The Tech Market Gives Small Thanks — "It Coulda Been Worse"

Andrew Bartels

The day before Thanksgiving is a good point to pause and give thanks for the recent news in the tech market, before we give thanks for our personal blessings with our families and friends tomorrow.  So, amidst the glum news about the ongoing European debt crisis that is grinding growth to a standstill, the failure of the congressional supercommittee to make any progress on US budget deficits or stimulus, and the crashing stock markets, here are some things that tech vendors can be thankful for.

  1. US economy is still growing.  The revised real GDP growth rate for Q3 2011 was 2%, down from the preliminary report of 2.5% (Gross Domestic Product, 3rd Quarter 2011 [second estimate]).  That's not much growth, but at least it is growth.  And the report on "Personal Income and Outlays: October 2011" released this morning showed a 0.4% increase in October from September (5% at an annualized rate), with consumer spending up by 0.1% (1% annualized).  So, the fourth quarter began with some good momentum for consumer spending. 
  2. The US tech market is still growing — better than the government data indicates.  The Bureau of Economic Analysis data on business investment in information technology was revised downward from the preliminary release, with total IT investment growing by just 3.3%.  However, computer equipment grew by 10.6% and software by 6%, with software doing even better if we make adjustments to exclude the "own account" software that is created by firms for their own use.  The bad news was that communications equipment investment declined by 13.2%. 
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T-Systems’ Analyst Summit 2011: Getting Past A Lost Year

Dan Bieler

T-Systems’ Analyst Summit 2011 in Frankfurt was dominated by updates on the progress the company made regarding its restructuring projects. As a result of these efforts, T-Systems has created the basis to become a more efficient and agile ICT services provider going forward. Still, in our view, the period between mid-2010 to mid-2011 was a lost year for T-Systems — despite the obvious progress T-Systems made in addressing its past challenges.

In some respects, T-Systems had become a victim of its own success in 2009 and 2010. T-Systems was clearly overwhelmed by its multibillion deals (with clients including Linde, BP, Shell, E.ON, MAN, Continental, etc). Delivery capacities were stretched to the limit, manifesting in serious transition and transformation challenges. T-Systems was forced to allocate more capacities to big deals, thus depressing margins to just over 2% in Q3 2011 (see chart below). T-Systems still aims to reach the peer-group average EBIT margin.

Source: company reports

About a year ago, T-Systems began to restructure its entire operations in a mammoth project, effectively redrawing the entire organisational structure and reshuffling the top management team, except for the CEO and CFO. The Analyst Summit provided some insights that these efforts are beginning to bear fruit:

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Update On Cisco's Collaboration Strategy

Philipp Karcher

Special thanks to Art Schoeller, TJ Keitt, Henry Dewing, and Ted Schadler for their input

I went to Cisco's Collaboration Summit last week to hear the latest from the various product teams and some of their marquee customers. Much of the story remains the same: Cisco continues to dominate in video and web conferencing; it is taking strong steps in the right direction but still has a lot of work ahead to deliver a cohesive collaboration platform with the likes of Microsoft, IBM, and Google:

  • Video continues to be a key differentiator. Cisco is expanding its foothold in video at different ends of the market. Highlights from the conference include Telepresence Conductor, a component that optimizes the video traffic in large enterprises with multiple MCUs; and Callway, a hosted service for SMBs that don't want to invest in dedicated infrastructure. The most interesting development to me is the redesigned Jabber client, Cisco's push to compete with Lync. SVP for Telepresence OJ Winge described it to me as a combination of the best technologies from Cisco's applications for IM (Jabber), video (Movi), and voice. The recently released Jabber SDK also allows developers to enable Jabber IM, presence, voice, web conferencing -- and in the future, video -- in web applications like Gmail or SAP.
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Fujitsu Forum 2011 In Munich: A Global Reset

Dan Bieler

During its Fujitsu Forum, which was attended by over 10,000 customers and partners, Fujitsu presented itself as a company in transformation from a fairly disjointed business to a more streamlined international business. Fujitsu’s new strategy has three main components:

