2008: What The Year Holds

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.

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.

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.

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.

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.

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.

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.

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.

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)