2010: The year of transformation

2010: The year of transformation

Steven Graham – Act On Insight

If 2009 was the year of survival, 2010 will be the year of transformation, says Steven Graham, head of Act On Insight, a business consultancy focusing on digital strategy.

“There is amazing opportunity to transform your business,” says the former general manager of Fronde Systems Group. “Organisations that really adapt and go aggressive with some of the new technologies in terms of engagement, are going to be some of the most successful ones.”

It is also about understanding the speed of change and the possibilities this opens for enterprises. “People get so caught up in the business day to day that they don’t take the time to look at emerging trends and disruptions,” says Graham.

He cites three areas that could provide the impetus for businesses. These are cloud computing, social media and mobility.

He is cogniscant the economic woes are not entirely past and says for the first half of 2010, organisations will continue to have pressure on company spending, while also being mandated to do more with less. “These organisations are running hundreds of applications. Operational costs keep going up incrementally and they have to maintain those they have got,” says Graham.

So while organisations may have the same amount of money, they are actually working on reduced budgets.

“That is where the IT is on the hook, because they have to come up with more innovative models of delivering,” he says. “I think the trend is continuing where business is kind of driving stuff and the cloud makes it easier for them to drive some of the applications.”

Another area that organisations need to focus on is what Graham calls “transparency” in relation to social media. Organisations need to come to terms with the fact that customers and citizens have control and that their brand will live in the conversations in the social networking space.

“There is a whole bunch of models out there where business is impacted by their presence in the social media worlds.”

He cites the case of journalist Jeff Jarvis who blogged about his negative experiences in Dell’s customer support system. “Organisations have to deal with having to be open and transparent and there is a lot of supporting evidence that CIOs are saying ‘we realise we need to open up our environment’.”

At the same time, there is a fundamental shift in the consumer technology space. In the past, he says, staff wished that what they had to work with was what they would have at home. “But now it is ‘I wish what I had at home, I had that at work’.”

These, he says, are just some of the things enterprises have to deal with. “The transformation that will occur will have so much more of an impact on what we call web 2.0 versus web 1.0, because of the engagement of the community like no time before. It is this whole new world out there in terms of 2.0, because now customers directly have a voice and if they are disgruntled they can create negative feedback.

“Organisations I am talking to are aware it is a ticking time bomb,” says Graham. “We don’t even talk about the digital native any more, now we talk about the under 30. The under 30s have a whole new way of interacting and if you want to attract that audience, you need to be where they are,” he says.

“The senior managers that get that will be ahead of the other ones that are scared of technology or the internet or the openness,” he says. “In the best interest of the organisation they better get upskilled quickly, in terms of the impact they can have on the business.”

Mobility is another subject that will have a real impact on businesses in the next 12 months, he says. As an example, he cites the evolution of today’s smartphones. They are “on the cusp of becoming the dominant internet access device”.

In Graham’s case, the iPhone is his “lifeline”. People can easily buy things with this device and provide location-based services, he says. These include advertising that is relevant to the user. He says the location-based services will tailor the messages to where the user is based or what the needs are. “It is like traditional mail. They sent out a flyer because you live in this area around a restaurant. The same analogy goes on a location-based service,” he says, only this time, on a different platform.

He points to the statement by eBay’s CEO, John Donahue, who recently said shoppers have already spent about $400 million on the company’s site using their free iPhone application.

This is a device that did not exist three years ago, utilising an application that did not exist a year ago.

Brett Roberts, Microsoft

Microsoft innovation director Brett Roberts is optimistic about the prospects for agile companies with smart strategies for growth, but is another who believes the economy has not yet turned entirely for the better.

“Those companies which take advantage of changing marketplaces and new opportunities will thrive and if they’ve got cash in the bank then all the better. Keep an eye out for market share movements as customers make their own decisions about who will and won’t be around for the longer term and vote with their IT spend accordingly. I’m not convinced that all of the economic shift has hit the fan yet, so I think the reseller community should be prepared for some more surprises ahead and build their financial plans on the assumption of relatively flat growth.”

