First , IDC and Forrester Research lowered their forecasts for global IT spending in 2008. Worldwide IT marketgrowth is now predicted to be 5% from 6% by IDC; and 6% from 9% by Forrester. U.S. IT market growth is predicted to be 4% from 6% by IDC; and 2.8% from 4.6% by Forrester. ChangeWave’s latest corporate IT spending survey points to a negative growth rate for the 2nd Quarter of 2008, and confirms that U.S. business spending has already entered into a recession. Changewave survey finds that nearly one-in-four respondents ) say their company’s ITspending will decrease (or there will be no spending at all) in the 2nd Quarter – 3-pts worse than the previous survey. Only 15% say spending will increase – an unprecedented 9-pt drop from previously.
Amidst all these things, we also see that customer appetite for innovative technologies and delivery models seems to have not diminished. IDC’s Albert Pang finds that customer win announcements from enterprise applications vendors came in at a steady clip throughout the month of January 2008 suggesting that deals were still being consummated. Offshore headquartered service providers may not be hit says Everest Group. The rationale : In bad times, companies tend to go in for bigger pieces than smaller ones. For example, if a large retailer is was doing $5 million with one vendor, they would now prefer to do $10 million. If it was $25 million, it might go up to $50 million. While you won’t be able to track this for individual clients, what you will see is that SWITCH companies will start reporting more $50 million- $100 million deals than last year. Earlier, I wrote that captives are imploding. Everest Group now confirms that the proportion of work done by captives is reducing compared to that done by third-party firms but that doesn’t mean captives are not growing, but points out sellouts are getting more difficult than anticipated.
I recently wrote about healthy growth in IT Spending. The Forrester/ITAA Tech Sector Index — which measures the health of the US technology industry — reached its highest level in five and a half years in Q4 2006, rising two points to 128.8, says Forrester Research, Inc. and the Information Technology Association of America (ITAA). Net income for the 22 major US tech vendors that Forrester monitors reached $13.2 billion, the highest quarterly level since Forrester began tracking. Point to note : International business is helping the boost - foreign sales — not domestic US demand — is driving vendor revenues and profits. After all the world is hungry for technology. The Index is based on 11 indices measuring IT demand, IT supply, and the financial strength of US-based vendors. All of the indices are weighted evenly in the overall Index score, which uses a 2002 quarterly average of 100 as the baseline. In Q4 2006, seven of the 11 indices were up. The two point increase in the Index compares with a 3.7-point gain in Q3. Highlights include: • As indicated above, vendor financial performance was the primary driver lifting the Index. The stock price component of the Index jumped 16.2 points, reflecting the broad rise in the stock market at the end of last year. The vendor profit component of the Index grew 10.9 points for the quarter. • US demand for tech products and services grew 2.5 points, based in part on continued optimism of spending forecasts by CIOs surveyed by Forrester. • IT industry employment edged up slightly, gaining 11,700 tech sector jobs. Employment now stands at the highest level since the close of 2002. • After falling 9.4 points in Q3, venture capital investment plunged an additional 20.8 points in Q4 — a quarter-on-quarter drop of $711 million.
Studies show that 36% of Internet users are now in Asia and 24% are in Europe. Only 23% of users are in North America and Asia would be adding more internet subscribers in the days to come. The impact of wireless, next generation communication hubs, politics surrounding Ipv6, Icann, explosion of content in asian languages- all these need to be factored in while discussing the future of internet. There is no doubt that the world is becoming a different place. Education,technology & capital are becoming the biggest equalizers in this unequal world. This is a happy news for all tech sector stakeholders!!
Growth and innovation are the top ticket items on the CxO minds confirms a survey finding of international CxO’s by Saugatuck Technology and BusinessWeek Research Services.
Key Finding : Revenue growth outpaced both cost control and asset allocation by a 5-to-1margin as the top business strategy for C-Team executives to improve their firm’s financial performance for 2007 – implying a more than subtle shift in priorities – and what looks like an emerging scenario of accelerated business spending rather than saving. In support of this shift, the top five business goals of C-Team executives are all revenue, customer and market share growth related – with managing budgets and ROI measurement metrics falling precipitously in the rankings. Does it mean back to the old days of hectic enterprise wide spending ? The answer is NO. IT spending priorities are continuing to focus on point projects rather than enterprise-wide initiatives, as well as investments that improve the integration and availability of data and/or applications, enabling enterprises to better leverage existing IT and to improve business and IT operations and efficiencies. What does this mean to the tech ecosystem? The shift away from cost control to corporate spending and investment focused on top-line revenue growth and innovation has, and will continue to have, significant impact on both IT buyers and vendors. While IT buyers will see their budgets increasing over time, spending will continue to be restrained and tactically strategic in nature (with an emphasis on innovation at the margin). It is clear that the C-suite is not completely aligned with respect to how to best achieve top-line growth. That presents huge opportunities to the tech players and CIO's, who can try out unique innovative inititatives. Big ticekte investments are likely to be in the arenas of Business Intelligence, Data Warehousing, and Portals and Collaboration, besides a growing commitment to SOA (and investment by IT organizations) as a means of creating greater organizational agility – and as a platform for product and service innovation – while at the same time leveraging prior IT investments. SaaS and Open Source are two disruptive innovations with significant momentum that will also impact how vendors relate to IT spending and investment.
Saugatuck while anticipating growth in IT capital budgets throughout the remainder of this decade which should help further fuel spending on key infrastructure and integration initiatives has this dope of advice to the players: user executives will need to find creative ways of enabling business growth while spending struggles to close the gap – and that IT vendors will need to deliver more business innovation as part of their software and service solutions. A recent Mckinsey survey pointed to the advent of two trends in information technology that will become increasingly important to CIOs in 2007: - A migration to service-oriented architectures and - The introduction of lean-manufacturing principles to data center operations. An Alinean study of IT spending finds that Across the 37 industries in the study group, innovation investments were up sharply in several segments. The dynamism, more than anything else proves that IT Does Matter!!. Next time as an user when you spend on IT initiatives ask yourself whether this is in alignment with global trends or as a vendor/service provider, are your efforts and investments going towards exploiting this growth trajectory.
Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld "All views expressed are my personal views are not related in any way to my employer"
