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2011: Industry fans the flames of growth

2011: Industry fans the flames of growth

Brett O’Riley, NZICT

NZICT CEO Brett O’Riley predicts there will be continued focus on virtualisation this year, as companies pursue post-recessionary budgeting measures.

“I think we will continue to see strong interest in virtualisation because businesses are looking at opportunities after the downturn, to save money and defer capital expenditure,” says O’Riley. “Virtualisation is an important tool.”

He adds the explosion in video use will also be high on organisations’ agendas, particularly in the education market.

“The use of mobility will continue to grow and we will see focus on that, particularly around mobile application development. Increasingly, video is being used by companies and with the prospect of a managed education network for schools that will continue to increase the use of video across the economy. We won’t have many young workers who enter the workforce in the coming years who won’t see video as a key tool.”

The growing use of video will have other consequences for businesses, O’Riley says.

“Storage will grow massively because we’re in a video generation. The biggest challenge for secondary schools other than broadband connectivity is storage.”

As more employees use their own devices as workplace tools, security will gain in importance, O’Riley believes. He says a trend toward tablet use will be mirrored by a focus on security in the enterprise.

“I see tablets as game-changing devices. They have been around for a while, but we’re seeing increased emphasis now on form factor and design. Judging by the number of people I see who are reading from tablets or playing games on them, they have significant utility.

“We’ll continue to see the tablet form factor grow although I would like to see the price point come down. One area that will have more focus in 2011 is security. I’m increasingly seeing — unless you’re in a situation that requires a lockdown environment — most organisations are comfortable with people bringing their own devices to work. That will have an impact on equipment sales overall, because people won’t use multiple devices but the challenge around that will be security and backing up information. It may decrease a company’s equipment cost but it is likely to increase costs on the security side.”

O’Riley says the consolidation that has occurred in the industry locally in recent years may not continue because of the post-recession environment, but companies will come together less formally for different reasons.

“I think in our industry we’ll start to see a lot more collaboration. I believe we’ve gone past the skills shortage and have gone to a skills crisis. Companies are looking to share their talent pool, for example in software development where developers are skilful in a specific language. I have been involved in discussions where companies want to match skills but don’t have critical mass. This is an industry that changes rapidly. so we’re less likely to see consolidation because of economic reasons and more likely to see it around opportunity particularly in the export arena where we have opportunities particularly around the China free trade agreement.”

Neil Dwight and Steve Harris, Business Technology Group (BTG)

The economy is definitely showing signs of recovery, according to Neil Dwight, operations director and Steve Harris, technical director - both of the IT solutions provider Business Technology Group (BTG). While BTG itself expects to add 15 to 20 new staff in the coming year, Harris and Dwight see business in general emerging from an extended period of holding the line on spending.

“Businesses have been in a maintenance phase for the last three years,” Harris says.

He compares what businesses have done during the recession — holding off on infrastructure replacement — to a driver that has deferred changing worn-down brake pads until their car has sped through a red light.

Although it seems those days are coming to an end, Dwight says, businesses will still be cautious.

“Clients are investing in refreshes again,” says Dwight. “But they’re doing their due diligence in more detail, especially around delivery capability. Reputation and sustained track record of delivery are very important now.”

Although BTG is “getting on board with the cloud,” as Harris says, he and Dwight say that too big a deal has been made of this as a phenomenon, especially since virtualisation has been putting companies on private clouds for at least a decade already.

“It is the most hyped item of the past two years,” Dwight says. “What is sold out there is not ‘cloud,’” Harris says. “It is virtual hosting.”

Dwight and Harris say virtualisation is part of the path to a true cloud and this is the more salient trend to watch in the coming year, as companies centralise and virtualise for private delivery of applications. A true public cloud is a little far into the future.

“We see the next steps [toward the public cloud] as government fibre roll-out, and more internet cables [other than Southern Cross],” says Dwight. “Then lots of smaller datacentres consolidating into four or five real big established players, kind of like what happened with ISPs.”

Dwight and Harris also see disaster recovery, a natural outgrowth of virtualisation, as an important trend to watch ever since the Christchurch earthquakes. Companies, they say, are slating older storage resources for disaster recovery duty as they bring new storage equipment online.

In contrast to others interviewed for this article, Dwight does not see the consumerisation of the workplace as an important trend just yet. Companies, in his experience, have yet to see workers bring their iPads online, for example.

“We’re seeing a few out there but, we still consider this a consumer, media item at this point,” Dwight says. “Much of the stuff — like shares or exchange rates tracking — can all be done on iPhones as well, which are multifunctional and more portable.”

Greg Davidson, Datacom

Datacom ranked second in the Technology Investment Network’s 2010 TIN100 report and is this country’s largest IT exporter. Greg Davidson, Datacom’s chief executive officer, says improving economic conditions are causing some technology projects that were put on hold during the global financial crisis to come online again.

Customers recognise the value in creating new systems or transforming legacy systems that increase profitability, Davidson says. “Even during the recession we saw continued investment in such projects and we’ve since seen them on the increase.”

