Year of getting more from less: LOCAL RESELLERS

That 2001 was a bad year for the IT industry is undisputed; do you consider the industry to be in a better or worse state facing into 2003 than it was this time last year, and why?

David Laird, Datapac

“The industry is in better shape. On the one hand excess costs taken on by the IT industry to cater for Y2K are gone out of the supplier channel, and on the other hand the further we move away from Y2K and September 11th the greater the recovery we can expect in IT budgets. In addition to this any recovery in US and international markets will have a positive impact.

David Little, Cara

“Firstly the global economy and more particularly the Irish economy are weaker. Government spending is of necessity being cutback, this will cancel, or put on hold public sector spending across the board and ICT (information and communication technology) projects in particular as witnessed by the severe cut backs outlined in the recent Book of Estimates. On average, IT initiatives were slashed by 25% plus. These cut backs will definitely have a spin off that will effect the private sector. So the market situation going into 2003 is weaker as the economic climate is much less favourable.

There has been rationalisation and consolidation in the ICT sector in 2002, globally (such as: HP acquired Compaq, IBM acquired PwC Consulting etc) and locally. This rationalisation will continue apace in 2003.

Much of the product and service business is now commodity and competition is fierce. Cost reduction and rapid return on investment are still the key criteria for all IT spending. Resources have been pared back to match revenue. So the industry going into 2003 faces many uncertainties and many new challenges. The industry has moved from the growth phase to the mature phase in the development cycle and in my view is stronger than a year ago as it is rapidly adapting to the new business environment and new business models. It still faces significant challenges and the momentum of change will continue apace.

However, we see a lot of our clients using this time to rebuild after the cutbacks of last year and they are all seeking a competitive edge to sustain them. For most, this is fuelling spend on new applications and associated hardware.

A major concern going forward is the fall off in students choosing ICT Courses at Third Level this will slow the recovery and damage the competitiveness of Ireland.

Richard Nolan, DSS

“I believe the IT industry is now in a better state facing into 2003 than this time last year.  After a number of years of heavy investments into some questionable ventures, the turning point has now been reached where investors no longer invest capital into untested ventures. Good management is being recognised again as the critical success factor to any business, in particular in the IT business. The most successful companies – going forward – never lost sight of this and are now poised to prosper going forward.

Kevin Haverty, Mentec

“I suspect that many IT companies have undertaken steps to get their infrastructure into shape in line with current market conditions. However, I would imagine that there are still a number of companies who have been trying to hold on for the renewal of the good times and that we are likely to see some more fall-out over the next 12 months.

The industry is in a better state, because it has had to refocus on projects that provide real value for money. Pioneering projects will be few and far between as customers strive to catch up with the massive technological advancements of recent years.

Roland Noonan, Horizon Open Systems

“I believe the industry in the main to be in a stronger position heading into 2003. The reasons for this are not due to an improvement in the external economic environment, but rather to the actions of good management practice throughout the downturn. This involved realigning cost models with business conditions and revenue budgets based on the new reality. Companies who have completed these necessary adjustments can look forward to 2003 with confidence. Those that have not and are betting on a recovery are doing exactly that, betting.

Last year, respondents to this survey were unanimous that cost reduction and speedy return on investment were the key factors driving IT purchases. Is this still the case, or are there signs of optimism in the local market driving investments in IT to fuel expansion?

David Laird, Datapac

“Return on investment is still the key to investment in IT. Organisations are more conscious than ever of the need for direct benefits from investment in IT.

From the point of view of the IT industry this can only be a good thing. It is important that IT systems give, and are seen to give, value for money.

David Little, Cara

“Today’s business environments present opportunities and challenges for the IT customers and vendors as companies seek to enhance computing capabilities, while simultaneously providing effective management of existing resources and maintaining or improving the return on investment. At the same time, the demand for competitive advantage and customer loyalty in the marketplace has forced a close link between business and IT. Circumstances now place a new set of demands on IT. Do more with less… do it faster, more flexibly, less expensively and all together. If you please?

A new breed of Sales Consultant is required who is at once an account manager, business and technical consultant, cost benefit specialist, troubleshooter and solution selling specialist. The customer is very much in control.

There are signs that ICT spending which has been very tight all year is now picking up in Q4 as IT rush to spend their remaining budgets. There are no sign that this will be sustained in Q1. IT in organisations is under pressure due shortages in resources and skills due to cutbacks over the past two years.

