Few industry watchers will be surprised that software revenues continue to thrive. As organisations strive after ever greater competitive advantage, the software emphasis continues to shift toward more intelligent software products that can enable greater levels of business intelligence to be extracted that are in line with business objectives.
“Each year we have seen an improvement in the alignment of IT with business drivers, where investment decisions are taken over a longer time line, taken at a more strategic level, and have a more measurable impact on the overall business performance. Due to economic concerns, global IT research analysts such as IDC and Gartner are predicting a downturn. However we do not see a similar trend in Ireland in 2008.” So said Oisin Byrne, MD of Irish market intelligence and research firm iReach, commenting on the findings of a recent survey of 250 business decision makers.
Similar views on the health of the Irish market have been voiced by many of the top software vendors, including Microsoft. Last year for most players seems to have ended very strongly with “strong pipelines” going forward into 2008. Security and of course compliance are increasing. The main buzz word for 2008 seems to be “business intelligence”, admittedly with a host of other titles. SAS is leading the charge but more significant are the number of BI (business intelligence) acquisitions that have taken place by firms that include Microsoft, SAP, Oracle and IBM. Somewhat related to BI is the greatly increased emphasis on aligning IT spend with business objectives with Microsoft such as the IMI productivity Centre and Microsoft’s envisioning Centre. Another important trend that emerged was the provision of software as a service, an area that will grow very strongly over the next few years
Microsoft
Microsoft had another good year in 2007 with double digit growth in both Western Europe and in Ireland, where it exceeded its own forecasts. Globally the firm continues its apparently unstoppable march – with current indications suggesting revenues will grow to about $60b or about 17% for its financial year ended next June. While the major divisions are profitable, the online services business and entertainment and devices divisions are significant loss makers. The surprisingly high price ($44b) proffered for Yahoo suggests a certain level of desperation.
The emphasis has shifted more toward strategic selling, where the needs of the business or organisation are clearly defined, after which the appropriate technical IT solution is recommended. The productivity centre set up with the Information Management Institute is at the forefront of this initiative, as is the envisioning Centre that is used to demonstrate how possible solutions can be used to enhance the performance of an organisation.
Neil Tanner, small and medium size business and partner director, said Microsoft has made significant investments in its channel partners, principally in the areas of training, sales capabilities and joint engagements. The emphasis has been on solution selling and core skills enhancement. Microsoft says there has been strong interest from partners for Vista and Office 2007 that has boosted sales of other products and services. On the enterprise front there are many pilot projects under evaluation and some large firms will roll out Vista in 2008. In the mid market there is a strong pipeline of opportunities that will drive deployment. There is a strong demand for server virtualisation, and Microsoft is reducing the time between refresh cycles for these products and for SQL and Virtual Studio.
Microsoft has set up a partner council that meets quarterly to ensure the needs and concerns of the channel are addressed. There is an industry-wide issue, with a lack of resources in terms of people with the required level of skills, capacity and capabilities. More talent is required, along with more training on how to deliver and put technology in place.
The key messages from Microsoft are to continue the strong investment in the channel, leading to more productivity and automation; to maximise the use of the productivity and envisioning centres to drive the business benefits of technology; and to deploy the productivity leveraged last year.
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Sage
Sage describes itself as the largest software firm in the UK – and now ranks second in the Irish marketplace, having garnered the lion’s share of the accounting/ business management software market. A recent strategic acquisition was Protx, a credit card payment system that has now been integrated with Sage 50. According to MD Liam Mullaney, this is a major benefit for small businesses that can now deploy credit card payments with minimal hassle. Sage can help smaller organisations to get credit card payment agreements put in place and the system can be easily deployed with e-commerce systems.
Thousands of payroll sites were updated without any problems last year with the new version of MicroPay Professional. Sage says it was well received as it included many new interface features and benefits. Mullaney said: “From a trading perspective 2007 was a year of two halves, with the first half being very successful”. The April/May period stagnated, with the uncertainty surrounding the General Election, and this was followed by a pick-up. Sage now has more sales leads than for the beginning of 2007, with an increased emphasis on cost control that is encouraging many small businesses to tighten up on financial controls. The mid market will take more time before committing to purchase decisions.
As awareness of customer retention permeates smaller firms, Sage has seen a strong acceptance for its CRM.com, launched in October. The newly released version of Sage 200 has been well received in the UK, and Mullaney is expecting similar results in Ireland.
