Israel IT Market 2007-2009

Slide 2: Agenda 1. Methodology 3. Trends 5. Architectures 7. Vendor-User relations 9. New views 11. Israeli Market 13. Vendor Tiers © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 2

Slide 3: METHODOLOGY • Surveys: • 98 IT departments • 40 providers of IT products and services • Interviews: • 60 CIOs personally • over 150 second level by STKI analysts • Over 20 round tables (users-only meetings at STKI) done during the last 6 months © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 3

Slide 4: HISTORY  In 1986 I did the first ISRAELI IT MARKET study for Digital Equipment.  Since then I have made a complete study every year.  That makes this one my © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 4

Slide 7: Cheap Technology: The Ultimate Driver... Jimmy ’s Law: Memory, bandwidth and computing power continue to decrease in cost.. exponentially 1,000,000 100,000 10,000 Bandwidth Cost of sending 1 trillion bits Logarithmic 1,000 Storage Cost of 1 megabyte storage Scale 100 (3) 10 US $ - Computing Cost of 1 MHz processor speed 1 75 85 95 07 0.1 10 Source : Federal Reserve Bank of Dallas, © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 7

Slide 8: ...and the effect on networks When the network is as fast as the computer’s internal links, the machine disintegrates across the net into a set of special purpose appliances © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 8

Slide 11: Israeli Technology Adoption Trends for disruptive technologies RFID A Sa ED aS ge n o ra atio Wi St lid r so E- eles on A 64 bit C SO ma s il Server UX Technology LIN Server wir IP-TEL ele ss EAI Consolidation Adoption VoIP PORTAL Thin Office Trends ITIL BC/DRP XML Clients CIO g DW-BI agin Mess CRM Unif ied ERP Business ms D Solutions ste Mi ata Sy n i on atio ni ng BP (applications) at id M plic nsol Adoption Ap Co Trends Real Time Data Analytics Management © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 11

Slide 12: The most important trends for 2007 (a) BUSINESS – IT TRENDS  CIOs become strategic  Innovation life cycle enabled by IT  Engaging web sites (Web 2.0)  Customer service (internal and external)  Data finally goes to work  Real Time Decision Systems (active BI)  IT risk management  Risk to clients from IT  Risk to company from IT  Companies invest in IT leadership  Security…. (no HACKERS; now organized CRIME) 12 © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info

Slide 13: The most important trends for 2007 (b) INTERNAL IT TRENDS  Dissatisfaction with vendors is on the rise  MEGA-vendors get “good” fight from other vendors  Project responsibilities are a fantasy  ERP loses luster and core business needs become number one  More and more budgets are allocated to smaller but strategic projects  Architectures:  Service oriented, event driven and legacy architectures  Business, applications, data and infrastructure architectures  Outsourcing changes IT management  Hard to find business savvy technologists  Security ….. Security…. Security 13 © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info

Slide 14: defined by the Information Architecture Institute 1. The structural design of shared information environments. 2. The art and science of designing software and hardware systems in INFORMATION order to support business needs. 3. An emerging community of practice SYSTEM focused on bringing principles of ARCHITECTURE design and architecture to the digital landscape. 4. Information systems are dynamic and should adapt to specific users’ actions. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 14

Slide 16: What is a Business Architecture Model? “A business architecture model is what a business does and how it makes money.” Source: Bernard Boar in T art o f strate g ic p lanning fo r info rmatio n te chno lo g y he © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 16

Slide 21: VENDOR-USER RELATIONS Worst year in vendor-user relations The current process for buying products and projects is the MAIN problem  Users expect more than what they are willing to pay  Vendors expect the user to understand that the price paid at the signing of the agreement does not reflect the real cost.  Fierce competition between vendors makes them take any project (they then subcontract it to another vendor, sometimes at a loss). © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 21

Slide 22: STKI IT project contract expectation metrics USER VENDOR relationships should be based on an APPROVED rule of engagement (expectation metrics). 3.Who takes responsibility 4.Who takes the risk 5.What premium should be paid 6.What profit should the vendor expect USERS that buy “cheap” are usually those that: 2.Do not understand project management 3.Expect not to be responsible for IT in the long run 4.Never worked as an IT professional © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 22

