I followed the Ericsson Capital Markets Day last week on the live webcast, and it was fascinating too, particularly their vision for the communications sector. They believe we are about to see a third and distinct phase in the development of the sector. First came fixed communications, which over the past 100 years has enabled 750 million buildings to connect. Second, (and still underway) is the mobile era that will enable 5 billion people to communicate. But over the next decade and a half will come a third stage where up to 50 billion things (cars, appliances, office machines, cargoes, etc.) will connect to the network using machine-to-machine (M2M) technologies.
In the UK we are now in the final days of the election campaign to choose the next government. This election has been unique. For the first time ever in the UK, there have been live TV debates between the leaders of the three major political parties. In all three 90-minute TV debates, the elephant in the room has been what to do about the huge public sector debt taken onboard in 2009 to rescue the banking system from collapse. Four and a half hours later and all three main parties avoided spelling out to the UK electorate the true scale of the challenge the election victor will inherit on Friday this week.
But the elephant in the room is not simply a political issue in the UK alone, it has a real economic impact as the citizens of Greece are discovering at the moment. In most European countries, the public sector accounts for around 40% of activity in an economy, and the amounts borrowed by governments during the financial crisis are around 10% of GDP. With such large public sectors, it is difficult for governments to borrow against the taxation revenues. In the case of Greece the cost of borrowing soared forcing the government to secure loans from the IMF and EU. With a weak economic recovery across Europe, and with similar market concerns regarding government debt in Portugal, Spain, Italy, and Ireland, it looks like more uncertainty for Europe in the coming months.
Last week Japan's government was reported to be revisiting plans to carve out the NTT access network and place it into a separate business - a process called structural separation. The access network covers the connection from a home or business to a service provider's street cabinet. Next month the government of Australia is expected to put forward legislation to impose structural separation on the incumbent Telstra. Structural separation was first implemented in the UK in 2006 when BT created Openreach, a move that was subsequently replicated in New Zealand.
Structural separation is an area we have covered in our research. Two years ago, we published a report called Access Structural Separation And Regulation Gain Traction where we offered advice to incumbent strategists. The advice was twofold: 1) Telco strategists need to understand the latest developments and formulate an appropriate response; and 2) they must adopt a new mindset and treat this conversation as an opportunity to negotiate a positive outcome - not a confrontation.
To most incumbents, the idea of structural separation is, of course, a complete anathema. But, as the examples of Japan and Australia show, it remains on the agenda of regulators and governments. So structural separation is, for incumbents, a bit like a ticking time bomb. Whether incumbents accept it as a concept or not they cannot ignore it, so they must have a strategy worked out in advance to deal with it. In short, the advice we gave in our report of the topic two years ago is as relevant today as it was when it was written.
But what do you think? I'd be happy to discuss further.
Late last week, Symantec made two acquisitions in the encryption space, scooping up both PGP and GuardianEdge. My colleague, Andrew Jaquith, is publishing an in-depth report analyzing the acquisition, so there’s no need to go into too much detail here. We’re in total agreement that encryption has been a significant hole in Symantec’s security portfolio, given that data security is the #1 focus for IT security shops. You can also see some of my initial comments to the press on the acquisition here.
These two acquisitions got me thinking about Symantec’s acquisition strategy in general. What we’ve seen from Symantec over the years is a clear proclivity to paying more in order to acquire market-leading vendors. This doesn't mean Symantec overpays. Simply that Symantec seems to weigh established customer base and market share more than other security specialists. Certainly, McAfee has its share of big acquisitions (it paid about as much for SafeBoot as Symantec paid for PGP and GuardianEdge combined, and the Secure Computing acquisition was no small purchase either), but as a more general rule Symantec goes after the big game on the plains more than other security specialists. In security, Symantec is clearly moving to more head-to-head competition against the mega-vendors with deep pockets: IBM, Cisco, Microsoft, EMC, etc. I believe that this approach to acquisitions is a key factor that helps Symantec over the long term against this competition.
A combination of factors is combining to reshape and recast the IT services sector. These factors include the continued weak economic environment, the further development of a global delivery model (GDM), new uses of technology across clients’ go-to-market and supply chain ecosystems, the adoption of cloud and SaaS utility-based pricing and delivery models as well as the adoption of a selective sourcing model by buyers. Forrester asserts that these changes will have a dramatic impact on the make-up and dynamics of the IT services business just as the shift to PCs dramatically changed the minicomputer/hardware market in the late 1980s and early 1990s.
Over the past several weeks my colleague John McCarthy and I have conducted extensive research around the future of the IT services market which forms the basis of our forthcoming major research report to be published in June 2010. We talked to approximately 20 of the leading vendor strategists from both leading service provider organizations as well as other key market players like ISVs, SaaS providers and communication services firms. We now offer interested vendor strategists the unique opportunity to hear from us what the major outcome of the research was and what key implications and recommendations they draw for vendor strategists. For this we have designed a workshop format that will deal with the following key questions:
Will the emergence of cloud and SaaS impact the traditional IT services market?
When and how will that impact play out?
How will the economic slowdown and declining IT budgets impact users’ services spending?
What are the key attributes for success in the new services market?
If you are interested in such a workshop (either in person or via web conference) please let us know and we will be happy to schedule according to your needs.