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The Wright Stuff

“2003” says Ovum’s Richard Holway, “is not the year of revenue growth. It is the year of competitiveness and market share.”

We’ve had several years now of the larger IT vendors directing business towards the benefits of a new El Dorado, ‘Return on Investment’ (ROI) and many, if not most customers are still hacking their way through the jungle trying to discover if such a thing really exists or whether its simply wishful thinking on the part of the Financial Director.

Before Xmas, I was told that software companies had a very narrow view of ROI which failed to embrace the ‘Big Picture’ view of what constitutes a good return and what doesn’t. 2002, introduced the first evidence of a new conservatism on the part of customers, who had realized that spending as much of 40% of a company’s revenue on IT wasn’t demonstrating a proportional leap in profitability or an improvement in processes.

Of course, there were exceptions but 2002 was a hard year for many businesses and an even harder year for the IT sector and 2003, as Holway suggests, looks set to follow a new direction, one more likely to contrast the hard-nosed pragmatism of our Victorian ancestors to the rather more ambiguous promises made on behalf of IT.

With that small matter of a court case behind it, Microsoft is now free to use its considerable savings rather more freely than it has in the past. Navision and Great Plains Software were two recent investments which didn’t tread on too many toes in the Enterprise space but remember that the company is sitting on more cash than many of the world’s smaller economies and is now in a much better position to decide where it should be expanding next. There’s little doubt that there will be a war of attrition with Sony Ericsson in the gaming and telecoms sector but with IBM now a truly global services business, through its acquisition of PWC, I rather wonder whether Microsoft will seek to break-out of the pure software business into technology areas that we wouldn’t normally associate with the company. A hundred years ago, this might have been something along the lines of :

“Those Wright brothers are completely crazy but offer those guys a hundred dollars and a contract just in case they get off the ground”.

2003 will be the year of Linux, well almost. I still have my own doubts about the success of Open Source computing in its purest form because it appears to contradict the interests of its larger supporters, the IBMs of this world. What we are seeing is the industry gradually splitting into two camps. On the one side, Microsoft and the proprietary view of software development and on the other, the big global services players like IBM and EDS, who may be happy to give away the software but will charge you for the service and support that goes with it. This is, I know a terribly simplistic view of what’s happening but I wonder if the Robin Hood morality behind Open Source computing can survive the economic pressure of being championed by Sun and IBM as an alternative to Microsoft.

Linux will however continue to pick-up market share as will the new Applications Server market and quite possibly and here’s a wild prediction, if this continues to do so, then I wouldn’t be surprised to see Microsoft seriously considering porting some of their most strategic products, such as Exchange, to the Linux platform, a strategic master-stroke worthy of Napoleon but probably not this year.

My final prediction is that the recession in the IT industry will continue to bite, regardless of any good news surveys I read in December. I was speaking to journalists at one of the largest PR parties of the year in Fleet Street and there was a prevailing atmosphere of gloom. Perhaps a war in the middle-east will jump start the economy and the stock market but if we remember back to the last occasion, quite the opposite happened.

2003 will, I believe be more of year of clever improvisation than grand innovation, making the best of the IT tools that companies have today in order to make them leaner and more competitive once this bear market bounces back into a growth cycle. This New Year will be as tough as last year but budgets and belts will be more than a notch tighter.


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