However, some areas of Datacom’s business never slowed down; for example, software and integration. “Customers want systems that both grow revenue and reduce costs for their business — like web self-service, electronic B2B trading and more efficient line of business systems.”

Relative to other countries’ currencies, our dollar is still in a good position for offering exchange rate benefits to offshore companies that select a local supplier, he says. “Demand for IT services is growing across the Tasman, and it make sense for Australian companies to benefit from the lower-cost model experienced with ‘near-shoring’ to New Zealand.”

Datacom sees growth opportunities in storage, virtualisation, networking and unified communications, says Davidson. “We’re currently taking on more staff in these areas to meet the increased demand.”

The hype around cloud computing will need to be replaced by robust offerings within the next 12 months, and the industry is moving into that phase now, he says. He identifies the move to cloud computing as one of the biggest challenges currently facing the reseller community.

Datacom now has eight datacentres across Australia and New Zealand; including its newly-opened Christchurch datacentre, which opened a week after the September earthquake. Datacom is in the process of rolling out its cloud platform in Australia. Davidson predicts the importance of cloud technology brands will decrease in the future, as customer emphasis shifts from the provider to the reliability of their own cloud services.

“We’re seeing the investment by global technology providers in cloud solutions trickling back into products for our datacentres, allowing us to offer these affordable, resilient cloud solutions locally.” As an example, Davidson cites its iGovt project, which is designed to provide a shared single log-in for government agencies.

As a professional services firm, Datacom’s priority is developing face-to-face relationships. Davidson recognises the importance of social media, which he says is evolving beyond wikis, discussion boards and instant messaging. “Datacom is doing this with our new intranet, using SharePoint 2010. Every employee has a newsfeed page that updates them with their colleagues’ latest entries whether they’re tweet-like comments, the latest document they’ve uploaded to the knowledgebase, blogs, or tagged pages of interest.”

Chris Rycroft, Dove Electronics

Dove Electronics is a privately-owned, wholesale distributor of computer components and peripherals. It distributes a range of brands including Acer, Canon, D-Link, Microsoft, Sandisk and Western Digital. The company operates from its Christchurch head office with branches in Auckland and Wellington.

Chris Rycroft, Dove’s general manager, says a number of drivers contributed to the industry’s recent consolidation and there’s a slow, incremental growth curve, rather than a sharp recovery trend, ahead for the economy. “Any market condition can have a negative or positive influence over the desire to consolidate.”

The challenges facing all sectors of the local reseller community are diverse, he says; from tough retail conditions combined with increasing numbers of stores, to the unknown consequences of the all-of-government tender. Rycroft says currency stability would help businesses brace against currency fluctuations in the coming year. “There has always been inherent risk in the floating currency. The way each distributor manages that risk is a potential differentiator.”

He doesn’t rate the dollar’s current volatility as any better or worse than previously. “Contrary to popular belief, the high New Zealand dollar doesn’t help IT importers particularly, as it lowers the average selling price without the economic elasticity in the market to correspondingly recover that in increased demand.”

Many IT companies are now either investigating the capital savings potential of cloud services adoption or have taken tentative cloud computing first steps. Various Dove team members are currently using iPhones to connect via the cloud for email and other communications, says Rycroft. “We’ve moved to Microsoft’s hosted mail services and will extend the applications in this arena. Beyond that, the fundamentals of product distribution remain the same for us.”

Dove is still considering when and how it should embrace social media, so Facebook and Twitter are not yet significant factors in its marketing strategy.

In the tablets debate, Rycroft sees a continuing niche for netbooks in the education sector, although some of the home use market is likely to migrate to other devices. He predicts the area to watch in the technology industry over the next 12 months will be the way in which Apple responds to Android’s growing market-share.

Chris Maclean, Maclean Computing

While many companies still struggled with the end of the recession, 2010 proved to be a year of positive change for Maclean Computing.

CEO Chris Maclean believes his company will continue to evolve in 2011 and that more business opportunities will arise. “While the wider economy is anybody’s guess, we’re comfortable that the IT economy will improve. The average age of IT assets in the field is now at a point where businesses must replace them or take on unacceptable risk of downtime and support costs.”

Maclean also believes the proliferation of new tablets and smartphones presents not only opportunities but also a number of risks. “New types of user devices are getting interesting, and presenting all sorts of opportunities – particularly in the ability for businesses to offer new levels of flexibility to add them to their networks, balancing convenience with security.” However, as Maclean points out, “the days of the IT manager dictating what we use are gone” and there are security issues to be aware of.

As far as the cloud landscape is concerned, the company has already stepped into that area, with its Enfusion cloud service offering, as well as providing infrastructure-as-a-service and reselling vendors’ public cloud services. As Maclean says, “it would be difficult for anyone in the reseller space to ignore the opportunities and threats the cloud presents.”

Maclean marketing director Andrew Charlesworth is working on a company-wide social media strategy for Maclean Computing, as the company realises the benefits and value that websites such as Linkedin.com can add to the business.

Paul Plester, Express Data

Paul Plester, sales and marketing director at enterprise IT distributor Express Data, says the level of complexity in technology business will increase in the coming months.

“We’ve never had more information about everything we want to buy and it has probably never been more confusing,” Plester says.