Sage has 65 partners in Ireland – mostly traditional Sage-only software suppliers, although some also supply hardware. Some focus specifically on vertical markets such as construction and these vertical specialists, with their high levels of industry expertise, have become a key component in Sage’s success. Sage 50 is popular with accounting practices as it simplifies adjusting journal entries and allows audits to be pursued without interfering with the day-to-day accounting activities.
MySQL is now the standard database software deployed across products that greatly simplify integration; for example, payroll and human resource solutions that will be an important product for the firm for 2008. The firm expects “double digit growth” in 2008 and will gain further market share. As solutions become more complex it will be more difficult for smaller players to maintain the level of R&D required, and the number of suppliers has declined significantly over the last five years. The Irish market is relatively small and this presents a significant challenge for international players. It should also be noted that, Sage after a prior year adjustment, should have been placed above IBM and Oracle in second place in our league table last year.
Oracle
This firm continued its strong acquisition policy and frequent refreshes of its core products. At the start of 2007 there were five new releases of its major applications covering Oracle E-Business Suite Release 12, Oracle’s PeopleSoft Enterprise Release 9.0, Siebel CRM 8.0, JD Edwards EnterpriseOne 8.12 and World A9.1. In August Oracle announced the integration of Financial Services Application and Business Intelligence Enterprise Edition, giving better insights into business while enabling cost of delivery to be reduced.
Acquisitions during 2007 covered a wide spectrum including security (Bharose), improved performance (Tangosol, Lodestar, Interlace Systems, Bridgestream, Moniforce, LogicalApps and Agile), mobile (AppForge) and BI (Netsure Telecom, Hyperion). At the beginning of 2008 two more acquisitions were announced in January: Captovation, covering content and transaction processing, and BEA for $8.5b with a strong SOA (Service-orientated architecture) offering.
MD Paul O’Riordan highlighted some key trends. He maintained that oracle was leading the way with BI and EPM (enterprise project management) solutions that provide integrated end-to-end management performance systems covering the complete spectrum of organisational needs. Oracle is strong in the financial services area, as it helps empower “financial institutions to enhance customer intimacy, build competitive advantage, reduce costs and mitigate risk”.
Oracle partnered with Rocela to provide Advanced Innovations (contract electronics manufacturer headquartered in Ireland) with E-Business Suite Special Edition and Portal to support AI’s global business operations. Netsure had already been working with Vodafone, Cable & Wireless and Eircom. The combination of Netsure and Oracle enables improved network use, optimisation capacity planning and financial modelling, and streamlining end-to-end network lifecycle management. Toward the end of 2007 Systems Dynamices joined the Oracle PartnerNetwork. Oracle seems well positioned to advance with larger organisations.
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IBM
IBM has reinvented itself many times and has become more tightly focussed on non-hardware markets apart from the server and mainframe markets, where it is the biggest global player. While we complain about the dearth of local information available from other global players, IBM is by far the most secretive. We have been lead to believe IBM’s performance may have been better in the Irish marketplace. Globally, software accounts for 40% of IBM profits and is expected to grow to 50% by 2010.
The five key focus areas of IBM middleware portfolio focus on delivering business process flexibility, increasing empowerment of people, providing information on demand, service management, and software lifecycle management; Lotus for collaboration and user interaction, WebSphere for transaction processing and integration, DB2 for data management, Rational for application development, and Tivoli for systems management. All are built on a SOA platform.
IBM software manager Niamh Madigan said IBM software continues to capitalise on industry imperatives of SOA, which is primarily about automating horizontal business processes across a firm and analytics – providing real time data to make business decisions that include information on demand, business process services, Web 2.0 and open systems. IBM has continued to invest in acquisitions, such as Cognos, that will provide IBM with a strong entry into the BI market.
Madigan says the global software trend is shifting toward new architectures and the componentisation of applications and infrastructure software. The shift is driven by the sheer capacity of computing and volume of information as end users are connected now in real time and are highly interactive. Businesses are placing a growing premium on a faster route to innovation, and competitive advantages not possible with off-the-shelf technology and solutions. She added “IBM is uniquely able to capitalise on this change and to help our customers innovate in an increasingly complex world”.
