Internet will continue to be a key driver of growth
For the Information Technology (IT) industry, last year may well be described as a FUD (Fear, Uncertainty and Doubt) year with decisions being taken with a great degree of trepidation.
Pradeep Gupta, July 25, 2003
Internet will continue to be a key driver of growth
For the Information Technology (IT) industry, last year may well be described as a FUD (Fear, Uncertainty and Doubt) year with decisions being taken with a great degree of trepidation.
Pradeep Gupta, July 25, 2003
For the Information Technology (IT) industry, last year may well be described as a FUD (Fear, Uncertainty and Doubt) year with decisions being taken with a great degree of trepidation. The industry cratered with IT spending growth rate declining from 10.8 percent in 1999 to - 4.1 percent in 2002. The dotcom crash; the slide of the US economy; and the telecom capacity glut was further affected by the events of September 11 in the previous year (2001) and its aftermath. And that resulted in the FUD year.
Enough has been said and written about the political and economic events of the last two years. And therefore, this article focuses on the IT business cycle pattern, which was indicating a retardation of growth following the boom years. The cyclical pattern projects a three-phase approach new technology initiating a new paradigm thereby creating a speculative bubble; post this phase, reality strikes triggering a temporary slowdown; and this eventually leads to evolution of a new technology.
In the context of the year gone by, the rebound has started. IDC's research shows that in 2003, the IT spending growth rate is expected to revive and grow at 3.7 percent. A start has been made for the next wave. Every new wave creates new leaders as well as changes in the market share. The outlook vis-a-vis IT spend forecast is that of cautious optimism with IT growth expected to rebound.
Going forward, all of us are going to have to adjust to the new landscape. The double-digit growth of yesteryears is past. The new reality, as IDC sees it, is that worldwide IT spending will rise to 6-7 percent in the next three years. In this new landscape, opportunity will be a little harder to find and market share will be a little harder to preserve.
Clearly these times call for different strategies. The new mandate is detailed market profiling and understanding the buying cycle and patterns. Containing costs will be the key and simplicity will continue to be a driver. It will be critical to accurately segment the market and deliver the right message to the desired audience.
So what are the key drivers of the IT business in the near future? Firstly, the need for IT. The shift from 'Must have Latest Technology' to 'Return on Investment' has already happened. Buyers are looking at IT for internal process improvements.
Also increasingly, IT purchase decisions are becoming broad-based with committees comprising various functional experts besides the chief information officer evaluating them. Top managers like the chief executive officer and chief financial officer are still involved in taking the final decisions thus necessitating multiple constituency management.
A key concern for IT companies has been to control costs. Interestingly, IT companies have worked on a wiser allocation of costs rather than drastic reduction of costs.
As an example, IDC's chief marketing officer, advisory service research, shows that 70 percent of IT companies have level-funded or expanded marketing budgets. But there has been a shift in priorities. Marketing costs have been diverted to direct marketing instead of the traditional advertisement and event spends.
Industry specific solutions is another area that will ensure opportunities for IT vendors. An IDC study indicates that 10-30 percent of the buyers had indicated industry-specific applications as their top investment priority. Particularly bullish are the healthcare, utilities, transportation, telecommunications, consumer services and banking sectors.
Also, within the industry a mix of solutions comprising integrated suites and best-of-breed solutions will form the investment pattern followed by the best-of-breed component solutions. Going forward, IDC believes that the Internet will continue to be a key driver of growth, despite the obituaries written. More and more organisations are continuing to adopt it and e-commerce continues to grow, albeit at a lower pace than what was believed during the heady days of the dotcom boom. Consequently, firms need integrated applicationsthat tie their back-end applications with the front-end web interface and this will be a key driver in the future.
IDC sees growth opportunities in web services, application integration, middleware, outsourcing, supply chain automation and private exchanges. Also, with 50 percent of telecom revenues coming from wireless, this segment will be a key growth area. Equipment and software to enable VoIP, IP telephony, messaging, content management, etc will show good growth rates.
The market for handheld devices, including PDAs and "converged devices" that have telephone and PDA functionality, will grow. Growth in the mobile and wireless sectors creates opportunities for billing, location-aware applications, telematics, 802.11b interconnect, content redeployment, remote access management and gaming.
Another area of opportunity is clearly created by political concerns. In the present volatile situation, security and continuity will continue to occupy top-of-the-mind recall and is a key concern area. This would push growth in areas like intrusion detection support, hazmat (hazardous materials) services, biometrics, real time back-up, wireless continuity and infrastructure management.
Globalisation will change the paradigms of the IT sector with new emerging markets like China and India providing stimuli to services like offshore, outsourcing, partnering and logistics management, translation software, collaboration tools, etc. To take advantage of the new reality where opportunity is a little more concealed and market share is a little harder to preserve, one must embrace the mandates.
Source: The Financial Express
September 21, 2003 at 08:30 PM in Internet evolution, eCommerce | Permalink
| TrackBack (18)
| Top of page
| Blog Home
