Once upon a time, such companies ruled the roost in IT. In fact, user organisations were often defined by their choice of main system supplier: you were an IBM, or a DEC or an ICL site first and foremost. Those days have largely gone of course, as indeed have many of the old systems companies that pioneered the market. Today’s HP encompasses the former Compaq and DEC; Fujitsu and its joint ventures account for large parts of what was once ICL and Siemens Nixdorf.
There has been a great deal of standardisation and rationalisation around a few key products and technologies. The Intel architecture is now ubiquitous: even Sun Microsystems has adopted it! HP has sounded the death knell – albeit a long drawn out rendition – of both its PA-RISC and Alpha microprocessor architectures. IBM’s POWER and Sun’s SPARC architectures are hanging on but the former is increasingly a services-led company and the latter is battling declining sales and market share.
We put our questions to leading executives of the local arms of five systems companies. Martin Murphy is managing director of HP Ireland. John Scully is global services director with IBM Ireland. Tim McCarthy is country manager for Dell in Ireland. Following a recent reorganisation, which coincided with the departure of former country manager Aidan Furlong from Sun Microsystems, the company’s Irish sales operation is run by a triumvirate, each with responsibility for specific sectors. Brian Jordan is responsible for enterprise accounts and the public sector for Sun Microsystems in Ireland. Niamh Spelman is managing director of Fujitsu Siemens Computers.
1) The years 2001-2002 were painful ones for the IT industry. Do you consider the industry to be in a better or worse state facing into 2004 than it was this time last year, and why?
Martin Murphy, HP
Much better. Looking back there were too many players in this market, offering too many technology-based solutions and who didn’t understand the real business needs. Our customers’ want to deal with organisations of scale who really understand their business, which is what we can offer now.
John Scully, IBM
The IT industry’s not the same old industry we’ve been used to for the last ten or fifteen years. This is now a customer-driven industry, not one driven by the IT-industry agenda. I believe that there is a fundamental shift in the market. There is no longer a meaningful distinction between business and IT strategy. This combination, this integration, is unlocking opportunities that we wouldn’t have seen before and business transformation is one of them.
Although it is too early to say that a rebound is at hand, we are confident that we will benefit from both a pick-up in IT spending and an economic recovery. Technology spending has stabilised, but companies are still cautious in their spending. I would say that overall tech spending remains ‘good’ but not ‘robust’.
Tim McCarthy, Dell
I think that the industry is definitely in better shape. EMEA Q3 market data from independent research companies such as IDC, Dataquest and Gartner was very encouraging with the market growing in the region of 15 to 20 per cent year on year, depending on which company you talk to. The statistics for Ireland very much followed this overall trend and 2003 seems to be the year that the market turned from negative to positive growth.
In terms of Dell specifically, our last set of financial results for the third quarter, released last November, showed strong growth worldwide. In EMEA, total Dell shipments increased 26 per cent, seven points ahead of the average for the rest of the industry. Locally, for Dell, the Irish market has reflected a similar trend.
In the US, we see some positive, albeit early improvement in the corporate space. Large corporations have started to replace aging PCs, upgrade servers and invest in wireless and business-critical infrastructure such as storage. There is also increased demand from consumers and small business owners.
Brian Jordan, Sun Microsystems
It is generally recognised that economic growth within Ireland will pick up in line with the upturn in the wider European and global economies. This growth is predicted to be modest. Most IT companies have retrenched during the downturn. For many, R&D budgets were severely curtailed and investments in IT were severely stalled. Sun has sustained its R&D investments during this downturn and is now better positioned than most IT companies to bring true innovative solutions to businesses as investment in IT returns.
Niamh Spelman, Fujitsu Siemens
The successful players in the market have focused on process improvement and cost reduction to deliver an effective business model to meet the needs of customers in a more challenging business environment. The projected improvement in the economic outlook for 2004 in all sectors will result in a positive knock-on effect for the IT industry.
2) Cost reduction, speedy return on investment and doing more with less were expected to be the key factors driving IT investment last year. Is there any evidence that expansion will drive investment in 2004?
