Software spend signals new business realities

4 Feb 2008

Business software spending is growing again, with Irish firms investing in technology to help them perform better.

Software has traditionally been the poor relation in Irish IT spending, but there are signs that may be changing. Over the years, the lion’s share of technology budgets has been eaten up by infrastructure, hardware like PCs, servers, printers and storage systems, instead of tools and applications that could help a business to perform more efficiently or profitably.

New research shows software spending in Ireland is set to rise during 2008, for the first time in three years. According to the latest data from iReach, the overall size of the Irish software market is set to increase. Factors behind this renewed growth are a greater focus on enterprise software allied to continued spending growth in software infrastructure and security software.

Irish organisations are forecast to spend €440m on software this year – a 6pc increase on 2007. IT security is the fastest-growing segment of the market, with predicted licence fees of €100m, up from €90m last year. There are other indications Irish companies are making serious investments in software to help them improve their businesses.

The bulk of software spending is to be found in infrastructure projects such as document and content management solutions, business intelligence and analytics, database, web servers and enterprise portals. Close to €200m will be spent across these areas in 2008, iReach predicted.

The firm also foresees higher levels of investment in enterprise software such as supply chain systems, customer relationship management and human resources applications.

Richard Moore, business manager for the information worker products with Microsoft Ireland, said the earlier stage of infrastructure investment is a necessary step in putting foundations in place before adding features.

“The new investments are for making people more productive, helping them make decisions more quickly and efficiently and bringing people together to collaborate,” he commented.

Working environments are changing and software is adapting to this, he added. As more people work in teams, there are applications to cater for this demand.

“People are spending up to two days a week collaborating with colleagues. Giving them the right tools to bridge a geographical divide is of great benefit,” he said.

Videoconferencing technology reduces the need to travel in order to meet with colleagues about a project, Moore pointed out. Document sharing and collaboration tools like SharePoint allow people to make changes to a file that is stored centrally, so everyone on the project sees the same version.

Business intelligence (BI) is another area where, like iReach, Moore sees more investment ahead. “You only really manage what you measure,” he said. Typical projects within a business usually have three or four indicators of performance and BI tools crunch data to display these metrics in a kind of ‘dashboard’ or ‘scorecard’ format.

This allows managers to see quickly and easily how their organisation is performing. The software can display progress in a range of different ways, from simple up or down arrows to a traffic light green-amber-red combination.

“You get a simple visual of the performance of a particular system, team or project,” Moore said. Meteor, the mobile phone division of Eircom, uses these kinds of scorecard tools in its business, he commented.

What will really help BI, Moore observed, is if that information is widely distributed throughout a company to help everyone to do their jobs better. “It shouldn’t just be the preserve of the top decision-makers. That kind of information is the lifeblood and helps everyone to make better decisions quicker,” he emphasised.

“It’s probably not the case that every single employee in every single department needs it but it can definitely go more broadly than it does now, where it’s maybe only in finance or some other department.”

Organisations have struggled in the past to understand what the most meaningful metrics were to gauge how they were performing, Moore acknowledged. Putting in place some simple business intelligence doesn’t have to be complicated, costly or time consuming. “It’s possible to build very simple solutions around SharePoint and Excel,” he said.

Many organisations are also coming to realise they are composed of small teams involved in a series of projects. However, a common pitfall is the lack of clear methodologies or reporting structures for managing projects and ensuring their successful outcome. Here again, software tools can come to the rescue, Moore said. “If you can’t quickly and easily see the next steps [in a project], then you’re not really going to plan for success.”

Another trend for 2008 is the much-hyped software as a service (SaaS) model. Also known as on-demand software, this concept involves delivering applications over the internet through a web browser, unlike traditional packaged software that is installed on a computer by CD-Rom. The model has had most success in the area of customer relationship management.

Research from the Aberdeen Group said it suits companies of all sizes, as it offers advantages such as fast return on investment and lower IT costs. Almost three quarters of the companies surveyed said the software took less than two months to implement and had paid for itself in less than six months.

The world’s biggest software company, Microsoft, has yet to fully embrace the SaaS model, preferring an approach it calls ‘software plus service’. “Our view is not as polarised as saying ‘it’s all one or the other’. We believe there’s going to be a place for both,” said Moore. Some applications that rely heavily on graphics need the processing power of the user’s PC.

Others such as security software are well suited to being delivered remotely as a service and Microsoft already offers this in the Irish market. “Over the next couple of years you will see that expand more to embrace different products within the Office suite,” he confirmed.

The increased software investment is an encouraging sign Irish organisations are aware of the business benefits that it can bring. It could also signal a welcome change in thinking that IT is just about cutting costs – an attitude that had prevailed for some time.

“It’s probably less about saving money than about getting more throughput in the working day,” Moore concluded.

By Gordon Smith