From his perspective as a Microsoft staffer, Roberts expects the rapid deployment of Windows 7, the intensification of collaboration and that cloud and social media will offer opportunities.

“2010 will see rapid deployment of Windows 7 into businesses of all sizes. Broadening things out a little, I think collaboration will continue to grow very quickly – SharePoint is the fastest growing product in Microsoft’s history – and cloud computing will also continue on a very steep growth curve driven by the potential for massive scalability, cost savings, cost predictability and reliability. No doubt there will be all sorts of advances and changes in the area of social media too, some of which, in the case of Facebook and Twitter in particular, will be driven by a desire to monetise their huge user bases.”

Roberts cautions the industry that the mergers and acquisitions that permeated the sector in 2009 are certainly not over yet. He believes the continuation of this trend will negatively impact companies left in the wake of dominant players, for up to the next decade.

“Over the next year or two I suspect you will see many of the well-managed and well-funded companies move ahead of the pack and this will have a double-whammy effect on those they leave behind. [They] will find it increasingly difficult to raise the funding required to compete effectively and will therefore have to cut back on R&D spend, which will cause them much larger issues in the long term. For that reason I expect the M&A activity that the recession has kicked off, will play out over a long timeframe – perhaps five or even 10 years.”

Roberts advises resellers that only quantifiable business value will suffice in 2010, saying the days of the “everything to anybody” reseller are numbered.

“Those organisations which choose to focus on specific vendors, and leverage their channel programmes and training, will do better than those who don’t. If there was one technology area I would recommend focusing on it would be cloud computing and online services. This area is growing massively and the major vendors such as Microsoft, Google and Amazon have relatively congruent plans in this space, so it’s a fairly safe bet that the growth will continue for some time yet.”

Resellers should also assess opportunities based on vertical industries and buying cycles, rather than particular customer segments, Roberts adds.

“This reinforces my earlier comment regarding focusing on specific vendors and ensuring that resellers are leveraging their programmes and training as much as possible. A good vendor can provide valuable market insight and will be able to help resellers with segment, vertical and customer-specific account planning.”

Roberts also tips increased local application development on Azure, “a lot of noise” around interoperability and standards in online services, and “fantastic” head to head competition between Microsoft and Google in the office web applications space. In addition, an increasing number of workers will choose to work from home, using collaboration technologies to facilitate this.

Chris Quin, Gen-i

Gen-i CEO Chris Quin says the integrator has done a lot of preparation to lay the platform for a better year ahead. However, he cautions that spending patterns have irrevocably changed.

“We’ve done a lot of work on the XT mobile network and building our managed services capability. We’re feeling better about 2010, but everyone needs to remember that the change in spending most organisations did in 2009 won’t come back. We’ve all been shown some hard lessons and no one will go back to doing anything lazy or unnecessary.”

Gen-i has its eyes firmly on cloud computing and mobility as growth areas next year.

“There’s no question that mobile offers growth potential. We’re in a stronger position now and with 3G data speeds many people can see different solutions and uses for mobile and its technical capability.

“Everyone’s talking about cloud and wondering who’s doing it. The word is hype-ridden but the question is, ‘are people up for variable cost and flexible IT delivery’? The answer is absolutely yes. We’ve been in that game for a long time because telco services have been delivered that way.

Quin believes technology has progressed to enable cloud services, while customers can benefit from a mixture of services with global scale and local relevance.

“There will be applications and infrastructure customers will see as an advantage to them. There will be things we’ll host together. Some customers will take advantage of globally hosted services. The key is how we build that together and make it work for the end users who are just trying to do their job. We will be an integrator of some services and a service provider of others.”

Gen-i is also seeing customers invest in customer relationship management as a result of the economic downturn.

“The recessionary time reminds us how important existing customers are. The size of some of those organisations investing in CRM would surprise some people. Some are smaller companies. We’re working with a lot of motivated organisations who are investing a greater amount in some troubled times.”

Quin says there are risks and benefits associated with the contraction that has occurred in the industry in 2009.

“Many medium or small organisations have discovered competitive advantages from getting together. If it builds stronger organisations committed to New Zealand that’s a good thing. The ones that worry me are people who see New Zealand as a sales-only office and don’t base capability here.”

