anix, German IT services provider SDS, and French transport technology provider Ascom. The two key reasons for ACS's European interest are the ability to service key multinational customers in their European markets; and Europe's strong local markets and skills, which ACS can utilise across the group. ACS’s flagship European BPO centre is in Barcelona, from where it provides a range of customer call services. [12]
Next month British Petroleum (BP) will be awarding up to $1bn in outsourcing contracts. TCS, Infosys, Wipro and Mahindra Satyam have been bidding against IBM and Accenture for the business. BP already outsources the majority of its application development, system integration and infrastructure management projects to almost 30 suppliers, but now wants to cut 30% from its IT costs, by working with fewer vendors at lower rates. Each BP business unit runs its IT operations autonomously, with a different set of suppliers. This has led to complexity and a higher cost of operations. With the planned consolidation, BP now wants to work with no more than six vendors globally. [13]
OFFSHORE
Steria intends to achieve double-digit organic growth, thereby consolidating its position among the top ten services providers in Europe, according to its CEO. India will then contribute about 40% of revenues, he said. (In 2007, Steria acquired UK-headquartered Xansa, which had substantial BPO resource in India.) [14]
Tech Mahindra announced a 5% fall in revenue Rs 1,087 crore. [15]
TCS announced fiscal 1Q10 revenues of $1.5bn, down 3%, for the period ending 30 June 2009. The UK accounted for 16.9% of these revenues, compared to 19.5% a year ago. Both TCS and Infosys saw declining revenues from BT, but Infosys suffered more, due to BT bringing call centre work back to the UK. TCS added just 26 new clients in the quarter, and its active client list fell from 985 to 933. [16]
Wipro announced a 5% increase in revenue to Rs 6,274 crore. [17]
Wipro sees a big opportunity in green areas such as clean technology, green lighting and water over the next 10-15 years. Wipro plans to offer consultancy services in water treatment and has a team of over 100 consultants. Wipro has extended its strategy of copying IBM by opening a virtual innovation centre in Second Life. Wipro also has a Consumer Care business, and Santoor, its flagship brand, is now the top-selling toilet soap brand in South India.[18] [19]
EMPLOYMENT
The cost of bringing employees from overseas to the UK could rise by almost 25% next year when tax changes are made. The new 50% rate and loss of personal allowances will be especially painful for employers committed to equalising the net benefits that employees enjoy in their home countries, such as the USA, says experts. This comes on top of the new tax regime for 'non-doms' introduced last year. [20]
EDS staff have been told that if they don't accept a 5% pay cut, they will be replaced by HP people. "Project managers are running around with their heads on fire because there are experienced people leaving the company," said one source. He said contractors have already been offered a 10% pay cut and are now on a four-day week. [21]
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