Richard Nolan, DSS

“In the case of IT companies where the economic spiral was recognised early and cost reduction programs put in place, I think they are beginning to feel the benefits of being leaner, fit and more focussed organisations. I am starting to see customers turning their attention to sharpening their competitive edge and investing in IT systems that will deliver real value to their core business’s.

Kevin Haverty, Mentec

“Yes our current experience is that customers are looking for substantial cost improvements from their new systems. The days of upgrades for the sake of the technology are gone for the moment. However, we do see signs of the so-called ‘pent-up’ demand coming out in recent times. Many good projects that were shelved are now coming back into play.

Roland Noonan, Horizon Open Systems

“We must continue to drive cost out of our customers’ businesses. This remains the key driver for the industry, those that can proactively bring cost saving IT- led initiatives to companies will be rewarded. Sun, we believe, is in a strong position to lead this type of engagement through its i-Force programme. This programme allows us to develop and demonstrate real life ‘Proof of Concept’ solutions in our i-Force centres tailored to individual customers without any major investment required before the ROI is clearly shown.

What business and technology drivers do you see impacting the market through 2003?

David Laird, Datapac

“The ever-present need to refresh technology will be the main driver in 2003. This is cyclical and the last major investment was pre Y2K in ’98/’99, therefore in the natural order of technology investment cycles it will be time for many organisations to replace systems in 2003.

David Little, Cara

“Much in business will depend on the economic indicators and in particular what happens in the US economy. There is a lot of uncertainty in the US and it is the engine of growth for the global economy. Another national pay agreement would be a positive step in the Irish economy. The technology refresh of the Y2K PCs may occur in 2003. Average PC life is now 42 months. Moves to Microsoft Windows 2000 and XP will increase as the support for Windows 95/95 and NT 4 ceases.

Wireless and mobility technology will start to mature as real world applications start to prove themselves.

The slow but eventual availability of increased access to broadband in Ireland will fuel a steady upgrade of the networking infrastructures in SMEs.

Given the high ROI that customers can achieve with standard off-the-shelf components and solutions, value-add rises even higher in the solution set. Today’s value-add solutions focus on integrating the supply chains, understanding the customer. Optimising interactions and personalising transactions. These functions are much higher up the value chain.

However, in truth, in today’s business, it is not so much the ingredients as it is the recipe by which you differentiate true value-add.

Richard Nolan, DSS

“Business drivers: Continue working out the fat and deliver bottom line results. Technology drivers: I believe that the SAN (Storage Area Network) market has not taken off yet but this will be a good growth area in 2003.

Kevin Haverty, Mentec

“As mentioned above, projects with significant cost reduction or good ROI potential will continue to be funded. B2B projects will continue to be sourced through reputable systems integrators. Customers will continue to investigate and invest in more outsourced managed services options to reduce their internal spend.

Roland Noonan, Horizon Open Systems

“I see these as one and the same thing – to drive cost out of our customers’ business models. This can take many forms but a few examples include: Server consolidation means fewer system administration personnel required, less real estate occupied and fewer upgrades being driven by non critical desktop software. Sun’s office productivity office, Star Office is another area where organisations can drive real and immediate savings simply by changing the culture of its users. Microsoft is not the only answer!

Is there a ‘Next Big Thing’ to follow the previous booms in PC and Internet growth? What do you think it is and when do you think we will see it?

David Laird, Datapac

“The most interesting device to emerge for some time is the ‘tablet’ PC. While its impact in wholescale terms will not be immediate, by the end of 2003 it will have had a major impact.

David Little, Cara

“There is no obvious “killer technology” on the horizon, rather we see many different technologies such as the Internet continuing to mature and spread their sphere of influence.

Steve Balmer stated recently the “Next Big Thing” only happens when it touches the average consumer i.e., when the PC became all pervasive, or when the Internet entered peoples homes. The “Next Big Thing” will be when the majority of home devices have computing power attached and will influence the way we operate at home and that is sometime away.

In the meantime we will have to do with enhancements to existing technology that will be of more interest to the IT director than the consumer.

However we do expect convergence to be a significant factor as voice/data and video move together and are carried over the same WAN and LAN infrastructures using the IP protocol. This will eventually mean the end of separate departments, budgets and skills for voice and data as well as an end to the ubiquitous PBX.

Richard Nolan, DSS

“Utility Computing, maybe in five years.

