Year of getting more from less: SOFTWARE DEVELOPERS

Trade

1 April 2005

Last year witnessed a significant downturn in economies, both global and national, including our own. This year promised little and remained true to its word. Such trading conditions, though harsh, invariably remove the weak and fortify the strong. High profile IT acquisitions have been both expected and witnessed. Those who have continued to provide value during these lean times will surly be well placed to reap the benefits once economic recovery returns.

One year on from our last major IT industry overview, TechCentral.ie is taking a fresh look at the IT industry, reflecting upon market, economic and political performance variables. We polled key opinion leaders of some of the country’s leading IT companies on the status quo 2002 and outlook for 2003.

Software Developers

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?

Dermot O’Kelly, Oracle

“Quite how bad 2001 was is a question of relativity. For Oracle while global revenue goals proved difficult, we reached record levels of profitability – a result of the deployment of Oracle systems and e-business best practice. Specifically in Ireland, Oracle reached record levels of revenue and completed a record number of Application sales.

Despite the above, however, there is no doubt that trading conditions are extremely tough and there is no sign of this abating. Organisations are looking for real value not just from what they buy in the future but also from the systems they have already invested in. Darwinian theory will apply to IT companies – survival of the fittest.

Kathryn Raleigh, Irish Software Association

“The years 2001 and 2002 were difficult and challenging years for the IT industry and it would appear that 2003 will be another challenging year. In the past 12-18 months, the software sector has responded to the difficult global environment by restructuring and refocusing their business models to meet the challenges head on. For this reason, many in the sector will be well positioned to face into 2003 and grow exports in global markets.

Matt Brennan, Computer Associates

“We experienced an over valuation in the technology sector and we have now come through a balancing or levelling out period. Companies with good management and business strategies have survived and will continue doing business albeit in a tougher environment. Companies cannot hold off on IT spending indefinitely and will need to address IT projects that were put on hold. I would say that we are in a better position.

 

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?

Dermot O’Kelly, Oracle

“Business leaders are still looking at the investment they made in IT over the past number of years and are trying to figure out what they got for the money. In a lot of cases the answer is not much. Companies responded to business issues by throwing money at IT in the vague hope that buying a CRM system, for example, would mean they now understood their customers. The result has been a proliferation of systems and data models in all parts of the organisation with a lack of integration – and consequently a lack of real knowledge. As businesses look forward they will pay a lot more attention to this question of value from IT – speedy return on investment will continue to be the rallying cry.

Kathryn Raleigh, Irish Software Association

“Cost reduction and a speedy return on investment are still key factors driving IT purchases. Customers want to know how the IT supplier can result in cost savings for them – it is all about ROI. While the local market is an important aspect for the sector, global sales are still key to developing their business and long term strategy.

Matt Brennan, Computer Associates

“Companies are still very focused on reducing costs while improving productivity and return on investment.

 

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

Dermot O’Kelly, Oracle

“There will be a drive towards consolidation and integration of IT systems within organisations. They will look at the most effective means of deployment both inside and outside the organisation. This will lead to a greater focus on the overall architecture underpinning the IT strategy. There will be more thought given to the middleware platform not just as a Java engine but also as a means to provide integration and business intelligence across applications and as a means of deploying through customer portals and mobile devices. In a continuation of the ‘value for money’ theme, organisations will deploy ‘clustering’ at the hardware, database and application levels to increase availability and scalability whilst protecting the hardware investment. Linux will feature more and more in the Irish market as organisations seek a cheaper alternative to the Microsoft OS monopoly.

Kathryn Raleigh, Irish Software Association

“The business drivers which will impact on the market are those which can offer an ROI to the customer. This is key for any business.

Matt Brennan, Computer Associates

“Broadband infrastructure, digital services, web services, e-government projects, government investment, private sector growth and more companies moving to convergence and consolidation will all play a role.

 

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?