Noteworthy deals include Irish Life, which chose IBM software to deliver enhanced services for financial clients with IBM Master Data Management software, and the new IBM Information Server software platform to enhance its pensions and investment offerings. In December an agreement was signed with AIB to provide DB2 and WebSphere software as part of a EUR*45m three-year deal. IBM also opened a new Innovation Center at its Mullhuddart Technology Campus to help start-up firms, software developers, and independent software vendors create new software and hardware applications and services.
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HP
HP should have appeared in our Top Ten Software table last year, albeit very near the bottom. HP software sales had a huge increase in 2007, probably reaching EUR*15 to 16m. With global earnings over $104b, HP ranks about sixth worldwide in software revenues. Its strong software growth was due to a combination of excellent organic performance and strong performance on the back of acquisitions. These software sales figures cover software written by HP and its associated firms, and does not include third-party products, thus there is no element of double accounting.
Q2 in 2007 saw the acquisition of Israeli firm Mercury Interactive, a huge acquisition that cost HP $4.5b to strengthen OpenView with Mercury’s network management software for data centres. Another important acquisition was Opsware ($1.5b) which specialised in data centre automation. In the application security testing area HP acquired SPI Dynamic.
HP sales director Mary-Lou Nolan said strong software revenue growth in the Irish market will be further strengthened by expanding sales through enterprise channel partners that stood at about 30% in 2007. In 2008 there will be further consolidation and new products, especially in project & portfolio management, identity management and service oriented architecture governance and management areas. Business intelligence will be another important area, though Nolan says the Irish market is quite limited.
The drive to continue growing revenues while cutting costs will encourage the market to demonstrate the business impact of IT. Nolan said: “HP also sees a lot of interest in its new Service Management product which was released in November. Service Manager 7.0 extends HP’s leadership in the IT Service Management area and leverages the firm’s involvement in the development of ITIL v3.”
HP has recently moved into the SaaS (software as a service) market and this will generate a lot of interest in the SMB area in the coming year. In 2008 and beyond, HP will continue to aggressively build its software business, both through organic development as well as acquisitions as it seeks to consolidate its leadership position in operations management, data centre automation, application testing and project and portfolio management. The firm is positive about growth prospects, although this will be less spectacular than in 2007.
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SAP
SAP is divided into four broad business: software and licences, support and maintenance, consultancy, and education and training. Last year was again strong, with Irish International Sales continuing to be the “number one” SAP partner in the EMEA region. There was increased activity in the channel, partly due to the successes generated by Green Rock Technology. The Business One product made significant inroads into the smaller business market covering one to 20 users. With over 130 customers, this area is expected to grow strongly in 2008. The medium and small business markets are major growth areas for the firm, and MD Phil Codd says it may review its geographic distribution model this year.In the medium sized business market (revenues of EUR*30m to EUR*1b) with about 600
to 700 potential customers, SAP continues to add new names and to maintain its dominance, according to Codd. Large enterprises are expanding their use of SAP by buying new modules. Drivers include the increased emphasis on compliance, governance and risk management covering both finance and security. Commenting on BI, Codd said “it never got to where it should be”. SAP strengthened its position in this marketplace with the acquisition of Business Objects. This market will grow and is not confined to big firms, as the technology is useful to medium enterprises.
SAP is a large employer in Ireland with 1,200 employees (200 in Galway) and a smaller research branch in Northern Ireland. SAP will be pushing its Business by Design, supplying services to small to medium sized organisations. Much money has been spent on developing these best of breed services, and SAP expects a good return.
CA Country manager Frank Kennedy said last year was very good in Ireland and that the firm gained market share. Growth was strong with existing and new products to new and existing customers. Although the mainframe market is small in Ireland, the firm did well with related products in the financial and government areas. Strong growth areas were security and portfolio server management, followed by storage replication management (with a big win from the Bord Failte). Security was really strong with financial customers.
Kennedy said that there was a strong pipeline ahead, though customers are becoming cautious. The quality end of the market will hold up well over the next two years as organisations invest in strategic IT solutions that ensure real business benefits. In portfolio management CA was ranked number one by Gartner over the last five to six years. This is not just concerned with evaluating IT investments; it can be used for all types of investments. It helps to measure and ensure that investments are aligned with business objectives and are realistic in terms of available resources.
CA products are distributed by CMS Peripherals and Sharptext. CA has built up a very strong relationship with partners in Ireland, and is ahead of other markets. This has been achieved mainly through Kennedy’s background and experience and because it is easier in a small market to build these types of relationships. CA regularly monitors its progress in this area and Ireland is significantly better than the average.
