..| .. |
July 1-15, 1999 My CT Almanac Column |
|
|
SOFTWARE EXPORTS Millennium Challenges
Much of the Indian software exports industry's recent gains can be considered opportunistic, given the artificially accelerated spending levels bought on by Y2K. Sales and earnings of leading software companies have continued to seduce millions of investors on the country's bourses with valuations of most IT stocks touching historic highs. Aiding the Indian success story is the fact that the US economy has never had it better.
It may come as a surprise to many readers to know that current spending outside the IS budgets among US and European enterprises represents over 50 percent of the total IT spending. In fact, IT spend in the business lines budget of firms with over $1 billion sales is expected to rise to 60 percent over the next few years. The total IT spend is expected to fall from 8.9 percent of revenue in 1999 to about 7 percent by 2003. Worldwide, financial services/banking sector typically have the largest IS budget (as a percentage of revenue), followed by telecom, healthcare/hospitals, transportation, and insurance. Dataquest estimates that the largest portion of $1 trillion global IT spending (about 35 percent) is actually directed to IT services, exceeding an estimated 28 percent for systems and peripherals, 14 percent for software and 22 percent for telecom networks. The worldwide services revenue is put at $326 billion in 1999, and growing 10 percent annually. The market is highly fragmented, with IBM and EDS having shares at under 8 percent each. This category includes business/IT consulting, systems & network integration, IT outsourcing, business process outsourcing and hardware support services.
IT consulting, systems integration, and outsourcing represent 60 percent of the industry revenue. Its 12 percent annual growth seems to be strongly aided by the changing role of IT departments towards more of managing the portfolio of technology, applications, and strategy. This marks the shift from a centralised structure to more modular, centred on core competencies. In the new model, the IT organisation is a provider of indirect technology skills, including project management, relationship management, and business analysis. In the 1960s and '70s it was hardware; in the '80s it was the relational database; currently, the ERP platform is viewed as strategic tool. Life Beyond Y2K Y2K is winding down; Euro has yet to pick up; and ERP business is going down. The success story of Indian IT stocks is predicated more on the very high growth rates than any other factor. The business case for IT services however, continues to remain compelling. I see six major avenues for potential growth beyond 2000. E-Commerce: Whatever spin is put to this term, there is no denying the clear trend towards electronic transactions of all sorts. Online shopping will consume 8 percent of all retail (excluding autos) in the US by 2003. Electronic check acceptance has the potential to cut processing costs for up to half of the 65 billion checks written each year in the US. Post-2000 Mainframe Outsourcing: As mainframe computing enters its fifth decade, the desire of companies to offload support responsibilities is rising. Business process outsourcing is another very fast growing opportunity. Consumer adoption of the Euro: The introduction of Euro coins and notes will provide more work that the business to business Euro conversion implemented in 1998/99. Customer Relationship Management: Under this broad segment is a range of software packages and system integration challenges which involve linking and warehousing disparate sources of data and centralising service provision in call centers and front-end office systems. Applications Management: There is a clear trend in changing the way in which software is sold and charged for. The rapid migration of end-users through successive versions of software programs creates a role for service vendors. The Automated Enterprise: After ERP, what? The new elements seem to be supply chain management, workflow automation, data warehousing/mining, new billing and customer care platforms. In conclusion, the key to a competitive posture will be a few critical success factors for the new millennium. To address these opportunities the major vendors have to place a significant emphasis on branding their service offerings. The ideal brand should confer an image of reliability and technical expertise. What's more, improving brand recognition and identity also helps in employee recruitment and retention. And trust the Great Indian software bandwagon continues to roll merrily. The writer is senior vice president, corporate planning group, Satyam Computer Services Ltd. |
|
Issue Contents Write to us Subscriptions Syndication INDIA
TODAY | BUSINESS
TODAY | INDIA TODAY PLUS | TEENS TODAY © Living Media India Ltd |
 |
 |
Rusi Brij
IT Spending Trends 
The Changing Roles 
