What lies ahead
- 23 January, 2008 22:00
In a spot of crystal ball gazing Reseller News spoke to a number of local industry leaders to gauge their views on what lies ahead for the technology sector in 2008. Our panel highlighted the opportunities, challenges, technologies and trends they believe will shape the market this year, while also reflecting on 2007.
We kick off in integrator-land with Eagle Technology.
CEO Gary Langford says the company has its eye on several systems-integration trends this year, including server consolidation and virtualisation. It says this trend was picking up in 2007 and shows no sign of abating.
“Storage management is an oldie but a goodie and it also complements server virtualisation,” says Langford. “The need for centralised storage, high availability of data, resilience for data storage and integrity of data continues, while retrieval and management is critical.”
Langford tips a continued move to software-as-a-service computing, with pay-as-you-use models growing and a move away from what he calls Microsoft-style licensing. He also foresees a shift toward less expensive thin client desktop devices and technologies.
Along with two of Eagle’s core areas of expertise – business intelligence and geographic information systems, Langford says fraud protection and identity management, energy efficient datacentres, laptops and mobile computing devices, and faster broadband and wireless will be hot technology areas this year.
The tight labour market will be a challenge again in 2008. “It is often difficult for companies to recruit and retain IT staff with the high levels of technical expertise required to manage and maintain complex in-house data management facilities,” Langford says. “More companies will look to outsource these services (either fully or partially), even at the small to medium business end of the market.”
On the plus side of the ledger, Eagle is looking forward to capitalising on partnerships with HP, IBM and Sun Microsystems to offer thin client devices and server consolidation technology, software-as-a-service, managed services and storage management.
On the vendor side of the fence, Katrina Troughton, managing director of global giant IBM’s local subsidiary, agrees the labour shortage will be an ongoing challenge this year, but believes it also creates a technology opportunity.
“The challenge side is making sure we can hire the right people to deliver to our clients. But the opportunity side is that IT is a key enabler of employee productivity.”
One such technology is unified communications, she says. “It’s an enabler to having mobility for employees, and applications that provide data, voice, video and all the other things people might like.”
Troughton also believes data warehousing and analytics will grow as a result of employees’ needs for quality information.
Also, she says virtualisation will continue to expand as businesses look to get the most out of the technology they already have.
Globalisation will also impact its business in 2008, says Troughton. “For our clients it’s a reality in the way they operate. In New Zealand we’re continually focused on leveraging our global IP and experience to really make a difference for local clients.”
IBM is also placing continued emphasis on environmental considerations. Troughton says it has had policies on the subject since the 1970s and continually updates them, setting measurable targets for success.
Big opportunities lie ahead this year for Microsoft with the wave of new products, such as Windows Server 2008, SQL Server 2008 and Visual Studio 2008, that it will be releasing, says local managing director Kevin Ackhurst.
“Currently, the company is rolling out more new technology than at any other time in our history.”
In addition, Ackhurst believes productivity improvement and technologies impacting the environment in a positive manner, as well as the continued uptake of Web 2.0, will also present opportunities this year.
Trends that will shape the industry this year, include increasingly sophisticated technology, better broadband and the ability of technology to positively impact people’s lives by driving better productivity and innovation, says Ackhurst.
“[There will be] an increased focus on the benefit of technologies to people’s lives. I see enormous opportunity for the local technology industry in its ability to help increase the productivity of New Zealand businesses through technology and in the development of innovative technology solutions for key sectors including eGovernment and healthcare.”
Ackhurst picks for 2008’s hottest business technologies are unified communications, business intelligence, virtualisation, hosted ERP and CRM, and managed mobility.
On the consumer front, he sees high-definition, increasingly interactive TV and gaming, Web 2.0, gaming peripherals and communities, and convergence between TV, music and mobile as areas to watch.
Challenges for New Zealand organisations will come in the form of competitiveness and skills development, according to Ackhurst.