Geoff Cossey, Chillisoft

Chillisoft director Geoff Cossey says his company’s wasn’t negatively impacted by the recession, so in 2010 it will be focusing on maintaining success as rivals rebound.

“We had a great 2009 with about 40 percent growth. In a way the tough times made some competitors fall back on things that created some opportunities for us. Next year the feeling is things will be better so maybe [competitors will] come back a bit better.

“In security it’s a really competitive space and the difference between the offerings is subtle. Hopefully, good systems service and processes will continue to be a factor.”

Cossey believes there is a need for more stringent financial management in 2010, saying this is an area in which some companies were “looser” in 2009.

“Next year we’re hoping people will pay their bills faster. At a micro level and at a global level businesses and countries have been looser in their financial management.

“I’m surprised at the number of resellers who seem to be a bit afraid to ask to get paid. There’s fallout from that - if they can’t pay their bills it goes on down the chain. People shouldn’t be backward about asking to be paid.”

Chillisoft continued to invest in staff and systems throughout 2009, says Cossey. “We haven’t changed our view on investing in staff and systems. We would rather have surplus staff capacity so we can give [good] service. Relationships with customers are still really important.”

Cossey believes the need for robust security will escalate in 2010, with an increasingly dangerous threat landscape.

“The bad guys are trying harder. They’re generally in crime and crime does pay. I think we’ll see more effort by the bad guys and they’ll have some successes. It feels like the [threat] landscape is getting more sophisticated. With the more simple security measures, people might have to lift their game and not be so passive about [threats].

“We will be working hard in the user education space. There is not a lot of revenue in that but it is important to help resellers to educate customers about that sort of thing.”

On the technology side, Cossey believes low power computing will continue to be sought after.

“We’ve seen low power computing make a comeback and I would expect that to continue,” he says. “There’s less power required on the desktop. It is almost coming back to the old bureau style. Gadget-wise it won’t be about power, it will be about useability and other factors.

He says users are also more and more familiar with remote applications, whether they refer to this as the cloud or simply other web-based services.

“People have got really comfortable with not having the application on the desktop or their own network, and even using internet banking. Cloud is just the buzzword.”

David Webster, EMC

EMC ANZ president David Webster says the state of the economy will continue to influence the utilisation of IT in-house.

“In 2010 we are going to see a continued focus by CIOs on doing more with less. In parallel with that is how they prepare for [the time] when the economy starts to pick up again.”

Partners need to be attuned to CIOs needs in a post-recessionary environment, says Webster.

“Partners are starting to focus on areas that are relevant, such as virtualisation and deduplication, which are key enablers of efficiency.”

As the economy begins to recover, the talent war will persist, he says. “A focus on building culture and hiring the best people is key as you come out of a difficult time. You’ve got to make sure your people are motivated and engaged around the business. A lot of people have had to shed staff, which is always painful.”

EMC is considering hiring in the areas of virtualisation, backup and recovery, along with archiving. “We’re going to need people in those areas as the customers need to work with us more. The economy hasn’t turned yet, but the attitude of our customers has become more positive. I still think we have 12 to 18 months of challenge. The focus on efficiency and ROI, and getting the most of technology, will be key moving forward,” he says.

Webster tips a continued shift toward IT as a service and believes partners will adopt different strategies in response to this trend.

“Some will focus on providing component technology for people who want to build IT as a service. Others may build their own service offering around new technologies. The idea of building managed services and having cloud-like service delivery is something a lot of them are thinking about.”

He also foresees a need for new infrastructure as organisations move to adopt newer Microsoft platforms. “From that, we will see business flow. EMC will grow and our channel partners will benefit.”

According to Webster, the deployment of mobility applications will also change next year.

“As we shift to simpler data infrastructures, it will open up the deployment of mobile apps differently. The virtual desktop will become an area where people start to see the benefit of virtualisation of their core infrastructure, which will enable the virtual desktop to play out.”

Craig Scroggie, Symantec

Symantec is more optimistic about next year as global markets turn a corner, says Asia Pacific vice president and managing director Craig Scroggie.

