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Australian ICT Market Perspectives for the Queensland ICT Industry

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    Notes on slide 1

    22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved

    This is where we are: happy, making money, but tightening between now and 2010. There is effectively 18 months of sunshine left before things get really tough. So what do we need to do?Well first let’s take a look at how our customers are spending….

    Maybe discuss the new data centre in the context of the asset replacement box?

    Interesting that Services is only 13% but when taken with Internal staff costs the total “people” investment is around 42%.I wonder if contractors are counted in the Internal Staff Costs?I would also clarify the distinctions we make between “Business Applications” and “Software” which collectively chew up almost 30%. Highlight the apparent “smallish” numbers for hardware and connectivity.

    22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved

    Longhaus’ analysis of over 150 enterprises in major segments across the ANZ markets suggests that service organisations and technology dependant firms remains the source of the largest ICT spend and in most cases the areas of highest growth. Not surprisingly, as you can see from the table Banking, Government, Manufacturing and Telecommunications represent the areas of highest ICT spend.Growth areas become a little more interesting. Banks are up with growth well above the 5% average running at close to 10% in some cases, with a knock on effect to the broader general finance industry. Resources we previously mentioned and while they are up, the base upon which this growth exists is smaller compared to the other ICT industry pillars.Telecommunication continues to see major growth with 3G services, expansion in to VOIP and other IP services driving major infrastructure activity.To aid you in your search for growth in 2007 I wanted now to share with you some more detailed data points about the sectors marked in bold here.

    This means close to 10% of new spending will be in existing operations. There is an opportunity to help CIOS contain this base cost creep.22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved

    22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved

    Self ActualisationCreativitySpontaneityEsteem NeedsConfidenceAchievementSocial NeedsFriendship and familySafety NeedsPersonal securityPhysiological NeedsFood and waterAs the harder times set in, Maslow’s theory says we focus on the more basic needs. Only when those are not threatened or in abundance are we able to focus on higher order needs and pursuits. 22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved

    Recent research by Robert Urwiler and Mark Frolick has shown that organisations exhibit similar “needs” concepts that translate to perceived value and behaviour. Niether Urwiler or Frolick link these needs to economic cycles, but it is Longhaus’ experience that the focus of organisation on ICT changes with the times.A classic example if the shift of CIOs within the organisation structure. At the start of the economic cycle when times are booming and capital investment by the board is high they report to the CEO. By the of the cycle when ICT is treated as a pure commodity and business as usual the CIO may find themselves as simply the 2IC to the CFO.What is interesting is that given the current stage of the cycle Longhaus is seeing a return to the 22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved

    Business Issues Slide:You need to be having two conversations with the CIO. One is about business drivers for ICT. The other is about technical drivers for ICT. Let us walk through a couple of the stand out ones that we see:Clearly the two top priorities align directly with your key play of Service Management Foundation and Services for Unified Communications (Perhaps we could align the need for UC with the slide that shows a massive increase in spending with Microsoft which could be driven by 2008 Server + their UC program. Also, increase in spend with Telstra (27% increase) is reflected there as well. They will also be making a play there.)Perhaps align the first 3 issues above (flexibility, innovation and competitive advantage to their SOA key play but steer them away from using “speed to market” as a sales pitch). Technical Issues Slide:You could comment about everyone in the room being pretty technical so maybe comment on a palpable sense of relief when you throw up the technical issues.Clearly the top 3 issues (alignment, operations and interoperability) align directly with their SPLs but let us draw your attention to a little anomaly in the data…Align to their “Focus on Security – Safeguarding Critical Data with ISS” key play. We could make the point that while decision makers see security itself as a low primary driver what we are actually seeing is that there is huge potential for BPR related work based on organisation’s use of information. Security breaches aren’t breaches they are different ways that information is used. How do you guys capitalize on that?I might also make a final point that while the Business Drivers may differ considerably for the public and private sectors, the Technical Drivers are virtually the same. This is a key point and will reflect directly in their ability to hold meaningful conversations with CIOs from different industries. The takeaway that underscores this is: adapt the sales language to the business drivers because they are the problems.