  • Focus on organic growth: Fujitsu is investing more in its sales and services structure as well as its internal IT systems. It aims to get better in what it has already been doing, such as exploiting its large software and hardware portfolio, including smartphones, thin clients, handsets, tablets, mainframes, laptops, and super computers. In terms of services, Fujitsu is pushing its multivendor maintenance capabilities and its IT outsourcing experience. Fujitsu considers its product knowledge and near- and offshore mix a key, unique selling point vis-à-vis its competitors. Given Fujitsu's weak marketing and sales structures of the past, we would believe that it is high-time to improve its go-to-market approach.
  • Target emerging markets: The main focus is on Russia, India, and the Middle East. Fujitsu is ramping up local operations and also adapting its go-to-market approaches. For instance, in India it is using its promotion campaign via auto rickshaw on “see-try-buy” basis. Fujitsu’s goal is to double emerging markets sales by 2015 from €800 in 2010. Given its Asian roots, it is astonishing how long it took Fujitsu to realise the opportunities at its doorstep.
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Do Asian organisations still need IT departments?

Tim Sheedy

The shift towards the empowered consumer and employee is no more obvious than in Asia - particularly in Singapore, where a recent Google study showed that smartphone penetration is a whopping 62% (compared to 31% in the US). In fact, of the 11 countries in Asia surveyed, four of them (Singapore, Australia - 37%, Hong Kong - 35%, Urban China - 35%) had higher smartphone penetration rates than the US (and amongst 18-29 year olds, 84% of Singaporeans had smartphones, compared to 47% in the US!). With many of the more populous countries having young populations (average age: Philippines - 22.9, China - 35.5, India - 26.2, Indonesia - 28.2 - see World Factbook), the gen Y factor is driving employees to question whether the current way of working makes the most sense.

With so many young, mobile and connected employees, it is no surprise that CIOs across the region regularly complain about the company staff self-deploying devices, applications and services from the web or from app stores. The attitude of many IT shops is to shut it down - interestingly, the whole concept of "empowered employees" is quite "taboo" in some countries across the Asia Pacific region. A CIO recently told me that "smartphones and social media have come five years too soon" - referring to the fact he is planning to retire in five years, and that these technology-centric services are proving to be quite a headache for his IT department!

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Smarter Cities Rio: From Blueprint To Proof Point For Cities Large And Small

Jennifer Belissent, Ph.D.

This past week I attended IBM’s Smarter City Summit in Rio de Janeiro, the fourth in a series of global events highlighting the opportunities for cities to improve their systems — and themselves as a “system of systems.” This event felt different from the previous summit I had attended in Shanghai. Obvious political and cultural differences aside (not to dismiss them, as they were significant), the big difference I observed here was that the sessions were more real. And I don’t mean that as a slight on the Shanghai event. Rather, in Shanghai, the focus was on moving from vision to execution– creating the blueprints for smart cities. In Rio, we had moved from blueprints to proof points. (Yes, you can quote that . . . it is mine.) Mayors from cities across Latin America and some from even farther came to share their experiences.

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New HR Analytics Research Focuses On Improving The Talent Management Processes

Claire Schooley

Boris Evelson and I have published research entitled “Use HR Analytics To Optimize Talent Processes.”

The premise: HR analytics have taken on new importance as companies work to find, develop, and retain top talent. Using analytics requires asking the right questions that address key organizational pain points and determining the metrics and best practices that will move the company toward greater productivity. We anticipate that this report will help guide HR professionals as they focus on analytics to support recruiting, performance, and learning.

HR faces a challenge of proving its value in helping to set business priorities. Data from technology solutions now give HR the opportunity to become a valued business partner in determining the appropriate metrics to help the executive suite and people in other lines of business make important talent management decisions. The tactical role of advertising for and finding employees, negotiating the hires, and bringing employees on board is no longer enough; HR must become a strategic business partner.

We recommend that you start with solid foundational components including data sources, data extraction and integration processes, master data management (MDM), and an HR data mart as the official HR data repository. Once that’s in place, you need to build queries, reports, and dashboards. Medium-size organizations may use a packaged solution, but large global enterprises with many business units will have to assemble these components.

