When it comes to delivering IT to Irish businesses, many of the feet on the street belong to the employees of local resellers. This catch-all term refers to those who supply products and technologies produced by other companies but add their own expertise in terms of support, customisation, bespoke development or integration with other systems.
Some of the companies polled here are general IT services companies with a broad portfolio of products or services at their disposal; others focus on niche areas like database development or security. There are also consultancy firms who offer strategic advice to customers regarding their technology choices and deployments.
Q1 This time last year, many of you were optimistic that 2004 would be a good year for the IT business. Did it meet your expectations and what were the factors that affected your business for better or worse this year?
Conall Lavery Entropy
The year 2004 met our expectations which were for better performance than 2003. In 2003 we were mainly completing the consolidation that was instigated by the slow down in ICT projects over the previous two years. In 2004, projects that had a relatively short payback period were commenced, many of these requiring IT security which resulted in an increase in sales.
David Laird, Datapac
The year 2004 has been another year of growth for Datapac. This is in line with a general trend globally of increased expenditure on IT services and products. The recovery of the growth in the Irish economy is also an influencing factor, combined with our ongoing success in gaining market share.
David Little, CARA
This year was a good year for the IT business given the challenges we all experienced in the previous three years. My expectations were met in 2004 and CARA performed well in what was a tough year—moving our business more towards the provision of high value services and solutions.
The market was very tough with serious competition for every piece of business. Clients are looking for value and a quick return on their investment. All projects are receiving significant evaluation internally within organisations as IT competes with other business functions for the available investment funds.
There is emerging a real focus on aligning IT with the business as corporate and IT governance comes under scrutiny. IT is becoming a ‘business within a business’. There is a gradual move away from taking support contracts on desktop PC’s and a significant demand in the market for high quality premium services on critical devices such as server, storage and networking technology including virtualisation.
There is an increased demand for support packages that include remote monitoring coupled with easy access to high level technical support.
On the positive side, CARA launched remote monitoring and network operations centres in Dublin and Belfast, and signed up ten customers for these services; it won significant contracts for its Service Desk Management solution; and won an additional number of Cisco based IP/Telephony solutions during the year.
On the negative side is the growing level of commoditisation across all of the product business, and much of the services business. In many of the purchasing procurements, price is the sole criteria and added value is not factored in. The falloff in graduates taking engineering and IT courses here is a cause of concern for the future on the industry and the economy, and the lack of availability of quality sales expertise in the marketplace is a growing challenge.
Kevin Haverty, Mentec
It has been a very busy year. We started with an acquisition in Belfast and we expect to finish with another in the UK. We have seen a tremendous increase in activity in the commercial sector and in the public sector, for products relevant to ourselves. Our software development and managed services operations have also experienced significant growth this year.
What has fared worse than expected? Perhaps the extra costs involved in pre-sales as customers are taking longer to make investment decisions.
Ned McQuaid, Sabeo
I would say expectations have been met. Sabeo has achieved an aggressive sales target this year growing the business in overall terms by 25 per cent. We have maintained our position in the top 50 fastest growing IT companies. Our strong vendor relationships and a focus on services has facilitated continued growth and profitability. Services grew by over 65 per cent this year. Hardware margins are still very low due to the competitive nature of the industry but also fuelled by customer expectation of a continued fall in hardware and software prices.
Pat Millar, Clarion Consulting
2004 has been a good year for the consulting business. After a slow enough start we saw increased demand for our services from the second quarter on. Despite rising oil prices and a weakening dollar we have seen a significant increase in IT spend among our customers. Customers have been spending on business solutions and process improvement projects again and this has led to a much greater volume of projects. We have also seen renewed interest in the ERP market which has had a couple of relatively quiet years.
Justin Keatinge, Version 1
IT services companies have the ability to create their own ‘good years’, by ensuring our skills and services match the requirements of the marketplace. In 2004 we continued to do this and build on our solid track record. Our model of providing services has struck a chord with organisations that are increasingly looking for measurable ROI on all investments—not just technology. As a result of this approach, our business grew by 80 per cent—so it definitely was a good year.
Roland Noonan, Horizon Open Systems
Yes 2004 was a very positive year with growth coming in all areas of the business, among the highlights are server volumes up 29 per cent in 2004.
The continuing weakening of the dollar was disappointing however as this did impact our revenue growth, which could have been even stronger.
Q2 There has been some scepticism from analysts and academics about the competitive advantage provided by IT to today’s business. Do you meet such scepticism in the marketplace today and how do you counter it?
