While there have been some stark warnings about the likely impact of the recession on the IT industry, I like to think that there are sectors that will be more robust than others, and even see some decent growth.
Here’s my pick of the top 10 sectors that I believe are best placed to weather the downturn. But don’t get me wrong: there will be companies that do better in each of these than others. Equally, I don’t believe any company is completely recession-proof.
The focus, perhaps, will not be on revenue growth so much as market share gains. Comparing quarterly revenue in 2009 to the same quarter a year ago is unlikely to compliment many firms. It should still be done and will act as a barometer of just how bad things get, but looking at that metric in isolation, rather than comparing companies to their peers, is likely to give a clouded picture of how well a company is really weathering the downturn.
As Kevin Johnson, CEO of Juniper Networks told CBR last month when asked whether Juniper is recession-proof, “No. The economic situation will affect us as it does many other businesses. I would suggest though that because we compete in a portion of the market that is growing and we’ve got a very strong product portfolio, I think we will continue to gain market share.”
But undoubtedly there will be winners and losers in the tech sector as the economy dips into the red. There will be a renewed focus on technologies that can help a company save costs or indeed boost revenue or productivity. The companies best able to demonstrate these potential achievements through existing customer testimonials and solid analytical evidence will win out, and unfortunately that does make things tougher for start-up companies.
It’s perhaps for that reason that during any downturn in IT there tends to be what the analysts call a ‘flight to quality’ – companies start buying more from fewer, larger, more established vendors. But anyway, here’s my 10…[click continue reading for the list]…
1. Virtualisation
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But not just any virtualisation. While 2007-8 saw massive growth in the number of companies looking to server virtualisation, I believe there will be some take-up of desktop virtualisation in 2009. It won’t match the stellar growth of server virtualisation last year, but it will help to keep the virtualisation market buoyant.
The licensing terms of Microsoft’s operating systems haven’t exactly encouraged desktop virtualisation, but I expect Microsoft to get its own desktop virtualisation marketing ducks more neatly arranged – if not perfectly aligned – this year. As with its inclusion of virtualisation technology in Windows Server 2008, this will no doubt heat up the market for desktop virtualisation, with the likes of Citrix, VMware and Parallels the likely beneficiaries of a concomitant ‘halo effect’.
Also expect to see the likes of Novell, IBM, Sun and Oracle up their games in virtualisation management, arguing the case for the ability to manage heterogeneous virtualised environments – not least because that’s where VMware and Microsoft will be found to have Achilles heels.
In 2008, VMware’s CEO and co-founder Diane Green was ousted by VMware chairman and EMC CEO Joe Tucci.
2. Open source
Most companies already consider open source when making technology procurement decisions, but the economic downturn will make them that much more attractive.
As Gartner noted recently, “OSS will be chosen more as a possible alternative to expensive proprietary software. The economic downturn will push the OSS adoption up and harm sales in several segments; notably OS and office suites.” They mean Windows and Microsoft Office. And their potential replacements are Linux and OpenOffice or Google Docs or Zoho. Remember though, it’s not just about up-front costs but ongoing costs as well as quality of support, so look before you leap.
In 2008, hosted office and CRM vendor Zoho’s CEO, Sridhar Vembu, attacked salesforce.com’s CEO Marc Benioff for refusing to allow Zoho applications on the Force.com platform.
3. Green IT
If green IT is a bit passé for you, you might want to remember the recent research by analyst firm Forrester that found that those companies accelerating their green IT initiatives outnumber those slowing down their activities by a factor of two to one.
Among the 1,000 companies polled for the latest study, a majority were not expecting to make any changes to their plans. Some 10% of those surveyed are reportedly accelerating their green IT initiatives, with only 5% of sites slowing them down, the analyst found.
This isn’t about saving the planet for most companies remember, it’s about saving their bacon. Reducing energy costs and cutting power consumption of the compute estate is the most important criteria for organisations looking to implement green IT initiatives.
The green IT trend of course also helps make the business case for virtualisation, which helps to improve efficiency rates and hence bring down overall power consumption. As Forrester noted, thin client alternatives to standard PC desktop assets can generate energy efficiency savings of up to 25%.