“For New Zealand to truly become competitive in the global economy, strategic collaboration between businesses, governments and non-governmental organisations is essential. We also think IT skills development is a key challenge for New Zealand.”
Green IT, as it is now commonly called, will also be an opportunity in both the desktop and notebook areas, according to HP New Zealand managing director Keith Watson.
“There is an increasing demand for more energy-efficient products. Companies are also looking to consolidate server infrastructure by installing blade systems.”
Watson cites virtualisation as another major opportunity.
“Virtualisation will take hold among smaller customers as its capabilities spread beyond the server. We will see businesses implement virtualisation across a wider array of environments to gain benefits such as security and energy efficiency.”
Mobility is Watson’s third opportunity pick.
“Notebooks are outselling desktops and products like smart phones and online software are adding to the rise of mobility.”
Security will continue to be a big challenge this year, Watson says.
“Security is increasingly important as we become more mobile. Wireless, wifi and live broadband devices require advanced security.”
He regards the skills shortage as a problem.
“The skills shortage in the marketplace means the industry must develop smarter ways of delivering services. Retention is also a problem, because people are attracted to well-paying roles in other countries.”
Watson says 2007 was an excellent year for HP both locally and internationally across the board.
“There was a very strong demand for notebooks in the corporate and consumer space. Printing products are showing strong growth as well. There have been significant changes in the printing industry as they convert from analogue printing to digital, so 2008 looks very strong.”
However, Watson says the general election may introduce some uncertainty into the marketplace towards the end of the year.
Geoff Lawrie country manager of Cisco New Zealand says 2008 will not be much different from other years in terms of the key sources of opportunities for the technology sector.
“Our customers will continue to be concerned about how they drive productivity, lower costs, increase customer satisfaction and grow their own business. Any technology company that organises itself around delivering solutions in these areas will continue to prosper.”
This year brings an increasing understanding of the business value delivered by video and mobile applications, as well as increased focus on virtualisation as a value driver in the datacentre area, says Lawrie. “There will be a significant upswing in investment in network build, driven by an increased understanding of the economic and social impact of high capacity broadband.”
The environmental impact of new technologies will also begin to feature in business cases supporting IT investment, he adds.
“Unified communications, beyond voice and including both video and mobile integration, will become an essential enabling technology for many businesses,” says Lawrie, adding the decline of non-IP based voice systems and traditional PBXs will accelerate.
He also expects social networking applications will start to find their way into mainstream business IT strategies, while software that enables companies to manage storage and content will be important.
The current technical skills shortage is “effectively constraining the growth and progress in the industry” as it is slowing implementation projects and elevates both costs and risks in some circumstances, says Lawrie.
The broader industry would also benefit from early certainty around the final shape of regulation, costs and separation initiatives in the telecommunications sector, he adds. “This will be the catalyst for considerable investment in infrastructure and overlay solutions.”
Looking back, Lawrie says 2007 was an average to good year for the industry. “Good technology companies that focused on the business outcomes of customers continued to prosper.”
“We’re also seeing changes in the stock market due to the downturn in the US economy.”
On the analyst front meanwhile, Amit Gupta country manager of research firm IDC believes unified communications offerings and Web 2.0 will both be hot.
He sees unified communications across the small, medium and large business markets as an opportunity along with software-as-a-service within the SME space.
Gupta agrees the country continues to face a severe shortage of skilled IT professionals.
He says 2007 was an average year for the local industry, adding the market is forecast to grow at 3.3 percent this year to a value of $11.5 billion in 2008.
“Whilst the predicted growth rate will not lead to exuberant celebrations amongst the vendor community, IDC predicts the continued impact of disruptive market forces within a wide variety of ICT submarkets.”
This disruption is changing the market landscape and competitive forces, presenting strong growth opportunities for vendors that are prepared to face the challenges these disruptions will bring, Gupta says.
