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Gartner Predicts Future IT Business Spending
Thursday, March 13, 2008
The Gartner Group has some interesting things to say about global IT and business spending plans for the rest of the year. The analytical firm's UK-research division recently rolled out a list of top IT business trends for 2008, some of them directly pertaining to cost control and procurement strategies.
Some of the highlights include . . .
  • By 2012, 50 percent of traveling workers will leave their notebooks at home in favor of other devices. Even though notebooks continue to shrink in size and weight, traveling workers lament the weight and inconvenience of carrying them on their trips. Vendors are developing solutions to address these concerns: new classes of Internet-centric pocketable devices at the sub-$400 level; and server and Web-based applications that can be accessed from anywhere. There is also a new class of applications: portable personality that encapsulates a user's preferred work environment, enabling the user to recreate that environment across multiple locations or systems.
  • By 2012, 80 percent of all commercial software will include elements of open-source technology. Many open-source technologies are mature, stable and well supported. They provide significant opportunities for vendors and users to lower their total cost of ownership and increase returns on investment. Ignoring this will put companies at a serious competitive disadvantage. Embedded open source strategies will become the minimal level of investment that most large software vendors will find necessary to maintain competitive advantages during the next five years.
  • By 2012, at least one-third of business application software spending will be as service subscription instead of as product license. With software as service (SaaS), the user organisation pays for software services in proportion to use. This is fundamentally different from the fixed-price perpetual license of the traditional on-premises technology. Endorsed and promoted by all leading business applications vendors (Oracle, SAP, Microsoft) and many Web technology leaders (Google, Amazon), the SaaS model of deployment and distribution of software services will enjoy steady growth in mainstream use during the next five years.
  • By 2011, early technology adopters will forgo capital expenditures and instead purchase 40 percent of their IT infrastructure as a service. Increased high-speed bandwidth makes it practical to locate infrastructure at other sites and still receive the same response times. Enterprises believe that as service oriented architecture (SOA) becomes common "cloud computing" will take off, thus untying applications from specific infrastructure. This trend to accepting commodity infrastructure could end the traditional "lock-in" with a single supplier and lower the costs of switching suppliers. It means that IT buyers should strengthen their purchasing and sourcing departments to evaluate offerings. They will have to develop and use new criteria for evaluation and selection and phase out traditional criteria.
  • By 2009, more than one third of IT organizations will have one or more environmental criteria in their top six buying criteria for IT- related goods. Initially, the motivation will come from the wish to contain costs. Enterprise data centers are struggling to keep pace with the increasing power requirements of their infrastructures. And there is substantial potential to improve the environmental footprint, throughout the life cycle, of all IT products and services without any significant trade-offs in price or performance. In future, IT organisations will shift their focus from the power efficiency of products to asking service providers about their measures to improve energy efficiency.
  • By 2011, suppliers to large global enterprises will need to prove their green credentials via an audited process to retain preferred supplier status. Those organizations with strong brands are helping to forge the first wave of green sourcing policies and initiatives.
    These policies go well beyond minimizing direct carbon emissions or requiring suppliers to comply with local environmental regulations.
    For example, Timberland has launched a "Green Index" environmental rating for its shoes and boots. Home Depot is working on evaluation and audit criteria for assessing supplier submissions for its new EcoOptions product line.

Gartner is careful to say that none of these trends require IT directors, CFO's and other key corporate decision makers to drop what they're doing and address each one immediately.
"But they are the most compelling and critical predictions, the trends and topics . . . and they indicate a strong focus on individuals, the environment, and alternative ways of buying and selling IT services and technologies," said Daryl Plummer, managing vice president and Gartner Fellow. "These areas of focus imply a significant groundswell of change that may in turn change the entire industry."

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posted by William Dorn @ 8:15 AM   0 comments
New Study: Supply Management Spending To Rise By Almost 14% in 2008
Friday, February 29, 2008
Maybe because of, or in spite of the troubling economic climate, companies are looking to invest more in supply management equipment and services for 2008. According to a study by AMR Research entitled Supply Management Spending Report 2008, US companies, on average, plan on increasing investment in supply management technology and processes by 13.9%, according to AMR. In Europe, the study says, the figure will be even higher, with planned increases averaging 15.6%.

Supply Chain Digest, summarizing the report, notes that AMR also asked companies to rate the perceived importance of a variety of supply management processes and technologies compared to the company’s current capabilities/performance in that area.

"While the research showed important gaps between importance and performance in areas like supplier connectivity and visibility, the largest gaps were actually in more basic areas, such as contract management and spend analysis. Services procurement was another area that showed a large gap between importance and performance," says SC Digest.

Global warming or climate change doesn't seem to be a hot topic - or anything green for that matter. The study shows that "green procurement" initiatives ranked near the bottom of the priority list, cited as the top priority of only 4% of respondents.

