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2008: What The Year Holds

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DQC News Bureau
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All eyes are on the Asian IT market, which has been displaying rapid growth

in IT adoption and business. The absence of legacy systems and the unique needs

of the region have made the region a hotbed of innovative technologies and

solutions.

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Springboard Research has tracked the major trends and developments in the

APAC IT markets and interviewed 15 CIOs from some of the leading companies in

the region, executives with IT vendors, and assessed publicly available

information on countries, IT companies, products, techno­logies and services, to

come up with a synopsis of the key trends in the region in 2008.

Year of China and India



As the two leading economies-China and India-continued to experience GDP

growth in the range of nine to 10 percent, and other nations followed with

another year of solid macro­economic performance, the APAC IT market strongly

reflected the buoyancy in the regional economy. Even though the US sub-prime

crisis, which began to unfold in the middle of this year and the rising energy

prices did raise some concerns, they remained mere blips in the larger

macroeconomic picture of the region.

As Asian companies continued to make new investments in IT, the region

delivered impressive growth and profits to leading multinational vendors. For

many of these vendors, markets like India and China grew more than 40 percent in

2007. Leading multinational vendors like IBM, HP and Microsoft all made

significant investments to bolster their Asian presence.

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In 2007, software as a service (SaaS), service-oriented architec­ture (SOA)

and virtualization emerged as strong focus areas for many organizations. On the

horizon was also a quest for greener IT solutions, driven by concerns for the

environment and also rising energy costs.

SOA gained significantly from an increased awareness and understanding of its

benefits and there was a considerable amount of interest among Asian

organizations. However, most organizations still took a cautious approach when

it came to adopting SOA because of the complexities involved and commitment

required.

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Similarly, SaaS gained strength from the announce­ments made by large vendors

like Microsoft, Symantec and SAP. These vendors not only acknowledged the value

in delivering software as a service but also announced more clear-cut SaaS

market strategies.

These announcements marked a major breakthrough for SaaS as they heralded the

first real acknowledgement by traditional software vendors that SaaS was

mainstreaming and gaining popularity among enterprises of all sizes across

industries.



2007 Market Awards
Award 2007
IT Buzzword of

the Year
Social

Networking
IT Trend of

the Year
Green IT
Asian IT

Company of the Year
TCS
Acquisition of

the Year
SAP/Business

Objects
Source: Springboard Research,

12/2007
 
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On the other hand, even though Asian enterprises were slow in adopting

virtualization, organizations were more appreciative of its benefits. However,

most of those who acknowledged its benefits remained undecided on implementing

it in their IT systems as they were not sure how to go about it.

As such, even though virtualization emerged as the hottest technology in

2007, it was not the hottest business in APAC. Growing environmental concerns

and rising energy costs started to gain more attention from both IT vendors and

the user community. Many large IT vendors spelled out concrete moves toward

greener IT systems like datacenters that consume less energy and require less

cooling as green IT grew in importance and prominence in the user community.

However, while a large number of IT professionals believe environmental

factors are important in planning IT operations, a small proportion actually

have clear green purchase criteria in place currently.

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Buzzword of the year



Social networking continues to be a hit with the general populace with the

young taking the lead. Many large IT vendors like IBM and Cisco began to look at

it as a great productivity and collaboration tool for themselves, their

customers and partners.

Large enterprises began to acknowledge the virtues of social networking

especially when it came to encouraging the free flow of information,

collaboration between employees and for fostering innovation.

Social networking emerged as the most potent among consumer technologies and

applications to have found its way in the enterprise world in 2007.

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Trend of the year



Green IT emerged as IT industry's most important trend of 2007. Rising

energy costs and climate change concerns helped bring end-users attention to

greener IT solutions as many IT vendors started marketing products and solutions

that addressed the environmental concerns more actively.

However, green IT products and solution awareness among end-users was

limited, partly because the focus on green IT is very recent and IT vendors are

only now starting to promote the green IT message in their marketing.

Nevertheless, Asian organizations are waking up to the economic and social

benefits of deploying IT solutions and technologies that are energy efficient.

Asian IT vendor of the year



TCS is the most global among the Indian IT service providers with delivery
centers in many different parts of the world and 25 to 30 percent of its

employees are outside India. The company climbed several steps in the global

delivery value chain successfully competing with established US giants.

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In 2007, TCS became the first Indian service provider to secure a $1 billion

multi-year outsourcing contract and it succeeded in gaining a significant amount

of new business in regions outside the US-especially in Europe and South

America. Its $1 billion deal with information and media company Nielsen, is one

of the largest in the offshore business.