Software-as-a-service and unified communications top Axon CEO Scott Green’s list of key technologies for 2008, along with virtualisation.
“Virtualisation will be huge this year. The other two are emerging trends and it’s still to be determined what services will be delivered around them.”
Green cites the perception of value for service as a challenge facing the industry.
“There is a need to clearly demonstrate how technology benefits businesses.”
Consolidation will continue to affect the industry as companies change or downsize, says Green, adding the IT skills shortage is ongoing and needs to be addressed.
“It is getting harder to find new talent.”
For Axon, 2007 was a good year. “We had significant growth of 20 percent and good profitability, so I’m very pleased,” says Green.
He also says general economic uncertainty due to the soft US economy may affect local businesses this year. “However, there is continued strong demand for our services so I’m confident 2008 will be even better.”
Connect NZ managing director Brent Page also expects to see more consolidation in both the reseller and distributor channels, but says this will offer opportunities to grow through acquisition and could offer some relief in the tight labour market.
“One of the beneficial side effects of what might be a correction in the economy will be a freer, more exciting recruitment environment. We’re seeing signs of that already in the quality of applications we’re getting for both ICT engineering and sales account manager positions.”
Page says VoIP has been hot for the company over the past three years.
“There are compelling reasons where VoIP can make a huge difference to the productivity and service delivery of a business.”
Convergence is also important, he says.
“The traditional demarcations in our industry are blurring. Is a multisite, print copy solution something that a traditional copy company should be doing, or is that an ICT challenge now? I would suggest it is an ICT challenge.”
Page adds the technology market is tighter.
“Those who are doing things well will be fine and some others may not.”
He says 2007 was a consolidation of the acquisitions Connect NZ made through 2005 and 2006.
“Whenever you acquire companies you go through rationalisation of assets and resources, but more importantly you colonise your acquisition and get the other company’s culture right. Results wise it has been fine and our revenues have been flat but profitable.”
The only warning sign for Connect NZ is the alarming trend for brand partners removing their core decision making from New Zealand to offshore, says Page.
“That is a real threat to our ability to continue to deliver quality service to our business companies in New Zealand. When they remove key decision making resources back to Singapore or Sydney, you lose any sense of focus and care for New Zealand customers.”
Maclean Computing managing director Allan Maclean sees virtualisation as a trend that will help organisations to improve their support at a lower cost.
“With the economy tightening, the industry is making better use of what it has got. The cost of virtualisation has gone down and it’s more accessible to the mid-market.”
Another opportunity is integration of the network through unified communications, says Maclean, adding Windows Vista will be another key technology.
“We’re seeing a serious uptake of Vista.”
But, Maclean says the cost of training is a challenge for the industry.
“People have to be specialists in their field and it’s getting harder for the little guys to stay in the race. As the desktop gets simpler, the backroom hardware becomes more sophisticated than ever and you need the right training.”
Recruiting the right people is also becoming tougher he says.
“There is a huge demand for qualified people and there seems to be fewer immigrants applying for jobs. At one time we had 15 different nationalities working for the company.”
Last year was very busy for the company and Maclean expects this to continue.
“Costs are creeping up but there is plenty of work. I made the decision to purchase our building early in January, so we can expand to the second floor if we wish.”
Chris Rycroft, general manager of Christchurch-based distributor Dove Electronics, tips new Microsoft and Google applications as hot technologies in 2008, along with display technology, Vista and applications which require storage.
He sees opportunities in various technology areas. “New opportunities will continue to come from convergence with other market segments such as AV, retail automation, and security, but of course the bulk of the opportunity will still come from within the basic broad base of IT distribution.”
Reflecting on 2007, Rycroft says it had good results last year, taking on more agencies than it usually does, acquiring another distributor (IT Computer Products), while also revamping its web presence.
Dove plans to consolidate these developments in the coming year, but Rycroft foresees the continuation of some challenging business conditions. These include a shrinking global market and credit risk.