For more information on corporate supply spending trends, contact Source One Inc. at:

Source One Management Services, LLC
724 Fitzwatertown Road
Willow Grove, PA 19090
Phone: (215) 902-0200
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posted by William Dorn @ 8:17 AM   0 comments
Small Business IT Trends Point to Flexibility, Adaptability, For the Rest of 2008
Friday, February 15, 2008
With cost-cutting on everyone's mind - okay, the lousy weather blanketing much of the Upper U.S. this week, too -- some new economic numbers are in that suggest corporate cost-cutting initiatives should continue in the coming months.

For starters, consumer sentiment fell sharply in early February to levels associated with previous recessions, dragged down by concerns a bleak economic outlook would raise the unemployment rate, a survey showed on Friday. The Reuters/University of Michigan Surveys of Consumers index of consumer sentiment dropped to 69.6 -- well below analysts' median forecast for a preliminary reading of 76.3 -- from 78.4 at the end of January. The February reading was the lowest since February 1992.

A key manufacturing number was down, too. The New York Federal Reserve's Empire State Manufacturing Survey indicated that conditions deteriorated this month, to the first negative reading since May, 2005.

Apparently, the economy -- despite what Ben Bernanke is telling us -- could get worse before it gets better. And the sentiment from the business sector is that companies are going to be more nimble and prudent this spring and summer, at least. One indicator of that is a report on the top IT trends for small global businesses for the remainder of 2008, issued today by New York-based Access Markets International (AMI) Partners, Inc., a big-time consulting firm in IT, Internet, telecom & business services market intelligence.

Among the top trends . . .

Emerging Markets Maintain Double-Digit IT Investment Growth Despite Recessionary Concerns

Given the strong growth rates expected of regional economies in 2008, bullish demand for IT products and services is continuing to be voiced by emerging markets. In fact, in countries such as China and India, IT spending will continue to rise rapidly as companies increasingly look to IT to spur effectiveness in their operations and compete more aggressively. Emerging market IT investments are forecast to grow at an annual rate of nearly 12%, outpacing the forecasted investment growth in mature markets of about 6%. Demand in newly industrialized markets such as Singapore and South Korea is also expected to rise nearly 9%.

SMBs Become ‘Value-Buyers’ vs. ‘Price-Shoppers’

Analysis of historical trends in purchasing decision drivers reveals that technology investments are increasingly being tied to top-of- mind business objectives/strategies, signaling the rise of a less price-sensitive, and yet more sophisticated, business consumer. The total cost of operations (TCO) of technology procurement already has heavier impact than price itself across SMBs globally. This could mean additional ripple effects in the way technology is valued and applied in the marketplace. For instance, cost savings arguments in favor of hosted services become increasingly weak and ultimately businesses will begin to develop more comprehensive models for assessing the ROI benefits for such technology purchases. It should be noted though that Asia-Pacific SMBs tend to remain somewhat more price conscious than their Western counterparts, though similar trends in developing consumer sophistication can be noted in these regions as well.

Remote Managed Services Become a ‘Must-Have’ Channel Partner Offering

The growing supply-side trend to offer remote services decreases channel partner risk cost while increasing their ability to serve more clients in IT services, where margins are the highest. Over 52% of channel partners in the United States already currently offer managed IT services, up from last year, with an average profit margin of 44% or roughly double that of margins made off product-based reselling. Year-over-year trending signals that these remote managed services will further drive IT service offering adoption among channel partners, pushing expected penetration for such offerings to over 60% of partners—driven by increased interest in remote managed services customers. Dell acquired managed services platform vendor Silverback Technologies to become a significant player in this segment and attract the attention of the large channel partnerships that Silverback had developed. Interest and opportunity in managed online backup services for the SMB market also saw some very high- profile acquisitions—EMC of Berkeley Data Systems and IBM of Arsenal Digital Solutions.

Telcos, Cable Companies and ISPs Look to Leverage Software-as-a- Service (SaaS) to Escape Low Margin ‘Profitless Prosperity’

The SMBs lack the IT resources and expertise of large enterprises but are facing similar global competitive challenges. They cannot deal with 5-6 different vendors/service providers to meet their technology and communications needs – they prefer 1 or 2 vendors that they can hold responsible to all their technology needs – their Virtual CIO.
SaaS enabled business and infrastructure solutions present an opportunity to these companies that have: tremendous brand awareness, existing SMB reach, long-standing customer relationships. These companies are facing steady decline in their traditional services to this segment in a converged IP environment. An easy to deploy, web- delivered infrastructure, business and communications service based on a service-oriented platform will provide significant opportunities to the SP-Cos to differentiate themselves and generate incremental revenue—especially in the 6 million small businesses (1-100 employee) in the US. A key to rolling out this strategy will be quick and efficient implementation based on establishing partnerships with technology vendors and channel partners to bring these solutions to market.