He believes his company’s growing product portfolio in storage and security enables it to strategically address customers’ needs.

“That expanding position in this growing economy has enabled us to do strategic things with clients. In tougher times they’ve been looking for fewer suppliers and greater value. With such a broad technology portfolio, this has given us the ability to step up with those customers and do more,” he says.

Symantec has hired new sales representatives and Scroggie says it plans to invest further in its local team this year.

“I think the next 12 months will be very strong for us in New Zealand not only because of our company position, but also the additional investments we’ve made and will continue to make. We are very focused on developing the channel as the majority of our business is done through them.”

Symantec will continue to grow both organically and through acquisition next year, he says. “Whilst I can’t say specifically what companies we’re looking at, Symantec is always looking at opportunities.”

Scroggie highlights three trends in the security market – continued hacking of social media services, the rise of false and malicious anti-virus messages and the growth of instant message spam.

“You’re seeing more and more Facebook accounts getting hacked. It is because that trusted medium is an easy way to be able to penetrate and execute their fraudulent activities on individuals.

“As much as two-thirds of the small business community don’t have basic anti-virus protection. They tend to be more susceptible to these types of messages that say the PC has a virus when it does not.

“[A trend] that is interesting to watch is the growth of instant messaging spam.”

Scroggie says it will move to new platforms such as social networking sites and mobile phones due to the number of iPhones and Blackberries in circulation.

He believes the shrinking of the channel through mergers and acquisitions, and company failures, has its pros and cons, but it is ultimately an opportunity for renewal.

“Operators who have worked on lower margins and were under cashflow pressure found it difficult to continue. Many would criticise those lower-cost players as being responsible for dragging the overall health of the industry down in challenging times.”

He says the disappearance of some firms creates opportunity for other players in the industry.

“They [partners] get to pick up more skilled and qualified staff who are looking for a new home. There are also a lot of customers out there who have been left in a difficult position and they’re looking for someone to pick up that service. A lot of small businesses rely heavily on those contracted IT companies to provide them with Outlook support or their backup infrastructure.”

Cloud and green IT will also be high on companies’ agendas next year, Scroggie says.

“Our strategy is to build out these cloud and security storage offerings and give people choice. Green IT is a huge area as companies won’t accept things such as screen savers being on all the time any more.”

Noel Simpson, Lexel Systems

With the recession coming to an end, Lexel Systems CEO Noel Simpson expects a surge in procurement by companies in the latter half of next year.

“In terms of growth, we continue to see significant growth coming from the services area of our business. That’s either through broader capability or new types of services we are offering.”

Next year Lexel plans continued investment in its staff and in systems. “We’ve continued to add staff all the way through this year as we’ve needed to. When you’re growing a services business you need to employ more people. The headcount is relevant to turnover.”

The integrator is targeting managed service opportunities heading into 2010.

“Some of those are on-premise and some are cloud-based. Clients are maturing on their trust around online IT offerings and they’re also losing their desire to have them on-premise where they can touch them. That isn’t the case anymore because customers want to subscribe to cloud [services].

“At the top end of town you’re going to see more direct business from vendors to customers with consolidated government procurement. That’s going to impact on a lot of the bigger deals.”

Simpson forecasts further contraction in the IT sector in the year to come. “Those resellers who don’t go niche or adjust to that new model of IT in the way it gets provisioned out to the market will get left behind and eventually die.”

Lexel is focusing its spending on technology to enable scalability and efficiency, he says.

“We use a lot of tool sets now to manage our own customers remotely. You have to keep those continuous investments in place and have the best toolsets available.”

Michael Murphy, HP

HP channel manager for enterprise storage, servers and networking, Michael Murphy, says global research commissioned by the vendor identified a number of key market trends.

According to 84 percent of business leaders, innovation is critical to their organisation’s success in the new economy and the majority of them are using technology to identify new business opportunities.

“The research also shows 80 percent of organisations indicated their business and technology approach must be more flexible to meet changing customer needs, with CIOs facing increasing demands for rapid technology changes to meet business needs.”

