Menu
Sharpen your senses to navigate a crisis, says IDC

Sharpen your senses to navigate a crisis, says IDC

SMB opportunities abound in the current economic climate, but businesses have to acclimatise themselves to a period of darkness, says IDC.

In his introduction to IDC Directions, country manager Ullrich Loeffler explains the research firm will be “delivering Directions as a service” this year. It’s the first time the event has been presented exclusively in the form of a webinar. At a time when everyone is more cost-conscious than they were a year ago, it’s an approach that underscores the cost-cutting messages the research firm is presenting.

Needless to say, a recurring theme is the global economic situation. The presenters conclude their approximately 10-minute presentations with essential guidelines, most involving vendors and channel partners adapting their offerings to help customers cut costs. The following is a Reseller News snapshot of the presentations with arguably the most relevance to the New Zealand channel.

1. The world at a watershed: Ullrich Loeffler, IDC country manager

“Being in the dark in a fast-moving industry can become quite scary.”

A couple of minutes into Loeffler’s presentation, the screen lapses into darkness. Just as it seems that the technology has failed, stars and moonlight glow from this darkness and Loeffler explains that, just like someone stumbling around in an unlit room, we’re going to have to grow accustomed to a period of darkness brought on by the current economic situation.

“We’re facing the worst economic downturn since the advent of the PC in the early 1980s,” says Loeffler, “or since the invention of the computer itself, in 1946.

“It’s a fast-paced industry that doesn’t allow us to stand still. We have to find ways of navigating in the dark. But the longer we’re in the darkness, the more we adjust to it; we spot stars, glimpse light and wait it out until the dawn of a new growth period.”

In dealing with the ways the economic crisis might affect us, Loeffler presents two key messages. The first is about the scale of downsizing in the past six months, showing a percentage fall in GDP of around or above 5 percent across the globe, and with the crisis not limited to a specific geography and including previous growth regions such as the Asia-Pacific and New Zealand, for which there was recently a negative growth forecast of 3.2 percent in 2009. (Adam Williamson recently pointed out in a letter to the editor in response to a Guardian Weekly article that economists and analysts appear fixated on the concept of growth. “Please consider, in future, calling it exactly what it is: contraction,” he suggested.)

Rather than pretending IDC can predict the future, says Loeffler, it’s more helpful if it suggests scenarios and probabilities that will help to reduce uncertainty. In March this year, IDC conducted a poll to find out what recession models were expected by line of business managers and CIOs around the Asia-Pacific. There were very few optimists who believed in a V-shaped recession where a rapid turnaround follows the steep decline we have experienced to date. Most believed, though, that there would be an economic turnaround in late 2009.

The ‘Black Book’ is IDC’s worldwide IT spending forecast. It uses GDP and growth forecasts to form the foundation for this research. IDC’s worst-case scenario for 2009 is negative growth in IT spending of 4.7 percent. The research firm predicts a slowdown in recovery in IT spending until 2012. “This is a reflection of the change of the originally anticipated V-shaped recession,” says Loeffler, “now more likely a U-shaped or even L-shaped recession model.”

Emerging markets will this year account for 28 percent of ICT spending, and 56 percent of new money coming into the market over the next three years. There’s a link, IDC’s research shows, between the degree of technology penetration in emerging markets and the opportunities for those with IT products and services to sell because of the high percentage of total IT spending these markets represent. There is currently an imbalance between the penetration in these markets and the exploitation of business opportunities.

“When we talk to CIOs,” says Loeffler, “we don’t get any pushback when we say that CIO challenges seem to be growing faster than the solutions to solve them.” CIOs, he says, will now be forced to solve problems in new ways.

This is Loeffler’s cue to raise the subject of cloud computing and the need for efficiency and an incentive for resource sharing, which brings with it further complexity, challenges and resistance.

The ability to adapt to change is one of the most sought after qualities in business. The unpredictability of the current era means we also have to “learn to run in the dark”, says IDC. And if recovery is coming, businesses have to be prepared for that, too.

Top tip: A crisis forces innovative organisations to look at the world differently. It presents an opportunity to review internal processes as well as the way in which we treat our customers.

2. Security drivers in the A/NZ region: Ker-Hoong Lim, associate analyst A/NZ, software and services

“Staff using Facebook, Twitter, and even iPhones connected to our enterprise network could possibly transmit viruses, therefore representing a huge threat.”

Security technology, Ker-Hoong Lim posits, is rarely considered to be at the forefront of ICT innovation; it’s something that’s merely expected to work.

New Zealanders, it seems from IDC’s Australia and New Zealand IT Security Survey 2008, are “somewhat confident” (46 percent) about their deployed security – and more of them feel that way than Australians (34.1 percent). However, when it comes to “very confident”, Kiwis (40 percent) are outnumbered by their closest neighbours (52.1 percent). In the “extremely confident” stakes, things even out to around 11 percent on either side of the Tasman.

So while many organisations want more security, the key drivers for spending money on it differ. Business continuity requirements are a self-evident priority. Other priorities for spending include taking measures to protect intellectual property. Secure systems can be used to provide competitive advantage, Ker-Hoong Lim proposes.