Martin Murphy, HP
All of the above parameters will continue to be relevant to investment decisions going forward. More importantly, I think that the key will be our ability to continue to offer solutions which drive real business, or new business propositions for our customers, and generate new revenue streams for them.
John Scully, IBM
Corporate customers are increasingly seeking packaged solutions to specific business problems, rather than making technology purchases in a piecemeal fashion. Also, the boundaries of IT are shifting. To win in this marketplace, you need to have the ability to bring together business process expertise and information technology expertise. In a recent survey of some 300 CEOs, it was found that corporate managers are showing a growing interest in boosting company revenue, rather than just cutting costs and are eager to make their companies’ computing systems more flexible and better connected.
Our customers are asking us to make them more productive and efficient. It’s knowing how to deploy that technology that’s the theme IBM wants to follow to generate growth in the coming year.
Our on-demand offerings are well established in the Irish market. The key focus of the e-business on-demand initiative is for businesses to give their clients what they need, when they need it, with as little fuss as possible. Basically, that’s a strategy of selling our customers just what they need to enable them to expand as necessary and allows them also to call on new resources, as needed, to sustain growth.
Tim McCarthy, Dell
I absolutely think customers’ focus will continue to be on return on investment and total cost of ownership. As the cost leader, Dell’s direct model is particularly relevant in a challenging economic climate. That cost focus and our ability to create value for our customers has been a key driver in Dell’s significant 20 per cent year on year growth over the last three years. In 2004, I believe that there will be a continued move towards standardisation, particularly in the server environment. Unlike proprietary technologies, standards give customers flexibility and choice.
Brian Jordan, Sun Microsystems
Many enterprises have found it difficult to calculate the true return on investment for proposed IT projects which resulted in many stalled investments. In addition, the significant investments companies made in Y2K, Euro changeover and Internet-related projects left many feeling exhausted and nervous of where new investments would bring efficiencies to their organisations. Renewed confidence is now emerging and internal business justification methodologies for new investments have become much more quantifiable in terms of financial return on the investment.
Well-targeted Internet-related investments, in areas such as supply-chain optimisation and customer-relationship management, are now showing tangible benefits to companies. Other areas of current focus for companies are alternate desktop solutions, consolidation and investment in wireless technologies. Irish-based companies will, in all likelihood, show moderate expansion in line with the economic upturn. This should have a domino effect in increasing IT investment.
Niamh Spelman, Fujitsu Siemens
Based on a more optimistic view of business in their own sectors, customers are expecting a renewed investment in IT. They will continue to view any IT spend in terms of ROI and business benefit, which is a positive for all.
3) Given the consolidation and attrition among IT companies over the past few years, do you see large system builders, such as yourselves, having to change the way in which they approach the market? How will your company do so?
Martin Murphy, HP
Simply stated, we have to compete and win every single project we bid for. In Ireland, there will be a small number of very large multi-year projects in the market every year. These offer us the opportunity to dramatically increase our revenues and market share with annuity revenue streams. These are ‘must win’ opportunities for us.
In general, I believe the market is increasingly becoming services led and HP has both the breadth and scale to be best positioned in this space.
John Scully, IBM
IBM’s customers aren’t just looking for technology in the current economic rebound, but how best to deploy it in order to get a return on their investment. We have a strategy that focuses on e-business solutions and on-demand computing.
We have recently regrouped our sales force into industry specific teams so as to better address the needs of different types of companies. Some of our recent acquisitions, such as PricewaterhouseCoopers (PwC) Consulting and Rational software, have given IBM both the intellectual/business knowledge and the tools to deliver effective business solutions that no one else can match in the Irish market.
I’m confident that IBM’s service-centric business model, and an increasingly comfortable embrace of Linux and standards, will serve our customers well in the future.
Tim McCarthy, Dell
No. Dell’s direct approach with our customers is the whole ethos upon which our company is based and will continue to be the way we approach the market. However, we are focussed on offering increased product offerings for our customers. We have already added storage, PDAs, projectors and printers to our portfolio and are about to launch our new flat panel televisions in Ireland.
Brian Jordan, Sun Microsystems
Sun’s strategy is to develop technologies and services that reduce cost and complexity within an enterprise, accelerate the launch of new business services and allow mobility of user access to business services while ensuring total security.