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EMC
EMC is starting to spread its wings in the reseller space, having appointed Contech in December. Country manager Colm O’Neill said there will further announcements in line with the recently introduced Velocity2 Partners Programme. He said the firm gained market share from some competitors as a result of EMC’s more direct engagement with customers and the technical superiority of its products. The two main drivers have been server virtualisation and a shift in the user focus from hardware to functionality, placing a greater emphasis on platform management software.
The scale in the growth for storage demand is difficult to comprehend. IDC figures published in 2002 showed that the total volume of data recorded up to that point was 12 billion gigabytes. In 2010 the annual figure is expected to be 988 billion gigabytes – an annual growth rate of 60% year-on-year.
Last September EMC announced Avamar, the virtual edition for VMware Infrastructure that is the first fully virtualised de-duplication solution for backup and recovery. This can simplify and speed backup by up to 90%. To gain the full benefit, the primary backup medium has to be disk-based, and users are moving in this direction. O’Neill said within three years tape will be used only for “deep archiving”. He saw encryption becoming a standard feature within three years.
O’Neill was upbeat about EMC’s success in Ireland, saying the greatest challenge EMC faced here was “one of coverage rather than being successful”. This success underlines the need to build the reseller channel – considered very capable and which enjoys great trust. He sees this as a strong opportunity for the channel to make real margins backed by the clear objectives around sales, services and support established by the EMC technical people in Ireland.
Autodesk
In previous years this entry appeared under Cadco who continue to be the distributors for the Autodesk range of software products. These products prospered in 2007 although the growth across all products fell short of the anticipated 15%. Autodesk’s Industry Solutions such as Revit, AutoCAD Architecture, AutoCAD Civil grew by twelve%, and Design Visualisation products -VIZ and 3ds max – grew by thirty% while Inventor and AutoCAD Mechanical were equally successful. AutoCAD seats declined and the sales of AutoCAD LT grew modestly.
Seamus Hurley, Sales and Marketing Director of Cadco, said that the expected growth for 2008 is around 12%, due mainly to the expected growth in the demand for the industry products. Ireland has lagged behind some other European markets but recent indications are that the industry solutions are starting to move in Ireland. Vertical solutions are also expected to show strong growth of around 20%.
Hurley sees a polarisation in the marketplace with some users optimistic about investing in solutions while others are waiting to see how developments play out in the construction industry. He believes that there will be steady growth this year in the AEC (Architecture, Engineering, Construction) commercial developments, infrastructure and manufacturing. Training and consultancy services continue to be a focus for resellers as the adoption of industry solutions is as much about adapting and integrating work-flows as it is about product knowledge.
SAS
SAS is the leading global player in business intelligence, and has recently acquired many rivals. BI software spans a broad range, with advanced analytics being the best known, leaving the ad hoc reporting of ERP systems way behind. Advanced analytics covers areas like forecasting, complex modelling, causality, propensity modelling, optimal outcome and optimisation. Country manager Michael Kearney says Ireland still lags, with 20 firms that are “with it”. This raises concerns for global competitiveness as many global firms are successfully deploying this technology.
<p>Last year was healthy, with strategic purchases by about 10 firms, mostly indigenous, including insurance firms, the public sector and autonomous subsidiaries of global conglomerates. SAS in Ireland partnered with some key players, and it bills itself as the fifth largest global software firm. Its main rivals – Hyperion, Business Objects and Cognos – have been acquired by Oracle, SAP and IBM and, according to Kearney, SAS is the only serious player still focused exclusively on business intelligence.
IDC says BI is the software market’s fastest growing sector. BI’s return on investment can be dramatic, and SAS seems well poised to reap the benefits. As complexity increases, demand for new business insights grows across a broader range of businesses, including small firms. It is no longer a question of how hard organisations work, but how smart they are.
Analysis by iReach suggests the overall Irish software market will generate revenues of EUR*440m in 2008, up 6% on 2007’s EUR*415m. The EUR*440m is split EUR*100m for security, EUR*200m for document and content management solutions, business intelligence and analytics, database, web servers and enterprise portals, leaving EUR*140m for other software categories. iReach also reports significant growth for enterprise software, an area that is addressed by most of the players in the Top Ten list.
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