Conall Lavery Entropy
We have not met this objection. IT security in itself can be rarely shown to provide an ROI as it is about risk management but the projects that drive the need for security can. The projects that our customers embark upon use the medium of the Internet or Internet technologies and these typically have a high ROI (Return on Investment). These technologies can be demonstrated to provide increased efficiencies, lower costs of the business transaction and improved customer service.
Certainly projects with long paybacks are thin on the ground.
David Laird, Datapac
There have always been sceptics and there will always be sceptics and the IT industry will continue to deliver competitive advantage and value for money into the future despite them.
David Little, CARA
Nicholas Carr certainly stirred a hornets nest with his Harvard Business Review Article of mid 2003 and the ensuing often heated discussion on whether IT provided competitive advantage or not.
We do not meet much scepticism in the marketplace here today. IT buyers are too busy getting on with running the business and addressing the challenges they face with less funds and less skilled people. They do not have the time luxury of analysts and academics to get into the debate.
At senior executive level there is some scepticism about the return on investment of IT and the excesses of the late nineties. There is emerging a real focus on aligning IT with the business as corporate and IT governance comes under scrutiny.
Kevin Haverty, Mentec
Mentec has not experienced this scepticism within the sectors or customers with whom we work. I think this issue arose in the very large tier 1 enterprise projects where some of the consultancy organisations perhaps took maximum advantage of the boom in the late 90’s, when return on investment was difficult to estimate.
We have no doubt that a carefully planned and implemented project with the full involvement of both the customer and the implementer can be a serious addition to a firm’s competitive advantage. We justify this assertion by directing prospective candidates to many of our customers who have implemented important solutions.
Ned McQuaid, Sabeo
Competitive advantage cannot be achieved by supply of hardware/software alone. Sabeo’s position has always been to add value through services. The Sabeo proposition for its customers is in facilitating the highest levels of expertise available without the need for the customer to build and maintain that level of expertise in house. This has always been and will continue to be a competitive advantage for Sabeo. This is particularly true in multivendor deployments.
Pat Millar, Clarion Consulting
We do come across this scepticism from time to time and I think it’s very healthy to continually ask what will any investment (IT or otherwise) do for me. We counter this scepticism by pointing out that where IT systems or projects have failed to deliver is very often due to factors like lack of sponsorship by customer organisations, weak project management and not enough time taken up front to define the extent of the investment, the objectives and the benefits and ROI.
Technology on its own is only part of the solution and the business process and people aspects are just as important for the success of any project.
Justin Keatinge, Version 1
The IT industry is responsible for sowing the seeds of much of the scepticism that exists, by producing products in the past that their customers did not want and then embarking on massive marketing activities to persuade them that they did!
The nadir of this was the CRM hype in the late 90’s and many suppliers and customers did get burnt. Since then, both sides have matured significantly. IT suppliers realise they can only sell products that deliver real solutions to current business problems in a cost-effective way and their customers have got a lot smarter at cutting through the hype and identifying exactly what they need.
Our customers realise that IT can make big improvements in their operational efficiencies and that any improvement in a company’s efficiency is a major factor in improving their competitive advantage.
Roland Noonan, Horizon Open Systems
IT continues to deliver ever increasing competitive advantages to all business, both traditional and so called new economy. Take AerLingus for example: its increased leverage of integrated IT solutions, among other things has transformed both its business model and financial performance.’
Q3 With the ongoing consolidation among large hardware and software vendors, and the increasing commoditisation of hardware technology how is the relationship between resellers and vendors likely to change over the next 12 months? Is there still room for collaboration or are you all competitors now?
Conall Lavery, Entropy
A. Entropy only works with vendors that recognise their need for a channel.
David Laird, Datapac
Our experience in terms of our relationship with our vendors is that change is happening constantly. At any point in time some vendors are moving towards a direct model while others are developing their reseller channel. This leads to a situation where collaboration and competition between a reseller and a vendor can be happening at the same time. This is a cyclical thing—five years ago it was predicted that our businesses would be wiped out by the web. The resellers have developed a vast amount of experience and efficiencies and the vendors do not have the skills or business model required to compete successfully in the reseller space.
David Little, CARA
Over the next year we will see vendors taking more of their business direct, initially in large strategic accounts. However there will always be a role for resellers who possess existing ongoing trusted customer relationships, focus on specific value niches and solutions and possess skill sets that differentiate them.
Vendors have been gradually withdrawing support services and funding from all their channel partners and this will continue to do so as their margins come under pressure. Only the large resellers will be able to meet the certification criteria in terms of qualifications and number of resources.
Vendors will continue to squeeze the channel with ever more stringent terms and conditions, budgets, forecasting and certifications, all the while reducing the margin available to the channel partners.
