Reflections: Michael Warrilow, Hydrasight

Michael Warrilow, director of analyst company Hydrasight, predicts relatively flat enterprise IT budgets for 2007 Q. What's your outlook for the tech sector in Asia-Pacific in 2007?

Michael Warrilow
Michael Warrilow, director of analyst company Hydrasight, predicts relatively flat enterprise IT budgets for 2007

Q. What's your outlook for the tech sector in Asia-Pacific in 2007?
We'll consider this from two perspectives: first, the vendor (seller), and second, the end user (buyer).

For the vendors, it is becoming increasingly difficult to penetrate enterprise customers due to market saturation. This will be a major challenge for enterprise vendors in the tech sector in 2007 in Asia-Pacific. Hydrasight also expects continuing consolidation among software vendors.

It's also becoming harder for vendors to compete just on product functionality. In fact, we believe that functionality now has limited importance as a differentiator (for tech vendors selling to enterprise customers). We believe that it is solution delivery, including services and business outcomes, that will determine winners and losers in the tech sector in 2007 and beyond.

The tech market for midsize organizations remains confused, with too little differentiation and vendors that 'flip flop' on their targets. This results in a lack of long-term commitment, with many SME vendors chasing 'trends', hence making this market unstable. Even still, there will be growth in SME because there are always new small and midsize companies starting up, particularly in countries such as China and India but also Indonesia, Thailand and Vietnam.

The tech market for midsize organizations remains confused, with too little differentiation and vendors that 'flip flop' on their targets.

From the end-user perspective, we expect to see growth in areas such as server virtualization, plus workgroup-driven analytics and business process management. Overall, we expect relatively flat enterprise IT budgets to continue in 2007.

However, this will mask several spending patterns, including doing 'more with same' (as opposed to doing 'more with less'), and continued spending by business units outside of the control of the IT organization.

What are the top 3 market drivers?
The first is a combination of optimism and amnesia in regard to the ability for new technology to achieve improved business outcomes. This will be strengthened by refresh cycles as we continue to climb out of the post-Y2K 'trough' in regard to major IT capital investment.

The second is the desire for improved business processes, via the assumption that investment in BPM (business process management) will improve business process automation and business outcomes

Of interest, although not a top 3 driver, we also expect to see social and environmental issues coming into the agenda in 2007. This will be driven by rising consumer interest and demand.

Name three hot tech markets/technologies that would be worth investing in and why?
Investments can be looked at from at least two perspectives: financial investments and IT purchasing investments.

In terms of financial investments, it's been suggested that the top three to four global software companies realize most (75%+) of the profits. This, therefore, makes them a sound investment. To balance that--with a little risk--it would be prudent to punt on a few startups with a good chance of being the 'next big thing'. Of these, social computing seems to be the most 'trendy' at present. Overall though, investments seem to continue to lack the lustre of pre-2001. Worse, we expect to see 'fast rises and faster demises' among new IT startups in future.

As for IT purchasing decisions in the enterprise, we see vertical-specific focus, particularly in areas like the Payment Card Industry (PCI) data security standard, plus an increasing gulf between the organizations that are willing to make investments in IT to improve innovation and performance, and those just wanting to do 'more with same'. The latter will continue to be subject to budget pressures and (often failed) outsourcing arrangements.

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