Slide 28: But remember: “ if you keep doing what you have always done, you will get what you have always got” “ if you act on what you already know, you will do what you have always done and get what you have always got” © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 28

Slide 29: The future is a innovation problem How do we find the future we prefer? Innovation is the ability to move from the existing to the preferred © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 29

Slide 30: Innovation versus Creativity Vision Desired Future Innovation is the engine that drives transformation.. Present Default Future © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 30

Slide 31: CIOs do matter: IT of Competitor Value Business 1 ERP captured by verticals Process 1 Market Best Business No Real difference in value Innovation Competitive Differentiation Sales Prospect IT of Competitor Practices Value war Business ERP captured by verticals Process 2 2 © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 31

Slide 33: Enterprise 2.0 ? Only if we could…………………… Enterprise 2.0: Partnering Business Enterprise 1.0: with Technology Aligning (Innovation Technology with Business Cycle) Strategy (Alignment Cycle) © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 33

Slide 38: Enterprise 2.0 @2007: IT extracts the data and Creation of shared business analyzes it. applications  Knowledge worker platform  Business Processes  Instant information retrieving – Management – Improvement  Real Time Analytics  Business services  Composite Applications Creation of DATA ARCHITECTURE Source: Dion Hinchcliffe © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 38

Slide 39: 1. Knowledge worker platform Information Collaboration, Access & Discussion & Content, Productivity, Search Interaction Knowledge & Sharing & History Configurability Enterprise Internal External Spreadsheets Notes Taskl.ico Apps Microsoft Word Web Reports Microsoft Office Postl.ico Document Tasks & Reports Excel Worksheet Email Portals / Mtgs Dashboards 39 © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info Source: attunity

Slide 40: 2. Instant Retriever Platform Web admin Application interface Server glossaries Glossary local builder Custom glossaries extract Corporate Data Base Source: babylon © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 40

Slide 41: 3. WEB 2.0 Harnessing Collective Intelligence: architectures of participation or CROWDSOURCING Data is the Next "Intel Inside": information has become as important, or more important, than software Innovation in Assembly: unintended uses of systems and information. Rich User Experiences: enable interaction and immersion in innovative new ways. Perpetual Beta: continuous change Leveraging the Long Tail: mass servicing of micro markets cost effectively Source: Dion Hinchcliffe © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 41

Slide 43: 5.- “Business Services” “Transfer Funds” “Execute trade” “Get Portfolio Balance” “Etc., etc.” Business Business Business Business Logic Logic Logic Logic LEGACY ERP CRM FINANCE © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 43

Slide 44: 6.- Composite Applications Process Get Order Churn Optimize Rate Plan figure nd-con Drop-a Get Get Value Customer Composite Applications © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 44

Slide 48: Growth (world) in budgets for 2007  AMR Research forecasts U.S. companies will increase their budgets by 11.3% in 2007.  Forrester forecasts U.S. companies will increase their spending by 9% in 2007.  Computer Economics forecasts European companies will increase their spending by 5% in 2007.  Datamonitor forecasts US and European companies will increase their budgets by 8% in 2007.  Society for Information Management forecasts US companies will increase their IT budgets by 10% in 2007. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 48

Slide 54: Why you cannot look at financial reports  For many reasons, different companies use different accounting principles. Very hard to find consistency (between companies):  when and what do they recognize as expenses and revenues on sales of multi-year software license’s contracts, hardware, outsourcing services, multi-year projects and other services.  How do they recognize projects that they subcontract to their competitors (double booking), etc. WE LOOK AT WHAT WAS SOLD IN ISRAEL DURING THE YEAR AND SERVICES GIVEN DURING THAT PERIOD © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 54

Slide 58: During the last couple of years a new IT vendor has grown in the market. These vendors service clients in all types of services and products. They came to be after a series of M&As during the last six years. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 58