Vendors will at one time continue to be suppliers, co-operators and competitors. There is most definitely room for collaboration, no one supplier has all the answers in terms of product, service and solution.
Kevin Haverty, Mentec
I believe that consolidation will happen not just in the larger vendors but even at the mid-tier, this will be a very important factor for the indigenous Irish industry. Regarding collaboration, we are seeing a huge increase in collaborative projects with manufacturers where both sides are contributing serious real work—as opposed to simply a name. I believe that the importance of vendor accreditations will increase and this is something Mentec welcomes as it helps to demonstrate the investment you have made in particular areas of expertise.
Ned McQuaid, Sabeo
The relationship between reseller and vendor has and will continue to change. Tier 1 resellers who add real value through services offer a significant advantage to vendors. We would envisage continued pressure on the commodity reseller in the coming year. Sabeo’s focus on accreditation at the highest level allows vendors to feel confident in our ability to deliver the most complex solutions on their behalf. Again this is especially true with multivendor solutions.
Pat Millar, Clarion Consulting
I think there will always be room for collaboration in our industry. Customers require complex solutions and no single organisation (no matter how large) has all the skills required to deliver these solutions. The consolidation in the industry creates both challenges and opportunities for all of us and is set to continue. The real goal has got to be to continually look at how we can change and develop our offerings to ensure that we can add real value to customers.
Justin Keatinge, Version 1
Any IT services organisation has unique features and benefits that set them apart in the marketplace. While they may have allegiances to some technologies (including any they resell), the quality of their staff, the breadth of services they offer and the approach they take to business provides significant competitive differentiation. Some customers like dealing directly with vendors, while others prefer the more neutral approach of companies such as Version 1 Software. However, as specialist technologies (such as geo-spatial, mobile solutions etc) continue to be adopted, there is still significant scope for collaboration amongst companies as it is not economical for them all to have all the skills they may need.
Roland Noonan, Horizon Open Systems
Consolidation and commoditisation do not competition breed. However the IT industry is a long way from there. The amount of innovation coming from companies like Sun, and others will ensure that the customers can get what the want which is choice, value and simplicity. This is the environment which breeds collaboration between organisations focused on delivering best of breed solutions.
Q4 What are the compelling technologies and services that will drive your company’s business in 2005 and how does your company differentiate its own from its competitors?
Conall Lavery, Entropy
Entropy differentiates itself from its competitors by offering a complete solution in the narrow range of IT security implementation.
Other specialist security companies do not offer the depth and range of services that Entropy does. Many of the other specialist security companies are not large enough to give large customers the comfort they require. General IT service companies do not offer a full range of IT security solutions or really understand customers’ requirements in this area.
David Laird, Datapac
At Datapac we differentiate ourselves from our competitors by a committed culture of customer service. The technologies that will drive our services during 2005 include the demands created in the field of security for IT systems which is being driven by the expanding deployment of the web, mobility, and remote access technologies. We are also experiencing increased demand for infrastructure upgrades based on Microsoft and Citrix technologies. And we look forward to the impact of 3G technology.
David Little, CARA
Our compelling technologies and services include our CARAView remote monitoring and management service for client networks and systems; a Service Management Solution based on ITIL (Information Technology Infrastructure Library) best practices; server and storage virtualisation; IP telephony and our new premium Server (CARAServe-Assure) and networking support (CARANet-Assure) offers which will be launched shortly.
Kevin Haverty, Mentec
Compelling technologies include financial applications for public sector and business, based on the Agresso and Microsoft Business Solutions products; software development, particularly in Microsoft.NET; and managed services and application management.
Mentec relies a great deal on the success of previous projects and customers’ recommendations. We are a hybrid organisation involved both in reselling and in development, where we have 40 full-time local software developers.
Ned McQuaid, Sabeo
Linux deployment at the enterprise level is likely to be a major focus for us next year. There have been a number of significant Linux/Oracle enterprise installations this year and we see this as an area for continued growth next year. Sabeo’s focus on enterprise UNIX platforms has now expanded to include Linux with the inclusion of RedHat to our list of partners this year
Although large scale backup deployments have been few and far between lately there is significant buoyancy in the upgrade of enterprise backup environments. Risk and compliance issues are driving companies to look at legally compliant archives for their data such as email. We would see this as a growth area.