The current economic climate propels some disgruntled staff to take malicious action against their employers. Employees understand the organisation’s IT environment better than anyone, she warns. “IDC sees identity and access management, as well as security and vulnerability management solutions vital to organisations; especially for auditing purposes and to protect identities of not only employees but also of trusting customers.”

The threat landscape is evolving and companies are willing to spend big on security, because those with malicious intent are becoming more sophisticated in their methods.

Top tip: Security compliance is expensive, but can give companies a competitive edge.

3. Productisation of services: Rasika Versleijen-Pradhan, senior analyst, IT Services

“Looking at the overall context of the New Zealand market, we need to embrace the majority of the end-user community.”

The presentation opens with a quote from US real estate developer and civic activist James W. Rouse that has regained currency: “Profit is not the legitimate purpose of business. The legitimate purpose of business is to provide a product or service that people need and do it so well that it’s profitable.”

In 2008, there were more than 151,000 businesses registered in New Zealand, 98.5 percent with fewer than 100 employees. IDC’s measure of an SMB is a company employing less than 500 people.

The New Zealand IT services market is worth close to NZ$2.7 billion in 2008. “The combined spend in the SMB market shows that it is substantial,” says Versleijen-Pradhan, “and a relatively under-tapped market.”

New vendors can enter the market to offer services, she suggests, in spite of the cost and resource challenges. Versleijen-Pradhan briefly explored success factors, incorporating channel and technology partners, branding, promotion, process orientation and partner enablement.

In lowering costs for your customer through the use of cloud services, says Versleijen-Pradhan, “It’s important to understand the opportunities from both an end user and vendor perspective, on how to best leverage cloud services as part of the overall productised portfolio.”

Top tip: There is a viable market in New Zealand for dedicated, cost-effective, repeatable and productised service offerings.

4. The cloud in New Zealand: Adam (Zhuo Hang) Lee, associate analyst, ANZ Software and Services

“With an online delivery model vendors now have a larger, reachable market.”

Lee grounds his presentation with a no-nonsense definition of cloud services, while summarising the opportunities and some end user responses to this way of delivering services and enterprise applications.

The cloud, he says, involves “taking what have traditionally been inhouse resources outside of your company boundaries”. A shared services model offers a lowered overall total cost of ownership and you only pay for what you use.

The largest obstacle to its adoption, he says, is a perceived lack of the security of online delivery. Doing business via the internet, in short, still makes some companies uncomfortable. And although cloud services are easier to deploy, performance and uptime reliability problems due to low connection speeds are among the other potential drawbacks.

The cloud brings enterprise services within the reach of SMBs. But increased competition through the cloud is a “double-edged sword”, he says.

The cloud also lowers the cost of switching vendors, while international vendors can also access the local market and poach customers from New Zealand suppliers.

Perhaps surprisingly, users are open to offerings from new and smaller players. And Lee suggests that this country’s long-standing shortage in IT skills could be solved indirectly by using cloud services to take advantage of talent-pooling.

Lee finishes with what he describes as a “reality check” regarding the country’s low broadband speeds, which are not yet sufficient for data-intensive applications such as real-time data mining.

Top tip: The cloud is here to stay, suits the New Zealand market and customers are open to new, small cloud services vendors. But they will need to be creative to circumvent the limits of broadband performance.

5. Hardcopy output devices: Ariki Pearson, associate analyst — peripherals

“To say that hardware sales are being challenged is to put it mildly.”

Ariki Pearson uses nautical metaphors to explain, rhetorically, “Why the tide is going out”. Every ocean has its share of currents, choppy water and rough weather. As the tide goes out on the New Zealand peripherals market there are risks, rules and beacons. Those who come up with profitable answers, he suggests, are likely to be those who figure out how to reduce end-user costs while discovering new revenue opportunities.

A “synchronised global recession” has resulted in plummeting IT expenditure. This in turn puts pressure on channel partners and business relationships.

IDC says an important focus area for businesses this year is “leveraging IT to achieve business process optimisation”, including cost reduction, a focus on customer engagement and long-term strategic investment.

Companies are considering hardcopy, cost-cutting measures. Unit shipments will decline this year, but hardware vendors should be offering their customers productivity enhancements as part of their hardware, software and services offerings — such as managed print service engagements and scanning to replace paper-based services.

Top tip: Surviving this financial crisis depends on providing viable hardcopy output offerings to customers, by helping them to cut costs and improve productivity.

Everything you know is wrong

Controversial IT commentator Nicholas G. Carr closes IDC Directions with a video presentation based on his book, The Big Switch: Rewiring the World, from Edison to Google. Presenting against a backdrop of swirling clouds — what else? — Carr urges his audience not to discount the past when thinking about what’s happening now. Looking at the economic forces that drive the evolution of technology, he says, we will see familiar patterns.

The trouble is that although everyone recognises one, every cloud is different. And the fact that today’s problems are different from any we’ve previously experienced, will be one of the biggest challenges for business in the months and years to come.


Follow Us

Join the newsletter!

Error: Please check your email address.

Featured

Slideshows

Reseller News ICT Industry Awards 2017 - Meet the winners...

Reseller News ICT Industry Awards 2017 - Meet the winners...

Reseller News honoured the industry’s finest on a standout evening for the New Zealand channel, recognising the achievements of established and emerging partners on a memorable night in Auckland.

Reseller News ICT Industry Awards 2017 - Meet the winners...
Show Comments