Whatever you think about green IT – and the vast hype has become known as ‘greenwash’ – 60% of organisations include green criteria in their IT procurement processes, Forrester found. For vendors, failing to address green criteria could ultimately sound their death knell.
See also ‘The Green Light for Green IT’, written for CBR by Accenture’s Rockwell C. Bonecutter.
4. Cloud computing (and SaaS)
I know, I know. Hype over substance, right? Not quite. The promise of ‘IT as a service’ may not be attractive to every CIO, but with the economy taking a nosedive it may fall to the CFO in many cases to decide where costs can be cut from the bottom line. CFOs may not think of it as cloud computing at all, but they will no doubt be asking what can be outsourced (answer: more than you think) during the course of 2009.
The software as a service (SaaS) vendors are already morphing themselves into cloud computing companies, so you might as well lump them in with that trend (announcing its latest results, salesforce.com declared itself the “First enterprise cloud computing company to exceed $1.1 billion annual revenue run rate”). But don’t only think of salesforce.com: what about the likes of RightNow Technologies, Workday, Salesnet, NetSuite, or Success Factors?
Meanwhile, although the SaaS companies have a legitimate claim to have history in the cloud computing space, I believe the real excitement this year will come from the likes of IBM, Sun and even Dell. It is those vendors that are best placed to deliver the true promise of cloud computing, which is not software as a service but IT as a service.
Also, don’t underestimate the impact of Microsoft spending a few hundred million dollars marketing its own take on cloud computing, Azure (question: why would Microsoft name its cloud computing strategy after a word that means ‘purplish blue’, suggestive of a cloudless sky?)
However many CIOs will rightly remain sceptical, with concerns lingering over security, scalability, lock-in and quality of service. But that won’t prevent the trend gathering steam this year.
Read CBR’s cover feature, Is the Enterprise Ready for Cloud Computing? here. Pic: Keble, on Flickr, CC licence.
5. Data loss prevention
It’s often said that security investments are actually rather hard to justify: like insurance, you often don’t see the benefits unless something goes drastically wrong. Well, data losses are pretty drastic, and enough of them have been in the headlines of late for CEOs and CFOs as well as CIOs to know the risk posed by a data loss incident.
But while avoiding data loss is more about policies and processes — and employee adherence to those – than technology, there are some interesting data loss prevention (DLP) technologies emerging from the likes of McAfee, Symantec, EMC/RSA and others. CIOs may find it easier to get buy in for investment in these than other areas in IT while purse strings are tight.
The only drawback for the IT department itself, is that while it may give them a warm fuzzy feeling inside that the organisation is less likely to suffer a data loss incident, DLP probably won’t help the IT department to ‘get more done with less’ like some of the other technologies on this list. Still, you can’t have everything.
McAfee chief Dave DeWalt: DLP was one of McAfee’s big pushes in 2008.
6. Mobile computing
Businesses will find it harder and harder to ignore employees’ mobile device preferences in 2009, thanks at least in part to the rise of the iPhone and Google’s G1 Android. Surveys show that younger employees are swayed by their company’s choice of supported mobile devices – they see their mobility as a lifestyle choice, not just a way of keeping in touch on the move.
The desire for companies to attract the best talent may force them to be a little less restrictive on their mobile device policies, though sensible CIOs will be looking for at least some enterprise-wide mobile harmonisation, and plenty of security and management tools (good news for Sybase iAnywhere and its ilk).
Google’s Brin and Page: launched the Android in 2008.
7. Integration and BPM
There is often an acceleration of mergers and acquisitions during a downturn, as struggling companies are swallowed up. And what do CIOs tend to need, at least in the short term, when they are trying to integrate acquired companies? Plumbing. OK, service oriented architecture-based integration technology (SOABI, anyone?).
Anyway whatever you want to call it, it’s basically middleware. IBM and Oracle may be the bellwethers, but we’ve also been witnessing some decent wins by Europe’s Software AG in this space.
It’s not just acquisitions that create demand for middleware. The desire to cut costs from the IT estate and get more done with less often results in companies going back to older assets and squeezing more value from them. Integration technology, from legacy wrappering to more modern business process execution language (BPEL) orchestrations, can help.