    There is a real opportunity for IBM to aid CIOs here – struggling to address staffing / skills issues while at the same time increase maturity and adopt virtualisation it is clear that selective outsourcing is an option.Not surprisingly the drive for offshoring is low as it has been for sometime.E457 visa issue for IT recruitment firms is only going to make this worse and when the stability and security of the ICT becomes threatened in a tight economic environment then the Maslow theory applied to the IT value hierarchy says that CIOs will be more motivated (read desperate) to solve the problem.The e457 visa issue highlights the “train wreck” that Longhaus identified in 2006.22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved

    We think these figures support the spending patterns for the big reset – i.e. hardware spending with the multi-nationals. Traditional services company spending is down but we believe that will change in 2009 and 2010So let’s look at what they’ll be buying:Dell – desktops and serversFujistsu – HP – MicrosoftOracle – VMWare – notice EMC is down but virtualisation is strongTelstra -

    22/05/09Copyright 2008 Longhaus Pty Ltd - All Rights Reserved22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved

    22/05/09Copyright 2006 Longhaus Pty Ltd - All Rights Reserved

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    Australian ICT Market Perspectives for the Queensland ICT Industry - Presentation Transcript

    1. Australian ICT Market Perspectives Peter Carr, Managing Director Sam Higgins, Research Director July 2008 Copyright © 2008 Longhaus Pty Ltd
    2. Reviewing the Australian ICT Market • How are business and ICT cycles driving CEOs and CIOs? • Where are Australian CIO’s spending? • What are the local CIO priorities? • Who are the vendors making waves in the market? • Which major Australian themes and trends are we watching? 2 Commercial-in-confidence
    3. CEOs know the current Business Cycle is ending 9 8 7 6 5 Forecast 4 3 2 1 0 -1 Average long -2 business cycle is 34 quarters -3 (8 1/2 years) 36 qtrs. 34 qtrs. 34 qtrs. 33 qtrs. 38 qtrs. 33 qtrs. -4 -5 Annual real GDP growth (%) progressed in quarters to September 2007 (and forecast to June 2011) -6 1962 1966 1970 1974 1978 1982 1984 1986 1988 1992 1994 1996 2000 2004 2006 2008 2010 2012 2014 2016 2018 2020 1960 1964 1968 1972 1976 1980 1990 1998 2002 Source: Paul Ruthven of IBISWorld 07/12/07
    4. CIOs know the ICT Asset Cycle is right behind it Post Y2K Synchronised ICT Asset Renewal Cycle Asset Replacement Renewal Business Planning As Usual 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Longhaus
    5. Longhaus’ Annual ICT Spending & Priorities Study is aimed at understanding these cycles • Australia’s annual domestic business and public sector spending on ICT is $80-90 Billion • 80% of this spending is by the top 6000 Medium to Large Enterprises – >200 Employees / $10 million in revenue • We survey 100+ CIOs and IT Decision Makers from this population • Giving us a 95% confidence level with a MOE of +/-10% 5 Commercial-in-confidence
    6. Our studies include both private and public sectors 6 Commercial-in-confidence
    7. Australian organisations spend an average of 5% of their revenue / budget on ICT 7 Commercial-in-confidence
    8. People “assets” consume the most and are hardest to “renew” 8 Commercial-in-confidence
    9. Regardless of the economic climate CIOs remain optimistic 9 Commercial-in-confidence
    10. There is growth is occurring in the typical segments Expected Segment ICT Spend Change Growth Banking High Above Average Steady Construction Medium Average Up Finance & Insurance Low Above Average Steady Government High Above Average Up Manufacturing High Below Average Down Resources Low Above Average Steady Retail Medium Average Steady Services Medium Average Up Telecommunications High Above Average Steady Transport Low Average Steady Base: 150 in 2006 , 123 in 2008 Australian Medium to Large Enterprises 10 Commercial-in-confidence
    11. Proportion of new investment remains low, but rising • Australian firms expect to have to spend 12% more on ICT in 2008 BUT Lights On: 80%  84% • New investment is expected to increase by 16% – Real increase of 3.2% New Investments: 20%  16%
    12. This new investment is balanced overall, with new purchases reinforcing steady growth 12 Commercial-in-confidence
