IT industry analysis—2009 Week 40—on one page

Catch up on the past week's analysis

SERVICES

• Accenture posted a 41% drop in fiscal 4Q profit, as revenue fell across nearly all business groups and the company recorded a hefty restructuring charge. Quarterly revenue slid 14% to $5.2bn. Accenture's EMEA sales reached $2.3bn, a decrease of 20% in US dollars and 8% in constant currency. The restructuring charge was related to 'the realignment of the company's work force' and to global real estate consolidation, the company said in a release. In August, Accenture said it would cut some 336 senior-level executive positions -- about 7% of its senior executives -- and reduce office space. Consulting revenue totaled $2.9bn, a decrease of 19% from last year. Outsourcing revenue fell 7% to $2.2bn. For the full year, total revenues slid 8% to $21.6bn. [1] [2]
  

ACQUISITIONS

• Following in the footsteps of Dell, Xerox is paying $6.4bn for Affiliated Computer Services (ACS). The purchase of ACS will more than triple Xerox’s services revenues to an estimated $10bn in 2010, from $3.5bn in 2008. The combined operation, to be known as ‘ACS, a Xerox Company’ and led by ACS CEO Lynn Blodgett, will comfortably rank as one of the 20 largest global IT services providers, ahead of the newly expanded Dell services business. Xerox is looking to keep pace with the converging IT market. Simply put, hardware vendors with services arms are able to cross-sell both hardware and services, as well as diversifying their business away from hardware refresh cycles. Xerox intends to help ACS, which generates over 90% of its revenues from the US, expand globally. What makes ACS really attractive to Xerox is its BPO capability. Of all the global IT services vendors, ACS generates a higher proportion of its revenues from BPO (79%) than any other. [3]
  
• A European lawyer is proposing that Oracle should not be allowed to acquire Sun without certain restrictions. Shortly after getting the green light from the American regulator for the acquisition of Sun, Oracle passed up the chance to address any lingering EU concerns about the deal, apparently confident that Brussels would follow Washington's lead. Instead, the European commissioner for competition expressed particular concern about the effect of the merger on the market for enterprise databases.
  
  • Sun's business model –- making its money on services and hardware, rather than from license fees –- allowed it to license Java to application builders (and corporate users) for free, and to encourage open-source development of its technologies while retaining intellectual-property rights.
    
  • On the other hand, Oracle is a pure software company which will want to monetise its entire software product line, including what it inherits from Sun. At a minimum, Oracle will want to limit the scope for Sun's open-source software (MySQL database software and the Solaris server operating system) to compete with its own proprietary products. It will also have incentives to hike up licensing fees for Java users, with the IP rights to Java code constituting a potential stranglehold over competitors.
    
  • The European Committee for Interoperable Systems, which counts Oracle, Sun, and IBM amongst its members, is on record as warning against letting a single undertaking gain control over an IT standard, with the attendant risk that it may exclude competitors from the market by limiting their access to the standard. The acquisition of Sun would appear to land Oracle in precisely this position, as sole custodian of Java, yet no press release to this effect has been issued. Some public comment might reassure the outside world that its members are bound by something other than commercial rivalry with Microsoft. [4]
    
  
  

663 subscribers BACK ISSUES:
40	Skills & Services
39	IT Spending
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

UK GOVERNMENT SPENDING

• UK prime minister Gordon Brown confirmed that the UK government will cut public spending in order to reduce Britain’s fiscal deficit. His announcement on ID cards indicates that other large projects could become sacrificial lambs within the Deficit Reduction Plan. Local governments are assuming that their budgets will be cut between 10% and 20% and are planning their 2010–11 budgets accordingly. Lower public spending will reduce opportunities and revenues for IT companies. The government has already set out its plans for the next 12 months in the November 2008 pre-budget statement and the 2009 Budget, which announced plans for 3–4% cuts in back-office and IT spending. [5]
  

SKILLS

• A panel assembled by the British Computer Society to consider whether IT could lead the UK out of recession cited the recent CBI report which blamed poor teaching in schools for the shortage of graduates in science, technology, engineering and maths. "If you talk to 12-year-olds they'll say they don't want to work in an office because what they're taught is Word and Excel," said the CEO of the BCS. "They're not taught what this profession is really about." [6]
  

CHANNELS

• Lenovo has finally taken steps to speed up lead times, ensure products are more aggressively priced and minimise channel conflict. As a result of an operational review, Lenovo has also shaken up its rebate structure and vowed to pay resellers within a month of quarter-end on all products in the portfolio, not just those in the Top Seller programme. A Gartner analyst said Lenovo needed to inject some consistency into its channel engagement model: "Execution is the key, resellers have had a tough 2009 but they are expecting a better 2010 and don’t want any uncertainty with vendors in respect of Ts and Cs, the delivery of products or price competitiveness." [7]
  

STANDARDS

• The IEEE has ratified the 802.11n standard for WLAN networks. This will boost confidence in the standard among vendors thinking of supplying related products and among organisations considering adopting it. The main arguments against wireless have been security concerns, throughput rates, cost and health concerns:
  
  • Wireless traffic is easier for hackers to intercept than traffic on a wired network. 802.11n is believed secure for normal business use, but nothing is forever, particularly in security.
    
  • As for throughput, you should get 150Mbps on some WLAN configurations, whereas many wired connections work at 100Mbps. But you are not going to equal the throughput of a gigabit Ethernet connection, which shows the need to retain wired connections in the data centre.
    
  • The cost of 802.11n access points has been five times the cost of 802.11g access points. The ratified standard and the resulting market growth will reduce the cost significantly.
    
  • The generally accepted view regarding health is that there is no significant risk due to the low power of the equipment. The World Health Organisation has discounted any risk. Indeed, the education sector is leading the way in large-scale WLAN deployments. [8]
    
  
  

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