IT industry analysis—2009 Week 36—on one page

Catch up on the past week's analysis

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IT SPENDING

• Next year the USA is forecast to experience a rate of recovery in ICT spending twice the rate of Western Europe. According to Forrester, the USA will see a 8% increase in technology purchases next year compared to 4% in Western and Central Europe. All the major countries of Europe are seeing a decline this year in demand for IT goods and services: -12% in Britain, and -3% in both France and Germany. The European recession has turned out to be deeper than the US recession, with Europe's downturn starting later and probably lasting into 2010. All categories of IT purchases will be down, with computer and communications equipment being especially weak, said the report. [1]
  
• The global market for servers crashed in 2Q09, with sales falling 30% to $9.8bn, to their lowest level in 13 years. IBM increased its share to 34.5% up from 32.7% a year ago. Thanks to the pending Oracle acquisition and the uncertainty that surrounds Sun's hardware business, the company posted a 37% slide in server revenues, and Fujitsu experienced a 35% decline. HP was EMEA's top server vendor for the sixth consecutive quarter. In second place was IBM and growing its market share 1.4% in EMEA, but its mainframe revenues dropped by 47%. IDC is more optimistic about the future: 'Fewer servers have been shipped over the past four quarters than at any time since 2005 and it is clear that the worldwide server installed base is aging rapidly. In the months ahead, IDC believes that IT customers around the globe will begin to focus on the future once again, making strategic platform decisions for the next business cycle, and driving more predictable server demand as market conditions stabilize in the second half of 2009.' [2] [3] [4]
  

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SOFTWARE

• Procurement technologies being used to streamline the ways that businesses buy goods and services are not delivering the expected benefits. According to a survey by Capgemini, although many companies have been using e-procurement systems and online auctions to purchase products and services for ten years, they are not making the most of them. For 60% of the companies surveyed, less than 20% of their total spend went through procurement tools. Most procurement tools do not suit certain types of purchases, so buyers often avoid them. 'Too often people find ways to bypass the system and revert to traditional ways of transacting; for example, using the phone as an easier medium,' the report said. [5]
  
• There is a new breed of search engine called contextual search (or perhaps more accurately decision engine technology) which claims to be more sensitive to human needs. Contextual search sites such as Hunch, Answers.com, Mahalo and ChaCha work with more metadata—information about the user, the user’s system, and their previous searches. In the future, users will have an increased expectation that their devices understand the context of their search—e.g. location (for mobile devices), task, and time of day. Keyword search isn't going to disappear overnight, but both Microsoft and Yahoo are taking contextual search seriously.
  
• European Union regulators have applied the brakes to Oracle's proposed acquisition of Sun, by launching a formal antitrust probe that shatters Oracle's goal of completing the acquisition this summer. The U.S. Department of Justice has already approved the deal. The investigation is focused on whether Oracle will gain too much power in the market for database software. EU regulators want to make sure Oracle will properly care for Sun's MySQL open-source database software, or let it wither in favor of Oracle's proprietary software. The European Commission now has until 19th January 2010 before it makes a final decision to clear the deal or block it. The EU describes the database market as "highly concentrated", with the three main proprietary software companies—Oracle, IBM and Microsoft—controlling some 85% of the market. Swedish MySQL has just 0.2% share. The regulators question Oracle's incentive to further develop MySQL as an open source database. Oracle may have to sell off MySQL, or make binding commitments so that rival developers can continue to base their software on MySQL code. [6]
  

663 subscribers BACK ISSUES:
36	Buying?
35	Jobs + H/W
34	Productivity
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

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CLOUD COMPUTING

• According to Gartner, the cloud applications space is on the verge of major change. The trigger point for shakeout comes when one or more firms achieve a level of productivity that neither weaker rivals nor potential entrants can match. Gartner doesn't think the shakeout period has started yet, but does believe we're in the last stages of expansion before a shakeout starts. Microsoft Azure, which is a hybrid approach somewhere between Amazon EC2 and Google Apps Engine, will hit general availability soon. Microsoft will become the first major enterprise software player to have its own cloud application platform offering. Gartner doesn't think there's a big enough market for all of the companies producing cloud application platform software to become winners. The other mega-vendors—IBM, Oracle, and SAP—must either launch their own cloud application platforms, or acquire one, or risk being left behind, says Gartner. [7]
  

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SERVICES

• Accenture has announced two multi-year deals to provide computer support and Web services to two European companies. It will provide outsourcing services for five years to Luottokunta, a Finnish card payment firm. And it has signed a seven-year contract with Henkel, the German-based consumer products maker, known for brands such as Dial soap and Right Guard deodorant. [8] [9]
  
• Sopra, the French services company, announced 1H09 revenues down 1% to €0.5bn. Its application services revenues in Europe were down 18% due to a sharp decline in the UK and Spain. But overall these were better results than those of French rivals such as Atos Origin and Capgemini. Sopra is still weak in India, where it has just 600 personnel serving mostly French clients.
  

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OUTSOURCING

• According to a Capgemini poll of Fortune 1000 executives:
  
  • 79% recognised that outsourcing may have a poor public perception,
    
  • 72% said this poor perception has little or no effect on their outsourcing decisions, and
    
  • 74% agreed that outsourcing helps a company survive in today's economy. [10]
    
  
  
• Royston Hoggarth, the UK boss of troubled outsourcer BT Global Services, has resigned after less than a year in the job. Mark Quartermaine has replaced him from BT's public sector business with immediate effect. [11]
  

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OFFSHORE

• It's a common argument that globalization is nothing to worry about because jobs lost offshore, many of them blue-collar, are being replaced with high-tech ones. But according to one US professor, trade can be win-lose. When China gets better at the things the USA is good at, the USA can become poorer. The offshoring of R&D and innovation is clearly happening. When HP took over EDS, it said it would lay off 24,000 workers, but most of the work did not disappear—at least half the jobs ended up offshore. IBM's headcount in India has gone from 6,000 in 2003 to over 90,000 today. Clearly, high-skill, high-wage jobs are moving offshore. IBM is competing its USA workers against its Indian workers. How do those American workers justify their five-times salary differential? CEOs are motivated by profit, and their focus is on the shareholder. It's a systems issue where the interest of IBM or Kodak isn’t necessarily in the interest of the U.S. They’re global companies—why should they care more about their U.S. workers than their Indian workers or their Chinese workers? "These companies have huge influence over policy and the political process. They have millions of dollars they spend on lobbying. They have a huge presence in Washington. But there’s no group that represents the national interest in any way in Washington to counterbalance this. Which is why you see no action in Washington to address these issues. Who represents American workers in this debate? Who represents accountants? Who represents engineers? No-one." [12]
  

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