    13. But as Business and ICT Cycles change so does “IT Value” • Just as personal needs change with economic cycles, so does the IT needs focus of an enterprise The Hierarchy of Personal • Self Actualisation Needs • Esteem Needs • Social Needs • Safety Needs • Physiological Needs Source: Abraham Maslow, 1943 13 Commercial-in-confidence
    14. But as Business and ICT Cycles change so does “IT Value” • Just as personal needs change with economic cycles, so does the IT needs focus of an enterprise The IT Value • Paradigm Shifting Hierarchy • Competitive Differentiation • Integrated Information • Stability & Security • Infrastructure & Connectivity Source: Robert Urwiler & Mark Frolick, 2008 14 Commercial-in-confidence
    15. The primary issues facing CIOs suggests a focus on stability 15 Commercial-in-confidence
    16. And spending intention reinforces this, but we expect this to change in the next 24 months 16 Commercial-in-confidence
    17. Stability in the short term means cost strategies around addressing skills and service management 17 Commercial-in-confidence
    18. Microsoft’s Server Launch Wave is highly anticipated when it comes to vendor focus 18 Commercial-in-confidence
    19. Australian CIOs are starting to engage in preparation for the application renewal wave • Y2K bubble has driven asset replacement, but… – Skills required to implement are scarce • Virtualisation offers savings through utilisation, but… – Virtual server sprawl now rivals physical sprawl • Service-oriented architecture offers flexibility, but… – Inevitable SOA creep means many connections are unmanaged • Digital regulation means safer consumers, but… – Complex compliance not previously see in Australian mid-market 19 Commercial-in-confidence
    20. However, Longhaus cautions organisations to look beyond the hype • Y2K bubble has driven asset replacement, but… – Skills required to implement are scarce • Virtualisation offers savings through utilisation, but… – Virtual server sprawl now rivals physical sprawl • Service-oriented architecture offers flexibility, but… – Inevitable SOA creep means many connections are unmanaged • Digital regulation means safer consumers, but… – Complex compliance not previously see in Australian mid-market 20 Commercial-in-confidence
    21. Selected Source Material • Successful Portfolio Management Unifies ICT Management Practices, Longview, September 2006 • Post-Y2K bubble looms as an asset replacement train wreck, Longview, December 2006 • Managing not implementing SOA becomes the real challenge, Longview, December 2006 • Business culture is the next barrier to second generation SOA projects, Longview, December 2007 • Increasing Digital Regulation will drive ICT spending In already saturated market, Longview, December 2007 • IT Spending and Priorities Study 2008, February 2008 21 Commercial-in-confidence
    22. Who is Longhaus? • Longhaus is a research publisher and • Strong international and technology advisory company with a specialty in research experience technology • Leading industry voice in press and • We publish business reports and media broadsheets advise executives and management across Australia's government, business, and consumer sectors on the application • Queensland founded and headquartered and direction of technology – Website: 5,000+ site visits per month • Our directional research reports are – Website: 12,000+ page visits per month utilised by both SME and major – Website: 7-10 minutes per visit organisations across the world – Blog: 3,500+ hits – Newsletter: 2,500+ distribution per month • Through our AAA (Access All Areas) – Downloads: 1,000+ per month advisory service we answer big business – 8,400+ SlideShare visits questions that most often pertain to customer, product or services markets – strong focus on government 22 Commercial-in-confidence
    23. Research Focus
    24. Website Snapshot
    25. Corporate Blog - The Naked Chief
    26. Strong Local Research and Branding
    27. Online Research Database
    28. National and International Press Visibility
    29. Annual Retainer Service - Access All Areas
    30. Access All Areas Deliverables
    31. Work Product – Traditional Whitepapers
    32. Work Product – Custom Strategy Development
    33. Thank you Longhaus Head Office Level 30, AMP Place 10 Eagle Street Brisbane QLD 4000 Longhaus Research Centre 7/269 Abbotsford Road Bowen Hills QLD 4006 p: +61 7 3868 4796 f: +61 7 3303 8445 inquiry@longhaus.com 33 Commercial-in-confidence

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