The vendor has been successful in reducing its dependence on the US

market-most Indian service providers heavily depend on the US market for

business and margins-and therefore are at lesser risk of losing profits to a

depreciating dollar.

Acquisition of the year



2007 was a year of acquisitions of business intelligence (BI) software

companies (Oracle-Hyperion, SAP-Business Objects and more recently IBM-Cognos).

Of these, the $6.8 billion acquisition of Business Objects was the surprise of

the pack as it came from a company like SAP acknowledged as very conservative,

when it comes to inorganic growth.

The move will clearly bolster SAP's BI efforts. How the merger unfolds will

depend a lot on the shape BI business takes in the coming months especially in

the realm of IBM, a key SAP implementation partner, acquiring Cognos.

Top predictions



Despite the ongoing credit crisis in the US and the upward swing in energy

prices, leading Asian economies like China and India are likely to maintain

their growth momentum. Other economies like Australia, Singapore and Korea are

also likely to maintain their current momentum.

These countries account for more than 80 percent of the APAC IT market

(excluding Japan). Springboard Research believes that Asian organizations will

continue to significantly invest in technology, products and services. A

substantial portion of these investments will be new IT investments and will

come from organizations scaling up their IT systems or building entirely new

ones to drive business.

Top

10 trends that will shape up enterprises in IT in 2008


1: US subprime crisis




The subprime mortgage crisis and projected economic slowdown in the US is a
key risk for the Asian IT market heading toward 2008. However, Springboard

expects the Asian IT market to continue powering ahead in spite of the

challenges facing the US.The region is far less dependent on export-driven

growth than in previous years and the development of larger domestic

economies has helped Asian countries cope with volatility in the US.

There are some benefits the Asian IT market is

likely to see as a result of the US slowdown. As the US dollar depreciates

against most Asian currencies, enterprises and consumers are able to spend

more local currency on IT products coming from the US. In addition, as

growth slows in the US, we expect to see major international IT vendors more

focus and spending toward Asia to offset slowdowns in more mature markets.

2: SOA to get more

attention




This is what Asian CIOs said when asked what they think will be top of

mind in 2008, which is not without a reason. As companies in leading

economies like China and India struggle to deal with the twin challenges of

managing growth and managing information, there will be significant SOA

uptake in the region. A key change in 2008 anticipated is greater senior

management buy-in than in previous years.

Organizations that have already done

enterprise integration will most likely go for the next level — reorganizing

specific business processes and introducing an element of reusability in

those processes. There will also be interest among enterprises that have not

gone for EAI or web services.

3: Virtualization to

make headaway




Virtualization will be a big battleground for IT vendors in 2008. As

organizations increasingly emphasize cost reductions, improving application

performance, energy efficiency and offer easily manageable IT systems,

virtualization will receive more focus from Asian organizations.

Springboard's interviews with several CIOs

indicated virtualization, at least at the server level, will become an

imperative for them in the coming year. Although current adoption levels are

low,



our survey results show that a growing number of Asian organizations are
indeed looking to invest in virtualization in the future. In spite of the

promise, it is not going to be all smooth sailing for organizations looking

at virtualization to make their IT systems more efficient; how and where to

get started will be one of the key challenges confronting business

organizations. Springboard research expects licensing issues to be among the

key challenges that virtualization will provide to both users and IT

vendors, which it believes will be a temporary hurdle for mainstream

adoption.

4: Cost savings will

drive green IT




Although creating a greener planet will drive some implementations, the

primary driver for green IT adoption in APAC will be the cost savings

provided by better energy efficiency. A majority of end-user green IT

investment will be directed toward virtualization and consolidation efforts.

Springboard research also expects regulations to become more uniform and

stringent, which will spur greater visibility and adoption in the market,

and it believes that IT equipment vendors operating in Asia will

increasingly be required by law to provide equipment take-back programs for

their customers.

As green IT takes hold, the government

segment will lead adoption and spark broader green IT investments across

other enterprises in the region.

5: Appreciating

consumer-driven technology




The year 2007 saw several large corporations appreciating the value of

consumer web applications and deploying them in their business environments,

especially to foster more effective workplace collaboration and innovation.

2008 will witness more business organizations mimicking consumer

applications like podcasts, Wikis or social networking by building their own

versions of MySpace and Facebook, or participating in virtual worlds like

Second Life to create Avatars of their executives and holding virtual

meetings and conferences. Business mash-ups will also find a foothold in

enterprises.