Dermot O’Kelly, Oracle

“At the risk of being more boring than normal, I will give the same answer as last year which is that we are still in the middle of the Internet revolution – the current big thing! Companies and government organisations are really only beginning to deploy fully on the Internet. They are now realising the benefit it can bring to customers and citizens as well as the efficiencies it can drive within the organisation.</p>

There are a lot of opinions on what the ‘Next Big Thing’ is or should be. For example Web Services is being touted in some quarters as the answer to all IT problems. There is no doubt that it is an important future direction and all IT managers should understand how it can help with their integration strategy, but it is a long way from nirvana. Beware the hype!

Kathryn Raleigh, Irish Software Association

“It is impossible to predict the next ‘killer application’! If I could I would be out their developing it. Mobile and the Internet will continue to develop – albeit at a slower rate than predicted.

Matt Brennan, Computer Associates

“We need to create an open environment where consumers of web services can locate and work with providers of web services, through web-based heterogeneous systems. Web services are essentially a set of open standards that enable applications, developed through the assembly of reusable components, to dynamically interact with other applications over the Web.

Web services will help businesses to connect islands of information and heterogeneous systems, enable users to access applications and services from anywhere and make eBusiness process automation faster and easier. Gartner are predicting that by 2005 Web Services will be integral to new application solutions for Fortune 2000 companies and, in this same timeframe, two thirds of Web Services implementations will be based on both J2EE and .NET. Web Services Solutions is a potential $28bn market.

 

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?

Dermot O’Kelly, Oracle

“The government’s responsibility is to provide employment and services to the citizens of Ireland in as easy and efficient a manner as possible. This is the gauge by which its e-business and broadband strategies should be judged. So, rather than focus on the EU definitions of e-government, which may provide useful publicity, the government should focus on what the citizen wants.

The majority of citizens are not looking for Government to provide a more efficient way to pay tax: They want a better health service! This should drive the focus for e-government. For example, consider the advantage of a single health record per citizen available via the Internet to both primary and secondary health providers.

Not only would this provide greater efficiency and cut out duplication but also it would lead to quicker and more accurate diagnosis. A better service for less cost – this should be the theme of e-government strategy in Ireland.

Kathryn Raleigh, Irish Software Association

“The focus for the software sector is availability of R&D and commercialisation of research from the universities; access to finance and funding – in particular for start-ups and sales capabilities of software professionals. The Irish Software Association has been extremely vocal in raising these issues with the Government and will continue to do so, until these issues are addressed. These issues are areas which require immediate action, if the long term viability of the sector in Ireland is to remain secure.

Matt Brennan, Computer Associates

“The government needs to deliver on the above and continue to monitor and move with current trends. We need cheaper fixed line access and a spatial strategy in place for the role out of broadband and satellite technology.

 

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

Dermot O’Kelly, Oracle

“In the eternal boom days of the dot.com era it seemed that growth curves would continue inexorably upwards. Norms of economic theory were temporarily discarded until reality dawned and the market took its revenge. This has been the cause for the hardship of recent years. Whilst there is no sign of a sudden return to the boom days, today consumer demand has stabilised, interest rates have been held at historic lows for a sustained period and stocks of technology brought forward are being consumed. There is some debate as to whether we are already seeing the early signs of turnaround in the US as businesses there look to repeat their success by leveraging technology for cost and competitive advantage. The recovery will be at a slower pace than the downturn and there will be a time lag between Europe and the US but the climate is right for industry to start to invest and to realise the benefit of the next wave of technology enabled productivity.

Kathryn Raleigh, Irish Software Association

“The Irish Software sector is very strong – we now employ over 31,000 people – which represents a 5per cent increase on 2000 figures and exports are up almost 20per cent – we are therefore very well placed to meet the challenges of 2003.

Matt Brennan, Computer Associates

“The Irish economy showed promising signs of recovery in the early months of the year but the global economy has slowed appreciably since the summer and that does impact us locally. Everyone just has to work a lot harder. In the past 18 months, we have moved back to selling instead of taking orders. We need to look at what the business drivers are and what ROI should be expected in a more typical pre-boom sales cycle.

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