Savvy Vendors Zero in on 137M Global Home-Based Businesses as a New Growth Engine

Though often overlooked, home-based businesses (who already have a quarter the technology purchasing power of all SMBs combined) are becoming an important revenue stream, providing much needed buying lift during weaker business purchasing seasons. And with recession forecasts looming over the US economy, which has many direct effects globally, it is the home-based businesses that look to gain the most in per-firm, and IT spending market share as businesses unload the cost burden of employees who then make great candidates for new home business starts. This coupled with the increasing ease with which a home business can be started and operated, using relatively little startup capital, strengthens the likelihood of a recession-driven home-based business boom. Several vendors have already begun responding to this trend, such as Intuit who started to help new businesses and business owners get up and running, and connect with other business owners. The site features a community especially for home-based business owners. Intuit is also offering QuickBooks Simple Start free to new business owners. Further, IT adoption among HBB will become increasingly important with the pervasiveness of Wi-Fi hotspots, ease of wireless LAN configuration, and cost affordability of Internet connectivity. Also with competitive computing hardware prices, HBBs would adopt IT more readily.

Vendors Blur the Line Between ‘Business Software’ and ‘Business Services’

The distinctions between software solutions and business process outsourcing will increasingly blur as software vendors—particularly in the SaaS realm—and business process outsourcing vendors focus more on delivering integrated applications, business process and managed services to SMB customers. For example, ADP is using recent acquisition of SaaS vendors Employease and Virtual Edge to automate and extend its business services footprint; Intuit’s acquisition of Digital Insights will enable its banking partners to provide a seamless and extended set of financial solutions to customers; Bank of America private labels and resells PayCycle’s on demand payroll services as part of its Integrated Small Business Online Banking Offerings; and numerous banks, publishers and direct marketers, including Amway, integrate their own business services with Smart Online’s OneBiz platform and business solutions to give their customers more comprehensive, turnkey solutions. This trend promises to give SMBs more complete solutions—and the best of both worlds. In contrast to a traditional BPO approach, customers retain solution visibility and control. At the same time, customers benefit from an ongoing, services-centric relationship with vendors.

Vendors Stay in the Black by Marketing ‘Green’, Finding Traction in ‘Server and Desktop Virtualization’ Amid Rising SMB Demand

With businesses globally looking to boost both their public image and profit margins in the face of rising market competition, cost-based expense management will become the pre-eminent business response.
This plays well for the cost reducing implications of several green technologies hitting the market, and highlights a larger market trend for increased energy efficiency in addition to added functionality.
Virtualization’s appeal as a ‘green’ technology lies in its ability to dramatically improve SMBs’ computing resource utilization and performance, reduce infrastructure costs, consolidate physical space, provide an easier and more flexible application deployment mechanism, speed server and application provisioning times, and enhance reliability and uptime by providing organizations with inherent business continuity and disaster recovery functionality. New virtualization solutions from companies like VMware, Microsoft, and Citrix will allow companies of all sizes to take advantage of server and desktop virtualization.

Manufacturer/Vendor Financing Programs Defrost SMB Tech Budgets

As traditional lenders seek to tighten their balance sheets in 2008, an opportunity is rapidly emerging for cash-heavy technology manufacturers and vendors to inject fresh liquidity into IT lending markets by removing lending middlemen and directly offering competitive financing terms on products and services. Such strategies could be applied globally to incubate mature markets, and provide much needed purchasing liquidity to emerging markets as they continue to rapidly expand their IT footprint. Note that Asia-Pacific banks are increasingly being motivated to provide IT financing for SMBs, proving to be a useful means to reach out to the lower tier cities given the banks’ reach. In terms of forecasted demand for such financing from the borrower perspective, this trend is supported with increasing demand for such manufacturer/vendor supplied financing as seen with roughly 16% of SMBs in mature markets, and an even higher percentage in emerging markets, stating that they ‘often’ look for such financing options when making their IT investments.

SaaS will Become a Mainstream SMB Alternative

SaaS isn’t quite a staple for SMBs, but adoption is ramping up. For instance, in 2004, 10% of U.S. small businesses, and 15% of medium businesses used SaaS; in 2007, use jumped to 21% of small and 30% of medium businesses. Pivotal shifts underway will further propel SaaS into the SMB mainstream. First, the growing reality of the "always- on" network helps even small companies that lack servers to take advantage of business solutions. Second, vendors such as ADP and Taleo are combining the benefits of SaaS solutions with business- process services to give SMBs more complete solutions. Third, large, established vendors such as Microsoft, SAP, Google are now in the game, underscoring SaaS viability, and developing ecosystems that will streamline and integrate the SaaS shopping, buying and use experience. As broader adoption of SaaS models become a reality, SaaS vendors will kick partnerships with VARs, retailers, and telcos, as well as financial institutions, direct marketers, business service outsourcers, and other non-traditional IT channels into high gear. In 2008, many of these channel partners will adopt platforms and partner with vendors that enable them to dispense a portfolio of services that SMBs can mix, match and integrate. Although SaaS adoption will accelerate much more rapidly in mature technology markets with pervasive high-speed connectivity, telcos that can assure quality of service and persistent connectivity will provide an on-ramp in emerging markets.

It seems that small businesses are teeing up creative strategies for the long term that can help them . . . well . . . survive the short term.

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posted by William Dorn @ 1:49 PM   0 comments
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