Sun’s R&D division has concentrated on producing infrastructure solutions that truly show return on investment for our customers. Our mission is very focused on driving cost and complexity from existing infrastructures, while also building flexibility in those architectures to allow business to adapt easily to changes in their requirements.
We are somewhat unique in the industry these days for bringing true innovation to customers. Count the companies out there with sizeable investments in R&D that regularly bring new innovative products and services to the marketplace. There are very few. The industry needs choice to reduce cost and drive up service levels continually.
Niamh Spelman, Fujitsu Siemens
Business efficiency and price competitiveness are key factors in maintaining strong customer loyalty. When we are talking about more complex solutions, the most successful companies in the IT industry will be those who prove their capability as business advisors, not just as technology advisors.
4) What are the compelling technologies that will drive your company’s business in 2004, and how does your company differentiate its own from its competitors?
Martin Murphy, HP
It’s not about the compelling technologies, it is more about the utilisation of technology to drive compelling leverage for businesses around competitive advantage, increasing customer reach, driving out cost and developing new markets. Of course, key technologies will play a role in this in terms of mobility, virtualisation, integrated service management etc, but technology alone will not drive our business. It’s the ability to make it work.
Our depth and breadth of products and services is unrivalled in the IT market globally and locally. This is probably the most compelling differentiation for us, as we see our business customers looking to consolidate and rationalise their IT infrastructure and suppliers. It is this strength that allows us to capitalise on where and how the growth will come.
In the Enterprise and SMB space, it’s about getting more for less and driving real return on investment from IT. The basis for this being alignment of business and IT, providing an agile/adaptable architecture that is manageable, scaleable and cost effective built on industry standards.
John Scully, IBM
IBM has become a services-led business and since the acquisition of PwC Consulting in October 2002, the company has moved up the IT services value chain to higher value business-process work.
Companies that want to remain competitive realise they need to re-engineer their business processes in order to become more flexible and responsive to their customers. IBM now has that deep industry insight and knowledge of business processes to be able to help companies to break down boundaries between departments to ensure that operations are more seamless and run more smoothly.
In addition to investing in consulting expertise, IBM is also investing in software to enable companies to address the way work flows through their enterprises. Information technology is becoming the language in which you describe business; business design is becoming a computer science problem.
Tim McCarthy, Dell
In addition to our client business, we continue to perform strongly in the server/storage market and I expect this to continue. At the top of the computing tree, Dell’s supercomputing cluster at the University of Illinois’ National Centre for Supercomputing Applications is recognised as the world’s fourth fastest supercomputer. Dell has not only demonstrated that it can deliver incredibly powerful computing solutions, but can do so at a fraction of the cost of a traditional supercomputer.
Closer to home, UCC’s research institution, has also implemented a Dell a high performance computing cluster (HPCC) which will be used in the Boole Centre for Research in Informatics.
I think our Professional Services portfolio which we recently launched in EMEA will be a key driver in 2004. Worldwide, we are now one of the fastest growing hardware services companies with annual revenues of $2.6bn. There is huge opportunity to replicate that success in EMEA. We intend to apply our direct model to services – that is demystify and standardise the process while allowing customers flexibility and offering great value.
Mobility infrastructure and usage is also exploding. Europe has 80m mobile workers, growing to 100m by 2003. Wi-Fi hot spots, pervasive in the US now – are beginning to come in here. I think that companies, not evaluating wireless solutions or at least making strategic decisions today could be severely disadvantaged in the future. Standards have solidified, costs have come down, performance is robust and security is no longer an issue. The challenge Ireland has is, of course, is the continued roll out of fixed line broadband.
Dell’s increased offering in peripherals including PDAs, projectors and printers will also help drive our business. We plan to improve the customer experience of purchasing printers and replacement ink or toner by delivering the same value, attention to service and industry-leading products that we have traditionally done.
On the consumer side, our new flat-panel televisions, our entry into handheld computing and printers are exciting for both us and our customers and complement our existing product offering.
How do we differentiate ourselves? With our direct model which starts and ends with our customers, with no intermediaries to add confusion and cost. Dell is the single point of accountability and acts as a trusted partner. We concentrate on standards-based technology developed collaboratively with our industry partners, and a dedication to reducing costs through process improvements.
