The document summarizes key findings from a Longhaus study on the Australian ICT market: 1) Business and ICT spending cycles are driving CEO and CIO priorities, with both cycles expected to end soon. 2) Current CIO spending focuses on stability through cost reduction strategies like addressing skills shortages and improving service management. 3) There is an anticipated renewal wave of business applications as assets purchased during the Y2K period reach end of life, but skills shortages remain a challenge.

1. Australian ICT Market Perspectives Peter Carr, Managing Director Sam Higgins, Research Director July 2008

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? Commercial-in-confidence

3. CEOs know the current Business Cycle is ending 36 qtrs. 34 qtrs. 33 qtrs. 38 qtrs. 34 qtrs. Source: Paul Ruthven of IBIS World 07/12/07 33 qtrs. Average long business cycle is 34 quarters (8 1 / 2 years) Forecast Annual real GDP growth (%) progressed in quarters to September 2007 (and forecast to June 2011)

4. CIOs know the ICT Asset Cycle is right behind it Source: Longhaus Post Y2K Synchronised ICT Asset Renewal Cycle 2001 2002 2003 2004 2005 2006 2007 2008 2009 Business As Usual Asset Replacement Renewal Planning

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% Commercial-in-confidence

6. Our studies include both private and public sectors Commercial-in-confidence

7. Australian organisations spend an average of 5% of their revenue / budget on ICT Commercial-in-confidence

8. People “assets” consume the most and are hardest to “renew” Commercial-in-confidence

9. Regardless of the economic climate CIOs remain optimistic Commercial-in-confidence

10. There is growth is occurring in the typical segments Commercial-in-confidence Base: 150 in 2006 , 123 in 2008 Australian Medium to Large Enterprises Segment ICT Spend Expected Growth Change 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

11. Proportion of new investment remains low, but rising Australian firms expect to have to spend 12% more on ICT in 2008 BUT New investment is expected to increase by 16% Real increase of 3.2% Lights On: 80%  84% New Investments: 20%  16%

12. This new investment is balanced overall, with new purchases reinforcing steady growth 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 Commercial-in-confidence Self Actualisation Esteem Needs Social Needs Safety Needs Physiological Needs Source: Abraham Maslow, 1943 The Hierarchy of Personal Needs

14. Just as personal needs change with economic cycles, so does the IT needs focus of an enterprise But as Business and ICT Cycles change so does “IT Value” Source: Robert Urwiler & Mark Frolick, 2008 Paradigm Shifting Competitive Differentiation Integrated Information Stability & Security Infrastructure & Connectivity Commercial-in-confidence The IT Value Hierarchy

15. The primary issues facing CIOs suggests a focus on stability Commercial-in-confidence

16. And spending intention reinforces this , but we expect this to change in the next 24 months Commercial-in-confidence

17. Stability in the short term means cost strategies around addressing skills and service management Commercial-in-confidence

18. Microsoft’s Server Launch Wave is highly anticipated when it comes to vendor focus 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 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 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 Commercial-in-confidence

22. Who is Longhaus? Longhaus is a research publisher and advisory company with a specialty in technology We publish business reports and advise executives and management across Australia's government, business, and consumer sectors on the application and direction of technology Our directional research reports are utilised by both SME and major organisations across the world Through our AAA (Access All Areas) advisory service we answer big business questions that most often pertain to customer, product or services markets – strong focus on government Strong international and technology research experience Leading industry voice in press and media broadsheets Queensland founded and headquartered Website: 5,000+ site visits per month Website: 12,000+ page visits per month Website: 7-10 minutes per visit Blog: 3,500+ hits Newsletter: 2,500+ distribution per month Downloads: 1,000+ per month 8,400+ SlideShare visits Commercial-in-confidence

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