CIOs will have to find a fine balance between

what will be allowed and what will not be in the enterprise environment

without stifling innovation, collaboration and creativity that many of the

new consumer technologies are fostering.



6: Skill shortage to

hit business




A key trend in 2008 is a shortage of critical skills impeding IT

investments. This dynamic emerged in 2007 and it will strengthen in 2008. It

is often assumed-incorrectly-that with billions of people and strong

technical skills, Asia has a limitless supply of talent. The truth is that

specific IT skills in areas such as ERP, solution architecting, SOA and

industry-specific applications (among others) trained professionals are in

short supply.

With a lack of the requisite skills for many

solution categories, organizations are holding back investments or they are

being implemented with many critical flaws. Moreover, large organizations

tend to win the battle for skills, which leaves many small and mid-sized

firms with limited budgets in an even more difficult position.

This trend is emerging as a key battleground

for vendors as well. Increasingly, a key factor for success will be a

vendor's ability to generate support and skills for its platforms starting

at the university level and extending through capable networks of ISVs and

SIs.

7: IT governance and

risk management critical




A number of factors will drive greater importance for IT governance and

risk management in 2008. This will include enterprises becoming more

complex, global and innovative. There is also a growing dependence on IT and

the web for every aspect of companies' business processes.

Organizations are exposing more and more of

their internal IT operations to external partners and customers. Add to

this, the ever-increasing regulations with numerous data, business and event

risks (from terrorism to climate change and energy shortages to

geo-political issues) that are attached to a network.

Moreover, the effects of not addressing risk

management and mitigation are greater now than ever before. Springboard's

research shows that most enterprises in Asia have weak disaster recovery and

even weaker business continuity planning with few really understanding the

difference between the two.

This is likely to change in 2008 and for

organizations to gains a better understanding of what IT governance is and

how to go about it.

8: UC to gain

traction




Heightened vendor activities-especially from Cisco, IBM and

Microsoft-and growing multiplicity of communication devices on one hand and

the need to encourage workplace collaboration and faster decision-making on

the other, will drive more enterprises toward deploying unified

communication platforms.

2008 will also see an intense battle between

the best-of-breed approach to unified communications (built around an IP

PBX) and the one promoted by Microsoft built on its own unified

communication platform. Whatever the approach, organizations deploying a

unified communications platform will expect it to tear down the silos in

enterprise communication that exists in most organizations.

9: Consolidation in

software industry




The global software industry will increasingly consolidate around the

likes of Microsoft (as it tries to build its presence in the enterprise

segment), Oracle and SAP (as they consolidate their recent acquisitions and

target new ones to fortify their leadership positions in the enterprise

applications segment) and IBM and HP (as they build new services and

solutions) who will use their scale and reach to bolster their market

dominance. If 2007 was a year when the leading business intelligence vendors

with the exception of SAS were acquired by Oracle (Hyperion), SAP (Business

Objects) and IBM (Cognos), 2008 is likely to see action in the collaboration

and virtualization space.

Prime candidates for acquisition in these

segments will be vendors like Citrix-XenSource, SWsoft, Virtual Iron,

(virtualization), and Citrix (collaboration). There will be acquisitions in

the middleware, IT infrastructure management and governance tools market as

well with vendors with niche competencies like SOA testing tools and SOA

governance emerging as big targets.

10: India a

lucrative IT outsourcing




Springboard believes that India is going to be hot, not just as service

delivery hub but also as a lucrative market as India Inc takes up

outsourcing with a vengeance. The Indian market has seen some of the really

innovative and mature deals in outsourcing in 2007 in several verticals

including government, manufacturing and real estate, besides telecom. This

trend will get stronger in other verticals in 2008 even as India becomes one

of the hottest markets for IT outsourcing service providers. For emerging

economies like India and China, outsourcing will be driven by challenges

related to top-line growth as opposed to developed economies where

outsourcing is being driven by the need to manage bottom line growth.

At a macro level, competition, globalization, the challenges of managing

growth and fostering innovation, and mergers and acquisitions will be the

factors that will drive IT investments.

At a micro level, CIOs will be concerned with the challenges of reducing the

cost of IT operations, improving business application performance, finding

skilled technical people and retaining them, maintaining IT systems and

identifying IT investments that will integrate closely with enterprise business

goals. CIOs will also be con­cerned with issues related to governance, overall

IT manage­ment and risk management.

RAVI SHEKHAR PANDEY, DANE ANDERSON, BOB HAYWARD and PHIL HASSEY



(The authors are senior analysts at Springboard Research)

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