IT industry analysis—2009 Week 38—on one page

Catch up on the past week's analysis

ORACLE

• Oracle announced revenue for the quarter of $5.1bn, 7% down on last year, though the drop was just 1% at constant currency. Sales in EMEA dropped 10% to $1.6bn. New software license sales were down 17% to just over $1bn, but software license updates and product support rose 6% to $3.1bn. Oracle's co-president blamed the fall in Oracle's database sales on the sales declines of other ERP providers, particularly SAP—if their customers don't buy ERP suites, they don't buy Oracle databases. [1] [2]
  
• It looks like Oracle is serious about becoming a hardware business. A full-page ad in The Wall Street Journal promised to outspend Sun on developing the SPARC microchip and the Solaris operating system, and on supporting Sun's hardware business: "We're in it to win it. IBM, we're looking forward to competing with you in the hardware business." If Cisco or HP were planning to pick up Sun's server and storage businesses, they can now think again. Of course, Oracle is trying to preserve the value of the asset it hopes to acquire. HP and IBM have been taking every opportunity to swipe Sun's customers. The dilemma of Sun customers essentially amounts to this: "Will Oracle continue to support and develop these expensive servers, or should we just go buy them from Big Blue and HP?" The longer the process of acquiring Sun takes, the more Sun's business will deteriorate, and the more market share IBM and HP will take away. “I think someone at Oracle suddenly realized that Sun was bleeding so badly that what would be left when Oracle finally got control would be worth a small fraction of what they paid and no one would buy the hardware unit,” said Rob Enderle, an independent analyst. Others still doubt Oracle's commitment: the reality is that hardware takes immense resources to design, qualify, test, manufacturer, and support to compete on the level of IBM and HP. [3] [4] [5]
  

SAP

• It is rumoured that Siemens, one of SAP's largest customers, has submitted a termination notice to SAP related to maintenance contracts for its software. These contracts are a dependable source of recurring revenue for SAP, and they also offer profit margins of up to 90%. Wall Street is concerned that other major SAP customers could copy Siemens' lead. Third-party alternative maintenance providers to SAP include Las Vegas-based Rimini Street. [6]
  
• T-Systems, the IT services division of Deutsche Telekom, has acquired the external hosting business of SAP in Europe, worth around €112m in revenue last year. Ovum estimates that, by 2010, T-Systems will become the first telco-led services provider to produce $1bn in annual revenues from managed SAP services. T-Systems has done well this month: it has acquired the SAP consultancy business of Logica in Switzerland; it has become a certified SAP partner for hosting services in the Netherlands; and announced that Continental, one of the biggest of all its multinational customers, will in future purchase SAP Services from T-Systems. (Continental has 55,000 SAP users worldwide.) Several key accounts such as Shell, MAN and Linde already get their SAP applications over the T-Systems centre in Munich. Under the terms of this deal with SAP, another 90 or more SAP corporate customers will be transferred to T-Systems. But this deal is as much about SAP getting out of the hosting business as it is about T-Systems expanding its existing hosting business. SAP has been looking to offload the European business since at least last year, when BT was reportedly interested in buying it. From the telco point of view, a move into the IT services market via low-cost, low-margin hosting services makes sense. Network operators own the networks, and have strategically located data centres around the world whose utilisation they are keen to increase. They also see the convergence of communications and IT around IP pressing ahead.
  

663 subscribers BACK ISSUES:
38	ERP
37	S/W
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

SERVICES

• HP has set up a global business unit to boost enterprise sales of managed print services. The aim is to provide customers with a single point of contact for the purchase of services, software and systems, which include products supplied by Canon. HP has expanded its 25-year relationship with Canon by agreeing to jointly market a new range of Canon systems. CEO Mark Hurd estimates the enterprise print market to be worth around $100bn a year, of which the managed print services (MPS) market could be $25bn this year. Some forecast MPS will be a $60bn market by 2013 with at least one out of every three printers being part of a service contract. [7] [8]
  
• Prior to next week's announcement of the Dell bid, Perot Systems, the Texas-based IT services firm, was looking to increase its international activities to boost revenue. Europe, and particularly the UK and Germany, were the top priority, followed by India and China. To establish a sizeable footprint in those markets, particularly in the healthcare sector, Perot Systems is pursuing an initial strategy of partnerships and acquisitions. EMEA is already Perot's fastest-growing region: up 32% in 2008, with the UK in the lead with $123m, up 10%, followed by Germany with $62m, up 72% from last year. Perot has about 1,100 staff in Europe, with approximately 500 in the UK (of which 200 are in healthcare), 300 in Germany and 125 in Romania. It has been active in the UK since 2004, when it won a five-year deal from BT as a subcontractor to an NHS contract for the implementation of healthcare records in the London region.
  

HARDWARE

• Fujitsu Technology Solutions (which arose from the absorption of Fujitsu Siemens) plans to focus on its higher-end product range to increase profit margins and sales, a senior executive has revealed. "The product positioning had to be changed as we were losing money in the low-end business. In Europe we have exited the entry-level market but in emerging markets—that is Russia, Eastern Europe, the Middle East and Africa—these products will continue to be sold." [9]
  

IT SPENDING

• "I haven’t met a CIO or IT director that thinks their budget is going up in 2010," says HP's VP of servers and storage in UK and Ireland. As a result, he says, users will continue to look for cost savings in operations and maintenance. [10]
  

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