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Win-Win Tech Curriculum Collaboration: Vendors Contribute To Solve Skilled Labor Shortages

Jennifer Belissent, Ph.D.

A few months ago I wrote about my first trip to Rio. One of the observations that had jumped out at me at the time was the repeated message from IT services firms: Lack of skilled labor was their biggest challenge. Forrester's Forrsights survey findings confirm: Education and skilled labor is the No. 1 constraint to technology implementation globally, particularly in emerging markets. In Brazil, 58% of respondents in our Forrsights Budgets and Priorities Tracker, Q4 2010 survey reported concern about insufficient skilled technical labor or relevant technical training as an obstacle to implementing IT solutions. That compares with only 16% reporting skills as an obstacle in the UK.

That message has been repeated to me several times since during trips to emerging markets. On my visit to Orange Business Services' (OBS's) Major Service Center (MSC) in Mauritius last month, the OBS team emphasized that they had selected Mauritius as a strategic location in part because of the availability of skilled labor. Mauritius, with an emphasis on information and communications technology (ICT) as the third pillar of its economy, has a goal of doubling its ICT labor force in three years. The government recently announced an ICT Academy with industry partnership to train 1.3 million young people and promote the software and business process outsourcing (BPO) industries in the country. ICT vendors and services providers such as OBS are participating in that initiative.

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Huawei Analyst Summit 2011: Extending The Competition To Mobile Devices And Enterprise Solutions

Dan Bieler

During its European Analyst Summit in London, Huawei provided details regarding two crucial elements of its expanding market positioning: It outlined its intention to launch mobile devices and enterprise solutions. Although Huawei has been engaged in these activities in China for some time, it is a new and exciting step for its European strategy. Competitors should not underestimate Huawei’s ability to take business away from them in these areas.

Huawei’s mobile device range for Europe is small, but very effective. The company targets the low-end smartphone segment with a €100 device (Blaze), the mid-market (Vision), and high-end (Honour), in addition to a tablet (Media Pad). The marketing strategy is to position these devices as affordable, easy-to-use, and reliable (i.e., the “Volkswagen of the mobile devices”). All devices are touch, have fast processors, crisp screens, and retail at about €100 below competitors’ offerings. Timing is good for Huawei, given the relative weakness of the competitive landscape, especially RIM and Sony Ericsson. Initial customer feedback on sites such as Amazon.com reflects positive customer experiences.

The fact that Huawei has no consumer brand in many European countries should not be a great obstacle. Rather, Huawei could use this factor in order to involve its emerging customer base to build a brand using social networking and viral marketing. Traditional big-board advertising campaigns would be pointless: Nokia will dominate the traditional channels with its Lumia campaign in the coming months. The main channels for Huawei will be MVNOs like Fonic, consumer electronics outlets like Phone4U, as well as selected larger operators.

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Beyond Study Abroad: There’s Vendor Opportunity In Education’s Global Expansion

Jennifer Belissent, Ph.D.

[Co-authored with Rachel Brown]

Recently, two top-tier American universities announced plans to launch new global satellite campuses. Yale University will partner with the National University of Singapore to set up a joint campus in Singapore, and MIT, which already has a global campus in Abu Dhabi, is partnering with the Skolkovo Foundation to develop a graduate research university in Skolkovo, Russia. Yale University and MIT are not the only universities to expand globally. In fact, having a global satellite campus (or even multiple global satellite campuses) is a growing trend among universities trying to remain competitive in an increasingly global world (see the “flight map” figure below).

The expansion of universities poses a huge opportunity for technology vendors who are already accustomed to “going global.” Technology vendors can offer universities a way to bridge the geography gap through technologies such as intercampus networks, videoconferencing, and content-sharing platforms that allow students and faculty at global campuses to stay connected with the home campus. However, vendors need to be aware of the many challenges that are inherent in education ICT. To learn more about the global campus phenomenon and how vendors can seize this opportunity, check out my latest report, "Opportunities In Education’s Global Expansion: Tap Global Enterprise Experience and Local Expertise."

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