Kevin Haverty, Mentec

“Although not in the same league as the proliferation of the PC or the Internet, I believe that the “next big thing” in terms of business technology usage will be the further evolution of web services. Any application can be wrapped up into a web-service and, as a result, can communicate with each other using standard web protocols. Because of their modular nature, organisations can assemble chains of web-services into the specific configurations that add value to their business. The use of web protocols facilitates “plug and play” interoperation of web-services, independent of platform and programming language.

Billions of R&D dollars have already been spent on this area with technology champions such as Microsoft, Sun and IBM working together, along with independent co-ordinating bodies, to formulate commonly agreed standards.

I think web services will succeed where others have failed because they make perfect sense from both a business and a technology perspective, a real win-win situation. They will allow companies to integrate and customise existing enterprise applications and capitalise on previous investments in people and technology, while at the same time allowing business people to make decisions based on business criteria and not just technology.

Roland Noonan, Horizon Open Systems

“Everybody is constantly looking for the next big thing in IT. I believe we are in a period of technology consolidation where the opportunity is to really leverage IT into the business. By this I mean that the majority of organisations look at IT as a means of increasing productivity but have never really seen it as an integral part of the business. In these tougher economic times people see IT departments as cost centres. To change this perception, and indeed leverage real cost savings by supply chain integration, will deliver the next big thing.

The government’s strategies on e-government, broadband access provision and the appointment of a Minister for the Information Society have received widespread publicity. What else could or should the government do to support the IT industry?

David Laird, Datapac

“The immediate issue that the IT industry in Ireland requires of Government is that they don’t cut too deeply into their own expenditure on IT.

As Government is the largest spender on IT in Ireland, the IT industry has a major dependency on Government spending. Any dramatic reduction in spending will immediately hit the IT industry in Ireland and will also impact in the longer term on the ability of ‘Ireland ‘ to remain competitive.

David Little, Cara

“They should continue to promote e-government initiatives as they broaden the use of IT throughout society and help flatten the digital divide.

Investment in IT in education is an investment in all our futures and should not be tampered with at any cost.

However, the recent cut backs introduced recently will hamper progress in this area.

The government should rethink its approach to the procurement of hardware by government departments. There is a lot of wasteful duplication of effort and in many cases it is questionable whether the tender process really results in value for money for the tax payer.

We are getting to the stage where legitimate IT companies that pay their taxes and pay their staff a fair wage will rarely win government business because they can’t be cheap enough to win in the price driven tender process. How many cases have we seen where the cheapest product to purchase turns out to be the most expensive to support and maintain over it’s lifetime?’

Richard Nolan, DSS

“Stick with the program Charlie.

Kevin Haverty, Mentec

“Assist indigenous companies to grow and expand, both through organic and acquisitive activities. Avoid excessive cutbacks in public sector spending in IT. Such spending should be aimed at reducing waste and inefficiencies. Cutbacks now will both hurt the IT industry and also delay improvements.

Roland Noonan, Horizon Open Systems

“Government should continue to foster key initiatives like broadband access and competition through de-regulation which benefit industry in general and promote Ireland as an efficient and cost effective entity.

What grounds for optimism do you see locally and internationally for 2003?

David Laird, Datapac

“The main area for optimism is that all successful organisations, in order to remain successful and competitive, need to continuously invest in IT.

Technology continues to be applied to both old and new applications creating an ever increasing demand for more resources in hardware, software, communications and services. This applies both locally and internationally.

David Little, Cara

“There will always be opportunities and challenges. But at the end of the day we cannot effect the external forces, we have to live within the constraints, be innovative, flexible, provide value, speed and reliability and above all integration.

Most of our clients are busily preparing for the recovery that they believe is just around the corner. No one wants to be left behind when the turnaround happens.

The EU enlargement presents both threats and opportunities. Many Irish companies will see these as new markets to capture.

Richard Nolan, DSS

“Right now I can’t think of any but I am an optimist by nature and I have got a good feeling about 2003.

Kevin Haverty, Mentec

“Any company that has tidied up its act during the past two years should be in a good position to take advantage of any upturn in the market.

EGovernment initiatives will hopefully continue to be resourced and funded. Once established, these services will have a knock-on impact for business generally.

Broadband access provision should help to accelerate developments, particularly in the SME marketplace.

Any company that has held back on investment will start to re-invest to avoid falling behind their more efficient competitors.

Roland Noonan, Horizon Open Systems

“As in all economic environments and at all times companies, that have unique and provable technologies with profitable and sustainable business models, can always look forward with optimism.

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