IT industry analysis—2009 Week 34—on one page

Catch up on the past week's analysis

UK PUBLIC SECTOR

• The UK government has thrown increasingly large sums of money at public sector IT, yet civil service productivity is declining. Spending on public sector IT grew to over £16bn in 2007/08, but over the same period the Office of National Statistics found that the productivity of the public sector—the vertical's total output divided by the resources put in—fell by 0.3% per annum. In response, the government CIO says that the £16bn is only 4.6% of total public sector spending, compared to an average of 5.9% for governments across the world, according to Gartner. [1]
  

HARDWARE

• EMEA revenues fell 12% in HP's latest quarterly results, which also showed the USA growing by 8%. Server revenues fell 23% and PC revenues dropped 18%. Thanks to the acquisition of EDS, services were the only growth area for HP. But with HP now viewed as a barometer for the IT industry (because of the breadth of its product range), one investment analyst was sufficiently encouraged to say that "It definitely looks like the worst is behind us". Many pundits now believe the server market is stabilising, and CEO Mark Hurd was optimistic that HP would benefit from the replacement of the ageing installed server base. [2] [3]
  
• Reseller Morse says that all takeover talks have ended. Last month it was forced to reveal an approach from a potential acquirer after a sudden change in its share price. But the offer has now been rejected because it "significantly undervalued" the company. [4]
  

SOFTWARE

• Accenture has published a couple of papers which state the almost obvious:
  
  • Software development is moving towards Asia and Eastern Europe—driven by growth markets, cheaper labour and the need to reduce risk by operating from multiple locations.
    
  • The availability of software developers is declining in the developed nations.
    
  • But in some parts of these mature countries, there may be a high-skill, low-cost pool of labour. Some firms may want to help out local, disadvantaged workers.
    
  • In mature markets such as the USA, ISVs will make more money from maintenance than from new software sales.
    
  • ISVs should ensure they collect the licence fees they are owed. But be careful about demanding cash during these hard times.
    
  • SaaS might enable ISVs to gain more customers, though it also might erode the revenue earned per customer.
    
  • As the Facebook generation enters the workforce (assuming that not all graduate recruitment schemes have been terminated), firms will be obliged to implement Web 2.0 technologies.
    
  • When it comes to hitting revenue targets, indirect channels could be useful. [5]
    
  
  

663 subscribers BACK ISSUES:
33	Offshore & Soft
32	Slowdown+Cloud
31	2Q Results
30	PCs + Services
29	CapEx→OpEx
28	Net & Services
27	Realigning
26	Decline
25	Consolidation
24	Transactions
23	Cost-cutting
compiled by:	Gavin Wilson

SERVICES

• Dell has started to roll out, into the UK and Europe, its modular services offering which consists of three services towers: consulting (ProConsulting), managed services (ProManaged) and support (ProSupport). Although they can be sold and delivered in conjunction with partners, Dell retains a strong element of its direct model. Modular Services provide a menu of options that can be both ordered direct from the Web and delivered via the Web, using SaaS management tools. Ovum says that Dell is still slow to 'localise' its services, particularly for non-English-speaking customers. And these services are only for x86 —not legacy systems. [6]
  
• McKinsey seems no better than Accenture in the depth of its insight. Asked to predict the state of the offshoring market in 2020, a McKinsey executive in Mumbai forecasted that:
  
  • India may lose market share, if the communication skills of its graduates don't improve.
    
  • China and Russia are likely to gain share, with China particularly strong in engineering, design and infrastructure services for North Asia, while Russia is 'outstanding' for software product development.
    
  • But for the USA and the UK, India will continue to be the offshore country of choice.
    
  • In Latin America, only Brazil has a sufficiently large and skilled population.
    
  • Eastern Europe is, apparently, more fragmented by language than both China and India.
    
  • Both Vietnam and Egypt are receiving a lot of government support to promote their offshore capability.
    
  • A few of the Indian top-tier outsourcers will make it into the world's top 10, if their current growth rates continue.
    
  • McKinsey is 'excited' about offshoring by government and healthcare.[7]
    
  
  

EMPLOYMENT

• Accenture is to make 336, or about 7% of its 4,800 senior executives, redundant, and will take a charge of $128m—i.e.$381,000 per executive—to cover the cost. [8] [9]
  
• BT has scrapped its graduate recruitment scheme for next year. BT said it is committed to this year’s graduate intake. Last year BT received 4,800 applications for 130 jobs. The move will leave more graduates fighting over fewer places.[10]
  
• Deutsche Telekom will cut approximately 3,000 jobs (from a 45,000 headcount) at its IT subsidiary T-Systems. The company said that all remaining T-Systems staff will receive a guarantee of employment until the middle of 2012. In its most recent quarter, T-Systems reported a 3% decline in revenue to €2.2bn. [11]
  
• Due to the pain of data leaks by employees, 38% of large US companies now have staff whose main job is to monitor the outgoing email of colleagues, according to a new survey. A year ago, this figure was just 15%. 8% of firms had fired employees because of leaks through social networks such as LinkedIn, Facebook and MySpace. [12]
  

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