IT industry analysis—2009 Week 37—on one page

Catch up on the past week's analysis

STORAGE

The worldwide storage software market fell 10% year-on-year to $2.8bn in 2Q09, says IDC. Storage hardware sales fell 19% to $5.7bn over the same period. [1]

Companies are missing out on a major cost-cutting opportunity by not focusing on their Microsoft product licences, according to analysts. A key problem is that the complex licensing system is self-policing, yet the penalties for not buying the correct licences are severe, and board members are liable. As a result companies often overbuy on licences to play safe. With Microsoft offering so many types of enterprise product, companies tend either to buy the wrong licences or sign up to all-you-can-eat enterprise agreements. [2]

Accenture's advice to ISVs in the current economic environment is to:
- Strengthen their product portfolios rather than cut back on R&D. Poorly performing products should be weeded out.
- Reduce product development costs by increased use of open-source software and capitalizing on feedback from online communities.
- Reduce piracy and ensure all customers comply with their licence agreements. (One ISV discovered it was owed more $1bn in uncollected fees.)
- Piggyback their software with other non-competing ISVs or hardware vendors to increase the number of sales channels.
- Outsource non-core activities such as HR and finance.
- Improve their acquisition analysis and implementation processes. [3]
Oracle has its customers locked in to high prices, according to BusinessWeek. Some corporate customers are also concerned that Oracle is stifling innovation. Oracle's aggressive acquisition strategy is making it a dominating force in the IT industry and leaving customers with fewer credible alternatives to choose from. One sore point is caused by Oracle's aggressive audits of its customers' compliance with its licence terms.[4]

Using the example of SAP's tie-up with EDS, Ovum believes there is a rush by enterprise solution providers to develop the capabilities needed to manage CO₂ emissions. There is a natural fit, says Ovum, between enterprise applications and the management of environmental data, because energy consumption simply provides another stream of data, similar to the streams of business process data already managed by ERP applications. [5]

Reseller and consultancy Morse saw revenue fall 10% to £0.2bn for the year ended 30th June. [6]
HP is rumoured to be disbanding its channel marketing unit in the UK, the so-called Solution Partner Organisation. The channel teams that manage partners will be merged into the appropriate product businesses. One source called the rumour "shocking", while another said that resellers want predictability and consistency, which HP is not providing. [7]

Just two weeks after Accenture nominated BPO as a strategic investment area, it is rumoured that HP may sell off the Business Process Outsourcing operation it acquired with EDS. BPO economics are supposed to be about scale and process delivery, but in practice, most BPO solutions are non-standard—there are few best practices which work well across mulitiple industries. The promise of 'continuous' process improvements may be too costly to implement. Furthermore the licence and support costs of the ERP software which underlies many BPO solutions are growing faster than inflation. The inattention of the ERP giants to innovation is hurting BPO, wrote a blogger, and that may be why HP is thinking of running away from BPO. [8]
Steria announced 1H09 revenues down 8% to €0.8bn. The UK was down 2% to €0.3bn. Steria has decreased its headcount in India slightly while improving the utilisation of its onshore personnel.

IBM is visiting investors to argue that its stock is undervalued. Earnings-Per-Share is a bogus metric, wrote The Register, but IBM is obsessed with it. Real earnings growth is what matters, especially when you are talking about a company like IBM, whose share buyback programs are akin to a crack habit. 'Wall Street yawned, but it's hard to get excited by revenue declines and financial engineering.' [9]
Negotiations over the redundancy programme at Fujitsu Services, which will cut 1,200 UK jobs, have been interrupted by the mass resignation of the entire consultative committee, in protest at the lack of consultation from Fujitsu's management. Representatives said management action "reflects a culture in the company of keeping employees in the dark and treating them in a patronising way". [10]