There are some fairly obvious truths about ICT spending in Ireland this year, agreed by all industry sales people and others in a position to know: almost all budgets are down, flat and being disbursed cautiously, not to say parsimoniously. On the other hand, there is a general feeling that some slight easing of corporate purse strings is on the way, while a modest spate of data centre investments around the turn of the year has buoyed the figures for server sales. Given the generally depressed state of the market overall, what is probably more significant than the absolute figures is the thinking and the trends behind what business and other sectors are actually buying.
Two broad trends seem to be almost universal: server replacement is doing quite well, relatively speaking, but general desktop refreshing is very reluctant and for another day. End of useful or safe operational life will always drive some spending on systems refreshment but after that the decisions are going to be hard-headed. Financial directors are absolutely in ‘You can’t have what would be nice to have’ mode. Even the trusty RoI argument is not a winner unless the return, in cost savings or tangible business benefit, is going to be delivered speedily.
Bottoming
The IDC survey in May gives the clearest picture, showing that a full third of organisations have either already upgraded their servers (24%) or PC hardware (25%) recently or intend to do so this year. Disregarding the fairly typical 38% and 45% which have no plans, the other 22% and 27% intend to upgrade within three years. All in all, as IDC Ireland director Keith Gaffney points out, the picture is not too gloomy. “With a typical three-year refresh rate, that is about what you would expect normally. The budgets are down, of course, by 26% last year and about 19% this year. But it does appear to have bottomed out.”
Corporate survival is the priority and business challenge, he says, coming top of the list of business challenges in IDC research over the past two years. In second place consistently is the cost of doing business. Of the ICT challenges identified by IDC, controlling costs and improving the business case and financial justification are the most important for hard-pressed IT departments. “We would say that vendors need to be more involved and help customers make the business case and show how speedy RoI can be achieved.”
The other major challenge is migrating from older technology, Gaffney says, with the proportion who have identified this as the priority rising from 14% last year to 22% this year. “That does suggest that a significant number are getting into trouble with their IT infrastructure, with a lot of their stuff at a worrying age even if it is still working OK.”
In the server market Gaffney observes that even with the known data centre figures taken out there is still significant growth showing. “Our survey figures show 35% of organisations investing in server replacement this year, which is far from unhealthy. It is clear that the economics and IT advantages of virtualisation and other new and more efficient technologies is a serious driver. We estimate that by end of year over 60% of organisations will have some level of virtualisation. That is a very significant uplift for a single technology.”
Sharp drop
Another organisation with a great market view is Microsoft and itself probably a more accurate market barometer than formal surveys. “The market here has dropped sharply since about 2007 and we reckon it bottomed out at the end of last year and is running level since then,” says Martin Cullen, Microsoft Ireland business manager for SMEs and partners. “It was certainly clear that a lot of normal corporate IT refresh activity was simply stalled during 2008 and 2009. But we have seen significant market action more recently with, for example, massive uptake of virtualisation and our Hyper-V products in the last six or eight months. There has also been a great response to our drive on Windows 7, with take-up actually ahead of Microsoft expectations. Another area that has been successful for us is our cloud offerings and BPOS, with multiple thousands of users actually signed up so far in Ireland.”
Larger organisations are looking to cut costs and improve productivity, Cullen says, while SMBs are responding to more fundamental drivers. “Device failure or the threat of it is for many the point at which technology is replenished. Where a potential productivity gain is on offer it has to be immediate. On the other hand, we are seeing a step change in how smaller businesses avail of technology. They are flexible, can make fast decisions and we are seeing them embrace hosted Exchange and other cloud offerings and move to managed services for more of their essential ICT needs. Transferring costs from CapEx to OpEx is even more immediate and important for SMBs as well as letting service providers take on the IT responsibilities while they concentrate on core business.”
Virtualisation drive
The overall trend towards a return to ‘normal’ levels of IT refresh in larger organisations is confirmed by Chris Mullan, Dell head of SMB sales for Ireland and the UK. “Server replacement is healthy, driven by virtualisation. We are also seeing investment on the client technology side, with significant movement to Windows 7, Office 2010 and Exchange. Server virtualisation is definitely key, with talk of desktop virtualisation but little actual buying of desktop virtualisation just yet.”
Since there is such a large installed base of ageing technology in all organisations, Mullan says, there is definitely a trend towards ‘invest to save’ strategies. “That ranges from server and storage virtualisation to energy usage. A growing number of organisations are realising that now is a very good time to invest in up to date technology. The market is very competitive and there is a very real sense in which the many cost and efficiency benefits are compounded for those organisations which can make the investment.”
The focus on infrastructure enhancement in recent times will be followed in the latter part of the year by a renewed interest in refreshing desktops and the client side generally, Mullan believes. “We see that customers understand their needs for better ICT resources but there is the continuing challenge of trying to finance them. Certainly Dell and the industry generally should be doing everything possible to give IT managers the tools and the proof points to convince their financial colleagues.”
Innovative financing solutions are becoming increasingly significant, Mullan says. “We are offering 0% finance on enterprise products, for example, and Dell believes in engaging customers and their range of needs on an individual basis and trying to be as flexible as possible. The Accelerated Capital Allowance scheme is important and definitely part of any financial business case. But it is not really a driver and businesses have to assess the right time for them across a varied set of financial and business value criteria.”
Servers mostly
The general story is much the same as viewed from HP Ireland. “Larger enterprises are spending OK, on servers mostly, and it is notable that multinationals with operations here are investing and reflecting the renewed growth elsewhere,” says Ciar
Subscribers 0
Fans 0
Followers 0
Followers