I’m going to add business process management (BPM) to the mix here, too. OK, it’s about far more than integration these days, but the BPM specialists either came from integration or workflow backgrounds so they’re not so very far apart. BPM holds the promise of not only integrating disparate processes but enabling process automation, analysis and ultimately, optimisation. That’s fairly attractive in an economic downturn, or so I’ve heard.
BPM has always been a bit of a niche activity but with a new version of a key standard (business process modelling notation, BPMN) just around the corner BPM may get a shot in the arm this year.
As well as the Oracles, Tibcos and IBMs of this world look to specialists like Metastorm, Pegasystems, Savvion, Lombardi and Appian to fight for their slice of a growing market.
My personal pick for the BPM company to come through from seemingly nowhere in 2009 is Cordys, founded by Jan Baan of Baan Software. It’s going great guns with a new version of its Business Operations Platform and a hosted BPM tool that can help companies develop ‘MashApps’ (mashed up applications, don’t you know).
Jan Baan, founder and CEO of Cordys.
8. Information management & search
While most companies have already ‘done’ some form of content management, 2009 will see companies attempting to standardise on one (or at least fewer) content management technologies. Not only is there a cost driver, but such projects can help to get the right information in decision-makers’ hands, faster. That’s good news in a tough economy.
There will also be some interesting announcements from Microsoft, I suspect, about what it is going to do with its acquired FAST enterprise search technology, but British born Autonomy will continue to dominate the market it calls ‘meaning based computing’. Information management, in its various forms, is a growing market, and the likes of Endeca, IBM, Oracle, Google Enterprise, Simplexo, Sinequa, Recommind and more will all be aiming to capitalise on it.
Don’t miss CBR’s profile of Autonomy, including an exlusive interview with CEO and founder Mike Lynch, here.
9. Business activity monitoring (BAM)
To my mind the easiest piece of business intelligence to sell in a downturn: BAM is all about analysing real business processes (in real time if possible) rather than historical datasets a la more traditional BI.
The vendors involved will also ‘big up’ their performance management technologies, designed to close the gap between reporting and analytics, but I personally think that ship has sailed. If companies haven’t already combined these two disciplines by now, 2009 probably isn’t the best time to do so.
BAM, on the other hand, could help them grasp what technology marketers like to call ‘low hanging fruit’, or ‘quick wins’. Companies touting BAM (and performance management) include Tibco, Informatica, IBM, SAP, Oracle and the gang. Meanwhile Netezza, Greenplum, Kognitio and others are interesting in the data warehouse acceleration game.
Netezza CEO Jit Saxena: making waves in the data warehouse space.
10. Social networking & online collaboration tools
Again, I feel your pain. More words of wisdom about how Facebook and the like could become legitimate business tools. But love them or loathe them, even Gartner has advised CIOs not to ban all access to social networking technologies in the workplace, seeing them as a legitimate new way for staff to collaborate. No, seriously.
Companies disregarding the likes of wikis, blogs and even emerging virtual reality networking tools out of hand will be seen as laggards by ‘Millenial’ staff and even customers.
Expect as much hype as usual from the Web 2.0 faithful, and people talking more and more about Web 3.0, 4,0, 5.0, x.0 etc. etc. Over-hyped perhaps, but a new generation of collaboration tools is coming to a desktop in your enterprise soon.
If nothing else, expect the likes of Citrix Online, IBM Lotus Sametime Unyte, Webex and so on to see renewed interest as they help companies cut the costs spent on staff travelling to meetings. This technology complies with a green agenda, too, which is an added bonus.
Facebook founder Mark Zuckerberg: CIO’s headache or helper? You decide.
My list of 10 then:
1. Virtualisation
2. Open source
3. Green IT
4. Cloud computing (and SaaS)
5. Data loss prevention
6. Mobile computing
7. Integration & BPM
8. Information management & search
9. Business activity monitoring (BAM)
10. Social networking & online collaboration tools
Have any to add to my list? Any you would remove? Drop me a comment.