One example is the advent of tablets in the workplace.

“There has been a rapid adoption in the consumer side of things and I believe that’s going to flow through to business,” Plester says. “That is going to pose challenges to the traditional players from the notebook and PC manufactures to the network people to the software applications. It is going to be quite a major sea-change in terms of how people think about computing.”

Businesses are even holding off on normal PC purchases until they figure out where tablets will fit in, Plester says.

“It will take some time for them to work out what they want and for the clear leaders to emerge,” he says. “It is going to be very interesting to see how that shakes out.”

The cloud presents a similar problem for end users. Plester says that companies may have to weigh new business needs against existing long-term investments.

“Now the challenge that [companies] have is they have already paid and bought their infrastructure,” Plester says. “So the first question...is what happens to my existing hardware, software? They could keep on using that and they’ve paid for it already and it is not going to cost anything, whereas if they go to the cloud, they are going to be faced with a monthly bill.”

A company might consider the cloud in light of rapid business expansion, Plester says, and delay considering that expense for months while it gets the most value out existing infrastructure.

Plester says businesses will probably first make purchases they deferred out of pessimism about the economy, before looking to spend on new services. He is already seeing signs that the IT sector is “ready to kick off again”.

“I know that three of our vendors have had inside sales support roles they haven’t been able to fill in the last three months,” Plester says. “And anecdotally I’ve heard talk of big numbers of new engineers being required in the new year.”

Plester even foresees New Zealand soon returning to the problems it had before the recession, especially finding skilled workers to fill roles as business picks up again..

Geoff Lawrie, Cisco

The Government’s $1.35 billion ultra-fast broadband initiative is already rolling out, but the technology’s implications haven’t been realised yet, says Geoff Lawrie, Cisco’s New Zealand country manager.

“There is still a general lack of appreciation for how significantly this new network platform will change the way we work, live, communicate and entertain ourselves,” Lawrie says. “This will become more apparent over the next few years, as new broadband-based applications move into general use and innovation around the network gets real traction.”

Lawrie is convinced that one of those applications, high-definition video, will change the way we communicate and work, strengthening the nation’s “commercial and social ties with the rest of the world”.

Lawrie, however, suggests that iPads and similar devices will have a more immediate impact over the coming months, especially in pushing the consumerisation of the workplace.

“The form factor and utility of these devices clearly resonates with all classes of user,” Lawrie says. “What is more significant is the underlying trend that suggests we are moving into an environment where the end-user, rather than the IT department, decides what device they will use to connect and communicate in the corporate environment. This will usher in a whole new set of challenges around how companies build flexible, dynamic and secure networks to support this trend.”

He also sees social media as becoming a more pervasive business tool, though not as a replacement for sturdier methods of collaboration. While Lawrie says his company advocates the use of social media to “find and connect the right people, store and find useful material and facilitate collaboration activity within the company,” Cisco still relies on “commercial grade tools that help us keep this activity focused and secure, and we are planning to extend this fully into our partners and customers in the future.”

A less impending trend than consumerisation and social media is the much-hyped cloud, an environment Lawrie believes is still maturing.

“I think the cloud will be relatively significant in terms of how New Zealand companies think about their strategy for acquiring and consuming computing capability,” he says. “However, experience would suggest that its real impact will not be felt until much further in the future than the current profile and rhetoric would suggest.”

“The basic notion behind the commercial and technical advantages of the cloud are sound,” Lawrie says. “But not all of the technologies — especially those related to management and orchestration of the cloud environment — are in place to manage this at scale. What is clear, though, is that the task of building next-generation datacentres to support the cloud environment is going to require a new approach to computing architecture, and this is going to significantly disrupt the status quo in this market.”

In regard to the economy, Lawrie says he is “modestly optimistic” about the coming year, adding that “the market will continue to present opportunities for technology companies who present a value proposition aimed at helping their customers address the key challenges of driving productivity, innovation and sustainability.”

He doesn’t, however, venture a guess as to currency volatility.

“I try to stay focused on the things that I can control,” Lawrie says. “The exchange rate for the New Zealand dollar isn’t one of them.”

Graeme Riley, SAP

SAP managing director Graeme Riley says the acceptance of smartphones and tablets in the enterprise is one of the most important recent industry changes.

The company has policies about which platforms to use and it is adjusting to the use of these devices.

Despite the emergence of the iPad and other tablet devices, Riley says netbooks still have their space in the technology market. “The affordability question means there is a space for everyone,” he says.

Along with a review of its Blackberry-only policy, SAP has been busy exploring the business opportunities in the social media space. “Type SAP into YouTube and you’ll be amazed,” says Riley who, despite admitting to seeing real value in social media, isn’t a convert himself yet. “In 2011 I’ll throw in the towel and probably join Facebook,” he says.

As for the security threats posed by the new mobile devices, Riley mentions that there is software - such as the one developed by Sybase, a company SAP acquired in 2010 – that allows companies to manage all sorts of mobile devices and keep business and personal data separate. “Security is the biggest issue. This is a much more complex environment and companies like ours are now building applications for those devices.”

SAP plans to offer software “on premise, on demand and on device.


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