Murphy says converging infrastructure is a trend that will continue next year.

“Customers are looking to cut costs, find ways to maximise operational efficiencies and to leverage IT resources to help them seize greater competitive advantage by running less complex IT environments that can be adapted more quickly to changing needs.”

He adds that virtualisation will be key as the sector heads into 2010.

“Organisations are recognising the need and opportunity to realise the benefits of complexity through virtualisation beyond the server, in areas such as the network and management of the datacentre.”

Although the country faces a slow economic recovery, there are opportunities for vendors and resellers to thrive, Murphy says.

“The market trends mentioned above mean there will be very good opportunities for vendors and resellers that adapt quickly to this new environment. To thrive in this environment, we all need to be supporting our clients by helping them invest wisely in their IT infrastructure and continuing to focus solutions on cost savings and efficiency gains.”

Ross Fodie, Equico

Ross Fodie, general manager of technology finance company Equico, is optimistic about its prospects amid a restructured finance company industry.

“What we will see is the percentage of our resellers’ business will grow. They will understand the benefits of finance and make use of that a lot more.”

However, he warns there is a “massive risk” for businesses if they continue to keep PC equipment running outside the warranty period.

“Finance is a tool to help end customers upgrade to that technology easier. Cashflow in businesses has been tight and I don’t think that’s going to change substantially in 2010.”

Fodie predicts equipment leasing will gain popularity due to cash flow restraints and sustainability concerns. “Companies are becoming more aware of sustainability around ICT and we’re very concerned about the end of lease life,” says Fodie.

In fact, he believes end of warranty periods will force companies to act.

“Many companies have been delaying that IT spend decision, but with warranties [expiring] they can’t afford to have that risk in their business. That’s where leasing is going to help, because they’re not going to have the capital budget available to [contribute to IT spend].”

Mobility is a trend Fodie believes will impact companies, as they will have to be a lot more flexible in how they deal with employees.

“Being flexible in where and when they can work is key - that includes PDAs and mobiles. You’ll find more and more staff are demanding them, so your back-end infrastructure needs to support mobility. When you give staff mobile devices they can do all and sundry, so you need to have good security.”

Virtualisation will also continue to grow as companies look to consolidate their IT assets.

“By and large you would put storage into that solution. That leads into how you’re backing up your data, so there is quite a big platform that businesses need to be aware of. Vendors are placing a large emphasis on power consumption.”

He adds that the biggest demand for Equico’s services are coming from the top resellers and second tier resellers.

“Traditionally, it has been an easy market for them to turn up with their order book and now there is a lot more scrutiny around those orders both in terms of what is being provided, but also internally. One of the hard questions the business is asking is ‘what’s the return on investment’.”

According to Fodie, the reseller industry will consolidate further due to the number of smaller firms in existence.

“There are a lot of one-man-bands out there servicing this client here and there. I’m not sure that is a valid model for the end customer moving forward. The reliance on a one-man reseller is a risk because if they [the reseller] grow and have 10 clients, the ability to get hold of them in an emergency is limited.”

Gary Langford, Eagle Technology

The second half of 2010 will be brighter when new budgets for government and local authorities are in place, says Eagle Technology CEO Gary Langford.

“This year has been a particularly challenging year in many ways. You’ve had issues in the channel with consolidation. Sun and Oracle’s merger has stalled and it hasn’t done Sun any good.”

Eagle intends to keep growing in its GIS software area and working with central government and councils to give them enterprise licensing agreements.

“We are keen to continue to provide software in the business intelligence space, which is a growth area. Forecasting, planning and budgeting software is a fast-growing niche.”

Contraction in the industry will increase the stimulus for some consolidation strategies, says Langford. “When there [are fewer] dollars to go around that’s what happens. We’re interested in acquisitions if someone wants Eagle to take over their business.”

The company has invested in a new enterprise resource planning system and built a new website. It is looking at other infrastructure investments next year.

Areas where it can make productivity or cost savings gains are where the opportunities will be in this tough market, adds Langford. “If you can show a pay back from your projects quickly then you have a good chance of getting it going.”

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