The document discusses trends in the Israeli IT market and technology adoption based on surveys of IT departments and vendors. It covers methodology, disruptive technologies driving innovation, the effect of cheap technologies, architectural trends, vendor-user relations, and forecasts for user budgets and the market in 2007-2008.

2. Agenda Methodology Trends Architectures Vendor-User relations New views Israeli Market Vendor Tiers

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

4. 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 HISTORY

5. People ask me if in 2007 :

6. or Innovation War driven by: Cheap basic technologies New d isruptive technologies

7. Cheap Technology: The Ultimate Driver... Jimmy ’ s Law: Memory, bandwidth and computing power continue to decrease in cost.. exponentially US $ - Logarithmic Scale 1 10 100 1,000 10,000 100,000 1,000,000 0.1 (3) 75 85 95 07 10 Bandwidth Cost of sending 1 trillion bits Storage Cost of 1 megabyte storage Computing Cost of 1 MHz processor speed Source : Federal Reserve Bank of Dallas,

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

9. … and the effect on people as seen in New Maslow’s hierarchy of needs

10. and the effect on IT…….

11. Israeli Technology Adoption Trends for disruptive technologies Technology Adoption Trends Business Solutions (applications) Adoption Trends Server Consolidation Storage Consolidation Application Systems Consolidation LINUX ERP CRM IP-TEL VoIP Unified Messaging SaaS DW-BI Data Mining wireless Wireless E-mail RFID EDA SOA XML ITIL Office CIO BPM PORTAL EAI BC/DRP Data Management Real Time Analytics 64 bit Server Thin Clients

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)

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

14. defined by the Information Architecture Institute INFORMATION SYSTEM ARCHITECTURE The structural design of shared information environments. The art and science of designing software and hardware systems in order to support business needs. An emerging community of practice focused on bringing principles of design and architecture to the digital landscape. Information systems are dynamic and should adapt to specific users’ actions.

15. FATHER OF ENTERPRISE ARCHITECTURE: John Zachman DATA Number 1 priority for 2007 [email_address]

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 The art of strategic planning for information technology

17. ARCHITECTURE: THE PROCESS

18. 2007 STKI IT ARCHITECTURE MODEL

19. A mixed operational architecture (for all)

20. Architectures Event Driven Architecture Service Oriented Architecture Legacy System Architecture

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).

22. STKI IT project contract expectation metrics USER VENDOR relationships should be based on an APPROVED rule of engagement (expectation metrics). Who takes responsibility Who takes the risk What premium should be paid What profit should the vendor expect USERS that buy “cheap” are usually those that: Do not understand project management Expect not to be responsible for IT in the long run Never worked as an IT professional

23. "The cynic knows the price of everything and the value of nothing" Oscar Wilde

24. There is NO free lunch

25. How the RFP starts and how the project finishes is up to the CIO

26. Innovation War

27. The Innovation Lifecycle

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”

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

30. Innovation versus Creativity Innovation is the engine that drives transformation.. Present Desired Future Default Future Vision

31. CIOs do matter: ERP Value captured by verticals Business Process 1 ERP Value captured by verticals Business Process 2 Sales Prospect Market IT of Competitor IT of Competitor No Real difference in value Competitive Differentiation 1 2 Best Business Practices Innovation war

32. Innovation Management? It is called ENTERPRISE 2.0 ?

33. Enterprise 2.0 ? Only if we could…………………… Enterprise 2.0: Partnering Business with Technology (Innovation Cycle) Enterprise 1.0: Aligning Technology with Business Strategy (Alignment Cycle)

34. Enterprise 2.0: INFORMATION BUSINESS innovation

35. Enterprise 2.0: The new CIO and “custom” solutions innovation

36. Enterprise 2.0: what we need…….. information

37. Enterprise 2.0: what we need…….. information

38. Enterprise 2.0 @2007: IT extracts the data and business analyzes it. Knowledge worker platform Instant information retrieving Real Time Analytics Creation of shared applications Business Processes Management Improvement Business services Composite Applications Source: Dion Hinchcliffe Creation of DATA ARCHITECTURE

