IT industry analysis—2009 Week 33—on one page

Catch up on the past week’s analysis

ECONOMY

• Ecommerce spending has fallen for only the second time in recorded history. Sales fell 1% in 2Q09 to $20bn. “The reality of nearly 10% unemployment and rising gas prices, coupled with an increased savings rate, continues to hold down consumers’ discretionary spending,” said the US-based internet metrics firm. [1]

SERVICES

• The 50 biggest IT outsourcing companies grew their combined share to 56% of the market in Europe last year, according to IDC. IDC says the industry consolidation will continue, with the merger of Oracle and Sun, and the joining of Fujitsu Services and Fujitsu Siemens under a single brand. The three fastest-growing companies last year were Gruppo Engineering, Steria and Wipro. TCS was the first offshore provider to break into the top 20. [2] [3]

663 subscribers BACK ISSUES:
33	Offshore & Soft
32	Slowdown+Cloud
31	2Q Results
30	PCs + Services
29	CapEx→OpEx
28	Net & Services
27	Realigning
26	Decline
25	Consolidation
24	Transactions
23	Cost-cutting
compiled by:	Gavin Wilson

• According to PAC, this year the UK will see a 4% drop in software spending and a 6% decrease in project services. The sectors that will cut software and services investment the most severely are retail, services and manufacturing. [4]
• CSC declared a 22% revenue decline (to $0.8bn) in its commercial outsourcing division and an 18% fall (to $1.6bn) for its managed services arm in its latest quarterly results. Commentators say that CSC faces a number of major challenges:
  • It is late in its verticalization strategy.
  • Its sales organization is not used to selling commercial outsourcing offerings.
  • The company has limited experience in emerging markets or outside the U.K. and Denmark in dealing with mid-sized organizations.
  • It lags its main competitors in global delivery capabilities. [5]
• HP has told EDS workers worried about 30% salary cuts and lay-offs not to talk to the media. A senior VP said that “if we have to get the feeling that everything that we do will show up in the newspapers tomorrow, you’ll get whitewashed statements.” But EDS employees said they feel information is already being whitewashed for themselves, as well as customers and potential clients. They said the warning against speaking to the news media is intended to keep issues of morale and the potential impact on customers quiet. EDS employees say morale is low, anxiety is high and productivity is down as many workers spend part of their days on the task of searching for new employment. Workers said they fear every day that they will receive a tap on the shoulder—or an e-mail—informing them their services are no longer required. [6]

OFFSHORE

• Shareholders and directors have been hit harder than employees by the economic downturn, according to a study of 750 Indian companies. Directors took an average 4% cut in total remuneration in the year ended March, whereas the employee wage bill rose 20%, and net sales increased by 19%. The problem for directors was that profits remained flat, which affected their bonuses. But with results for the quarter ending June showing signs of improvement, directors could expect another year of multi-crore bonuses. [7]
• The larger Indian firms sense an impending increase in demand. TCS, Wipro and Infosys are changing their product offerings and focusing on allegedly ‘recession-proof’ sectors such as pharmaceuticals, healthcare, education, telecom and utilities to tide over the dip in volumes.
  • Wipro expects a few outsourcing deals worth more than $100m in the third quarter, in areas such as services, consulting, remote management and BPO.
  • Infosys is pursuing 12 to 15 deals worth a total of $1bn.
  • TCS is tweaking its product offerings for SMEs. [8]
• When BT announced it was bringing back its back-office operations from India to the UK, its customers probably didn’t realise that BT would continue the contract with its Indian supplier. But that is what will happen. Tech Mahindra is simply moving its processes and some of its people from India to the UK. [9]
• Infosys is considered the most admired Indian company, according to Wall Street Journal survey. TCS came second. The survey took into account factors such as financial management, vision, corporate reputation, quality and innovation. [10]

SOFTWARE

• Google has announced the availability of a tool to migrate Lotus Notes email, calendar and contact information to Google Apps. A rapid move of the enterprise Notes installed base to Google Apps is not expected—there are too many business-critical and business-specific applications within many enterprises and government departments. [11]
• A judge in Texas has issued an injunction preventing Microsoft from selling its Word software in the USA after ruling the company’s software violated a patent owned by i4i, and obliging it to pay fines of almost $300m. Not surprisingly, Microsoft has filed an emergency motion to block the order. [12] [13]
• In an interview with the New York Times, SAP CEO Leo Apotheker disagrees that customers want to deal with fewer suppliers: “I have never, ever heard a customer expressing the faintest wish for having everything delivered out of one hand.” But the NYT is unsure that SAP has a firm grip on what customers really want, either. The company has fallen well behind rivals in building a cloud computing service. Although SAP remains well ahead of Oracle in the $88bn business applications market (with a 10% share in 2007 compared to Oracle’s 7%), Oracle may put SAP at a disadvantage if it can quickly put together a complete solution which uses Sun’s hardware. [14]

FUTURES

• Gartner forecasts a number of potentially transformational technologies that will hit the mainstream in less than five years, including: Web 2.0, cloud computing, internet TV, virtual worlds and SOA. Beyond the five-year horizon: Gartner predicts that RFID, 3-D printing, context-delivery architectures, mobile robots, and human augmentation could also be transformational. [15]

ODDS AND ENDS

• Twitter is being used to send out commands to malicious botnets. A security researcher discovered a botnet which used a Twitter account to send out status updates containing what appears to be a single line of indecipherable text. Once decoded, the text actually points to links where the infected botnet machines can download more malicious code. The account has now been shut down by Twitter. In many ways Twitter is the perfect platform from which to control botnets, as it is able to withstand requests from hundreds of thousands of PCs. Because no legitimate users followed this account, no-one was likely to complain. The only PCs looking for these instructions were the infected PCs. [16]

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