Slide 59: This are big vendors with a variety of services and products. Usually this vendors tend to specialize in a couple of areas or markets © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 59

Slide 61: This vendors offer basic services or products in their areas : B. moving boxes C. telecomm services D. contracted work without central technical support. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 61

Slide 63: Unix and Proprietary Servers UNIX Servers  Factors affecting low UNIX sales  64 bit X86  Linux and Microsoft  This was the year of the Mainframe PROPRIETARY  All other proprietary systems are in MIGRATION roadmaps © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 63

Slide 64: Servers - Industry Standard  Consolidation and virtualization will drive this market  64 bit X86 will become the standard architecture with either or both Windows and Linux installed © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 64

Slide 65: PC Clients DESKTOP  Some users have been buying used PCs  VISTA and Thin Client Architecture will drive this market ( its speed…. slow now)  Notebooks will have a slowdown in businesses during LAPTOPS the next 24 months (VISTA effect)  Companies like laptops because they extend the workday © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 65

Slide 66: Storage (disks, tapes and software)  Storage is growing by over 30% a year (capacity)  Buying more and more of cheaper storage  All storage is becoming cheaper : 30-40% a year © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 66

Slide 68: Printers and extras for equipment  We will see new vendors offering printing solutions and printing as a service in the next 12 months  This will change the buying habits of most of the users needing printing services  STKI has not “tiered” companies in this area for 2007 © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 68

Slide 73: Consulting There is a big confusion in the consulting market: 2.Consultants are not body shops/ temps 3.Consultant’s employees do not implement or compete with integrators. 4.Because of the need for transparency : all consultants should show their clients notarized statements about their income from vendors or other connections. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 73

Slide 74: Analysts The analyst Analysts market has gone through a big change during the last four years: 2.The market has consolidated 3.The internet has competed strongly with report only services given by some analyst firms 4. Because of transparency analysts should be able to give a notarized statement about not competing for consulting or implementation work (in the market). Analysts are not consultants and consultants are not analysts DIFFERENT RULES AND ETHICS APPLY TO EACH © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 74

Slide 76: Infrastructure / Integration / DRP Projects  Service oriented infrastructures, new 64 bit standard servers, new networking and storage technologies require intense infrastructure integration projects. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 76

Slide 77: Computer room and other “environment” integration projects  STKI has not “tiered” companies in this area for 2006 or 2007  New technologies require rooms similar to those of the 1980s because of:  very heavy need of cooling, electricity and weight requirements of new servers and storage equipment © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 77

Slide 78: Risk / Integration This is a growth area and much of the monies spend in RISK/SECURITY are in other markets 2.Security is one of the biggest problems for 2007-8 3.Regulation will force enterprises to invest heavily 4.New products in RISK management will help clients control costs © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 78

Slide 79: Testing / QA Projects  Testing is growing but to many companies are buying only temps and not projects  DATA cleansing and profiling in order to create the data architecture will be the main area here for the next couple of years (example DBQ’s offering) © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 79

Slide 80: IT education and Implementation Training  Training of employees in project management (AGILE), SOA and other new technologies will boom.  On average an employee should get ONE week advanced training a year.  Implementation of new application involves training users of applications and new ones as they are hired or transferred (years). Also yearly refresh courses should be mandatory. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 80

Slide 81: Specialized Hosting Services  Business continuity needs regulations and the need for expensive “environmental support” is pushing clients to this Also outsourcing players vendors (infrastructure)  Senior business executives, AND the board of directors often has oversight responsibility. © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 81

Slide 82: SaaS - ASP - Renting Software Usage  Users in Israel have been slow in accepting this offering in the past  Very few vendors are offering but those like salesforce.com are being very successful 82 © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info

Slide 84: Outsourcing (SLA) and BPO The “partial” outsourcing market is growing faster than we expected. But the total outsourcing is not growing at all. 2.Application outsourcing like ERP or other back office applications is catching fast 3.Infrastructure and security outsourcing will be the main growth areas. 4.Development outsourcing © 2007 STKI moshav bnei zion 60910 tel 09 74 444 74 www.stki.info 84

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