Brian Jordan, Sun Microsystems
To attack cost and complexity, Sun has introduced low-cost PC desktops running Linux or Solaris. In addition, Sun has also teamed with AMD to deliver Opteron processor-based x86 systems to customers in the next calendar year. A fully integrated Linux desktop with StarOffice, Email and Web capability, known as Java Desktop System provides customers with a low-cost alternative to Microsoft desktops.
N1 is Sun’s architecture for the next generation data centre. It simplifies data centre operations by automating away the complexity associated with running IT infrastructures. With N1, the focus is not on the individual servers and storage systems. Rather, focus has shifted to managing an IT infrastructure as a smoothly integrated whole. N1 is about making the data centre behave as a single, unified system.
Sun’s approach to software provision and licensing solves common problems experienced within enterprises. Enterprise infrastructure software has become too complex, difficult and costly to acquire and expensive to integrate. Planning and deploying infrastructure software has becomes too complex. The Sun Java Enterprise System and Java Desktop System provide pre-integrated software stacks, a single price and single license for the software system, maintenance and support, key consulting and education services. The benefits to enterprises are reduced cost, reduced risk of integration and faster time to deployment.
Mobility with security is provided by Sun using Sun JavaCard smartcard technologies integrated with the desktop interfaces allowing portability of the desktop to follow the user around different access devices.
Niamh Spelman, Fujitsu Siemens
Clearly, one of the most significant growth areas in the coming year will be in mobility – mobility for both people and PC clients.
In the enterprise space, evolving business processes continue to offer a positive challenge in building a robust IT infrastructure and reduction of risk is a key driver. Fujitsu Siemens Computers maintains a strong position in Solaris-based system technology offering superior performance and security to it’s customers across Europe and in Ireland. Mobility and business critical computing have been the cornerstones of our product strategy for the last number of years.
5) What grounds for optimism do you see locally and internationally in 2004?
Martin Murphy, HP
I see optimism and increased spend from many multinationals based in Ireland and I believe HP will benefit from this. No other IT or Services company in Ireland can offer the portfolio that HP has – and our customers can see that. We have proven that we can win and implement the largest projects in the market and I am very optimistic that if we stay focussed on our current strategy we can continue to grow our revenues and market share in Ireland.
John Scully, IBM
I see working with open research communities being critical to the future. IBM has embraced the idea that there is no point in one company just working alone anymore and this is where Linux comes into play, or, more importantly, the community that is behind it. When you have the smartest minds, not just in IBM, but from everywhere, sharing ideas to create the optimum tools that we need to move forward, it gives you a good feeling that we can take on the problems and win.
The second important thing, then, is to create the ideal software environment to make it much easier to integrate business processes, applications, people and information. One of the significant efforts that IT departments in companies have is in integrating the various pieces. This is the thinking behind our major push in middleware, and Web services in XML: to make it easier to connect the pieces and this is critical to drive more applications in the future.
From a local point of view , IBM are making massive inroads into developing software and services – and Open Source software in particular. Much of this work is being undertaken in our research and development facility in Dublin.
Tim McCarthy, Dell
Based on Q3 results for the industry, EMEA and Ireland are already performing well. If there is a global pick up, Ireland, with its globalised economy, is set to benefit.
Brian Jordan, Sun Microsystems
The current GDP growth within the USA is now generally accepted as a true indicator that the economic climate is recovering in a sustainable way. From an IT perspective, Gartner is predicting 5 per cent global economic expansion in wireless, optical networking and Linux. There are grounds for optimism. Sun is performing well in terms of units shipped according to IDC, especially in the Volume (<$25K) space, which is proof of our strong execution and focus on low-cost computing.
Niamh Spelman, Fujitsu Siemens
In 2004 there will be many IT issues that companies need to address in terms of business need such as security, employee productivity and value-based investment. Over the past few years customers have had to sweat their IT assets and many companies will now see the need to reinvest in the infrastructure as the cost of maintaining this base is now becoming prohibitive. This, together with renewed optimism for better growth rates in business, will yield moderate, but solid growth in the coming year for the IT sector.
02/02/04
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