39. 1. Knowledge worker platform Information Access & Search Collaboration, Discussion & Interaction Content, Knowledge & History Productivity, Sharing & Configurability Source: attunity Notes Email Spreadsheets Web Tasks & Mtgs Internal Reports Enterprise Apps External Reports Portals / Dashboards

40. 2. Instant Retriever Platform Source: babylon glossaries Corporate Data Base local glossaries Application Server Web admin interface Glossary builder Custom extract

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

42. 4.- DATA ARCHITECTURE MASTER DATA MANAGER

43. 5.- “Business Services” Business Logic Business Logic Business Logic Business Logic LEGACY ERP CRM FINANCE “ Transfer Funds ” “ Execute trade” “ Etc., etc.” “ Get Portfolio Balance”

44. 6.- Composite Applications Composite Applications Drop-and-configure Optimize Rate Plan Get Customer Process Order Get Value Get Churn

45. STKI Software Application Platform Model STKI SOFTWARE APPLICATION PLATFORM MODEL

46. Israeli IT market 2006-2007

47. Israel IT Market In the following slides forecast 2007 and 2008 differences between the forecasted and real 2006

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.

49. The Israeli market

50. User costs and effort to control them

51. USER BUDGETS FOR 2007 The booklet has errors in calculations

52. The users ……. by industry

53. Finding the right DATA for “real” sales VENDOR.CO.IL

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

55. Sometimes you compare and realize it is not FAIR but…… All numbers on MILLIONS of US Dollars

56. VENDOR CLASSIFICATION

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.

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

60. This vendors are highly specialized in their fields

61. This vendors offer basic services or products in their areas : moving boxes telecomm services contracted work without central technical support.

62. Hardware Vendors

63. Unix and Proprietary Servers This was the year of the Mainframe All other proprietary systems are in MIGRATION roadmaps Factors affecting low UNIX sales 64 bit X86 Linux and Microsoft UNIX Servers PROPRIETARY

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

65. PC Clients Notebooks will have a slowdown in businesses during the next 24 months (VISTA effect) Companies like laptops because they extend the workday Some users have been buying used PCs VISTA and Thin Client Architecture will drive this market ( its speed…. slow now) DESKTOP LAPTOPS

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

67. Data Networking “dealers” plus suppliers

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

69. Software Cycles

70. Software: system and tools

71. Software: applications (local & imported)

72. Value added vendors

73. Consulting There is a big confusion in the consulting market: Consultants are not body shops/ temps Consultant’s employees do not implement or compete with integrators. Because of the need for transparency : all consultants should show their clients notarized statements about their income from vendors or other connections.

74. Analysts Analysts The analyst market has gone through a big change during the last four years: The market has consolidated The internet has competed strongly with report only services given by some analyst firms 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

75. Application / Integration Projects

76. Infrastructure / Integration / DRP Projects Service oriented infrastructures, new 64 bit standard servers, new networking and storage technologies require intense infrastructure integration projects.

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

78. This is a growth area and much of the monies spend in RISK/SECURITY are in other markets Security is one of the biggest problems for 2007-8 Regulation will force enterprises to invest heavily New products in RISK management will help clients control costs Risk / Integration

79. Testing / QA Projects Testing is growing but t o 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)

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.

81. Specialized Hosting Services Business continuity needs regulations and the need for expensive “ environmental support ” is pushing clients to this vendors Senior business executives, AND the board of directors often has oversight responsibility. Also outsourcing players (infrastructure)

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

83. Hardware Maintenance Contracts

84. Outsourcing (SLA) and BPO The “partial” outsourcing market is growing faster than we expected. But the total outsourcing is not growing at all. Application outsourcing like ERP or other back office applications is catching fast Infrastructure and security outsourcing will be the main growth areas. Development outsourcing

85. Temps / contracted experts

86. Thank you and I hope this study helps you