Pat Millar, Clarion Consulting
We expect to see more mid sized organisations invest in ERP systems in 2005 to provide a backbone to support future growth. We expect larger organisations to continue to outsource areas of IT (especially infrastructure support) in the coming year. We also expect to see IT skills shortages creating more opportunities (and challenges) for IT services companies
We also see larger organisations examining IT spend more closely with an increased emphasis on value for money and increased pressure on IT departments to deliver tangible benefits as part of projects.
One of our key differentiators is our willingness to share our knowledge and frameworks with customers during projects and to work to ensure a high degree of skills transfer ensuring that the customer organisation gains valuable skills that can be used in future projects.
Justin Keatinge, Version 1
The major trend we see for the coming year is that of data consolidation and presentation—ie the growing realisation within companies of the importance of a single, reliable source of data (instead of multiple sources with different versions of the same data) and the business criticality of making it available over web sites to both internal and external users as appropriate. As a result, web technologies and secure database technologies will continue to feature significantly in our ongoing business.
We are also seeing an increase in companies using IT as a catalyst for change and requiring business and process consulting to help them drive new efficiencies within their organisations. We also expect ProWatch—our managed premium support service—to continue growing to match the demand for such services.
Roland Noonan, Horizon Open Systems
Horizon Open Systems, represents Sun Microsystems in the Irish market, and the amount of new innovation and products planned for 2005 provide compelling solutions to some of the main problems facing organisations. Take Solaris 10 for example a single operating system that will support literally hundreds of different hard platforms and it’s free. This is a unique differentiator in the IT business world.
Q5 What grounds for optimism do you see in the Irish market for 2005? What will be the drivers for growth?
Conall Lavery, Entropy
Confidence in ICT to deliver benefits is increasing. The owners and senior managers now understand that the crazy projects that were taken on in the late 90s and 00 are not a barometer for technology investment.
Our customers have rolled out some very successful projects or have seen their competitors do so and this will increase the activity at a steady increase in pace. Remote working for staff, be they at a fixed location or mobile is a big driver. The need for increased interoperability with customers and suppliers’ IT systems is another growth area. At a macro level the growth in the economy is forecasted to be strong.
David Laird, Datapac
There are many grounds for optimism for 2005. The improving Irish economy, improving global economies, increasing investment in IT, and the ongoing march of technological developments in the ICT sector.
David Little, CARA
Grounds for optimism include: a growing Irish economy; optimism within the global economy and increasing returns for shareholders; increasing ICT expenditure for projects that will either deliver a quick return on investment, competitive advantage or leverage existing ICT investment.
There is the risk of the dollar weakening further and making Irish exporters more uncompetitive, the well documented US budget and trading deficit present a risk and there is a need to secure the organisation and its data from the growing cyber threats including spam.
Kevin Haverty, Mentec
There is increased confidence in the SME sector; the public sector needs to increase efficiencies; there is an increased take up of .net technology; a further release of the purse strings for the ‘pent-up’ demand in the marketplace; replacement of legacy systems and increased convergence of telecommunications and IT technologies…among other things.
Ned McQuaid, Sabeo
As the economy has slowly recovered we are now seeing defined IT budgets for large IT projects. Sabeo’s continued success positions us well when competing for new business and enhances our position with existing customers.
Pat Millar, Clarion Consulting
We believe that 2005 will be a year of growth for the Irish market. As the market in general for our customer organisations grows so to does their need for IT services to support that growth. Our conversations with both customers and prospects lead us to believe that next year will be a very busy year. We also see a number of drivers for growth such as: continued pressure on multinationals to look at lower cost countries also creates demand for using technology to allow them to be as productive as possible; a tightening labour market for IT professionals will lead to more projects being outsourced and will also create more demand for IT staff development and mentoring; and increased regulatory pressures (e.g Sarbanes Oxley) will lead to greater emphasis on governance structures and structured project management methodologies.
Justin Keatinge, Version 1
The Irish Economy continues to be the envy of Europe and this is good news for anyone doing business here. The Irish economy is unique in that although the vast majority of companies are small, many punch above their weight on the international stage. This, coupled with an agility and flexibility missing in their larger competitors, creates dynamism in the market that inevitably will lead to an increased demand for IT.
The main drivers for growth will be the need to meet new corporate compliance legislation. For those trading internationally, communications and online marketing technology will continue to be important. The adoption of broadband will also allow smaller companies to adopt an electronic business model.
Roland Noonan, Horizon Open Systems
Ireland continues to achieve extremely good GDP and GNP numbers with growth approaching 5 per cent forecast for 2005. These good numbers increase general business confidence and continue to position Ireland very well internationally. Irish business and foreign business based here need to invest to ensure that they benefit from the excellent prospects that are presenting themselves now and I feel sure will continue into 2005.
14/02/05
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